As filed with the Securities and Exchange Commission on October 25, 1996
Registration No. 33-08699*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
POST-EFFECTIVE AMENDMENT
TO
FORM S-6
----------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
MUNICIPAL SECURITIES TRUST, SERIES 35,
SERIES 39 and SERIES 40
B. Name of depositor:
REICH & TANG DISTRIBUTORS L.P.
C. Complete address of depositor's principal executive office:
600 Fifth Avenue
New York, New York 10020
D. Name and complete address of agent for service:
PETER J. DeMARCO Copy of comments to:
Executive Vice President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Distributors L.P. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, NY 10020 New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485.
/ x / on (October 31, 1996) pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a) of Rule 485.
/ / on ( date ) pursuant to paragraph (a) of Rule 485.
========
* The Prospectus included in this Registration Statement constitutes a
combined Prospectus as permitted by the provisions of Rule 429 of the
General Rules and Regulations under the Securities Act of 1933 (the
"Act"). Said Prospectus covers units of undivided interest in Municipal
Securities Trust, Series 35, Series 39 and Series 40 covered by
prospectuses heretofore filed as part of separate registration statements
on Form S-6 (Registration Nos. 33-08699, 33- 24031 and 33-25127,
respectively) under the Act. This filing constitutes Post- Effective
Amendment No. 10 for Series 35 and Post-Effective Amendment No. 8 for
Series 39 and Series 40.
Each of the Registrants, except Series 35, has registered an indefinite
number of securities under the Act pursuant to Section 24(f) under the
Investment Company Act of 1940, as amended, and Rule 24f-2 thereunder, and
each of the Registrants filed a Rule 24f-2 Notice for its fiscal year
ended June 30, 1996 on or about August 23, 1996.
932.1
<PAGE>
MUNICIPAL SECURITIES TRUST
SERIES 35,
SERIES 39 AND
SERIES 40
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
<S> <C> <C>
1. (a) Name of trust................... Front Cover of Prospectus
(b) Title of securities issued...... "
2. Name and address of each depositor.. The Sponsor
3. Name and address of trustee......... The Trustee
4. Name and address of principal
underwriters...................... The Sponsor
5. State of organization of trust...... Organization
6. Execution and termination of
trust agreement................... Trust Agreement, Amendment and
Termination
7. Changes of name..................... Not Applicable
8. Fiscal year......................... "
9. Litigation.......................... None
</TABLE>
II. General Description of the Trust and Securities of the Trust
<TABLE>
<S> <C> <C>
10. (a) Registered or bearer
securities...................... Certificates
(b) Cumulative or distributive
securities...................... Interest and Principal Distributions
(c) Redemption...................... Trustee Redemption
(d) Conversion, transfer, etc....... Certificates, Sponsor Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan........... Not Applicable
(f) Voting rights................... Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders.... Records, Portfolio, Trust Agreement,
Amendment and Termination, The
Sponsor, The Trustee
(h) Consents required............... Trust Agreement, Amendment and
Termination
(i) Other provisions................ Tax Status
11. Type of securities
comprising units.................. Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
</TABLE>
-i-
977.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
13. (a) Load, fees, expenses, etc....... Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges
(b) Certain information regarding
periodic payment certificates... Not Applicable
(c) Certain percentages............. Summary of Essential Information,
Offering Price, Total Reinvestment
Plan
(d) Price differences............... Volume and Other Discounts
(e) Other loads, fees, expenses..... Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons.............. Sponsor's and Underwriters' Profits
(g) Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities...... Organization, Certificates
15. Receipt and handling of payments
from purchasers................... Organization
16. Acquisition and disposition of
underlying securities............. Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............ Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income........... Distribution Elections, Interest and
Principal Distributions, Records,
Total Reinvestment Plan
(b) Reinvestment of distributions... Total Reinvestment Plan
(c) Reserves or special funds....... Interest and Principal Distributions
(d) Schedule of distributions....... Not Applicable
19. Records, accounts and reports....... Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................ Trust Agreement, Amendment and
Termination
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... The Trustee
(e) and (f) Depositor, removal
and successor................... The Sponsor
21. Loans to security holders........... Not Applicable
22. Limitations on liability............ The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements................ Part II--Item A
24. Other material provisions
of trust agreement................ Not Applicable
</TABLE>
III. Organization, Personnel and Affiliated Persons of Depositor
<TABLE>
<S> <C> <C>
25. Organization of depositor........... The Sponsor
26. Fees received by depositor.......... Not Applicable
27. Business of depositor............... The Sponsor
</TABLE>
-ii-
977.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
28. Certain information as to
officials and affiliated
persons of depositor.............. Part II--Item C
29. Voting securities of depositor...... Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "
32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "
</TABLE>
IV. Distribution and Redemption of Securities
<TABLE>
<S> <C> <C>
35. Distribution of trust's
securities by states.............. Distribution of Units
36. Suspension of sales of
trust's securities................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution.......... Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters.................... The Sponsor
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a) Business of principal
underwriters.................... The Sponsor
(b) Branch offices of principal
underwriters.................... Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation............. Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price... Not Applicable
(c) Variation in offering price
to certain persons.............. Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights..... Trustee Redemption
46. (a) Redemption valuation............ Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Trustee
Redemption
</TABLE>
-iii-
977.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
(b) Schedule as to
redemption price................ Not Applicable
47. Maintenance of position in
underlying securities............. Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
</TABLE>
V. Information Concerning the Trustee or Custodian
<TABLE>
<S> <C> <C>
48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........ Trust Expenses and Charges
50. Trustee's lien...................... "
</TABLE>
VI. Information Concerning Insurance of Holders of Securities
<TABLE>
<S> <C> <C>
51. Insurance of holders of
trust's securities................ Not Applicable
</TABLE>
VII. Policy of Registrant
<TABLE>
<S> <C> <C>
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision, Substitution of Bonds
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Tax Status
</TABLE>
VIII. Financial and Statistical Information
<TABLE>
<S> <C> <C>
54. Trust's securities during
last ten years.................... Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6)...... Statement of Financial Condition
</TABLE>
-iv-
977.1
<PAGE>
Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
SERIES 35
- ------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 35
("Municipal Trust") with an underlying portfolio of long-term tax-exempt bonds
issued by or on behalf of states, municipalities and public authorities, and was
formed to preserve capital and to provide interest income (including, where
applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently exempt
from regular Federal income tax (including where applicable earned original
discount) under existing law but may be subject to state and local taxes. Such
interest income may, however, be a specific preference item for purposes of
Federal individual and/or corporate alternative minimum tax. Investors may
recognize taxable capital gain upon maturity or earlier redemption of the
underlying bonds. (See "Tax Status" and "The Trust--Portfolio" in Part B of this
Prospectus.) The Sponsor is Reich & Tang Distributors L.P. The value of the
Units of the Trust will fluctuate with the value of the underlying bonds.
Minimum purchase: 1 Unit.
- ------------------------------------------------------------------------------
This Prospectus consists of two parts. Part A contains the Summary
of Essential Information as of June 30, 1996 (the "Evaluation Date"), a summary
of certain specific information regarding the Trust and audited financial
statements of the Trust, including the related portfolio, as of the Evaluation
Date. Part B of this Prospectus contains a general summary of the Trust.
