<PAGE>
As filed with the Securities and Exchange Commission on May 24, 1994
Registration No. 33-2328
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
POST-EFFECTIVE AMENDMENT NO. 8 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
___________________
A. Exact Name of Trust:
PRUDENTIAL UNIT TRUSTS
High Yield Tax-Exempt Series 4
B. Name of depositor:
PRUDENTIAL SECURITIES INCORPORATED
C. Complete address of depositor's principal executive office:
One Seaport Plaza
199 Water Street
New York, New York 10292
D. Name and complete address of agent for service:
Copy to:
LEE B. SPENCER, JR., ESQ. KENNETH W. ORCE, ESQ.
PRUDENTIAL SECURITIES INCORPORATED CAHILL GORDON & REINDEL
One Seaport Plaza 80 Pine Street
199 Water Street New York, New York 10005
New York, New York 10292
It is proposed that this filing will become effective (check appropriate box.)
___
/_ / immediately upon filing on (date) pursuant to paragraph (b);
___
/ X/ on May 31, 1994 pursuant to paragraph (b);
___
/__/ 60 days after filing pursuant to paragraph (a);
___
/__/ on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
CUSIP: 744311770R MAIL CODE C
Prospectus--PART A
NOTE: PART A of this Prospectus may not be distributed unless accompanied by
PART B.
- --------------------------------------------------------------------------------
Prudential Unit Trusts
HIGH YIELD TAX-EXEMPT SERIES 4
- --------------------------------------------------------------------------------
The initial public offering of Units in the Trust has been completed. The Units
offered hereby are issued and outstanding Units which have been acquired by the
Sponsor either by purchase from the Trustee of Units tendered for redemption or
in the secondary market.
The objective of this Trust is to provide a high level of interest income which,
in the opinion of counsel is, under existing law, excludable from gross income
for Federal income tax purposes (except in certain instances depending on the
Unit Holder) through investment in a fixed portfolio consisting primarily of
long-term state, municipal and public authority debt obligations, many of which
are rated below investment grade or are unrated. Such ``high yield/high risk''
Securities should be viewed as speculative and an investor should review his
ability to assume the risks associated with speculative municipal bonds. The
value of the Units of the Trust will fluctuate with the value of the portfolio
of underlying Securities. Securities such as those included in the Trust may be
subject to greater market fluctuations and risk of loss of income and principal
than are investments in lower yielding fixed-income securities. A reduction in
the credit rating of a Security or a general increase in interest rates would be
expected to reduce the value of the underlying portfolio. The Securities in the
Trust are not insured by The Prudential Insurance Company of America. The Tax
Reform Act of 1986 has an adverse tax impact on corporate investors who are
subject to alternative minimum tax. See ``Tax Status.''
Minimum Purchase: 1 Unit.
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Sponsor: Prudential Securities (LOGO)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Please read and retain Prospectus dated
this Prospectus for future reference May 31, 1994
<PAGE>
PRUDENTIAL UNIT TRUSTS
High Yield Tax-Exempt Series 4
Table of Contents
<TABLE>
<S> <C> <C>
Page
Summary..................................................................................... Part A A-i
Summary of Essential Information............................................................ A-v
Independent Auditors' Report................................................................ A-1
Statement of Financial Condition............................................................ A-2
Schedule of Portfolio Securities............................................................ A-7
The Trust................................................................................... Part B 1
Portfolio Summary..................................................................... 4
Objectives and Securities Selection................................................... 8
The Units............................................................................. 9
Estimated Annual Income and Current Return Per Unit................................... 9
Tax Status.................................................................................. 10
Public Offering of Units.................................................................... 12
Public Offering Price................................................................. 12
Public Distribution................................................................... 13
Secondary Market...................................................................... 13
Profit of Sponsor..................................................................... 14
Volume Discount....................................................................... 14
Employee Discount..................................................................... 14
Exchange Option............................................................................. 15
Tax Consequences...................................................................... 16
Reinvestment Program........................................................................ 16
Expenses and Charges........................................................................ 16
Fees.................................................................................. 16
Other Charges......................................................................... 16
Rights of Unit Holders...................................................................... 17
Certificates.......................................................................... 17
Distribution of Interest and Principal................................................ 17
Reports and Records................................................................... 18
Redemption............................................................................ 19
Sponsor..................................................................................... 20
Limitations on Liability.............................................................. 20
Responsibility........................................................................ 20
Resignation........................................................................... 21
Trustee..................................................................................... 21
Limitations on Liability.............................................................. 21
Responsibility........................................................................ 22
Resignation........................................................................... 22
Evaluator................................................................................... 22
Limitations on Liability.............................................................. 22
Responsibility........................................................................ 22
Resignation........................................................................... 22
Amendment and Termination of the Indenture.................................................. 22
Amendment............................................................................. 22
Termination........................................................................... 23
Legal Opinions.............................................................................. 23
Auditors.................................................................................... 23
Bond Ratings................................................................................ 24
</TABLE>
<PAGE>
<PAGE>
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This Prospectus does not contain all of the information with respect to the
investment company set forth in its registration statement and exhibits relating
thereto which have been filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the Investment Company Act
of 1940, and to which reference is hereby made.
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any
representations with respect to this investment company not contained herein;
and any information or representations not contained herein must not be relied
upon as having been authorized. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
- --------------------------------------------------------------------------------
SUMMARY
THE PRUDENTIAL UNIT TRUSTS, High Yield Tax-Exempt Series 4 (the ``Trust'')
is a unit investment trust composed of ``high yield/high risk'' interest-bearing
municipal bonds and contracts and funds for the purchase thereof (the
``Securities''), the interest on which bonds, in the opinion of bond counsel to
the issuing governmental authorities is, under existing law, excludable from
gross income for Federal income tax purposes (except in certain instances
depending on the Unit Holder). Securities accounting for at least 80% of the
aggregate offering side evaluation of the Securities were, as of the Date of
Deposit, rated BB or better by Standard & Poor's Corporation or Ba or better by
Moody's Investors Service, or BB or better by Fitch Investors Service, Inc. if
not rated by Standard & Poor's Corporation or Moody's Investors Service, or, if
unrated, had comparable credit characteristics, in the opinion of The Prudential
Investment Corporation, the Sponsor's affiliate. The remaining Securities were,
as of the Date of Deposit, rated B by Standard & Poor's Corporation, or Moody's
Investors Service, or Fitch Investors Service, Inc. if not rated by Standard &
Poor's Corporation or Moody's Investors Service, or, if unrated, had comparable
credit characteristics in the opinion of The Prudential Investment Corporation.
Securities having a rating below BBB or Baa generally reflect a higher degree of
risk than investment grade bonds indicating that the issuers of such Securities
may not be able to meet their obligations to make timely payments of principal
and interest. (See Part B--``Bond Rating'') The ratings of the Securities set
forth in Part A--``Schedule of Portfolio Securities'' may have declined due to,
among other factors, a decline in creditworthiness of the issuer of said
Securities.
THE OBJECTIVE of the Trust is to provide a high level of interest income
which, in the opinion of counsel is (with certain exceptions) exempt from
Federal income taxes under existing law, through investment in a fixed portfolio
consisting primarily of long-term state, municipal and public authority debt
obligations many of which are rated below ``investment grade'' or are unrated.
The Trust may be an appropriate investment vehicle for investors who desire to
participate in the ``high yield/high risk'' municipal bond market with
commensurate higher risk, through a portfolio which offers greater
diversification than they might be able to achieve if acquired individually.
There is, of course, no guarantee that the Trust's objective will be achieved
since the payment of interest is dependent on the continuing ability of the
respective issuers of the Securities to meet their obligations. Similarly, the
preservation of principal is not assured. (See ``High Yield/High Risk
Obligations--Risk Factors.'')
MONTHLY DISTRIBUTIONS of principal, premium, if any, and interest received
by the Trust will be made on or shortly after the twenty-fifth day of each month
to Unit Holders of record as of the preceding Record Date. Alternatively, Unit
Holders may elect to have their monthly distributions reinvested in the
Reinvestment Program of the Sponsor, as, if and when such program is available
to Unit Holders. (See Part B--``Reinvestment Program.'')
PUBLIC OFFERING PRICE of the Units of the Trust is equal to the aggregate
bid side evaluation of the underlying securities in the Trust's portfolio
divided by the number of Units outstanding in the Trust, plus a sales charge as
set forth in the table herein. (See Part B--``Public Offering of Units--Volume
Discount.'') Units are offered at the Public Offering Price plus accrued
interest. (See Part B--``Public Offering of Units.'')
ESTIMATED CURRENT RETURN per Unit is computed by dividing the Estimated Net
Annual Income per Unit by the Public Offering Price per Unit. The Estimated Net
Annual Income per Unit will vary with changes in the fees and expenses of the
Trustee, Sponsor and Evaluator and with the exchange, redemption, sale or
maturity of underlying Securities. The Public Offering Price will also vary with
fluctuations in the bid side evaluation of the underlying Securities. Therefore,
it can be expected that the Estimated Current Return will fluctuate in the
future. (See Part B-- ``The Trust--Estimated Annual Income and Current Return
per Unit.'')
A-i
<PAGE>
<PAGE>
THE SPONSOR, although not obligated to do so, presently intends to maintain
a secondary market for the Units of the Trust based on the aggregate bid side
evaluation of the underlying Securities, as more fully described under Part B--
``Public Offering of Units--Secondary Market.'' If such a market is not
maintained, a Unit Holder may be able to dispose of Units only through
redemption at prices that are also based on the aggregate bid side evaluation of
the underlying Securities. (See Part B--``Rights of Unit
Holders--Redemption--Computation of Redemption Price per Unit.'')
HIGH YIELD/HIGH RISK OBLIGATIONS--RISK FACTORS. An investment in Units of
the Trust should be made with an understanding of the risks which an investment
in fixed-income long-term high yield/high risk debt obligations may entail,
including the risk that the value of the Units will decline with increases in
interest rates and that yields fluctuate over time. Securities such as those
included in the Trust rated BBB or lower are subject to greater market
fluctuations and risk of loss of income and principal than are investments in
lower yielding fixed-income securities. Such fluctuations will occur and may
affect the value of the Portfolio and the Units. Securities which are rated
lower than BBB or Baa are speculative as such ratings indicate a quality of less
than investment grade. Bonds rated BBB or Baa, although investment grade, have
speculative characteristics. Bonds which are rated BB, B and CCC by Standard &
Poor's are regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. Bonds which are rated Ba by Moody's are
judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
Bonds which are rated B by Moody's generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small. Bonds
rated Caa by Moody's are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal and interest.
Credit ratings evaluate the safety of principal and interest payments, not
market value risk of high yield high risk bonds. (See Part B--``Bond Ratings.'')
Buyers of Units should be aware that many of the Securities are unrated by any
national rating organization and that the market for unrated bonds is not as
broad as the market for rated bonds, which may result in the achievement of the
Trust's investment objective being more dependent on the Sponsor's credit
analysis than is the case for higher quality Securities and less flexibility in
the disposal, if required, of such nonrated bonds. There is no established
retail secondary market for many of these Securities. The Sponsor does not
anticipate that these Securities could be sold other than to institutional
investors. However, the Sponsor expects that there is a readily available market
among institutional investors for these Securities in the event it is necessary
to sell such Securities to meet redemptions of Units. The limited market for
these Securities may affect the choice of the particular Security to be sold for
purposes of redemption and the amount actually realized by the Trust upon such
sale. Such sale may result in a loss to the Trust. In a fixed portfolio,
redemption of a majority of Units will likely result in a complete and
unanticipated liquidation of a Trust before maturity, resulting in unanticipated
losses to investors. Investors should carefully review the objective of the
Trust and consider their ability to assume the risks involved before making an
investment in the Trust. See Part B--``Bond Ratings'' for a comparison of
investment grade and speculative ratings issued by Standard & Poor's, Moody's
and Fitch.
Lower rated and comparable nonrated securities tend to offer higher yields
than higher rated securities with the same maturities because the
creditworthiness of the issuers of lower rated securities is not as strong as
that of other issuers. Since investors generally perceive that there are greater
risks associated with the lower rated securities in the Trust, the yields and
prices of such securities tend to fluctuate more than higher rated securities
with changes in the perceived quality of the credit of their issuers. In
addition, the market value of high yield/high risk fixed-income securities may
fluctuate more than the market value of higher rated securities since high
yield/high risk fixed-income securities tend to reflect short-term credit
developments of both the issuer and the general market to a greater extent than
higher rated securities, which fluctuate primarily in response to the general
level of interest rates, assuming that there has been no change in the
fundamental quality of such securities. Lower rated securities generally involve
greater risks of loss of income and principal than higher rated securities. The
issuers of lower rated securities may possess less creditworthy characteristics
than the issuers of higher rated securities. High yield/high risk bonds are
directly and adversely affected by variables such as interest rates,
unemployment rates, inflation rates and real growth in the economy. In the
opinion of the Sponsor's affiliate, although the historic default rate for the
types of high yield/high risk securities in the Trust is low and, therefore,
such securities are appropriate for inclusion in an unmanaged portfolio for long
term investors willing and able to assume a degree of credit risk, such
securities nevertheless involve greater risk of loss of income and principal
than higher rated securities. Therefore, investors should consider carefully the
relative risks associated with investment in
A-ii
<PAGE>
<PAGE>
securities which carry lower ratings. In addition, the Portfolio of the Trust
may also include Restricted Securities (not to exceed 10%*) which have been
privately placed and which are viewed as illiquid Securities since Restricted
Securities cannot be offered for sale publicly by the Trustee unless and until
such securities are registered with the Securities and Exchange Commission or
are otherwise determined to be exempt from such registration. (See Part B--``The
Trust.'')
The prices of high yield/high risk bonds rated B, BB and BBB have been found
to be more sensitive to adverse economic changes than high yield/high risk bonds
rated A or better. An economic downturn could severely disrupt the market for
high yield/high risk bonds and adversely affect the value of outstanding bonds
and the ability of issuers to repay principal and interest as well as result in
a higher incidence of high yield/high risk bond defaults. A high yield/high risk
bond's value will decrease in a rising interest rate environment, as will the
value of the Trust's assets. High yield/high risk bonds rated BBB and/or lower
are likely to be disproportionately negatively affected by a downturn in the
economy or a substantial period of rising interest rates due to the fact that
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service their principal and interest payment
obligations, and to obtain additional financing, and more likely to suffer rapid
credit status changes than bonds rated A or better. In addition, periods of
economic uncertainty can be expected to result in increased volatility of market
prices of high yield/high risk bonds, and a Trust's asset value. As a result,
dispositions of high yield/high risk bonds by the Trustee may be required with a
resulting diminution in the size of the Trust and a reduction in the net annual
income. In the event the issuer of a security defaults on the payments of income
or principal the Trust may incur expenses in exercising its rights to payments
on the defaulted security. Because amounts (if any) recovered by the Trustee may
not be reflected in the value of the Units until actually received by the Trust,
it is possible that a Unit Holder would bear a portion of the cost of recovery
without receiving the benefit of any portion of the payment recovered if the
Units are sold before the recovery is received or the sale price does not
adequately reflect the potential recovery. Unit Holders should assess the risks
relating to an investment in high yield/high risk debt in determining whether to
invest in Units.
Note: ``Tax Status'' in Part B is amended so that the paragraph on page B-11
discussing the taxation of Social Security benefits is updated as follows:
Persons in receipt of Social Security benefits should be aware that a
portion of such Social Security benefits may be includible in gross income.
For a taxpayer whose modified adjusted gross income plus one-half of his or
her Social Security benefits does not exceed $34,000 ($44,000 for married
taxpayers filing a joint return), the includible amount is the lesser of (i)
one-half of the Social Security benefits or (ii) one-half of the amount by
which the sum of ``modified adjusted gross income'' plus one-half of the
Social Security benefits exceeds $25,000 in the case unmarried taxpayers and
$32,000 in the case of married taxpayers filing a joint return. All other
taxpayers receiving Social Security benefits are required to include up to
85% of their Social Security benefits in income.
Portfolio Summary
Securities
The Portfolio contains 17 issues of Securities of issuers located in 10
states. All of the issues are payable from the income of specific projects or
authorities and are not supported by the issuer's power to levy taxes. Although
income to pay such Securities may be derived from more than one source, the
primary sources of such income and the percentage of issues deriving income from
such sources are as follows: industrial revenue bonds: 4.1%* of the Trust;
health and hospital facilities: 12.3%* of the Trust; airport facilities: 1.6%*
of the Trust; power facilities: 40.0%* of the Trust; pollution control
facilities: 38.1%* of the Trust; miscellaneous: 3.9%* of The Trust. The Trust is
concentrated in pollution control facilities and power facilities Securities.
