As filed with the Securities and Exchange Commission on April 26, 1996
Registration No. 2-73986*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 15
To
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: MUNICIPAL SECURITIES TRUST,
1ST and 2ND DISCOUNT SERIES
B. Name of depositor: REICH & TANG DISTRIBUTORS L.P.
C. Complete address of depositor's principal executive office:
600 Fifth Avenue
New York, NY 10020
D. Name and complete address of agent for service:
PETER J. DeMARCO Copy of comments to:
Executive Vice President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Distributors L.P. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, NY 10020 New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on April 30, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
* The Prospectus included in this Registration Statement constitutes a
combined Prospectus as permitted by the provisions of Rule 429 of the
General Rules and Regulations under the Securities Act of 1933 (the
"Act"). Said Prospectus covers units of undivided interest in Municipal
Securities Trust, 1st and 2nd Discount Series covered by prospectuses
heretofore filed as part of separate registration statements on Form S-6
(Registration Nos. 2-73986 and 2-74227, respectively) under the Act.
1667.1
<PAGE>
MUNICIPAL SECURITIES TRUST
1ST DISCOUNT SERIES, 2ND DISCOUNT SERIES
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust.....................Front Cover of Prospectus
(b) Title of securities issued........"
2. Name and address of each depositor.....The Sponsor
3. Name and address of trustee............The Trustee
4. Name and address of principal
underwriters.........................The Sponsor
5. State of organization of trust.........Organization
6. Execution and termination of
trust agreement......................Trust Agreement, Amendment and
Termination
7. Changes of name........................Not Applicable
8. Fiscal year............................"
9. Litigation.............................None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities........................Certificates
(b) Cumulative or distributive
securities........................Interest and Principal
Distributions
(c) Redemption........................Trustee Redemption
(d) Conversion, transfer, etc.........Certificates, Sponsor Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan.............Not Applicable
(f) Voting rights.....................Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders......Records, Portfolio, Trust
Agreement, Amendment and
Termination, The Sponsor,
The Trustee
(h) Consents required.................Trust Agreement, Amendment and
Termination
(i) Other provisions..................Tax Status
11. Type of securities
comprising units.....................Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates........Not Applicable
-i-
711.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
13. (a) Load, fees, expenses, etc.........Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges
(b) Certain information regarding
periodic payment certificates.....Not Applicable
(c) Certain percentages...............Summary of Essential Information,
Offering Price, Total
Reinvestment Plan
(d) Price differences.................Volume and Other Discounts
(e) Other loads, fees, expenses.......Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons................Sponsor's and Underwriters' Profits
(g) Ratio of annual charges
to income.........................Not Applicable
14. Issuance of trust's securities.........Organization, Certificates
15. Receipt and handling of payments
from purchasers......................Organization
16. Acquisition and disposition of
underlying securities................Organization, Objectives,
Portfolio, Portfolio Supervision
17. Withdrawal or redemption...............Comparison of Public Offering
Price, Sponsor's Repurchase Price
and Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income.............Distribution Elections, Interest
and Principal Distributions,
Records, Total Reinvestment Plan
(b) Reinvestment of distributions.....Total Reinvestment Plan
(c) Reserves or special funds.........Interest and Principal
Distributions
(d) Schedule of distributions.........Not Applicable
19. Records, accounts and reports..........Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement...................Trust Agreement, Amendment and
Termination
(a) Amendment........................."
(b) Termination......................."
(c) and (d) Trustee, removal and
successor.........................The Trustee
(e) and (f) Depositor, removal
and successor.....................The Sponsor
21. Loans to security holders..............Not Applicable
22. Limitations on liability...............The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements...................Part II--Item A
24. Other material provisions
of trust agreement...................Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor..............The Sponsor
26. Fees received by depositor.............Not Applicable
27. Business of depositor..................The Sponsor
28. Certain information as to
officials and affiliated
persons of depositor.................Part II--Item C
-ii-
711.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
29. Voting securities of depositor.........Not Applicable
30. Persons controlling depositor.........."
31. Payments by depositor for certain
services rendered to trust..........."
32. Payment by depositor for certain
other services rendered to trust....."
33. Remuneration of employees of
depositor for certain services
rendered to trust...................."
34. Remuneration of other persons for
certain services rendered to trust..."
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states.................Distribution of Units
36. Suspension of sales of
trust's securities...................Not Applicable
37. Revocation of authority
to distribute........................"
38. (a) Method of distribution............Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements..........."
(c) Selling agreements................"
39. (a) Organization of principal
underwriters......................The Sponsor
(b) N.A.S.D. membership of
principal underwriters............"
40. Certain fees received by
principal underwriters...............Not Applicable
41. (a) Business of principal
underwriters......................The Sponsor
(b) Branch offices of principal
underwriters......................Not Applicable
(c) Salesmen of principal
underwriters......................"
42. Ownership of trust's
securities by certain persons........"
43. Certain brokerage commissions
received by principal
underwriters........................."
44. (a) Method of valuation...............Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price.....Not Applicable
(c) Variation in offering price
to certain persons................Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights........Trustee Redemption
46. (a) Redemption valuation..............Comparison of Public Offering
Price, Sponsor's Repurchase Price
and Redemption Price, Trustee
Redemption
(b) Schedule as to redemption
price.............................Not Applicable
-iii-
711.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
47. Maintenance of position in
underlying securities................Comparison of Public Offering
Price, Sponsor's Repurchase Price
and Redemption Price, Sponsor
Repurchase, Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee...........................The Trustee
49. Fees and expenses of trustee...........Trust Expenses and Charges
50. Trustee's lien........................."
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities...................Not Applicable
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities........................ Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities........................ Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities........................ Objectives, Portfolio, Portfolio
Supervision, Substitution of
Bonds
(d) Fundamental policy not
otherwise covered................. Not Applicable
53. Tax status of trust.................... Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years.......................Not Applicable
55. Hypothetical account for issuers
of periodic payment plans............"
56. Certain information regarding
periodic payment certificates........"
57. Certain information regarding
periodic payment plans..............."
58. Certain other information
regarding periodic payment plans....."
59. Financial Statements
(Instruction 1(c) to Form S-6).........Statement of Financial Condition
-iv-
711.1
<PAGE>
Note: Part A of this Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
1ST DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)
_______________________________________________________________________________
The Trust is a unit investment trust designated 1st Discount
Series ("Municipal Discount Trust") with an underlying portfolio of long-term
tax-exempt bonds 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 under existing
law but may be subject to state and local taxes. (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 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
112976.1
<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 issued by or on behalf of states, municipalities
and public authorities (the "Bonds"). 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.) The Bonds were acquired at prices which resulted in the portfolio
as a whole being purchased at a deep discount from par value. The portfolio may
also include bonds issued at a substantial original issue discount some of which
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
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 as
of the Evaluation Date, if any, 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
1/7844th 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
A-2
112976.1
<PAGE>
Prospectus.) The Units being offered hereby are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market.
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 5.65% of the Public
Offering Price, which is the same as 5.988% of the net amount invested in Bonds
per Unit. In addition, accrued interest to expected date of settlement including
earned original issue discount 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 $667.73 plus accrued interest of $13.31 under the monthly
distribution plan, $16.03 under the semi-annual distribution plan and $16.03
under the annual distribution plan, for a total of $681.04, $683.76 and $683.76,
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
A-3
112976.1
<PAGE>
plans, see "Summary of Essential Information". See "Estimated Long Term
Return and Estimated Current Return" in Part B of this Prospectus.)
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 under "Interest and Principal Distributions" in Part B of the
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 5.65% (5.988% 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 "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
112976.1
<PAGE>
MUNICIPAL SECURITIES TRUST
1ST DISCOUNT SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: September 23, 1981 Evaluation Time: 4:00 p.m.
Principal Amount of Bonds ... $4,170,000 New York Time.
Number of Units ............. 7,844 Minimum Principal Distribution:
Fractional Undivided Inter- $1.00 per Unit.
est in Trust per Unit ..... 1/7844 Weighted Average Life
Principal Amount of to Maturity: 17.5 Years.
Bonds per Unit ............ $531.62 Minimum Value of Trust:
Secondary Market Public Trust may be terminated if
Offering Price** value of Trust is less than
Aggregate Bid Price $4,400,000 in principal amount
of Bonds in Trust ....... $4,957,803+++ of Bonds.
Divided by 7,844 Units .... $632.05 Mandatory Termination Date:
Plus Sales Charge of 5.65% The earlier of December 31,
of Public Offering Price $35.68 2030 or the disposition of the
Public Offering Price last Bond in the Trust.
per Unit ................ $667.73+ Trustee***: The Bank of New
Redemption and Sponsor's York.
Repurchase Price Trustee's Annual Fee: Monthly
per Unit .................. $632.05+ plan $1.08 per $1,000; semi-
+++ annual plan $.60 per $1,000;
++++ and annual plan is $.40 per
Excess of Secondary Market $1,000.
Public Offering Price Evaluator: Kenny S&P Evaluation
over Redemption and Services.
Sponsor's Repurchase Evaluator's Fee for Each
Price per Unit ............ $35.68++++ Evaluation: Minimum of $12
Difference between Public plus $.25 per each issue of
Offering Price per Unit Bonds in excess of 50 issues
and Principal Amount per (treating separate maturities
Unit Premium/(Discount) ... $136.11 as separate issues).
Sponsor: Reich & Tang
Distributors L.P.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $40.95 $40.95 $40.95
Less estimated annual fees and
expenses ............................ 1.46 1.14 1.03
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $39.49 $39.81 $39.92
Estimated interest distribution# ...... 3.29 19.90 39.92
Estimated daily interest accrual# ..... .1097 .1106 .1109
Estimated current return#++ ........... 5.91% 5.96% 5.98%
Estimated long term return++ .......... 4.92% 4.97% 4.98%
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
112976.1
<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 $13.31 monthly, $16.03 semi-annually and
$16.03 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
112976.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 8 issues representing
obligations of issuers located in 7 states. The Sponsor has participated as a
sole underwriter or manager, co-manager or member of an underwriting syndicate
from which 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 24% are hospital revenue bonds; none are issued in
connection with the financing of nuclear generating facilities; and
approximately 21.3% 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. Eight issues representing $4,170,000 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: Coal Power 1, Federally Assisted Housing 1,
Hospital 2, Housing 1, Port Authority 1, Toll Road Revenue 1, and Water and
Sewer Revenue 1. For an explanation of the significance of these factors see
"The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1995, $1,115,000 (approximately 26.7% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, none were Zero Coupon Bonds. Approximately
73.3% of the aggregate principal amount of the Bonds in the Trust were purchased
at a "market" discount from par value at maturity, none 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,
$105,000 of the principal amount of the Bond in portfolio no. 3 was sold
and is no longer contained in the Trust. $35,000 of the principal
amount of the Bond in portfolio no. 7 was called and is no longer
contained in the Trust.
A-7
112976.1
<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 8,536 $771.75 $48.76 $49.21 $49.34 $11.58
December 31, 1994 8,145 647.98 44.79 45.22 45.34 51.49
December 31, 1995 7,844 648.38 42.11 42.53 42.65 54.74
- --------
* 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
112976.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, 1st Discount Series:
We have audited the accompanying statement of net assets, including the
portfolio, of Municipal Securities Trust, 1st Discount Series 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 the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Municipal Securities Trust, 1st
Discount Series 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>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost$2,541,329) $ 4,957,773
Excess of other assets over total liabilities 128,139
------------
Net assets 7,844 units of fractional undivided
interest outstanding,$648.38 per unit) $ 5,085,912
------------
------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
Statements of Operations
<CAPTION>
Years ended December 31,
------------ ------------ ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 345,068 379,326 430,308
------------ ------------ ------------
Expenses:
Trustee's fees 7,894 8,851 8,903
Evaluator's fees 3,286 3,307 3,298
------------ ------------ ------------
Total expenses 11,180 12,158 12,201
------------ ------------ ------------
Investment income, net 333,888 367,168 418,107
------------ ------------ ------------
Realized and unrealized gain (loss) on investments:
Net realized gain on
bonds sold or called 252,735 246,625 73,382
Unrealized appreciation
(depreciation) for the year 190,977 (839,562) 279,636
------------ ------------ ------------
Net gain (loss)
on investments 443,712 (592,937) 353,018
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations $ 777,600 (225,769) 771,125
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
Statements of Changes in Net Assets
<TABLE>
Years ended December 31,
------------ - ------------ - ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 333,888 367,168 418,107
Net realized gain on
bonds sold or called 252,735 246,625 73,382
Unrealized appreciation
(depreciation) for the year 190,977 (839,562) 279,636
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations 777,600 (225,769) 771,125
------------ ------------ ------------
Distributions To Certificateholders:
Investment income 336,633 369,912 418,070
Principal 429,380 423,454 98,847
Redemptions:
Interest 4,986 7,457 1,778
Principal 198,470 283,276 67,471
------------ ------------ ------------
Total distributions and
redemptions 969,469 1,084,099 586,166
------------ ------------ ------------
Total (decrease) increase (191,869) (1,309,868) 184,959
Net assets at beginning of the year 5,277,781 6,587,649 6,402,690
------------ ------------ ------------
Net assets at end of year (including
undistributed net investment
income of$128,113, $135,844 and
$146,045, respectively) $ 5,085,912 5,277,781 6,587,649
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Municipal Securities Trust, 1st Discount Series (Trust) was organized on
September 23, 1981 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 Kenny by 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.
F-5
<PAGE>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
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. 301, 391 and 92 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 $ 8,043,970
Less initial gross underwriting commission (442,330)
7,601,640
----------
Cost of securities sold or called (5,060,311)
Net unrealized appreciation 2,416,444
Undistributed net investment income 128,113
Distributions in excess of proceeds
from bonds sold or called (26)
----------
Total $ 5,085,912
==========
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 11,000 units of fractional undivided
interest of the Trust as of the date of deposit.
F-6
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
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 $ 500,000 Connecticut Health & Education NR 7.000% 7/01/01 @ 100 S.F. $ 576,585
Facilities Authority, Yale-New Haven 7/01/2012 None
Hospital, Series B Revenue
2 430,000 Escambia County Utilities Authority, AAA 9.500 9/01/10 @ 100 S.F. 560,608
Florida, Water and Sewer Revenue 9/01/2011 None
Bonds Series 1981 (MBIA Insured)
3 690,000 State of Indiana, Indiana Toll Road AAA 9.000 1/01/11 @ 100 S.F. 977,689
Commission East-West Toll Bond 1/01/2015 None
Revenue Bonds, 1980 Series
4 500,000 City of Davenport, Iowa, Hospital NR 7.200 7/01/99 @ 100 S.F. 548,320
Facility Revenue Bonds, Series 1979, 7/01/2009 None
St. Luke's Hospital Project
5 460,000 Massachusetts Port Authority AA 7.125 7/01/98 @ 100 S.F. 465,801
Refunding Revenue Series 1978 7/01/2012 1/29/96 @ 101 Ref.