Investors should retain both parts of this Prospectus for
future reference.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated October 31, 1996
81412.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term bonds (the "Bonds") issued by or on behalf of states,
municipalities and public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Description of Portfolio" in this Part A for a
description of those Bonds which pay interest income subject to the federal
individual alternative minimum tax. See also "Tax Status" in Part B of this
Prospectus.) Some of the Bonds in the portfolio may be "Zero Coupon Bonds",
which are original issue discount bonds that provide for payment at maturity at
par value, but do not provide for the payment of any current interest. Some of
the Bonds in the portfolio may have been purchased at an aggregate premium over
par. Some of the Bonds in the Trust have been issued with optional refunding or
refinancing provisions ("Refunded Bonds") whereby the issuer of the Bond has the
right to call such Bond prior to its stated maturity date (and other than
pursuant to sinking fund provisions) and to issue new bonds ("Refunding Bonds")
in order to finance the redemption. Issuers typically utilize refunding calls in
order to take advantage of lower interest rates in the marketplace. Some of
these Refunded Bonds may be called for redemption pursuant to pre-refunding
provisions ("Pre-Refunded Bonds") whereby the proceeds from the issue of the
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the call
price for such bonds but will cease receiving interest income with respect to
them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of the
Evaluation Date, see "Notes to Financial Statements" in this Part A. All of the
Bonds in the Trust were rated "A" or better by Standard & Poor's Corporation or
Moody's Investors Service, Inc. at the time originally deposited in the Trust.
For a discussion of the significance of such ratings see "Description of Bond
Ratings" in Part B of this Prospectus and for a list of ratings on the
Evaluation Date see the "Portfolio". The payment of interest and preservation of
capital are, of course, dependent upon the continuing ability of the issuers of
the Bonds to meet their obligations. There can be no assurance that the Trust's
objectives will be achieved. Investment in the Trust should be made with an
understanding of the risks which an investment in long-term fixed rate
obligations may entail, including the risk that the value of the underlying
portfolio will decline with increases in interest rates, and that the value of
Zero Coupon Bonds is subject to greater fluctuations than coupon bonds in
response to changes in interest rates. Each Unit in the Trust represents a
1/1925th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "The Trust--Organization" in Part B of
this Prospectus.) The Units being offered hereby are issued and outstanding
Units which have been purchased by the Sponsor in the secondary market.
A-2
81412.1
<PAGE>
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 5.35% of the Public
Offering Price, which is the same as 5.652% of the net amount invested in Bonds
per Unit. The sales charge for secondary market purchases is based upon the
number of years remaining to maturity of each bond in the Trust's portfolio.
(See "Public Offering" in Part B of this Prospectus.) In addition, accrued
interest to expected date of settlement is added to the Public Offering Price.
If Units had been purchased on the Evaluation Date, the Public Offering Price
per Unit would have been $282.00 plus accrued interest of $7.63 under the
monthly distribution plan, $8.94 under the semi-annual distribution plan and
$23.53 under the annual distribution plan, for a total of $289.63, $290.94 and
$305.53, respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the aggregate bid price of the Bonds.
(See the "Summary of Essential Information" and "Public Offering--Offering
Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution
A-3
81412.1
<PAGE>
plans, see "Summary of Essential Information". See "Estimated Long Term
Return and Estimated Current Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the plan selected by the prior owner of such Unit and may thereafter change the
plan as provided in "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsor, although not obligated to do so,
intends to maintain a market for the Units at prices based upon the aggregate
bid price of the Bonds in the portfolio of the Trust. The Secondary Market
repurchase price is based on the aggregate bid price of the Bonds in the Trust
portfolio, and the reoffer price is based on the aggregate bid price of the
Bonds plus a sales charge of 5.35% of the Public Offering Price (5.652% of the
net amount invested) plus net accrued interest. If such a market is not
maintained, a Certificateholder will be able to redeem his or her Units with the
Trustee at a price also based upon the aggregate bid price of the Bonds. (See
"Sponsor Repurchase" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have their interest
distributions and principal distributions, if any, reinvested in available
series of "Insured Municipal Securities Trust" or "Municipal Securities Trust."
(See "Total Reinvestment Plan" and for residents of Texas, see "Total
Reinvestment Plan for Texas Residents" in Part B of this Prospectus.) The Plan
is not designed to be a complete investment program.
A-4
81412.1
<PAGE>
MUNICIPAL SECURITIES TRUST
SERIES 35
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
Date of Deposit*: October 15, 1986 Minimum Principal Distribution:
Principal Amount of Bonds ... $675,000 $1.00 per Unit.
Number of Units ............. 1,925 Weighted Average Life
Fractional Undivided Inter- to Maturity: 21.4 Years.
est in Trust per Unit ..... 1/1925 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $350.65 value of Trust is less than
Secondary Market Public $800,000 in principal amount of
Offering Price** Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $515,293.52+++ The earlier of December 31,
Divided by 1,925 Units .... $267.68 2035 or the disposition of the
Plus Sales Charge of 5.35% last Bond in the Trust.
of Public Offering Price $14.32 Trustee***: The Chase Manhattan
Public Offering Price Bank.
per Unit ................ $282.00+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.02 per $1,000; semi-
Repurchase Price annual plan $.54 per $1,000;
per Unit .................. $267.68+ and annual plan is $.35 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $12
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............ $14.32++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Reich & Tang
Unit Premium/(Discount) ... $(68.65) Distributors L.P.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in Part B
of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $13.55 $13.55 $13.55
Less estimated annual fees and
expenses ............................ 1.50 1.31 1.32
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $12.05 $12.24 $12.23
Estimated interest distribution# ...... 1.00 6.12 12.23
Estimated daily interest accrual# ..... .0335 .0340 .0340
Estimated current return#++ ........... 4.27% 4.34% 4.34%
Estimated long term return++ .......... 4.817% 4.903% 4.900%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-5
81412.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan" in
Part B of this Prospectus.
The proceeds from securities called July 1, 1996 and certain amounts
distributable as of June 30, 1996 are reported in the summary of essential
information as if they had been distributed as of year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue,
New York, New York 10017 and its unit investment trust office at 770
Broadway, New York, New York 10003 (tel. no.: 1-800-882-9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately three
business days after purchase) of $7.63 monthly, $8.94 semi-annually and
$23.53 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-6
81412.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 5 issues representing
obligations of issuers located in 5 states. The Sponsor has not participated as
a sole underwriter or manager, co-manager or member of an underwriting syndicate
from which any of the initial aggregate principal amount of the Bonds were
acquired. Approximately 18.5% of the Bonds are obligations of state and local
housing authorities; none are hospital revenue bonds; approximately 44.4% are
issued in connection with the financing of nuclear generating facilities; and
none are "mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or call
provisions. The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). None of the Bonds are general obligation bonds. Five issues
representing $675,000 of the principal amount of the Bonds are payable from the
income of a specific project or authority and are not supported by the issuer's
power to levy taxes. The portfolio is divided for purpose of issue as follows:
Airport 1, Federally Insured Multi-Family Housing 1, Nuclear Power 1 and
Turnpike 1. For an explanation of the significance of these factors see "The
Trust--Portfolio" in Part B of this Prospectus.
