MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 15, 497, 1994-12-09

MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 15
497, 1994-12-09

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Rule 497(b)
Registration No. 2-98184

Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

MUNICIPAL SECURITIES TRUST

MULTI-STATE SERIES 15
(MULTIPLIER PORTFOLIO)

__________________________________________________________________

The Trust consists of 3 separate unit investment trusts
designated California Trust, New York Trust and Pennsylvania Trust (the
"State Trusts"). Each State Trust contains an underlying portfolio of
long-term tax-exempt bonds issued by or on behalf of states,
municipalities and public authorities and was formed to preserve capital
and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from
regular Federal income tax (including where applicable earned original
discount) under existing law. In addition, in the opinion of counsel to
the Sponsor, the interest income of each State Trust is exempt, to the
extent indicated, from state and local taxes when held by residents of the
state where the issuers of bonds in such State Trust are located. Such
interest income may, however, be a specific preference item for purposes
of Federal individual and/or corporate alternative minimum tax. Investors
may recognize taxable capital gain or ordinary income, to the extent of
accrued market discount, upon maturity or the earlier receipt of principal
payments with respect to the bonds. (See "Tax Status" and "The
Portfolios--General.") The Sponsor is Bear, Stearns & Co. Inc. The value
of the Units of the Trust will fluctuate with the value of the underlying
bonds. Minimum purchase: 1 Unit.

__________________________________________________________________

This Prospectus consists of two parts. Part A contains the
Summary of Essential Information including descriptive material relating
to each State Trust as of June 30, 1994 (the "Evaluation Date"), a summary
of certain specific information regarding each State trust and audited
financial statements of each State Trust, including the related portfolio,
as of the Evaluation Date. Part B of this Prospectus contains a general
summary of the State Trusts.

Investors Should Read and Retain Both Parts
of This Prospectus for Future Reference.

__________________________________________________________________

Principal Secondary Market
Number of Amount of Offering Price
Units Bonds per Unit (6/30/94)

California Trust 2,425 $ 510,000 $160.45
New York Trust 5,440 $1,940,000 $364.85
Pennsylvania Trust 1,564 $ 266,000 $129.54

__________________________________________________________________

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 October 28, 1994

<PAGE>

THE TRUST. The Trust consists of three separate unit
investment trusts designated California Trust, New York Trust and
Pennsylvania Trust (the "State Trusts"). Each State Trust has been formed
to preserve capital and to provide interest income (including, where
applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently
exempt from regular federal income tax under existing law through
investment in a fixed, diversified portfolio of long-term bonds (the
"Bonds") issued by or on behalf of the State for which such Trust is named
and political subdivisions, municipalities and public authorities thereof
and of Puerto Rico and its public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average
portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have
a dollar-weighted average portfolio maturity of more than ten years.
Although the Supreme Court has determined that Congress has the authority
to subject interest on bonds such as the Bonds in the Trust to regular
federal income taxation, existing law excludes such interest from federal
income tax. In addition, in the opinion of counsel to the Sponsor, the
interest income of each State Trust is exempt, to the extent indicated,
from state and local taxes when held by residents of the state where the
issuers of the Bonds in such State Trust are located. Such interest
income may, however, be subject to the federal corporate alternative
minimum tax and to state and local taxes in other jurisdictions. (See
"Description of Portfolios" 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 State Trusts contain bonds that were acquired at prices
which resulted in the portfolios 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 that provide for payment at maturity at par value, but do not
provide for the payment of current interest. 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. Some of the Bonds in the portfolio may have been purchased at
an aggregate premium over par. (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, if any, as of the Evaluation Date, see "Notes to Financial
Statements" in this Part A. All of the Bonds in each State Trust were
rated "A" or better by Standard & Poor's Corporation or Moody's Investors
Service, Inc. at the time originally deposited in the State Trusts. 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 Trusts' investment 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 debt 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 fluctuation than coupon bonds in response to such
changes in interest rates. Each Unit represents a fractional undivided
interest in the principal and net income of each State Trust. The
principal amount of Bonds deposited in such State Trust per Unit is
reflected in the Summary of Essential Information. Each State Trust will
be administered as a distinct entity with separate certificates, expenses,
books and records. (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
5.5% of the Public Offering Price, or 5.820% of the net amount invested in
Bonds per Unit. In addition, accrued interest to the expected date of
settlement is added to the Public Offering Price. If Units of the
California Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $160.45 plus accrued interest of
$8.12 under the monthly distribution plan, $8.86 under the semi-annual
distribution plan and $15.34 under the annual distribution plan, for a
total of $168.57, $169.31 and $175.79, respectively. If Units of the New
York Trust had been purchased on the Evaluation Date, the Public Offering
Price per Unit would have been $364.85 plus accrued interest of $8.35
under the monthly distribution plan, $10.89 under the semi-annual
distribution plan and $28.25 under the annual distribution plan, for a
total of $373.20, $375.74 and $393.10, respectively. If Units of the
Pennsylvania Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $129.54 plus accrued interest of
$8.36 under the monthly distribution plan, $8.68 under the semi-annual
distribution plan and $12.73 under the annual distribution plan, for a
total of $137.90, $138.22 and $142.27, 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 "Summary of Essential
Information" and "Public Offering--Offering Price" in Part B of this
Prospectus.)

ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using
the computation method previously described under "Public Offering Price")
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of
bonds or to an earlier redemption date). Since they are offered on a
dollar price basis, the rate of return on an investment in Units of each
Trust is measured in terms of "Estimated Current Return" and "Estimated
Long Term Return".

Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted
bond practices, which practices take into account not only the interest
payable on the Bond but also the amortization of premiums or accretion of
discounts, if any; (2) calculating the average of the yields for the Bonds
in the Trust's portfolio by weighing each Bond's yield by the market value
of the Bond and by the amount of time remaining to the date to which the
Bond is priced (thus creating an average yield for the portfolio of the
Trust); and (3) reducing the average yield for the portfolio of the Trust
in order to reflect estimated fees and expenses of the Trust and the
maximum sales charge paid by investors. The resulting Estimated Long Term
Return represents a measure of the return to investors earned over the
estimated life of the Trust. (For the Estimated Long Term Return to
Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)

Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return
does not take into account the amortization of premium or accretion of
discount, if any, on the Bonds in the portfolio of the Trust. Moreover,
because interest rates on Bonds purchased at a premium are generally
higher than current interest rates on newly issued bonds of a similar type
with comparable rating, the Estimated Current Return per Unit may be
affected adversely if such Bonds are redeemed prior to their maturity.

The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to the Trust and with the redemption, maturity, sale
or other disposition of the Bonds in the Trust. The Public Offering Price
will vary with changes in the bid prices of the Bonds. Therefore, there
is no assurance that the present Estimated Current Return or Estimated
Long Term Return will be realized in the future. (For the Estimated
Current Return to Certificateholders under the monthly, semi-annual and
annual distribution plans, see "Summary of Essential Information". See
"Estimated Long Term Return and Estimated Current Return" in Part B of
this Prospectus.)

A 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 actually
receive distributions in accordance with the distribution plan chosen by
the prior owner of such Unit and may thereafter change the plan as
provided under "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-
annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of
this Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information.")

SPECIAL FACTORS CONCERNING THE TRUST PORTFOLIO. In March 1992
the Sponsor notified unitholders of certain events of default reported by
the Trustee for the Delaware County, Pennsylvania, Authority Sacred Heart
Medical Center Hospital Revenue Bonds Refunding Series of 1985 (the
"Bonds"), the Trustee's acceleration of the Bonds, and the formation of an
unofficial bondholder committee.

In October 1992 the Sponsor notified unitholders of additional
developments reported by the Bond Trustee, including the filing of a
bankruptcy petition, the sale of the Medical Center to Crozer-Keystone
Health System, and certain distributions to bondholders. These
distributions to bondholders came from proceeds of the sale of the Medical
Center, from sums held in Medical Center bank accounts and from partial
collection of accounts receivable, all of which were subject to the lien
of the Bond Indenture.

Recently the Bond Trustee notified the Sponsor of the U.S.
Bankruptcy Court's confirmation of the Medical Center's Modified Second
Amended Liquidation Plan of Reorganization and of the availability of
additional funds for distribution to Bondholders.

In particular, on February 4, 1994, the Bond Trustee
distributed $400,000 to bondholders. This sum was generated from asset
sales and the collection of Medical Center receivables, after payment of
certain expenses, administrative and priority claims, and unsecured
creditor settlements, all as provided in the Medical Center's
Reorganization Plan.

To date and including the February 1994 distribution, the Bond
Trustee has distributed to bondholders an amount equal to 45.5% of the
outstanding principal of, and accrued unpaid interest on, the Bonds up to
the date of acceleration, November 18, 1991.

The Medical Center has submitted expense reimbursement claims
to the Federal Medicare Program, to the Pennsylvania Medicaid Program, and
to Independence Blue Cross of Philadelphia. The Medical Center has
received a small portion of the allowed claims to date, and it expects to
receive additional payments in 1994 and 1995. It is impossible to predict
with any certainty the amount and timing of additional distributions to
bondholders from these or other sources.

MARKET FOR UNITS. The Sponsor, although not obligated to do
so, intends to maintain a secondary market for the Units at prices based
on the aggregate bid price of the Bonds in the Trust portfolio. 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 5.5% of the Public
Offering Price (5.820% of the net amount invested) plus net accrued
interest. If a market is not maintained, a Certificateholder will be able
to redeem his Units with the Trustee at a price also based on 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 all
their regular interest distributions, and principal distributions, if any,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of
this Prospectus. 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.

For additional information regarding the Public Offering Price
and Estimated Current Return and Estimated Long Term Return for Units of
each State Trust, descriptions of interest and principal distributions,
repurchase and redemption of Units and other essential information
regarding the Trusts, please refer to the Summary of Essential Information
for the particular State Trust on one of the immediately succeeding pages.

<PAGE>
MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 15

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1994

Date of Deposit: August 8, 1985 Weighted Average Life
Principal Amount of Bonds ...$510,000 to Maturity: 16.1 Years.
Number of Units .............2,425 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .....1/2425 value of Trust is less than
Principal Amount of $1,000,000 in principal
Bonds per Unit ............$210.31 amount of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2034 or the disposition of
of Bonds in Trust .......$367,714 the last Bond in the Trust.
Divided by 2,425 Units ....$151.63 Trustee***: United States
Plus Sales Charge of 5.5% Trust Company of New York.
of Public Offering Price $8.83 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.02 per $1,000; semi-
per Unit ................$160.45+ annual plan $.54 per $1,000;
Redemption and Sponsor's and annual plan is $.35 per
Repurchase Price $1,000.
per Unit ..................$151.63+ Evaluator: Kenny S&P
+++ Evaluation Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $12
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsor's Repurchase (treating separate maturities
Price per Unit ............$8.83++++ as separate issues).
Difference between Public Sponsor: Bear, Stearns & Co.
Offering Price per Unit Inc.
and Principal Amount per Sponsor's Annual Fee: Maximum
Unit Premium/(Discount) ...$(49.86) of $.15 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. Expenses and Charges" in
Minimum Principal Distribution: Part B of this Prospectus).
$1.00 per Unit.

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income#.......... $13.40 $13.40 $13.40
Less estimated annual fees and
expenses ............................ 1.29 1.04 .98
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $12.11 $12.36 $12.42
Estimated interest distribution# ...... 1.00 6.18 12.42
Estimated daily interest accrual# ..... .0336 .0343 .0345
Estimated current return#++ ........... 7.55% 7.70% 7.74%
Estimated long term return ++ ......... 6.39% 6.55% 6.59%
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

<PAGE>
MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 15

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1994

Date of Deposit: August 8, 1985 Weighted Average Life
Principal Amount of Bonds ...$1,940,000 to Maturity: 8 Years.
Number of Units .............5,440 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .....1/5440 value of Trust is less than
Principal Amount of $2,400,000 in principal
Bonds per Unit ............$356.62 amount of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2034 or the disposition of
of Bonds in Trust .......$1,875.623+++ the last Bond in the Trust.
Divided by 5,440 Units ....$344.78 Trustee***: United States
Plus Sales Charge of 5.5% Trust Company of New York.
of Public Offering Price $20.07 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.02 per $1,000; semi-
per Unit ................$364.85+ annual plan $.54 per $1,000;
Redemption and Sponsor's
Repurchase Price and annual plan is $.35 per
per Unit ..................$344.78+ $1,000.
+++ Evaluator: Kenny S&P
++++ Evaluation Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $12
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............$20.07++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Bear, Stearns & Co.
and Principal Amount per Inc.
Unit Premium/(Discount) ...$8.23 Sponsor's Annual Fee: Maximum
Evaluation Time: 4:00 p.m. of $.15 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in
$1.00 per Unit. Part B of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $34.74 $34.74 $34.74
Less estimated annual fees and
expenses ............................ .97 .70 .63
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $33.77 $34.04 $34.11
Estimated interest distribution# ...... 2.81 17.02 34.11
Estimated daily interest accrual# ..... .0938 .0945 .0947
Estimated current return#++ ........... 9.26% 9.33% 9.35%
Estimated long term return ++ ......... 5.60% 5.67% 5.69%
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

<PAGE>
MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 15

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1994

Date of Deposit: August 8, 1985 Weighted Average Life
Principal Amount of Bonds ...$266,000 to Maturity: 21 Years.
Number of Units .............1,564 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .....1/1564 value of Trust is less than
Principal Amount of $800,000 in principal amount
Bonds per Unit ............$170.08 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2034 or the disposition of
of Bonds in Trust .......$191,471+++ the last Bond in the Trust.
Divided by 1,564 Units ....$122.42 Trustee***: United States
Plus Sales Charge of 5.5% Trust Company of New York.
of Public Offering Price $7.12 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.02 per $1,000; semi-
per Unit ................$129.54+ annual plan $.54 per $1,000;
Redemption and Sponsor's and annual plan is $.35 per
Repurchase Price $1,000.
per Unit ..................$122.42+ Evaluator: Kenny S&P
+++ Evaluation Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $12
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsor's Repurchase (treating separate maturities
Price per Unit ............$7.12++++ as separate issues).
Difference between Public Sponsor: Bear, Stearns & Co.
Offering Price per Unit Inc.
and Principal Amount per Sponsor's Annual Fee: Maximum
Unit Premium/(Discount) ...$(39.42) of $.15 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. Expenses and Charges" in
Minimum Principal Distribution: Part B of this Prospectus).
$1.00 per Unit.

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $10.48 $10.48 $10.48
Less estimated annual fees and
expenses ............................ 1.41 1.19 1.14
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $9.07 $9.29 $9.34
Estimated interest distribution# ...... .75 4.64 9.34
Estimated daily interest accrual# ..... .0251 .0258 .0259
Estimated current return#++ ........... 7.00% 7.17% 7.21%
Estimated long term return ++ ......... 2.92% 3.09% 3.13%
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

<PAGE>
* 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 office at 770 Broadway, New
York, New York 10003 (tel. no.: 1-800-428-8890). 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 $8.12 monthly, $8.86 semi-
annually and $15.34 annually for the California Trust, $8.35
monthly, $10.89 semi-annually and $28.25 annually for the New York
Trust, and $8.36 monthly, $8.68 semi-annually and $12.73 annually
for the Pennsylvania Trust.

++ 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 from 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 accrual from original issue discount bonds, if any.

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF JUNE 30, 1994

DESCRIPTION OF PORTFOLIOS

California Trust

Each Unit in the California Trust consists of a 1/2425th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $210.31 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the California Trust consists of 3 issues of 3 issuers
located in California. Approximately 37.2% of the Bonds are obligations
of state and local housing authorities; 43.1% are hospital revenue bonds;
and none were issued in connection with the financing of nuclear
generating facilities. None of the Bonds are mortgage subsidy bonds. All
of the Bonds are subject to redemption prior to their stated maturity
dates pursuant to sinking fund or 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. Three issues representing $510,000 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:
Federally Insured Mortgage 1, Hospital 1, and Water and Power 1. For an
explanation of the significance of these factors see "The State Trusts--
Portfolios" in Part B of this Prospectus.

As of June 30, 1994, $190,000 (approximately 37.2% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $190,000 (approximately 37.2% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero
Coupon Bonds do not provide for the payment of any current interest and
provide for payment at maturity at par value unless sooner sold or
redeemed. The market value of Zero Coupon Bonds is subject to greater
fluctuations than coupon bonds in response to changes in interest rates.
None of the aggregate principal amount of the Bonds in the Trust were
purchased at a "market" discount from par value at maturity, approximately
62.8% were purchased at a premium and none were purchased at par. For an
explanation of the significance of these factors see "The Portfolios--
Discount and Zero Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the California 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.

<PAGE>
New York Trust*

Each Unit in the New York Trust consists of a 1/5440th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $356.62 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the New York Trust consists of 9 issues of 9 issuers located
in New York. Approximately 7.4% of the Bonds are obligations of state and
local housing authorities; none are hospital revenue bonds; and none were
issued in connection with the financing of nuclear generating facilities.
None of the Bonds are mortgage subsidy bonds. All of the Bonds are
subject to redemption prior to their stated maturity dates pursuant to
sinking fund or 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. Nine issues representing $1,940,000 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:
Convention Center 1, Dormitory Authority 1, Federally Assisted Mortgage 2,
Municipal Assistance 2, Pollution Control 1, Power 1 and Transit
Facilities 1. For an explanation of the significance of these factors see
"The State Trusts--Portfolios" in Part B of this Prospectus.

* Changes in the Trust Portfolio: From July 1, 1994 to September 23,
1994, the entire principal amount of the Bonds in portfolio nos. 1
and 2 have been called and are no longer contained in the Trust.
The entire principal amount of the Bonds in portfolio nos. 4 and 5
have been called pursuant to pre-refunding provisions and are no
longer contained in the Trust. 173 Units have been redeemed from
the Trust.

As of June 30, 1994, $315,000 (approximately 16.2% 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 7.4% of the aggregate principal amount of the Bonds in the
Trust were purchased at a "market" discount from par value at maturity,
approximately 76.4% were purchased at a premium and none were purchased at
par. For an explanation of the significance of these factors see "The
Portfolios--Discount and Zero Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the New York 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.

<PAGE>

Pennsylvania Trust

Each Unit in the Pennsylvania Trust consists of a 1/1564th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $170.08 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the Pennsylvania Trust consists of 2 issues of 2 issuers
located in Pennsylvania. None of the Bonds are obligations of state and
local housing authorities; approximately 34.2% are hospital revenue bonds;
and none were issued in connection with the financing of nuclear
generating facilities. None of the Bonds are mortgage subsidy bonds. All
of the Bonds are subject to redemption prior to their stated maturity
dates pursuant to sinking fund or 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. Two issues representing $266,000 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:
Hospital 1 and Industrial Development 1. For an explanation of the
significance of these factors see "The State Trusts--Portfolios" in Part B
of this Prospectus.

As of June 30, 1994, none of the aggregate principal amount of the
Bonds were original issue discount bonds. Approximately 65.7% of the
aggregate principal amount of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 34.3% were
purchased at a premium and none were purchased at par. For an explanation
of the significance of these factors see "The Portfolios--Discount and
Zero Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the Pennsylvania 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.

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

California Trust

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)

June 30, 1992 2,500 $468.64 $39.32 $39.94 $40.58 $ 8.00
June 30, 1993 2,500 314.91 31.97 32.53 38.75 140.63
June 30, 1994 2,425 159.77 14.86 15.32 -0- 150.39

New York Trust

June 30, 1992 6,000 $591.22 $48.44 $49.17 $49.55 $ 5.92
June 30, 1993 6,000 591.22 48.44 48.09 49.10 34.62
June 30, 1994 5,440 358.60 37.11 37.46 43.95 148.73

Pennsylvania Trust

June 30, 1992 1,884 $389.42 $33.04 $33.58 $36.43 -0-
June 30, 1993 1,764 300.47 28.62 29.00 29.96 $ 71.97
June 30, 1994 1,564 127.84 12.30 12.62 23.24 173.64

*. 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.

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, Multi-State Series 15:

We have audited the accompanying statements of net assets, including the
portfolios, of Municipal Securities Trust, Multi-State Series 15
(comprising, respectively, the California Trust, New York Trust and
Pennsylvania Trust) as of June 30, 1994, 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 June 30, 1994, by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
trusts constituting the Municipal Securities Trust, Multi-State Series 15
as of June 30, 1994, and the results of their operations and the changes
in their 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
September 15, 1994
<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

Statements of Net Assets

June 30, 1994

California New York Pennsylvania
Trust Trust Trust

Investments in marketable
securities, at market value (cost
$352,562, $2,023,876, and
$262,289, respectively) $ 367,699 1,998,599 193,214

Accrued interest 7,626 90,840 8,158
Cash 12,253 0 0
Other assets 19,879 90,840 8,158

Accrued expenses 129 296 111
Advance from trustee 0 138,342 1,324
Total liabilities 129 138,638 1,435

Excess (deficiency) of other assets
over total liabilities 19,750 (47,798) 6,723

Net assets (2,425, 5,440, and
1,564 units of fractional
undivided interest outstanding,
$159.77, $358.60, and $127.84
per unit, respectively) $ 387,449 1,950,801 199,937

See accompanying notes to financial statements.