The Portfolio contains six Securities which were issued with an ``original
issue discount.'' (See Part B--``Tax Status.'')
The Sponsor participated as sole underwriter or manager or member of
underwriting syndicates from which approximately 81.3%* of the Trust was
acquired. None of the Securities in the Trust (not to exceed 10%* as of the Date
of Deposit) are privately placed Restricted Securities and 100%* of the Trust
consists of marketable Securities although the market for certain of the
Securities may be limited to institutional investors.
- ------------
*Percentages computed on the basis of the aggregate bid side evaluation of
the Securities in the Trust on April 22, 1994.
A-iii
<PAGE>
<PAGE>
Portfolio Rating: Standard & Poor's: AA: 30.9%*; A: 8.5%*; BBB: 18.5%*;
Moody's: Baa: 10.3%*; Aaa: 10.2%*; A: 7.7%*; Ba: 1.6%*;
Non-Rated Securities: 12.3%*.
For a description of the meaning of the applicable rating symbols as
published by Standard & Poor's Corporation and Moody's Investors Service, see
Part B--``Bond Ratings.'' It should be emphasized, however, that the ratings of
Standard & Poor's and Moody's represent their opinions as to the quality of the
Securities which they undertake to rate, and that these ratings are general and
are not absolute standards of quality.
A-iv
<PAGE>
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
As of April 22, 1994
<TABLE>
<S> <C>
FACE AMOUNT OF SECURITIES.......................... $8,295,000.00
NUMBER OF UNITS.................................... 12,560
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
REPRESENTED BY EACH UNIT......................... 1/12,560th
PUBLIC OFFERING PRICE
Aggregate bid side evaluation of Securities in
the Trust...................................... $8,589,004.84
Divided by 12,560 Units.......................... $ 683.84
Plus sales charge of 4.12% of Public Offering
Price (4.297% of net amount invested in
Securities).................................... $ 29.38
-------------
Public Offering Price per Unit(2)................ $ 713.22
Plus accrued interest(3)......................... $ 15.69
-------------
Total........................................ $ 728.91
-------------
-------------
REDEMPTION PRICE AND SPONSOR'S REPURCHASE PRICE PER
UNIT (based on bid side evaluation of underlying
Securities, $29.38 less than Public Offering
Price per Unit) includes accrued interest(3)..... $ 699.53
-------------
-------------
CALCULATION OF ESTIMATED NET ANNUAL INCOME PER UNIT
Estimated Annual Income per Unit................. $ 58.00
Less estimated annual expenses per Unit(5)..... $ (1.40)
-------------
Estimated Net Annual Income per Unit............. $ 56.60
-------------
-------------
DAILY RATE OF INCOME ACCRUAL PER UNIT.............. $ .1572
ESTIMATED CURRENT RETURN (based on Public Offering
Price)(4)(6)..................................... 7.94%
ESTIMATED LONG-TERM RETURN(6)...................... 6.81%
MONTHLY INTEREST DISTRIBUTION
Estimated Net Annual Income per Unit........... $ 56.60
Divided by 12.................................... $ 4.71
RECORD DATE: The tenth day of each month
DISTRIBUTION DATE: The twenty-fifth day of each month
MINIMUM PRINCIPAL DISTRIBUTION: No distribution need be made from
the Principal Account if the balance therein is less than $1
per Unit.
TRUSTEE'S ANNUAL FEE: $1.05 per $1,000 face amount of underlying
Securities.
SPONSOR'S ANNUAL PORTFOLIO SUPERVISION FEE: Maximum $.05 per
$1,000 face amount of underlying Securities.
PREMIUM AND DISCOUNT ISSUES IN PORTFOLIO:
Face amount of Securities with bid side evaluation:
over par--72.2%; at par--0%; at a discount from par--27.8%
EVALUATOR'S FEE FOR EACH EVALUATION: Maximum of $14.
EVALUATION TIME: 3:30 P.M. New York time
MANDATORY TERMINATION DATE: February 1, 2036
MINIMUM VALUE OF TRUST: The Trust may be terminated if the value
of the Trust is less than $8,000,000.
DATE OF DEPOSIT: February 11, 1986(1)
</TABLE>
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(1) The Date of Deposit is the date on which the Indenture was signed and
the deposit of Securities with the Trustee was made.
(2) This Public Offering Price is computed as of April 22, 1994 and may vary
from the Public Offering Price on the date of this Prospectus or any subsequent
date.
(3) Figure shown represents interest accrued to the expected date of
settlement (normally five business days after purchase).
(4) The estimated current return is increased for transactions entitled to a
reduced sales charge. (See Part B--``The Trust--Estimated Annual Income and
Current Return per Unit.'')
(5) Includes Trustee's fee, Sponsor's Portfolio supervision fee, estimated
expenses and Evaluator's fees.
(6) The Estimated Current Return is calculated by dividing the Estimated Net
Annual Income per Unit by the Public Offering Price per Unit. The Estimated Net
Annual Income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator and with the principal prepayment, redemption,
maturity, exchange or sale of Securities while the Public Offering Price will
vary with changes in the offering price of the underlying Securities; therefore,
there is no assurance that the present Estimated Current Return indicated above
will be realized in the future. The Estimated Long-Term Return is calculated
using a formula which 1) takes into consideration, and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Securities in the Trust and 2) takes into account the
expenses and sales charge associated with each Unit. Since the market values and
estimated retirements of the Securities and the expenses of the Trust will
change, there is no assurance that the present Estimated Long-Term Return as
indicated above will be realized in the future. The Estimated Current Return and
Estimated Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net Annual
Interest Income and Public Offering Price as of the above indicated calculation
date of the Summary of Essential Information.
A-v
<PAGE>
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
We have audited the statement of financial condition and schedule of
portfolio securities of the Prudential Unit Trusts High Yield Tax-Exempt
Series 4 as of January 31, 1994, and the related statements of operations and
changes in net assets for each of the three years in the period then ended.
These financial statements are the responsibility of the Trustee (see
Footnote (a)(1)). 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 the securities owned as of January
31, 1994 as shown in the statement of financial condition and schedule of
portfolio securities by correspondence with United States Trust Company of
New York, the Trustee. An audit also includes assessing the accounting
principles used and the significant estimates made by the Trustee, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Prudential Unit Trusts
High Yield Tax-Exempt Series 4 as of January 31, 1994, and the results of its
operations and the changes in its net assets for each of the three years in
the period then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
May 9, 1994
New York, New York
</AUDIT-REPORT>
A-1
<PAGE>
STATEMENT OF FINANCIAL CONDITION
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
January 31, 1994
<TABLE>
TRUST PROPERTY
<S> <C>
Investments in municipal bonds at market value (cost $7,930,514)
(Note (a) and Schedule of Portfolio Securities Notes (4) and (5)) $8,890,797
Accrued interest receivable 125,476
Cash 69,298
Total $9,085,571
NET ASSETS
Balance applicable to 12,560 units of fractional
undivided interest outstanding (Note (c))
Capital, plus net unrealized market
appreciation of $960,283 $8,890,797
Undistributed principal and net investment
income (Note (b)) 194,774
Net assets $9,085,571
Net asset value per unit ($9,085,571 divided by 12,560 units) $ 723.37
</TABLE>
See notes to financial statements
A-2
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
<CAPTION>
For the years ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Investment income -- interest $772,152 $1,027,496 $1,130,749
Less: Expenses
Trust fees and expenses 18,633 21,496 37,790
Total expenses 18,633 21,496 37,790
Investment income -- net 753,519 1,006,000 1,092,959
Net gain on investments:
Realized gain (loss) on securities sold or
redeemed 30,015 552,482 (925,572)
Net unrealized market appreciation 17,251 107,107 1,160,176
Net gain on investments 47,266 659,589 234,604
Net increase in net assets resulting from
operations $800,785 $1,665,589 $1,327,563
</TABLE>
See notes to financial statements
A-3
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
<CAPTION>
For the years ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Operations:
Investment income -- net $ 753,519 $ 1,006,000 $ 1,092,959
Realized gain (loss) on securities sold
or redeemed 30,015 552,482 (925,572)
Net unrealized market appreciation 17,251 107,107 1,160,176
Net increase in net assets resulting
from operations 800,785 1,665,589 1,327,563
Less: Distributions to Unit Holders
Principal (1,185,287) (1,994,903) (505,370)
Investment income -- net (826,071) (973,670) (1,111,337)
Total distributions (2,011,358) (2,968,573) (1,616,707)
Less: Capital Share Transactions
Redemption of 598 Units and
2,210 Units, respectively - (501,983) (2,025,556)
Accrued interest on redemption - (9,125) (36,558)
Total capital share transactions - (511,108) (2,062,114)
Net decrease in net assets (1,210,573) (1,814,092) (2,351,258)
Net assets:
Beginning of year 10,296,144 12,110,236 14,461,494
End of year (including undistributed
principal and net investment income of
$194,774, $267,278 and $246,280,
respectively) $ 9,085,571 $10,296,144 $12,110,236
</TABLE>
See notes to financial statements
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
January 31, 1994
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of
the Trust and is responsible for establishing and maintaining a
system of internal controls directly related to, and designed to
provide reasonable assurance as to the integrity and reliability of,
financial reporting of the Trust. The Trustee is also responsible
for all estimates and accruals reflected in the Trust's financial
statements. The Evaluator determines the price for each underlying
Security included in the Trust's Schedule of Portfolio Securities on
the basis set forth in Part B of this Prospectus, "Public Offering
of Units -- Public Offering Price". Under the Securities Act of
1933 ("the Act"), as amended, the Sponsor is deemed to be an issuer
of the Trust Units. As such, the Sponsor has the responsibility of
an issuer under the Act with respect to financial statements of each
Trust included in the Registration Statement under the Act and
amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations on the last day of
trading during the period, except that value on the date of deposit
(February 11, 1986) represents the cost of investments to the Trust
based on the offering side evaluations as of the date of deposit.
(3) Income Taxes
The Trust is not an association taxable as a corporation for Federal
income tax purposes; accordingly, no provision is required for such
taxes.
(4) Expenses
The Trust pays annual Trust fees, including estimated expenses,
Evaluator's fees and an annual Sponsor's portfolio supervision fee,
and may incur additional charges as explained under "Expenses and
Charges -- Fees" and "-- Other Charges" in Part B of this
Prospectus.
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
(b) DISTRIBUTIONS
Effective July 2, 1993, interest received by the Trust is distributed to
the Unit Holders on or shortly after the twenty-fifth day of each month
after deducting applicable expenses. Receipts other than interest are
distributed as explained in "Rights of Unit Holders -- Distribution of
Interest and Principal" in Part B of this Prospectus.
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial public
offering price as of the date of deposit (February 11, 1986) exclusive
of accrued interest.
<TABLE>
A reconciliation of the original cost of units to investors to the net
amount applicable to investors as of January 31, 1994 follows:
<S> <C>
Original cost to investors $ 20,332,244
Less: Gross underwriting commissions (sales charge) (1,016,600)
Net cost to investors 19,315,644
Cost of securities sold or redeemed (11,385,130)
Net unrealized market appreciation 960,283
Net amount applicable to investors $ 8,890,797
</TABLE>
(d) OTHER INFORMATION
<TABLE>
Selected data for a unit of the Trust during each year:
<CAPTION>
For the years ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Principal distributions during year $ 94.37 $157.80 $ 35.63
Net investment income distributions
during year $ 65.77 $ 76.34 $ 83.70
Net asset value at end of year $723.37 $819.76 $922.47
Trust units outstanding at end of year 12,560 12,560 13,128
</TABLE>
A-6
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
January 31, 1994
<CAPTION>
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F1> Amount Rate Date Redemptions<F3> Redemptions<F2> Value<F4><F5>
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1. Alabama State Docks Depart-
ment, Coal Revenue Refund-
ing Bonds, Series 1985.
<F7> Baa<F6> $ 300,000 10.000% 10/01/05 10/01/94@100 10/01/95@103 $ 339,435
2. Pope County, Arkansas,
Pollution Control Revenue
Bonds, Series 1985 (Arkan-
sas Power & Light Company
Project). BBB 875,000 11.000 12/01/15 NONE 12/01/95@102 1,002,601
3. Los Angeles Regional Air-
ports Improvement Corpora-
tion, California, Facili-
ties Sublease Revenue
Bonds, Issue of 1985,
Western Air Lines, Inc.,
(Los Angeles International
Airport). Baa2<F6> 125,000 11.250 11/01/25 11/01/06@100 11/01/95@103 143,346
4. Burke County, Georgia,
Development Authority,
Pollution Control Revenue
Bonds, First Series 1985,
(Georgia Power Company
Plant -- Vogtle Project). BBB+ 205,000 10.125 06/01/15 NONE 06/01/95@102 225,135
5. Burke County, Georgia,
Development Authority,
Pollution Control Revenue
Bonds, Third Series 1985,
(Georgia Power Company
Plant -- Vogtle Project). BBB+ 100,000 10.500 11/01/15 NONE 11/01/95@102 113,261
6. Monroe County, Georgia,
Development Authority,
Pollution Control Revenue
Bonds, First Series 1985,
(Georgia Power Company
Plant -- Scherer Project). A3<F6> 305,000 10.500 09/01/15 NONE 09/01/95@102 342,402
7. Burke County, Georgia,
Development Authority,
Pollution Control Revenue
Bonds, Series 1985, (Ogle-
thorpe Power Corporation
-- Vogtle Project). AA- 795,000 7.500 01/01/17 01/01/16@100 01/01/95@100 822,404
8. Municipal Electric Author-
ity of Georgia, Power Rev-
enue Bonds, Series K. <F7> AA- 840,000 6.500 01/01/07 01/01/05@100 01/01/95@102 886,603
9. City of Vincennes, Indi-
ana, Economic Development
First Mortgage Revenue
Bonds, Series 1985 (Lodge
of the Wabash, Ltd. Proj-
ect). NR 495,000 12.500 11/01/15 11/01/94@100 11/01/95@103 470,250
10. County of Monroe, Michi-
gan, Pollution Control
Revenue Bonds, (Detroit
Edison Company Project),
Series A 1985. Baa1<F6> 500,000 10.500 12/01/16 NONE 12/01/95@103 577,695
</TABLE>
A-7
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES 4
(CONTINUED)
January 31, 1994
<CAPTION>
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F1> Amount Rate Date Redemptions<F3> Redemptions<F2> Value<F4><F5>
<C> <S> <C> <C> <C> <C> <C> <C> <C>
11. North Carolina Municipal
Power Agency Number One,
Catawba Electric Revenue
Bonds, Series 1985 B. A $ 775,000 6.000% 01/01/20 01/01/18@100 01/01/96@100 $ 791,074
12. North Carolina Eastern
Municipal Power Agency,
Power System Revenue
Bonds, Series 1985 A.
<F7> Aaa<F6> 860,000 7.500 01/01/19 07/01/18@100 01/01/95@100 894,701
13. County of Montgomery,
Ohio, First Mortgage
Health Facility Revenue
Refunding Bonds, Series
1985 (Friendship Village
of Dayton Project). <F7> NR 510,000 11.750 11/01/15 11/01/00@100 11/01/95@103 598,924
14. Bucks County, Pennsyl-
vania, Industrial Develop-
ment Authority Revenue
Bonds, Hechinger Company
Project. BBB 325,000 11.375 11/15/04 11/15/95@100 11/15/94@103 356,099
15. Montgomery County, Penn-
sylvania, Industrial
Development Authority,
Pollution Control Revenue
Bonds, 1985 Series A
(Philadelphia Electric
Company Project). BBB 250,000 10.500 05/15/15 NONE 05/15/95@103 277,915
16. Intermountain Power
Agency, Utah, Power Supply
Revenue Refunding Bonds,
1985 Series H. AA 200,000 6.000 07/01/21 07/01/20@100 07/01/95@100 202,696
17. Intermountain Power
Agency, Utah, Power Supply
Revenue Refunding Bonds,
1985 Series I. AA 835,000 6.000 07/01/21 07/01/20@100 07/01/95@100 846,256
$8,295,000 $8,890,797
</TABLE>
A-8
<PAGE>
[FN]
<F1> All ratings are provided by Standard & Poor's Corporation, unless
otherwise indicated. A brief description of applicable Security
ratings is given under "Bond Ratings" in Part B of this
Prospectus.
<F2> There is shown under this heading the date on which each issue of
Securities is redeemable by the operation of optional call
provisions and the redemption price for that date; unless
otherwise indicated, each issue continues to be redeemable at
declining prices thereafter but not below par. Securities listed
as non-callable, as well as Securities listed as callable, may
also be redeemable at par under certain circumstances from special
redemption payments.