As of June 30, 1996, $425,000 (approximately 63% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of these
original issue discount bonds, $125,000 (approximately 18.5% of the aggregate
principal amount of the Bonds) are Zero Coupon Bonds. Zero Coupon Bonds do not
provide for the payment of any current interest and provide for payment at
maturity at par value unless sooner sold or redeemed. The market value of Zero
Coupon Bonds is subject to greater fluctuations than coupon bonds in response to
changes in interest rates. None of the aggregate principal amount of the Bonds
in the Trust were purchased at a "market" discount from par value at maturity,
approximately 37% were purchased at a premium and none were purchased at par.
For an explanation of the significance of these factors see "Discount and Zero
Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1996 to September 15,
1996, the entire principal amount of the Bond in portfolio no. 1b was called
for redemption pursuant to pre-refunding provisions and is no longer contained
in the Trust.
A-7
81412.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
June 30, 1994 2,000 $708.45 $59.46 $60.04 $67.21 $153.00
June 30, 1995 1,973 558.01 49.30 49.83 54.59 140.75
June 30, 1996 1,925 425.79 35.89 36.30 44.87 121.72
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-8
81412.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Municipal Securities Trust, Series 35
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Securities Trust, Series
35 (the "Trust") at June 30, 1996, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the date
is September 28, 1995, expressed an unqualified opinion on those financial
statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
Municipal Securities Trust, Series 35
Portfolio of Investments June 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Feature(2)(4)
Portfolio Principal Name of Issuer and Title Ratings Rate/Date(s) S.F. - Sinking Fund Market
No. Amount of Bonds (1) of Maturity(2) Ref. - Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1a $ 40,000 Kentucky State Turnpike A* 8.500% 1/01/99 @ 100 S.F. $ 40,945
Authority Toll Road Revenue 7/01/2004 7/01/96 @ 102 Ref.
Bonds, Series A
1b 60,000 Kentucky State Turnpike A 8.500 9/01/96 @102 S.F. 61,200
Authority Toll Road 7/01/2004 None
Revenue Bonds, Series A
2 200,000 North Carolina Eastern BBB+ 4.000 1/01/17 @ 100 S.F. 156,284
Municipal Power Agency 1/01/2018 None
Power System Revenue
Bonds, Refunding Series A
3 150,000 Memphis-Shelby County, BBB 7.875 No Sinking Fund 166,203
Tennessee Airport Authority, 9/01/2009 9/01/01 @ 103 Ref.
Special Facility and Project
Revenue Bonds (Federal
Express Corp.
4 100,000 Intermountain Power AA- 5.000 7/01/18 @ 100 S.F. 84,960
Agency (a political 7/01/2021 7/01/96 @ 100 Ref.
subdivision of the State of
Utah) Power Supply
Revenue Bonds Series
1986A
5 125,000 Housing Finance Authority NR 0.000 1/01/97 @ 14.412 S.F. 5,786
of Dade County (Florida) 7/01/2026 1/01/97 @ 4.827 Ref.
Multifamily Mortgage
Revenue Bonds, 1984
Series B (T.M. Alexander
Plaza Project - FHA Insured
Mortgage Loan)
------------ --------
$ 675,000 Total Investments (Cost (3) $456,547) $515,378
========= ========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Municipal Securities Trust, Series 35
Footnotes to Portfolio - June 30, 1996
- ---------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meaning is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1996, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross Unrealized Appreciation $ 65,811
Gross Unrealized Depreciation (6,980)
--------
Net Unrealized Appreciation $ 58,831
-------
(4) The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 35
Statement of Net Assets
June 30, 1996
- ------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $456,547) $ 515,378
-----------
Other Assets
Accrued Interest 14,590
Cash 289,971
---------
Total Other Assets 304,561
---------
Other Liabilities
Accrued Expenses 285
---------
Total Other Liabilities 285
---------
Excess of Other Assets over Other Liabilities 304,276
---------
Net Assets (1,925 Units of Fractional Undivided
Interest Outstanding, $425.79 per Unit) $ 819,654
==========
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 35
Statement of Operations
- ------------------------------------------------------------------------------
For the Years Ended June 30,
1996 1995 1994
Investment Income
Interest $ 66,601 $ 101,153 $ 121,705
-------- --------- ---------
Expenses
Trustee's Fees 2,522 2,830 2,776
Evaluator's Fees 825 825 899
Sponsor's Advisory Fee 375 375 450
-------- --------- ---------
Total Expenses 3,722 4,030 4,125
-------- --------- --------
Net Investment Income 62,879 97,123 117,580
-------- --------- --------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (49,794) (40,411) (28,594)
Change in Unrealized Appreciation
(Depreciation) on Investments 37,635 23,052 (61,717)
------- -------- ---------
Net Gain (Loss) on Investments (12,159) (17,359) (90,311)
------- -------- ---------
Net Increase in Net Assets
Resulting from Operations $ 50,720 $ 79,764 $ 27,269
======== ========= ========
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 35
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
For the Years Ended June 30,
1996 1995 1994
Operations
Net Investment Income $ 62,879 97,123 $ 117,580
Realized Gain (Loss) on
Investments (49,794) (40,411) (28,594)
Change in Unrealized Appreciation
(Depreciation) on Investments 37,635 23,052 (61,717)
-------- -------- ---------
Net Increase in Net
Assets Resulting
From Operations 50,720 79,764 27,269
------- -------- ---------
Distributions to Certificateholders
Investment Income 71,104 99,001 119,562
Principal 240,154 281,500 306,000
Redemptions
Interest 741 378 -
Principal 20,013 14,831 -
------- -------- -------
Total Distributions
and Redemptions 332,012 395,710 425,562
------- -------- --------
Total Increase (Decrease) (281,292) (315,946) 398,293)
Net Assets
Beginning of Year 1,100,946 1,416,892 1,815,185
--------- --------- ---------
End of Year (Includes
Undistributed Net Investment
Income of $21,616, $30,582
and $32,838, Respectively) $ 819,654 $1,100,946 $1,416,892
========= ========== ==========
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 35
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
1. Organization
Municipal Securities Trust, Series 35 (the "Trust") was organized on
December 1, 1988 by Bear Stearns & Co. Inc. under the laws of the State of
New York by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. The Trust was formed to preserve capital
and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York was
merged into The Chase Manhattan Bank (the "Trustee"). Accordingly, Chase is
the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual
amounts could differ from those estimates.
Interest Income
The discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such discount is
included in interest income; however, it is not distributed until realized
in cash upon maturity or sale of the respective bonds.
Security Valuation
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
investments is based upon the bid prices for the bonds at the end of the
period, which approximates the fair value of the securities at that date,
except that the market value on the date of deposit represents the cost to
the Trust based on the offering prices for investments at that date. The
differences between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
<PAGE>
Municipal Securities Trust, Series 35
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ----------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify for
the tax treatment applicable to Grantor Trusts under the Internal Revenue
Code. Under existing law, if the Trust so qualifies, it will not be subject
to federal income tax on net income and capital gains that are distributed
to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
The Trust Indenture and Agreement further requires that principal received
from the disposition of bonds, other than those bonds sold in connection
with the redemption of units, be distributed to Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. For the years ended June 30, 1996 and 1995, 48 and 27 units were
redeemed, respectively. No units were redeemed for the year ended June 30,
1994.