6 655,000 Minnesota Housing Finance Agency, AA+ 6.250 2/01/98 @ 100 S.F. 666,921
Housing Development, 1977 Series A 2/01/2020 2/01/96 @ 102 Ref.
7 235,000 City of Vadnais Heights, Ramsey A+ 7.500 Currently @ 100 S.F. 235,792
County, Minnesota, Housing 8/01/2009 2/01/96 @ 100 Ref.
Development Revenue Bonds, Series
A, Riverwood Housing Foundation
Project
8 700,000 Sam Rayburn Municipal Power Agency AAA 8.000 No Sinking Fund 926,057
(Texas) Power Supply System Revenue 9/01/2012 None
Bonds, Series 1981
------------ ------------
$ 4,170,000 $ 4,957,773
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
F-7
MUNICIPAL SECURITIES TRUST, 1ST DISCOUNT SERIES
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 gross unrealized appreciation of $2,416,444.
(4) The annual interest income, based upon bonds held at December 31, 1995, to
the Trust is $321,288.
(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 A of this Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
2nd DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)
_______________________________________________________________________________
The Trust is a unit investment trust designated 2nd Discount
Series ("Municipal Discount Trust") with an underlying portfolio of long-term
tax-exempt bonds 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 under existing
law but may be subject to state and local taxes. (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 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
113566.1
<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 issued by or on behalf of states,
municipalities and public authorities (the "Bonds"). 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.) The Bonds were acquired at prices which resulted in the portfolio
as a whole being purchased at a deep discount from par value. Some of the Bonds
in the portfolio may have been purchased at an aggregate premium over par. As a
result of the Tax Reform Act of 1986, capital gains based upon the difference,
if any, between the value of the Bonds at maturity, redemption or sale and
their original purchase price at discount (plus the earned portion of original
issue discount) are generally taxed at the same rates applicable to ordinary
income, although the Revenue Reconciliation Act of 1990 restored advantageous
treatment for capital gains in certain circumstances. (See "Tax Status" in Part
B of this Prospectus.) 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 as of the Evaluation Date, if any, 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 1/6264th
undivided
A-2
113566.1
<PAGE>
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.
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 5.19% of the
Public Offering Price, which is the same as 5.474% of the net amount invested
in Bonds per Unit. In addition, accrued interest to expected date of settlement
including earned original issue discount 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 $557.11 plus accrued interest of $11.71 under the
monthly distribution plan, $13.55 under the semi-annual distribution plan and
$13.64 under the annual distribution plan, for a total of $568.82, $570.66 and
$570.75, 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
A-3
113566.1
<PAGE>
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 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 under "Interest and Principal
Distributions" in Part B of the 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 5.19% (5.474% 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 "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
113566.1
<PAGE>
MUNICIPAL SECURITIES TRUST
2nd DISCOUNT SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: November 4, 1981 Minimum Principal Distribution:
Principal Amount of Bonds ... $2,960,000 $1.00 per Unit.
Number of Units ............. 6,264 Weighted Average Life
Fractional Undivided Inter- to Maturity: 13.6 Years.
est in Trust per Unit ..... 1/6264 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $472.54 value of Trust is less than
Secondary Market Public $4,400,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $3,317,642+++ The earlier of December 31,
Divided by 6,264 Units .... $529.64 2030 or the disposition of the
Plus Sales Charge of 5.19% last Bond in the Trust.
of Public Offering Price $27.47 Trustee***: The Bank of
Public Offering Price New York.
per Unit ................ $557.11+ 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 .................. $529.64+ 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 $12
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............ $27.47++++ 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) ... $84.57 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# ......... $33.70 $33.70 $33.70
Less estimated annual fees and
expenses ............................ 1.58 1.25 1.16
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $32.12 $32.45 $32.54
Estimated interest distribution# ...... 2.67 16.22 32.54
Estimated daily interest accrual# ..... .0892 .0901 .0903
Estimated current return#++ ........... 5.77% 5.82% 5.84%
Estimated long term return++ .......... 4.48% 4.55% 4.56%
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
113566.1
<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 $11.71 monthly, $13.55 semi-annually and
$13.64 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
113566.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 8 issues representing
obligations of issuers located in 4 states. The Sponsor has not participated as
a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the Bonds
were acquired. None of the Bonds are obligations of state and local housing
authorities; approximately 23% 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. Eight
issues representing $2,960,000 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: Airport Revenue 1, Electric Revenue 1, Hospital 3, Industrial
Development 1, Port Authority 1 and University 1. 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. 100% of the aggregate principal amount of the Bonds in the
Trust were purchased at a "market" discount from par value at maturity, none
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.
A-7
113566.1
<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 6,934 $571.24 $39.06 $39.47 $39.58 $110.75
December 31, 1994 6,547 504.90 32.99 33.37 33.47 17.90
December 31, 1995 6,264 542.55 32.33 32.69 32.78 -0-
- --------
* 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
113566.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, 2nd Discount Series:
We have audited the accompanying statement of net assets, including the
portfolio, of Municipal Securities Trust, 2nd Discount Series 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 the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Municipal Securities Trust, 2nd
Discount Series 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>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $1,705,666) $ 3,312,432
Excess of other assets over total liabilities 86,097
------------
Net assets 6,264 units of fractional undivided
interest outstanding,$542.55 per unit) $ 3,398,529
------------
------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
Statements of Operations
<CAPTION>
Years ended December 31,
------------ ---- ------------ ----- ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 216,521 230,443 279,462
------------ ------------ ------------
Expenses:
Trustee's fees 5,924 6,601 7,428
Evaluator's fees 3,286 3,309 3,298
------------ ------------ ------------
Total expenses 9,210 9,910 10,726
------------ ------------ ------------
Investment income, net 207,311 220,533 268,736
------------ ------------ ------------
Realized and unrealized gain (loss) on investments:
Net realized gain on
bonds sold or called 68,232 133,205 356,836
Unrealized appreciation
(depreciation) for the year 176,180 (459,111) (145,042)
------------ ------------ ------------
Net gain (loss)
on investments 244,412 (325,906) 211,794
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations $ 451,723 (105,373) 480,530
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ - ------------ - ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 207,311 220,533 268,736
Net realized gain on
bonds sold or called 68,232 133,205 356,836
Unrealized appreciation
(depreciation) for the year 176,180 (459,111) (145,042)
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations 451,723 (105,373) 480,530
------------ ------------ ------------
Distributions To Certificateholders:
Investment income 207,437 221,424 273,695
Principal - 120,022 770,778
Redemptions:
Interest 4,447 6,196 2,584
Principal 146,865 202,429 85,969
------------ ------------ ------------
Total distributions and
redemptions 358,749 550,071 1,133,026
------------ ------------ ------------
Total increase (decrease) 92,974 (655,444) (652,496)
Net assets at beginning of year 3,305,555 3,960,999 4,613,495
------------ ------------ ------------
Net assets at end of year (including
undistributed net investment
income of$80,886, $85,459 and
$92,546 respectively) $ 3,398,529 3,305,555 3,960,999
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Organization
Municipal Securities Trust, 2nd Discount Series (Trust) was organized on
November 4, 1981 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 controls 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, 2ND DISCOUNT SERIES
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. 283, 387 and 136 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 $ 7,152,649
Less initial gross underwriting commission (393,360)
6,759,289
----------
Cost of securities sold or called (5,053,623)
Net unrealized appreciation 1,606,766
Undistributed net investment income 80,886
Undistributed proceeds from bonds sold or called 5,211
----------
Total $ 3,398,529
==========
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 11,000 units of fractional undivided
interest of the Trust as of the date of deposit.
F-6
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
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 $ 205,000 Connecticut Health & Education NR 7.000% 7/01/01 @ 100 S.F. $ 236,400
Facilities Authority, Yale-New 7/01/2012 None
Haven Hospital, Series B Revenue
2 380,000 Illinois Health Facilities Aaa* 6.600 Currently @ 100 S.F. 400,668
Authority Revenue Bonds, Series 10/01/2003 None
1977 (Evangelical Hospital
Association-Oakbrook Ill.)
3 495,000 Decatur Illinois Industrial Aa2* 6.625 1/29/96 @ 100 S.F. 496,074
Development Revenue, Archer 10/01/2006 None
Daniels Midland Co.
4 435,000 Eastern Illinois University AAA 7.375 Currently @ 100 S.F. 492,390
Auxiliary Facility System, 4/01/2006 None
Refunding & Improvement, Series A
5 515,000 Massachusetts Port Authority AA 7.125 7/01/98 @ 100 S.F. 521,494
Refunding Revenue Series 1978 7/01/2012 1/29/96 @ 101 Ref.
6 475,000 Houston Texas, Airport Systems AAA 7.200 7/01/00 @ 100 S.F. 577,743
Revenue Bonds, Series 1979 A 7/01/2013 None
7 360,000 Sam Rayburn Municipal Power AAA 8.000 No Sinking Fund 476,258
Agency (Texas) Power Supply 9/01/2012 None
System Revenue Bonds, Series 1981
8 95,000 Southeast Texas Hospital AAA 7.500 No Sinking Fund 111,405
Financing Agency Revenue, 12/01/2009 None
Memorial Hospital System Revenue
------------ ------------
$ 2,960,000 $ 3,312,432
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
MUNICIPAL SECURITIES TRUST, 2ND DISCOUNT SERIES
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 gross unrealized appreciation of $1,606,766.
(4) The annual interest income, based upon bonds held at December 31, 1995, to
the Trust is $211,124.
(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.
1173.3
<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
-2-
1173.3
<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,
-3-
1173.3
<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
-4-
1173.3
<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
-5-
1173.3
<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
-6-
1173.3
<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
-7-
1173.3
<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
-8-
1173.3
<PAGE>
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
-9-
1173.3
<PAGE>
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
-10-
1173.3
<PAGE>
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
-11-
1173.3
<PAGE>
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-
-12-
1173.3
<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
-13-
1173.3
<PAGE>
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
-14-
1173.3
<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
-15-
1173.3
<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
-16-
1173.3
<PAGE>
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.
-17-
1173.3
<PAGE>
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.
-18-
1173.3
<PAGE>
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
-19-
1173.3
<PAGE>
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
-20-
1173.3
<PAGE>
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
-21-
1173.3
<PAGE>
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
-22-
1173.3
<PAGE>
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
-23-
1173.3
<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
-24-
1173.3
<PAGE>
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
-25-
1173.3
<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.
-26-
1173.3
<PAGE>
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.
-27-
1173.3
<PAGE>
(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
-28-
1173.3
<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
-29-
1173.3
<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.
-30-
1173.3
<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.
-31-
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
-32-
1173.3
<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.
-33-
1173.3
<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
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Consent of Independent Auditors.
Consent of Counsel (included in Exhibits 99.3.1 and 99.3.1.1).
Consent of the Evaluator including Confirmation of Ratings
(included in Exhibit 99.5.1).
The following exhibits:
99.1.1 -- Form of Reference Trust Agreement, as amended (filed as
Exhibit 1.1 to Amendment No. 1 to Form S-6 Registration
Statement Nos. 2-73986 and 2-74227 of Municipal Securities
Trust, 1st and 2nd Discount Series, respectively, on
September 23, 1981 and November 4, 1981, respectively, and
incorporated herein by reference).
*99.1.1.1 -- Trust Indenture and Agreement for Municipal Securities
Trust, Series 12 (and Subsequent Series).
99.1.1.2 -- Trust Indenture and Agreement for New York Municipal
Trust, Series 1 (and Subsequent Series) (filed as Exhibit
1.1.1. to Post Effective Amendment No. 19 to Form S-6
Registration Statement No. 2-62505 of New York Municipal
Trust, Series 1 on April 25, 1996 and incorporated herein
by reference).
99.1.3.4 -- Certificate of Formation and Agreement among Limited Partners,
as amended, of Reich & Tang Distributors L.P. (filed as Exhibit
99.1.3.4 to Post-Effective Amendment No. 10 to Form S-6
Registration Statements Nos. 2-98914, 33-00376, 33-00856 and
33-01869 of Municipal Securities Trust, Series 28, 39th
Discount Series, Series 29 & 40th Discount Series and Series 30
& 41st Discount Series, respectively, on October 31, 1995 and
incorporated herein by reference).
99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4 to
Amendment No. 1 to Form S-6 Registration Statement No. 2-62605
of Municipal Securities Trust, Series 1 on December 15, 1978
and incorporated herein by reference).
99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement Nos. 2-73986 and 2-74227 of
Municipal Securities Trust, 1st and 2nd Discount Series,
respectively, on September 23, 1981 and November 4, 1981,
respectively, and incorporated herein by reference).
II-1
1667.1
<PAGE>
99.3.1 -- Opinion of Battle Fowler LLP (formerly Battle, Fowler, Jaffin &
Kheel) as to the legality of the securities being registered,
including their consent to the delivery thereof and to the use
of their name under the headings "Tax Status" and "Legal
Opinions" in the Prospectus, and to the filing of their opinion
regarding tax status of the Trust (filed as Exhibit 3.1 to
Amendment No. 1 to Form S-6 Registration Statement Nos. 2-73986
and 2-74227 of Municipal Securities Trust, 1st and 2nd Discount
Series, respectively, on September 23, 1981 and November 4,
1981, respectively, and incorporated herein by reference).
99.3.1.1 -- Opinion of Battle Fowler LLP (formerly Battle, Fowler, Jaffin &
Kheel) as to tax status of securities being registered (filed
as Exhibit 3.1.1 to Amendment No. 1 to Form S-6 Registration
Statement Nos. 2-73986 and 2-74227 of Municipal Securities
Trust, 1st and 2nd Discount Series, respectively, on
September 23, 1981 and November 4, 1981, respectively, and
incorporated herein by reference).
*99.5.1 -- Consents of the Evaluator including Confirmation of Ratings.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities Trust,
Series 6, Signature Series, Gabelli Entertainment and Media
Trust on November 16, 1995 and incorporated herein by
reference).
*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-2
1667.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Municipal Securities Trust, 1st and 2nd Discount Series, certify
that they have met all of the requirements for effectiveness of this Post-
Effective Amendment to the Registration Statements pursuant to Rule 485(b)
under the Securities Act of 1933. The registrants have duly caused this Post-
Effective Amendment to the Registration Statements to be signed on their
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 17th day of April, 1996.
MUNICIPAL SECURITIES TRUST,
1ST AND 2ND DISCOUNT SERIES
(Registrants)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: PETER J. DeMARCO
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below
by the following persons who constitute the principal officers and a majority
of the directors of Reich & Tang Asset Management, Inc., the general partner
of Reich & Tang Distributors L.P., the Depositor, in the capacities and on the
dates indicated.