<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

CALIFORNIA TRUST

Statements of Operations
<CAPTION>
Years ended June 30,
---------- ---- ---------- ---- ----------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Investment income - interest $ 41,535 86,057 106,865
---------- ---------- ----------

Expenses:
Trustee's fees 2,133 2,956 3,071
Evaluator's fees 1,196 1,057 1,088
Sponsor's advisory fee 481 331 493
---------- ---------- ----------

Total expenses 3,810 4,344 4,652
---------- ---------- ----------

Investment income, net 37,725 81,713 102,213
---------- ---------- ----------

Realized and unrealized gain (loss)
on investments:
Net realized loss
on bonds sold or called (23,334) (17,745) (1,196)
Unrealized appreciation
(depreciation) for the year 11,129 (15,465) (22,133)
---------- ---------- ----------

Net loss
on investments (12,205) (33,210) (23,329)
---------- ---------- ----------

Net increase in net
assets resulting
from operations $ 25,520 48,503 78,884
========== ========== ==========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

NEW YORK TRUST

Statements of Operations
<CAPTION>
Years ended June 30,
----------- ---- ----------- ---- -----------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Investment income - interest $ 218,167 298,232 308,355
----------- ----------- -----------

Expenses:
Trustee's fees 4,532 5,617 6,264
Evaluator's fees 1,215 1,057 1,088
Sponsor's advisory fees 695 884 493
----------- ----------- -----------

Total expenses 6,442 7,558 7,845
----------- ----------- -----------

Investment income, net 211,725 290,674 300,510
----------- ----------- -----------

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss)
on bonds sold or called (65,816) (16,962) 3,234
Unrealized depreciation
for the year (74,285) (130,417) (10,526)
----------- ----------- -----------

Net loss
on investments (140,101) (147,379) (7,292)
----------- ----------- -----------

Net increase in net
assets resulting
from operations $ 71,624 143,295 293,218
=========== =========== ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

PENNSYLVANIA TRUST

Statements of Operations
<CAPTION>
Years ended June 30,
----------- ---- ----------- ---- -----------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Investment income - interest $ 22,025 54,498 69,928
----------- ----------- -----------

Expenses:
Trustee's fees 712 2,818 2,886
Evaluator's fees 1,194 1,057 1,088
Sponsor's advisory fee 89 255 493
----------- ----------- -----------

Total expenses 1,995 4,130 4,467
----------- ----------- -----------

Investment income, net 20,030 50,368 65,461
----------- ----------- -----------

Realized and unrealized gain (loss)
on investments:
Net realized loss on bonds
sold or called (6,408) (4,076) (8,350)
Unrealized appreciation
(depreciation) for the year 9,620 (28,362) (55,289)
----------- ----------- -----------

Net gain (loss)
on investments 3,212 (32,438) (63,639)
----------- ----------- -----------

Net increase in net
assets resulting
from operations $ 23,242 17,930 1,822
=========== =========== ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

CALIFORNIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended June 30,
----------- -- ----------- -- -----------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 37,725 81,713 102,213
Net realized loss on
bonds sold or called (23,334) (17,745) (1,196)
Unrealized appreciation
(depreciation) for the year 11,129 (15,465) (22,133)
----------- ----------- -----------

Net increase in net
assets resulting
from operations 25,520 48,503 78,884
----------- ----------- -----------

Distributions:
To certificateholders:
Investment income 36,622 81,256 98,893
Principal 372,828 351,575 20,000
----------- ----------- -----------

Redemptions:
Interest 1,255 - -
Principal 14,648 - -
----------- ----------- -----------

Total distributions
and redemptions 425,353 432,831 118,893
----------- ----------- -----------

Total decrease (399,833) (384,328) (40,009)

Net assets at beginning of year 787,282 1,171,610 1,211,619
----------- ----------- -----------

Net assets at end of year (including
undistributed net investment
income of $24,342, $46,281 and
$45,824, respectively) $ 387,449 787,282 1,171,610
=========== =========== ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITES TRUST, MULTI-STATE SERIES 15

NEW YORK TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended June 30,
-------------- --- -------------- -- --------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 211,725 290,674 300,510
Net realized gain (loss) on
bonds sold or called (65,816) (16,962) 3,234
Unrealized depreciation
for the year (74,285) (130,417) (10,526)
-------------- -------------- --------------

Net increase in net
assets resulting
from operations 71,624 143,295 293,218
-------------- -------------- --------------

Distributions:
To certificateholders:
Investment income 221,947 285,743 292,905
Principal 879,292 207,720 35,520

Redemptions:
Interest 5,601 1,629 -
Principal 163,639 45,846 -
-------------- -------------- --------------

Total distributions
and redemptions 1,270,479 540,938 328,425
-------------- -------------- --------------

Total decrease (1,198,855) (397,643) (35,207)

Net assets at beginning of year 3,149,656 3,547,299 3,582,506
-------------- -------------- --------------

Net assets at end of year (including
undistributed net investment
income of $75,178, $91,001 and
$130,064, respectively) $ 1,950,801 3,149,656 3,547,299
============== ============== ==============

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

PENNSYLVANIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended June 30,
------------ -- ------------ -- ------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 20,030 50,368 65,461
Net realized loss on
bonds sold or called (6,408) (4,076) (8,350)
Unrealized appreciation
(depreciation) for the year 9,620 (28,362) (55,289)
------------ ------------ ------------

Net increase in net
assets resulting
from operations 23,242 17,930 1,822
------------ ------------ ------------

Distributions:
To Certificateholders:
Investment income 22,293 51,206 65,912
Principal 306,301 123,525 -

Redemptions:
Interest 1,658 2,229 1,173
Principal 24,132 43,563 44,862
------------ ------------ ------------

Total distributions
and redemptions 354,384 220,523 111,947
------------ ------------ ------------

Total decrease (331,142) (202,593) (110,125)

Net assets at beginning of year 531,079 733,672 843,797
------------ ------------ ------------

Net assets at end of year (including
undistributed net investment
income of $8,466, $12,387 and
$16,871, respectively) $ 199,937 531,079 733,672
============ ============ ============

See accompanying notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

Notes to Financial Statements

June 30, 1994, 1993 and 1992

(1) Organization and Financial and Statistical Information

Municipal Securities Trust, Multi-State Series 15 (Trust) was
organized on August 8, 1985 by Bear, Stearns & Co. Inc. (Sponsor)
under the laws of the State of New York by a Trust Indenture
Agreement, and is registered under the Investment Company Act
of 1940.

(2) Summary of Significant Accounting Policies

United States Trust Company 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.

The discount on the zero-coupon bonds is accreted by the interest
method over the respective lives of the bonds. The accretion of
such discount is included in interest income; however, it is not
distributed until realized in cash upon maturity or sale of the
respective bonds.

Investments are carried at market value which is determined by
either Standard & Poor's Corporation or Moody's Investors Service,
Inc. (Evaluator) as discussed in Footnotes to Portfolio. The
market value of the investment 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 each state Trust based on
the offering prices for investments at that date. The difference
between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) 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.

(3) Income Taxes

The Trust is not subject to Federal income taxes as provided by the
Internal Revenue Code.

(4) Trust Administration

The fees and expenses of each state 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).

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.

See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the years
ended June 30, 1994, 1993 and 1992.

The Trust Indenture and Agreement also requires each state Trust to
redeem units tendered. 75, 472, and 200 units were redeemed during
the year ended June 30, 1994 by the California, New York, and
Pennsylvania Trusts respectively. 88 and 120 units were redeemed
during the year ended June 30, 1993 by the New York, and Pennsylvania
Trusts, respectively. No units were redeemed by the California Trust
during the year ended June 30, 1993. During the year ended June 30,
1992, 116 units were redeemed in the Pennsylvania Trust and no units
were redeemed in the California and New York Trusts.

(5) Net Assets

At June 30, 1994, the net assets of the Trust represented the
interests of Certificateholders as follows:

California New York Pennsylvania
Trust Trust Trust

Original cost to
Certificateholders $ 1,483,384 3,553,985 1,184,946
Less initial gross
underwriting commission (81,575) (195,480) (65,180)

1,401,809 3,358,505 1,119,766

Cost of securities sold
or called (1,053,853) (1,334,629) (857,477)
Net unrealized appreciation
(depreciation) 15,137 (25,277) (69,075)
Undistributed net
investment income 24,342 75,178 8,466
Distributions in excess
of proceeds from bonds
sold or called 14 (122,976) (1,743)

Total $ 387,449 1,950,801 199,937

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 2,500, 6,000 and
2,000 units of fractional undivided interest of the California Trust,
New York Trust and Pennsylvania Trust, respectively, as of the date of
deposit.

Undistributed net investment income includes accumulated accretion of
original issue discount of $4,606 for the California Trust. The New
York and Pennsylvania Trusts did not have any accumulated accretion of
original discount for the year ended June 30, 1994.
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15
CALIFORNIA TRUST
Portfolio
June 30, 1994
<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)(8) Value(3)
- ----- ------------ --------------------- ------- -------------- ---------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 220,000 Hayward County, AAA 10.000% Currently @ 100 S.F. $ 256,410
California Hospital 10/01/2004 None
Revenue Bonds St.
Rose Hospital

2 100,000 Los Angeles, AA* 10.500 No Sinking Fund 105,042
California Department 10/15/2024 10/15/94 @ 103 Ref.
of Water and Power
(Electric Plant) (5)

3 190,000 City of Santa Rosa A 0.000 4/15/99 @ 5.500 S.F. 6,247
(California) Mortgage 10/15/2025 10/15/97 @ 4.667 Ref.
Revenue Bonds Series
1984 FHA Insured
Mortgage (Village
Square Apartment
Project)
------------ ----------

$ 510,000 $ 367,699
============ ==========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15
NEW YORK TRUST
Portfolio
June 30, 1994
<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)(8) Value(3)
- ----- ------------ --------------------- ------- -------------- ---------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 100,000 Dormitory Authority BAA1* 10.750% 7/01/98 @ 100 S.F. $ 102,615
of the State of New 7/01/2003 7/31/94 @ 102 Ref.
York Revenue Bonds
City University
Issue,1984 Series R

2 500,000 New York State Energy BAA2* 11.250 No Sinking Fund 513,245
Research and 7/01/2014 7/31/94 @ 102 Ref.
Development Authority
Pollution Control
Revenue Bonds
(Niagara Mohawk Power
Corporation Project),
1984 Series A

3 250,000 Power Authority of AAA 10.375 1/01/06 @ 100 S.F. 264,735
the State of New York 1/01/2016 1/01/95 @ 103 Ref.
General Purpose
Bonds,1984 Series R
(5)

4 400,000 Metropolitan AAA 10.250 7/01/05 @ 100 S.F. 410,000
Transportation 7/01/2014 7/01/94 @ 102.5 Ref.
Authority Transit
Facilities Service
Contract Bonds,
1984Series F (5)

5 130,000 Municipal Assistance AAA 10.000 7/01/00 @ 100 S.F. 132,600
Corporation for the 7/01/2008 7/01/94 @ 102 Ref.
City of New York (A
Public Benefit
Corporation of the
State of New York)
1984 Series 50 Bonds
(5)

6 100,000 Municipal Assistance AAA 10.250 Currently @ 100 S.F. 107,633
Corporation for the 7/01/2008 7/01/95 @ 102 Ref.
City of New York (A
Public Benefit
Corporation of the
State of New York)
1984 Series 52 Bonds
(5)

7 110,000 New York City Housing A 6.500 5/01/07 @100 S.F. 108,592
Development 5/01/2022 7/31/94 @ 102 Ref.
Corporation (A
Corporate
Governmental Agency
of the State of New
York) General Housing
Bonds, 1972 Series A

8 35,000 New York City Housing A 7.500 Currently @ 100 S.F. 35,857
Development 5/01/2023 7/31/94 @ 102 Ref.
Corporation (A
Corporate
Governmental Agency
of the State of New
York) General Housing
Bonds, 1975 Series D

9 315,000 Triborough Bridge and AAA 7.000 1/01/10 @ 100 S.F. 323,322
Tunnel Authority (Cont.) 1/01/2012 7/01/95 @ 100 Ref.
Convention Center
Project Bonds, 1985
Series D (5)
------------ ----------

$ 1,940,000 $ 1,998,599
============ ==========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15
PENNSYLVANIA TRUST
Portfolio
June 30, 1994
<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)(8) Value(3)
- ----- ------------ --------------------- ------- -------------- ---------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 91,000 Delaware County D 9.750% 9/01/00 @ 100 S.F. $ 6,370
Authority Delaware 9/01/2011 9/01/95 @ 102 Ref.
County, Pennsylvania
Hospital Revenue
Bonds, Refunding
Series of 1985
(Sacred Heart Medical
Center)(7)

2 175,000 Lehigh County A 9.375 No Sinking Fund 186,844
Industrial 7/01/2015 7/01/95 @ 102 Ref.
Development Authority
Pollution Control
Revenue Bonds, 1985
Series A
(Pennsylvania Power &
Light Company
Project)
------------ ----------

$ 266,000 $ 193,214
============ ==========

See accompanying footnotes to portfolio and notes to financial
statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 15

Footnotes to Portfolios

June 30, 1994

(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 June 30, 1994, the net unrealized appreciation (depreciation)
of all the bonds was comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 22,744 98,121 15,782
Gross unrealized depreciation (7,607) (123,398) ( 84,857)

Net unrealized appreciation
(depreciation) $ 15,137 (25,277) (69,075)

(4) The annual interest income based upon bonds held at June 30,
1994, (excluding accretion of original issue discount on zero-coupon
bonds) to the Municipal Securities Trust, Multi-State Series 15 is
$32,500, $189,013 and $16,406 for the California Trust, New York Trust
and Pennsylvania Trust, respectively.

(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.

(6) Bonds sold or called after June 30, 1994 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.

(7) Bond #1 in the Portfolio of Pennsylvania Trust is in default as
to payments of principal and interest and, accordingly, is non-income
producing.

(8) 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).

<PAGE>

Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.

Please Read and Retain Both Parts
of the Prospectus for Future Reference.

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES
(Multiplier Portfolio)

Prospectus Part B

Dated: October 28, 1994

THE TRUST

Organization

"Municipal Securities Trust," Multi-State Series (the "Trust")
consists of several separate "unit investment trusts," which may include
California Trust, Michigan Trust, New York Trust and/or Pennsylvania Trust
(collectively, the "State Trusts") designated as set forth in Part A. The
State Trusts were created under the laws of the State of New York pursuant
to a Trust Indenture and Agreement* (collectively, the "Trust
Agreement"), dated the Date of Deposit, among Bear, Stearns & Co. Inc., as
Sponsor, Kenny S&P Evaluation Services, as Evaluator, and, depending on
the particular State Trust, either The Bank of New York or United States
Trust Company of New York, as Trustee. The name of the Trustee for a
particular State Trust is contained in the "Summary of Essential
Information" in Part A. For a description of the Trustee for a particular
State Trust, see "Trust Administration--The Trustee." Each State Trust
will be administered as a distinct entity with separate certificates,
expenses, books and records.

* References in this Prospectus to the Trust Agreement are qualified
in their entirety by the respective Trust Indentures and Agreements
which are incorporated herein by reference.

On the Date of Deposit the Sponsor deposited with the Trustee long-
term bonds, including delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds"), and cash or irrevocable
letters 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 State Trusts. The Trust consists of the
interest-bearing bonds described under "The Trust" in Part A of this
Prospectus, the interest on which is, in the opinions of bond counsel to
the respective issuers given at the time of original delivery of the
Bonds, 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 each
State Trust in the ratio of one Unit to the principal amount of Bonds in
such State Trust on such date as specified in Part A of this Prospectus.
To the extent that any Units of a State Trust are redeemed by the Trustee,
the fractional undivided interest or pro rata share in such State Trust
represented by each unredeemed Unit of such State Trust will increase,
although the actual interest in such State 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

Each State Trust, each 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, which may
include deep "market" discount and original issue discount bonds, with a
greater diversification than they might be able to acquire themselves.
The objectives of each State Trust are to preserve capital and to provide
interest income 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, currently exempt from regular federal income tax and
from present income taxes of the State for which such Trust is named for
residents thereof. Such interest income may, however, be subject to the
federal corporate alternative minimum tax and to state and local taxes in
other jurisdictions. Investors should be aware that there is no assurance
the State Trusts' objectives will be achieved because 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 exemptions 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 a State
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. The State Trusts are not designed to be
complete investment programs.

The Portfolios--General

All of the Bonds in the State Trusts were rated "A" or better by
Standard & Poor's Corporation or Moody's Investors Service, Inc. at the
time originally deposited in the State Trust. For a list of the ratings
of each Bond on the Evaluation Date, see each "Portfolio" in Part A of
this Prospectus.

For information regarding (i) the number of issues in each State
Trust, (ii) the range of fixed maturity 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 "Description of Portfolio" for each State
Trust in Part A of this Prospectus.

When selecting Bonds for the State Trusts, 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 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 State Trusts, (d) the diversification of each
State Trust's portfolio, as to purpose of issue and location of issuer,
taking into account the availability in the market of issues which meet
such State Trust's quality, rating, yield and price criteria and (e) the
existence of "market" discount and original issue discount. 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 State Trust but may be considered in the Sponsor's
determination to direct the Trustee to dispose of the Bond. See
"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 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, 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
residency, ownership, purchase price and target area requirements, ceiling
amount 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 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 change in the sources of funds, including
proceeds from property taxes applied to the support of public schools, may
have on the school bonds in the State Trusts.

Legal Proceedings Involving the Trusts. The following is a
description of the legal proceedings involving the Delaware County,
Pennsylvania Authority, Sacred Heart Medical Center Hospital Revenue Bonds
Refunding Series of 1985 (the "Sacred Heart Bonds") contained in the
Pennsylvania Trust of Multi-State Series 15:

In March 1992 the Sponsor notified unitholders of certain events of
default reported by the Trustee for the Sacred Heart Bonds, the Trustee's
acceleration of the Bonds, and the formation of an unofficial bondholder
committee.

In particular, on February 4, 1994, the Bond Trustee distributed
$400,000 to bondholders. This sum was generated from asset sales and the
collection of Medical Center receivables, after payment of certain
expenses, administrative and priority claims, and unsecured creditor
settlements, all as provided in the Medical Center's Reorganization Plan.

To date and including the February 1994 distribution, the Bond
Trustee has distributed to bondholders an amount equal to 45.5% of the
outstanding principal of, and accrued unpaid interest on, the Sacred Heart
Bonds up to the date of acceleration, November 18, 1991.

The Medical Center has submitted expense reimbursement claims to the
Federal Medicare Program, to the Pennsylvania Medicaid Program, and to
Independence Blue Cross of Philadelphia. The Medical Center has received
a small portion of the allowed claims to date, and it expects to receive
additional payments in 1994 and 1995. It is impossible to predict with
any certainty the amount and timing of additional distributions to
bondholders from these or other sources.

Other than the Sacred Heart Bonds described above, as of the date of
this Prospectus, 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 effect on the State Trusts other than that
which is discussed relating to the Sacred Heart Bonds or under "The State
Trusts" herein. 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 the Bonds in the State Trusts. The Sponsor is unable to
predict whether any such litigation may be instituted or, if instituted,
whether it will have a material adverse effect on a State Trust.

Other Factors. The Bonds in the State Trusts, 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 of declining interest rates
there have been increased redemptions of bonds, particularly housing
bonds, pursuant to such redemption provisions. In addition, the Bonds in
the State 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
state Trusts.

The State Trusts may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but
not a legal obligation of the state or municipality in question. See
"Portfolio" and "Information Regarding the State Trust" for each State
Trust in Part A of this Prospectus for the amount of moral obligation
bonds contained in each State Trust's portfolio.

Certain of the Bonds in the State Trusts 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 in each State Trust is contained under the "Portfolio"
for such State Trust 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 the 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 the State Trusts will retain their present size and
composition for any length of time. The proceeds from the sale of a Bond
in a State Trust or from the exercise of any redemption or call provision
will be distributed to Certificateholders of such State Trust, except to
the extent such proceeds are applied to meet redemptions of Units. See
"Trustee Redemption."

Puerto Rico Bonds. Certain of the Bonds in the portfolio may be
general obligations and/or revenue bonds of issuers located in Puerto Rico
which will be affected by general economic conditions in Puerto Rico. The
economy of Puerto Rico is closely integrated with that of the mainland
United States. During fiscal year 1993, approximately 86% of Puerto
Rico's exports were to the United States mainland, which was also the
source of 69% of Puerto Rico's imports. In fiscal 1993, Puerto Rico
experienced a $2.5 billion positive adjusted trade balance. The economy
of Puerto Rico is dominated by the manufacturing and service sectors. The
manufacturing sector has experienced a basic change over the years as a
result of increased emphasis on higher wage, high technology industries
such as pharmaceuticals, electronics, computers, microprocessors,
professional and scientific instruments, and certain high technology
machinery and equipment. The service sector, including finance, insurance
and real estate, also plays a major role in the economy. It ranks second
only to manufacturing in contribution to the gross domestic product and
leads all sectors in providing employment. In recent years, the service
sector has experienced significant growth in response to and paralleling
the expansion of the manufacturing sector. Since fiscal 1987, personal
income has increased consistently in each fiscal year. In fiscal 1993,
aggregate personal income was $24.1 billion ($20.6 billion in 1987 prices)
and personal income per capita was $6,760 ($5,767 in 1987 prices).
Personal income includes transfer payments to individuals in Puerto Rico
under various social programs. Total federal payments to Puerto Rico,
which include many types in addition to federal transfer payments, are
lower on a per capita basis in Puerto Rico than in any state. Transfer
payments to individuals in fiscal 1993 were $5.3 billion, of which $3.6
billion, or 67.6%, represent entitlement to individuals who had previously
performed services or made contributions under programs such as Social
Security, Veterans Benefits and Medicare. The number of persons employed
in Puerto Rico during fiscal 1994 averaged 1,011,000. Unemployment,
although at a low level compared to the late 1970s, remains above the
average for the United States. In fiscal 1994, the unemployment rate in
Puerto Rico was 15.9%. Puerto Rico's decade-long economic expansion
continued throughout the five-year period from fiscal 1989 through fiscal
1993. Almost every sector of its economy was affected and record levels
of employment were achieved. Factors behind this expansion include
Commonwealth sponsored economic development programs, the relatively
stable prices of oil imports, the continued growth of the United States
economy, periodic declines in exchange value of the United States dollar
and the relatively low cost borrowing during the period. Real gross
product (adjusted to reflect 1987 prices) amounted to approximately
$20.07 billion in fiscal 1993, or 3.1% above the fiscal 1992 level. The
Puerto Rico Planning Board's economic activity index, a composite index
for thirteen economic indicators, increased 1.6% in fiscal 1994 compared
to fiscal 1993, which period showed an increase of 1.4% over fiscal 1992.
Growth in the Puerto Rico economy in fiscal 1994 and 1995 depends on
several factors, including the state of the United States economy and the
relative stability in the price of oil imports, the exchange value of the
U.S. dollar and the cost of borrowing.

Discount and Zero Coupon Bonds

The State Trust portfolios may contain original issue discount
bonds. 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 each State Trust
may be 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 fluctuations 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. See "Description of Portfolios"
in Part A for the aggregate principal amount of original issue discount
bonds in each State Trust's portfolio.

The State Trust portfolios may also contain Bonds that were
purchased at deep "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 State Trusts 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 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 yield and a lower current market value than otherwise
comparable bonds with a shorter term to maturity. If interest rates rise,
the value of the bonds will decrease; and if interest rates decline, the
value of the bonds will increase. The discount does not necessarily
indicate a lack of market confidence in the issuer.

THE STATE TRUSTS

The Sponsor believes the information summarized below describes some
of the more significant events relating to the State Trusts. Sources of
such information are the official statements of the issuers located in the
states of the State Trusts which have been issued in connection with debt
offerings by such states, as well as other publicly available documents
and information. While the Sponsor has not independently verified such
information, it has no reason to believe it is not correct in all material
respects.