The Trust pays an annual fee for trustee services rendered by the Trustee
that ranges from $.35 to $1.02 per $1,000 of outstanding investment
principal. In addition, a minimum fee of $12 is paid to a service bureau
for each portfolio valuation. A maximum fee of $.25 per $1,000 of
outstanding investment principal is paid to the Sponsor. For the year ended
June 30, 1996, the "Trustee's Fees" are comprised of Trustee fees of
$1,065, and other expenses of $1,457. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Municipal Securities Trust, Series 35
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the interest of
Certificateholders as follows:
Original Cost to Certificateholders $ 2,046,336
Less Initial Gross Underwriting Commission (100,260)
------------
1,946,076
Accumulated Cost of Bonds Sold, Matured
or Called (1,492,871)
Net Unrealized Appreciation 58,831
Undistributed Net Investment Income 21,616
Distributions in Excess of Proceeds
from Investments 286,002
-----------
Total $ 819,654
==========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 2,000 units of
fractional undivided interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $3,342.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
7. Successor Sponsor
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear Stearns & Co. Inc., the previous
sponsor.
<PAGE>
Municipal Securities Trust, Series 35
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 558.01
Interest Income $ 34.17
Expenses (1.91)
--------
Net Investment Income 32.26
Net Gain or Loss on Investments(1) 5.87
-------
Total from Investment Operations 596.14
Less Distributions
to Certificateholders
Income 36.48
Principal 123.22
for Redemptions
Interest .38
Principal 10.27
------
Total Distributions 170.35
-------
Net Asset Value, End of Period** $ 425.79
-------
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- --------
* Unless otherwise stated, based upon average units outstanding during the
year of 1,949 ([1,973+1,925]/2).
** Based upon actual units outstanding.
<PAGE>
Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
SERIES 39
- -------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 39 ("Municipal
Trust") with an underlying portfolio of long-term tax-exempt bonds issued by or
on behalf of states, municipalities and public authorities, and was formed to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
Federal income tax (including where applicable earned original discount) under
existing law but may be subject to state and local taxes. Such interest income
may, however, be a specific preference item for purposes of Federal individual
and/or corporate alternative minimum tax. Investors may recognize taxable
capital gain upon maturity or earlier redemption of the underlying bonds. (See
"Tax Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The
Sponsor is Reich & Tang Distributors L.P. The value of the Units of the Trust
will fluctuate with the value of the underlying bonds. Minimum purchase: 1
Unit.
- -------------------------------------------------------------------------------
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information as of June 30, 1996 (the "Evaluation Date"), a summary of
certain specific information regarding the Trust and audited financial
statements of the Trust, including the related portfolio, as of the Evaluation
Date. Part B of this Prospectus contains a general summary of the Trust.
Investors should retain both parts of this
Prospectus for future reference.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated October 31, 1996
81247.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve capital
and to provide interest income (including, where applicable, earned original
issue discount) which, in the opinions of bond counsel to the respective
issuers, is, with certain exceptions, currently exempt from regular federal
income tax under existing law through investment in a fixed, diversified
portfolio of long-term bonds (the "Bonds") issued by or on behalf of states,
municipalities and public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law
excludes such interest from regular federal income tax. Such interest income
may, however, be subject to the federal corporate alternative minimum tax and
to state and local taxes. (See "Description of Portfolio" in this Part A for a
description of those Bonds which pay interest income subject to the federal
individual alternative minimum tax. See also "Tax Status" in Part B of this
Prospectus.) Some of the Bonds in the portfolio may be "Zero Coupon Bonds",
which are original issue discount bonds that provide for payment at maturity at
par value, but do not provide for the payment of any current interest. Some of
the Bonds in the portfolio may have been purchased at an aggregate premium over
par. Some of the Bonds in the Trust have been issued with optional refunding or
refinancing provisions ("Refunded Bonds") whereby the issuer of the Bond has
the right to call such Bond prior to its stated maturity date (and other than
pursuant to sinking fund provisions) and to issue new bonds ("Refunding Bonds")
in order to finance the redemption. Issuers typically utilize refunding calls
in order to take advantage of lower interest rates in the marketplace. Some of
these Refunded Bonds may be called for redemption pursuant to pre-refunding
provisions ("Pre-Refunded Bonds") whereby the proceeds from the issue of the
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the
call price for such bonds but will cease receiving interest income with respect
to them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of
the Evaluation Date, see "Notes to Financial Statements" in this Part A. All of
the Bonds in the Trust were rated "A" or better by Standard & Poor's
Corporation or Moody's Investors Service, Inc. at the time originally deposited
in the Trust. For a discussion of the significance of such ratings see
"Description of Bond Ratings" in Part B of this Prospectus and for a list of
ratings on the Evaluation Date see the "Portfolio". The payment of interest and
preservation of capital are, of course, dependent upon the continuing ability
of the issuers of the Bonds to meet their obligations. There can be no
assurance that the Trust's objectives will be achieved. Investment in the Trust
should be made with an understanding of the risks which an investment in
long-term fixed rate obligations may entail, including the risk that the value
of the underlying portfolio will decline with increases in interest rates, and
that the value of Zero Coupon Bonds is subject to greater fluctuations than
coupon bonds in response to changes in interest rates. Each Unit in the Trust
represents a 1/2381st undivided interest in the principal and net income of the
Trust. The principal amount of Bonds deposited in the Trust per Unit is
reflected in the Summary of Essential Information. (See "The
Trust--Organization" in Part B of this Prospectus.) The Units being offered
hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
A-2
81247.1
<PAGE>
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of each
Unit is equal to the aggregate bid price of the Bonds in the Trust divided by
the number of Units outstanding, plus a sales charge of 4.61% of the Public
Offering Price, which is the same as 4.832% of the net amount invested in Bonds
per Unit. The sales charge for secondary market purchases is based upon the
number of years remaining to maturity of each bond in the Trust's portfolio.
(See "Public Offering" in Part B of this Prospectus.) In addition, accrued
interest to expected date of settlement is added to the Public Offering Price.
If Units had been purchased on the Evaluation Date, the Public Offering Price
per Unit would have been $540.01 plus accrued interest of $9.35 under the
monthly distribution plan, $12.60 under the semi-annual distribution plan and
$32.85 under the annual distribution plan, for a total of $549.36, $552.61 and
$572.86, respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the aggregate bid price of the Bonds.