Name Title Date
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) April 17, 1996
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director )By: PETER J. DeMARCO
STEVEN W. DUFF Director ) Attorney-in-Fact*
BERNADETTE N. FINN Vice President )
LORRAINE C. HYSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Amendment No. 1 to Registration Statement No. 33-62627 on November 16,
1995.
II-3
1667.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in these Post-Effective Amendments to the Registration
Statement of our report on the financial statements of Municipal Securities
Trust, Discount Series 1 and Municipal Securities Trust, Discount Series 2
included herein and to the reference to our firm under the heading "Independent
Auditors" in the Prospectus which is part of this Registration Statement.
KPMG Peat Marwick LLP
New York, New York
April 17, 1996
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
99.1.1 Form of Reference Trust Agreement, as amended
(filed as Exhibit 1.1 to Amendment No. 1 to
Form S-6 Registration Statements Nos. 2-73986
and 2-74227 of Municipal Securities Trust, 1st
and 2nd Discount Series, respectively, on
September 23, 1981 and November 4, 1981,
respectively, and incorporated herein by
reference).
99.1.1.1 Trust Indenture and Agreement for
Municipal Securities Trust, Series 12
(and Subsequent Series)...................
99.1.1.2 Trust Indenture and Agreement for New
York Municipal Trust, Series 1 (and
Subsequent Series) (filed as Exhibit
1.1.1. to Post Effective Amendment
No. 19 to Form S-6 Registration
Statement No. 2-62505 of New York
Municipal Trust, Series 1 on April
25, 1996 and incorporated herein by
reference).
99.1.3.4 Certificate of Formation and Agreement among
Limited Partners, as amended, of Reich & Tang
Distributors L.P. (filed as Exhibit 99.1.3.4 to
Post-Effective Amendment No. 10 to Form S-6
Registration Statements Nos. 2-98914, 33-00376,
33-00856 and 33-01869 of Municipal Securities
Trust, Series 28, 39th Discount Series, Series
29 & 40th Discount Series and Series 30 & 41st
Discount Series, respectively, on October 31,
1995 and incorporated herein by reference).
99.1.4 Form of Agreement Among Underwriters (filed as
Exhibit 1.4 to Amendment No. 1 to Form S-6
Registration Statement No. 2-62605 of Municipal
Securities Trust, Series 1 on December 15, 1978
and incorporated herein by reference).
99.2.1 Form of Certificate (filed as Exhibit 2.1 to
Amendment No. 1 to Form S-6 Registration
Statement Nos. 2-73986 and 2-74227 of Municipal
Securities Trust, 1st and 2nd Discount Series,
respectively, on September 23, 1981 and
November 4, 1981, respectively, and incorporated
herein by reference).
99.3.1 Opinion of Battle Fowler LLP (formerly Battle,
Fowler, Jaffin & Kheel) as to the legality of
the securities being registered, including their
consent to the delivery thereof and to the use
of their name under the headings "Tax Status"
and "Legal Opinions" in the Prospectus, and to
the delivery of their opinion regarding tax
-1-
1667.1
<PAGE>
Exhibit Description Page No.
status of the Trust (filed as Exhibit 3.1 to
Amendment No. 1 to Form S-6 Registration
Statement Nos. 2-73986 and 2-74227 of Municipal
Securities Trust, 1st and 2nd Discount Series,
respectively, on September 23, 1981 and
November 4, 1981, respectively, and incorporated
herein by reference).
99.3.1.1 Opinion of Battle Fowler LLP (formerly Battle,
Fowler, Jaffin & Kheel) as to tax status of
securities being registered, including their
consent to the delivery thereof and to the use
of their name under the heading "Tax Status" in
the Prospectus (filed as Exhibit 3.1.1 to
Amendment No. 1 to Form S-6 Registration
Statement Nos. 2-73986 and 2-74227 of Municipal
Securities Trust, 1st and 2nd Discount Series,
respectively, on September 23, 1981 and
November 4, 1981, respectively, and incorporated
herein by reference).
99.5.1 Consents of the Evaluator including Confirmation
of Ratings...................
99.6.0 Power of Attorney of Reich & Tang Distributors
L.P., the Depositor, by its officers and a
majority of its Directors (filed as Exhibit
99.6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity
Securities Trust, Series 6, Signature Series,
Gabelli Entertainment and Media Trust on
November 16, 1995 and incorporated herein by
reference).
27 Financial Data Schedule(s) (for EDGAR filing only).
-2-
1667.1
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and
supporting schedules as of the end of the most
current period and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000355440
<NAME> MST DISC SERIES 1
<SERIES>
<NUMBER> 1
<NAME> MST DISC SERIES 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2541329
<INVESTMENTS-AT-VALUE> 4957773
<RECEIVABLES> 139630
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5097403
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11491
<TOTAL-LIABILITIES> 11491
<SENIOR-EQUITY> 5085912
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 128113
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 629572
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2416444
<NET-ASSETS> 5085912
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345068
<OTHER-INCOME> 0
<EXPENSES-NET> 11180
<NET-INVESTMENT-INCOME> 333888
<REALIZED-GAINS-CURRENT> 252735
<APPREC-INCREASE-CURRENT> 190977
<NET-CHANGE-FROM-OPS> 777600
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 336633
<DISTRIBUTIONS-OF-GAINS> 429380
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 301
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (191869)
<ACCUMULATED-NII-PRIOR> 135844
<ACCUMULATED-GAINS-PRIOR> (1696)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 647.98
<PER-SHARE-NII> 42.11
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 54.74
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 648.38
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and
supporting schedules as of the end of the most
current period and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000355836
<NAME> MST DISC SERIES 2
<SERIES>
<NUMBER> 1
<NAME> MST DISC SERIES 2
<S> <C>
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1705666
<INVESTMENTS-AT-VALUE> 3312432
<RECEIVABLES> 75305
<ASSETS-OTHER> 11162
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3398899
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370
<TOTAL-LIABILITIES> 370
<SENIOR-EQUITY> 3398529
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 80886
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 152050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1606766
<NET-ASSETS> 3398529
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 216521
<OTHER-INCOME> 0
<EXPENSES-NET> 9210
<NET-INVESTMENT-INCOME> 207311
<REALIZED-GAINS-CURRENT> 68232
<APPREC-INCREASE-CURRENT> 176180
<NET-CHANGE-FROM-OPS> 451723
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 207437
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 283
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 92974
<ACCUMULATED-NII-PRIOR> 85459
<ACCUMULATED-GAINS-PRIOR> 26
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 504.90
<PER-SHARE-NII> 32.33
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 542.55
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
MUNICIPAL SECURITIES TRUST
SERIES 12 (and Subsequent Series)
-------------
TRUST INDENTURE AND AGREEMENT
Among
BEAR, STEARNS, & CO.
As Depositor
BRADFORD TRUST COMPANY
As Trustee
and
STANDARD & POOR'S CORPORATION
As Evaluator
-------------
Dated: February 2, 1982
359994.1
<PAGE>
TRUST INDENTURE AND AGREEMENT
MUNICIPAL TRUST SECURITIES
SERIES 12 (and Subsequent Series)
CONTENTS
Article and Section Page
INTRODUCTION............................................................... 1
ARTICLE I DEFINITIONS; CERTIFICATES........................................ 3
1.1 Definitions.................................................. 3
1.2 Form of Certificate.......................................... 5
ARTICLE II DEPOSIT OF BONDS; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES............................. 11
2.1 Deposit of Bonds............................................. 11
2.2 Declaration of Trust......................................... 11
2.3 Issue of Certificates........................................ 12
2.4 Form of Certificates......................................... 12
2.5 Certain Contracts Satisfactory............................... 12
ARTICLE III ADMINISTRATION OF TRUST........................................ 12
3.1 Initial Cost................................................. 12
3.2 Interest Account............................................. 12
3.3 Principal Account............................................ 13
3.4 Reserve Account.............................................. 13
3.5 Distributions................................................ 14
3.6 Distribution Statements...................................... 17
3.7 Sale of Bonds................................................ 19
3.8 Refunding Bonds.............................................. 20
3.9 Counsel...................................................... 20
3.10 Notice and Sale by Trustee.................................. 21
3.11 Trustee Not to Amortize..................................... 21
3.12 Action by Trustee Regarding Bonds........................... 21
3.13 Notice of Change in Principal Account....................... 21
3.14 Limited Replacement of Special Bonds........................ 21
ARTICLE IV EVALUATION OF BONDS; EVALUATOR.................................. 23
4.1 Evaluation of Bonds.......................................... 23
4.2 Compensation of Evaluator.................................... 24
4.3 Liability of Evaluator....................................... 24
4.4 Resignation, Removal and Other Matters....................... 24
ARTICLE V Trust Evaluation; Redemption, Purchase,
Transfer, Interchange or Replacement of
Certificates................................................. 26
5.1 Trust Evaluation............................................. 26
-i-
359994.1
<PAGE>
5.2 Redemptions by Trustee; Purchases by
Depositor................................................. 27
5.3 Transfer or Interchange of Certificates...................... 29
5.4 Certificates Mutilated, Destroyed, Stolen or
Lost...................................................... 30
ARTICLE VI TRUSTEE; REMOVAL OF DEPOSITOR.................................. 31
6.1 General Definition of Trustee's Liabilities,
Rights and Duties; Removal of Depositor................... 31
6.2 Books, Records and Reports................................... 34
6.3 Indenture and List of Bonds on File.......................... 34
6.4 Compensation................................................. 34
6.5 Removal and Resignation of the Trustee;
Successor................................................. 35
6.6 Qualifications of Trustee.................................... 36
ARTICLE VII DEPOSITOR...................................................... 37
7.1 Succession................................................... 37
7.2 Resignation of Depositor..................................... 37
7.3 Liability of Depositor and Indemnification................... 37
ARTICLE VIII RIGHTS OF CERTIFICATEHOLDERS.................................. 39
8.1 Beneficiaries of Trust....................................... 39
8.2 Rights, Terms and Conditions................................. 39
ARTICLE IX ADDITIONAL COVENANTS; MISCELLANEOUS
PROVISIONS................................................... 40
9.1 Amendments................................................... 40
9.2 Termination.................................................. 40
9.3 Construction................................................. 42
9.4 Registration of Certificates................................. 42
9.5 Written Notice............................................... 42
9.6 Severability................................................. 43
9.7 Dissolution of Depositor Not to Terminate.................... 43
-----------------
This Table of Contents does not constitute part of the Indenture.
-ii-
359994.1
<PAGE>
MUNICIPAL SECURITIES TRUST
SERIES 12
(A UNIT INVESTMENT TRUST)
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED FEBRUARY 2, 1982
This Trust Indenture and Agreement ("Indenture") dated February 2,
1982, among Bear, Stearns & Co. as Depositor, Bradford Trust Company, as Trustee
and Standard & Poor's Corporation, as Evaluator.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee and the Evaluator agree as follows:
INTRODUCTION
The Depositor concurrently with the execution and delivery hereof is
establishing Municipal Securities Trust, Series 12, wherein certain interest
bearing obligations will be deposited by the Depositor, to be held by the
Trustee in trust for the use and benefit of the registered holders of
certificates of ownership to be issued as hereinafter provided. The parties
hereto are entering into this Indenture for the purpose of establishing certain
of the terms, covenants and conditions of Municipal Securities Trust, Series 12
and of each additional series of such Trust which may be established from time
to time hereafter. For Municipal Securities Trust, Series 12 and each subsequent
series of Municipal Securities Trust (as to which this Indenture is to be
applicable) the parties hereto shall execute a separate Reference Trust
Agreement incorporating by reference this Indenture and effecting any amendment,
supplement or variation from or to such incorporation by reference with respect
to the related series and specifying for that series (i) the Bonds deposited in
trust and the number of Units delivered by the Trustee in exchange for the Bonds
pursuant to Section 2.03; (ii) the initial fractional undivided interest
represented by each Unit; (iii) the first Record Date; (iv) the first Payment
Date; (v) the Evaluator's fee; (vi) the liquidation amount for purposes of
Section 6.01(g); (vii) the Trustee's fee and
359994.1
<PAGE>
(viii) any other change or addition contemplated or permitted by this Indenture.
-2-
359994.1
<PAGE>
ARTICLE I
Definitions; Certificates
Section 1.1 Definitions: Whenever used in this Indenture the
following words and phrases, unless the context clearly indicates otherwise,
shall have the following meanings:
(1) "Bonds" shall mean the bonds, including Contract Bonds, (i)
which are listed in Schedule A to the Reference Trust Agreement or (ii)
which have been received by the Trust in exchange, substitution or
replacement pursuant to Sections 3.8 and 3.14 hereof, as may from time to
time continue to be held as part of the Trust and unless the context
otherwise requires.
(2) "Business Day" shall mean any day other than a Saturday, Sunday,
or, in the City of New York, a legal holiday or a day on which banking
institutions are authorized by law to close.
(3) "Certificate" shall mean any one of the certificates
substantially in the form hereinafter recited executed by the Trustee and
the Depositor evidencing ownership of an undivided fractional interest in
the Trust.
(4) "Certificateholder" shall mean the registered holder of any
Certificate as recorded on the books of the Trustee, his legal
representatives and heirs and the successors of any corporation,
partnership or legal entity which is a registered holder of any
Certificate, and as such shall be deemed a beneficiary of the trust
created by the Indenture to the extent of his pro rata share thereof.
(5) "Contract Bonds" shall mean Bonds which are to be acquired by
the Trust pursuant to contracts, including (i) Bonds listed in Schedule A
to the Reference Trust Agreement and (ii) Bonds which the Depositor has
contracted to purchase for the Trust pursuant to Section 3.14.
(6) "Depositor" shall mean Bear, Stearns & Co. or its
successors or any successor Depositor appointed as herein
provided.
(7) "Evaluator" shall mean Standard & Poor's Corporation, or its
successors or any successor Evaluator appointed as herein provided.
(8) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
-3-
359994.1
<PAGE>
(9) "Payment Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(10) "Plan Units" shall mean fractional Units offered by the
Depositor pursuant to the reinvestment plans described in the final
prospectus of the Trust filed within the appropriate registration forms
under the Securities Act of 1933.
(11) "Record Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(12) "Redemption Form" shall mean the form provided by the Trustee
at the request of holders of Plan Units for the purpose of redeeming such
Units, as such form may be reasonably acceptable to the Depositor and the
Trustee from time to time.
(13) "Reference Trust Agreement" shall mean the Indenture for the
particular series of Municipal Securities Trust into which the terms of
this Indenture are incorporated.
(14) The words "herein," "hereby," "herewith," "hereof,"
"hereinafter," "hereunder," "hereinabove," "hereafter," "heretofore" and
similar words or phrases of reference and association shall refer to this
Indenture in its entirety.