California Trust

Because the California Trust invests in California issues, it is
susceptible to political, economic, regulatory or other factors affecting
issuers of California municipal securities. The following information
constitutes only a brief summary of a number of the complex factors which
may have an impact on issuers of California municipal securities and does
not purport to be a complete or exhaustive description of all adverse
conditions to which issuers of California municipal securities may be
subject. Additionally, many factors, including national, economic, social
and environmental policies and conditions, which are not within the
control of such issuers, could have an adverse impact on the financial
condition of such issuers. The California Trust cannot predict whether or
to what extent such factors or other factors may affect the issuers of
California municipal securities, the market value or marketability of such
securities or the ability of the respective issuers of such securities
acquired by the California Trust to pay interest on or principal of such
securities. Further, the creditworthiness of obligations issued by local
California issuers may be unrelated to the creditworthiness of obligations
issued by the State of California.

Bonds in the California Trust include primarily debt obligations of
the State of California and its subdivisions issued to obtain funds for
various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other
purposes for which said Bonds may be issued include the refunding of
outstanding obligations, the obtaining of funds for general operating
expenses, or the obtaining of funds to lend to public or private
institutions for the construction of facilities such as educational,
hospital and housing facilities. In addition, certain types of bonds may
be issued by California public authorities to finance privately operated
housing facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal.

California's economy is the largest among the 50 states and one of
the largest in the world. The State's July 1, 1993 population of almost
32 million represents more than 12.0 percent of the total United States
population. Total employment is about 14.0 million, the majority of which
is in the service, trade and manufacturing sectors.

Recent California Economic Trends

Since the start of the 1990-91 Fiscal Year (July 1 - June 30),
California has faced the worst economic, fiscal and budget conditions
since the 1930s. Construction, manufacturing (especially aerospace),
exports and financial services, among others, have all been severely
affected.

Job losses have been the worst of any post-war recession and have
continued through the end of 1993. The State Department of Finance (the
"Department of Finance") projects that non-farm employment levels will be
stable in 1994 and show modest growth in 1995, but pre-recession job
levels are not expected to be reached for several more years.
Unemployment is expected to remain well above the national average through
1994. The Department of Finance foresees slow recovery from the recession
in California beginning in 1994. Both the California and national
economic recoveries are much weaker than in previous business cycles, and
could be harmed by several factors, including rising interest rates.

California has lost over 850,000 payroll jobs, making this by far
the longest and deepest downturn of the post-World War II era. By
contrast, in both the 1969-70 and 1981-82 recessions, the State had
recovered its job losses by two years after the start of the recession.

Major cuts in federal defense spending are now recognized as the
main source of the recession and the largest obstacle to recovery. This
year and for the next several years to come, the principal question in the
California outlook is when and whether other elements in the State's
economy can muster sufficient strength to overcome the continuing drag of
defense cuts.

The State's tax revenue experience clearly reflects sharp declines
in employment, income and retail sales on a scale not seen in over 50
years. The May 1994 Revision to the 1994-95 Governor's Budget, released
May 20, 1994 (the "May Revision"), assumes the State will start to recover
from recessionary conditions in 1994, with a modest upturn beginning in
1994 and continuing in 1995, a year later than predicted in the May 1993
Department of Finance economic projection. Pre-recession job levels are
not expected to be reached until 1997.

National Economic Trends

Economic recovery is apparently proceeding at a steady pace for the
nation as a whole. The May Revision economic forecast for the United
States is moderately higher, reflecting both improved prospects and upward
revisions in several major data series.

The recovery gained momentum in the last quarter of 1993, with GDP
expanding at a 7 percent rate. This was stronger than assumed for the
Budget forecast in January, 1993. Strength in the recovery has been
reflected in car sales, housing starts, job gains, industrial production
and corporate profits. Business investment in equipment has strengthened
beyond that expected for the Budget forecast. Inflation remains under
control, and appears to be coming in lower than previously forecast.

On the downside, investment in nonresidential structures is coming
in weaker than anticipated. Federal spending for both defense and
nondefense programs has fallen more rapidly than forecast previously, and
a surge in imports has contributed to a large foreign trade deficit.
California's Northridge Earthquake was reflected in national data,
although the effect was far smaller and more temporary for the United
States than it will be for the State.

Gross domestic product (GDP) for the first quarter of 1994 grew at
essentially the rate forecast late last year. For all of 1994, however,
real GDP is now expected to grow by 3.6 percent. Growth for 1995 is
expected to be reduced as concerns mount over the impact of higher
interest rates.

Although assumptions underlying various forecasts included rising
interest rates, policy moves by the Federal Reserve in recent months have
pushed rates up faster than expected. The mortgage rate is of particular
concern. There are reports that housing activity resales, refinancings,
and new building is already slowing down. It will be difficult to keep
the recovery going if rates edge higher in coming months.

Another downside risk is the as yet unresolved issue of health care
coverage and costs. Both interest rates and the health care question are
critical factors for job creation. Small businesses, in particular, could
be adversely affected by rising health costs, and it is this sector which
creates many of the new jobs during an economic upturn.

California Economy

There is growing evidence that California is showing signs of an
economic turnaround, and the May Revision forecast is revised up from the
January Budget forecast. Since the January Budget forecast, 1993 nonfarm
employment has been revised upward by 31,000. Employment in the early
months of 1994 has shown encouraging signs of growth, several months
sooner than was contemplated in the January Budget forecast. Between
December and April, payrolls were up by 50,000 jobs. The Northridge
Earthquake may have dampened economic activity briefly during late January
and February, but the rebuilding effects are now adding a small measure of
stimulus.

Sectors which are contributing to California's recovery include
construction and related manufacturing, wholesale and retail trade,
transportation and several service industries such as amusements and
recreation, business services and management consulting. Electronics is
showing modest growth and the rate of decline in aerospace manufacturing
is slowly diminishing. These trends are expected to continue, and by next
year, much of the restructuring in the finance and utilities industries
should be nearly completed. Thus, the State's recovery should gain
momentum over the next two years.

As a result of these factors, average 1994 nonfarm employment is now
forecast to maintain 1993 levels compared to a projected 0.6 percent
decline in the January budget. 1995 employment is expected to be up 1.6
percent, compared to 0.7 percent in the January budget.

The Northridge Earthquake resulted in a downward revision of this
year's personal income growth from 4.0 percent in the January Budget to
3.6 percent. However, this decline is more than explained by the $5.5
billion charge against rental and proprietor's incomes equal to 0.8
percent of total income reflecting uninsured damage from the quake. Next
year, without the quake effects, incomes grow 6.1 percent, compared to 5
percent in the January Budget. Without these quake effects, income growth
was little changed in the May Revision compared to the January forecast
contained in the Governor's Proposed Budget.

The housing forecast remains essentially unchanged. Although
existing home sales have strengthened and subdivision surveys indicated
increased new home sales, building permits are up only slightly from
recession lows. Gains are expected in the months ahead, but higher
mortgage interest rates will dampen the upturn. Essentially, the
earthquake adds a few thousand units to the forecast, but this effect is
offset by higher interest rates.

Interest rates represent one of several downside risks to the
forecast. The rise in interest rates has occurred more rapidly than
contemplated in the January Budget forecast. In addition to affecting
housing, higher rates may also dampen consumer spending, given the high
proportion of California homeowners with adjustable-rate mortgages. The
May Revision forecast includes a further rise in the Federal Funds rate to
nearly 5 percent by the beginning of 1995. Should rates rise more
steeply, housing and consumer spending would be adversely affected.

The employment upturn is still tenuous. The Employment Development
Department revised down February's employment gain and March was revised
to a small decline. Unemployment rates in California have historically
been volatile since January ranging from a high of 10.1 percent to a low
of 8.6 percent. The small sample size coupled with changes made to the
survey instrument in January contribute to this volatility.

The State. The recession has seriously affected State tax revenues,
which basically mirror economic conditions. It has also caused increased
expenditures for health and welfare programs. The State has also been
facing a structural imbalance in its budget with the largest programs
supported by the General Fund K-12 schools and community colleges, health
and welfare, and corrections growing at rates higher than the growth rates
for the principal revenue sources of the General Fund. As a result, the
State has experienced recurring budget deficits. The State Controller
reports that expenditures exceeded revenues for four of the five fiscal
years ending with 1991-92 and were essentially equal in 1992-93. By June
30, 1993, according to the Department of Finance, the State's Special Fund
for Economic Uncertainties had a deficit, on a budget basis, of
approximately $2.8 billion. The 1993-94 Budget Act incorporated a Deficit
Retirement and Reduction Plan to repay this deficit over two fiscal years.
The original budget for 1993-94 reflected revenues which exceeded
expenditures by approximately $2.0 billion. As a result of the continuing
recession, the excess of revenues over expenditures for the fiscal year is
now expected to be only about $500 million. Thus the accumulated budget
deficit at June 30, 1994 is now estimated by the Department of Finance to
be approximately $2.0 billion, and the deficit will not be retired by June
30, 1995 as planned.

The accumulated budget deficits over the past several years,
together with expenditures for school funding, which have not been
reflected in the budget, and reduction of available internal borrowable
funds, have combined to significantly deplete the State's cash resources
to pay its ongoing expenses. In order to meet its cash needs, the State
has had to rely for several years on a series of external borrowings,
including borrowings past the end of a fiscal year. Such borrowings are
expected to continue in the future, provided that the State may not issue
any revenue anticipation notes, reimbursement warrants or other registered
warrants which by their terms are due and payable on or prior to April 26,
1996, the maturity date of the 1994 Revenue Anticipation Warrants, other
than the Notes and the 1994 Revenue Anticipation Warrants.

Administration reports during the course of the 1993-94 Fiscal Year
have indicated that while economic recovery appears to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 Fiscal Year were approximately $800
million lower than original projections, and expenditures were
approximately $780 million higher, primarily because of higher health and
welfare caseloads, lower property taxes which require greater State
support for K-12 education to make up the shortfall, and lower than
anticipated federal government payments for immigration-related costs.
The most recent reports, however, in May and June, 1994, indicated that
revenues in the second half of the 1993-94 Fiscal Year have been very
close to the projections made in the Governor's Budget of January 10,
1994, which is consistent with a slow turnaround in the economy.

During the 1993-94 Fiscal Year, the State implemented the Deficit
Retirement and Reduction Plan, which was part of the 1993-94 Budget Act,
by issuing $1.2 billion of revenue anticipation warrants in February 1994
maturing December 21, 1994. This borrowing reduced the cash deficit at
the end of the 1993-94 Fiscal Year. Nevertheless, because of the $1.5
billion variance from the original Budget Act assumptions, the General
Fund ended the Fiscal Year at June 30, 1994, carrying forward an
accumulated deficit of approximately $2 billion.

Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement and
Reduction Plan, the State issued an additional $2.0 billion of revenue
anticipation warrants which were needed to fund the State's obligations
and expenses through the end of the 1993-94 Fiscal Year.

Northridge Earthquake. On January 17, 1994, a major earthquake
measuring an estimated 6.8 on the Richter Scale struck Los Angeles.
Significant property damage to private and public facilities occurred in a
four-county area including northern Los Angeles County, Ventura County,
and parts of Orange and San Bernardino Counties. These areas were
declared as State and federal disaster areas by January 18. Current
estimates of total property damage (private and public) are in the range
of $20 billion, but these estimates are subject to change.

Despite such damage, on the whole, the vast majority of structures
in the areas, including large manufacturing and commercial buildings and
all modern high-rise offices, survived the earthquake with minimal or no
damage, validating the cumulative effect of strict building codes and
thorough preparation for such an emergency by the State and local
agencies.

Damage to State-owned facilities included transportation corridors
and facilities such as Interstate Highways 5 and 10 and State Highways 14,
118 and 210. Most of the major highways (Interstates 5 and 10) have now
been reopened. The campus at California State University Northridge (very
near the epicenter) suffered an estimated $350 million damage, resulting
in temporary closure of the campus. The campus has reopened on a reduced
operating basis using borrowed facilities elsewhere in the area and many
temporary structures. There was also some damage to University of
California at Los Angeles. Overall, except for the temporary road and
bridge closures, and CSU-Northridge, the earthquake did not and is not
expected to significantly affect State government operations.

The President immediately allocated some available disaster funds,
and Congress has approved additional funds for a total of at least $9.5
billion of federal funds for earthquake relief, including assistance to
homeowners and small businesses, and costs for repair of damaged public
facilities. The Governor has announced that the State's share for
transportation projects would come from existing Department of
Transportation funds (thereby delaying other, non-earthquake related
projects), the State's share for certain other costs (including local
school building repairs) would come from reallocating existing bond funds,
and that a proposed program for homeowner and small business aid
supplemental to federal aid would have to be abandoned. Some other costs
will be borrowed from the federal government in a manner similar to that
used by the State of Florida after Hurricane Andrew. Pursuant to Senate
Bill 2383, repayment will have to be addressed in 1995-96 or beyond.

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

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

The 1994-95 Budget Act contains no tax increases. Under legislation
enacted for the 1993-94 Budget, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after this year failed at the June, 1994 election.
The Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving approximately $390 million in the 1995-96 Fiscal
Year. Subsequent to the enactment of the 1994-95 Budget Act, the State of
California's bond rating was lowered to A by Standard & Poor's Corporation
and to A by Fitch Investors Service, Inc. Moody's Investors Service, Inc.
also lowered the State of California's long-term rating to A1.

Certain issuers of California Municipal Bonds receive subventions
from the State which are eligible to be used to make payments on said
Bonds. No prediction can be made as to what effect continued decreases in
subventions may have on the ability of some issuers to make such payments.
Constitutional and Statutory Limitations; Recent Initiatives; Pending
Litigation

Article XIIIA of the California Constitution (which resulted from
the voter-approved Proposition 13 in 1978) limits the taxing powers of
California public agencies. Article XIIIA provides that the maximum ad
valorem tax on real property cannot exceed 1% of the "full cash value" of
the property, and effectively prohibits the levying of any other ad
valorem property tax for general purposes. However, on May 3, 1986,
Proposition 46, an amendment to Article XIIIA, was approved by the voters
of the State of California, creating a new exemption under Article XIIIA
permitting an increase in ad valorem taxes on real property in excess of
1% for bonded indebtedness approved by two-thirds of the voters voting on
the proposed indebtedness. "Full cash value" is defined as "the County
Assessor's valuation of real property as shown on the 1975-76 tax bill
under "full cash value" or, thereafter, the appraised value of real
property when purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment." The "full cash value" is subject to
annual adjustment to reflect increases (not to exceed 2%) or decreases in
the consumer price index or comparable local data, or to reflect
reductions in property value caused by damage, destruction or other
factors.

Article XIIIB of the California Constitution limits the amount of
appropriations of the State and of local governments to the amount of
appropriations of the entity for the prior year, adjusted for changes in
the cost of living, population and the services that the local government
has financial responsibility for providing. To the extent the revenues of
the state and/or local government exceed its appropriations, the excess
revenues must be rebated to the public either directly or through a tax
decrease. Expenditures for voter-approved debt services are not included
in the appropriations limit.

In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) required that any tax for general
governmental purposes imposed by local governments be approved by a
majority of the electorate of the government entity, (ii) required that
any special tax (defined as taxes levied for other than general government
purposes) imposed by a local government entity be approved by a two-thirds
vote of the voters within that jurisdiction, (iii) restricted the use of
revenues from a special tax to the purposes or for the service for which
the special tax is imposed, (iv) prohibited the imposition of ad valorem
taxes on real property by local government entities except as permitted by
Article XIIIA, (v) prohibited the imposition of transaction taxes and
sales taxes on the sale of real property by local governments,
(vi) required that any tax imposed by a local government on or after
August 1, 1985 be ratified by a majority vote of the electorate within two
years of the adoption of the initiative or be terminated by November 15,
1988, (vii) required that, in the event a local government fails to comply
with the provisions of this measure, a reduction in the amount of property
tax revenues allocated to such local government occur in an amount equal
to the revenues received by such entity attributable to the tax levied in
violation of the initiative, and (viii) permitted those provisions to be
amended exclusively by the voters of the State of California. While
several recent decisions of the California Courts of Appeal have held that
all or portions of Proposition 62 are unconstitutional, the California
Supreme Court has yet to consider the matter.

At the November 9, 1988 general election, California voters approved
an initiative known as Proposition 98. This initiative amends Article
XIIIB to require that (i) the California Legislature establish a prudent
state reserve fund in an amount as it shall deem reasonable and necessary
and (ii) revenues in excess of amounts permitted to be spent and which
would otherwise be returned pursuant to Article XIIIB by revision of tax
rates or fee schedules, be transferred and allocated (up to a maximum of
40%) to the State School Fund and be expended solely for purposes of
instructional improvement and accountability. Proposition 98 also amends
Article XVI to require that the State of California provide a minimum
level of funding for public schools and community colleges. Commencing
with the 1988-89 fiscal year, money to be applied by the State for the
support of school districts and community college districts shall not be
less than the greater of: (i) the amount which, as a percentage of the
State general fund revenues which may be appropriated pursuant to Article
XIIIB, equals the percentage of such State general fund revenues
appropriated for school districts and community college districts,
respectively, in fiscal year 1986-87 or (ii) the amount required to ensure
that the total allocations to school districts and community college
districts from the State general fund proceeds of taxes appropriated
pursuant to Article XIIIB and allocated local proceeds of taxes shall not
be less than the total amount from these sources in the prior year,
adjusted for increases in enrollment and adjusted for changes in the costs
of living pursuant to the provisions of Article XIIIB. The initiative
permits the enactment of legislation, by a two-thirds vote, to suspend the
minimum funding requirement for one year. As a result of Proposition 98,
funds that the State might otherwise make available to its political
subdivisions may be allocated instead to satisfy such minimum funding
level.

On November 3, 1992, voters approved an initiative statute,
Proposition 163, which exempts certain food products, including candy and
other snack foods, from California's sales tax. The sales tax had been
broadened to include those items as part of the 1991-92 budget
legislation.

Article XIIIA, Article XIIIB and a number of propositions were
adopted pursuant to California's constitutional initiative process. From
time to time, other initiative measures could be adopted by California
voters. The adoption of any such initiatives may cause California issuers
to receive reduced revenues, or to increase expenditures, or both.

Recent Initiatives. In July 1991, California increased taxes by
adding two new marginal tax rates, at 10% and 11%, effective for tax years
1991 through 1995. After 1995, the maximum personal income tax rate is
scheduled to return to 9.3%, and the alternative minimum tax rate is
scheduled to drop from 8.5% to 7%. In addition, legislation in July 1991
raised the sales tax by 1.25%, of which 0.5% was a permanent addition.
This tax increase will be cancelled if a court rules that such tax
increase violates any constitutional requirements. Although 0.5% of the
State tax rate was scheduled to expire on June 30, 1993, such amount was
extended for six months for the benefit of counties and cities. On
November 2, 1993, voters approved extension of this 0.5% levy as a
permanent source of funding for local government.

The November 2, 1993 special election ballot also contained an
initiative constitutional amendment providing parental choice regarding
education. This initiative would have required the State to allocate
every school-age child a scholarship in an amount equal to at least 50% of
the prior year's per-pupil State and local government expenditure for
kindergarten through twelfth grade education. Such scholarships would
have been redeemable by public or private schools. If passed, the
parental choice initiative could have threatened the fiscal stability of
any school district in which a significant number of students withdraw and
enroll elsewhere. Although the initiative failed, other parental choice
initiatives have already been filed in an attempt to qualify them for
future voter consideration.

Pending Litigation. On June 20, 1994, the United States Supreme
Court, in two companion cases, upheld the validity of California's prior
method of taxing multinational corporations under a "unitary" method of
accounting for their worldwide earnings. Barclays Bank PLC v. Franchise
Tax Board concerned foreign corporations, and Colgate-Palmolive v.
Franchise Tax Board concerned domestic corporations.

In the spring of 1991, the Richmond Unified School District ("RUSD")
Board of Directors attempted to end classes six weeks early because of a
fiscal crisis. In response to lawsuits, a lower court judge, in a case
called Butt v. State of California, ordered the State, over objections
from the Governor, to provide funding to allow the school year to be
completed, and an emergency loan was arranged by the State Controller. On
appeal, the California Supreme Court in late December, 1992 upheld the
lower court's action, ruling that the State Constitution's guarantee of
public education required the State to ensure a full year's education in
all school districts. The Court, however, overturned a portion of the
original order relating to the source of funds for RUSD's emergency loan;
the decision leaves unclear just where the State must find funds to make
any future loans of this kind.

In Parr v. State of California, a complaint was filed in federal
court claiming that payment of wages in registered warrants violated the
Fair Labor Standards Act ("FLSA"). The federal court held that the
issuance of registered warrants does violate the FLSA. The next phase of
the trial will focus on the issue of damages. The maximum amount of
damages is the amount of the salary originally owed or approximately $350
million.

The State is involved in a lawsuit seeking reimbursement for alleged
State-mandated costs. In Thomas Hayes v. Commission on State Mandates,
the state director of finance is appealing a 1984 decision by the State
Board of Control. The Board of Control decided in favor of local school
districts' claims for reimbursement for special education programs for
handicapped students; however, funds have not been appropriated. The
amount of potential liability to the State, if all potentially eligible
school districts pursue timely claims, has been estimated by the
Department of Finance at over $1 billion.

The State is involved in two lawsuits related to contamination at
the Stringfellow toxic waste site. In one suit, the State is one of
approximately 130 defendants in Penny Newman v. J.B. Stringfellow, et al.
in which 3,800 plaintiffs are claiming damages of $850 million arising
from contamination at the Stringfellow toxic waste site. A conservative
estimate of the State's potential liability is $250 million to $550
million. A group of 17 of the plaintiffs has received a verdict of
$159,000 against the State. In a separate lawsuit, United States, People
of the State of California v. J.B. Stringfellow, Jr. et al. the State is
seeking recovery for past costs of cleanup of the site, a declaration that
the defendants are jointly and severally liable for future costs, and an
injunction ordering completion of the cleanup. However, the defendants
have filed a counterclaim against the State for alleged negligent acts.
Because the State is the present owner of the site, the State may be found
liable. Present estimates of the cleanup range from $200 million to $800
million.

In 1992 the State, as part of an experimental work incentive
program, reduced welfare payments to approximately 2.7 million people who
receive Aid to Families with Dependent Children. The State's reduction in
welfare payments was challenged in federal court. In a recent United
States Court of Appeals ruling, the Court held that the State welfare cuts
were improper. To date, the decision has not been appealed. The Court's
decision could cost the State approximately $202 million a year in
increased welfare benefit costs. In such event, the State may shift some
or all of the increased burden to local governments.