<F3> There is shown under this heading the date on which an issue of
Securities is subject to scheduled sinking fund redemption at a
redemption price of par.
<F4> The market value of the Securities as of January 31, 1994 was
determined by the Evaluator on the basis of bid side evaluations
for the Securities at such date.
<F5> At January 31, 1994, the net unrealized market appreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $1,031,389
Gross unrealized market depreciation (71,106)
Net unrealized market appreciation $ 960,283
The aggregate cost of the Securities for Federal income tax
purposes was $7,930,514 at January 31, 1994.
<F6> Moody's Investors Service, Inc. rating.
<F7> The Issuers of Portfolio Nos. 1, 8, 12 and 13 have indicated that
they will refund these Securities on their respective optional
redemption dates.
A-9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
<PAGE>
<PAGE>
PROSPECTUS--PART B: MAIL CODE C
Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
PRUDENTIAL UNIT TRUSTS
HIGH YIELD TAX-EXEMPT SERIES
THE TRUST
Each Trust is one of a series of similar but separate unit investment trusts
created by the Sponsor under the following name: Prudential Unit Trusts, High
Yield Tax-Exempt Series (the ``Trust''). Each Trust was created under the laws
of the State of New York by deposit, on the Date of Deposit, of certain
securities and contracts and funds for the purchase of such securities
(collectively, the ``Securities'') at prices equal to the evaluation of such
Securities on the offering side of the market as determined by the Evaluator as
of the Date of Deposit, pursuant to a Trust Indenture and Agreement and a
related Reference Trust Agreement dated the Date of Deposit (collectively, the
``Indenture''),* among Prudential Securities Incorporated (the ``Sponsor''),
United States Trust Company of New York (the ``Trustee'') and Kenny Information
Systems, Inc. (the ``Evaluator''). The Sponsor, Prudential Securities
Incorporated, is a wholly-owned, indirect subsidiary of The Prudential Insurance
Company of America. Each Trust has a mandatory termination date set forth under
Part A--``Summary of Essential Information'', but may be terminated
substantially prior thereto upon the occurrence of certain events, including a
reduction in the value of the Trust below the value set forth under Part
A--``Summary of Essential Information''.
The initial public offering of Units in each Trust has been completed. The
units offered hereby are issued and outstanding Units which have been acquired
by the Sponsor either by purchase from the Trustee of Units tendered for
redemption or in the secondary market.
The objective of each Trust is the providing of a high level of interest
income which, in the opinion of counsel is (with certain exceptions) exempt from
all Federal income taxes under existing law, through investment in a fixed
portfolio of Securities (the ``Portfolio'') consisting primarily of long-term
state, municipal and public authority (``Issuers'') debt obligations, many of
which are rated below BBB by Standard & Poor's Corporation (``Standard &
Poor's''), Baa by Moody's Investors Service (``Moody's'') or BBB by Fitch
Investors Service, Inc. (``Fitch'') or are unrated. Securities accounting for at
least 80% of the aggregate offering side evaluation of the Securities in the
Portfolio (70% in the case of High Yield Tax-Exempt Series 8) were, as of the
Date of Deposit, rated BB or better by Standard & Poor's, Ba or better by
Moody's or BB or better by Fitch, or, if unrated, had comparable credit
characteristics, in the opinion of The Prudential Investment Corporation, the
Sponsor's affiliate. (See ``Objectives and Securities Selection'' and ``Bond
Ratings.'') The remaining Securities in each Trust were, as of the Date of
Deposit, rated B by Standard & Poor's, Moody's or Fitch, or, if unrated, had
credit characteristics comparable to B as determined by the Sponsor's affiliate.
Thereafter, the ratings of such Securities may have declined. See ``Schedule of
Portfolio Securities'' for the ratings of the bonds on a recent date. Securities
such as those included in each Trust rated BBB or lower are subject to greater
market fluctuations and risk of loss of income and principal than are
investments in lower yielding securities. In particular, Securities which rely
primarily on private firms or other nongovernmental entities for payment of debt
service such as industrial revenue bonds often sold to finance, among other
things, nursing homes and pollution control facilities, have greater risk of
default, and consequently risk of loss of interest and principal than bonds
relying on governmental entities for payment of debt service. Securities which
are rated lower than BBB or Baa are speculative as such ratings indicate a
quality of less than investment grade. Bonds rated BBB or Baa, although
investment grade, have speculative characteristics. Bonds which are rated BB, B
and CCC, CC and C by Standard & Poor's are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Bonds rated D by Standard & Poor's are in payment default (i.e. when interest or
principal payments are not made on the date due). Bonds which are rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class. Bonds which are rated B by Moody's generally lack characteristics of
a desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small. Bonds rated Caa by Moody's are of poor standing. Such issues may be in
default or
- ------------
*Reference is hereby made to said Indenture and any statements contained herein
are qualified in their entirety by the provisions of said Indenture.
1
<PAGE>
<PAGE>
there may be present elements of danger with respect to principal and interest.
Bonds which are rated Ca by Moody's represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. Credit ratings evaluate the safety of
principal and interest payments, not market value risk of high yield/high risk
bonds. (See ``Bond Ratings''.) Buyers of Units should be aware that many of the
Securities are unrated by any national rating organization and that the market
for unrated bonds is not as broad as the market for rated bonds, which may
result in the achievement of the Trust's investment objective being more
dependent on the Sponsor's credit analysis than is the case for high quality
Securities and less flexibility in the disposal, if required, of such non rated
bonds. There is no established retail secondary market for many of these
Securities. The Sponsor does not anticipate that these Securities could be sold
other than to institutional investors. However, the Sponsor expects that there
is a readily available market among institutional investors for these Securities
in the event it is necessary to sell such Securities to meet redemptions of
Units. The limited market for these Securities may affect the choice of the
particular Security to be sold for purposes of redemption and the amount
actually realized by each Trust upon such sale. Such sale may result in a loss
to the Trust. In a fixed portfolio, redemption of a majority of Units will
likely result in a complete and unanticipated liquidation of a Trust before
maturity, resulting in unanticipated losses to investors. There is, of course,
no guarantee that the Trust's objectives will be achieved. Subsequent to the
Date of Deposit, a Security in a Trust may cease to be rated or the rating
assigned may be reduced below the minimum requirements of such Trust for the
acquisition of Securities. Although such events may be considered by the Sponsor
in determining whether to direct the Trustee to dispose of the Security (see
``Sponsor-Responsibility''), such events do not automatically require the
elimination of such Security from the Portfolio. An investment in a Trust should
be made with an understanding of the risks which an investment in fixed rate
long-term debt obligations may entail, including the risk that the value of the
Units will decline with increases in interest rates. Investors should carefully
review the objective of the Trusts and consider their ability to assume the
risks involved before making an investment in a Trust. See ``Bond Ratings'' for
a comparison of investment grade and speculative ratings issued by Standard &
Poor's, Moody's and Fitch.
A portion of the Portfolio of a Trust (see Part A--``Portfolio Summary''),
principally industrial revenue bonds (the restricted securities not to exceed
10% of the aggregate offering side evaluation as of the Date of Deposit), may be
acquired on a private placement basis (``Restricted Securities''). Restricted
securities are acquired on a private placement basis and cannot be offered for
sale publicly by the Trustee unless and until such Securities are registered
with the Securities and Exchange Commission or are otherwise determined to be
exempt from such registration. Among the additional factors which will be
considered by the Evaluator in determining the value of any Restricted
Securities are (i) an estimate of the existence and extent of any available
market therefor, (ii) the estimated period of time during which such Securities
will not be freely marketable, (iii) the estimated expenses of qualifying such
Securities for public sale, if required, (iv) estimated underwriting
commissions, if any, and (v) any credit or other factors affecting the issuer or
the guarantor of such Securities. If the Trustee is required to sell Restricted
Securities in the open market, there is no assurance that the price realized on
the sale of such Securities would not be adversely affected by the absence of an
established secondary market for certain of such Securities. The secondary
market, if any, would probably be limited to institutional investors and any
such sale could result in a loss to a Trust.
Trading of ``high yield/high risk'' bonds takes place primarily in
over-the-counter markets consisting of groups of dealer firms that are typically
major securities firms. Because the ``high yield/high risk'' bond market is a
dealer market, rather than an auction market, no single obtainable price for a
given bond prevails at any given time. Prices are determined by negotiation
between traders. Not all dealers maintain markets in all ``high yield/high
risk'' bonds. Therefore, since there are fewer traders in these bonds than there
are in bonds rated A or better, the bid-offer spread is usually greater for
``high yield/high risk'' bonds than it is for bonds rated A or better. (See
``Public Offering of Units--Public Offering Price''.)
``High yield/high risk'' bonds offer higher returns than other bonds as
compensation for holding an obligation of an issuer which is viewed as less
creditworthy. While all security investments have some degree of risk, these
types of securities are subject to greater market fluctuations and risk of loss
of income and principal than are investments in lower yielding securities due to
their speculative nature. However, each Trust is designed to reduce the effect
of these risks by diversifying holdings to minimize the portfolio impact of any
single investment. Neither the Sponsor nor the Trustee shall be liable in any
way for any default, failure or defect in any Security.
On the Date of Deposit, the Sponsor deposited with the Trustee the
underlying Securities, or confirmations of contracts for the purchase of such
Securities, at prices equal to the evaluation of such Securities on the offering
side of the market as determined by the Evaluator as of the Date of Deposit.
(See Part A--``Schedule of Portfolio Securities''.) Confirmations of
2
<PAGE>
<PAGE>
contracts for the purchase of such Securities were delivered to the Trustee
together with an irrevocable letter or letters of credit issued by a commercial
bank or banks in an amount necessary to complete the purchase of such
Securities. The Trust was created simultaneously with the deposit of the
Securities with the Trustee and the execution of the Indenture. The Trustee then
immediately delivered to the Sponsor certificates of beneficial interest (the
``Certificates'') representing the units (the ``Units'') comprising the entire
ownership of the Trust. The Sponsor offered and is offering the Units for sale
to the public. The holders of Units (the ``Unit Holders'' or ``Unit Holder,'' as
the context requires) will have the right to have their Units redeemed at a
price based on the aggregate bid side evaluation of the Securities (the
``Redemption Price'') if they cannot be sold in the secondary market which the
Sponsor, although not obligated to, proposes to maintain.
On a recent date, a Unit of a Trust represented the fractional undivided
interest in the Securities and net income of such Trust set forth under Part
A--``Summary of Essential Information'' in the ratio of 1 Unit for each
approximately $1,000 face amount of Securities initially deposited in such
Trust. If any Units are redeemed by the Trustee, the face amount of Securities
in a Trust will be reduced by an amount allocable to redeemed Units and the
fractional undivided interest in such Trust represented by each unredeemed Unit
will be increased. Units will remain outstanding until redeemed upon tender to
the Trustee by any Unit Holder (which may include the Sponsor) or until the
termination of a Trust pursuant to the Indenture.
On a recent date, certain of the Securities in the Portfolio of a Trust are
valued at prices in excess of prices at which such Securities may be redeemed in
the future. (See Part A--``Schedule of Portfolio Securities'' for information
relating to the particular series described therein.) To the extent that a
Security is redeemed (or sold) at a price which is less than the valuation of
such Security on the date a Unit Holder acquired his Units, the proceeds
distributable to such Unit Holder in respect of such redemption (or sale) will
be less than that portion of the purchase price for such Units which was
attributable to such Security (representing a loss of capital to such Unit
Holder). Such proceeds, however, may be more or less than the valuation of such
Security at the time of such redemption (or sale). Similarly, on a recent date,
certain of the Securities in a Trust may be valued at a price in excess of their
face value at maturity (i.e., such Securities were valued at a premium above
par). (See Part A--``Schedule of Portfolio Securities'' for information relating
to the particular series described therein.) The proceeds distributable to a
Unit Holder upon the maturity of a Security which was valued at a premium on the
date he acquired his Units will be less than that portion of the purchase price
for such Units which was attributable to such Security (representing a loss of
capital to such Unit Holder).
The Portfolio of a Trust may consist of Securities, the current market value
of some of which were below face value on the date of this Prospectus. A primary
reason for the market value of such Securities being less than face value at
maturity is that the interest coupons of such Securities are at lower rates than
the current market interest rate for comparably rated debt securities, even
though at the time of the issuance of such Securities the interest coupons
thereon represented then prevailing interest rates on comparably rated debt
securities then newly issued. The current yields (coupon interest income as a
percentage of market price, ignoring any original issue discount) of such
Securities are lower than the current yields (computed on the same basis) of
comparably rated debt securities of similar type newly issued at currently
prevailing interest rates. Securities selling at market discounts tend to
increase in market value as they approach maturity when the principal amount is
payable. Investors should be aware that any gain attributable to market discount
will be taxable and will not be realized until maturity, redemption or sale of
the Securities or Units. (See ``Tax Status''.) The current yield of such
discounted securities carrying the same coupon interest rate and which are
otherwise comparable tends to be higher for securities with longer periods of
maturity than it is for those with shorter periods to maturity because the
market value of such securities with a longer period to maturity tends to be
less than the market value of such a bond with a shorter period to maturity. If
currently prevailing interest rates for newly issued and otherwise comparable
securities increase, the market discount of previously issued bonds will become
deeper and if such currently prevailing interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Market discount
attributable to interest rate changes does not indicate a lack of market
confidence in the issue.
Portfolio Summary
The Portfolio consists of Securities issued by or on behalf of states,
counties, municipalities or other political subdivisions of the United States or
issued by or on behalf of territorial possessions of the United States, or
municipalities or other political subdivisions thereof. The interest on such
Securities is, with certain exceptions, or upon their delivery will be, in each
instance, in the opinion of bond counsel to the Issuer of such Securities or by
ruling of the Internal Revenue Service, exempt from Federal income taxes under
existing law (but may be subject to state and local taxation). Capital gains, if
any, will be subject to Federal income tax and, generally, to state and/or local
income taxes.
3
<PAGE>
<PAGE>
The Portfolio of a Trust may contain Securities that are general obligations
of governmental entities and/or bonds that are guaranteed by governmental
entities. (See Part A--``Portfolio Summary'' for information relating to the
particular series described therein.) General obligation bonds are general
obligations of a state or local government secured by the power of such Issuer
to levy taxes, and are backed by the pledge of such governmental entity. The
ability of the Issuer of a general obligation bond to meet its obligation
depends largely upon its economic condition. Many Issuers rely upon ad valorem
real property taxes as a source of revenue. Proposals in the form of state
legislative or voter initiatives to limit ad valorem real property taxes have
been introduced in various states. It is not presently possible to predict the
impact of these or future proposals, if adopted, on states, local governments or
school districts or on their abilities to make future payments on their
outstanding debt obligations. The remaining issues are payable from the income
of specific projects or authorities and are not supported by the Issuer's power
to levy taxes. In the portfolios for certain of the Trusts, this latter group of
issues contains Securities that are also supported by the moral obligations of
governmental entities. In the event of a deficiency in the debt service reserve
funds of moral obligation Securities, the governmental entity having the moral
commitment may (but is not legally obligated to) satisfy such deficiency.
However, in the event of a deficiency in the debt service reserve funds of
Securities not backed by such moral obligations, no such moral commitment of a
governmental entity exists.
The Portfolio of a Trust may contain Securities which are Industrial Revenue
Bonds (``IRBs''). (See Part A--``Portfolio Summary'' for information pertaining
to the particular series therein.) IRBs are tax-exempt securities issued by
state, municipal or public authorities to finance the costs of acquiring,
constructing or improving various projects, including nursing homes, pollution
control facilities, environmental improvement facilities, special airport
facilities and certain industrial development facilities. These projects are
usually operated by corporate entities. IRBs are not general obligations of
governmental entities and are not backed by the taxing power of such entities.
Payment of IRBs is dependent solely upon the creditworthiness of the corporate
operator of the project or corporate guarantor. Issuers are obligated to pay the
principal of any premium then due or interest on the IRBs only to the extent
that funds are available from the unexpended proceeds of the IRBs or receipts or
revenues of the Issuer. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The IRBs constituting the Securities in a 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 corporate
operator of a particular project have been assigned and pledged to the holders
of the IRBs or a trustee for the benefit of the holders of the IRBs. In certain
cases a mortgage on the underlying project has been assigned to the holders of
the IRBs or a trustee as additional security for the IRBs. In addition, IRBs are
frequently directly guaranteed by the corporate operator of the project or by
another affiliated company.