(15) "Trust" shall mean the trust created by this Indenture, which
shall consist of the Bonds held pursuant and subject to this Indenture
together with all undistributed interest received or accrued thereon, and
any undistributed cash realized from the sale, redemption, liquidation, or
maturity thereof. Such amounts as may be on deposit in the Reserve Account
hereinafter established shall be excluded from the definition of the
Trust.
(16) "Trustee" shall mean Bradford Trust Company, or its successors
or any successor Trustee appointed as herein provided.
(17) "Unit" shall mean the fractional undivided interest in and
ownership of the Trust initially specified in Part II of the Reference
Trust Agreement, the denominator of which shall be decreased by the number
of any such Units redeemed as provided in Section 5.02.
(18) Words importing singular number shall include the plural number
in each case and vice versa, and words importing person shall include
corporations and associations, as well as natural persons.
-4-
359994.1
<PAGE>
Section 1.2 Form of Certificate: The form of Certificate evidencing
ownership of fractional undivided interests in each Trust shall be substantially
as follows:
No. 1 -
CERTIFICATE OF OWNERSHIP
____________________
--evidencing-- PLAN OF DISTRIBUTION
A Fractional Undivided MONTHLY_____________
Interest SEMI-ANNUAL_________
ANNUAL______________
--in--
MUNICIPAL SECURITIES TRUST
SERIES _____
This is to certify that _______________________________________ is
the owner and registered holder of this Certificate evidencing the ownership of
____ unit(s) of fractional undivided interest in Municipal Securities Trust of
the above Series (hereinafter called the "Trust") created under the laws of the
State of New York by the Trust Indenture and Agreement (hereinafter called the
"Indenture") dated ____________, 19__, among BEAR, STEARNS & CO. (hereinafter
called the "Depositor"), BRADFORD TRUST COMPANY (hereinafter called the
"Trustee"), and STANDARD & POOR'S CORPORATION (hereinafter called the
"Evaluator"). The Trust consists of (1) such of the interest-bearing tax-exempt
obligations deposited in trust and listed in Schedule A of the Indenture and any
other securities that may be deposited in the Trust in exchange or substitution
therefor by reason of replacement of failed contracts or refunding of the
obligations initially deposited in trust, in accordance with the Indenture, as
may from time to time continue to be held in the Trust and (2) such cash amounts
as from time to time may be held in the Interest Account and the Principal
Account maintained under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of units set forth on the face hereof and the denominator of which shall
be the total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture, all of the terms, conditions and covenants of
which are incorporated herein as if fully set forth at length.
-5-
359994.1
<PAGE>
The registered holder of this Certificate is entitled at any time
upon tender of this Certificate to the Trustee at its corporate trust office in
the City of New York, and upon payment of any tax or other governmental charges,
to receive on the seventh calendar day following the day on which such tender is
made, or, if such calendar day is not a business day, on the first business day
prior to such calendar day, an amount in cash equal to the evaluation of the
fractional undivided interest in the Trust evidenced by this Certificate, upon
the basis provided for in the Indenture. The right of redemption may be
suspended and the date of payment may be postponed for any period during which
the New York Stock Exchange is closed or trading on the Exchange is restricted,
or for any period during which an emergency exists so that disposal of the
obligations held in the Trust is not reasonably practicable or it is not
reasonably practicable fairly to determine the value of such obligations or for
such other periods as the Securities and Exchange Commission may by order
permit.
The Trustee is irrevocably authorized in its discretion, in lieu of
redeeming this Certificate if tendered for redemption, to sell this Certificate
in the over-the-counter market or by private sale for the account of the
Certificateholder at a price 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 this
Certificate. In the event of any such sale the Trustee shall pay the net
proceeds thereof to the Certificateholder on the day he would otherwise be
entitled to receive payment of the redemption price.
Interest received by the Trustee as part of the Trust (including
interest accrued and unpaid prior to the day of deposit of any obligation in the
Trust and that part of the proceeds of the sale, liquidation, redemption or
maturity of any such obligation which represents accrued interest) shall be
credited by the Trustee to the Interest Account. The fractional undivided
interest represented by this Certificate in the balance in the Interest Account
(after the deductions referred to below) shall first be computed and paid to all
Certificateholders as of ____________, 19__. The next computation shall be made
as of ____________, 19__, and thereafter as of the first day of June and
December of each year commencing with the first such day following the date of
this Certificate.
An amount equal in cash to the fractional undivided interest in the
Interest Account (on the basis set forth below) computed as set forth above
shall be distributed on the 15th day of the respective months, or within a
reasonable period of time thereafter, to the registered holder of this
Certificate at the close of business on the first day of the month in which such
distribution is made.
-6-
359994.1
<PAGE>
The Trustee shall make semi-annual distributions from the Interest
Account on the basis of one-half of the estimated annual interest income
expected by the Trustee to be received by the Trust in the ensuing twelve month
period, after deduction of the estimated costs and expenses to be incurred
during such period, except as otherwise hereafter provided. To the extent cash
in the Interest Account is insufficient for any distribution the Trustee shall
advance its own funds sufficient therefor and shall be entitled to
reimbursement, without interest, out of interest received by the Trust
subsequent to such advance. The estimated annual interest income expected by the
Trustee to be received by the Trust shall be recomputed by the Trustee whenever
Bonds in the Trust mature, are redeemed, retired, sold or replaced.
All moneys (other than interest) received by the Trustee, as part of
the Trust (including amounts received from the sale, liquidation, redemption or
maturity of any obligation held in the Trust) shall be credited by the Trustee
to a separate Principal Account. The fractional undivided interest represented
by this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing ____________ 1, 19__. An amount in cash equal
to the fractional undivided interest in the Principal Account, computed as set
forth above, shall be distributed on the fifteenth day of the respective months,
or within a reasonable time thereafter, to the registered holder of this
Certificate at the close of business on the first day of such month. The Trustee
shall not be required to make a distribution from the Principal Account unless
the cash balance on deposit therein available for such distribution shall be
sufficient to permit the distribution of at least $1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made
to the registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account
and Principal Account, as more fully set forth in the Indenture, for
redemptions, compensation of the Trustee, compensation of the Evaluator,
reimbursement of certain expenses incurred by or on behalf of the Trustee,
certain legal and auditing expenses, and payment of, or the establishment of a
reserve for, applicable taxes, if any.
Within a reasonable period of time after the end of each calendar
year the Trustee shall furnish to the registered holder of this Certificate a
statement setting forth, among other things, the amounts received and deductions
therefrom and the amounts distributed during the preceding year in respect of
-7-
359994.1
<PAGE>
interest on, sales, redemptions or maturities of, obligations
held in the Trust.
This Certificate shall be transferable by the registered holder
hereof by presentation and surrender hereof at the corporate trust office of the
Trustee properly endorsed on the reverse hereof or accompanied by a written
instrument or instruments of transfer in form satisfactory to the Trustee and
executed by the registered holder hereof or his authorized attorney.
Certificates of this Series are interchangeable for one or more Certificates in
an equal aggregate number of Units of fractional undivided interest at the
corporate trust office of the Trustee, in denominations of a single Unit of
fractional undivided interest or any multiple thereof.
The holder of this Certificate, by virtue of the acceptance hereof,
assents to and shall be bound by the terms of the Indenture, a copy of which is
on file and available for inspection at the corporate trust office of the
Trustee, to which reference is made for all the terms, conditions and covenants
thereof.
The Trustee may deem and treat the person in whose name this
Certificate is registered upon the books of the Trustee as the owner hereof for
all purposes and the Trustee shall not be affected by any notice to the
contrary.
The Indenture and the trust created thereby shall terminate upon the
maturity, redemption, sale or other disposition of the last security held
thereunder, provided, however, that in no event shall the Indenture and the
trust continue beyond the end of the calendar year preceding the fiftieth
anniversary of the execution of the Indenture. The Indenture also provides that
the Trust may be terminated at any time by the written consent of the holders of
Certificates representing 100% of the Units outstanding and under certain
circumstances which include a decrease in the value of the Trust to less than
40% of the initial aggregate principal amount of the securities deposited in the
Trust. Upon any termination the Trustee shall fully liquidate the securities
then held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture. Upon
termination, the Trustee shall be under no further obligation with respect to
the Trust, except to hold the funds in trust without interest until distribution
as aforesaid and shall have no duty upon any such termination to communicate
with the holder hereof other than by mail at the address of such holder
appearing on the registration books of the Trustee.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
-8-
359994.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. has caused this Certificate
to be executed in facsimile in its partnership name by a General Partner and
Bradford Trust Company, as Trustee, has caused this Certificate to be executed
in its corporate name by an authorized officer.
Date: BEAR, STEARNS & CO.,
Depositor
_________________________________
BRADFORD TRUST COMPANY,
Trustee
By _______________________________
Authorized Officer
-9-
359994.1
<PAGE>
FORM OF ASSIGNMENT
For Value Received ___________________________________________
hereby sells, assigns and transfers unto ____________________________________
_________________ the within Certificate and does hereby irrevocably constitute
and appoint attorney, to transfer the within Certificate on the books of the
Trustee, with full power of substitution in the premises.
Date: ______________________________________
Notice: The signature(s) to this assignment must correspond with the
name(s) as written above upon the face of this Certificate in every
particular, without alteration or enlargement or any change whatever.
Statement Regarding Distributions
This Certificate by its terms provides that distributions from the
Interest Account shall first be computed as of ____________ ___, 19__, and
thereafter as of the first day of June and December of each year, and an amount
in cash equal to the share of the Interest Account represented by this
Certificate distributed on the fifteenth day of the respective months next
following such computations, or within a reasonable period of time thereafter,
to the registered holder of this Certificate at the close of business on the
first day of the month in which the distribution is made.
If monthly distributions have been selected, the fractional
undivided interest represented by this Certificate in the balance in the
Interest Account, after the first distribution and after the deductions referred
to in the Certificate, will be computed monthly as of the first day of each
month of each year, commencing with _____________ 1, 19__, and an amount in cash
as thus computed will be distributed to the holder hereof at such date of
computation (which also is the Record Date) on or shortly after the fifteenth
day of each month.
If annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest Account,
after the first distribution and after the deductions referred to in the
Certificate, will be computed annually as of the first day of December of each
year, commencing with December 1, 19__, and an amount in cash as thus computed
will be distributed to the holder hereof at such date of computation (which is
also the Record Date) on or shortly after each December 15.
-10-
359994.1
<PAGE>
All Certificateholders of record as of _________________________
________, 19__, however, regardless of the plan of distribution
selected, will receive the distribution to be made on or shortly after
_______________ 15, 19__, and thereafter, distributions will be made monthly,
semi-annually or annually depending upon the plan of distribution, chosen by the
holder hereof.
The plan of distribution chosen by the registered holder hereof may
be changed by written notice to the Trustee not later than November 1 in any
calendar year by surrender to the Trustee of this Certificate, together with a
completed form for selection of plan of distribution provided by the Trustee. A
plan of distribution shall continue in effect until changed as herein provided.
A change in a plan of distribution may only be made as indicated herein and will
be effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
[end of certificate]
ARTICLE II
Deposit of Bonds; Declaration of Trust;
Form and Issuance of Certificates
Section 2.1 Deposit of Bonds: The Depositor, concurrently with the
execution and delivery of the Reference Trust Agreement, has deposited with the
Trustee in trust the Bonds listed in Schedule A to the Reference Trust Agreement
in bearer form or registered in the name of the Trustee, or its nominee, or duly
endorsed in blank or accompanied by all necessary instruments of assignment and
transfer in proper form to be held, managed and applied by the Trustee as herein
provided. The Depositor shall deliver the bonds listed on said Schedule A to the
Trustee which were not actually delivered concurrently with the execution and
delivery of the Reference Trust Agreement within 90 days after said execution
and delivery, or if the contract to buy such bond between the Depositor and
seller is terminated by the seller thereof for any reason beyond the control of
the Depositor, the Depositor shall forthwith take the remedial action specified
in Section 3.14.
Section 2.2 Declaration of Trust: The Trustee declares that it holds
and will hold the Trust as Trustee in trust upon the trusts herein set forth for
the use and benefit of all present and future Certificateholders.
-11-
359994.1
<PAGE>
Section 2.3 Issue of Certificates: The Trustee hereby acknowledges
receipt of the deposit referred to in Section 2.1, and simultaneously with the
receipt of said deposit has executed Certificates substantially in the form
above recited representing the ownership of the number of Units specified in
Part II of the Reference Trust Agreement.
Section 2.4 Form of Certificates: Each Certificate referred to in
Section 2.3 is, and each Certificate hereafter issued shall be, in substantially
the form hereinabove recited, numbered serially for identification, in fully
registered form, transferable only on the books of the Trustee as herein
provided, executed manually by an authorized officer of the Trustee and in
facsimile by a General Partner of the Depositor.
Section 2.5 Certain Contracts Satisfactory: The Depositor approves
as satisfactory in form and substance the contracts to be entered into or
assumed by the Trustee with regard to any Bonds listed in Schedule A to the
Reference Trust Agreement and authorizes the Trustee on behalf of the Trust to
enter into or assume such contracts and otherwise to carry out the terms and
provisions thereof or to take other appropriate action in order to complete the
deposit of the Bonds covered thereby into the Trust.
ARTICLE III
Administration of Trust
Section 3.1 Initial Cost: The cost of the initial preparation,
printing and execution of the Certificates and this Indenture, the initial fees
of the Trustee and its counsel, and the initial fees of the Evaluator and other
reasonable expenses in connection therewith, shall be paid by the Depositor,
provided, however, that the liability on the part of the Depositor for such
initial costs, fees and expenses shall not include any fees, costs or other
expenses incurred in connection herewith after the execution of this Indenture
and the deposit referred to in Section 2.1.
Section 3.2 Interest Account: The Trustee shall collect the interest
on the Bonds as it becomes payable (including all interest accrued but unpaid
prior to the date of deposit of the Bonds in trust and including that part of
the proceeds of the sale, liquidation, redemption or maturity of any Bonds which
represents accrued interest thereon and including all moneys representing
penalties for the failure to make timely payments on the Bonds, or as liquidated
damages for default or breach of any condition or term of the Bonds or of any
instrument underlying such Bonds) and credit such interest to a separate account
to be known as the "Interest Account."