(See the "Summary of Essential Information" and "Public Offering--Offering
Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of each
Trust are offered to investors on a "dollar price" basis (using the computation
method previously described under "Public Offering Price") as distinguished
from a "yield price" basis often used in offerings of tax exempt bonds
(involving the lesser of the yield as computed to maturity of bonds or to an
earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an
average yield for the portfolio of the Trust); and (3) reducing the average
yield for the portfolio of the Trust in order to reflect estimated fees and
expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow. Estimated
Current Return is computed by dividing the Estimated Net Annual Interest Income
per Unit by the Public Offering Price per Unit. In contrast to the Estimated
Long Term Return, the Estimated Current Return does not take into account the
amortization of premium or accretion of discount, if any, on the Bonds in the
portfolio of the Trust. Moreover, because interest rates on Bonds purchased at
a premium are generally higher than current interest rates on newly issued
bonds of a similar type with comparable rating, the Estimated Current Return
per Unit may be affected adversely if such Bonds are redeemed prior to their
maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution
A-3
81247.1
<PAGE>
plans, see "Summary of Essential Information". See "Estimated Long Term Return
and Estimated Current Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor upon
request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will be
made by the Trust either monthly, semi-annually or annually depending upon the
plan of distribution applicable to the Unit purchased. A purchaser of a Unit in
the secondary market will initially receive distributions in accordance with
the plan selected by the prior owner of such Unit and may thereafter change the
plan as provided in "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsor, although not obligated to do so, intends to
maintain a market for the Units at prices based upon the aggregate bid price of
the Bonds in the portfolio of the Trust. The Secondary Market repurchase price
is based on the aggregate bid price of the Bonds in the Trust portfolio, and
the reoffer price is based on the aggregate bid price of the Bonds plus a sales
charge of 4.61% of the Public Offering Price (4.832% of the net amount
invested) plus net accrued interest. If such a market is not maintained, a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based upon the aggregate bid price of the Bonds. (See "Sponsor
Repurchase" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual and
annual plans of distribution have the opportunity to have their interest
distributions and principal distributions, if any, reinvested in available
series of "Insured Municipal Securities Trust" or "Municipal Securities Trust."
(See "Total Reinvestment Plan" and for residents of Texas, see "Total
Reinvestment Plan for Texas Residents" in Part B of this Prospectus.) The Plan
is not designed to be a complete investment program.
A-4
81247.1
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL SECURITIES TRUST
SERIES 39
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
<S> <C> <C>
Date of Deposit*: October 13, 1988 Minimum Principal Distribution:
- --------------- ------------------------------
Principal Amount of Bonds .. $1,275,000 $1.00 per Unit.
- -------------------------
Number of Units ............ 2,381 Weighted Average Life to
- --------------- ------------------------
Fractional Undivided Inter- Maturity: 17.8 Years.
- -------------------------- --------
est in Trust per Unit .... 1/2381 Minimum Value of Trust:
--------------------- ----------------------
Principal Amount of Trust may be terminated if
- -------------------
Bonds per Unit ........... $535.49 value of Trust is less than
--------------
Secondary Market Public $1,000,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ...... $1,229,072.21+++ The earlier of December 31,
Divided by 2,381 Units ... $516.20 2037 or the disposition of the
Plus Sales Charge of 4.61% last Bond in the Trust.
of Public Offering Price $23.81 Trustee***: The Chase Manhattan
-------
Public Offering Price Bank.
per Unit ............... $540.01+ Trustee's Annual Fee: Monthly
--------------------
Redemption and Sponsor's plan $1.05 per $1,000; semi-
- ------------------------
Repurchase Price annual plan $.60 per $1,000;
----------------
per Unit ................. 516.20+ and annual plan is $.35 per
--------
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
--------------------- ------------------------
over Redemption and Evaluation: Minimum of $15
------------------- ----------
Sponsor's Repurchase plus $.25 per each issue of
--------------------
Price per Unit ........... $23.81++++ Bonds in excess of 50 issues
--------------
Difference between Public (treating separate maturities
- -------------------------
Offering Price per Unit as separate issues).
-----------------------
and Principal Amount per Sponsor: Reich & Tang
------------------------ -------
Unit Premium/(Discount) .. $4.52 Distributors L.P.
-----------------------
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in Part B
of this Prospectus).
</TABLE>
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $40.52 $40.52 $40.52
Less estimated annual fees and
expenses ............................ 1.63 1.34 1.57
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $38.89 $39.18 $38.95
Estimated interest distribution# ...... 3.24 19.59 38.95
Estimated daily interest accrual# ..... .1080 .1088 .1082
Estimated current return#++ ........... 7.20% 7.26% 7.50%
Estimated long term return++ .......... 5.377% 5.433% 5.389%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
81247.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was
signed and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment
Plan" in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 770 Broadway, New York, New York 10003 (tel. no.: 1-800-882-9898).
For information regarding redemption by the Trustee, see "Trustee
Redemption" in Part B of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately
three business days after purchase) of $9.35 monthly, $12.60
semi-annually and $32.85 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-6
81247.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 6 issues representing obligations
of issuers located in 6 states. The Sponsor has not participated as a sole
underwriter or manager, co-manager or member of an underwriting syndicate from
which any of the initial aggregate principal amount of the Bonds were acquired.
None of the Bonds are obligations of state and local housing authorities;
approximately 52.9% are hospital revenue bonds; approximately 19.6% are issued
in connection with the financing of nuclear generating facilities; and none are
"mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
call provisions. The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). None of the Bonds are general obligation bonds. Six issues
representing $1,275,000 of the principal amount of the Bonds are payable from
the income of a specific project or authority and are not supported by the
issuer's power to levy taxes. The portfolio is divided for purpose of issue as
follows: Airport Facilities 2, Hospital 3 and Nuclear Power 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1996, $675,000 (approximately 52.9% of the aggregate
principal amount of the Bonds) were original issue discount bonds. None of the
aggregate principal amount of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 47.1% were
purchased at a premium and none were purchased at par. For an explanation of
the significance of these factors see "Discount and Zero Coupon Bonds" in Part
B of this Prospectus.
None of the Bonds in the Trust are subject to the federal individual
alternative minimum tax under the Tax Reform Act of 1986. See "Tax Status" in
Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1996 to September 15, 1996,
the entire principal amount of the Bond in portfolio no. 1 was called for
redemption pursuant to pre-refunding provisions and is no longer contained
in the Trust.
A-7
81247.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1994 2,495 $940.59 $75.97 $76.59 -0- -0-
June 30, 1995 2,432 743.09 66.67 67.22 -0- $185.58
June 30, 1996 2,381 528.63 49.20 49.57 -0- $205.29
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components
of Net Assets.
</TABLE>
A-8
81247.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Municipal Securities Trust, Series 39
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Securities Trust,
Series 39 (the "Trust") at June 30, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the date
is September 28, 1995, expressed an unqualified opinion on those financial
statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
<TABLE>
Municipal Securities Trust, Series 39
Portfolio of Investments June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 250,000 Reg. Arpts. Imprvmnt. Ba1* 11.250% 11/01/06 @ 100 S.F. $ 257,855
Corp. Facs. Sublease 11/01/2025 None
Rev. Bonds, 1985 Issue
Western Air Lines,
(L.A. Intrnt. Arpt.)
2 250,000 N.C. Eastern Muni. AAA 4.500 7/01/20 @ 100 S.F. 206,710
Pwr. Agency Sys. Rev. 1/01/2024 1/01/24 @ 100 Ref.
Rfndg. Bonds Series
1987 A (Financial
Guaranty)
3 100,000 Philadelphia Penn. A- 9.000 6/15/06 @ 100 S.F. 102,401
Arpt. Rev. Bonds Series 6/15/2015 None
1985 (Philadelphia
Arpt. Systems)
4 175,000 Westmoreland Cnty. Baa1* 6.500 7/01/99 @ 100 S.F. 173,679
Penn. Indus. Dev. Auth. 7/01/2015 7/01/97 @ 102 Ref.