Interest on the IRBs was generally exempt, with certain exceptions, from
Federal income tax pursuant to Section 103 of the Internal Revenue Code of 1954,
as amended (the ``1954 Code'') when the IRBs held in a Trust were issued,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. In the opinion of bond counsel to the Issuers, the interest on the
IRBs constituting the Securities was exempt (except in certain instances
depending on the Unit Holders) from Federal income tax under existing law but
might be subject to state or local taxation when the IRBs held in a Trust were
issued. Enactment of the Internal Revenue Code of 1986 (the ``1986 Code'' or the
``Code'') did not adversely affect the exemption from Federal income taxation of
interest on such IRBs. (See ``Tax Status''.)
The Portfolio of a Trust may contain zero coupon bonds or one or more other
Securities which were issued with an ``original issue discount''. ``Original
issue discount'' bonds are acquired at prices which represent a discount from
face amount, principally because such bonds bear interest at rates which are
lower than currently-prevailing markets rates. (See Part A--``Portfolio
Summary'' for information relating to the particular series described therein.)
A discounted 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 income
than a comparable bond bearing interest at current market rates. Zero coupon
bonds do not provide for the payment of any current interest and provide for
payment at maturity at face value unless sooner sold or redeemed. The market
value of zero coupon bonds is subject to greater fluctuation in response to
changes in interest rates than is the market value of bonds which pay interest
currently. 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.
The Portfolio of a Trust may contain Securities of housing authorities which
are payable from revenues derived by state housing finance agencies or municipal
housing authorities from repayments on mortgage and home improvement loans made
by such agencies. (See Part A--``Portfolio Summary'' for information relating to
the particular series described therein.) Since housing authority obligations,
which are not general obligations of a particular state, are generally supported
to a large
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extent by Federal housing subsidy programs, the failure by a housing authority
to meet the qualifications required for coverage under the Federal programs, or
any legal or administrative determination that the coverage of such Federal
programs is not available to a housing authority, could result in a decrease or
elimination of subsidies available for payment of principal and interest on such
housing authority's obligations. Weaknesses in Federal housing subsidy programs
and their administration may result in a decrease of subsidies available for
payment of principal and interest on housing authority bonds. Repayment of
housing loans and home improvement loans in a timely manner is dependent on
factors affecting the housing market generally and upon the underwriting and
management ability of the individual agencies (i.e., the initial soundness of
the loan and the effective use of available remedies should there be a default
in loan payments). Economic developments, including failure or inability to
increase rentals, fluctuations in interest rates and increasing construction and
operating costs may also have an adverse impact on revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations.
The Portfolio of a Trust may contain Securities which are subject to the
requirements of Section 103A of the 1954 Code, or Section 143 of the 1986 Code.
(See Part A--``Portfolio Summary'' for information relating to the particular
series described therein.) Sections 103A and 143 provide that obligations issued
to provide single family housing will be exempt from Federal income taxation if
all of the proceeds of the issue (exclusive of issuance costs and a reasonably
required reserve) are used to make or acquire loans which meet requirements
including certain requirements which must be satisfied after issuance. If
proceeds of the issue are not used to acquire such loans, the Issuer may be
required to redeem all or a portion of such issue from such uncommitted proceeds
to maintain the issue's tax exemption. Bond counsel to each such Issuer has
issued an opinion that the interest on such Securities was exempt from Federal
income tax at the time the Securities were issued. The failure of the issuers of
such Securities to meet certain ongoing compliance requirements imposed by
Sections 103A and 143 could render the interest on such Securities subject to
Federal income taxation, possibly from the date of their issuance. Repayment of
housing loans and home improvement loans in a timely manner is dependent upon
factors affecting the housing market generally and upon the underwriting and
management ability of the individual agencies (i.e., the initial soundness of
the loan and the effective use of available remedies should there be a default
in loan payments). If interest on such Securities in a Trust is deemed to be
subject to Federal income taxation, the loss of tax-exempt status can be
expected to adversely affect the market value of such Securities. In this event
and under the terms of the Indenture the Sponsor may direct the sale of such
Securities. The sale of such Securities in such circumstances is likely to
result in a loss to a Trust.
The Portfolio of a Trust may include certain housing authority obligations
whose tax exemption depends upon qualification under Section 103(b)(4)(A) of the
1954 Code, or Section 142 of the 1986 Code, and appropriate Treasury
Regulations. Both Code Sections require that minimum percentages of the units in
each rental housing project financed by tax-exempt debt are to be continuously
occupied by or held available for occupancy by low or moderate income tenants
for specified periods. Department of the Treasury Regulations issued under
Section 103(b)(4)(A) of the 1954 Code provide that in order to prevent possible
retroactive Federal income taxation of interest on such Securities certain
conditions must be met. The regulations provide, however, that such retroactive
taxation will not occur if the Issuer corrects any non-compliance occurring
after the issuance of the Securities within a reasonable period after such
non-compliance is first discovered or should have been discovered by the Issuer.
Similar regulations are expected to be issued under 1986 Code Section 142. If
the interest on any of the Securities in a Trust that are housing securities
should ultimately be deemed to be taxable, the Sponsor may instruct the Trustee
to sell such Securities and, since they would be sold as taxable securities, it
is expected that such Securities would have to be sold at a substantial discount
from current market price of a comparable tax-exempt security.
The Portfolio of a Trust may contain housing Securities which contain
provisions which require the Issuer to redeem such obligations at par from
unused proceeds of the issue within a stated period which typically does not
exceed three years from the date of issuance of such Securities. (See Part
A--``Portfolio Summary'' for information relating to the particular series
therein.) In periods in which interest rates decline there may be increased
redemptions of housing securities pursuant to such redemption provisions. Such
an increase in redemptions may occur because conventional mortgage loans may
have become available at interest rates equal to or less than the interest rates
charged on the mortgage loans previously made available from the proceeds of
such housing securities. Therefore, some Issuers of such housing securities may
have experienced insufficient demand to complete mortgage loan originations for
all of the money made available from such securities. In addition, mortgage
loans made with the proceeds of housing securities, in general, do not carry
prepayment penalties and therefore certain mortgage loans may be prepaid earlier
than their maturity dates. If the Issuers of such housing securities are unable
to or choose not to reloan these monies, they will generally redeem housing
securities in an amount approximately equal to such prepayments. The Sponsor is
unable to predict at this time when such redemptions will be made at a high
rate. The disposition of such Securities may result in a loss to a Trust. A Unit
Holder will have a taxable event upon the redemption of a Security.
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The Portfolio of a Trust may contain Securities in the hospital facilities
category that are payable from revenues derived from hospitals and health care
facilities which, generally, were constructed or are being constructed from the
proceeds of such Securities. (See Part A--``Portfolio Summary'' for information
relating to the particular series therein.) The continuing availability of
sufficient revenues is dependent upon several factors affecting all such
facilities generally, including, among other factors, the ability of the
facilities to provide the services required by patients, changes in Medicare and
Medicaid reimbursement regulations, the success of efforts by the states and the
Federal government to limit the cost of health care, changes in contracts
between health care institutions and public or private insurers, the timely
completion of the construction of projects and achieving and maintaining
projected rates of utilization. Additionally, a major portion of hospital
revenues typically is derived from Federal or state programs such as Medicare
and Medicaid and from Blue Cross and other insurers. The future solvency of the
Medicare trust fund is periodically subject to question. Changes in the
compensation and reimbursement formulas of these governmental programs or in the
rates of insurers may reduce revenues available for the payment of principal of,
or interest on, hospital revenue bonds. Governmental legislation or regulations
and other factors, such as the inability to obtain sufficient malpractice
insurance, may also adversely impact upon the revenues or costs of hospitals and
may also adversely affect the ratings of hospital revenue bonds held in a Trust.
Actions by the Federal government with respect to Medicare and by the Federal
and State governments with respect to Medicaid, reducing the total amount of
funds available for either or both of these programs or changing the
reimbursement regulations, or their interpretations, could adversely affect the
amount of reimbursement available to hospital facilities. A number of additional
legislative proposals concerning health care are typically under review by the
United States Congress at any given time. These proposals span a wide range of
topics, including cost control, national health insurance, incentives for
competition in the provision of health care services, tax incentives and
penalties related to health care insurance premiums and promotion of prepaid
health care plans. The Sponsor is unable to predict the effect of these
proposals, if enacted, on any of the Securities in the Portfolio of a Trust.
The Portfolio of a Trust may contain Securities in the power and electric
facilities category payable from revenues derived from power facilities, which
generally include revenues from the sale of electricity generated and
distributed by power agencies using hydro-electric, nuclear, fossil or other
power sources. (See Part A--``Portfolio Summary'' for information relating to
the particular series therein.) The ability of the Issuers of such Bonds to make
payments of principal of, or interest on, such obligations is dependent, among
other things, upon the continuing ability of such Issuers to derive sufficient
revenues from their operations to meet debt service requirements. General
problems of the power and electric utility industry include difficulty in
financing large construction programs during an inflationary period,
restrictions on operations and increased cost and delays attributable to
environmental considerations, uncertain technical and cost factors relating to
the construction and operation of nuclear power generating facilities, the
difficulty of the capital markets in absorbing utility debt and equity
securities, the availability of fuel for electric generation at reasonable
prices, the steady rise in fuel costs and the costs associated with conversion
to alternate fuel sources such as coal. Some of the Issuers of Securities in the
Portfolio may own or operate nuclear facilities for electric generation.
Additional considerations in the case of such Issuers include the problems
associated with the use and disposal of radioactive materials and wastes, and
other problems associated with construction, licensing, regulation and operation
of such facilities. In addition, Federal, state or municipal governmental
authorities may from time to time impose additional regulations or take other
governmental action which might cause delays in the licensing, construction or
operation of nuclear power plants, or the suspension of operation of such plants
which have been or are being financed by proceeds of certain of the Securities
held in the Portfolio of a Trust. Such delays, suspensions, or other action may
affect the payment of interest on, or the repayment of the principal amount of,
such Securities. Current and future environmental legislation, regulations or
other governmental actions may increase the cost of utility service. The Sponsor
is unable to predict the ultimate form that any such future legislation,
regulations or other governmental action may take, or the resulting impact on
the Securities in the Portfolio of a Trust.
The Portfolio of a Trust may contain Securities which are in the water and
sewer facilities category. (See Part A-- ``Portfolio Summary'' for information
relating to the particular series therein.) Bonds in the water and sewer
facilities category include securities issued to finance public water and sewer
projects for water management and supply and sewer control securities issued by
public issuers on behalf of private corporations for such projects. These bonds
are payable from the income of specific facilities or from payments made by such
private corporations to the state authorities issuing such bonds. The ability of
state and local water and sewer authorities to meet their obligations may be
affected by failure of municipalities to utilize fully the facilities
constructed by these authorities, economic or population decline and resulting
decline in revenue from user charges, rising construction and maintenance costs
and delays in construction of facilities, impact of environmental requirements,
the difficulty of obtaining or discovering new supplies of fresh water, the
effect of conservation programs and the impact of ``no growth'' zoning
ordinances.
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The Portfolio of a Trust may contain Securities which are in the revenue
obligations of universities and schools category. (See Part A--``Portfolio
Summary'' for information relating to the particular series therein.) The
ability of universities and schools to meet their obligations is dependent upon
various factors, including the revenues, costs and enrollment levels of the
institutions. In addition, their ability may be affected by declines in
enrollment and tuition revenue, the availability of Federal, state and alumni
financial support, the method and validity, under state constitutions, of
present systems of financing public education, fluctuations in interest rates
and construction costs, increased maintenance and energy costs, failure or
inability to raise tuition or room charges and adverse results of endowment fund
investments. Studies undertaken by public and private groups differ with respect
to statistics and projections for postsecondary enrollment at educational
institutions in the 1990s.
The Portfolio of a Trust may contain Securities in the pollution control
facilities category. (See Part A--``Portfolio Summary'' for information relating
to the particular series therein.) Bonds in the pollution control facilities
category include securities issued to finance public water, sewage or solid
waste treatment facilities and securities issued by a public Issuer on behalf of
a private corporation to provide facilities for the treatment of air, water and
solid waste pollution. These Securities are payable from the income of specific
facilities, state authorities or from payments made by such private
corporations.
The Portfolio of a Trust may contain Securities which are in the
redevelopment facilities category. (See Part A-- ``Portfolio Summary'' for
information relating to the particular series described therein.) The purpose of
redevelopment is to revitalize deteriorated and/or underdeveloped areas within a
community. As new construction progresses, property values normally increase
significantly and the ultimate result is a proportionate increase in ad valorem
property tax revenues. However, if, due to various economic factors, the
assessed valuation is reduced, such reduction may result in insufficient tax
revenues, which could in turn impair the ability of the issuer to make payments
of principal and/or interest on the bonds when due. A reduction in property tax
rates or delinquencies in the payment of property taxes could have a similar
adverse effect.
Each Trust consists of the Securities listed under Part A--``Schedule of
Portfolio Securities'', as long as such Securities may continue to be held from
time to time in such Trust (including certain securities deposited in such Trust
in exchange or substitution for any Securities pursuant to the Indenture)
together with accrued and undistributed interest thereon and undistributed and
uninvested cash realized from the disposition of Securities. BECAUSE CERTAIN OF
THE SECURITIES FROM TIME TO TIME MAY BE REDEEMED OR WILL MATURE IN ACCORDANCE
WITH THEIR TERMS OR MAY BE SOLD UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN, NO
ASSURANCE CAN BE GIVEN THAT A TRUST WILL RETAIN FOR ANY LENGTH OF TIME ITS
PRESENT SIZE AND COMPOSITION. THE TRUSTEE HAS NOT PARTICIPATED IN THE SELECTION
OF SECURITIES FOR THE TRUSTS, AND NEITHER THE SPONSOR, NOR THE SPONSOR'S
AFFILIATE, NOR THE TRUSTEE WILL BE LIABLE IN ANY WAY FOR ANY DEFAULT, FAILURE OR
DEFECT IN ANY SECURITIES.
To the best knowledge of the Sponsor, there was no material litigation
pending as of the Date of Deposit in respect of any Securities which might
reasonably be expected to have a material adverse effect upon a Trust. At any
time after the Date of Deposit, litigation may be initiated on a variety of
grounds with respect to Securities in a Trust. Such litigation may affect the
validity of such Securities or the tax-free nature of the interest thereon.
Although the outcome of litigation of such nature cannot be predicted, opinions
of bond counsel are delivered with respect to each Security on the date of
issuance to the effect that such Security has been validly issued and that the
interest thereon is exempt from Federal income tax under then existing law. If
legal proceedings are instituted after the Date of Deposit seeking, among other
things, to restrain or enjoin the payment of any of the Securities or attacking
their validity or the authorization or existence of the Issuer, the Sponsor may,
in accordance with the Indenture, direct the Trustee to sell such Securities and
distribute the proceeds of such sale to Unit Holders. In addition, other factors
may arise from time to time which potentially may impair the ability of Issuers
to meet obligations undertaken with respect to Securities (e.g., state
legislative proposals or voter initiatives to limit ad valorem real property
taxes).
Under the Federal Bankruptcy Code, political subdivisions, public agencies
or other instrumentalities of any state (including municipalities) which are
insolvent or unable to meet their debts as they mature and which meet certain
other conditions may file a petition in Federal bankruptcy court. Generally, the
filing of such a petition operates as a stay of any proceeding to enforce a
claim against the debtor. The Federal Bankruptcy Code also requires the debtor
to file a plan for the adjustment of its debts which may modify or alter the
rights of creditors. Under such a plan the Federal bankruptcy court may permit
the debtor to issue certificates of indebtedness which have priority over
existing creditors and which could be secured. Any plan of adjustment confirmed
by the court must be approved by the requisite majorities of creditors of
different
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classes. If confirmed by the bankruptcy court, the plan would be binding upon
all creditors affected by it. The Sponsor is unable to predict the effect these
bankruptcy provisions may have on a Trust.
Most of the Securities are subject to redemption prior to their stated
maturity dates pursuant to optional refunding redemption and/or sinking fund
provisions. In general, optional refunding redemption provisions are more likely
to be exercised when the evaluation of a Security is at a premium over par than
when it is at a discount from par. Generally, the evaluation of Securities will
be at a premium over par when market interest rates fall below the coupon rate
on such Securities. In addition, certain Securities may be redeemed in whole or
in part other than by operation of the stated redemption or sinking fund
provisions under certain unusual or extraordinary circumstances specified in the
instruments setting forth the terms and provisions of such Securities. The
redemption of a Security at par may result in a loss to a Trust. See Part
A--``Schedule of Portfolio Securities'' for those Securities in the Portfolio of
a Trust which as of the date of such schedule had a bid side evaluation in
excess of par. The percentage of the face amount of Securities in the Portfolio
which were evaluated in excess of par on a recent date is set forth under Part
A--``Summary of Essential Information''. The Sponsor is unable to predict at
this time when such redemptions will occur and the extent of such redemptions.