-12-
359994.1
<PAGE>
Section 3.3 Principal Account: (a) The Bonds and all moneys (except
moneys held by the Trustee pursuant to subsection (b) hereof), other than
amounts credited to the Interest Account, received by the Trustee in respect of
the Bonds shall be credited to a separate account to be known as the "Principal
Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Bonds or deposited to secure such purchases are hereby declared to be
held specially by the Trustee for such purchases and shall not be deemed to be
part of the Principal Account until (i) the Depositor fails to timely purchase a
Contract Bond and has not given the Failed Contract Notice (as defined in
Section 3.14) at which time the moneys and/or letters of credit attributable to
the Contract Bond not purchased by the Depositor shall be credited to the
Principal Account; or (ii) the Depositor has given the Trustee the Failed
Contract Notice at which time the moneys and/or letters of credit attributable
to failed contracts referred to in such Notice shall be credited to the
Principal Account; provided, however, that if the Depositor also notifies the
Trustee in the Failed Contract Notice that it has purchased or entered into a
contract to purchase a New Bond (as defined in Section 3.14), the Trustee shall
not credit such moneys and/or letters of credit to the Principal Account unless
the New Bond shall also have failed or is not delivered by the Depositor within
two business days after the settlement date of such New Bond, in which event the
Trustee shall forthwith credit such moneys and/or letters of credit to the
Principal Account. The Trustee shall in any case forthwith credit to the
Principal Account, and/or cause the Depositor to deposit in the Principal
Account, the difference, if any, between the purchase price of the failed
Contract Bond and the purchase price of the New Bond, together with any sales
charge and accrued interest applicable to such difference and distribute such
moneys to Certificateholders pursuant to Section 3.5.
Section 3.4 Reserve Account: From time to time the Trustee shall
withdraw from the cash on deposit in the Interest Account or the Principal
Account such amounts as it, in its sole discretion, shall deem requisite to
establish a reserve for any applicable taxes or other governmental charges that
may be payable out of or by the Trust. Such amounts so withdrawn shall be
credited to separate account which shall be known as the "Reserve Account." The
Trustee shall not be required to distribute to the Certificateholders any of the
amounts in the Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for payment of
any applicable taxes or other governmental charges, then it shall promptly
deposit such amounts in the appropriate account from which withdrawn or, if the
Trust has been terminated or is in the process of termination, the Trustee shall
distribute to each Certificateholder such holder's interest in the Reserve
Account in accordance with Section 9.2.
-13-
359994.1
<PAGE>
Section 3.5 Distributions: On or before each Record Date, the
Trustee shall:
(a) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account, and pay to itself
individually the amounts that it is at the time entitled to receive
pursuant to Section 6.4 or pursuant to this Section 3.5;
(b) deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account, and pay to the
Evaluator the amount that it is at the time entitled to receive pursuant
to Section 4.02;
(c) deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account, and pay an
amount equal to the unpaid fees and expenses, if any, of counsel pursuant
to Section 3.9 as certified to it by the Depositor.
On each semi-annual Payment Date or within a reasonable period of
time thereafter, the Trustee shall distribute by mail to each Certificateholder
of record at the close of business on the preceding Record Date, at the post
office address appearing on the registration books of the Trustee, such holder's
pro rata share of the balance in the Interest Account computed as of the Record
Date on the basis of one-half of the estimated annual interest income to the
Trust for the ensuing twelve months, after deduction of the estimated costs and
expenses to be incurred during such period.
In the event the amount on deposit in the Interest Account on a
semi-annual Payment Date is not sufficient for the payment of the amount of
interest to be distributed on the basis of the aforesaid computation, the
Trustee shall advance out of its own funds and cause to be deposited in and
credited to the Interest Account such amount as may be required to permit
payment of the interest distribution to be made on such Payment Date and shall
be entitled to be reimbursed, without interest, out of interest received by the
Trust on the first Record Date following the date of such advance on which such
reimbursement may be made without reducing the amount in the Interest Account to
an amount less than that required for the next ensuing interest distribution.
In lieu of the semi-annual distributions of interest provided above,
a Certificateholder may elect to receive monthly payments from the Interest
Account. Certificateholders desiring to receive monthly distributions and who
purchase their Certificates prior to the Record Date for the first distribution
may elect at the time of purchase to receive distributions on a
-14-
359994.1
<PAGE>
monthly basis by notice to the Trustee. Such notice shall be effective with
respect to subsequent distributions until changed by further notice to the
Trustee. In October of each year after the initial public offering of the Units,
the Trustee shall furnish each Certificateholder a card to be returned to the
Trustee by November 1 of such year if the Certificateholder wishes to change his
plan of distribution. Those wishing to change shall so indicate on the card and
return it to the Trustee and accompany the card by the surrender of the
Certificate to which it relates. Changes may be made only as herein provided and
will become effective as of the following December 2 to continue until further
notice.
For monthly distributions, the share of the balance in the Interest
Account to be distributed to a Certificateholder who has elected to receive
monthly distributions, after the first distribution, shall be computed as of
each monthly Record Date, and distribution made as provided herein on or shortly
after the fifteenth day of the month of computation to the Certificateholder of
record on such date of computation. Such computation shall be made on the basis
of one-twelfth of the estimated annual interest income to the Trust for the
ensuing twelve months for the account of Certificateholders who have elected to
receive monthly distributions, after deduction of the estimated costs and
expenses to be incurred on behalf of such Certificateholders during the twelve
month period for which such interest income has been estimated.
For annual distributions, the share of the balance in the Interest
Account to be distributed to a Certificateholder who has elected to receive
annual distributions, after the first distribution, shall be computed as of each
annual Record Date, and distribution made as provided herein on or shortly after
the fifteenth day of the month of computation to the Certificateholder of record
on such date of computation. Such computation shall be made on the basis of the
estimated annual interest income to the Trust for the ensuing twelve months for
the account of Certificateholders who have elected to receive annual
distributions, after deduction of the estimated costs and expenses to be
incurred on behalf of such Certificateholders during the twelve month period for
which such interest income has been estimated.
To the extent practicable, the Trustee shall allocate the expenses
of the Trust among Units, giving effect to differences in administrative and
operational cost among those who have chosen to receive distributions monthly,
semi-annually and annually.
In the event the amount on deposit in the Interest Account for a
monthly distribution is not sufficient for the payment of the amount of interest
to be distributed to
-15-
359994.1
<PAGE>
Certificateholders participating in such distribution on the basis of the
aforesaid computation, the Trustee shall advance out of its own funds and cause
to be deposited in and credited to the Interest Account such amounts as may be
required to permit payment of the monthly interest distribution to be made as
aforesaid and shall be entitled to be reimbursed, without interest, out of
interest received by the Trust subsequent to the date of such advance and
subject to the condition that the funds in or available for the Interest Account
will not be reduced in an amount less than required for the next ensuing
distribution of interest. Distributions to Certificateholders who are
participating in either of the optional plans for distribution of interest shall
not be affected because of advancements by the Trustee for the purpose of
equalizing distributions to Certificateholders participating in the other plan.
On each semi-annual Payment Date or within a reasonable period of
time thereafter, the Trustee shall distribute by mail to each Certificateholder
of record at the close of business on the preceding Record Date, at the post
office address appearing on the registration books of the Trustee, such holder's
pro rata share of the cash balance of the Principal Account computed as of the
Record Date. The Trustee shall not be required to make a distribution from the
Principal Account unless the cash balance on deposit therein available for
distribution shall be sufficient to permit distribution of at least $1.00 per
Unit.
If the Depositor (i) fails to replace any failed Special Bond or
(ii) is unable or fails to enter into any contract for the purchase of any New
Bond in accordance with Section 3.14, the Trustee shall distribute to all
Certificateholders the principal, accrued interest and sales charge attributable
to such Special Bonds at the next Monthly Payment Date which is more than thirty
days after the expiration of the Purchase Period (as defined in Section 3.14) or
at such earlier time or in such manner as the Trustee in its sole discretion
deems to be in the best interest of the Certificateholders.
If any contract for a New Bond in replacement of a Special Bond
shall fail, the Trustee shall distribute the principal, accrued interest and
sales charge attributable to the Special Bond to the Certificateholders at the
next Monthly Payment Date which is more than thirty days after the date on which
the contract in respect of such New Bond failed or at such earlier time or in
such earlier manner as the Trustee in its sole discretion determines to be in
the best interest of the Certificateholders.
If, at the end of the Purchase Period, less than all moneys
attributable to a failed Special Bond have been applied or allocated by the
Trustee pursuant to a contract to purchase New
-16-
359994.1
<PAGE>
Bonds, the Trustee shall distribute the remaining moneys to Certificateholders
at the next Monthly Payment Date which is more than thirty days after the end of
the Purchase Period or at such earlier time thereafter as the Trustee in its
sole discretion deems to be in the best interest of the Certificateholders.
The amounts to be distributed to each Certificateholder shall be
that pro rata share of the cash balance of the Interest and Principal Accounts,
computed as set forth above, as shall be represented by the Units evidenced by
the outstanding Certificate or Certificates registered in the name of such
Certificateholder.
In the computation of each such share, fractions of less than one
cent shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Interest Account or the Principal Account shall be held
in the same manner as other amounts subsequently deposited in each such accounts
respectively.
For the purpose of distribution, as herein provided, the holders of
record on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Certificateholder of record. Nothing herein shall be construed to
prevent the payment of amounts from the Interest Account and the Principal
Account to individual Certificateholders by means of one check, draft or other
proper instrument, provided that the appropriate statement of such distribution
shall be furnished therewith as provided in Section 3.6 hereof.
Section 3.6 Distribution Statements: With each distribution from the
Interest or Principal Account the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in an
accompanying statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
In the event that the issuer of any of the Bonds shall fail to make
payment when due of any interest or principal and such failure results in a
change in the amount which would otherwise be paid as a distribution of interest
the Trustee shall, with the first such distribution to each Certificateholder
following such failure, set forth in an accompanying statement (a) the name of
the issuer and the Bond, (b) the amount of the reduction in the distribution per
Unit resulting from such failure, (c) the percentage of the aggregate principal
amount of Bonds which such Bond represents, and (d) to the extent then
determined, information regarding any disposition or legal action with respect
to such Bonds.
-17-
359994.1
<PAGE>
Within a reasonable period of time after the last business day of
each calendar year, the Trustee shall furnish to each person who at any time
during such calendar year was a Certificateholder a statement setting forth,
with respect to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds,
(2) the amounts paid for purchases of New Bonds pursuant to Section
3.14, and for redemptions of Units pursuant to Section 5.2,
(3) the deductions for applicable taxes and fees and
expenses of the Trustee, the Evaluator and counsel pursuant
to Section 3.9, and
(4) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year;
(B) as to the Principal Account:
(1) the date and the net proceeds received from the sale, maturity,
liquidation or redemption of any of the Bonds, excluding any portion
thereof credited to the Interest Account,
(2) the amounts paid for purchases of New Bonds pursuant to Section
3.14, and for redemptions of Units pursuant to Section 5.2,
(3) the deductions for payment of applicable taxes and
fees and expenses of the Trustee, the Evaluator and counsel
pursuant to Section 3.9, and
(4) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year; and
(C) the following information:
(1) a list of Bonds disposed of or acquired during such calendar
year and a list of Bonds as of the last business day of such calendar
year,
(2) the number of Units outstanding on the last
business day of such calendar year,
-18-
359994.1
<PAGE>
(3) the Net Asset Value per Unit based on the last Trust Evaluation
made during such calendar year, and
(4) the amounts actually distributed to Certificateholders during
such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts per
Unit outstanding on the Record Dates for such distributions and the status
of such distributions for Federal income tax purposes.
Section 3.7 Sale of Bonds: In order to maintain the sound investment
character of the Trust, the Depositor may direct the Trustee to sell or
liquidate Bonds at such prices and times and in such manner as shall be
determined by the Depositor, provided that the Depositor has determined that any
one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the
payment of principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law or in
equity seeking to restrain or enjoin the payment of principal or interest
on any such Bond or that there exists any other legal question or
impediment affecting such Bonds or the payment of principal or interest
thereon;
(c) that there has occurred any breach of covenant or warranty in
any trust indenture or other document relating to the issuer or guarantor
of the Bonds which would adversely affect either immediately or
contingently the payment of debt service on such Bonds, or their general
credit standing, or otherwise impair the sound investment character of
such Bonds;
(d) that there has been a default in the payment of principal of or
interest on any other outstanding obligations of an issuer or guarantor of
such Bonds;
(e) that in the case of revenue Bonds, the revenues and income of
the facility or project or other special funds expressly charged and
pledged for debt service on any such Bonds shall fall substantially below
the estimated revenues or income calculated by the engineers or other
proper officials charged with the acquisition, construction or operation
of such facility or project, so that, in the opinion of the Depositor, the
retention of such Bonds would be detrimental to the sound investment
character of the Trust and to the interests of the Certificateholders; or
-19-
359994.1
<PAGE>
(f) that the price of any such Bonds has declined to such an extent,
or such other market or credit factor exists, that in the opinion of the
Depositor the retention of such Bonds would be detrimental to the
interests of the Certificateholders.
Upon receipt of such direction from the Depositor, upon which the
Trustee shall rely, the Trustee shall proceed to sell the specified Bonds in
accordance with such direction. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any sale made pursuant
to any such direction, or by reason of the failure of the Depositor to give any
such direction, and in the absence of such direction the Trustee shall have no
duty to sell any Bonds under this Section 3.7 except to the extent otherwise
required by Section 3.10 of this Indenture. All proceeds from the disposition of
Bonds pursuant to this Section 3.7 which represent accrued interest thereon
shall be deposited in the Interest Account and the balance thereof in the
Principal Account and shall thereafter be distributed in accordance with Section
3.5.
Section 3.8 Refunding Bonds: In the event that an offer shall be
made to issue new securities in exchange or substitution for any issue of Bonds
pursuant to a plan for the refunding or refinancing of such Bonds, or an
exchange offer therefor; or tenders of Bonds for sinking fund or other cash
redemptions shall be solicited, the Depositor shall instruct the Trustee in
writing to reject such offer and either to hold or sell such Bonds, except that
if (1) the issuer is in default with respect to such Bonds or (2) in the opinion
of the Depositor, given in writing to the Trustee, the issuer will probably
default with respect to such Bonds in the reasonably foreseeable future, the
Depositor shall instruct the Trustee in writing to accept or reject such offer
to take any other action with respect thereto as the Depositor may deem proper.
Any security so received in exchange shall be deposited hereunder and shall be
subject to the terms and conditions of this Indenture to the same extent as the
Bonds originally deposited hereunder. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder, including an identification of the Bonds eliminated and the
Bonds substituted therefor.
Section 3.9 Counsel: The Depositor may employ from time to time as
it may deem necessary a firm of attorneys for any legal services that may be
required in connection with the disposition of Bonds pursuant to Section 3.7 or
the substitution of any securities for Bonds as the result of any refunding
permitted under Section 3.8. The fees and expenses of such counsel shall be paid
by the Trustee from the Interest and Principal Accounts as provided for in
Section 3.5(c) hereof.
-20-
359994.1
<PAGE>
Section 3.10 Notice and Sale by Trustee: If at any time the
principal of or Interest on any of the Bonds shall be in default and not paid or
provision for payment thereof shall not have been duly made, the Trustee shall
notify the Depositor thereof. If within thirty days after such notification the
Depositor has not given any instruction in writing to sell or to hold or has not
taken any other action in connection with such Bonds, the Trustee shall sell
such Bonds forthwith, and the Trustee shall not be liable or responsible in any
way for depreciation or loss incurred by reason of such sale.