Hosp. Rev. Rfndg.
Bonds (Citizens Gen.
Hosp.) Series A 1987
5 250,000 Wichita Cnty. Tx. Hosp. A* 6.000 9/01/10 @ 100 S.F. 237,153
Rev. Rfndg. Bonds 9/01/2013 9/01/97 @ 102 Ref.
(Wichita Falls Gen.
Hosp. Brd.) Series 1987
6 250,000 Peninsula Ports AAA 8.700 No Sinking Fund 264,675
Authority of Virginia 8/01/2023 8/01/97 @ 102 Ref.
Hosp. Rev. Rfndg.
Bonds 1987 Series
(Whittaker Mem. Hosp.
Prjt. - FHA Ins. Mtg.)
----------- -----------
$ 1,275,000 Total Investments (Cost (3) $1,189,695) $ 1,242,473
=========== ===========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Municipal Securities Trust, Series 39
Footnotes to Portfolio - June 30, 1996
- ------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meanings is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1996, the net unrealized appreciation of all the bonds was
comprised of the following.
Gross Unrealized Appreciation $ 113,137
Gross Unrealized Depreciation (60,359)
------------
Net Unrealized Appreciation $ 52,778
============
(4) The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 39
Statement of Net Assets
June 30, 1996
- ------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $1,189,695) $ 1,242,473
------------
Other Assets
Accrued Interest 30,152
------------
Total Other Assets 30,152
------------
Other Liabilities
Accrued Expenses 360
Advance from Trustee 13,597
------------
Total Other Liabilities 13,957
------------
Excess of Other Assets over Other Liabilities 16,195
------------
Net Assets (2,381 Units of Fractional Undivided
Interest Outstanding, $528.63 Per Unit) $ 1,258,668
============
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Municipal Securities Trust, Series 39
Statement of Operations
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 109,053 $ 165,548 $ 195,250
--------- ---------- ---------
Expenses
Trustee's Fees 3,078 3,580 3,557
Evaluator's Fees 893 967 899
Sponsor's Advisory Fee 444 569 616
--------- ---------- ---------
Total Expenses 4,415 5,116 5,072
--------- ---------- ---------
Net Investment Income 104,638 160,432 190,178
--------- ---------- ---------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (52,588) (67,345) -
Change in Unrealized Appreciation
(Depreciation) on Investments 45,231 40,273 (128,430)
--------- ---------- ---------
Net Gain (Loss) on Investments (7,357) (27,072) (128,430)
--------- ---------- ---------
Net Increase in Net Assets
Resulting from Operations $ 97,281 $ 133,360 $ 61,748
========= ========= =========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Municipal Securities Trust, Series 39
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 104,638 $ 160,432 $ 190,178
Realized Gain (Loss) on
Investments (52,588) (67,345) -
Change in Unrealized Appreciation
(Depreciation) on Investments 45,231 40,273 (128,430)
--------- ---------- ---------
Net Increase in Net
Assets Resulting
From Operations 97,281 133,360 61,748
--------- ---------- ---------
Distributions to Certificateholders
Investment Income 119,195 163,460 190,061
Principal 496,780 452,526 -
Redemptions
Interest 714 2,164 91
Principal 29,123 54,788 4,912
--------- ---------- ---------
Total Distributions
and Redemptions 645,812 672,938 195,064
--------- ---------- ---------
Total Increase (Decrease) (548,531) (539,578) (133,316)
Net Assets
Beginning of Year 1,807,199 2,346,777 2,480,093
--------- ---------- ---------
End of Year (Including
Undistributed Net Investment
Income of $29,598, $44,869
and $50,061, Respectively) $1,258,668 $1,807,199 $2,346,777
========== ========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 39
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
1. Organization
Municipal Securities Trust, 39 Series (the "Trust") was organized on
October 13, 1988 by Bear Stearns & Co., Inc. under the laws of the
State of New York by a Trust Indenture and Agreement, and is
registered under the Investment Company Act of 1940. The Trust was
formed to preserve capital and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee").
Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the investments is based upon the bid prices for the bonds at the end
of the period, which approximates the fair value of the securities at
that date, except that the market value on the date of deposit
represents the cost to the Trust based on the offering prices for
investments at that date. The differences between cost (including
accumulated accretion of original issue discount on zero-coupon
bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded
on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts under the Internal Revenue Code. Under existing law, if the
Trust so qualifies, it will not be subject to federal income tax on
net income and capital gains that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the
accounting records and financial statements of the Trust and is
responsible for establishing and maintaining a system of internal
control related thereto. The Trustee is also responsible for all
estimates of expenses and accruals reflected in the Trust's financial
statements.
<PAGE>
2
Municipal Securities Trust, Series 39
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold
in connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1996, 1995 and 1994, 51,
63 and five units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.35 to $1.05 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25
per $1,000 of outstanding investment principal is paid to the
Sponsor. For the year ended June 30, 1996, the "Trustee's Fees" are
comprised of Trustee fees of $1,471 and other expenses of $1,607. The
other expenses include professional, printing and miscellaneous fees.
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 2,569,042
Less Initial Gross Underwriting Commission (125,875)
-------------
2,443,167
Accumulated Cost of Bonds Sold, Matured
or Called (1,253,474)
Net Unrealized Appreciation 52,778
Undistributed Net Investment Income 29,598
Distributions in Excess of Proceeds from
Investments (13,401)
-------------
Total $ 1,258,668
=============
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 2,500 units of
fractional undivided interest of the Trust as of the date of deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds,
it may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
3
Municipal Securities Trust, Series 39
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
7. Successor Sponsor
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich
& Tang") has become the successor sponsor (the "Sponsor") to certain
of the unit investments trusts previously sponsored by Bear Stearns &
Co. As successor sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear Stearns & Co. Inc., the previous
sponsor.
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 743.09
Interest Income $ 45.32
Expenses (1.84)
----------
Net Investment Income 43.48
Net Gain or Loss on Investments(1) 10.42
----------
Total from Investment Operations 796.99
Less Distributions
to Certificateholders
Income 49.53
Principal 206.43
for Redemptions
Interest .30
Principal 12.10
----------
Total Distributions 268.36
----------
Net Asset Value, End of Period** $ 528.63
==========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 2,406.50 ([2,432+2,381]/2).
** Based upon actual units outstanding.
<PAGE>
Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
SERIES 40
- -------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 40 ("Municipal
Trust") with an underlying portfolio of long-term tax-exempt bonds issued by or
on behalf of states, municipalities and public authorities, and was formed to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
Federal income tax (including where applicable earned original discount) under
existing law but may be subject to state and local taxes. Such interest income
may, however, be a specific preference item for purposes of Federal individual
and/or corporate alternative minimum tax. Investors may recognize taxable
capital gain upon maturity or earlier redemption of the underlying bonds. (See
"Tax Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The
Sponsor is Reich & Tang Distributors L.P. The value of the Units of the Trust
will fluctuate with the value of the underlying bonds. Minimum purchase: 1
Unit.