Certain Securities in the Portfolio may be subject to sinking fund provisions
designed to redeem a significant portion of an issue of Securities gradually
over the life of such issue. Particular bonds of an issue of Securities to be
redeemed are generally chosen by lot. The ``Schedule of Portfolio Securities''
contains a listing of the optional refunding and sinking fund redemption
provisions, if any, with respect to each of the Securities. The disposition of
such Securities as a result of such redemptions may result in a loss to the Unit
Holder to the extent the evaluation of such Security, at the time of that
purchase of a Unit by a Unit Holder, is higher than the price at which such
Security is redeemed. A Unit Holder will have a taxable event upon the
redemption of such Security. (See ``Tax Status''.)
The Sponsor, although not obligated to do so, presently intends to maintain
a secondary market for the Units at prices based on the bid side evaluation of
the Securities in a Trust. (See ``Public Offering of Units--Secondary Market''.)
Holders of Units in a Trust, in the absence of a secondary market for Units,
will have the right to have one or more of their Units redeemed by the Trustee
at a price equal to the Redemption Price thereof (see ``Rights of Unit
Holders--Redemption''), based on the aggregate bid side evaluation for the
Securities in the Portfolio. DUE TO FLUCTUATIONS IN THE MARKET PRICE OF THE
SECURITIES IN THE PORTFOLIO AND THE FACT THAT THE PUBLIC OFFERING PRICE INCLUDES
A SALES CHARGE, AMONG OTHER FACTORS, THE AMOUNT REALIZED BY A UNIT HOLDER UPON
THE REDEMPTION OR SALE OF UNITS MAY BE LESS THAN THE PRICE PAID FOR SUCH UNITS
BY THE UNIT HOLDER. (SEE ``RIGHTS OF UNIT HOLDERS--REDEMPTION--COMPUTATION OF
REDEMPTION PRICE PER UNIT''.)
Objectives and Securities Selection
The objective of each Trust is to provide a high level of interest income
which, in the opinion of counsel is with certain exceptions, depending upon the
Unit Holder, exempt from all Federal income taxes under existing law, through
investment in a fixed portfolio consisting primarily of long-term state,
municipal and public authority debt obligations, many of which are rated below
BBB by Standard & Poor's, Baa by Moody's or BBB by Fitch or are unrated. There
is, of course, no guarantee that a Trust's objective will be achieved.
The Prudential Insurance Company of America, the indirect parent of the
Sponsor, or a division or subsidiary thereof (collectively, ``Prudential'') has
selected and negotiated for the Securities purchased by the Sponsor. In
selecting Securities for a Trust, Prudential considered factors established by
the Sponsor including, among others, the following: (a) for Securities in the
Portfolio accounting for at least 80% of the aggregate offering price (70% in
the case of High Yield Tax Exempt Series 8), a Standard & Poor's, Moody's or
Fitch rating of the Securities of BB, Ba or BB, respectively, (see ``Bond
Ratings''), or, if unrated, in the opinion of the Sponsor's affiliate,
comparable credit characteristics and for the remainder of the Securities in the
Portfolio a Standard & Poor's, Moody's or Fitch rating of the Securities of B
or, if unrated, the existence of comparable credit characteristics in the
opinion of the Sponsor's affiliate, (b) maturities or mandatory payment dates
consistent with the life of a Trust, (c) yields of the Securities relative to
other securities of comparable quality and maturity, and (d) diversification of
the Securities as to purpose and location of Issuer. While the ratings assigned
by Standard & Poor's or Moody's or Fitch were taken into consideration in
selecting Securities for each Trust, Prudential also performed its own
independent investment analysis as to the Securities, including, among other
things, consideration of the financial history and condition, the prospects and
the management of the Issuers. In performing this analysis, Prudential relied on
information from various sources, including, to the extent available, reports by
the rating services, research, analysis and appraisals of brokers and dealers
and the views of other responsible parties regarding economic developments and
the creditworthiness of particular Issuers.
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The Trust may contain Securities which were acquired through the Sponsor's
participation as sole underwriter or manager or as a member of the underwriting
syndicate for such Securities or which were privately placed with Prudential or
its affiliates. (See Part A--``Portfolio Summary''.) An underwriter typically
purchases securities, such as the Securities in each Trust, from the Issuer on a
negotiated or competitive bid basis in order to market such securities to
investors at a profit.
The yields on Securities of the type deposited in each Trust are dependent
on a variety of factors, including general money market conditions, interest
rates, general conditions of the municipal bond market, size of a particular
offering, the maturity of the obligation and rating of the issue. The ratings
represent the opinions of the rating organizations as to the quality of the
securities which they undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality. Consequently,
securities with the same maturity, coupon and rating may have different yields,
while securities of the same maturity and coupon with different ratings may have
the same yield.
The Units
On a recent date each Unit in a Trust represented a fractional undivided
interest in the principal and net income of such Trust as is set forth in Part
A--``Summary of Essential Information''. If any Units are redeemed after such
date by the Trustee, the face amount of Securities in each such Trust will be
reduced by an amount allocable to redeemed Units and the fractional undivided
interest in each such Trust represented by each unredeemed Unit will be
increased. Units will remain outstanding until redeemed upon tender to the
Trustee by any Unit Holder, which may include the Sponsor, or until the
termination of the Trust. (See ``Amendment and Termination of the
Indenture--Termination''.)
Estimated Annual Income and Current Return Per Unit
On a recent date the Estimated Net Annual Income per Unit was the amount set
forth above under Part A--``Summary of Essential Information''. This figure is
computed by dividing the aggregate net annual interest income (i.e., less
estimated annual fees and expenses of the Sponsor, the Trustee and the
Evaluator) ignoring any original issue discount by the number of Units
outstanding. The Estimated Current Return is computed by dividing the Estimated
Net Annual Income per Unit by the Public Offering Price per Unit as set forth
under ``Summary of Essential Information''. Thereafter, the estimated net annual
interest income per Unit will change whenever Securities mature, are redeemed or
are sold, default, or as the expenses of a Trust change. The fees of the
Trustee, the Sponsor and the Evaluator are subject to change without the consent
of Unit Holders. (See ``Expenses and Charges''.)
Interest on the Securities, less estimated expenses of a Trust, is expected
to accrue at the daily rate shown under Part A--``Summary of Essential
Information''. This rate will change as Securities mature, are redeemed or are
sold, default or as the expenses of a Trust change.
Units of a Trust are offered on a ``dollar price'' basis (as distinguished
from a ``yield price'' basis, often used in offerings of tax exempt bonds, which
involves a computation of yield to maturity or an earlier redemption date and
takes into account both the interest payable on the bonds and the amortization
of premium or discount to the specified date). Because Units of a Trust are
offered on a dollar price basis, the rate of return on an investment in Units is
expressed in terms of Estimated Current Return, computed by dividing the
Estimated Net Annual Income per Unit by the Public Offering Price.
On a recent date, the Estimated Current Return was set forth under Part
A--``Summary of Essential Information''. As the Public Offering Price will vary
due to fluctuations in the prices of the Securities and the net annual interest
income per Unit may change as Securities mature, are redeemed or are sold,
default, or as the expenses of a Trust change, it may be expected that such
events will be reflected in a change in the Estimated Current Return. In
addition, the Estimated Current Return per Unit will be higher for purchasers
entitled to a reduced sales charge.
TAX STATUS
In the opinion of bond counsel to the issuing governmental authorities,
interest income on the Securities comprising the Portfolio of each Trust is
(except in certain instances depending upon the Unit Holder, as described below)
exempt from Federal income tax under the provisions of the Internal Revenue Code
as in effect at the date of issuance. In the case of Securities issued at a time
when the 1954 Code was in effect, redesignation of the Code as the Internal
Revenue Code of 1986 (the ``1986 Code'' or the ``Code'') has not adversely
affected the exemption from Federal income tax of interest income on such
Securities. Gain (exclusive of any earned original issue discount) realized on
sale or redemption of the Securities or on sale of a Unit is, however,
includable in gross income for Federal income tax purposes and for state and
local income tax purposes generally. (It should be noted in this connection that
such gain does not include any amounts received in respect of
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accrued interest.) Such gain may be capital gain or ordinary income and if
capital gain may be long or short-term depending upon the facts and
circumstances. Securities selling at market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for taxable gain on their maturity, redemption or sale.
In the opinion of Messrs. Cahill Gordon & Reindel, special counsel for the
Sponsor, under existing law:
None of the Trusts is an association taxable as a corporation for Federal
income tax purposes, and interest on an underlying Security which is exempt from
Federal income tax under the Code when received by a Trust will retain its
status as tax exempt interest for Federal income tax purposes to the Unit
Holders.
Each Unit holder will be considered the owner of a pro rata portion of a
Trust's assets under Sections 671-678 of the Code. Each Unit Holder will be
considered to have received his pro rata share of interest derived from such
Trust assets when it is received by the Trust and each Unit Holder will have a
taxable event when an underlying Security is disposed of (whether by sale,
exchange, redemption, or payment at maturity) or when the Unit Holder redeems or
sells his Units. The total tax cost of each Unit to a Unit Holder is allocated
among each of the underlying Securities (in accordance with the proportion of a
Trust's assets comprised by each Security) in order to determine his per Unit
tax cost for each Security and the tax cost reduction requirements of the Code
relating to amortization of bond premium will apply separately to the per Unit
tax cost of each Security. Therefore, under some circumstances a Unit Holder may
realize taxable gains when his Units are sold or redeemed for an amount equal to
or less than his original cost.
When a contract to acquire an underlying Security is settled after the Unit
Holder's settlement date for a Unit, the Unit Holder's proportionate share of
the interest accrued on the underlying Security on the Security settlement date
will exceed the portion of the purchase price that was allocable to interest
accrued on the Unit settlement date. A Unit Holder will not be subject to
Federal income tax on his proportionate share of the interest which accrues
during the period between the Unit settlement date and the Security settlement
date when such interest is received by a Trust or when it is distributed to him.
Under the personal income tax laws of the State and City of New York, the
income of each Trust will be treated as the income of the Unit Holders and any
interest on the underlying Securities which is exempt from tax under these laws
when received by a Trust will retain its status as tax-exempt interest to Unit
Holders.
If the proceeds received by a Trust upon the sale or redemption of an
underlying Security exceed a Unit Holder's adjusted tax cost allocable to the
Security disposed of, that Unit Holder will realize a taxable gain to the extent
of such excess. Conversely, if the proceeds received by a Trust upon the sale or
redemption of an underlying Security are less than a Unit Holder's adjusted tax
cost allocable to the Security disposed of, that Unit Holder will realize a loss
for tax purposes to the extent of such difference. Any gain recognized on a sale
or exchange of a Unit Holder's pro rata interest in a Security, and not
constituting a realization of accrued ``market discount,'' and any loss will be
a capital gain or loss, except in the case of a dealer or financial institution.
Gain realized on the disposition of the interest of a Unit Holder in a market
discount Security is treated as ordinary income to the extent the gain does not
exceed the accrued market discount. A Unit Holder has an interest in a market
discount Security in a case in which (i) the Unit Holder purchased a Unit after
April 30, 1993, and (ii) the tax cost for the Unit Holder's pro rata interest in
the Security is less than the stated redemption price thereof at maturity (or
the issue price plus original issue discount accrued up to the acquisition date,
in the case of an original issue discount Security). Any capital gain or loss
arising from the disposition of a Unit Holder's pro rata interest in a Security
will be a long-term capital gain or loss if the Unit Holder has held his or her
Units and the Trust has held the Security for more than one year. Under the
Code, net capital gain (i.e., the excess of net long-term capital gain over net
short-term capital loss) of individuals, estates and trusts is subject to a
maximum nominal tax rate of 28%. Such net capital gain may, however, result in a
disallowance of itemized deductions and/or affect a personal exemption
phase-out.
Opinions relating to the validity of the underlying Securities and the
exemption of interest thereon from Federal income tax are rendered by bond
counsels to the issuing governmental authorities. It is the view of the
Sponsor's affiliate that interest on the Securities will not be a tax preference
item unless otherwise indicated on the ``Schedule of Portfolio Securities'' as
Securities the interest on which is, in the opinion of bond counsel, treated as
a tax preference item for alternative minimum tax purposes. See ``Schedule of
Portfolio Securities''. Neither the Sponsor nor its counsel have made any review
of proceedings relating to the issuance of underlying Securities or the bases
for bond counsels' opinions or the view of the Sponsor's affiliate. The Sponsor
and its counsel are, however, aware of nothing which would indicate to the
contrary.
Furthermore, exemption of interest on a Security from regular income tax
requires that the issuer of the Security (or other user of the Security
proceeds) meet certain ongoing compliance requirements. Failure to meet these
requirements could
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result in loss of the exemption and such loss of exemption could apply
retroactively from the date of issuance. A Security may provide that if a loss
of exemption is determined to have occurred, the Security is immediately due and
payable, and, in the case of a secured Security, that the security can be
reached if the Security is not then paid. If such a loss of exemption were to
occur and the Security did not contain such an acceleration clause, or if the
acceleration did not in fact result in payment of the Security, the affected
Security would likely be sold as a taxable bond. Sale of a Security as a taxable
bond would likely result in a realization of proceeds less than the cost of the
Security.
In the case of certain of the underlying Securities comprising the
Portfolio, the opinions of bond counsel indicate that although interest on such
underlying Securities is generally exempt from Federal income tax, such
underlying Securities are ``industrial development bonds'' under the 1954 Code
or ``private activity bonds'' under the 1986 Code as those terms are defined in
the relevant Code provisions, and interest on such underlying Securities will
not be exempt from Federal income tax for any period during which such
underlying Securities are held by a ``substantial user'' of the facilities
financed by the proceeds of such underlying Securities (or a ``related person''
to such a ``substantial user''). In the opinion of Messrs. Cahill Gordon &
Reindel, interest attributable to such underlying Securities (although not
subject to Federal income tax to the Trust), if received by a Trust for the
account of a Unit Holder who is such a ``substantial user'' or ``related
person,'' will be taxable (i.e., not tax exempt) to the same extent as if such
underlying Securities were held by the Unit Holder directly as owner. No
investigation as to the users or of the facilities financed by the underlying
Securities has been made by the Sponsor or its counsel. Investors should consult
their tax counsel for advice with respect to the effect of these provisions on
their particular tax situation.
Investors who are or may become recipients of Social Security benefits
should be aware that a portion of such Social Security benefits may be
includible in gross income. For 1993, the includible amount is the lesser of (i)
one-half of the Social Security benefits or (ii) one-half of the amount by which
the sum of ``modified adjusted gross income'' plus one-half of the Social
Security benefits exceeds a base amount. The base amount is (a) $25,000 for an
unmarried taxpayer, (b) $32,000 for married taxpayers filing a joint return, and
(c) zero for married taxpayers not living apart who file separate returns. For
1994 and subsequent taxable years, two threshold amounts apply. The 1993 rule
continues to apply to a taxpayer whose modified adjusted gross income plus
one-half of his or her Social Security benefits does not exceed $34,000 ($44,000
for married taxpayers filing a joint return). Taxpayers with modified adjusted
gross income in excess of the $34,000 threshold ($44,000 for married taxpayers
filing a joint return) are, however, required to include up to 85% of their
Social Security benefits in gross income.
Modified adjusted gross income is gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income, plus
tax exempt interest on municipal obligations including interest on the
Securities. To the extent that Social Security benefits are includible in gross
income they will be treated as any other item of gross income and therefore may
be taxable.
Investors should also consult their tax counsel for advice with respect to
the effect, if any, on the tax cost of Units to a Unit Holder in cases in which
a contract to acquire a Security is settled after the settlement date for such
Units and the Unit Holder's proportionate share of the interest accrued on the
underlying Security on the Security settlement date will exceed the portion of
the purchase price allocable to interest accrued on the Unit settlement date. In
such cases, the Unit Holder may have an adjustment to his tax basis in his Units
for interest accruing on such Securities during the interval between purchase of
Units and delivery of Securities.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME TAX
PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER ANY OTHER FEDERAL TAX
LAW OR UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF THE
SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH OBLIGATIONS. (See
``Rights of Unit Holders--Reports and Records.'')