Section 3.11 Trustee Not to Amortize: Unless required by law,
nothing in this Indenture, or otherwise, shall be construed to require the
Trustee to make any adjustments between the Interest and Principal Accounts by
reason of any premium or discount in respect of any of the Bonds.
Section 3.12 Action by Trustee Regarding Bonds: In the event that
the Trustee shall have been notified at any time of any action to be taken or
proposed to be taken by holders of the Bonds (including but not limited to the
making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to any amendment or supplement to any
indenture or other instrument under or pursuant to which the Bonds have been
issued) the Trustee shall promptly notify the Depositor and shall thereupon take
such action or refrain from taking such action as the Depositor shall in writing
direct; provided, however, that if the Depositor shall not within five business
days of the giving of such notice to the Depositor direct the Trustee to take or
refrain from taking any action, the Trustee shall take such action as it, in its
sole discretion, shall deem advisable. Neither the Depositor nor the Trustee
shall be liable to any person for any action or failure to take action with
respect to this Section 3.12.
Section 3.13 Notice of Change in Principal Account: The Trustee
shall give prompt written notice to the Depositor and the Evaluator of all
amounts credited to or withdrawn from the Principal Account pursuant to any
provisions of this Article III, and the balance of such account after giving
effect to such credit or withdrawal.
Section 3.14 Limited Replacement of Special Bonds: If any contract
in respect of Contract Bonds other than a contract to purchase a New Bond (as
defined below), including those purchased on a when, as and if issued basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Bonds being herein called the
"Special Bonds"), the Depositor shall notify the Trustee (such notice being
herein called the "Failed Contract Notice") of its inability to deliver the
failed Special Bond to the Trustee after it is notified in writing that the
Special Bond
-21-
359994.1
<PAGE>
will not be delivered by the seller thereof to the Depositor. Prior to, or
simultaneously with, giving the Trustee the Failed Contract Notice, or within a
maximum of twenty days after giving such Notice (such twenty day period being
herein called the "Purchase Period"), the Depositor shall, if possible, purchase
or enter into the contract, if any, to purchase an obligation to be held as a
Bond hereunder (herein called the "New Bond") as part of the Trust in
replacement of the failed Special Bond, subject to the satisfaction of all of
the following conditions in the case of each purchase or contract to purchase:
(a) The New Bonds (i) shall be tax-exempt bonds issued by states or
their political subdivisions, (ii) shall have a fixed maturity date (whether or
not entitled to the benefits of any sinking, redemption, purchase or similar
fund) not exceeding the date of maturity of the Special Bond it replaces and not
less than ten years after the date of purchase, (iii) shall bear fixed interest
at a rate not less than that of the Special Bond which it replaces, and shall be
purchased at a price that results in a yield to maturity at least equal to that
of the Special Bond it replaces on the date the Special Bond was deposited in
the Trust, (iv) shall be payable as to principal and interest in United States
currency, and (v) shall not be a when, as and if issued Bond.
(b) Each New Bond shall be rated at least equal to the Special Bond
it replaces and "A" or better by Standard & Poor's Corporation or Moody's
Investors Service, Inc., or comparably rated by any other nationally recognized
credit rating service rating debt obligations which shall be designated by the
Depositor and shall be satisfactory to the Trustee.
(c) The purchase price of the New Bonds (exclusive of accrued
interest) shall not exceed the principal attributable to the Special Bonds.
(d) The Depositor shall furnish a notice to the Trustee (which may
be part of the Failed Contract Notice) in respect of the New Bond purchased or
to be purchased that shall (i) identify the New Bonds, (ii) state that the
contract to purchase, if any, entered into by the Depositor is satisfactory in
form and substance, and (iii) state that the foregoing conditions of clauses (a)
through (c) have been satisfied with respect to the New Bonds.
Upon satisfaction of the foregoing conditions with respect to any
New Bond, the Depositor shall pay the purchase price for the New Bond from its
own resources or, if the Trustee has credited any moneys and/or letters of
credit attributable to the failed Special Bond to the Principal Account, the
Trustee shall pay the purchase price of the New Bond upon directions from the
Depositor from the moneys and/or letters of credit so
-22-
359994.1
<PAGE>
credited to the Principal Account. If the Depositor has paid the purchase price,
and, in addition, the Trustee has credited moneys of the Depositor to the
Principal Account, the Trustee shall forthwith return to the Depositor the
portion of such moneys that is not properly distributable to Certificateholders
pursuant to Section 3.5.
Whenever a New Bond is acquired by the Depositor pursuant to the
provisions of this Section 3.14, the Trustee shall, within five days thereafter,
mail to all Certificateholders notices of such acquisition, including an
identification of the failed Special Bonds and the New Bonds acquired. The
purchase price of the New Bonds shall be paid out of the principal attributable
to the failed Special Bonds. The Trustee shall not be liable or responsible in
any way for depreciation or loss incurred by reason of any purchase made
pursuant to any such directions and in the absence of such directions the
Trustee shall have no duty to purchase any Bonds under this Indenture. The
Depositor shall not be liable for any failure to instruct the Trustee to
purchase any New Bonds or for errors of judgment in respect of this Section
3.14; provided, however, that this provision shall not protect the Depositor
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
ARTICLE IV
Evaluation of Bonds; Evaluator
Section 4.1 Evaluation of Bonds: The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor upon request
the value of each issue of Bonds (treating separate maturities of Bonds as
separate issues) as of the close of trading on the New York Stock Exchange on
the bid side of the market on the days on which the Trust Evaluation is required
by Section 5.1, and, in addition, as of the close of trading on the New York
Stock Exchange on the offering side of the market until such time as the
Evaluator and Trustee have been informed by the Depositor that the initial
public offering has been completed and thereafter if the secondary market for
the Units is maintained based on offering side values, such additional
evaluation being made as of the last business day of each calendar week
effective for transactions during the following week commencing with the week
after the initial public offering has been completed. If the Bonds are listed on
a national securities exchange, the current bid or offering side evaluation
shall be determined on the basis of the closing sale price on such exchange
(unless the Evaluator deems such price inappropriate as a basis for valuation).
If the Bonds are not so listed or, if so listed and
-23-
359994.1
<PAGE>
the principal market therefor is other than on such exchange or there is no such
closing sale price available, the current bid or offering price evaluation shall
be based on the closing sale prices of such Bonds on the over-the-counter market
(unless the Evaluator deems such prices inappropriate as a basis for valuation),
or, if no such closing sale prices are available (i) on the basis of current bid
or offering prices for the Bonds, (ii) if bid or offering prices are not
available for any Bonds, on the basis of current bid or offering prices for
comparable obligations, (iii) by determining the value of the Bonds on the bid
or offering side of the market by appraisal or (iv) by any combination of the
above.
For each evaluation, the Evaluator shall also determine and furnish
to the Trustee and the Depositor the aggregate of (a) the value of all Bonds on
the basis of such evaluation and (b) on the basis of the information furnished
to the Evaluator by the Trustee pursuant to Section 3.13, cash on hand in the
Trust.
For the purpose of this Section 4.1, the Evaluator may obtain
current bid or offering prices for the obligations from investment dealers or
brokers (including the Depositor) that customarily deal in tax-exempt
obligations or from any other reporting service or source of information which
the Evaluator deems appropriate.
Section 4.2 Compensation of Evaluator: As compensation for its
services hereunder, the Evaluator shall be paid the fee specified in Part II of
the Reference Trust Agreement, provided that if at any time the fee of the
Trustee shall have been increased pursuant to Section 6.4, the compensation of
the Evaluator shall at the same time be ratably increased.
Section 4.3 Liability of Evaluator: The Trustee, the Depositor and
the Certificateholders may rely on any evaluation furnished by the Evaluator and
shall have no responsibility for the accuracy thereof. The determinations made
by the Evaluator hereunder shall be made in good faith upon the basis of the
best information available to it. The Evaluator shall be under no liability to
the Trustee, the Depositor or the Certificateholders for errors in judgment or
any action taken in good faith, provided, however, that this provision shall not
protect the Evaluator against any liability to which it would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
Section 4.4 Resignation, Removal and Other Matters: (a) The
Evaluator may resign and be discharged hereunder, by executing an instrument in
writing resigning as the Evaluator and filing the same with the Depositor and
the Trustee
-24-
359994.1
<PAGE>
not less than sixty days before the date specified in such instrument when,
subject to Section 4.4(c), such resignation is to take effect. Upon receiving
such notice of resignation, the Depositor and the Trustee shall use their best
efforts to appoint a successor Evaluator having qualifications and at a rate of
compensation satisfactory to the Depositor and the Trustee. Such appointment
shall be made by written instrument executed by the Depositor and the Trustee,
in duplicate, one copy of which shall be delivered to the resigning Evaluator
and one copy to the successor Evaluator. The Depositor or the Trustee may remove
the Evaluator at any time upon thirty days' written notice and appoint a
successor Evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor and the Trustee, in duplicate, one
copy of which shall be delivered to the Evaluator so removed and one copy to the
successor Evaluator. Notice of such resignation or removal and appointment of a
successor Evaluator shall be mailed by the Trustee to each Certificateholder.
(b) If the Evaluator resigns and no successor Evaluator shall have
been appointed and have accepted appointment within thirty days after receipt of
the notice of resignation by the Depositor and the Trustee, the Evaluator may
forthwith apply to a court of competent jurisdiction for the appointment of a
successor Evaluator. Such court may thereupon, after such notice, if any, as it
may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute,
acknowledge and deliver to the Depositor and the Trustee an instrument accepting
such appointment hereunder, and such successor Evaluator without any further
act, deed or conveyance shall become vested with all the rights, powers, duties
and obligations of its predecessor hereunder with like effect as if originally
named the Evaluator herein and shall be bound by all the terms and conditions of
this Indenture. Any resignation or removal of the Evaluator and appointment of a
successor Evaluator pursuant to this Section 4.4 shall become effective upon
such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Evaluator hereunder shall be a party, shall
be the successor Evaluator under this Indenture without the execution or filing
of any paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which the Evaluator may seek to retain certain powers, rights
and privileges theretofore obtaining for any period of time following such
merger or consolidation, to the contrary notwithstanding.
-25-
359994.1
<PAGE>
ARTICLE V
Trust Evaluation; Redemption, Purchase, Transfer,
Interchange or Replacement of Certificates
Section 5.1 Trust Evaluation: The Trustee shall make an evaluation
of the Trust (herein called a "Trust Evaluation") as of the closing of trading
on the New York Stock Exchange, (i) or the last business day of each of the
months of December and June, (ii) on the day on which any Unit is tendered for
redemption to the Sponsor for repurchase unless such tender shall occur
subsequent to the close of trading on the New York Stock Exchange, in which
event on the business day next following such day, and on each business day
after the initial public offering has been completed, and (iii) on any other day
desired by the Trustee or requested by the Depositor. Each Trust Evaluation
shall take into account and itemize separately:
(1) the cash on hand in the Trust (other than cash declared held
specially for purchase of Contract Bonds) or moneys in the process of
being collected from matured interest coupons or Bonds matured or called
for redemption prior to maturity,
(2) the value of each issue of the Bonds (including Contract Bonds)
on the bid side of the market as determined by the Evaluator pursuant to
Section 4.1, and
(3) accrued but unpaid interest on the Bonds.
For each such Trust Evaluation there shall be deducted from the sum of the
above:
(1) amounts representing any applicable taxes or governmental
charges payable out of the Trust and for which no deductions shall have
previously been made for the purpose of addition to the Reserve Account,
(2) amounts representing accrued expenses of the Trust including but
not limited to unpaid fees and expenses (including legal and auditing
expenses) of the Trustee, the Evaluator and counsel pursuant to Section
3.9 on or prior to the date of evaluation, and
(3) cash held for distribution to Certificateholders of record as of
a date prior to the evaluation then being made.
The value of the pro rata share of each Unit determined on the basis of any such
Trust Evaluation is referred to herein as the "Net Asset Value" per Unit.
-26-
359994.1
<PAGE>
Section 5.2 Redemptions by Trustee; Purchases by Depositor: Any
Certificate tendered for redemption by a Certificateholder or his duly
authorized attorney to the Trustee at its corporate trust office, or any Plan
Unit tendered to the Trustee for redemption by the registered holder thereof
pursuant to the Redemption Form, shall be redeemed by the Trustee on the seventh
calendar day following the day on which tender for redemption is made, provided
that if such day of redemption is not a business day, then such Certificate
shall be redeemed on the first business day prior thereto (such seventh calendar
day or first business day prior thereto being herein called the "Redemption
Date"). Subject to payment by such Certificateholder of any tax or other
governmental charges which may be imposed thereon, such redemption is to be made
by payment on the Redemption Date of cash equivalent to the Net Asset Value per
Unit or Plan Unit determined by the Trustee as of the closing of trading on the
New York Stock Exchange, on the date of tender, multiplied by the number of
Units represented by such Certificate or Redemption Form (herein called the
"Redemption Price"). Certificates or Redemption Forms received for redemption by
the Trustee on any day after the close of trading on the New York Stock Exchange
will be held by the Trustee until the next day on which the New York Stock
Exchange is open for trading and will be deemed to have been tendered on such
day for redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than seven calendar days following the
day on which tender for redemption is made:
(1) for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of
which disposal by the Trust of the Bonds is not reasonably practicable or
it is not reasonably practicable fairly to determine in accordance
herewith the value of the Bonds; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit,
and the Trustee shall not be liable to any person or in any way for any loss or
damage which may result from any such suspension or postponement.
Not later than the close of business on the day of tender of a
Certificate or Redemption Form for redemption by a
-27-
359994.1
<PAGE>
Certificateholder other than the Depositor, the Trustee shall notify the
Depositor of such tender. The Depositor shall have the right to purchase such
Certificate or Redemption Form by notifying the Trustee of its election to make
such purchase as soon as practicable thereafter, but in no event subsequent to
the close of business on the second business day after the day on which such
Certificate or Redemption Form was tendered for redemption. Such purchase shall
be made by payment for such Certificate or Redemption Form by the Depositor to
the Certificateholder or Plan Unit holder not later than the close of business
on the Redemption Date of an amount equal to the Redemption Price which would
otherwise be payable by the Trustee to such Certificateholder or Plan Unit
holder.
Any Certificate or Redemption Form so purchased by the Depositor
may, at the option of the Depositor, be tendered to the Trustee for redemption
at the corporate trust office of the Trustee in the manner provided in the first
paragraph of this Section 5.2.