Michigan Trust

Due primarily to the fact that the leading sector of the State's
economy is the manufacturing of durable goods, economic activity tends to
be more cyclical than in the nation as a whole. While the State's efforts
to diversify its economy have proven successful as reflected by the fact
that the share of employment in the State in the durable goods sector fell
from 33.1 percent in 1960 to 15.1 percent in 1993, durable goods
manufacturing still represents a sizeable proportion of the State's
economy. As a result, any substantial economic downturn is likely to have
an adverse effect on the State's economy and on the revenues of the State
and its municipalities and school districts. These conditions and other
factors described below could adversely affect the Michigan debt
obligations that the Michigan trust acquires and the value of the Units of
the Trust.

Recently, as well as historically, the average monthly unemployment
rate in the State has been higher than the average figures for the United
States. For example, for 1993 the average monthly unemployment rate in
the State was 7.0% as compared to a national average of 6.8% in the United
States.

The State's economy could continue to be affected by changes in the
auto industry, notably consolidation, reduction in administrative staff
and plant closings resulting from competitive pressures and overcapacity.
The financial impact on the local units of government in the areas in
which plants are closed could be more severe than on the State as a whole
and could adversely affect State revenues.

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

The State Constitution limits the purposes for which State general
obligation debt may be issued. Such debt is limited to short-term debt
for State operating purposes, short and long term debt for the purposes of
making loans to school districts and long term debt for voter approved
purposes. In addition to the foregoing, the State authorizes special
purpose agencies and authorities to issue revenue bonds payable from
designated revenues and fees. Revenue bonds are not obligations of the
State and in the event of shortfalls in self-supporting revenues, the
State has no legal obligation to appropriate money to these service
payments. The State's Constitution also directs or restricts the use of
certain revenues.

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

In recent years, the State of Michigan has reported its financial
results in accordance with generally accepted accounting principles. For
the fiscal years ended September 30, 1990 and 1991, the State reported
negative year-end General Fund balances of $310.3 million and $169.4
million, respectively, but ended the 1992 fiscal year with its General
Fund in balance. A positive cash balance in the combined General
Fund/School Aid Fund was recorded at September 30, 1990. In each of the
three fiscal years ending with the fiscal year ended September 30, 1993,
the State undertook mid-year actions to address projected year-end budget
deficits, including expenditure cuts and deferrals and one-time
expenditures or revenue recognition adjustments. In the fiscal year ended
September 30, 1993, the State reported a balance as of September 30, 1993
of $26.0 million after a transfer of $283 million to the Budget
Stabilization Fund described below. From 1991 through 1993, the State
experienced deteriorating cash balances which have necessitated short-term
borrowings and the deferral of certain scheduled cash payments to local
units of government. The State borrowed $700 million for cash flow
purposes in the 1992 fiscal year and $900 million in the 1993 fiscal year.
The State has a Budget Stabilization Fund which had an accrued balance of
$20.1 million as of September 30, 1992 and, after a transfer of $283
million on an accrual basis in connection with the completion of the
State's financial reports, an ending balance of $303 million as of
September 30, 1993.

Amendments to the Michigan Constitution which place limitations on
increases in State taxes and local ad valorem taxes (including taxes used
to meet debt service commitments on obligations of the taxing unit) were
approved by the voters of the State of Michigan in November 1978 and
became effective on December 23, 1978. To the extent that obligations in
the Trust are for local units and have been issued on or subsequent to
December 23, 1978, the ability of such local units to levy debt service
taxes might be affected.

State law provides for distributions of certain State collected
taxes or portions thereof to local units based in part on population as
shown by census figures and authorizes levy of certain local taxes by
local units having a certain level of population as determined by census
figures. Reductions in population in local units resulting from periodic
census could result in a reduction in the amount of State collected taxes
returned to those local units and in reductions in levels of local tax
collections for such local units unless the impact of the census is
changed by State law. No assurance can be given that any such State law
will be enacted. In the 1991 fiscal year, the state deferred certain
scheduled payments to municipalities, school districts, universities and
community colleges. While such deferrals were made up at later dates,
similar future deferrals could have an adverse impact on the cash position
of some local units. Additionally, the State reduced revenue sharing
payments to municipalities below the level provided under formulas by $0.9
million in the 1991 fiscal year and $34.4 million in the 1992 fiscal year
and froze the 1993 revenue sharing payments at the 1992 level.

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

Currently, the State's general obligation bonds ar rated "A1" by
Moody's Investors Service, Inc., "AA" by Fitch Investor's Services, Inc.,
and "AA" by Standard & Poor's Corporation.

New York Trust

State Economic Trends.

Over the long term, the State of New York (the "State") and the City
of New York (the "City") face serious potential economic problems. The
City accounts for approximately 41% of the State's population and personal
income, and the City's financial health affects the State in numerous
ways. The State historically has been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the
nation as a whole, gradually eroding its relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally
less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have
had in attracting people and business. The City has also had to face
greater competition as other major cities have developed financial and
business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City. In
recent years the State's economic position has improved in a manner
consistent with that for the Northeast as a whole.

The State has for many years had a very high State and local tax
burden relative to other states. The State and its localities have used
these taxes to develop and maintain their transportation networks, public
schools and colleges, public health systems, other social services and
recreational facilities. Despite these benefits, the burden of State and
local taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some businesses
and individuals to relocate outside, or not locate within, the State.

Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced
budgets, reductions in Federal spending could materially and adversely
affect the financial condition and budget projections of the State and its
localities.

New York City.

General. The City, with a population of approximately 7.3 million,
is an international center of business and culture. Its non-manufacturing
economy is broadly based, with the banking and securities, life insurance,
communications, publishing, fashion design, retailing and construction
industries accounting for a significant portion of the City's total
employment earnings. Additionally, the City is the nation's leading
tourist destination. The City's manufacturing activity is conducted
primarily in apparel and publishing.

The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As
a result, the City experienced job losses in 1990 and 1991 and real Gross
City Product (GCP) fell in those two years. In order to achieve a
balanced budget as required by the laws of the State for the 1992 fiscal
year, the City increased taxes and reduced services during the 1991 fiscal
year to close a then projected gap of $3.3 billion in the 1992 fiscal year
which resulted from, among other things, lower than projected tax revenue
of approximately $1.4 billion, reduced State aid for the City and greater
than projected increases in legally mandated expenditures, including
public assistance and Medicaid expenditures. Beginning in calendar year
1992, the improvement in the national economy helped stabilize conditions
in the City. Employment losses moderated toward year-end and real GCP
increased, boosted by strong wage gains. The City now projects, and its
current four-year financial plan assumes, that the City's economy will
continue to improve and that a modest employment recovery will occur
during calendar year 1994.

For each of the 1981 through 1993 fiscal years, the City achieved
balanced operating results as reported in accordance with generally
accepted accounting principles ("GAAP"), and the City's 1994 fiscal year
results are projected to be balanced in accordance with GAAP. The City
was required to close substantial budget gaps in recent years in order to
maintain balanced operating results. For fiscal year 1995, the City has
adopted a budget which has halted the trend in recent years of substantial
increases in City spending from one year to the next. The City's ability
to maintain balanced budgets in the future is subject to numerous
contingencies; therefore, even though the City has managed to close
substantial budget gaps in recent years in order to maintain balanced
operating results, there can be no assurance that the City will continue
to maintain a balanced budget as required by State law without additional
tax or other revenue increases or reductions in City services, which could
adversely affect the City's economic base.

Pursuant to the laws of the State, the City prepares an annual four-
year financial plan, which is reviewed and revised on a quarterly basis
and which includes the City's capital, revenue and expense projections.
The City is required to submit its financial plans to review bodies,
including the New York State Financial Control Board ("Control Board").
If the City were to experience certain adverse financial circumstances,
including the occurrence or the substantial likelihood and imminence of
the occurrence of an annual operating deficit of more than $100 million or
the loss of access to the public credit markets to satisfy the City's
capital and seasonal financing requirements, the Control Board would be
required by State law to exercise powers, among others, of prior approval
of City financial plans, proposed borrowings and certain contracts.

Fiscal Years 1993 and 1994. The City achieved balanced operating
results for the 1993 fiscal year as reported in accordance with GAAP.

On July 8, 1994, the City submitted to the Control Board a fourth
quarter modification to the City's Financial Plan for the 1994 fiscal year
(the "1994 Modification") which projects a balanced budget in accordance
with GAAP for the 1994 fiscal year, after taking into account a
discretionary transfer of $171 million in resources to the 1995 fiscal
year.

1995-1998 Financial Plan. On July 8, 1994, the City submitted to
the Control Board the Financial Plan for the 1995-1998 fiscal years (the
"1995-1998 Financial Plan" or "Financial Plan"), which relates to the
City, the Board of Education ("BOE") and the City University of New York
("CUNY"). The Financial Plan is based on the City's expense and capital
budgets for the City's 1995 fiscal year, which were adopted on June 23,
1994.

The 1995-1998 Financial Plan projects revenues and expenditures for
the 1995 fiscal year balanced in accordance with GAAP. The projections
for the 1995 fiscal year reflect proposed actions to close a previously
projected gap of approximately $2.3 billion for the 1995 fiscal year,
which include City actions aggregating $1.9 billion, a $288 million
increase in State actions over the 1994 and 1995 fiscal years, and a $200
million increased in Federal assistance. The City actions include
proposed agency actions aggregating $1.1 billion, including productivity
savings; tax and fee enforcement initiatives; service reductions; and
savings from the restructuring of City services. City actions also
include savings of $45 million resulting from proposed tort reform, the
projected transfer to the 1995 fiscal year of $171 million of the
projected 1994 fiscal year surplus, savings of $200 million for employee
health care costs, $51 million in reduced pension costs, savings of $225
million from refinancing City bonds and $65 million from the proposed sale
of certain City assets. The proposed savings for employee health care
costs are subject to collective bargaining negotiation with the City's
unions; the proposed savings from tort reform will require the approval of
the State Legislature; and the $200 million increase in Federal assistance
is subject to approval by Congress and the President.

The Financial Plan also set forth projections for the 1996 through
1998 fiscal years and outlines a proposed gap-closing program to close
projected gaps of $1.5 billion, $2.0 billion and $2.4 billion for the 1996
through 1998 fiscal years, respectively, after successful implementation
of the $2.3 billion gap-closing program for the 1995 fiscal year.

The projections for the 1996 through 1998 fiscal years assume the
extension by the State Legislature of the 14% personal income tax
surcharge beyond calendar year 1995 and extension of the 12.5% personal
income tax surcharge beyond calendar year 1996, resulting in combined
revenues of $159 million, $633 million and $920 million in the 1996, 1997
and 1998 fiscal years, respectively. However, as part of the tax
reduction program reflected in the Financial Plan, the City is proposing
the elimination of the 12.5% personal income tax surcharge when it expires
at a cost of $184 million in fiscal year 1997 and $455 million in fiscal
year 1998. The proposed gap-closing actions include City actions
aggregating $1.2 billion, $1.5 billion and $1.7 billion in the 1996
through 1998 fiscal years, respectively; $275 million, $375 million and
$525 million in proposed additional State actions in the 1996 through 1998
fiscal years, respectively, primarily from the proposed State assumption
of certain Medicaid costs; and $100 million and $200 million in proposed
additional Federal assistance in the 1997 and 1998 fiscal years,
respectively. The proposed additional City actions, a substantial number
of which are unspecified, include additional spending reductions, the
reduction of City personnel through attrition, government efficiency
initiatives, procurement initiatives, labor productivity initiatives, and
the proposed privatization of City sewage treatment plants. Certain of
these initiatives may be subject to negotiation with the City's municipal
unions. Various actions proposed in the Financial Plan for the 1996-1998
fiscal years, including the proposed state actions, are subject to
approval by the Governor and the State Legislature, and the proposed
increase in Federal assistance is subject to approval by Congress and the
President. The State Legislature has in previous legislative sessions
failed to approve certain of the City's proposals for the State assumption
of certain Medicaid costs and mandate relief, thereby increasing the
uncertainty as to the receipt of the State assistance included in the
Financial Plan. In addition, the Financial Plan assumes the continuation
of the current assumption with respect to wages for City employees and the
assumed 9% earnings on pension fund assets affecting the City's pension
fund contributions. Actual earnings on pension fund assets for the 1994
fiscal year are expected to be substantially below the 9% assumed rate,
which will increase the City's future pension contributions. In addition,
a review of the pension fund earnings assumptions is currently being
conducted which could further increase the City's future pension
contributions by a substantial amount.

The City expects that tax revenue for the 1994 fiscal year will be
approximately $65 million less than forecast in the 1994 Modification,
primarily due to shortfalls in the personal income tax and sales tax, and
that expenditures will be approximately $25 million greater than forecast.
Accordingly, the $171 million of the projected surplus for the 1994 fiscal
year, which is currently projected in the 1994 Modification and the
Financial Plan to be transferred to the 1995 fiscal year, will decrease to
$81 million. As a result, the City will reduce expenditures for the 1995
fiscal year to offset this decrease, which is expected to be reflected in
the first quarter modification to the Financial Plan. In addition, the
Financial Plan assumes that a special session of the State Legislature,
which may take place in the near future, will enact, and the Governor will
sign, State legislation relating to the proposed tort reform, which would
save the City $45 million in payments for tort liability in fiscal year
1995, and certain anticipated improvements in fine and fee collections
forecast to earn $25 million in City revenue in fiscal year 1995, and that
the State Legislature will not enact proposed legislation mandating
additional pension benefits for City retirees costing the City
approximately $200 million annually. To address these and other possible
contingencies, on July 11, 1994, the Mayor stated that he will reserve
$100 million from authorized spending by City agencies in fiscal year 1995
in addition to the existing general reserves of $150 million. In
addition, the City has identified a $360 million contingency program for
the 1995 fiscal year, primarily consisting of layoffs and service
reductions.

Collective Bargaining Agreements. In January 1993, the City
announced a settlement with a coalition of municipal unions, including
Local 237 of the International Brotherhood of Teamsters ("Local 237"),
District Council 37 of the American Federation of State, County and
Municipal Employees ("District Council 37") and other unions covering
approximately 44% of the City's workforce. The settlement, which has been
ratified by the unions, includes a total net expenditure increase of 8.25%
over a 39-month period, ending March 31, 1995 for most of these employees.
Between April 1993 and May 1994 the City announced agreements with the
Uniformed Fire Officers Association (the "UFOA"), the United Federation of
Teachers ("UFT"), the Housing Authority Police Benevolent Association
("HAPBA") and the Uniformed Firefighters Association ("UFA"), and recently
announced tentative settlements with the Transit Police Benevolent
Association ("TPBA") and the Patrolmen's Benevolent Association ("PBA"),
all of which are generally consistent with the coalition agreement. The
TPBA's delegate body has rejected the tentative settlement and the PBA's
delegate body has ratified it. The Financial Plan reflects the costs for
all City-funded employees associated with these settlements and provides
for similar increases for all other City-funded employees.

The Financial Plan provides no additional wage increases for City
employees after their contracts expire in the 1995 and 1996 fiscal years.
Each 1% wage increase for all employees commencing in the 1995 and 1996
fiscal years would cost the City an additional $130 million for the 1995
fiscal year, $140 million for the 1996 fiscal year and $150 million each
year thereafter above the amounts provided for in the Financial Plan.

Actions to Close the Gaps. The 1995-1998 Financial Plan reflects a
program of proposed actions by the City, State and Federal governments to
close the gaps between projected revenues and expenditures of $1.5
billion, $2.0 billion and $2.4 billion for the 1996, 1997 and 1998 fiscal
years, respectively.

City gap-closing actions total $1.2 billion in the 1996 fiscal year,
$1.5 billion in the 1997 fiscal year and $1.7 billion in the 1998 fiscal
year. These actions, a substantial number of which are unspecified,
include additional spending reductions, aggregate $501 million, $598
million and $532 million in the 1996 through 1998 fiscal years,
respectively; the reduction of City personnel through attrition, resulting
in savings of $39 million, $138 million and $253 million in the 1996
through 1998 fiscal years, respectively; government efficiency initiatives
aggregating $150 million, $230 million and $310 million in the 1996
through 1998 fiscal years, respectively; procurement initiatives,
aggregating $50 million, $100 million and $150 million in the 1996 through
1998 fiscal years, respectively; labor productivity initiatives,
aggregating $250 million in each of the 1996 through 1998 fiscal years;
and a proposed privatization of City sewage treatment plants which would
result in revenues of $200 million in each of the 1996 through 1998 fiscal
years. Certain of these initiatives may be subject to negotiation with
the City's municipal unions.

State actions proposed in the gap-closing program total $275
million, $375 million and $525 million in each of the 1996, 1997 and 1998
fiscal years, respectively. These actions include savings primarily from
the proposed State assumption of certain Medicaid costs.

The Federal actions proposed in the gap-closing program are $100
million and $200 million in increased Federal assistance in fiscal years
1997 and 1998, respectively.

Various actions proposed in the Financial Plan, including the
proposed increase in State aid, are subject to approval by the Governor
and the State Legislature, and the proposed increase in Federal aid is
subject to approval by Congress and the President. State and Federal
actions are uncertain and no assurance can be given that such actions will
in fact be taken or that the savings that the City projects will result
from these actions will be realized. The State Legislature failed to
approve a substantial portion of the proposed State assumption of Medicaid
costs in the last session. The Financial Plan assumes that these
proposals will be approved by the State Legislature during the 1995 fiscal
year and that the Federal government will increase its share of funding
for the Medicaid program. If these measures cannot be implemented, the
City will be required to take other actions to decrease expenditures or
increase revenues to maintain a balanced financial plan.

Although the City has maintained balanced budgets in each of its
last thirteen fiscal years, and is projected to achieve balanced operating
results for the 1995 fiscal year, there can be no assurance that the gap-
closing actions proposed in the Financial Plan can be successfully
implemented or that the City will maintain a balanced budget in future
years without additional State aid, revenue increases or expenditure
reductions. Additional tax increases and reductions in essential City
services could adversely affect the City's economic base.

Assumptions. The 1995-1998 Financial Plan is based on numerous
assumptions, including the continuing improvement in the City's and the
region's economy and a modest employment recovery during calendar year
1994 and the concomitant receipt of economically sensitive tax revenues in
the amounts projected. The 1995-1998 Financial Plan is subject to various
other uncertainties and contingencies relating to, among other factors,
the extent, if any, to which wage increases for City employees exceed the
annual increases assumed for the 1995 through 1998 fiscal years;
continuation of the 9% interest earnings assumptions for pension fund
assets and current assumptions with respect to wages for City employees
affecting the City's required pension fund contributions; the willingness
and ability of the State, in the context of the State's current financial
condition, to provide the aid contemplated by the Financial Plan and to
take various other actions to assist the City, including the proposed
State takeover of certain Medicaid costs and State mandate relief; the
ability of HHC, BOE and other such agencies to maintain balanced budgets;
the willingness of the Federal government to provide Federal aid; approval
of the proposed continuation of the personal income tax surcharge;
adoption of the City's budgets by the City Council in substantially the
forms submitted by the Mayor; the ability of the City to implement
proposed reductions in City personnel and other cost reduction
initiatives, which may require in certain cases the cooperation of the
City's municipal unions, and the success with which the City controls
expenditures; savings for health care costs for City employees in the
amounts projected in the Financial Plan; additional expenditures that may
be incurred due to the requirements of certain legislation requiring
minimum levels of funding for education; the impact on real estate tax
revenues of the current weakness in the real estate market; the City's
ability to market its securities successfully in the public credit
markets; the level of funding required to comply with the Americans with
Disabilities Act of 1990; and additional expenditures that may be incurred
as a result of deterioration in the condition of the City's
infrastructure.

The projections and assumptions contained in the 1995-1998 Financial
Plan are subject to revision which may involve substantial change, and no
assurance can be given that these estimates and projections, which include
actions which the City expects will be taken but which are not within the
City's control, will be realized.

Certain Reports. From time to time, the Control Board staff, the
City Comptroller and others issue reports and make public statements
regarding the City's financial condition, commenting on, among other
matters, the City's financial plans, projected revenues and expenditures
and actions by the City to eliminate projected operating deficits. Some
of these reports and statements have warned that the City may have
underestimated certain expenditures and overestimated certain revenues and
have suggested that the City may not have adequately provided for future
contingencies. Certain of these reports have analyzed the City's future
economic and social conditions and have questioned whether the City has
the capacity to generate sufficient revenues in the future to meet the
costs of its expenditure increases and to provide necessary services.

On March 1, 1994, the City Comptroller issued a report on the state
of the City's economy. The report concluded that, while the City's long
recession is over, moderate growth is the best the City can expect, with
the local economy being held back by continuing weakness in important
international economies.

On July 11, 1994, the City Comptroller issued a report on the City's
adopted budget for the 1995 fiscal year. The City Comptroller stated that
if none of the uncertain proposals are implemented, the total risk could
be as much as $763 million to $1.02 billion. Risks which were identified
as substantial risks include a possible $208 million to $268 million
increase in overtime costs; approval by the State Legislature of a tort
reform program to limit damage claims against the City, which would result
in savings of $45 million; the $65 million proceeds from a proposed asset
sale; additional expenditures at Health and Hospitals Corporation totaling
$60 million; and $60 million of increased pension contributions resulting
from lower than assumed pension fund earnings. Additional possible risks
include obtaining the agreement of municipal unions to the proposed
reduction in City expenditures for health care costs by $200 million;
uncertainties concerning the assumed improvement in the collection of
taxes, fines and fees totaling $50 million; renegotiation of the terms of
certain Port Authority leases totaling $75 million; and uncertainty
concerning the receipt of the $200 million of increased Federal aid
projected for the 1995 fiscal year. The City Comptroller noted that there
are a number of additional issues, including possible larger than
projected expenditures for foster care and public assistance and the
receipt of $100 million from assumed FICA refunds. The City Comptroller
has also stated in a report issued on June 8, 1994 that certain of the
reductions in personnel and services proposed in the City's financial plan
submitted to the Control Board on May 10, 1994 (the "May Financial Plan")
will have long-term and, in some cases, severe consequences for City
residents.