The Portfolio of a Trust may contain zero coupon bond(s) or one or more
other Securities which were originally issued at a discount (``original issue
discount''). In general, original issue discount can be defined as the
difference between the price at which a Security was issued and its stated
redemption price at maturity. In the case of a Security issued before September
4, 1982, original issue discount is deemed to accrue (be ``earned'') as
tax-exempt interest ratably over the period from the date of issuance of the
Security to the date of maturity and is apportioned among the original holder of
the obligation and subsequent purchasers in accordance with a ratio the
numerator of which is the number of calendar days the obligation was owned by
the holder and the denominator of which is the total number of calendar days
from the date of issuance of the obligation to its date of maturity. Gain or
loss upon the disposition of an original issue discount Security in a Portfolio
is
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measured by the difference between the amount realized upon disposition of and
the amount paid for such obligation. A holder is entitled, however, to exclude
from gross income that portion of such gain attributable to accrued interest and
the ``earned'' portion of original issue discount.
In the case of a Security issued after September 3, 1982, original issue
discount is deemed to accrue on a constant interest method which corresponds, in
general, to the economic accrual of interest (adjusted to eliminate
proportionately on an elapsed-time basis any excess of the amount paid for the
Security by a Trust over the sum of the issue price and the accrued original
issue discount on the acquisition date). A Trust will be entitled to increase
its tax basis in the Security by the amount of original issue discount that is
deemed to accrue while a Trust holds the Security. The difference between the
amount realized on a disposition of the Security (ex currently accrued interest)
and the adjusted tax basis of the Security will give rise to taxable gain or
deductible loss upon a disposition of the Security by a Trust (or a sale or
redemption of Units by a Unit Holder).
The Code provides, generally, that adjustments to taxable income to produce
alternative minimum taxable income for corporations will include 75% of the
amount by which adjusted current earnings (which would include tax-exempt
interest) of the taxpayer exceed the alternative minimum taxable income of the
taxpayer before any amount is added to alternative minimum taxable income
because of this adjustment.
For Federal income tax purposes, Trust expenses allocable to producing or
collecting Trust interest income are not deductible because the interest income
derived by the Trust is exempt from Federal income tax. A state or local income
tax may provide for a deduction for the portion of such Trust expenses
attributable to the production or collection of income derived by the Trust and
taxed by the state or locality. The effect on any such deductions of the Code
rules whereby investment expenses and other miscellaneous deductions are
deductible only to the extent in excess of 2% of adjusted gross income would
depend upon the law of the particular state or locality involved.
The Code also imposes an additional 12/100% ($12.00 per $10,000)
environmental tax on the alternative minimum taxable income (determined without
regard to any alternative tax net operating loss deduction) of a corporation in
excess of $2,000,000 for each taxable year beginning before January 1, 1996. The
environmental tax is an excise tax and is deductible for United States Federal
income tax purposes (but not for purposes of the environmental tax itself).
Although the environmental tax is based on alternative minimum taxable income,
the environmental tax must be paid in addition to any Federal income taxes
payable by the corporation.
From time to time proposals have been introduced before Congress the purpose
of which is to restrict or eliminate the Federal income tax exemption for
interest on securities similar to the Securities in the Trust or to require
treatment of such interest as a ``tax preference'' for alternative minimum tax
purposes, and it can be expected that similar proposals may be introduced in the
future. The Trusts and the Sponsor cannot predict what legislation, if any, in
respect of the tax status of interest on Securities may be proposed by the
Executive Branch or by members of Congress, nor can they predict which
proposals, if any, might be enacted or whether any legislation if enacted would
apply to the Securities in a Trust.
In addition, investors should be aware that no deduction is allowed for
Federal income tax purposes for interest on indebtedness incurred or continued
to purchase or carry Units in a Trust. 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 the Units. All taxpayers are
required to report for informational purposes on their Federal income tax
returns the amount of tax-exempt interest they receive.
Investors should consult their own tax advisors with respect to the
applicability of the foregoing general comments to their own particular
situations and as respects state and local tax consequences of an investment in
Units.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of Units is computed by adding to the aggregate
bid side evaluation of the Securities in a Trust, any money in the Principal
Account other than money required to redeem tendered Units, dividing such sum by
the number of Units outstanding, and then adding a sales charge as calculated
below under ``Volume Discount''. A proportionate share of accrued and
undistributed interest on the Securities to the settlement date for Units
purchased is also added to the Public Offering Price.
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The Public Offering Price on a date subsequent to the date listed on Part
A--``Summary of Essential Information'' may vary from the Public Offering Price
set forth on Part A--``Summary of Essential Information'' in accordance with
fluctuations in the evaluation of the underlying Securities in a Trust.
The aggregate bid prices of the Securities in a Trust, shall be determined
for a Trust by the Evaluator in the following manner: (a) on the basis of
current bid prices for the Securities as obtained from investment dealers or
brokers (including the Sponsor), (b) if bid prices are not available for the
Securities, on the basis of current bid prices for comparable securities, (c) by
determining the value of the Securities on the bid side of the market by
appraisal, or (d) by any combination of the above. Among the additional factors
which were considered in determining the value of any Restricted Securities that
have been privately placed and which are frequently considered by high yield
bond traders in determining high yield bond market values are (i) an estimate of
the existence and extent of any available market therefor, (ii) the estimated
period of time during which such Securities will not be freely marketable, (iii)
the estimated expenses of qualifying such Securities for public sale, if
required, (iv) estimated underwriting commissions, if any, and (v) any credit or
other factors affecting the issuer or the guarantor of such Securities.
Evaluations for purposes of secondary market transactions by the Sponsor and
redemptions by the Trustee will be made by the Evaluator each business day as of
the Evaluation Time, effective for all sales or redemptions made subsequent to
the last preceding determination.
The Public Offering Price of Units in the secondary market, the price at
which the Sponsor repurchases Units in the secondary market, and the Redemption
Price at which Units may be redeemed will be determined on the basis of the bid
side evaluation thereof.
Public Distribution
Unsold Units or Units acquired by the Sponsor in the secondary market
referred to below may be offered to the public by this Prospectus at the then
current Public Offering Price plus accrued interest.
The Sponsor intends to qualify Units for sale in states selected by the
Sponsor, to be sold by the Sponsor and through dealers who are members of the
National Association of Securities Dealers, Inc. Sales to dealers will initially
be made at prices which include a concession of 73% of the sales charge per
Unit, but subject to change from time to time at the discretion of the Sponsor.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units of each Trust and to continuously offer to
repurchase Units from Unit Holders at the applicable Sponsor's Repurchase Price.
In addition, if the secondary market is being maintained by the Sponsor it is
the present intention of the Sponsor to purchase Units tendered for redemption
at such Units' redemption value if it becomes necessary in order to meet
redemption requests to sell Securities that have been privately placed and it is
not feasible to dispose of such Securities within seven days. (See Part A--
``Summary of Essential Information''.) The Sponsor's Repurchase Price is
computed by adding to the aggregate of the bid side evaluation of the Securities
in a Trust, any money in the Principal Account other than money required to
redeem Units, plus accrued interest, deducting therefrom expenses of the
Trustee, Evaluator and Sponsor, and taxes, if any, and then dividing the
resulting sum by the number of Units outstanding, as of the date of such
computation. Any Units repurchased by the Sponsor at the Sponsor's Repurchase
price may be reoffered to the public by the Sponsor at the then current Public
Offering Price, plus accrued interest. Any profit or loss resulting from the
resale of such Units will belong to the Sponsor.
If the supply of Units exceeds demand (or for any other business reason),
the Sponsor may, at any time, occasionally, from time to time, or permanently,
discontinue the repurchase of Units of this series at the Sponsor's Repurchase
Price. In such event, although under no obligation to do so, the Sponsor may, as
a service to Unit Holders, offer to repurchase Units at the Redemption Price, a
price based on the current bid prices for the Securities, plus accrued interest.
Alternatively, Unit Holders may redeem their Units through the Trustee. In no
event will the price offered by the Sponsor for the repurchase of Units be less
than the current Redemption Price for those Units. (See ``Rights of Unit
Holders--Redemption''.)
Profit of Sponsor
The Sponsor receives a sales charge as calculated below under ``Volume
Discount'' in the secondary market. On the sale of Units to dealers, the Sponsor
will retain the difference between the dealer concession and the sales charge.
(See ``Public Distribution''.)
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The Sponsor may have realized a book profit (or a loss) on the deposit of
the Securities in a Trust representing the difference between the cost of the
Securities to the Sponsor and the cost of the Securities to such Trust. The
Sponsor may have realized profits or sustained losses in respect of Securities
which were acquired from the Sponsor or from underwriting syndicates of which it
was a member. An underwriter or underwriting syndicate purchases bonds from the
issuer on a negotiated or competitive bid basis as principal with the motive of
marketing such bonds to investors at a profit. In addition, the Sponsor may
realize profits (or sustain losses) due to daily fluctuations in the prices of
the Securities in a Trust and thus in the Public Offering Price of Units
received by the Sponsor. Cash, if any, received by the Sponsor from the Unit
Holders prior to the settlement date for purchase of Units may be used in the
Sponsor's business to the extent permitted by applicable regulations and may be
of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while maintaining a
secondary market in the Units, in the amount of any difference between the
prices at which the Sponsor buys Units (based on the bid side evaluation of the
Securities in the Trust) and the prices at which the Sponsor resells such Units
(the Public Offering Price at the time of sale includes a sales charge as
calculated below under ``Volume Discount'' in the secondary market) or the
prices at which the Sponsor redeems such Units (based on the bid side evaluation
of the Securities in a Trust), as the case may be.
Volume Discount
Although under no obligation to do so, the Sponsor intends to permit volume
purchasers of Units to purchase Units at a reduced sales charge. The Sponsor may
at any time upon prior notice to Unit Holders change the amount by which the
sales charge is reduced or discontinue the discount altogether.
The sales charge per Unit in the secondary market will be computed by
multiplying the Evaluator's determination of the bid side evaluation of each
Security by a sales charge determined in accordance with the table set forth
below based upon the number of years remaining to the maturity of each such
Security, totalling all such calculations, and dividing this total by the number
of Units then outstanding. In calculating the date of maturity, a Security will
be considered to mature on its stated maturity date unless: (a) the Security has
been called for redemption or funds or securities have been placed in escrow to
redeem it on an earlier call date, in which case the call date will be deemed
the date on which such Security matures; or (b) the Security is subject to a
mandatory tender, in which case the mandatory tender date will be deemed the
date on which such Security matures.
<TABLE>
<CAPTION>
(As Percent of Bid (As Percent of Public
Time to Maturity Side Evaluation) Offering Price)
------------------------------------------ ------------------ ---------------------
<S> <C> <C>
Less than six months...................... % 0 0 %
Six months to 1 year...................... 0.756% 0.75%
Over 1 year to 2 years.................... 1.523% 1.50%
Over 2 years to 4 years................... 2.564% 2.50%
Over 4 years to 8 years................... 3.627% 3.50%
Over 8 years to 15 years.................. 4.712% 4.50%
Over 15 years............................. 5.820% 5.50%
</TABLE>
The sales charge per Unit will be reduced pursuant to the following
graduated scale for sales to any person of at least 100 Units in the secondary
market.
<TABLE>
<CAPTION>
% of
Sales
Number of Units Charge
------------------------------------------ ------
<S> <C>
Less than 100 Units....................... 100%
100-249 Units............................. 90%
250-499 Units............................. 80%
500-749 Units............................. 75%
750-999 Units............................. 70%
1,000 Units or More....................... 65%
</TABLE>
The respective reduced sales charges as shown on the chart above will apply
to all purchases of Units in any fourteen day period by the same person in the
amounts stated herein, and for this purpose, purchases of Units of a Trust will
be aggregated with concurrent purchases of Units of any other trust that may be
offered by the Sponsor.
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Units held in the name of purchaser's spouse, in the name of a purchaser's
child under the age of 21 or in the name of an entity controlled by the
purchaser are deemed for the purposes hereof to be acquired by purchaser. The
reduced sales charges are also applicable to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
Employee Discount
The Sponsor intends to permit employees of Prudential Securities
Incorporated and its subsidiaries and affiliates to purchase Units of a Trust at
a price equal to the bid side evaluation of the Securities in a Trust divided by
the number of Units outstanding plus a reduced sales charge of $5.00 per Unit,
subject to a limit of 5% of the Units of a Trust at the discretion of the
Sponsor.
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of their Units of this series
of the Prudential Unit Trusts for units of one or more of any other series in
the Prudential Securities Incorporated family of unit investment trusts or
certain additional trusts that may from time to time be made available for such
exchange by the Sponsor (collectively referred to as the ``Exchange Trust'').
Such units may be acquired at prices based on reduced sales charges per unit.
The purpose of such reduced sales charges is to permit the Sponsor to pass on to
the Unit Holder who wishes to exchange Units the cost savings resulting from
such exchange of Units. The cost savings result from reductions in time and
expense related to advice, financial planning and operational expenses required
for the Exchange Option. Exchange Trusts may have different investment
objectives; a Unit Holder should read the prospectus for the applicable Exchange
Trust carefully to determine the investment objective prior to the exercise of
this option.
This option will be available provided the Sponsor maintains a secondary
market in both the Units of this series and units of the applicable Exchange
Trust and provided that units of the applicable Exchange Trust are available for
sale and are lawfully qualified for sale in the jurisdiction in which the Unit
Holder resides. While it is the Sponsor's intention to maintain a secondary
market for the units of all such trusts, there is no obligation on its part to
do so. Therefore, there is no assurance that a market for units will in fact
exist on any given date on which a Unit Holder wishes to sell or exchange his
units; thus there is no assurance that the Exchange Option will be available to
any Unit Holder. The Sponsor reserves the right to modify, suspend or terminate
this option at any time without further notice to Unit Holders. In the event the
Exchange Option is not available to a Unit Holder at the time he wishes to
exercise it, the Unit Holder will be immediately notified and no action will be
taken with respect to his units without further instruction from the Unit
Holder.
Exchanges will be effected in whole units only. If the proceeds from the
Units being surrendered are less than the cost of a whole number of units being
acquired, the exchanging Unit Holder will be permitted to add cash in an amount
to round up to the next highest number of whole units. When units held for less
than five months are exchanged for units with a higher regular sales charge, the
sales charge will be the greater of (a) the reduced sales charge or (b) the
difference between the sales charge paid in acquiring the units being exchanged
and the regular sales charge for the quantity of units being acquired,
determined as of the date of the exchange.
To exercise the Exchange Option, a Unit Holder should notify the Sponsor of
his desire to use the proceeds from the sale of his Units to purchase units of
one or more of the Exchange Trusts. If units of the applicable outstanding
series of the Exchange Trust are at that time available for sale, the Unit
Holder may select the series or group of series for which he desires his Units
to be exchanged. The Unit Holder will be provided with a current prospectus or
prospectuses relating to each series in which he indicates interest.
The exchange transaction will operate in a manner essentially identical to
any secondary market transaction, i.e. Units will be repurchased at a price
equal to the aggregate bid side evaluation per Unit of the Securities in the
Portfolio plus accrued interest. Units of the Exchange Trust will be sold to the
Unit Holder at a price equal to the Public Offering Price per unit of the
securities in that portfolio plus accrued interest and the applicable sales
charge of $15 per Unit. Excess proceeds not used to acquire whole units will be
paid to the exchanging Unit Holder. Owners of units of any registered unit
investment trust other than Prudential Unit Trusts which was initially offered
at a minimum applicable sales charge of 3.0% of the public offering price
exclusive of any applicable sales charge discounts may elect to apply the cash
proceeds of sale or redemption of those units directly to acquire available
units of any Exchange Trust at the reduced sales charge of $20 per Unit, subject
to the terms and conditions applicable to the Exchange Option. To exercise this
option, the owner should notify his retail broker. He will be given a prospectus
of each series in which he indicates interest of which units are available. The
Sponsor reserves the right to modify, suspend or terminate the option at any
time without further notice, including the right to increase the
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reduced sales charge applicable to this option (but not in excess of $5 more per
unit than the corresponding fee then charged for a unit of an Exchange Trust
which is being exchanged).
For example, assume that a Unit Holder, who has three units of a Trust with
a 4.25% sales charge and a current price (offering side evaluation plus accrued
interest) of $1,100 per unit, sells his units and exchanges the proceeds for
units of series of an Exchange Trust with a current price of $950 per unit and
an ordinary sales charge of 4.25%. The proceeds from the Unit Holder's units
will aggregate $3,300. Since only whole units of an Exchange Trust may be
purchased under the Exchange Option, the Holder would be able to acquire four
units in the Exchange Trust for a total cost of $3,860 ($3,800 for units and $60
for the $15 per unit sales charge) by adding an extra $560 in cash. Were the
Unit Holder to acquire the same number of units at the same time in the regular
secondary market maintained by the Sponsor, the price would be $3,968.68 [$3,800
for the units and $168.68 for the 4.25% sales charge (4.439% of the net amount
invested)].