If the Depositor does not elect to purchase any Certificate or
Redemption Form tendered to the Trustee for redemption, or if a Certificate or
Redemption Form is being tendered by the Depositor for redemption, that portion
of the Redemption Price which represents interest shall be withdrawn from the
Interest Account to the extent funds are available. The balance paid on any
redemption, including accrued interest, if any, shall be withdrawn from the
Principal Account to the extent that funds are available for such purpose. If
such available balance shall be insufficient, the Trustee shall sell such Bonds
from among those designated on the current list for such purpose as provided
below and in the manner, in its discretion, as it shall deem advisable or
necessary in order to fund the Principal Account for purposes of such
redemption. Sales of Bonds by the Trustee shall be made in such manner as the
Trustee shall determine, subject to any minimum face amount limitations on sale
which shall have been specified by the Depositor. In the event that funds are
withdrawn from the Principal Account or Bonds are sold for payment of any
portion of the Redemption Price representing accrued interest, the Principal
Account shall be reimbursed when sufficient funds are next available in the
Interest Account for such funds so applied.
The Depositor shall maintain with the Trustee a current list of
Bonds designated to be sold for the purpose of redemption of Certificates or
Redemption Forms tendered for redemption and not purchased by the Depositor, and
for payment of expenses hereunder, provided that if the Depositor shall for any
reason fail to maintain such a list, the Trustee, in its sole discretion, may
designate a current list of Bonds for such purposes. The net proceeds of any
sales of Bonds from such list representing principal shall be credited to the
Principal Account
-28-
359994.1
<PAGE>
and the proceeds of such sales representing accrued interest shall be credited
to the Interest Account.
Neither the Trustee nor the Depositor shall be liable or responsible
in any way for depreciation or loss incurred by reason of any sale of Bonds made
pursuant to this Section 5.2.
Certificates evidencing Units, or Redemption Forms evidencing Plan
Units, redeemed pursuant to this Section 5.2 shall be cancelled by the Trustee
and the Units or Plan Units evidenced by such Certificates or Redemption Forms
shall be terminated by such redemptions. In the event that a Certificate shall
be tendered representing a number of Units greater than those requested to be
redeemed by the Certificateholder, the Trustee shall issue to each
Certificateholder, upon payment of any tax or charges of the character referred
to in the second paragraph to Section 5.3, a new Certificate evidencing the
Units representing the balance of the Certificate so tendered.
Notwithstanding the foregoing provisions of this Section 5.2, the
Trustee is hereby irrevocably authorized in its discretion, in the event that
the Depositor does not elect to purchase any Certificate or Redemption Form
tendered to the Trustee for redemption, or in the event that a Certificate or
Redemption Form is being tendered by the Depositor for redemption, in lieu of
redeeming Units or Plan Units tendered for redemption, to sell such Units or
Plan Units in the over-the-counter market or by private sale for the account of
tendering Unit or Plan Unit holders at prices which will return to the Unit or
Plan Unit holders amounts in cash, net after deducting brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption Prices
which such Unit or Plan Unit holders would otherwise be entitled to receive on
redemption pursuant to this Section 5.2. The Trustee shall pay to the Unit or
Plan Unit holders the net proceeds of any such sale on the day they would
otherwise be entitled to receive payment of the Redemption Price hereunder.
Section 5.3 Transfer or Interchange of Certificates: A Certificate
may be transferred by the registered holder thereof by presentation and
surrender of such Certificate at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the
Certificateholder or his authorized attorney, whereupon a new registered
Certificate or Certificates for the same number of Units executed by the Trustee
and the Depositor will be issued in exchange and substitution therefor.
Certificates issued pursuant to this Indenture are interchangeable for one or
more other Certificates in an equal aggregate number of Units and all
Certificates issued shall be issued in denominations of one Unit or any multiple
thereof as may be requested by the
-29-
359994.1
<PAGE>
Certificateholder. The Trustee may deem and treat the person in whose name any
Certificate shall be registered upon the books of the Trustee as the owner of
such Certificate for all purposes hereunder and the Trustee shall not be
affected by any notice to the contrary, nor be liable to any person or in any
way for so deeming or treating the person in whose name any Certificate shall be
so registered.
A sum sufficient to pay any tax or other governmental charge that
may be imposed in connection with any such transfer or interchange shall be paid
by the Certificateholder to the Trustee. The Trustee may require a
Certificateholder to pay $2.00 for each new Certificate issued on any such
transfer or interchange.
All Certificates cancelled pursuant to this Indenture shall be
disposed of by the Trustee without liability on its part.
Section 5.4 Certificates Mutilated, Destroyed, Stolen or Lost: In
case any Certificate shall become mutilated or be destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and substitution
therefor upon the holder's furnishing the Trustee with proper identification and
indemnity satisfactory to the Trustee, and complying with such other reasonable
regulations and conditions as the Trustee may prescribe and paying such expenses
as the Trustee may incur. Any mutilated Certificate shall be duly surrendered
and cancelled before any new Certificate shall be issued in exchange and
substitution therefor. Upon the issuance of any new Certificate a sum sufficient
to pay any tax or other governmental charge and the fees and expenses of the
Trustee may be imposed. Any such new Certificate issued pursuant to this section
shall constitute complete and indefeasible evidence of ownership in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
In the event the Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in exchange
and substitution for any Certificate which shall have become mutilated or shall
have been destroyed, stolen or lost, make the distributions in respect of such
mutilated, destroyed, stolen or lost Certificate (without surrender thereof
except in the case of a mutilated Certificate) as provided in Section 9.2 hereof
if the Trustee is furnished with such security or indemnity as it may require to
save it harmless, and in the case of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
-30-
359994.1
<PAGE>
ARTICLE VI
Trustee; Removal of Depositor
Section 6.1 General Definition of Trustee's Liabilities, Rights and
Duties; Removal of Depositor: In addition to and notwithstanding the other
duties, rights, privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as follows:
(a) all moneys deposited with or received by the Trustee hereunder
shall be held by the Trustee without interest in trust as part of the
Trust or the Reserve Account until required to be disbursed in accordance
with the provisions of this Indenture and such moneys will be segregated
by separate recordation on the trust ledgers of the Trustee so long as
such practice preserves a valid preference under applicable law, or if
such preference is not so preserved the Trustee shall handle such moneys
in such other manner as shall constitute the segregation and holding
thereof in trust within the meaning of the Investment Company Act of 1940.
(b) the Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement,
assignment, resolution, draft or other document, whether or not of the
same kind prima facie properly executed, or for the disposition of moneys,
Bonds or Certificates pursuant to this Indenture, or in respect of any
evaluation which the Trustee is required to make or is required or
permitted to have made by others under this Indenture or otherwise except
by reason of its gross negligence, lack of good faith or willful
misconduct, provided that the Trustee shall not in any event be liable or
responsible for any evaluation made by the Evaluator. The Trustee may
construe any of the provisions of this Indenture, insofar as the same may
appear to be ambiguous or inconsistent with any other provisions hereof,
and any construction of any such provisions hereof by the Trustee in good
faith shall be binding upon the parties hereto.
(c) the Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Indenture or for the
due execution hereof by the Depositor or the Evaluator, or for the form,
character, genuineness, sufficiency, value or validity of any Bonds
(except that the Trustee shall be responsible for the exercise of due care
in determining the genuineness of Bonds delivered to it pursuant to
contracts for the purchase of such Bonds) or for or in respect of the
validity or
-31-
359994.1
<PAGE>
sufficiency of the Certificates or of the due execution thereof by the
Depositor, and the Trustee shall in no event assume or incur any
liability, duty or obligation to any Certificateholder, the Evaluator or
the Depositor other than as expressly provided for herein. The Trustee
shall not be responsible for or in respect of the validity of any
signature by or on behalf of the Depositor or the Evaluator.
(d) the Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may involve it in
expense or liability, unless as often as required it shall be furnished
with reasonable security and indemnity against such expense or liability
as it may require, and any pecuniary cost of the Trustee from such actions
shall be deductible from and a charge against the Interest and Principal
Accounts. The Trustee shall in its discretion undertake such action as it
may deem necessary at any and all times to protect the Trust and the
rights and interests of the Certificateholders pursuant to the terms of
this Indenture, provided, however, that the expenses and costs of such
actions, undertakings or proceedings shall be reimbursable to the Trustee
from the Interest and Principal Accounts, and that the payment of such
costs and expenses shall be secured by a prior lien on the Trust.
(e) the Trustee may employ agents, attorneys accountants and
auditors and shall not be answerable for the default or misconduct of any
such agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable care. The
Trustee shall be fully protected in respect of any action under this
Indenture taken, or suffered, in good faith by it in accordance with the
opinion of counsel. The fees and expenses charged by such agents,
attorneys, accountants or auditors shall constitute an expense of the
Trustee reimbursable from the Interest and Principal Accounts as set forth
in Section 3.5 hereof.
(f) other than as provided in Article VII hereunder, if at any time
the Depositor shall resign or fail to undertake or perform or become
incapable of undertaking or performing any of the duties which by the
terms of this Indenture are required by it to be undertaken or performed
and no express provision is made for action to be taken by the Trustee in
such event, or the Depositor shall be adjudged a bankrupt or insolvent, or
a receiver of such Depositor or of its property shall be appointed, or any
public officer shall take charge or control of such Depositor or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then in any such case the Trustee may do any one or more of
the
-32-
359994.1
<PAGE>
following: (1) appoint a successor Depositor who shall act hereunder in
all respects in place of the Depositor, who shall be compensated
semi-annually, at rates deemed by the Trustee to be reasonable under the
circumstances, by deduction from the Interest Account or from the
Principal Account, but no such deduction shall be made exceeding such
reasonable amount as the Securities and Exchange Commission may prescribe
in accordance with Section 26(a)(2)(C) of the Investment Company Act of
1940; (2) continue to act in the capacity of Trustee hereunder in its own
absolute discretion without appointing any successor Depositor; or (3)
terminate this Indenture and the Trust created hereby and liquidate the
Trust, all in the manner provided in Section 9.2.
(g) if the value of the Trust as shown by any evaluation by the
Trustee pursuant to Section 5.1 hereof shall be less than the liquidation
amount specified in Part II of the Reference Trust Agreement, the Trustee
may in its discretion, and shall, when so directed by the Depositor,
terminate this Indenture and the Trust created hereby and liquidate the
Trust, all in the manner provided in Section 9.2.
(h) in no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon or upon it as Trustee hereunder or upon or in respect of
the Trust which it may be required to pay under any present or future law
of the United States of America or any other taxing authority having
jurisdiction in the premises. For all such taxes and charges and for any
expenses, including counsel fees, which the Trustee may sustain or incur
with respect to such taxes or charges, the Trustee shall be reimbursed and
indemnified out of the Interest and Principal Accounts of the Trust, and
the payment of such amounts so paid by the Trustee shall be secured by a
prior lien on the Trust.
(i) the Trustee, except by reason of its gross negligence or willful
misconduct, shall not be liable for any action taken or suffered to be
taken by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
(j) notwithstanding anything in this Indenture to the contrary, the
Trustee is authorized and empowered to enter into any safekeeping
arrangement or arrangements it deems necessary or appropriate for holding
the Bonds then owned by the Trust and the Trustee is authorized and
empowered in its sole right to amend, supplement or terminate any
safekeeping arrangement or arrangements made under this provision.
-33-
359994.1
<PAGE>
Section 6.2 Books, Records and Reports: The Trustee shall keep
proper books of record and account of all the transactions under this Indenture
at its corporate trust office including a record of the name and address of, and
the Certificates issued by the Trust and held by, every Certificateholder, and
such books and records shall be open to inspection by any Certificateholder at
all reasonable times during the usual business hours.
The Trustee shall make such annual or other reports as may from time
to time be required under any applicable state or federal statute or rule or
regulation thereunder.
Section 6.3 Indenture and List of Bonds on File: The Trustee shall
keep a certified copy or duplicate original of this Indenture on file at its
corporate trust office available for inspection at all reasonable times during
the usual business hours by any Certificateholder and the Trustee shall keep and
so make available for inspection a current list of the Bonds.
Section 6.4 Compensation: For services performed under this
Indenture the Trustee shall be paid at the rate per annum set forth in Part II
of the Reference Trust Agreement which shall be computed on the basis of the
greatest principal amount of Bonds in the Trust at any time during the period
with respect to which such compensation is being computed. The Trustee may from
time to time adjust its compensation as set forth above provided that the total
adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent," or, if such index shall cease to be
published, then as measured by the available index most nearly comparable to
such index. The consent or concurrence of any Certificateholder hereunder shall
not be required for any such adjustment or increase. Such compensation shall be
charged by the Trustee against the Interest and Principal Accounts on or before
the Payment Date on which such period terminates; provided, however, that such
compensation shall be deemed to provide only for the usual normal and recurring
functions undertaken as Trustee pursuant to this Indenture.
The Trustee shall charge the Interest and Principal Accounts as
provided for in Section 3.5(a) for any and all expenses, including the fees of
counsel which may be retained by the Trustee in connection with its activities
hereunder, and disbursements incurred hereunder and any extraordinary services
performed by the Trustee hereunder. The Trustee shall be indemnified and held
harmless against any loss or liability accruing to it without negligence, bad
faith or willful misconduct on its part, arising out of or in connection with
the acceptance or administration of this trust, including the costs
-34-
359994.1
<PAGE>
and expenses (including counsel fees) of defending itself against any claim of
liability in the premises. If the cash balances in the Interest and Principal
Accounts shall be insufficient to provide for amounts payable pursuant to this
Section 6.4, the Trustee shall have the power to sell (i) Bonds from the current
list of Bonds designated to be sold pursuant to Section 5.2 hereof, or (ii) if
no such Bonds have been so designated, such Bonds as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section 6.4. The Trustee shall
not be liable or responsible in any way for depreciation or loss incurred by
reason of any sale of Bonds made pursuant to this Section 6.4. Any moneys
payable to the Trustee pursuant to this section shall be secured by a prior lien
on the Trust.
Section 6.5 Removal and Resignation of the Trustee; Successor: The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor Trustee.
(a) any resignation or removal of the Trustee and appointment of a
successor pursuant to this section shall not become effective until
acceptance of appointment by the successor Trustee as provided in
subsection (b) hereof.
(b) the Trustee or any trustee hereafter appointed may resign and be
discharged of the trust created by this Indenture by executing an
instrument in writing resigning as such Trustee, filing the same with the
Depositor and mailing a copy of a notice of resignation to all
Certificateholders then on record not less than sixty days before the date
specified in such instrument when, subject to Section 6.5(d), such
resignation is to take effect. Upon receiving such notice of resignation,
the Depositor shall use its best efforts to promptly appoint a successor
Trustee as hereinafter provided, by written instrument, in duplicate, one
copy of which shall be delivered to the resigning Trustee and one copy to
the successor Trustee. In case at any time the Trustee shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purposes of rehabilitation, conservation, or
liquidation, then in any such case the Depositor may remove the Trustee
and appoint a successor Trustee by written instrument, in duplicate, one
copy of which shall be delivered to the Trustee so removed and one copy to
the successor Trustee; provided that notice of such removal and
appointment of a successor shall be given to each Certificateholder then
of record.