In addition, on July 11, 1994, the private members of the Control
Board, Robert R. Kiley, Heather L. Ruth and Stanley S. Shuman, issued a
statement which concluded that the 1995 fiscal year is not reasonably
balanced and that further budget cuts are unavoidable in the next six
months. In addition, the private members stated that the Financial Plan
does not set forth a path to structural balance. The private members
stated that, in order to achieve this goal, City managers must be given
fiscal targets they can be expected to meet; solid new proposals must be
developed that back up the savings the City has committed to achieve to
balance future budgets; and the deferral of expenses to future years,
through actions such as the sale of property tax receivables, stretching
out pension contributions and delaying debt service payments through
refundings, must stop. On July 11, 1994, the Control Board staff stated
that the City faces risks of greater than $1 billion and $2 billion for
the 1995 and 1996 fiscal years, respectively, and risks of approximately
$3 billion for each of the 1997 and 1998 fiscal years.

New York City Indebtedness. Outstanding indebtedness having an
initial maturity greater than one year from the date of issuance of the
City as of March 31, 1994 was $21,290,000 compared to $19,624,000 as of
March 31, 1993.

A substantial portion of the capital improvements in the City are
financed by indebtedness issued by the Municipal Assistance Corporation
for the City of New York ("MAC"). MAC was organized in 1975 to provide
financing assistance for the City and also to exercise certain review
functions with respect to the City's finances. MAC bonds are payable out
of certain State sales and compensating use taxes imposed within the City,
State stock transfer taxes and per capita State aid to the City. Any
balance from these sources after meeting MAC debt service and reserve fund
requirements and paying MAC's operating expenses is remitted to the City
or, in the case of the stock transfer taxes, rebated to the taxpayers.
The State is not, however, obligated to continue the imposition of such
taxes or to continue appropriation of the revenues therefrom to MAC, nor
is the State obligated to continue to appropriate the State per capita aid
to the City which would be required to pay the debt service on certain MAC
obligations. MAC has no taxing power and MAC bonds do not create an
enforceable obligation of either the State or the City. As of March 31,
1994, MAC had outstanding indebtedness of approximately $4.377 billion
compared to $4.470 billion as of March 31, 1993.

The City's general obligation bonds are rated Baa1 by Moody's
Investors Service, Inc. ("Moody's"). Standard & Poor's Corporation
("Standard & Poor's") has rated the City's general obligation bonds A-.
Fitch Investors Service, Inc. ("Fitch") has rated them A-. Such ratings
reflect only the view of Moody's, Standard & Poor's and Fitch, from which
an explanation of the significance of such ratings may be obtained. There
is no assurance that such ratings will continue for any given period of
time or that they will not be revised downward or withdrawn entirely. Any
such downward revision or withdrawal could have an adverse effect on the
market prices of the City's general obligation bonds.

New York State and Its Authorities

The State's current fiscal year commenced on April 1, 1994, and ends
on March 31, 1995, and is referred to herein as the State's 1994-95 fiscal
year. The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State Financial Plan for the 1994-95 fiscal year was
formulated on June 16, 1994 and is based on the State's budget as enacted
by the Legislature and signed into law by the Governor.

The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors
can be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its
agencies and instrumentalities, but also by entities, such as the Federal
government, that are not under the control of the State.

The State Financial Plan is based upon forecasts of national and
State economic activity. Economic forecasts have frequently failed to
predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the
national and State economies, including consumer attitudes toward
spending, Federal financial and monetary policies, the availability of
credit, and the condition of the world economy, which could have an
adverse effect on the State. There can be no assurance that the State
economy will not experience results in the current fiscal year that are
worse than predicted, with corresponding material and adverse effects on
the State's projections of receipts and disbursements.

The State Division of the Budget ("DOB") believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are
reasonable. Actual results, however, could differ materially and
adversely from the projections set forth below, and those projections may
be changed materially and adversely from time to time.

As noted above, the financial condition of the State is affected by
several factors, including the strength of the State and regional economy
and actions of the Federal government, as well as State actions affecting
the level of receipts and disbursements. Owing to these and other
factors, the State may, in future years, face substantial potential budget
gaps resulting from a significant disparity between tax revenues projected
from a lower recurring receipts base and the future costs of maintaining
State programs at current levels. Any such recurring imbalance would be
exacerbated if the State were to use a significant amount of nonrecurring
resources to balance the budget in a particular fiscal year. To address a
potential imbalance for a given fiscal year, the State would be required
to take actions to increase receipts and/or reduce disbursements as it
enacts the budget for that year, and under the State Constitution the
Governor is required to propose a balanced budget each year. To correct
recurring budgetary imbalances, the State would need to take significant
actions to align recurring receipts and disbursements in future fiscal
years. There can be no assurance, however, that the State's actions will
be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years.

The 1994-95 State Financial Plan contains actions that provide
nonrecurring resources or savings, as well as actions that impose
nonrecurring losses of receipts or costs. It is believed that the net
positive effect of nonrecurring actions represents considerably less than
one-half of one percent of the State's General Fund, an amount
significantly lower than the amount included in the State Financial Plans
in recent years; it is believed that those actions do not materially
affect the financial condition of the State. In addition to those
nonrecurring actions, the 1994-95 State Financial Plan reflects the use of
$1.026 billion in the positive cash margin carried over from the prior
fiscal year, resources that are not expected to be available in the
State's 1995-96 fiscal year.

The General Fund is the general operating fund of the State and is
used to account for all financial transactions, except those required to
be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to
particular purposes. In the State's 1994-95 fiscal year, the General Fund
is expected to account for approximately 52 percent of total governmental-
fund receipts and 51 percent of total governmental-fund disbursements.
General Fund moneys are also transferred to other funds, primarily to
support certain capital projects and debt service payments in other fund
types.

New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State
incurred General Fund operating deficits that were closed with receipts
from the issuance of tax and revenue anticipation notes ("TRANs"). First,
the national recession, and then the lingering economic slowdown in the
New York and regional economy, resulted in repeated shortfalls in receipts
and three budget deficits. For its 1992-93 and 1993-94 fiscal years, the
State recorded balanced budgets on a cash basis, with substantial fund
balances in each year as described below.

The State ended its 1993-94 fiscal year with a balance of $1.140
billion in the tax refund reserve account, $265 million in its Contingency
Reserve Fund ("CRF") and $134 million in its Tax Stabilization Reserve
Fund. These fund balances were primarily the result of an improving
national economy, State employment growth, tax collections that exceeded
earlier projections and disbursements that were below expectations.
Deposits to the personal income tax refund reserve have the effect of
reducing reported personal income tax receipts in the fiscal year when
made and withdrawals from such reserve increase receipts in the fiscal
year when made. The balance in the tax refund reserve account will be
used to pay taxpayer refunds, rather than drawing from 1994-95 receipts.

Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-
95 fiscal year. The remaining $114 million will be redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to
continue the process of restructuring the State's cash flow as part of the
Local Government Assistance Corporation ("LGAC") program. The balance in
the CRF will be used to meet the cost of litigation facing the State. The
Tax Stabilization Reserve Fund may be used only in the event of an
unanticipated General Fund cash-basis deficit during the 1994-95 fiscal
year.

Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally
projected when the State Financial Plan for that year was formulated on
April 16, 1993 by $1.002 billion. Greater-than-expected receipts in the
personal income tax, the bank tax, the corporation franchise tax and the
estate tax accounted for most of this variance, and more than offset
weaker-than-projected collections from the sales and use tax and
miscellaneous receipts. Collections from individual taxes were affected
by various factors including changes in Federal business laws, sustained
profitability of banks, strong performance of securities firms, and
higher-than-expected consumption of tobacco products following price cuts.

Disbursements and transfers from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, lower disbursements
resulted from lower spending for Medicaid, capital projects, and debt
service (due to refundings) and $114 million used to restructure the
State's cash flow as part of the LGAC program. Disbursements were higher-
than-expected for general support for public schools, the State share of
income maintenance, overtime for prison guards, and highway snow and ice
removal.

In certain prior fiscal years, the State has failed to enact a
budget prior to the beginning of the State's fiscal year. A delay in the
adoption of the State's budget beyond the statutory April 1 deadline and
the resultant delay in the State's Spring borrowing has in certain prior
years delayed the projected receipt by the City of State aid, and there
can be no assurance that State budgets in future fiscal years will be
adopted by the April 1 statutory deadline.

On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced
its ratings on the State's moral obligation, lease purchase, guaranteed
and contractual obligation debt. Standard & Poor's also continued its
negative rating outlook assessment on State general obligation debt. On
April 26, 1993, Standard & Poor's revised the rating outlook assessment to
stable. On February 14, 1994, Standard & Poor's raised its outlook to
positive and, on June 27, 1994, confirmed its A- rating. On January 6,
1992, Moody's reduced its ratings on outstanding limited-liability State
lease purchase and contractual obligations from A to Baa1. On June 27,
1994, Moody's reconfirmed its A rating on the State's general obligation
long-term indebtedness. Such ratings reflect only the views of Standard &
Poor's and Moody's from which an explanation of the significance of such
ratings may be obtained. There is no assurance that either or both of
such ratings will continue for any given period of time or that either or
both will not be revised downward or withdrawn entirely. Any such
downward revision or withdrawal could have an adverse effect on the market
prices of the Bonds.

As of March 31, 1994, the State had approximately $5.370 billion in
general obligation bonds excluding refunding bonds and $293 million in
bond anticipation notes outstanding. On May 24, 1993 the State issued
$850 million in tax and revenue anticipation notes all of which will
mature on December 31, 1993. Principal and interest due on general
obligation bonds and interest due on bond anticipation notes and on tax
and revenue anticipation notes were $782.5 million and $786.3 million for
the 1992-93 and 1993-94 fiscal years, respectively. These figures do not
include interest on refunding bonds issued in July 1992, to the extent
that such interest is to be paid from escrowed funds.

The fiscal stability of the State is related to the fiscal stability
of its authorities, which generally have responsibility for financing,
constructing and operating revenue-producing public benefit facilities.
The authorities are not subject to the constitutional restrictions on the
incurrence of debt which apply to the State itself and may issue bonds and
notes within the amounts of, and as otherwise restricted by, their
legislative authorization. As of September 30, 1992 there were 18
authorities that had outstanding debt of $100 million or more. The
aggregate outstanding debt, including refunding bonds, of these 18
authorities was $63.5 billion as of September 30, 1993. As of March 31,
1994 aggregate public authority debt outstanding as State-supported debt
was $21.1 billion and as State-related debt was $29.4 billion.

The authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent
years, however, the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise for debt
service. This assistance is expected to continue to be required in future
years.

The Metropolitan Transit Authority ("MTA"), a State agency, oversees
the operation of the City's subway and bus system (the "Transit Authority"
or "TA") and commuter rail lines serving the New York metropolitan area.
Fare revenues from such operations have been insufficient to meet
expenditures, and the MTA depends heavily upon a system of State, local,
Triborough Bridge and Tunnel Authority ("TBTA") and, to the extent
available, Federal support. Over the past several years, the State has
enacted several taxes, including a surcharge on the profits of banks,
insurance corporations and general business corporations doing business in
the 12-county region served by the MTA (the "Metropolitan Transportation
Region") and a special one-quarter of 1% regional sales and use tax, that
provide additional revenues for mass transit purposes including assistance
to the MTA. The surcharge, which expires in November 1995, yielded $507
million in calendar year 1992, of which the MTA was entitled to receive
approximately 90 percent, or approximately $456 million. For the 1994-95
State fiscal year, total State assistance to the MTA is estimated at
approximately $1.3 billion.

In 1993, State legislation authorized the funding of a five-year
$9.56 billion MTA capital plan for the five-year period, 1992 through 1996
(the "1992-96 Capital Program"). The MTA has received approval of the
1992-96 Capital Program based on this legislation from the 1992-96 Capital
Program Review Board, as State law requires. This is the third five-year
plan since the Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan in 1981 for a capital program
designed to upgrade the performance of the MTA's transportation systems
and to supplement, replace and rehabilitate facilities and equipment. The
MTA, the TBTA and the TA are collectively authorized to issue an aggregate
of $3.1 billion of bonds (net of certain statutory exclusions) to finance
a portion of the 1992-96 Capital Program. The 1992-96 Capital Program is
expected to be financed in significant part through the dedication of the
State petroleum business taxes.

There can be no assurance that all the necessary governmental
actions for the Capital Program will be taken, that funding sources
currently identified will not be decreased or eliminated, or that the
1992-96 Capital Program, or parts thereof, will not be delayed or reduced.
Furthermore, the power of the MTA to issue certain bonds expected to be
supported by the appropriation of State petroleum business taxes is
currently the subject of a court challenge. If the Capital Program is
delayed or reduced, ridership and fare revenues may decline, which could,
among other things, impair the MTA's ability to meet its operating
expenses without additional State assistance.

The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities
to obtain financing in the public credit markets and the market price of
the State's outstanding bonds and notes may be adversely affected. The
Housing Finance Agency ("HFA") and the Urban Development Corporation
("UDC") have in the past required substantial amounts of assistance from
the State to meet debt service costs or to pay operating expenses.
Further assistance, possibly in increasing amounts, may be required for
these, or other, Authorities in the future. In addition, certain
statutory arrangements provide for State local assistance payments
otherwise payable to localities to be made under certain circumstances to
certain Authorities. The State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could
seek additional State funds.

Litigation. A number of court actions have been brought involving
State finances. The court actions in which the State is a defendant
generally involve state programs and miscellaneous tort, real property,
employment discrimination and contract claims and the monetary damages
sought are substantial. The outcome of these proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the
1994-95 fiscal year or thereafter.

In addition to the proceedings noted below, the State is party to
other claims and litigation which its legal counsel has advised are not
probable of adverse court decisions. Although the amounts of potential
losses, if any, are not presently determinable, it is the State's opinion
that its ultimate liability in these cases is not expected to have a
material adverse effect on the State's financial position in the 1994-95
fiscal year or thereafter.

On May 31, 1988 the United States Supreme Court took jurisdiction of
a claim of the State of Delaware that certain unclaimed dividends,
interest and other distributions made by issuers of securities and held by
New York-based brokers incorporated in Delaware for beneficial owners who
cannot be identified or located, had been, and were being, wrongfully
taken by the State of New York pursuant to New York's Abandoned Property
Law (State of Delaware v. State of New York, United States Supreme Court).
All 50 states and the District of Columbia moved to intervene, claiming a
portion of such distributions and similar property taken by the State of
New York from New York-based banks and depositories incorporated in
Delaware. In a decision dated March 30, 1993, the Court granted all
pending motions of the states and the District of Columbia to intervene
and remanded the case to a Special Master for further proceedings
consistent with the Court's decision. The Court determined that the
abandoned property should be remitted first to the state of the beneficial
owner's last known address, if ascertainable and, if not, then to the
state of incorporation of the intermediary bank, broker or depository.
New York and Delaware have executed a settlement agreement which provides
for payments by New York to Delaware of $35 million in the State's 1993-94
fiscal year and five annual payments thereafter of $33 million. New York
and Massachusetts have executed a settlement agreement which provides for
aggregate payments by New York of $23 million, payable over five
consecutive years. The claims of the other states and the District of
Columbia remain.

Among the more significant of these claims still pending against the
State at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes
transferred title to the State of certain land in central New York; (2)
certain aspects of the State's Medicaid rates and regulations, including
reimbursements to providers of mandatory and optional Medicaid services;
(3) contamination in the Love Canal area of Niagara Falls; (4) an action
against State and New York City officials alleging that the present level
of shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (5) challenges to the
practice of reimbursing certain Office of Mental Health patient care
expenses from the client's Social Security benefits; (6) a challenge to
the methods by which the State reimburses localities for the
administrative costs of food stamp programs; (7) alleged responsibility of
State officials to assist in remedying racial segregation in the City of
Yonkers; (8) an action in which the State is a third party defendant, for
injunctive or other appropriate relief, concerning liability for the
maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) an action challenging legislation enacted in 1990
which had the effect of deferring certain employer contributions to the
State Teachers' Retirement System and reducing State aid to school
districts by a like amount; (10) a challenge to the constitutionality of
financing programs of the Thruway Authority authorized by Chapters 166 and
410 of the Laws of 19; (11) a challenge to the constitutionality of
financing programs of the Metropolitan Transportation Authority and the
Thruway Authority authorized by Chapter 56 of the Law of 1993; (12)
challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on inpatient hospital bills paid by commercial
insurers and employee welfare benefit plans and portions of Chapter 55 of
The Laws of 1992 which require hospitals to impose and remit to the state
an 11% surcharge on hospital bills paid by commercial insurers; (14)
challenges to the promulgation of the State's proposed procedure to
determine the eligibility for and nature of home care services for
Medicaid recipients; (15) a challenge to State implementation of a program
which reduces Medicaid benefits to certain home-relief recipients; and
(16) challenges to the rationality and retroactive application of State
regulations recalibrating nursing home Medicaid rates.

Pennsylvania Trust

The following information constitutes only a brief summary of a
number of the complex factors which may impact issuers of Pennsylvania
municipal securities and does not purport to be a complete or exhaustive
description of all conditions to which issuers of Pennsylvania municipal
securities may be subject. Additionally, many factors, including
national, economic, social and environmental policies and conditions,
which are not within the control of such issuers, could have an adverse
impact on the financial condition of such issuers. The Pennsylvania Trust
cannot predict whether or to what extent such factors or other factors may
affect the issuers of Pennsylvania municipal securities, the market value
or marketability of such securities or the ability of the respective
issuers of such securities held by the Pennsylvania Trust to pay interest
on or principal of such securities. The creditworthiness of obligations
issued by local Pennsylvania issuers may be unrelated to the
creditworthiness of obligations issued by the Commonwealth of
Pennsylvania, and there is no obligation on the part of the Commonwealth
of Pennsylvania to make payments on such local obligations. There may be
specific factors that are applicable in connection with investment in the
obligations of particular issuers located within Pennsylvania, and it is
possible the Pennsylvania Trust has invested in obligations of particular
issuers as to which such specific factors are applicable. However, the
information set forth below is intended only as a general summary and not
as a discussion of any specific factors that may affect any particular
issuer of Pennsylvania municipal securities.

State Finance

State Economy. The Commonwealth of Pennsylvania is one of the most
populous states, ranking fifth behind California, New York, Texas and
Florida. Pennsylvania is an established yet growing state with a
diversified economy. It is the headquarters for 64 major corporations and
the home for more than 268,600 businesses. Pennsylvania historically has
been identified as a heavy industry state although that reputation has
changed recently as the industrial composition of the Commonwealth
diversified when the coal, steel and railroad industries began to decline.
The major new sources of growth in Pennsylvania are in the service sector,
including trade, medical and the health services, education and financial
institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, accounting
for more than $3.6 billion in crop and livestock products annually, while
agribusiness and food related industries support $39 billion in economic
activity annually.

Non-agricultural employment in the Commonwealth declined by 5.1
percent during the recessionary period from 1980 to 1983. In 1984, the
declining trend was reversed as employment grew by 2.9 percent over 1983
levels. From 1984 to 1990, non-agricultural employment continued to grow
each year, increasing an additional 14.3 percent during such period. For
the last three years, employment in the Commonwealth has declined 1.2
percent. The growth in employment experienced in Pennsylvania is
comparable to the growth in employment in the Middle Atlantic region which
has occurred during this period. As a percentage of total non--
agricultural employment within the Commonwealth, non-manufacturing
employment has increased steadily since 1980 to its 1993 level of 81.6
percent of total employment. Consequently, manufacturing employment
constitutes a diminished share of total employment within the
Commonwealth. Manufacturing, contributing 18.4 percent of 1993
non-agricultural employment, has fallen behind both the services sector
and the trade sector as the largest single source of employment within the
Commonwealth. In 1993, the services sector accounted for 29.9 percent of
all non-agricultural employment while the trade sector accounted for 22.4
percent.

From 1983 to 1989, Pennsylvania's annual average unemployment rate
dropped from 11.8 percent to 4.5 percent, falling below the national rate
in 1986 for the first time in over a decade. Slower economic growth
caused the unemployment rate in the Commonwealth to rise to 6.9 percent in
1991 and 7.5 percent in 1992. As of July 1994, the seasonally adjusted
unemployment rate for the Commonwealth was 6.5 percent compared to 6.1
percent for the United States as a whole.

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

The Constitution and the laws of the Commonwealth require all
payments from the treasury, with the exception of refunds of taxes,
licenses, fees and other charges, to be made only by duly enacted
appropriations. Amounts appropriated from a fund may not exceed its
actual and estimated revenues for the fiscal year plus any surplus
available. Appropriations from the principal operating funds of the
Commonwealth (the General Fund, the Motor License Fund and the State
Lottery Fund) are generally made for one fiscal year and are returned to
the unappropriated surplus of the fund (a lapse) if not spent or
encumbered by the end of the fiscal year.

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

Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting. Since
1984, the Commonwealth has also prepared annual financial statements in
accordance with generally accepted accounting principles ("GAAP").
Financial statements prepared in accordance with GAAP have been audited
jointly by the Auditor General of the Commonwealth and an independent
public accounting firm each year since 1984. Budgetary basis financial
reports are based on a modified cash basis of accounting as opposed to a
modified accrual basis of accounting prescribed by GAAP. The budgetary
basis financial information maintained by the Commonwealth to monitor and
enforce budgetary control is adjusted at fiscal year-end to reflect
appropriate accruals for financial reporting in conformity with GAAP.

Financial Results for Recent Fiscal Years (GAAP Basis). The five
year period from fiscal 1989 through fiscal 1993 was marked by public
health and welfare costs growing at a rate double the growth for all the
state expenditures. Rising caseloads, increased utilization of services
and rising prices joined to produce the rapid rise of public health and
welfare costs at a time when a national recession caused tax revenues to
stagnate and even decline. During the period from fiscal 1989 through
fiscal 1993, public health and welfare costs rose by an average annual
rate of 10.9 percent while tax revenues were growing at an average annual
rate of 5.5 percent. Consequently, spending on other budget programs was
restrained to a growth rate below 5.0 percent and sources of revenues
other than taxes became larger components of fund revenues. Among those
sources are transfers from other funds and hospital and nursing home
pooling of contributions to use as federal matching funds.

Tax revenues declined in fiscal 1991 as a result of the recession in
the economy. A $2.7 billion tax increase enacted for fiscal 1992 brought
financial stability to the General Fund. That tax increase included
several taxes with retroactive effective dates which generated some one-
time revenues during fiscal 1992. The absence of those revenues in fiscal
1993 contributed to the decline in tax revenues shown for fiscal 1993.

Fiscal 1991 Financial Results -- GAAP Basis. The General Fund
experienced an $861.2 million operating deficit resulting in a fund
balance deficit of $980.9 million at June 30, 1991. The operating deficit
was a consequence of the effect of a national recession that restrained
budget revenues and pushed expenditures above budgeted levels. At
June 30, 1991, a negative unreserved-undesignated balance of $1,146.2
million was reported. During fiscal 1991, the balance in the Tax
Stabilization Reserve Fund was used to maintain vital state spending.