Tax Consequences
An exchange of Units pursuant to the Exchange Option for units of an
Exchange Trust will generally constitute a ``taxable event'' under the Code,
i.e., a Unit Holder will recognize a gain or loss at the time of the exchange.
However, an exchange of Units of this series of the Prudential Unit Trusts for
units of any other series of Exchange Trusts which are grantor trusts for U.S.
federal income tax purposes will not constitute a taxable event to the extent
that the underlying Securities in each trust do not differ materially either in
kind or in extent. Unit Holders are urged to consult their own tax advisors as
to the tax consequences to them of exchanging Units in particular cases.
REINVESTMENT PROGRAM
Distributions of interest and principal, if any, are made to Unit Holders
monthly. The Unit Holder will have the option of either receiving his monthly
income check from the Trustee or participating in the following reinvestment
program offered by the Sponsor: the Prudential Tax-Free Money Fund, a no-load,
open-end diversified management investment company whose investment objective is
to attain for investors the highest level of current income that is exempt from
Federal income taxes, consistent with liquidity and the preservation of capital.
Participation in the reinvestment program is conditioned on such program's
lawful qualification for sale in the jurisdiction in which the Unit Holder
resides. There can be no assurance, however, that such qualification will be
obtained. Upon enrollment in a reinvestment program, the Trustee will direct
monthly interest distributions and principal distributions, if any, to the fund.
The Prudential Tax-Free Money Fund invests in short-term tax-exempt debt
securities of state and local governments. The appropriate prospectus will be
sent to the Unit Holder upon his request. A Unit Holder's election to
participate in a reinvestment program will apply to all Units of a Trust owned
by such Unit Holder. The Unit Holder should read the prospectus for the
reinvestment program carefully before deciding to participate.
EXPENSES AND CHARGES
Fees
The Portfolio supervision fee (the ``Supervision Fee''), which is earned for
Portfolio supervisory services, is based upon the aggregate face amount of the
Securities in a Trust at the beginning of each calendar year.
The Supervision Fee, which is not to exceed the amount set forth in Part
A--``Summary of Essential Information'' per $1,000 face amount of Securities in
a Trust, may exceed the actual costs of providing Portfolio supervisory services
for such Trust, but at no time will the total amount the Sponsor receives for
Portfolio supervisory services rendered to all series of the Prudential Unit
Trusts in any calendar year exceed the aggregate cost to it and/or an affiliate
thereof of supplying such services in such year. For a description of the
Portfolio supervisory services to be provided by the Sponsor and/or an affiliate
thereof, see ``Sponsor--Responsibility.'' The Supervision Fee will be paid to
the Sponsor by a Trust. The Prudential Insurance Company of America, the
indirect parent of the Sponsor, or a division or subsidiary thereof, has agreed
to advise the Sponsor regarding the Sponsor's Portfolio supervisory services and
will be compensated by the Sponsor for such advisory services.
For its services as Trustee under the Indenture, the Trustee receives an
annual fee in an amount set forth under Part A-- ``Summary of Essential
Information.''
For each evaluation of the Securities in each Trust, the Evaluator will
receive a fee in the amount set forth under Part A--``Summary of Essential
Information.''
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The Supervision Fee accrues quarterly but is paid annually, and the
Trustee's fees and the Evaluator's fees are payable monthly on or before each
Distribution Date from the Interest Account, to the extent funds are available,
and thereafter from the Principal Account. Any of such fees may be increased
without approval of the Unit Holders in proportion to increases under the
classification ``All Services Less Rent'' in the Consumer Price Index published
by the United States Department of Labor. The Trustee also receives benefits to
the extent that it holds funds on deposit in various non-interest bearing
accounts created under the Indenture.
Other Charges
The following additional charges are or may be incurred by a Trust as more
fully described in the Indenture: (a) fees of the Trustee for extraordinary
services, (b) expenses of the Trustee (including legal and auditing expenses)
and of counsel designated by the Sponsor, (c) various governmental charges, (d)
expenses and cost of any action taken by the Trustee to protect a Trust and the
rights and interests of the Unit Holders, (e) indemnification of the Trustee for
any losses, liabilities or expenses incurred by it in the administration of a
Trust without gross negligence, bad faith, willful misfeasance or willful
misconduct on its part or reckless disregard of its obligations and duties, (f)
indemnification of the Sponsor for any losses, liabilities and expenses incurred
in acting as Sponsor or Depositor under the Indenture without gross negligence,
bad faith, willful misfeasance or willful misconduct or reckless disregard of
its obligations and duties, (g) expenditures incurred in contacting Unit Holders
upon termination of a Trust, and (h) to the extent then lawful expenses
(including legal, auditing and printing expenses) of maintaining registration or
qualification of the Units and/or a Trust under Federal or state securities laws
subsequent to initial registration so long as the Sponsor is maintaining a
market for the Units.
The fees and expenses set forth herein are payable out of such Trust and
when so paid by or owing to the Trustee are secured by a lien on such Trust. If
the balances in the Interest and Principal Accounts are insufficient to provide
for amounts payable by a Trust, the Trustee has the power to sell Securities to
pay such amounts. To the extent Securities are sold, the size of such Trust will
be reduced and the proportions of the types of Securities will change. Such
sales might be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized. Moreover, due
to the minimum principal amount in which Securities may be required to be sold,
the proceeds of such sales may exceed the amount necessary for the payment of
such fees and expenses.
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates executed by the
Trustee and the Sponsor. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit Holder may be required to pay $2.00 per certificate reissued or
transferred, and will be required to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. For new
certificates issued to replace destroyed, stolen or lost certificates, the Unit
Holder must furnish indemnity satisfactory to the Trustee and must pay such
expenses as the Trustee may incur. Mutilated certificates should be surrendered
to the Trustee for replacement.
Distribution of Interest and Principal
Interest and principal received by a Trust will be distributed on each
monthly Distribution Date on a pro rata basis to Unit Holders of record as of
the preceding Record Date. All distributions will be net of applicable expenses
and funds required for the redemption of Units and, if applicable,
reimbursements to the Trustee for interest payments advanced to Unit Holders on
previous monthly Distribution Dates (See Part A--``Summary of Essential
Information'', ``Expenses and Charges'' and ``Rights of Unit
Holders--Redemption''.)
The Trustee will credit to the Interest Account all interest received by a
Trust, including that part of the proceeds of any disposition of Securities
which represents accrued interest. Other receipts will be credited to the
Principal Account. The pro rata share of the Interest Account and the pro rata
share of cash in the Principal Account represented by each Unit will be computed
by the Trustee each month as of the Record Date. (See Part A--``Summary of
Essential Information.'') Proceeds received from the disposition of any of the
Securities subsequent to a Record Date and prior to the next succeeding
Distribution Date will be held in the Principal Account and will not be
distributed until the following Distribution Date. The distribution to Unit
Holders as of each Record Date will be made on the following Distribution Date
or shortly thereafter and
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shall consist of an amount substantially equal to one-twelfth of such Unit
Holders' pro rata share of the estimated annual income to be credited to the
Interest Account after deducting estimated expenses (the ``Monthly Interest
Distribution'') plus such Unit Holders' pro rata share of the cash balance in
the Principal Account computed as of the close of business on the preceding
Record Date. Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distribution on the second Distribution Date
following their purchase of Units. No distribution need be made from the
Principal Account if the balance therein is less than an amount sufficient to
distribute $1.00 per Unit. The Monthly Interest Distribution per Unit initially
will be in the amount shown under Part A--``Summary of Essential Information''
and will change as the expenses of the Trust change and as Securities are
exchanged, redeemed, paid down or sold.
Normally, interest on the Securities in the Portfolio is paid on a
semiannual basis. Because interest is not received by a Trust at a constant rate
throughout the year, any monthly interest distribution may be more or less than
the amount credited to the Interest Account as of the Record Date. In order to
eliminate fluctuations in monthly interest distributions resulting from such
variances, the Trustee is required by the Indenture to advance such amounts as
may be necessary to provide monthly interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advances from funds available from the Interest Account on the next ensuing
Record Date or Record Dates, as the case may be. If all or a portion of the
Securities for which advances have been made subsequently fail to pay interest
when due, the Trustee may recoup advances made by it in anticipation of receipt
of interest payments on such Securities by reducing the amount otherwise
distributable per Unit with respect to one or more Monthly Interest
Distributions. If Units are redeemed subsequent to such advances by the Trustee,
but prior to receipt by the Trustee of actual notice of such failure to pay
interest, the amount of which was so advanced by the Trustee, each remaining
Unit Holder will be subject to a greater pro rata reduction in his Monthly
Interest Distribution than would have occurred absent such redemptions. Funds
which are available for future distributions, payments of expenses and
redemptions are in accounts which are non-interest bearing to Unit Holders and
are available for use by United States Trust Company of New York, pursuant to
normal banking procedures. In addition, because of the varying interest payment
dates of the Securities comprising a Trust's Portfolio, accrued interest at any
point in time will be greater than the amount of interest actually received by
such Trust and distributed to Unit Holders. Therefore, there will always remain
an item of accrued interest that is added to the value of the Units. If a Unit
Holder sells all or a portion of his Units a portion of his sale proceeds will
be allocable to his proportionate share of the accrued interest. Similarly, if a
Unit Holder redeems all or a portion of his Units, the Redemption Price per Unit
which he is entitled to receive from the Trustee will include accrued interest.
(See ``Rights of Unit Holders--Redemption--Computation of Redemption Price per
Unit''.)
As of the tenth 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 a Trust. (See ``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 governmental charges
payable out of a Trust. Amounts so withdrawn shall not be considered a part of
such Trust's assets for purposes of determining the amount of distributions
until such time as the Trustee shall return all or any part of such amounts to
the appropriate account. In addition, the Trustee may withdraw from the Interest
Account and the Principal Account such amounts as may be necessary to cover
redemption of Units by the Trustee. (See ``Rights of Unit
Holders--Redemption''.) The Trustee is also entitled to withdraw from the
Interest Account, and, to the extent funds are not sufficient therein, from the
Principal Account, on one or more Record Dates as may be appropriate, amounts
sufficient to recoup advances which it has made in anticipation of the receipt
by a Trust of interest in respect of Securities which subsequently fail to pay
interest when due.
Reports and Records
The Trustee shall furnish Unit Holders 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. In the event that the Issuer of any of the Securities fails to make
payment when due of any interest or principal and such failure results in a
change in the amount which would otherwise be distributed as a monthly
distribution, the Trustee will, with the first such distribution following such
failure, set forth in an accompanying statement, the Issuer and the Securities,
the amount of the reduction in the distribution per Unit resulting from such
failure, the percentage of the aggregate face amount of Securities which such
Security represents and, to the extent then determined, information regarding
any disposition or legal action with respect to such Security. 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 Unit Holder of
record, a statement (1) as to the Interest Account: interest received (including
amounts representing interest received upon any disposition of Securities), and,
if the Issuers of the Securities are located in different states or territories,
the percentage of such interest by such states or
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territories, deductions for payment of applicable taxes and for fees and
expenses of the Trusts, redemptions of Units and the balance remaining after
such distributions and deductions, expressed both as a total dollar amount and
as a dollar amount representing the pro rata share of each Unit oustanding on
the last business day of such calendar year; (2) as to the Principal Account:
the dates of disposition of any Securities and the net proceeds received
therefrom (excluding any portion representing interest), deductions for payments
of applicable taxes and for fees and expenses of the Trusts and redemptions of
Units, and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount representing the
pro rata share of each Unit outstanding on the last business day of such
calendar year; (3) a list of the Securities held and the number of Units
outstanding on the last business day of such calendar year; (4) the Redemption
Price per Unit based upon the last computation thereof made during such calendar
year; and (5) amounts actually distributed during such calendar year from the
Interest Account and from the Principal Account, 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 accounts of the Trusts shall be audited not less frequently than annually by
independent certified public accountants designated by the Sponsor, and the
report of such accountants will be furnished by the Trustee to Unit Holders upon
request.
The Trustee shall keep available for inspection by Unit 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 Unit
Holders, certificates issued or held, a current list of Securities in the
portfolio and a copy of the Indenture.
Redemption
Tender of Units
Units may be tendered to the Trustee for redemption at its unit investment
trust office at 770 Broadway, New York, New York 10003, upon payment of any
relevant tax. At the present time there are no specific taxes related to the
redemption of the Units. No redemption fee will be charged by the Sponsor or the
Trustee. Units redeemed by the Trustee will be cancelled.
Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer, although redemptions without
the necessity of certificate presentation will be effected for record Unit
Holders for whom Certificates have not been issued. Unit Holders must sign
exactly as their name appears on the face of the Certificate with the signature
guaranteed by an officer of a national bank or trust company or by a member firm
of either the New York, Midwest or Pacific Stock Exchanges. In certain instances
the Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator or
certificates of corporate authority.
Within seven calendar days following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto, the Unit
Holder 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 set
forth in the ``Summary of Essential Information'' in Part A on the date of
tender. (See ``Redemption--Computation of Redemption Price per Unit''.) The
``date of tender'' is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after the close of trading on the
New York Stock Exchange, the date of tender is the next day on which such
Exchange is open for trading, 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. For information relating to the purchase by the Sponsor of
Units tendered to the Trustee for redemption at prices which may, in certain
circumstances, be in excess of the Redemption Price, see ``Redemption--Purchase
by the Sponsor of Units Tendered for Redemption''.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the Principal
Account. The Trustee is empowered to sell Securities in order to make funds
available for redemption. Such sales, if required, could result in a sale of
Securities by the Trustee at a loss. To the extent Securities are sold, the size
and diversity of a Trust will be reduced.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or trading on that Exchange is restricted or during which (as
determined by the Securities and Exchange Commission by rule or regulation) an
emergency exists as a result of which disposal or evaluation of the underlying
Securities is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission has by order permitted. The Trustee is not
liable to any person or in any way for any loss or damage that may result from
any such suspension or postponement.
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Computation of Redemption Price per Unit
The Redemption Price per Unit is determined by the Trustee on the basis of
the bid prices of the Securities in a Trust (or contracts for Securities to be
acquired by a Trust) as of the Evaluation Time on the date any such
determination is made. The Redemption Price per Unit is each Unit's pro rata
share, determined by the Trustee, of: (1) the aggregate value of the Securities
in a Trust (or contracts for Securities to be acquired by the Trust) on the bid
side of the market (determined by the Evaluator as set forth below), (2) cash on
hand in the Trust and accrued and unpaid interest on the Securities as of the
date of computation, less (a) amounts representing taxes or governmental charges
payable out of a Trust, (b) the accrued expenses of a Trust, and (c) cash held
for distribution to Unit Holders of record as of a date prior to the evaluation.
Accrued interest payable in respect to the Units from the date of tender to, but
not including, the fifth business day thereafter also comprises a part of the
Redemption Price per Unit. The Evaluator may determine the value of the
Securities in a Trust (1) on the basis of current bid prices for the Securities
(2) if bid prices are not available for any Securities, on the basis of current
bid prices for comparable Securities, (3) by appraisal, or (4) by any
combination of the above. Among the additional factors which will be considered
in determining the value of any Restricted Securities are (i) an estimate of the
existence and extent of any available market therefor, (ii) the estimated period
of time during which such Securities will not be freely marketable, (iii) the
estimated expenses of qualifying such Securities for public sale, if required
(iv) estimated underwriting commissions, if any, and (v) any credit or other
factors affecting the issuer or the guarantor of such Securities.
Purchase by the Sponsor of Units Tendered for Redemption
The Indenture requires that the Trustee notify the Sponsor of any tender of
Units for redemption. So long as the Sponsor is maintaining a bid in the
secondary market, the Sponsor, prior to the close of business on the second
succeeding business day, will purchase any Units tendered to the Trustee for
redemption at the price so bid by making payment therefor to the Unit Holder in
an amount not less than the Redemption Price not later than the day on which the
Units would otherwise have been redeemed by the Trustee. (See ``Public Offering
of Units--Secondary Market''.) Units held by the Sponsor may be tendered to the
Trustee for redemption as any other Units. The price of any Units resold by the
Sponsor will be the Public Offering Price determined in the manner provided in
this Prospectus. (See ``Public Offering of Units--Public Offering Price''.) Any
profit resulting from the resale of such Units will belong to the Sponsor which
likewise will bear any loss resulting from a lower resale or redemption price
subsequent to its acquisition of such Units. (See ``Public Offering of
Units--Profit of Sponsor''.)
SPONSOR
Prudential Securities Incorporated is a Delaware corporation and is engaged
in the underwriting, securities and commodities brokerage business and is a
member of the New York Stock Exchange, Inc., other major securities exchanges
and commodity exchanges and the National Association of Securities Dealers, Inc.