-35-
359994.1
<PAGE>
(c) any successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositor and the retiring Trustee an
instrument accepting such appointment hereunder, and such successor
Trustee without any further act, deed or conveyance shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder with like effect as if originally named Trustee herein and shall
be bound by all the terms and conditions of this Indenture. Upon the
request of such successor Trustee, the Depositor and the retiring Trustee
shall, upon payment of any amounts due the retiring Trustee or provision
therefor to the satisfaction of such retiring Trustee, execute and deliver
an instrument acknowledged by it transferring to such successor trustee
all the rights and powers of the retiring Trustee; and the retiring
Trustee shall transfer, deliver and pay over to the successor Trustee all
bonds and moneys at the time held by it hereunder, together with all
necessary instruments of transfer and assignment or other documents
properly executed necessary to effect such transfer and such of the
records or copies thereof maintained by the retiring Trustee in the
administration hereof as may be requested by the successor Trustee, and
shall thereupon be discharged from all duties and responsibilities under
this Indenture. The retiring Trustee shall, nevertheless, retain a lien
upon all Bonds and moneys at the time held by it hereunder to secure any
amounts then due the retiring Trustee hereunder.
(d) in case at any time the Trustee shall resign and no successor
Trustee shall have been appointed and have accepted appointment within
thirty days after notice of resignation has been received by the
Depositor, the retiring Trustee may forthwith apply to a court of
competent jurisdiction for the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(e) any corporation into which any Trustee hereunder may be merged
or with which it may consolidate, or any corporation resulting from any
merger or consolidation to which any Trustee hereunder shall be a party,
shall be the successor Trustee under this Indenture without the execution
or filing of any paper, instrument or further act to be done on the part
of the parties hereto, anything herein, or in any agreement relating to
such merger or consolidation, by which any such Trustee may seek to retain
certain powers, rights and privileges theretofore obtaining for any period
of time following such merger or consolidation, to the contrary
notwithstanding.
Section 6.6 Qualifications of Trustee: The Trustee, or any successor
thereof, shall be a corporation organized and
-36-
359994.1
<PAGE>
doing business under the laws of the United States or any state thereof, which
is authorized under such laws to exercise corporate trust powers and having at
all times an aggregate capital, surplus, and undivided profits of not less than
$2,500,000.
ARTICLE VII
Depositor
Section 7.1 Succession: The covenants, provisions and agreements
herein contained shall in every case be binding upon any successor to the
business of the Depositor. In the event of the death, resignation or withdrawal
of any partner of the Depositor or of any successor Depositor which may be a
partnership, the deceased, resigning or withdrawing partner shall be relieved of
all further liability hereunder if at the time of such death, resignation or
withdrawal such Depositor maintains a net worth (determined in accordance with
generally accepted accounting principles) of at least $1,000,000. In the event
of an assignment by any Depositor to a successor corporation or partnership as
permitted by the next following sentence, such Depositor and, if such Depositor
is a partnership, its partners shall be relieved of all further liability under
this Indenture. The Depositor may transfer all or substantially all of its
assets to a corporation or partnership which carries on the business of the
Depositor, if at the time of such transfer such successor duly assumes all the
obligations of the Depositor under this Indenture and if at such time such
successor maintains a net worth of at least $1,000,000 (determined in accordance
with generally accepted accounting principles).
Section 7.2 Resignation of Depositor: If at any time the Depositor
desires to resign its position as Depositor hereunder, it may resign by
delivering to the Trustee an instrument of resignation executed by the
Depositor. Such resignation shall become effective upon the expiration of thirty
days from the date on which such instrument is delivered to the Trustee. Upon
effective resignation hereunder, the resigning Depositor shall be discharged and
shall no longer be liable in any manner hereunder except as to acts or omissions
occurring prior to such resignation and any successor Depositor appointed by the
Trustee pursuant to Section 6.1(f) shall thereupon perform all duties and be
entitled to all rights under this Indenture. The successor Depositor shall not
be under any liability hereunder for occurrences or omissions prior to the
execution of such instrument.
Section 7.3 Liability of Depositor and Indemnification: (a) The
Depositor shall be under no liability to the Trust or the Certificateholders for
any action or for
-37-
359994.1
<PAGE>
refraining from the taking of any action in good faith pursuant to this
Indenture, or for errors in judgment or for depreciation or loss incurred by
reason of the purchase or sale of any Bonds, provided, however, that this
provision shall not protect the Depositor against any liability to which it
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder. The Depositor may rely in
good faith on any paper, order, notice, list, affidavit, receipt, evaluation,
opinion, endorsement, assignment, draft or any other document of any kind prima
facie properly executed and submitted to it by the Trustee, the Trustee's
counsel, the Evaluator or any other person for any matters arising hereunder.
The Depositor shall in no event be deemed to have assumed or incurred any
liability, duty, or obligation to any Certificateholder, the Evaluator or the
Trustee other than as expressly provided for herein.
(b) The Trust shall pay and hold the Depositor harmless from and
against any loss, liability or expense incurred in acting as Depositor of the
Trust other than by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder, including the costs and expenses of the
defense against any claim or liability in the premises. The Depositor shall not
be under any obligation to appear in, prosecute or defend any legal action which
in its opinion may involve it in any expense or liability, provided, however,
that the Depositor may in its discretion undertake any such action which it may
deem necessary or desirable in respect of this Indenture and the rights and
duties of the parties hereto and the interests of the Certificateholders
hereunder and, in such event, the legal expenses and costs of any such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust and shall be paid directly by the Trustee out of the Interest and
Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be deemed to
protect or purport to protect the Depositor against any liability to the Trust
or to the Certificateholders to which the Depositor would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of the Depositor's reckless disregard of
its obligations and duties under this Indenture.
-38-
359994.1
<PAGE>
ARTICLE VIII
Rights of Certificateholders
Section 8.1 Beneficiaries of Trust: By the purchase and acceptance
or other lawful delivery and acceptance of any Certificate the Certificateholder
shall be deemed to be a beneficiary of the trust created by this Indenture and
vested with all right, title and interest in the Trust to the extent of the Unit
or Units set forth and evidenced by such Certificate, subject to the terms and
conditions of this Indenture and of such Certificate.
Section 8.2 Rights, Terms and Conditions: In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture the Certificateholders shall have the following rights and powers and
shall be subject to the following terms and conditions:
(a) a Certificateholder may at any time tender his Certificate or
Certificates to the Trustee for redemption in accordance with Section 5.2.
(b) the death or incapacity of any Certificateholder shall not
operate to terminate this Indenture or the Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them. Each Certificateholder
expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustee at any
time to account, in any manner other than as expressly provided in this
Indenture, in respect of the Bonds or moneys from time to time received,
held and applied by the Trustee hereunder.
(c) no Certificateholder shall have any right to vote or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners; nor shall
any Certificateholder ever be under any liability to any third persons by
reason of any action taken by the parties to this Indenture for any other
cause whatsoever.
-39-
359994.1
<PAGE>
ARTICLE IX
Additional Covenants; Miscellaneous Provisions
Section 9.1 Amendments: This Indenture may be amended from time to
time by the parties hereto or their respective successors, without the consent
of any of the Certificateholders (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision contained herein; (b) to change any provision required
by the Securities and Exchange Commission or any successor governmental agency
to be changed; or (c) to make such other provision in regard to matters or
questions arising hereunder as shall not adversely affect the interests of the
Certificateholders; provided, however, that the parties hereto may not amend
this Indenture so as to (1) increase the number of Units above the number set
forth in Part II of the Reference Trust Agreement except as provided in Section
5.4 hereof or such lesser amount as may be outstanding at any time during the
term of this Indenture or (2) subject to Sections 3.8 and 3.14 permit the
deposit or acquisition hereunder of securities either in addition to or in
replacement of any of the Bonds.
This Indenture may also be amended from time to time by the
Depositor and the Trustee (or the performance of any of the provisions or this
Agreement may be waived) with the expressed written consent of holders of
Certificates evidencing 66-2/3% of the Units at the time outstanding under the
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the holders of Certificates, save for the termination of
the Trust as set forth in Section 9.2 below; provided, however, that no such
amendment or waiver shall (i) reduce the interest in the Trust represented by
Units evidenced by any Certificate without the consent of the holder of such
Certificate, (ii) reduce the aforesaid percentage of Units, the holders of which
are required to consent to any such amendment, without the consent of the
holders of all Certificates then outstanding or (iii) affect the duties,
obligations and responsibilities of the Trustee without its consent.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification to all then outstanding Certificateholders of the
substance of such amendment.
Section 9.2 Termination: This Indenture and the Trust created hereby
shall terminate upon the maturity, redemption, sale or other disposition as the
case may be of the last Bond held hereunder unless sooner terminated as
hereinbefore specified and may be terminated at any time by written consent of
all the
-40-
359994.1
<PAGE>
holders of Certificates; provided that in no event shall the Trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of this Indenture.
Written notice of any termination, specifying the time or times at
which the Certificateholders may surrender their Certificates for cancellation
shall be given by the Trustee to each Certificateholder at his address appearing
on the registration books of the Trustee. Within a reasonable period of time
after such termination the Trustee shall fully liquidate the Bonds then held, if
any, and shall:
(a) deduct from the Interest Account or, to the extent that funds
are not available in such account, from the Principal Account and pay to
itself individually an amount equal to the sum of
(1) its accrued compensation for its ordinary
recurring services,
(2) any compensation due it for its extraordinary
services, and
(3) any other costs, expenses, advances or indemnities
as provided herein;
(b) deduct from the Interest Account or, to the extent that funds
are not available in such account, from the Principal Account and pay
accrued and unpaid fees of the Evaluator and counsel pursuant to Section
3.9;
(c) deduct from the Interest Account or the Principal Account any
amounts which may be required to be deposited in the Reserve Account to
provide for payment of any applicable taxes or other governmental charges
and any other amounts which may be required to meet expenses incurred
under this Indenture;
(d) distribute to each Certificateholder, upon surrender for
cancellation of his Certificate or Certificates, such holder's pro rata
share of the balance of the Interest Account;
(e) distribute to each Certificateholder, upon surrender for
cancellation of his Certificate or Certificates, such holder's pro rata
share of the balance of the Principal Account; and
(f) together with such distribution to each Certificateholder as
provided for in (d) and (e), furnish to each such Certificateholder a
final distribution statement as of the date of the computation of the
amount
-41-
359994.1
<PAGE>
distributable to Certificateholders, setting forth the data and
information in substantially the form and manner provided for in Section
3.6 hereof.
The amounts to be so distributed to each Certificateholder shall be
that pro rata share of the balance of the total Interest and Principal Accounts
as shall be represented by the Units therein evidenced by the outstanding
Certificate or Certificates held of record by such Certificateholder.
The Trustee shall be under no liability with respect to moneys held
by it in the Interest, Reserve and Principal Accounts upon termination except to
hold the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the liquidation distribution with respect thereto. If
within one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take steps to contact the
remaining Certificateholders concerning surrender of their Certificates and the
cost thereof shall be paid out of the moneys and other assets which remain in
trust hereunder.
Section 9.3 Construction: This Indenture is executed and delivered
in the State of New York, and all local laws or rules of construction of such
State shall govern the rights of the parties hereto and the Certificateholders
and the interpretation of the provisions hereof.
Section 9.4 Registration of Certificates: The Depositor agrees and
undertakes to register the Certificates with the Securities and Exchange
Commission or other applicable governmental agency pursuant to applicable
Federal or State statutes, if such registration shall be required, and to do all
things that may be necessary or required to comply with this provision during
the term of the Trust created hereunder, and the Trustee shall incur no
liability or be under any obligation or expense in connection therewith.
Section 9.5 Written Notice: Any notice, demand, direction or
instruction to be given to the Depositor hereunder shall be in writing and shall
be duly given if mailed or delivered to the Depositor as follows: Bear, Stearns
& Co., 55 Water St., New York, N.Y. 10041 or at such other address as shall be
specified by the Depositor to the Trustee in writing. Any notice, demand,
direction or instruction to be given to the
-42-
359994.1
<PAGE>
Trustee shall be in writing and shall be duly given if mailed or delivered to
the Trustee, 67 Broad Street, New York, New York 10004, Attention: Custody Trust
Division or such other address as shall be specified to the Depositor by the
Trustee in writing. Any notice, demand, direction or instruction to be given to
the Evaluator hereunder shall be in writing and shall be duly given if mailed to
the Evaluator at 25 Broadway, New York, New York 10004. Any notice to be given
to the Certificateholders shall be duly given if mailed or delivered to each
Certificateholder at the address of such holder appearing on the registration
books of the Trustee.
Section 9.6 Severability: If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy or express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or of the Certificates
or the rights of the holders thereof.
Section 9.7 Dissolution of Depositor Not to Terminate: The
dissolution of the Depositor from or for any cause whatsoever shall not operate
to terminate this Indenture or the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first above written.
[Signatures and acknowledgments on separate pages.]
-43-
359994.1
<PAGE>
BEAR STEARNS & CO.
Depositor
_______________________________
General Partner
ATTEST:
___________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, _______________________________ , a Notary Public in and for the
said County in the State aforesaid, do hereby certify that
________________________________ personally known to me to be the same person
whose name is subscribed to the foregoing instrument and personally known to me
to be a General Partner of Bear, Stearns & Co. a partnership, appeared before me
this day in person, and acknowledged that he signed and delivered the said
instrument as his free and voluntary act as such General Partner and as the free
and voluntary act of said Bear, Stearns & Co., for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this ____ day of ________, 19.
______________________________
Notary Public
(SEAL)
My Commission expires:
-44-
359994.1
<PAGE>
BRADFORD TRUST COMPANY
TRUSTEE
________________________________
Senior Vice President
(Seal)
ATTEST:
_______________________________
Assistant Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this second day of February, 1982, before me personally came
Curtis A. Yamaoka to me known, who being by me duly sworn, said that he is a
Senior Vice President of Bradford Trust Company, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
_______________________________
Notary Public
(SEAL)
My Commission expires:
-45-
359994.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
_________________________________
Vice President
(SEAL)
ATTEST:
_________________________________
Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of , 19 , before me personally appeared , to me known,
who being by me duly sworn, said that he is Vice President of Standard & Poor's
Corporation, one of the corporations described in and which (by facsimile)
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to the said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said corporation; and that
he signed his name (by facsimile) thereto by like authority.
_______________________________
Notary Public
(SEAL)
My Commission expires:
-46-
359994.1
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
STANDARD & POOR'S
A Division of The McGraw Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Municipal Securities Trust
1st Discount Series
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 2-73986 for the above-captioned trust. We hereby acknowledge
that Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
STANDARD & POOR'S
A Division of The McGraw Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Municipal Securities Trust
2nd Discount Series
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 2-74227 for the above-captioned trust. We hereby acknowledge
that Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