Budgetary Basis. A deficit of $453.6 million was recorded by the
General Fund at June 30, 1991. The deficit was a consequence of higher
than budgeted expenditures and lower than estimated revenues during the
fiscal year brought about by the national economic recession that began
during the fiscal year. The budgetary basis deficit at June 30, 1991 was
carried into the 1992 fiscal year and funded in the fiscal 1992 budget.

A number of actions were taken throughout the fiscal year by the
Commonwealth to mitigate the effects of the recession on budget revenues
and expenditures. Actions taken, together with normal appropriation
lapses, produced $871 million in expenditure reductions and revenue
increases for the fiscal year. The most significant of these actions were
a $214 million transfer from the Pennsylvania Industrial Development
Authority ("PIDA"), a $134 million transfer from the Tax Stabilization
Reserve Fund, and a pooled financing program to match federal Medicaid
funds replacing $145 million of state funds.

Restrained by the recession, economic activity within the state
declined and caused corporation tax receipts and sales and use tax
receipts to be below year-earlier receipts. Sales and use tax collections
for the fiscal year totaled $4,200.3 million, a 0.9 percent decrease from
fiscal 1990 collections and $276.4 million below the budget estimate.
Corporation, public utility, financial and insurance taxes in aggregate
totaled $2,648.0 million, 7.3 percent below fiscal 1990 collections and
$199.0 million below the budget estimate. Personal income tax receipts
totaled $3,375.5 million, an increase of 2.0 percent over fiscal 1990
collections, but $136.6 million below the budget estimate.

Non-tax revenues were above the budget estimate largely as a result
of the $214 million transfer of funds from the PIDA recapitalization. In
addition to the transfer from PIDA, $230.1 million of other non-recurring
revenues were received during the fiscal year to help reduce the budget
deficit.

Rising program demands caused by the economic recession,
particularly for the medical assistance and cash assistance programs,
produced rapidly increasing costs during the fiscal year, causing
expenditures to exceed their respective budget estimates. Costs of
special education programs and for corrections facilities and programs
also exceeded their budgeted amounts due to underestimates of their fiscal
year costs. Meeting these higher budget needs required supplemental
appropriation authority of $374 million to be enacted during the fiscal
year.

One consequence of the lower revenues and higher expenditures than
budgeted for fiscal 1991 was the need to delay making certain
disbursements against state appropriations. Throughout the fiscal year
the Commonwealth elected to defer certain disbursements of appropriated
amounts in order to assure that sufficient cash was available to meet the
highest priority payments such as debt service, cash assistance and
payrolls. The deferred payments were accounted for as fiscal 1991
expenditures but were disbursed during fiscal 1992 from current cash flow
or from the proceeds of the fiscal 1992 tax anticipation notes.

Fiscal 1992 Financial Results -- GAAP Basis. During fiscal 1992 the
General Fund recorded a $1.1 billion operating surplus. This operating
surplus was achieved through legislated tax rate increases and tax base
broadening measures enacted in August 1991 and by controlling expenditures
through numerous cost reduction measures implemented throughout the fiscal
year. These actions are described more fully below under the heading
"Budgetary Basis". As a result of the fiscal 1992 operating surplus, the
fund balance has increased to $87.5 million and the
unreserved/undesignated deficit has dropped to $138.6 million from its
fiscal 1991 level of $1,146.2 million.

Budgetary Basis. Eliminating the budget deficit carried into fiscal
1992 from fiscal 1991 and providing revenues for fiscal 1992 budgeted
expenditures required tax revisions that are estimated to have increased
receipts for the 1992 fiscal year by over $2.7 billion. Total revenues
for the fiscal year were $14,516.8 million, a $2,654.5 million increase
over cash revenues during fiscal 1991. Originally based on forecasts for
an economic recovery, the budget revenue estimates were revised downward
during the fiscal year to reflect continued recessionary economic
activity. Largely due to the tax revisions enacted for the budget,
corporate tax receipts totaled $3,761.2 million, up from $2,656.3 million
in fiscal 1991, sales tax receipts increased by $302.0 million to $4,499.7
million, and personal income tax receipts totaled $4,807.4 million, an
increase of $1,443.8 million over receipts in fiscal 1991.

As a result of the lowered revenue estimate during the fiscal year,
increased emphasis was placed on restraining expenditure growth and
reducing expenditure levels. A number of cost reductions were implemented
during the fiscal year that contributed to $296.8 million of appropriation
lapses. These appropriation lapses were responsible for the $8.8 million
surplus at fiscal year-end, after accounting for the required 10 percent
transfer of the surplus to the Tax Stabilization Reserve Fund.

Spending increases in the fiscal 1992 budget were largely accounted
for by increases for education, social services and corrections programs.
Commonwealth funds for the support of public schools were increased by 9.8
percent to provide a $438.0 million increase to $4.9 billion for fiscal
1992. The fiscal 1992 budget provided additional funds for basic and
special education and included provisions designed to help restrain the
annual increase of special education costs, an area of recent rapid cost
increases. Child welfare appropriations supporting county-operated child
welfare programs were increased $67.0 million, more than 31.5 percent over
fiscal 1991. Other social service areas such as medical and cash
assistance also received significant funding increases as costs have risen
quickly as a result of the economic recession and high inflation rates of
medical care costs. The costs of corrections programs, reflecting the
marked increase in prisoner population, increased by 12.0 percent.
Economic development efforts, largely funded from bond proceeds in fiscal
1991, were continued with General Fund appropriations for fiscal 1992.

The budget included the use of several Medicaid pooled financing
transactions. These pooling transactions replaced $135.0 million of
Commonwealth funds, allowing total spending under the budget to increase
by an equal amount.

Fiscal 1993 Financial Results -- GAAP Basis. The fund balance of
the General Fund increased by $611.4 million during the fiscal year, led
by an increase in the unreserved balance of $576.8 million over the prior
fiscal year balance. At June 30, 1993, the fund balance totaled $698.9
and the unreserved/undesignated balance totaled $64.4 million. A
continuing recovery of the Commonwealth's financial condition from the
effects of the national economic recession of 1990 and 1991 is
demonstrated by this increase in the balance and a return to a positive
unreserved/undesignated balance. The previous positive
unreserved/undesignated balance was recorded in fiscal 1987. For the
second consecutive fiscal year the increase in the unreserved/undesignated
balance exceeded the increase recorded in the budgetary basis
unappropriated surplus during the fiscal year.

Budgetary Basis. The 1993 fiscal year closed with revenues higher
than anticipated and expenditures about as projected, resulting in an
ending unappropriated balance surplus (prior to the ten percent transfer
to the Tax Stabilization Reserve Fund) of $242.3 million, slightly higher
than estimated in May 1993. Cash revenues were $41.5 million above the
budget estimate and totaled $14.633 billion representing less than a one
percent increase over revenues for the 1992 fiscal year. A reduction in
the personal income tax rate in July 1992 and revenues from retroactive
corporate tax increases received in fiscal 1992 were responsible, in part,
for the low revenue growth in fiscal 1993.

Appropriations less lapses totaled an estimated $13.870 billion
representing a 1.1 percent increase over those during fiscal 1992. The
low growth in spending is a consequence of a low rate of revenue growth,
significant one-time expenses during fiscal 1992, increased tax refund
reserves to cushion against adverse decisions on pending litigations, and
the receipt of federal funds for expenditures previously paid out of
Commonwealth funds.

By state statute, ten percent of the budgetary basis unappropriated
surplus at the end of a fiscal year is to be transferred to the Tax
Stabilization Reserve Fund. The transfer for the fiscal 1993 balance is
$24.2 million. The remaining unappropriated surplus of $218.0 million was
carried forward into the 1994 fiscal year.

Fiscal 1994 Budget (Budgetary Basis). Commonwealth revenues during
the fiscal year totaled $15,210.7 million, $38.6 million above the fiscal
year estimate, and 3.9 percent over Commonwealth revenues during the
previous fiscal year. The sales tax was an important contributor to the
higher than estimated revenues. Collections from the sales tax were
$5.124 billion, a 6.1 percent increase from the prior fiscal year and
$81.3 million above estimate. The strength of collections from the sales
tax offset the lower than budgeted performance of the personal income tax
which ended the fiscal year $74.4 million below estimate. The shortfall
in the personal income tax was largely due to shortfalls in income not
subject to withholding such as interest, dividends and other income. Tax
refunds in fiscal 1994 were reduced substantially below the $530 million
amount provided in fiscal 1993. The higher fiscal 1993 amount and the
reduced fiscal 1994 amount occurred because reserves of approximately $160
million were added to fiscal 1993 tax refunds to cover potential payments
if the Commonwealth lost litigation known as Philadelphia Suburban Corp.
v. Commonwealth. Those reserves were carried into fiscal 1994 until the
litigation was decided in the Commonwealth's favor in December 1993 and
$147.3 million of reserves for tax refunds were released.

Expenditures, excluding pooled financing expenditures and net of all
fiscal 1994 appropriation lapses, totaled $14,934.4 million representing a
7.2 percent increase over fiscal 1993 expenditures. Medical assistance
and corrections spending contributed to the rate of spending growth for
the fiscal year.

The Commonwealth maintained an operating balance on a budgetary
basis for fiscal 1994 producing a fiscal year ending unappropriated
surplus of $335.8 million. By state statute, ten percent ($33.6 million)
of that surplus will be transferred to the Tax Stabilization Reserve Fund
and the remaining balance will be carried over into the 1995 fiscal year.

Fiscal 1995 Budget. The fiscal 1995 budget was approved by the
Governor on June 16, 1994 and provided for $15,652.9 million of
appropriations from Commonwealth funds, an increase of 3.9 percent over
appropriations, including supplemental appropriations, for fiscal 1994.
Medical assistance expenditures represent the largest single increase in
the budget ($221 million) representing a nine percent increase over the
prior fiscal year. The budget includes a reform of the state-funded
public assistance program that added certain categories of eligibility to
the program but also limited the availability of such assistance to other
eligible persons. Education subsidies to local school districts were
increased by $132.2 million to continue the increased funding for the
poorest school districts in the state.

The budget also includes tax reductions totaling an estimated $166.4
million. Low income working families will benefit from an increase of the
dependent exemption to $3,000 from $1,500 for the first dependent and from
$1,000 for all additional dependents. A reduction to the corporate net
income tax rate from 12.25 percent to 9.99 percent to be phased in over a
period of four years was enacted. A net operating loss provision has been
added to the corporate net income tax and will be phased in over three
years with a $500,000 per firm annual cap on losses used to offset
profits. Several other tax changes to the sales tax, the inheritance tax
and the capital stock and franchise tax were also enacted.

The fiscal 1995 budget projects a $4 million fiscal year-end
unappropriated surplus. No assumption as to appropriation lapses in
fiscal 1995 has been made.

Tax Structure. The Commonwealth, through its principal operating
funds -- the General Fund, the Motor License Fund and the State Lottery
Fund -- receives over 57 percent of its revenues from taxes levied by the
Commonwealth. Interest earnings, licenses and fees, lottery ticket sales,
liquor store profits, miscellaneous revenues, augmentations and federal
government grants supply the balance of receipts to these funds.

Tax and fee proceeds relating to motor fuels and vehicles are
constitutionally dedicated for highway purposes and are deposited into the
Motor License Fund. Lottery ticket sale revenues are deposited into the
State Lottery Fund and are reserved by statute for programs to benefit
senior citizens. Revenues, other than those specified to be deposited in
a particular fund, are deposited into the General Fund.

The major tax sources for the General Fund of the Commonwealth are
the sales tax enacted in 1953, the personal income tax enacted in 1971,
and the corporate net income tax which in its present form dates back to
1935. The last restructuring of the Commonwealth's tax system occurred
with the enactment of the Tax Reform Code of 1971 that codified many of
the taxes levied by the Commonwealth.

The major tax sources for the Motor License Fund are the liquid
fuels taxes and the oil company franchise tax. The Motor License Fund
also receives revenues from fees levied on heavy trucks and from taxes on
fuels used for aviation purposes. Use of these revenues is restricted to
the repair and construction of highway bridges and aviation programs
respectively.

The Tax Stabilization Reserve Fund was established in 1986 to
provide a source of funds that can be used to alleviate emergencies
threatening the health, safety or welfare of the Commonwealth's citizens
or to offset unanticipated revenue shortfalls due to economic downturns.
Income to the fund is provided by specific appropriation from available
balances by the General Assembly, from investment income and, after fiscal
1991, by the transfer to the Tax Stabilization Reserve Fund of 10 percent
of the budgetary basis operating surplus in the General Fund at the close
of any fiscal year. In addition, the proceeds received from the
disposition of assets of the Commonwealth are also to be deposited into
the Tax Stabilization Reserve Fund. The Commonwealth has not prepared
estimates of such sales.

Assets of the Tax Stabilization Reserve Fund may be used only upon
the recommendation by the Governor and approval by the vote of two-thirds
of the members of each house of the General Assembly. In February 1991,
in response to a projected fiscal 1991 General Fund budgetary deficit
caused by lower revenues and higher expenditures than budgeted, the
Governor recommended, and the General Assembly authorized, the available
balance of $133.8 million in the Tax Stabilization Reserve Fund be used to
pay medical assistance and special education costs not covered by budgeted
funds. On June 30, 1994, the balance in the Tax Stabilization Fund was
$29.9 million. A transfer of $33.6 million into the Fund will be made
representing the 10 percent portion of the fiscal 1994 General Fund fiscal
year-end balance.

Debt Limits and Outstanding Debt. The Pennsylvania Constitution
permits the Commonwealth to issue the following types of debt: (i) debt to
suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years, and (iv) tax anticipation notes payable in
the fiscal year of issuance. All debt except tax anticipation notes must
be amortized in substantial and regular amounts.

Outstanding general obligation debt totalled $5,075.8 million on
June 30, 1994, an increase of $37 million from June 30, 1993. Over the
10-year period ending June 30, 1994, total outstanding general obligation
debt increased at an annual rate of 1.3 percent. Within the most recent
5-year period, outstanding general obligation debt has grown at an annual
rate of 1.5 percent.

General obligation debt for non-highway purposes of $3,791.9 million
was outstanding on June 30, 1994. Outstanding debt for these purposes
increased $148.3 million since June 30, 1993, in large part due to the
recent emphasis the Commonwealth has placed on infrastructure investment
as a means to spur economic growth and to provide a higher quality of life
for Commonwealth residents. For the period ending June 30, 1994, the
10-year and 5-year average annual compounded growth rate for total
outstanding debt for non-highway purposes has been 3.6 percent and 4.9
percent, respectively. In its current debt financing plan, Commonwealth
infrastructure investment projects include improvement and rehabilitation
of existing capital facilities, such as water supply systems and
construction of new facilities, such as roads, prisons and public
buildings.

Outstanding general obligation debt for highway purposes was
$1,283.8 million on June 30, 1994, a decrease of $111.4 million from June
30, 1993. Highway outstanding debt has declined over the most recent
10-year and 5-year periods ending June 30, 1994 by the annual average
rates of 3.4 percent and 5.6 percent, respectively.

During the period from 1980 through 1986, all of the Commonwealth's
highway investment was funded from current year revenues. Beginning in
1987, a limited return to the issuance of long-term bonds was required to
finance immediately needed repairs to highway bridges. The highway bridge
bonding program is funded from the Highway Bridge Improvement Restricted
Account within the Motor License Fund. Revenues in this restricted
account are derived from six cent per gallon surtax on motor fuel used on
Commonwealth highways by motor carriers and increased registration fees
for trucks and truck tractors weighing above 26,000 pounds. The two
funding sources for the Highway Bridge Improvement Restricted Account were
enacted on July 13, 1987 to replace revenues from an axle tax on heavy
trucks which was declared unconstitutional by the United States Supreme
Court.

The Commonwealth has also issued obligations for its advance
construction interstate program (the "ACI Program") to fund the completion
of the interstate highway network in anticipation of the receipt of
reimbursements for the federally financed portion of these projects. As
of June 30, 1994, $48 million of ACI Program debt was outstanding.

The Commonwealth may incur debt to fund capital projects for
community colleges, highways, public improvements, transportation
assistance, flood control, redevelopment assistance, site development and
the Pennsylvania Industrial Development Authority. Before a project may
be funded, it must be itemized in a capital budget bill adopted by the
General Assembly. An annual capital budget bill states the maximum amount
of debt for capital projects that may be incurred during the current
fiscal year for projects authorized in the current or previous years'
capital budget bills. Capital projects debt is subject to a
constitutional limit on debt. As of June 30, 1994, $3,965.6 million of
capital projects debt was outstanding.

The issuance of electorate approved debt is subject to the enactment
of legislation which places on the ballot the question of whether debt
shall be incurred. Such legislation must state the purposes for which the
debt is to be authorized and, as a matter of practice, includes a maximum
amount of funds to be borrowed. Upon electorate approval and enactment of
legislation implementing the proposed debt-funded program, bonds may be
issued. As of June 30, 1994, the Commonwealth had $848.7 million of
electorate approved debt outstanding.

Debt issued to rehabilitate areas affected by disasters is
authorized by specific legislation. The Commonwealth had $51.2 million of
disaster relief debt outstanding as of June 30, 1994.

Due to the timing of major tax payment dates, the Commonwealth's
cash receipts are generally concentrated in the last four months of the
fiscal year, from March through June. Disbursements are distributed more
evenly throughout the fiscal year. As a result, operating cash shortages
can occur during certain months of the fiscal year. The Commonwealth
engages in short-term borrowing to fund expenses within the fiscal year
through the sale of tax anticipation notes. The Commonwealth may issue
tax anticipation notes only for the account of the General Fund or the
Motor License Fund or both such funds. The principal amount issued, when
added to that outstanding, may not exceed in the aggregate 20 percent of
the revenues estimated to accrue to the appropriate fund or both funds in
the fiscal year. Tax anticipation notes must mature within the fiscal
year in which they are issued. The Commonwealth is not permitted to fund
deficits between fiscal years with any form of debt. All year-end deficit
balances must be funded within the succeeding fiscal year's budget. The
Commonwealth issued $400.0 million of tax anticipation notes for the
account of the General Fund for fiscal 1994. All such notes matured on
June 30, 1994 and were paid from fiscal 1994 General Fund receipts.

Pending the issuance of bonds, the Commonwealth may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may
not exceed three years. Currently, there are no bond anticipation notes
outstanding.

Certain state-created agencies have statutory authority to incur
debt for which state appropriations to pay debt service thereon is not
required. The debt of these agencies is supported by assets of, or
revenues derived from, the various projects financed and is not an
obligation of the Commonwealth. Some of these agencies, however, are
indirectly dependent on Commonwealth appropriations. These entities
include: Delaware River Joint Toll Bridge Commission, Delaware River Port
Authority, Pennsylvania Energy Development Authority, Pennsylvania Higher
Education Assistance Agency, Pennsylvania Higher Educational Facilities
Authority, Pennsylvania Industrial Development Authority, Pennsylvania
Infrastructure Investment Authority, Pennsylvania State Public School
Building Authority, Pennsylvania Turnpike Commission, the Philadelphia
Regional Port Authority and the Pennsylvania Economic Development
Financing Authority. As of December 31, 1993, the aggregate outstanding
indebtedness of these entities was $5,767.7 million.

The Pennsylvania Housing Finance Agency ("PHFA"), as of December 31,
1993, had $2,052.5 million of revenue bonds and $13.0 million of notes
outstanding. The statute creating PHFA provides that if there is a
potential deficiency in the capital reserve fund or if funds are necessary
to avoid default on interest, principal or sinking fund payments on bonds
or notes of PHFA, the Governor, upon notification from the PHFA, shall
place in the budget of the Commonwealth for the next succeeding year an
amount sufficient to make up any such deficiency or to avoid any such
default. The budget as finally adopted by the General Assembly may or may
not include the amount so placed therein by the Governor. PHFA is not
permitted to borrow additional funds so long as any deficiency exists in
the capital reserve fund.

The Hospitals and Higher Education Facilities Authority of
Philadelphia, as of June 30, 1993, had $21.1 million of bonds outstanding
which benefit from a moral obligation of the Commonwealth's Department of
Public Welfare to request a budget appropriation to make up any deficiency
in the debt service reserve fund for said bonds. The budget as finally
adopted may or may not include the amount requested.

The Commonwealth, through several of its departments and agencies,
has entered into various agreements to lease, as lessee, certain real
property and equipment and to make lease rental payments. Some of those
lease payments are pledged as security for various outstanding debt
obligations issued by certain public authorities or other entities within
the state. All lease payments due from Commonwealth departments and
agencies are subject to and dependent upon an annual spending
authorization approved through the Commonwealth's annual budget process.
The Commonwealth is not required by law to appropriate or otherwise
provide moneys from which the lease payments are to be paid. The
obligations to be paid from such lease payments are not bonded debt of the
Commonwealth.

The Commonwealth maintains contributory benefit pension plans
covering all state employees, public school employees and employees of
certain other state-related organizations. Unfunded actuarial accrued
liabilities for the Public School Employees' Retirement Fund as of June
30, 1993 were $3,303 million, and for the State Employees' Retirement Fund
were $847 million as of December 31, 1993.

Municipal Finance

Local Finance. The Local Government Unit Debt Act (Act 52 of 1978)
(the "Debt Act") establishes debt limits for local government units.
Local government units include municipalities (except a first class city
or county), school districts and intermediate units. The Act establishes
three classes of debt for a local government unit: (i) electoral debt
(debt incurred with the approval of the electors of the municipality for
which there is no limitation on the amount that may be incurred); (ii)
nonelectoral debt (debt of a local government unit not being electoral or
lease rental debt); (iii) lease rental debt (the principal amount of debt
of an authority organized by a municipality or debt of another local
government unit, which debt is to be repaid by the local government unit
through a lease, subsidy contract, guarantee or other form of agreement
evidencing acquisition of a capital asset, payable or which may be payable
out of tax revenues and other general revenues. Each local government
unit is subject to a limitation as to the amount of class "ii" and class
"iii" debt which may be issued which is based upon such local government
unit's Borrowing Base.

Borrowing Base is defined in the Debt Act as the annual arithmetic
average of the total revenues for the three full fiscal years ended next
preceding the date of the incurring of nonelectoral debt or lease rental
debt. Total revenues for the purposes of the Debt Act excludes, inter
alia, certain state and federal subsidies and reimbursements, certain
pledged revenues, interest on pledged funds and nonrecurring items.