- -------------------------------------------------------------------------------
This Prospectus consists of two parts. Part A contains the Summary of
Essential Information as of June 30, 1996 (the "Evaluation Date"), a summary of
certain specific information regarding the Trust and audited financial
statements of the Trust, including the related portfolio, as of the Evaluation
Date. Part B of this Prospectus contains a general summary of the Trust.
Investors should retain both parts of this
Prospectus for future reference.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated October 31, 1996
81304.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve capital
and to provide interest income (including, where applicable, earned original
issue discount) which, in the opinions of bond counsel to the respective
issuers, is, with certain exceptions, currently exempt from regular federal
income tax under existing law through investment in a fixed, diversified
portfolio of long-term bonds (the "Bonds") issued by or on behalf of states,
municipalities and public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law
excludes such interest from regular federal income tax. Such interest income
may, however, be subject to the federal corporate alternative minimum tax and
to state and local taxes. (See "Description of Portfolio" in this Part A for a
description of those Bonds which pay interest income subject to the federal
individual alternative minimum tax. See also "Tax Status" in Part B of this
Prospectus.) Some of the Bonds in the portfolio may be "Zero Coupon Bonds",
which are original issue discount bonds that provide for payment at maturity at
par value, but do not provide for the payment of any current interest. Some of
the Bonds in the portfolio may have been purchased at an aggregate premium over
par. Some of the Bonds in the Trust have been issued with optional refunding or
refinancing provisions ("Refunded Bonds") whereby the issuer of the Bond has
the right to call such Bond prior to its stated maturity date (and other than
pursuant to sinking fund provisions) and to issue new bonds ("Refunding Bonds")
in order to finance the redemption. Issuers typically utilize refunding calls
in order to take advantage of lower interest rates in the marketplace. Some of
these Refunded Bonds may be called for redemption pursuant to pre-refunding
provisions ("Pre-Refunded Bonds") whereby the proceeds from the issue of the
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the
call price for such bonds but will cease receiving interest income with respect
to them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of
the Evaluation Date, see "Notes to Financial Statements" in this Part A. All of
the Bonds in the Trust were rated "A" or better by Standard & Poor's
Corporation or Moody's Investors Service, Inc. at the time originally deposited
in the Trust. For a discussion of the significance of such ratings see
"Description of Bond Ratings" in Part B of this Prospectus and for a list of
ratings on the Evaluation Date see the "Portfolio". The payment of interest and
preservation of capital are, of course, dependent upon the continuing ability
of the issuers of the Bonds to meet their obligations. There can be no
assurance that the Trust's objectives will be achieved. Investment in the Trust
should be made with an understanding of the risks which an investment in
long-term fixed rate obligations may entail, including the risk that the value
of the underlying portfolio will decline with increases in interest rates, and
that the value of Zero Coupon Bonds is subject to greater fluctuations than
coupon bonds in response to changes in interest rates. Each Unit in the Trust
represents a 1/3851st undivided interest in the principal and net income of the
Trust. The principal amount of Bonds deposited in the Trust per Unit is
reflected in the Summary of Essential Information. (See "The
Trust--Organization" in Part B of this Prospectus.) The Units being offered
hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
A-2
81304.1
<PAGE>
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of each
Unit is equal to the aggregate bid price of the Bonds in the Trust divided by
the number of Units outstanding, plus a sales charge of 4.55% of the Public
Offering Price, which is the same as 4.766% of the net amount invested in Bonds
per Unit. The sales charge for secondary market purchases is based upon the
number of years remaining to maturity of each bond in the Trust's portfolio.
(See "Public Offering" in Part B of this Prospectus.) In addition, accrued
interest to expected date of settlement is added to the Public Offering Price.
If Units had been purchased on the Evaluation Date, the Public Offering Price
per Unit would have been $384.70 plus accrued interest of $7.23 under the
monthly distribution plan, $9.34 under the semi-annual distribution plan and
$22.95 under the annual distribution plan, for a total of $391.93, $394.04 and
$407.65, respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the aggregate bid price of the Bonds.
(See the "Summary of Essential Information" and "Public Offering--Offering
Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of each
Trust are offered to investors on a "dollar price" basis (using the computation
method previously described under "Public Offering Price") as distinguished
from a "yield price" basis often used in offerings of tax exempt bonds
(involving the lesser of the yield as computed to maturity of bonds or to an
earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an
average yield for the portfolio of the Trust); and (3) reducing the average
yield for the portfolio of the Trust in order to reflect estimated fees and
expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow. Estimated
Current Return is computed by dividing the Estimated Net Annual Interest Income
per Unit by the Public Offering Price per Unit. In contrast to the Estimated
Long Term Return, the Estimated Current Return does not take into account the
amortization of premium or accretion of discount, if any, on the Bonds in the
portfolio of the Trust. Moreover, because interest rates on Bonds purchased at
a premium are generally higher than current interest rates on newly issued
bonds of a similar type with comparable rating, the Estimated Current Return
per Unit may be affected adversely if such Bonds are redeemed prior to their
maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution
A-3
81304.1
<PAGE>
plans, see "Summary of Essential Information". See "Estimated Long Term Return
and Estimated Current Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor upon
request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will be
made by the Trust either monthly, semi-annually or annually depending upon the
plan of distribution applicable to the Unit purchased. A purchaser of a Unit in
the secondary market will initially receive distributions in accordance with
the plan selected by the prior owner of such Unit and may thereafter change the
plan as provided in "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsor, although not obligated to do so, intends to
maintain a market for the Units at prices based upon the aggregate bid price of
the Bonds in the portfolio of the Trust. The Secondary Market repurchase price
is based on the aggregate bid price of the Bonds in the Trust portfolio, and
the reoffer price is based on the aggregate bid price of the Bonds plus a sales
charge of 4.55% of the Public Offering Price (4.766% of the net amount
invested) plus net accrued interest. If such a market is not maintained, a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based upon the aggregate bid price of the Bonds. (See "Sponsor
Repurchase" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual and
annual plans of distribution have the opportunity to have their interest
distributions and principal distributions, if any, reinvested in available
series of "Insured Municipal Securities Trust" or "Municipal Securities Trust."
(See "Total Reinvestment Plan" and for residents of Texas, see "Total
Reinvestment Plan for Texas Residents" in Part B of this Prospectus.) The Plan
is not designed to be a complete investment program.
A-4
81304.1
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL SECURITIES TRUST
SERIES 40
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
<S> <C> <C>
Date of Deposit*: December 15, 1988 Minimum Principal Distribution:
- --------------- ------------------------------
Principal Amount of Bonds . $1,530,000 $1.00 per Unit.
- -------------------------
Number of Units ........... 3,851 Weighted Average Life
- --------------- ---------------------
Fractional Undivided Inter- to Maturity: 16.7 Years.