Prudential Securities Incorporated, a wholly-owned subsidiary of Prudential
Securities Group Inc. and an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America, is engaged in the investment advisory business.
Prudential Securities Incorporated has acted as principal underwriter and
managing underwriter of other investment companies. In addition to participating
as a member of various selling groups or as an agent of other investment
companies, Prudential Securities Incorporated executes orders on behalf of
investment companies for the purchase and sale of securities of such companies
and sells securities to such companies in its capacity as a broker or dealer in
securities.
Prudential Securities Incorporated is distributor for Prudential Government
Securities Trust (Intermediate Term Series), The Target Portfolio Trust and for
Class B shares of The BlackRock Government Income Trust, Global Utility Fund,
Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund),
Prudential Adjustable Rate Securities Fund, Inc., Prudential California
Municipal Fund (California Series), Prudential Equity Fund, Prudential Equity
Income Fund, Prudential FlexiFund, Prudential Global Fund, Prudential Global
Genesis Fund, Prudential Global Natural Resources Fund, Prudential GNMA Fund,
Prudential Government Plus Fund, Prudential Growth Opportunity Fund, Prudential
High Yield Fund, Prudential IncomeVertibleR Plus Fund, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series Fund, Prudential
National Municipals Fund, Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Prudential Strategic Income Fund, Prudential
Total Return Fund, Prudential U.S. Government Fund and Prudential Utility Fund.
Limitations on Liability
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Indenture, but will be under no liability to Unit
Holders for taking any action or refraining from any action in good faith or for
errors in
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judgment or be liable or responsible in any way for depreciation or loss
incurred by reason of the sale of any Securities, except in case of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. (See ``Sponsor-Responsibility''.)
Responsibility
The Indenture permits the Sponsor to direct the Trustee to dispose of any
Security in a Trust upon the happening of certain events, including without
limitation, the following:
1. Default in the payment of principal or interest on any of the
Securities when due and payable,
2. Institution of legal proceedings seeking to restrain or enjoin the
payment of any of the Securities or attacking their validity,
3. A breach of covenant or warranty which could adversely affect the
payment of debt service on the Securities,
4. Default in the payment of principal or interest on any other
outstanding obligations of the same Issuer of any of the Securities,
5. In the case of Securities that are revenue bonds, a fall in
revenues, based upon official reports, substantially below the estimated
revenues calculated to be necessary to pay principal and interest,
6. A decline in market price to such an extent, or such other market
or credit factor, as in the opinion of the Sponsor would make retention of
any of the Securities detrimental to a Trust and to the interests of the
Unit Holders,
7. Refunding or refinancing of any Security, as set forth in the
Indenture, or
8. The loss of Federal income tax exemption with respect to interest
on the Securities.
The Sponsor and/or an affiliate thereof intend to continuously monitor
developments affecting the Securities in each Trust in order to determine
whether the Trustee should be directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct the Trustee to reject
any offer made by an Issuer of any of the Securities to issue new obligations in
exchange and substitution for any Securities pursuant to a refunding or
refinancing plan, except that the Sponsor may instruct the Trustee to accept
such an offer or to take any other action with respect thereto as the Sponsor
may deem proper if the Issuer is in default with respect to such Securities or
in the judgment of the Sponsor the Issuer will probably default in respect to
such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Indenture to the same extent
as Securities originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for any of the underlying
Securities, the Trustee is required to give notice thereof to each Unit Holder,
identifying the Securities eliminated and the Securities substituted therefor.
Except as stated in this and the preceding paragraph, the acquisition by a Trust
of any securities other than the Securities initially deposited is prohibited.
Resignation
If any time the Sponsor shall resign under the Indenture or shall fail to
perform or be incapable of performing its duties thereunder or shall become
bankrupt or its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor or Sponsors at
rates of compensation deemed reasonable by the Trustee not exceeding amounts
prescribed by the Securities and Exchange Commission, or (2) terminate the
Trust. The Trustee will promptly notify Unit Holders of any such action.
TRUSTEE
The Trustee is United States Trust Company of New York, with its principal
place of business at 114 West 47th Street, New York, New York 10036 and a unit
investment trust office 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. In connection with the storage and
handling of certain Securities deposited in a Trust, the Trustee may use the
services of The Depository Trust Company. These
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services may include safekeeping of the Securities and coupon-clipping, computer
book-entry transfer and institutional delivery services. The Depository Trust
Company is a limited purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System and a clearing
agency registered under the Securities Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any moneys, Securities or
Certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Indenture provides that the Trustee
shall not be personally liable for any taxes or other governmental charges
imposed upon or in respect of each Trust which the Trustee may be required to
pay under current or future laws of the United States or any other authority
having jurisdiction.
Responsibility
For information relating to the responsibilities of the Trustee under the
Indenture, reference is made to the material set forth under ``Rights of Unit
Holders'' and ``Sponsor--Resignation''.
Resignation
By executing an instrument in writing and filing the same with the Sponsor,
the Trustee and any successor may resign. In such an event the Sponsor is
obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Indenture. The Sponsor may also remove the Trustee for any
other reason that the Sponsor determines to be in the best interest of the Unit
Holders. Such resignation or removal shall become effective upon the acceptance
of appointment by the successor trustee. If upon resignation of a 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 a
trustee becomes effective only when the successor trustee accepts its
appointment as such or when a court of competent jurisdiction appoints a
successor trustee.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc., with main offices located at 65 Broadway, New York,
New York 10006.
Limitations on Liability
The Trustee, Sponsor and Unit Holders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Indenture 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 Unit
Holders for errors in judgment. But this provision shall not protect the
Evaluator in cases of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Responsibility
The Indenture requires the Evaluator to evaluate the Securities on the basis
of their bid prices on the last business day of June and December in each year,
on the day on which any Unit is tendered for redemption and on any other day
such evaluation is desired by the Trustee or is requested by the Sponsor.
Resignation
The Evaluator may resign or may be removed by the Sponsor, and in such
event, the Sponsor is to use its best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective upon the
acceptance of appointment by a successor evaluator. If upon resignation of the
Evaluator no successor has accepted appointment within thirty days after notice
of resignation, the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor.
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AMENDMENT AND TERMINATION OF THE INDENTURE
Amendment
The Sponsor and the Trustee have the power to amend the Indenture without
the consent of any of the Unit Holders when such an amendment is (1) to cure any
ambiguity or to correct or supplement any provision of the Indenture which may
be defective or inconsistent with any other provision contained therein, or (2)
to make such other provisions as shall not adversely affect the interests of the
Unit Holders; provided, that the Indenture may also be amended by the Sponsor
and the Trustee (or the performance of any of the provisions of the Indenture
may be waived) with the consent of Unit Holders evidencing 51% of the Units of a
Trust at the time outstanding for the purposes of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of Unit Holders. In no event, however,
shall the Indenture be amended to increase the number of Units issuable
thereunder, to permit the deposit or acquisition of securities or other property
either in addition to or in substitution for any of the Securities initially
deposited in a Trust, except for the substitution of certain refunding
securities for such Securities as initially provided in the Indenture, or to
provide the Trustee with the power to engage in business or investment
activities not specifically authorized in the Indenture as originally adopted or
so as to adversely affect the characterization of a Trust as a grantor trust for
Federal income tax purposes. In the event of any amendment, the Trustee is
obligated to notify promptly all Unit Holders of the substance of such
amendment.
Termination
A Trust may be terminated at any time by the consent of the holders of 51%
of the Units or by the Trustee upon the direction of the Sponsor when the value
of the Trust as shown on the last business day of June or December in any year
is less than 40% of the principal amount of the Securities initially deposited
therein. However, in no event may a Trust continue beyond the Mandatory
Termination Date set forth under Part A--``Summary of Essential Information.''
In the event of termination, written notice thereof will be sent by the Trustee
to all Unit Holders. Within a reasonable period after termination, the Trustee
will sell any Securities remaining in the Trust, and, after paying all expenses
and charges incurred by such Trust, will distribute to each Unit Holder, upon
surrender for cancellation of his Certificate for Units, his pro rata share of
the balances remaining in the Interest and Principal Accounts. The sale of
Securities in a Trust upon termination may result in a lower amount than might
otherwise be realized if such sale were not required at such time. For this
reason, among others, the amount realized by a Unit Holder upon termination may
be less than the principal amount of Securities represented by the Units held by
such Unit Holder.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have been
passed upon by Messrs. Cahill Gordon & Reindel, a partnership including a
professional corporation, 80 Pine Street, New York, New York 10005, as special
counsel for the Sponsor.
AUDITORS
The financial statements included in this Prospectus have been examined by
Deloitte & Touche, certified public accountants, as stated in their report
appearing herein, and are included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
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BOND RATINGS+
All ratings except those identified otherwise are by Standard & Poor's
Corporation.
Standard & Poor's Corporation
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment of creditworthiness may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, or sell a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payments of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest
and repay principal.
AA--Bonds rated AA have a very strong capacity to pay interest and
repay principal, and in the majority of instances they differ from AAA
issues only in small degrees.
A--Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
affects of changes in circumstances and economic conditions than bonds in
higher-rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in the higher-rated
categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace period.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from ``AA'' to ``CCC'' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter ``p'' following a rating indicates
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to
completion, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. Accordingly, the investor should exercise
his own judgment with respect to such likelihood and risk.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A, BBB, commonly known as ``Investment Grade'' ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states impose certain rating or other standards for
obligations eligible for investment by savings banks, trust companies, insurance
companies and fiduciaries generally.
Moody's Investors Service
A brief description of the applicable Moody's Investors Service's
rating symbols and their meanings
is as follows:
- ------------
+As described by the rating agencies.
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Aaa--Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as ``gilt edge''. Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. Aa bonds are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba--Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Those municipal bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1. In addition, 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.
Although Industrial Revenue Bonds and Environmental Control Revenue Bonds
are tax-exempt issues, they are included in the corporate bond rating
system.
Conditional ratings, indicated by ``Con'' are given to bonds for which the
security depends upon the completion of some act or the fulfillment of some
condition. These are bonds 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. A parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors Service Inc.
rating symbols and their meanings is as follows:
AAA--Bonds which are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA--Bonds which are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay
principal is very strong although not quite as strong as bonds rated AAA.
A--Bonds which are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds which are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds and therefor impair timely payment. The likelihood
that these bonds will fall below investment grade is higher than for bonds
with higher ratings.
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<PAGE>
BB--Bonds are considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B--Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue..
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C--Bonds are in imminent default in payment of interest or
principal.
DDD, DD, D--Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued only on
the basis of their value in liquidation or reorganization of the obligor.
``DDD'' represents the highest potential recovery on these bonds, and ``D''
represents the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the AAA, DDD, DD or
D categories.
Conditional--A conditional rating is promised on the successful
completion of a project or the occurrence of a specific event.
Suspended--A rating is suspended when Fitch deems the amount of
information available from the issuer to be inadequate for rating purposes.
Withdrawn--A rating will be withdrawn when an issue matures or is
called or refinanced, and, at Fitch's discretion, when an issuer fails to
furnish proper and timely information.
FitchAlert--Ratings are placed on FitchAlert to notify investors of
an occurrence that is likely to result in a rating change and the likely
direction of such change. These are designated as ``Positive'', indicating a
potential upgrade, ``Negative'', for potential downgrade, or ``Evolving'',
where ratings may be raised or lowered. FitchAlert is relatively short-term,
and should be resolved within 12 months.
Credit Trend--Credit trend indicators show whether credit
fundamentals are improving, stable, declining, or uncertain, as follows:
Improving up arrow
Stable left/right arrow
Declining down arrow
Uncertain up/down arrow
Credit indicators are not predictions that any rating change will
occur, and have a longer term time frame than issues placed on FitchAlert.
----------------------
NR--Not rated (credit characteristics comparable to B or better
as determined by the Sponsor's affiliate on the Date of Deposit) indicates,
among other things, that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard & Poor's
Corporation, Moody's Investors Service and Fitch Investors Service, Inc. do
not rate a particular type of obligation as a matter of policy. Subsequent
to the Date of Deposit the credit characteristics of the Issuers of the
Securities may have changed. Currently, certain of the Securities in the
Portfolio of a Trust may be unrated and have credit characteristics
comparable to securities rated below B. See Part A-- ``Schedule of Portfolio
Securities'' to ascertain the ratings on the Securities, if any, on the date
of the Schedule of Portfolio Securities.
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<PAGE>
This Post-Effective Amendment to the Registration Statement
on Form S-6 comprises the following papers and documents:
The facing sheet on Form S-6.
The Prospectus.
Signatures.
Consent of independent public accountants and consent of evaluator;
all other consents were previously filed.
The following Exhibits:
***Ex-3.(i) - Certificate of Incorporation of
Prudential Securities Incorporated
dated March 29, 1993.
***Ex-3.(ii)- Revised By-Laws of Prudential
Securities Incorporated as amended
through March 5, 1993.
**Ex-4.a - Trust Indenture and Agreement dated
February 11, 1986.
*Ex-23 - Consent of Kenny S&P Evaluation
Services, a division of Kenny
Information Systems, Inc. (as
evaluator).
****Ex-24 - Powers of Attorney executed by a
majority of the Board of Directors
of Prudential Securities
Incorporated.
Ex-99 - Information as to Officers and
Directors of Prudential Securities
Incorporated is incorporated by
reference to Schedules A and D of
Form BD filed by Prudential
Securities Incorporated pursuant to
Rules l5b1-1 and l5b3-1 under the
Securities Exchange Act of 1934
(1934 Act File No. 8-16267).
*****Ex-99.2 - Affiliations of Sponsor with other
investment companies.
*****Ex-99.3 - Broker's Blanket Policies, Standard
Form No. 14 in the aggregate amount
of $62,500,000.
******Ex-99.4 - Investment Advisory Agreement.
_________________________
* Filed herewith.
II-1
<PAGE>
** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Prudential Unit Trusts, High Yield Tax-Exempt Series 4,
Registration No. 33-2328.
*** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Government Securities Equity Trust Series 5, Registration
No. 33-57992.
**** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
National Municipal Trust, Series 164, Registration
No. 33-66108.
***** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
Prudential Unit Trusts, Insured Tax-Exempt Series 1,
Registration No. 2-89263.
****** Incorporated by reference to exhibit of same designation filed
with the Securities and Exchange Commission as an exhibit to
the Registration Statement under the Securities Act of 1933 of
National Municipal Trust, Insured Series 43, Registration No.
33-29314.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Prudential Unit Trusts, High Yield Tax-Exempt Series 4
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Registration Statement or amendment thereto
to be signed on its behalf by the undersigned thereunto duly authorized, in
the City of New York, and State of New York on the 23rd day of May, 1994.
PRUDENTIAL UNIT TRUSTS
High Yield Tax-Exempt Series 4
(Registrant)
By PRUDENTIAL SECURITIES INCORPORATED
(Depositor)
By the following persons,* who
constitute a majority of the
Board of Directors of Prudential
Securities Incorporated
Alan D. Hogan
Howard A. Knight
George A. Murray
John P. Murray
Leland B. Paton
Richard Redeker
Hardwick Simmons
By /s/Richard R. Hoffmann__
(Richard R. Hoffmann,
First Vice President,
as authorized signatory
for Prudential Securities
Incorporated and Attorney-
in-Fact for the persons
listed above)
_____________________
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of Cahill Gordon & Reindel to the use of its name in
the Prospectus included in this Registration Statement is contained in its
opinion filed as Exhibit 3.1 to this Registration Statement.
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated May 9, 1994 accompanying the
financial statements of the Prudential Unit Trusts High Yield Tax-Exempt
Series 4 included herein and to the reference to our Firm as experts under
the heading "Auditors" in the Prospectus which is a part of this registration
statement.
DELOITTE & TOUCHE
May 20, 1994
New York, New York
II-5
<PAGE>
Exhibit 23
Letterhead of Kenny S&P Evaluation Services
(a division of Kenny Information Systems, Inc.)
May 23, 1994
Prudential Securities Incorporated
32 Old Slip
Financial Square
New York, NY 10292
Re: Prudential Unit Trusts
Post-Effective Amendment No. 8
High Yield Tax-Exempt Series 4
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-2328 for the above-captioned
trust. We hereby acknowledge that Kenny S&P Evaluation
Services, a division of Kenny Information Systems, Inc. is
currently acting as the evaluator for the trust. We hereby
consent to the use in the Amendment of the reference to Kenny
S&P Evaluation Services, a division of Kenny Information
Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust
portfolio are the ratings currently indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this
letter with the Securities and Exchange Commission.
Sincerely,
John Fitzgerald
John Fitzgerald