The debt limitations applicable to the various local government
units are set forth below:

Nonelectoral Nonelectoral plus
Lease Rental
First Class
School District 100% of Borrowing Base 200% of Borrowing Base

County 300% of Borrowing Base 400% of Borrowing Base

Other 250% of Borrowing Base 350% of Borrowing Base

A county may utilize an additional debt limit of 100% of its
Borrowing Base for additional nonelectoral or additional lease rental
debt, or both, if such county has assumed countywide responsibility for
hospitals and other public health services, air and water pollution
control, flood control, environmental protection, water distribution and
supply systems, sewage and refuse collection and disposal systems,
education at any level, highways, public transportation, or port
operations, but such additional debt limit may be so utilized only to
provide funds for and towards the costs of capital facilities for any or
any combination of the foregoing purposes.

City of Philadelphia. The City of Philadelphia ("Philadelphia")
is the largest city in the Commonwealth, with an estimated population of
1,585,577 according to the 1990 Census. Philadelphia functions both as a
city of the first class and a county for the purpose of administering
various governmental programs.

For the fiscal year ending June 30, 1991, Philadelphia
experienced a cumulative General Fund balance deficit of $153.5 million.
The audit findings for the fiscal year ending June 30, 1992, place the
Cumulative General Fund balance deficit at $224.9.

Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class
cities in remedying fiscal emergencies was enacted by the General Assembly
and approved by the Governor in June 1991. PICA is designed to provide
assistance through the issuance of funding debt to liquidate budget
deficits and to make factual findings and recommendations to the assisted
city concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City
Council on January 3, 1992, and approved by the PICA Board and signed by
the Mayor on January 8, 1992. At this time, Philadelphia is operating
under a five year fiscal plan approved by PICA on April 6, 1992. Full
implementation of the five year plan was delayed due to labor negotiations
that were not completed until October 1992, three months after the
expiration of the old labor contracts. The terms of the new labor
contracts are estimated to cost approximately $144.0 million more than
what was budgeted in the original five year plan. An amended five year
plan was approved by PICA in May 1993. The audit findings show a surplus
of approximately $3 million for the fiscal year ending June 30, 1993. The
fiscal 1994 budget projects no deficit and a balanced budget for the year
ended June 30, 1994. The Mayor's latest update of the five year financial
plan was approved by PICA on May 2, 1994.

In June 1992, PICA issued $474,555,000 of its Special Tax
Revenue Bonds to provide financial assistance to Philadelphia and to
liquidate the cumulative General Fund balance deficit. PICA issued
$643,430,000 in July 1993 and $178,675,000 in August 1993 of Special Tax
Revenue Bonds to refund certain general obligation bonds of the city and
to fund additional capital projects.

Litigation. According to the Official Statement dated August
24, 1994 describing Certificates of Participation in Lease Payments by the
Commonwealth of Pennsylvania, the Office of Attorney General and the
Office of General Counsel have reviewed the status of pending litigation
against the Commonwealth, its officers and employees, and have identified
the following cases as ones where an adverse decision could materially
affect the Commonwealth's governmental operations. Listed below are all
litigation items so identified that may have a material effect on
government operations of the Commonwealth and consequently, the
Commonwealth's ability to pay debt service on its obligations.

Under Act No. 1978-152 approved September 28, 1978, as amended,
the General Assembly approved a limited waiver of sovereign immunity.
Damages for any loss are limited to $250,000 for each person and
$1,000,000 for each accident. The Supreme Court of Pennsylvania has held
that this limitation is constitutional. Approximately 3,500 suits against
the Commonwealth remain open. Tort claim payments for the departments and
agencies, other than the Department of Transportation, are paid from
departmental and agency operating and program appropriations. Tort claim
payments for the Department of Transportation are paid from an
appropriation from the Motor License Fund. The Motor License Fund tort
claim appropriation for fiscal 1994 has been increased by 83 percent to
$32.0 million to fund possibly higher and more numerous payments resulting
from recent decisions by the Pennsylvania Supreme Court, including Woods
v. PaDOT, that will affect the Department of Transportation's liability.
The Woods v. PaDOT ruling changes the computation for delay damages by
using the jury award as the base rather than the damage limits specified
in Act No. 1978-152.

Baby Neal v. Commonwealth

In April of 1990, the American Civil Liberties Union ("ACLU")
and various named plaintiffs filed a lawsuit against the Commonwealth in
federal court seeking an order requiring the Commonwealth to provide
additional funding for child welfare services. No figures for the amount
of funding sought are available. A similar lawsuit filed in the
Commonwealth Court, captioned as The City of Philadelphia, Hon. Wilson
Goode v. Commonwealth of Pennsylvania, Hon. Robert P. Casey et al., was
resolved through a court approved settlement providing, inter alia, for
more Commonwealth funding for these services for fiscal year 1991 as well
as a commitment to pay to counties $30.0 million over five years. The
Commonwealth then sought dismissal of the federal action based on, among
other things, the settlement of the Commonwealth Court case.

In January of 1992, the U.S. District Court, per Judge Kelly,
denied the ACLU's motion for class certification and held that the "next
friends" seeking to represent the interests of the 16 minor plaintiffs in
the case were inadequate representatives. The Commonwealth filed a motion
for summary judgment on most of the counts in the ACLU's complaint on the
basis of, among other things, Suter v. Artist M.. After the motion for
summary judgment was filed, the ACLU filed a renewed motion to certify
sub-classes. The court stayed decision on that motion pending decision on
the motion for summary judgment.

The district court has since denied the ACLU's motion for class
certification. The parties have stipulated to a judgment against the
plaintiffs in order for plaintiffs to appeal the denial of class
certification to the Third Circuit.

County of Allegheny v. Commonwealth of Pennsylvania

On December 7, 1987, the Supreme Court of Pennsylvania held in
County of Allegheny v. Commonwealth of Pennsylvania, that the statutory
scheme for county funding of the judicial system is in conflict with the
Pennsylvania Constitution. However, the Supreme Court of Pennsylvania
stayed its judgment to afford the General Assembly an opportunity to enact
appropriate funding legislation consistent with its opinion and ordered
that the prior system of county funding shall remain in place until this
is done. Allegheny County, on February 12, 1991, filed a motion in the
Supreme Court of Pennsylvania to lift the stay and enforce the judgment.
The Supreme Court subsequently denied the motion.

On March 3, 1989, the City of Philadelphia, Allegheny County,
and the state County Commissioner's Association filed suit in the Supreme
Court of Pennsylvania to require the General Assembly to appropriate the
funds required by the Supreme Court of Pennsylvania. That suit was
summarily dismissed on March 31, 1989. On February 14, 1991, the
Pennsylvania State Association of County Commissioners and the Counties of
Blair, Bucks, Erie, Huntington and Perry filed in the Commonwealth Court
of Pennsylvania an action for declaratory judgment requesting an order
that the Commonwealth be required to provide funds for the operation of
the courts of common pleas in accordance with the County of Allegheny
decision. These parties also requested the Supreme Court of Pennsylvania
to assume plenary jurisdiction over their case. The Supreme Court of
Pennsylvania refused to do so, and these parties have withdrawn the
Commonwealth Court action.

On October 5, 1992, the Pennsylvania State Association of County
Commissioners, along with Allegheny, Beaver, Clarion, Forest, Tioga and
Washington counties, filed in the Supreme Court of Pennsylvania a motion
to enforce judgment seeking an order that would direct the Commonwealth to
restore funding for local courts and district justices to levels existing
in 1987. The Commonwealth has filed a response opposing the motion. By
order dated May 26, 1993, the motion to enforce judgment was denied.

On December 7, 1992, the State Association of County
Commissioners filed a new action in mandamus seeking to compel the
Commonwealth to comply with the decision in County of Allegheny. The
Commonwealth has filed a response in opposition to the new action.

The General Assembly has yet to consider legislation
implementing the Supreme Court of Pennsylvania's judgment.

Fidelity Bank v. Commonwealth

In Dale National Bank v. Commonwealth the Pennsylvania Supreme
Court held that it was unconstitutional for the Commonwealth, in
calculating the bank shares tax, to include in the taxable base the value
represented by federal obligations. In response, in 1983, the Legislature
enacted the single excise tax which was levied on banking firms to recover
refunds owed to each bank as a result of Dale. First National Bank of
Fredericksburg challenged the constitutionality of the single excise tax.
On February 3, 1989, the Supreme Court in First National Bank of
Fredericksburg v. Commonwealth held that the single excise tax, as applied
to the First National Bank of Fredericksburg and its affiliated banks,
violated the banks' due process rights and separation of powers doctrine.

On July 1, 1989, the Governor signed into law Act 1989-21, the
Amended Bank Shares Tax. This law, which revised the bank shares tax by
adjusting the tax base and increasing the tax rate, provided additional
revenues to the Commonwealth during fiscal year 1989-90 sufficient to meet
the Fredericksburg refund liabilities and to maintain a projected positive
budget balance for the General Fund. Single excise tax refunds were given
in the form of credits against the 1989 Amended Bank Shares Tax. After
the first installment of the Amended Bank Shares Tax became due in October
30, 1989, First National Bank of Fredericksburg, Fidelity Bank, and
Equibank filed actions against the Commonwealth contesting the
constitutionality of the tax. First National Bank of Fredericksburg and
Equibank have since withdrawn their cases.

On July 7, 1994, the Commonwealth Court en banc ruled that the
1989 Amended Bank Shares Tax is constitutional. The Court also ruled that
the New Bank Shares Credit Law, passed by the General Assembly in 1989 to
provide a credit against the 1989 Amended Bank Shares Tax for banks
chartered after January 1, 1979, violates the Uniformity Clause of the
Pennsylvania Constitution. The ruling striking down the New Bank Shares
Credit Law results in an expected revenue gain of $11.6 million dollars
for the Commonwealth.

Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey

This action was filed in January, 1991 by an association of
rural and small schools, several individual school districts, and a group
of parents and students, against Governor Robert P. Casey and Secretary of
Education Donald M. Carroll, Jr. The action challenges the
constitutionality of the Commonwealth's system for funding local school
districts. The action consists of two parallel cases, one in the
Commonwealth Court of Pennsylvania, and one in the United States District
Court for the Middle District of Pennsylvania. The federal court case has
been indefinitely stayed, pending resolution of the state court case. The
state court case is in the pretrial discovery stage. The trial has not
yet been scheduled.

Philadelphia Suburban Corp. v. Commonwealth

On December 10, 1993, the Pennsylvania Supreme Court overturned
a decision of the Commonwealth Court ruling that dividends received by a
corporate taxpayer which are accounted for under the equity method of
accounting are not includible in average net income for purposes of
determining capital stock value under the fixed formula. The Commonwealth
Court held that the Revenue Department regulation which requires that book
income be adjusted to include dividends accounted for under the equity
method is contrary to the capital stock tax law which requires that net
income be computed on an unconsolidated basis exclusive of the net income
or loss of corporations in which the taxpayer has an investment. The
Pennsylvania Supreme Court's decision permits the Commonwealth to release
$147 million held in reserve for potential tax refund.

Austin v. Department of Corrections, et al.

In November 1990, the American Civil Liberties Union ("ACLU")
brought a class action lawsuit on behalf of the inmate populations in
thirteen Commonwealth correctional institutions.

The lawsuit challenges the conditions of confinement at each
institution and includes specified allegations of overcrowding,
deficiencies in medical and mental health services, inadequate
environmental conditions, disparate treatment of HIV positive prisoners
and other assorted claims.

No damages are sought. The ACLU is seeking injunctive relief
which would modify conditions, change practices and procedures and
increase the number of staff deployment. The Department of Corrections
has been ordered to implement a new policy regarding detection and
prevention of tuberculosis. If injunctive relief is granted, the cost to
the Commonwealth may be substantial. The Commonwealth may incur
significant capital and personnel costs after this fiscal year ranging in
the millions of dollars.

Trial of this matter will take place in four distinct phases:
Corrections, Environmental, Medical and Mental Health. Trial of the first
phase (Corrections) began on December 6, 1993. The court recessed on
January 3, 1994, prompted by settlement negotiations between the parties,
and trial will resume if a settlement is not reached.

Scott v. Snider

In 1991, a consortium of public interest law firms filed a class
action suit, Scott v. Snider, against various Commonwealth officers,
alleging that the Commonwealth of Pennsylvania had failed to comply with a
1989 federal mandate to provide and pay for early and periodic screening,
diagnostic, and treatment services for all Medicaid-eligible children
under the age of 21. If the federal court were to grant all of the relief
that plaintiffs are seeking, the Commonwealth would be obligated, among
other things, (1) to substantially revise the methods by which it
presently identifies children in need of treatment and (2) to expand the
scope of services and treatment presently provided to such children. It
is estimated that such relief, if granted in toto, would cost the
Commonwealth approximately $98 million. On July 7, 1993, an Intervening
Complaint was filed by the City and County of Philadelphia, Allegheny
County, Pennsylvania State Association of County Commissioners, et al.,
but intervention was denied by the Court.

Defendants have moved for summary judgment, and plaintiffs are
seeking partial summary judgment. The court has not yet ruled on these
motions.

Pennsylvania Medical Society v. Karen F. Snider

The Pennsylvania Medical Society sued the Commonwealth for
payment of the full co-pay and deductible for outpatient services provided
to medical assistance clients who are also eligible for Medicare. The
federal Medicare program has an established fee schedule for services
under Part B of which Medicare pays 80 percent and the patient is
responsible for the 20 percent co-pay. For medical assistance eligible
clients the medical assistance program pays the 20 percent patient co-pay
amount up to the maximum fee for service set under the Commonwealth's
medical assistance program. Consequently, when the 80 percent portion
paid by Medicare equals or exceeds the state established medical
assistance fee for that service, the Commonwealth has not paid the
remaining 20 percent portion of the fee. It is the position of the
Commonwealth that the medical assistance fee has precedence and the
service provider should not be paid more than the Commonwealth's fee
schedule. The Commonwealth received a favorable decision in the United
States District Court but the Pennsylvania Medical Society appealed that
decision and won a reversal in the United States Third Circuit Court. No
detailed cost estimates have been completed, but estimates made earlier
have estimated the cost to the Commonwealth of approximately $50 million
per year. An appeal is under consideration.

PUBLIC OFFERING

Offering Price

The secondary market Public Offering Price per Unit of each
Trust is computed by adding to the aggregate bid price of the Bonds in
such Trust divided by the number of Units thereof outstanding, an amount
equal to 5.820% of such aggregate offering price of the Bonds per Unit.
This amount is equal to a sales charge of 5-1/2% of the Public Offering
Price. 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 Bonds
from the last day on which interest was paid and is initially accounted
for daily by each Trust at the daily rate set forth under "Summary of
Essential Information" for each Trust in Part A of this Prospectus. This
daily rate is net of estimated fees and expenses. The secondary market
Public Offering Price can vary on a daily basis from the amount stated on
the cover of Part A of this Prospectus in accordance with fluctuations in
the prices of the Bonds. The price to be paid by each investor will be
computed on the basis of an evaluation made as of 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 Sponsors) 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 Certificateholder at the time Units are purchased. Since each
Trust normally receives the interest on the Bonds twice a year and the
interest on the Bonds is accrued on a daily basis (this daily rate is net
of estimated fees and expenses), each Trust will always have an amount of
interest earned but uncollected by, or unpaid to, the Trustee. A Certifi-
cateholder will not recover his proportionate share of accrued interest
until the Units of a Trust are sold or redeemed, or such 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 sale or termination and to the date of tender in the
case of redemption.

Employee Discounts

Employees (and their families) of Bear, Stearns & Co. Inc. and
of any underwriter of any Trust, pursuant to employee benefit
arrangements, may purchase Units of a State Trust at a price equal to the
bid side evaluation of the underlying securities in such State 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 of each State Trust for
sale in only the State for which such Trust is named and certain other
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 $33.00 per Unit, subject to the Sponsor's
right to change the dealers' concession from time to time. 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. Such Units may then be distributed to the public by
the dealers at the Public Offering Price then in effect. The Sponsor
reserves the right to reject, in whole or in 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 in 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 of each
State Trust will be determined on the basis of the current bid prices of
the Bonds in such State Trust plus the applicable sales charge. 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 of each State Trust (based on the bid price of the Bonds in such
State Trust plus the sales charge) each exceeded the Repurchase and
Redemption Price per Unit (based upon the bid price of the Bonds in each
State Trust without the sales charge) by the amounts shown under "Summary
of Essential Information" for each State Trust in Part A of this
Prospectus. For this reason, among others (including fluctuations in the
market prices of such Bonds and the fact that the Public Offering Price
includes the 5-1/2% sales charge), the amount realized by a Certificate-
holder upon any redemption of Units may be less than the price paid for
such Units.

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 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 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
Sponsor upon request.

RIGHTS OF CERTIFICATEHOLDERS

Certificates

Ownership of Units of each State 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 instrument 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 each State Trust is credited by the Trustee
to the Interest Account of such Trust and a deduction is made to reimburse
the Trustee without interest for any amounts previously advanced.
Proceeds representing principal received by each State Trust from the
maturity, redemption, sale or other disposition of Bonds are credited to
the Principal Account of such State Trust.

Distributions to each Certificateholder of each State Trust from
the Interest Account of such State Trust 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 such
Certificateholder's pro rata share of the Estimated Net Annual Interest
Income in such Interest Account, depending upon the applicable plan of
distribution. Distributions from the Principal Account of each State
Trust will be computed as of each semi-annual Record Date, and will be
made to the Certificateholders of such State Trust 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 appropriate 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 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 State 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 as
may be necessary to provide interest distributions of approximately equal
amounts. The Trustee shall be reimbursed, without interest, for these
advances to the Interest Account. Funds which are available for future
distributions, investment in the Total Reinvestment Plan, payments of
expenses and redemptions are in accounts which are non-interest bearing to
Certificateholders and are available for use by the Trustee pursuant to
normal banking procedures.

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 of each State Trust initially will be in the amounts
shown under "Summary of Essential Information" in Part A and will change
and be reduced as Bonds mature or are redeemed, exchanged or sold, or as
expenses of each State Trust fluctuate. No distribution need be made from
a 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 applicable to the Unit Purchased. Record
Dates for interest distributions will be 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, the Trustee will furnish to each person who
at any time during the calendar year was a Certificateholder of record of
a State Trust, a statement showing (a) as to the Interest Account of such
State Trust: interest received (including any earned original issue
discount and amounts representing interest received upon any disposition
of Bonds and earned original discount, if any), amounts paid for
redemption of Units, if any, deductions for applicable taxes and fees and
expenses of such State 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 such
State Trust's 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 such
State Trust, amounts paid for redemption 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 in such State Trust and the number of Units
thereof outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit of such State Trust based upon the last
computation thereof made during such calendar year; and (e) amounts
actually distributed to Certificateholders of such State Trust 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 State Trusts 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 and from the
respective State income taxes. Such interest may, however, be subject to
the federal corporate alternative minimum tax and to state and local taxes
in other jurisdictions. 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.

The Revenue Reconciliation Act of 1993 ("P.L. 103-66") was
recently enacted. P.L. 103-66 increases maximum marginal income tax rates
for individuals and corporations (generally effective for taxable years
beginning after December 31, 1992), extends the authority to issue certain
categories of tax-exempt bonds (qualified small issue bonds and qualified
mortgage bonds), limits the availability of capital gain treatment for
tax-exempt bonds purchased at a market discount, increases the amount of
Social Security benefits subject to tax (effective for taxable years
beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to
the effect of P.L. 103-66 on an investment in Units.

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, counsel for the Sponsor, under
existing law:

The State Trusts are not associations taxable as corporations
for federal income tax purposes under the Internal Revenue Code of
1986 (the "Code"), and income received by each State 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 such State Trust.

Each Certificateholder of a State Trust will be considered the
owner of a pro rata portion of that State Trust under Section 676(a)
of the Code. Thus, each Certificateholder of a State Trust will be
considered to have received his pro rata share of Bond interest when
it is received by the State Trust, and the entire amount of net
income distributable to Certificateholders of a State Trust that is
exempt from federal income tax when received by that State Trust will
constitute tax-exempt income when received by the Certificateholders.

Gain (other than any earned original issue discount) realized on
sale or redemption of the Bonds or on sale of a Unit is, however,
includible 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 gain 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 Certificateholders may be deducted against ordinary income.
Capital assets acquired on or after January 1, 1988 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
maximum tax rate of 28% on such gain.

Each Certificateholder of a State Trust will realize taxable
gain or loss when that State 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. The Certificateholder's tax cost for each Bond is
determined by allocating the total tax cost of each Unit among all
the Bonds held in the State Trust (in accordance with the portion of
the State 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 State 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
Certificateholder, 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 a State Trust or of a Unit by a
Certificateholder.

A Certificateholder may also realize taxable income or loss when
a Unit of a State Trust is sold or redeemed. The amount received is
allocated among all the Bonds in that State Trust in the same manner
as when the State Trust disposes of Bonds and the Certificateholder
may exclude accrued interest and the earned portion of any original
issue discount (but not amounts 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 includible 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 Social Security
benefits that are includible 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 regard to this item). Further, interest
on the Bonds is includible in a 0.12% additional corporate minimum
tax imposed by the Superfund Amendments and Reauthorization Act of
1986 for taxable years beginning before January 1, 1996. In
addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be
subject to a minimum tax on excess "passive investment income" which
includes tax-exempt interest.

Under federal law, interest on Bonds in each State Trust issued
by authority of the Government of Puerto Rico is exempt from regular
federal income tax and state and local income taxes in the United
States and Puerto Rico.

The State Trusts are not subject to the New York State Franchise
Tax on Business Corporations or the New York City General Corporation
Tax.

Messrs. Battle Fowler are also of the opinion that under the
personal income tax laws of the State and City of New York, the income of
each State Trust will be treated as the income of the Certificateholders.
Interest on the Bonds that is exempt from tax under the laws of the State
and City of New York when received by the New York Trust will retain its
status as tax-exempt interest of the Certificateholders. In addition,
non-residents of New York City will not be subject to the City personal
income tax on gains derived with respect to their Units. Non-residents of
New York State will not be subject to New York State personal income tax
on such gains unless the Units are employed in a business, trade or
occupation carried on in New York State. A New York State or New York
City resident should determine his basis and holding period for his Units
in the same manner for New York State and New York City tax purposes as
for federal tax purposes. 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 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 local government. The laws of such states
and local governments vary with respect to the taxation of such
obligations. See "Rights of Certificateholders" in this Part B.

In the opinion of Brown & Wood, special counsel to the Sponsor
for California tax matters, under existing California law applicable to
individuals who are California residents:

The California Trust will not be treated as an association
taxable as a corporation, and the income of the California Trust will
be treated as the income of the Certificateholders. Accordingly,
interest on Bonds received by the California Trust that is exempt
from personal income taxes imposed by or under the authority of the
State of California will be treated for California income tax
purposes in the same manner as if received directly by the
Certificateholders.

Each Certificateholder of the California Trust will recognize
gain or loss when the California Trust disposes of a Bond (whether by
sale, exchange, redemption or payment at maturity) or upon the
Certificateholder's sale or other disposition of a Unit. The amount
of gain or loss for California income tax purposes will generally be
calculated pursuant to the Internal Revenue Code of 1986, as amended,
certain provisions of which are incorporated by reference under
California law.

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

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

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

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

The Michigan Single Business Tax replaced the tax on corporate
and financial institution income under the Michigan Income Tax, and
the intangible tax with respect to those intangibles of persons
subject to the Single Business Tax, the income from which would be
considered in computing the Single Business Tax. Persons are subject
to the Single Business Tax only if they are engaged in "business
activity," as defined in the Act. Under the Single Business Tax,
both interest received by the Michigan Trust on the underlying Bonds
and any amount distributed from the Michigan Trust to a Certificate-
holder, if not included in determining taxable income for Federal
income tax purposes, is also not included in the adjusted tax base
upon which the Single Business Tax is computed, of either the
Michigan Trust or the Certificateholders. If the Michigan Trust or
the Certificateholders have a taxable event for Federal income tax
purposes when the Michigan Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity) or the Certificateholder
redeems or sells his Certificate, an amount equal to any gain
realized from such taxable event which was included in the
computation of taxable income for Federal income tax purposes (plus
an amount equal to any capital gain of an individual realized in
connection with such event but excluded in computing that
individual's Federal taxable income) will be included in the tax base
against which, after allocation, apportionment and other adjustments,
the Single Business Tax is computed. The tax base will be reduced by
an amount equal to any capital loss realized from such a taxable
event, whether or not the capital loss was deducted in computing
Federal taxable income in the year the loss occurred. Certificate-
holders should consult their tax advisors as to their "business
activity" status under Michigan law.

In the opinion of Saul, Ewing, Remick & Saul, special counsel to
the Sponsor on Pennsylvania tax matters, under existing law:

(1) Units evidencing fractional undivided interests in the
Trust, to the extent represented by obligations issued by the
Commonwealth of Pennsylvania, any public authority, commission,
board or other agency created by the Commonwealth of
Pennsylvania, any political subdivision of the Commonwealth of
Pennsylvania or any public authority created by any such
political subdivision, or by the Government of Puerto Rico or
its public authorities, are not taxable under any of the
personal property taxes presently in effect in Pennsylvania;

(2) Distributions of interest income to Certificateholders that
would not be taxable if received directly by a Pennsylvania resident
are not subject to personal income tax under the Pennsylvania Tax
Reform Code of 1971; nor will such interest be taxable under
Philadelphia School District Investment Income Tax imposed on
Philadelphia resident individuals;

(3) A Certificateholder which is an individual, estate or trust
will have a taxable event under the Pennsylvania state and local
income tax referred to in the preceding paragraph upon the redemption
or sale of Units;

(4) A Certificateholder which is a corporation will have a
taxable event under the Pennsylvania Corporate Net Income Tax or, if
applicable, the Mutual Thrift Institutions Tax, upon the redemption
or sale of its Units. Interest income distributed to
Certificateholders which are corporations is not subject to
Pennsylvania Corporate Net Income Tax or Mutual Thrift Institutions
Tax. However, banks, title insurance companies and trust companies
may be required to take the value of Units into account in
determining the taxable value of their shares subject to Shares Tax;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania
Bonds may be subject to Pennsylvania personal or corporate income
taxes. Those gains which are distributed by the Trust to
Certificateholders who are individuals will be subject to
Pennsylvania Personal Income Tax and, for residents of Philadelphia,
to Philadelphia School District Investment Income Tax. For
Certificateholders which are corporations, the distributed gains will
be subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax.

(6) For Pennsylvania Bonds, gains which are not distributed by
the Trust will nevertheless be taxable to Certificateholders if
derived by the Trust from the sale, exchange or other disposition of
these Bonds issued on or after February 1, 1994. Such gains which
are not distributed by the Trust will remain nontaxable to
Certificateholders if derived by the Trust from the sale, exchange or
other disposition of Bonds issued prior to February 1, 1994.
However, for gains from the sale, exchange or other disposition of
these Bonds to be taxable under the Philadelphia School District
Investment Income Tax, the Bonds must be held for six months or less;

(7) Gains from the sale, exchange or other disposition of
Puerto Rico Bonds will be taxable to Certificateholders if
distributed or retained by the Trust. However, for gains from the
sale, exchange or other disposition of these Bonds to be taxable
under the Philadelphia School District Investment Income Tax, the
Bonds must be held for six months or less;

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations
held by the Trustee will be excludable from Pennsylvania gross income
if, and to the same extent as, such interest would have been so
excludable if paid in the normal course by the issuer of the
defaulted obligations; and

(10) The Trust is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.

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 IRBs 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 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 such 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 regular 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 the 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 State Trusts, and it can be
expected that similar proposals may be introduced in the future.

In a 1988 decision (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 Sec-
tion 103 of the Code.

The opinions of bond 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 of each State Trust and
continuously to offer to repurchase the Units of the Trusts. The
Sponsor's secondary market repurchase price will be based on the aggregate
bid price of the Bonds in each State Trust 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 as to current market prices
prior to making a tender for redemption. The Sponsor may discontinue
repurchases of Units of a State Trust 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 of a State Trust
are physically received in proper form by the Sponsor, Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, N.Y. 10167. 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
of a State Trust, 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 Sponsor, subject to change, to repurchase units of those
funds on the basis of a price higher than the bid prices of the Bonds in
the Trusts. Consequently, depending upon 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 these State Trusts, although in all bond trusts, the
purchase price per unit depends primarily on the value of the bonds in the
trust portfolio.

Units purchased by the Sponsor in the secondary market may be
re-offered for sale by the Sponsor at a price based on the aggregate bid
price of the Bonds in a State Trust plus a 5-1/2% sales charge (5.820% of
the net amount invested) 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
Certificateholders, 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 may also 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 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
appropriate Interest Account, or, if the balance therein is insufficient,
from the appropriate Principal Account. All other amounts paid on
redemption shall be withdrawn from the appropriate 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 in a State Trust are sold, the
size and diversity of such Trust will be reduced.

The Redemption Price per Unit of a State Trust is the pro rata
share of each Unit in such State Trust determined by the Trustee on the
basis of (i) the cash on hand in such Trust or monies in the process of
being collected, (ii) the value of the Bonds in such State 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 such State Trust, (b) the accrued expenses of such State Trust and
(c) cash allocated for distribution to Certificateholders of record of
such State Trust as of the business day prior to the evaluation being
made. The Evaluator may determine the value of the Bonds in such State
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 such State 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 Certificateholder 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.

TOTAL REINVESTMENT PLAN

Under the Total Reinvestment Plan (the "Plan"), semi-annual and
annual Certificateholders may elect to have all 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 "Plan Reinvestment Dates."

** Certificateholders of a particular State Trust of the Multi-State
Trust who participate in the Plan will have reinvestments made in
Units from the same State Trust of a similar Multi-State Trust if
such Units are available. If no such Units are available for
reinvestment, distributions to Certificateholders will be reinvested
in Units of regular series of Municipal Securities Trust, the income
earned on which may not be exempt from state and local income taxes.

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% of the Reinvestment Price 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 Certificate-
holder 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, approximated $10 (Ten Dollars).

A semi-annual or annual Certificateholder may join the Plan at
the time he invests in Units of the State 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 program
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 purchased in the Trust (and with respect to Plan Units purchased
with the distributions from the Units purchased in the State 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 all 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
Certificateholders, and December 1 of each year for annual Certificate-
holders. 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 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 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.) 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 intends to maintain
a market for the Plan Units and continuously to offer to purchase Plan
Units at prices based upon the aggregate offering 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 of the
Available Series of 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 price. 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 the 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 Trust. Participants may redeem Plan Units by making a
written request to the Trustee at the address set forth 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 otherwise would 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 per Unit for the
Available Series 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 confirmation stating his cost, number
of Units purchased and estimated current return. Questions regarding a
participant's statements should be directed to the Trustee by calling the
Trustee at the number set forth under "Summary of Essential Information"
in Part A of this Prospectus.

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.

TRUST ADMINISTRATION

Portfolio Supervision

The Sponsor may direct the Trustee to dispose of Bonds in a
State Trust 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
that in the opinion of the Sponsor would make the retention of such Bonds
in such State Trust detrimental to the interests of the Certificate-
holders. 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 Trust
Agreement to the same extent as the Bonds originally deposited. Within
five days after such deposit in a State Trust, notice of such exchange and
deposit shall be given by the Trustee to each Certificateholder of such
Trust registered on the books of the Trustee, including an identification
of the Bonds eliminated and the Bonds substituted therefor. Except as
previously stated in the discussion regarding Failed Bonds, the
acquisition by a State 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 Certificateholders.

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 of each State Trust affected by such amendment for the
purpose of modifying the rights of Certificateholders; provided that no
such amendment or waiver shall reduce any Certificateholder's interest in
a State 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 in a State Trust
then outstanding, to increase the number of Units issuable by such State
Trust or to permit the acquisition of any bonds in addition to or in
substitution for those initially deposited in such State Trust, except in
accordance with the provisions of the Trust Agreement. The Trustee shall
promptly notify Certificateholders, in writing, of the substance of any
such amendment.

The Trust Agreement provides that each State Trust shall
terminate upon the maturity, redemption or other disposition, as the case
may be, of the last of the Bonds held in such State 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 a State Trust shall be less than the minimum amount set forth
under "Summary of Essential Information in Part A" for such State Trust,
the Trustee may, in its discretion, and shall when so directed by the
Sponsor, terminate such State Trust. Each State Trust may also be
terminated at any time with the consent of the holders of Certificates
representing 100% of the Units of such State Trust then outstanding. In
the event of termination of a State Trust, written notice thereof will be
sent by the Trustee to all Certificateholders of such State Trust. Within
a reasonable period after termination, the Trustee must sell any Bonds
remaining in the terminated State Trust, and, after paying all expenses
and charges incurred by such State Trust, distribute to each Certificate-
holder thereof, upon surrender for cancellation of his Certificate for
Units, his pro rata share of the Interest and Principal Accounts of such
State Trust.

The Sponsor

The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation,
is engaged in the underwriting, investment banking and brokerage business
and is a member of the National Association of Securities Dealers, Inc.
and all principal securities and commodities exchanges, including the New
York Stock Exchange, the American Stock Exchange, the Midwest Stock
Exchange and the Pacific Stock Exchange. Bear Stearns maintains its
principal business offices at 245 Park Avenue, New York, New York 10167
and, since its reorganization from a partnership to a corporation in
October 1985, has been a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Bear Stearns, through its predecessor entities, has been
engaged in the investment banking and brokerage business since 1923. Bear
Stearns is the sponsor for numerous series of unit investment trusts,
including: A Corporate Trust, Series 1, New York Municipal Trust,
Series 1 (and Subsequent Series), Discount & Zero Coupon Fund, 1st Series
(and Subsequent Series); Municipal Series Trust, Series 1 (and Subsequent
Series), 1st Discount Series (and Subsequent Series), High Income Series 1
(and Subsequent Series), Multi-State Series 1 (and Subsequent Series)
Short-Intermediate Term Series 1 (and Subsequent Series); Insured
Municipal Securities Trust, Series 1 (and Subsequent Series), Series 1-4
(Multiplier Portfolio), 5th Discount Series (and Subsequent Series),
Navigator Series (and Subsequent Series); Mortgage Securities Trust, CMO
Series 1 (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. The information
contained in the Prospectus concerning governmental entities and
authorities, including the various issuers of the Bonds in the Trust, was
gathered from sources deemed to be reliable by the Sponsor. The Sponsor
has not independently verified the information contained in such sources.

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
any 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 State Trusts; 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

For certain of the State Trusts, as set forth in the "Summary of
Essential Information" in Part A, the Trustee is United States Trust
Company of New York, with its principal place of business at 770 Broadway,
New York, New York 10003. United States Trust Company of New York has,
since its establishment in 1853, engaged primarily in the management of
trust and agency accounts for individuals and corporations. The Trustee
is a member of the New York Clearing House Association and is subject to
supervision and examination by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.

For certain other State 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
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 Trusts
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, reference is made to the material set
forth under "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
Kenny Information Systems, 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
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 thirty days after notice of resignation, the retiring
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.

TRUST EXPENSES AND CHARGES

At no cost to the State Trusts, the Sponsor has borne all the
expenses of creating and establishing the State Trusts, including the cost
of initial preparation and execution of the Trust Agreement, registration
of the State Trusts and the Units under the Investment Company Act of 1940
and the Securities Act of 1933, preparation and printing of the
Certificates, the fees of the Evaluator during the initial public
offering, legal and auditing expenses, advertising and selling expenses,
initial fees and expenses of the Trustee and other out-of-pocket expenses.

The Sponsor will not charge the State Trust a fee for its
services as such. See "Sponsor's Profits."

The Trustee will receive for its ordinary recurring services to
each State Trust an annual fee in the amount set forth under "Summary of
Essential Information" in Part A. 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, which fee shall be allocated pro rata
among each State Trust.

The Trustee's and Evaluator's fees applicable to a State Trust
are payable monthly as of the Record Date from such State Trust's Interest
Account to the extent funds are available and then from such Trust's
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 any
or all of the State Trusts: all expenses (including counsel and auditing
fees) of the Trustee incurred in connection with its activities under the
Trust Agreement, including the expenses and costs of any action undertaken
by the Trustee to protect a State Trust and the rights and interests of
the Certificateholders; fees of the Trustee for any extraordinary services
performed under the Trust Agreement; indemnification of the Trustee for
any loss or liability accruing to it without gross negligence, bad faith
or willful misconduct on its part, arising out of or in connection with
its acceptance or administration of a State Trust; indemnification of the
Sponsor for any loss, liabilities and expenses incurred in acting as
Sponsor of a State 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 a State 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 State
Trust to which such expenses are allocable. In addition, the Trustee is
empowered to sell Bonds of a State Trust in order to make funds available
to pay all expenses of such State Trust.

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, A Corporate Trust or Equity
Securities Trust (upon receipt by Equity Securities Trust of an
appropriate exemptive order from the Securities and Exchange Commission)
(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 has been
completed, will be based on the aggregate bid price of the Bonds in the
particular Trust portfolio. Units in an Exchange Trust will be sold to
Certificateholders 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 based on the aggregate bid price of the
Bonds in the Exchange Trust portfolio if its initial public offering has
been completed, plus accrued interest (or for units of the 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 Certificateholders 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 $15 per unit (or per 1,000 Units for the Mortgage
Securities Trust or per 100 Units for the Equity Securities Trust)
(approximately 1.5% of the price of each Exchange Trust unit (or 1,000
Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust)). For Certificateholders 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) $15 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
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.

(3) The Sponsor reserves the right to suspend, modify or
terminate the Exchange Privilege. The Sponsor will provide
Certificateholders 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 Certificateholders.
Certificateholders 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
Certificateholder 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 $2,960 ($2,900 for unit and $60 for
the sales charge). The remaining $540 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 $3,068.80 ($2,900 for units and
$168.80 for the sales charge, assuming a 5 1/2% sales charge times the
public offering price).

The Conversion Offer

Certificateholders 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 A Corporate Trust, Municipal Securities Trust, Insured Municipal
Securities Trust, Mortgage Securities Trust, New York Municipal Trust or
Equity Securities Trust (upon receipt by Equity Securities Trust of an
appropriate exemptive order from the Securities and Exchange Commission
sponsored by Bear, Stearns & Co. Inc. or the Sponsor (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 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
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
(or for units of the Equity Securities Trust, based on the market value of
the underlying securities in the Equity Trust portfolio). The purchase
price of the units will be based on the aggregate offer price of bonds in
the Conversion Trust portfolio (or for units of the Equity Securities
Trust, based on the market value of the underlying securities in the
Equity Trust portfolio) during its initial offering period; 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 (or for units of the Equity Securities Trust, based on the market
value of the underlying securities in the Equity Trust portfolio), and a
sales charge as set forth below.

Except for Certificateholders 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 $15 per Unit (or per 1,000 Units
for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust). For Certificateholders 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) $15 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 Certificateholders
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. Certificateholders 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
Certificateholders 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 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 of the Equity
Securities Trust) for a total cost of $2,860 ($2,800 for units and $60 for
the sales charge). The remaining $515 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 $2,962.96 ($2,800 for units and $162.96 sales
charge, assuming a 5 1/2% sales charge times the public offering price).

Description of the Exchange Trusts and the Conversion Trusts

A Corporate Trust may be an appropriate investment vehicle for
an investor who is more interested in a higher current return on his
investment (although taxable) than a tax-exempt return (resulting from the
fact that the current return from taxable fixed income securities is
normally higher than that available from tax-exempt fixed income
securities). 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 and Puerto
Rico 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
distributions 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 income.

Tax Consequences of the Exchange Privilege and the Conversion Offer

A surrender of units pursuant to the Exchange Privilege or the
Conversion Offer will constitute a "taxable event" to the Certificate-
holder 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 and New York tax law have been passed upon by Battle
Fowler, 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. Certain matters relating to California tax law have been
passed upon by Brown & Wood, as special California counsel to the Sponsor.
Certain matters relating to Michigan tax law have been passed upon by
Miller, Canfield, Paddock and Stone, as special Michigan counsel to the
Sponsor. Certain matters relating to Pennsylvania tax law have been
passed upon by Saul, Ewing, Remick & Saul, as special Pennsylvania counsel
to the Sponsor. Carter, Ledyard & Milburn, Two Wall Street, New York, New
York 10005 have acted as counsel for United States Trust Company of New
York. Messrs. Booth & Baron, 122 East 42nd Street, New York, New York
10168, have 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, independent certified public accountants for the
periods indicated in its reports appearing herein. The financial
statements of KPMG Peat Marwick have been so included in reliance on its
reports given upon the authority of said firm as expert in accounting and
auditing.

DESCRIPTION OF BOND RATINGS*

Standard & Poor's Corporation

A brief description of the applicable Standard & Poor's Corpora-
tion rating symbols and their meanings is as follows:

* As described by the rating agencies.

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:

(i) Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms
of the obligation.
(ii) Nature of and provisions of the obligation.

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

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

Moody's Investors Service

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 other elements 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.

* * *

<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST

MULTISTATE SERIES 1-11

===================================================================

AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST,
MULTI-STATE SERIES ____

TRP PLAN - TOTAL REINVESTMENT PLAN

I hereby elect to participate in the TRP Plan and am the owner of ____
units of __________ Trust.

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, Wall Street Trust Division, as TRP
Plan Agent, who shall immediately invest the distributions in units of the
available series of The State Trust above or, if unavailable, of other
available series of regular Municipal Securities Trust.

The foregoing authorization is subject in Date ____________, 19__
all respects to the terms and conditions
of participation set forth in the pros
pectus 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 and Zipcode

Salesman's Name ___________________ Salesman's No.

=========================================================================

UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM.

MAIL TO YOUR BROKER
OR
THE BANK OF NEW YORK
ATTN: UNIT INVESTMENT TRUST DIVISION
101 BARCLAY STREET
NEW YORK, NEW YORK 10286

<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST

MULTISTATE SERIES 12-36

=======================================================================

AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST,
MULTI-STATE SERIES ____

TRP PLAN - TOTAL REINVESTMENT PLAN

I hereby elect to participate in the TRP Plan and am the owner of ____
units of __________ Trust.

I hereby authorize the United States Trust Company New York, Trustee, to
pay all semi-annual or annual distributions of interest and principal (if
any) with respect to such units to the United States Trust Company, as TRP
Plan Agent, who shall immediately invest the distributions in units of the
available series of The State Trust above or, if unavailable, of other
available series of regular Municipal Securities Trust.

The foregoing authorization is subject in Date ____________, 19__
all respects to the terms and conditions
of participation set forth in the pros
pectus 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 and Zip Code

Salesman's Name ___________________ Salesman's No.

=========================================================================

UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM.

MAIL TO YOUR BROKER
OR
UNITED STATES TRUST COMPANY OF NEW YORK
ATTN: THE UIT REINVESTMENT UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003

<PAGE>

INDEX MUNICIPAL SECURITIES
TRUST
Title Page MULTI-STATE SERIES

Summary of Essential Information . . . . . A-5 (A Unit Investment Trust)
Information Regarding the Trust . . . . . . A-9
Financial and Statistical Information . . . A-12
Audit and Financial Information Prospectus
Report of Independent Accountants . . . . F-1

Statement of Net Assets . . . . . . . . . F-2 Dated: October 28, 1994
Statement of Operations . . . . . . . . . F-3
Statement of Changes in Net Assets . . . F-6 Sponsor:
Notes to Financial Statements . . . . . . F-10
Portfolio . . . . . . . . . . . . . . . . F-13 Bear, Stearns & Co. Inc.
The Trust . . . . . . . . . . . . . . . . . 1 245 Park Avenue
The State Trusts . . . . . . . . . . . . . 8 New York, N.Y. 10167
Public Offering . . . . . . . . . . . . . . 45 212-272-2500
Estimated Long Term Return and Estimated
Current Return . . . . . . . . . . . . . 47 Trustee:
Rights of Certificateholders . . . . . . . 48
Tax Status . . . . . . . . . . . . . . . . 50 United States Trust
Liquidity . . . . . . . . . . . . . . . . . 56 Company
Total Reinvestment Plan . . . . . . . . . . 58 of New York
Trust Administration . . . . . . . . . . . 62 770 Broadway
Trust Expenses and Charges . . . . . . . . 65 New York, N.Y. 10003
Exchange Privilege and Conversion Offer . . 66 1-800-428-8890
Other Matters . . . . . . . . . . . . . . . 71 or
Description of Bond Ratings . . . . . . . . 71 The Bank of New York
[/R] 101 Barclay Street
Parts A and B of this Prospectus do New York, N.Y. 10286
not contain all of the information set forth in 1-800-431-8002
the registration statement and exhibits relating
thereto, filed with the Securities and Exchange Evaluator:
Commission, Washington, D.C., under the
Securities Act of 1933, and to which reference Kenny S&P Evaluation
is made. Services
65 Broadway
* * * New York, N.Y. 10006

This Prospectus does not constitute an offer to sell, or a
solicitation of any 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.

</MODULE CONTENT>
[/DOCUMENT]

</DOCUMENT