- -------------------------- -----------
est in Trust per Unit ... 1/3851 Minimum Value of Trust:
--------------------- ----------------------
Principal Amount of Trust may be terminated if
- -------------------
Bonds per Unit .......... $397.30 value of Trust is less than
--------------
Secondary Market Public $1,600,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ...... $1,416,990.67+++ The earlier of December 31,
Divided by 3,851 Units .. $367.95 2037 or the disposition of the
Plus Sales Charge of 4.55% last Bond in the Trust.
of Public Offering Price $16.75 Trustee***: The Chase Manhattan
Public Offering Price Bank.
per Unit ............... $384.70+ Trustee's Annual Fee: Monthly
--------------------
Redemption and Sponsor's plan $1.05 per $1,000; semi-
- ------------------------
Repurchase Price annual plan $.60 per $1,000;
----------------
per Unit ................ $367.95+ and annual plan is $.35 per
--------
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
--------------------- ------------------------
over Redemption and Evaluation: Minimum of $15
------------------- ----------
Sponsor's Repurchase plus $.25 per each issue of
--------------------
Price per Unit .......... $16.75++++ Bonds in excess of 50 issues
--------------
Difference between Public (treating separate maturities
- -------------------------
Offering Price per Unit as separate issues).
-----------------------
and Principal Amount per Sponsor: Reich & Tang
------------------------ -------
Unit Premium/(Discount) . $(12.60) Distributors L.P.
-----------------------
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in Part B
of this Prospectus).
</TABLE>
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $26.43 $26.43 $26.43
Less estimated annual fees and
expenses ............................ 1.15 .92 1.11
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $25.28 $25.51 $25.32
Estimated interest distribution# ...... 2.11 12.75 25.32
Estimated daily interest accrual# ..... .0702 .0709 .0703
Estimated current return#++ ........... 6.57% 6.63% 6.58%
Estimated long term return++ .......... 5.15% 5.22% 5.17%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
81304.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was
signed and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment
Plan" in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 770 Broadway, New York, New York 10003 (tel. no.: 1-800-882- 9898).
For information regarding redemption by the Trustee, see "Trustee
Redemption" in Part B of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately
three business days after purchase) of $7.23 monthly, $9.34
semi-annually and $22.95 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-6
81304.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 5 issues representing obligations
of issuers located in 5 states. The Sponsor has not participated as a sole
underwriter or manager, co-manager or member of an underwriting syndicate from
which any of the initial aggregate principal amount of the Bonds were acquired.
None of the Bonds are obligations of state and local housing authorities; none
are hospital revenue bonds; approximately 26.1% are issued in connection with
the financing of nuclear generating facilities; and approximately 18.3% are
"mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
call provisions. The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). None of the Bonds are general obligation bonds. Five issues
representing $1,530,000 of the principal amount of the Bonds are payable from
the income of a specific project or authority and are not supported by the
issuer's power to levy taxes. The portfolio is divided for purpose of issue as
follows: Airport Facilities 2, Housing 1, Nuclear Power 1 and Power 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1996, $750,000 (approximately 49% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of these
original issue discount bonds, none are Zero Coupon Bonds. Approximately 18.3%
of the aggregate principal amount of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 32.7% were
purchased at a premium and none were purchased at par. For an explanation of
the significance of these factors see "Discount and Zero Coupon Bonds" in Part
B of this Prospectus.
None of the Bonds in the Trust are subject to the federal individual
alternative minimum tax under the Tax Reform Act of 1986. See "Tax Status" in
Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1996 to September 15, 1996,
the entire principal amount of the Bond in portfolio no. 1 was called for
redemption pursuant to prerefunding provisions and is no longer contained
in the Trust.
A-7
81304.1
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1994 4,000 $904.30 $76.64 $77.27 $78.44 $ 40.86
June 30, 1995 3,946 580.28 58.18 58.71 73.57 312.49
June 30, 1996 3,851 377.38 39.86 40.18 50.23 193.01
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-8
81304.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Municipal Securities Trust, Series 40
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Securities Trust, Series
40 (the "Trust") at June 30, 1996, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the date
is September 28, 1995, expressed an unqualified opinion on those financial
statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
Municipal Securities Trust, Series 40
Portfolio of Investments June 30, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature(2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C>
1 $ 250,000 Reg. Arpts. Imprvmt. Corp. Bal* 11.250% 11/01/96 @ 100 S.F. $ 257,855
Facs. Sublease Rev. Bonds 11/01/2025 None
1985 Issue Western
Airlines Inc. (L.A. Intrnl
Arpt.)
2 280,000 Ill. Hsg. Dev. Auth. Hsg. A+ 5.600 No Sinking Fund 278,210
Dev. Bonds Series 1972A 7/01/2009 None
3 400,000 N.C. Eastern Muni. Pwr. Aaa* 4.500 7/01/20 @ 100 S.F. 330,736
Agency Pwr. Sys. Rev. 1/01/2024 01/01/24 @ 100 Ref.
Rfndg. Bonds Series
1987A
4 250,000 Philadelphia Penn. Arpt. A- 9.000 6/15/06 @ 100 S.F. 256,002
Rev. Bonds Series 1985 6/15/2015 None
(Philadelphia Arpt. Sys.)
5 350,000 Intermountain Pwr. Agency AA- 5.000 7/01/12 @ 100 S.F. 304,391
Utah Pwr. Supply Spec. 7/01/2016 7/01/96 @ 100 Ref.
Oblig. First Crossover
Series 1986B
---------------
-------------
$ 1,530,000 Total Investments (Cost (3) $1,287,962) $ 1,427,194
============== ==============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Municipal Securities Trust, Series 40
Footnotes to Portfolio - June 30, 1996
- ---------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meanings is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1996, the net unrealized appreciation of all the bonds was
comprised of the following.
Gross Unrealized Appreciation $ 203,958
Gross Unrealized Depreciation (64,726)
------------------
Net Unrealized Appreciation $ 139,232
------------------
(4) The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 40
Statement of Net Assets
June 30, 1996
- -----------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $1,287,962) $ 1,427,194
==================
Other Assets
Accrued Interest 30,943
------------------
Total Other Assets 30,943
------------------
Other Liabilities
Accrued Expenses 243
Advance From Trustee 4,598
------------------
Total Other Liabilities 4,841
------------------
Excess of Other Assets Over Other Liabilities 26,102
------------------
Net Assets (3,851 Units of Fractional Undistibuted
Interest Outstanding, $377.38 per Unit) $ 1,453,296
------------------
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 40
Statements of Operations
- -------------------------------------------------------------------------------
For The Years Ended June 30,
1996 1995 1994
Investment Income
Interest $ 134,011 $ 228,968 $ 314,196
--------- --------- ---------
Expenses
Trustee's Fees 3,628 4,316 5,082
Evaluator's Fees 1,031 1,031 1,124
Sponsor's Advisory Fee 638 963 975
--------- --------- --------
Total Expenses 5,297 6,310 7,181
--------- --------- --------
Net Investment Income 128,714 222,658 307,015
--------- --------- --------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (80,900) (145,883) (22,187)
Change in Unrealized Appreciation
(Depreciation) on Investments 70,923 109,637 (214,923)
-------- -------- --------
Net Gain (Loss) on Investments (9,977) (36,246) (237,110)
-------- -------- --------
Net Increase in Net Assets
Resulting from Operations $118,737 $186,412 $ 69,905
======== ======== ========
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 40
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------
For The Years Ended June 30,
1996 1995 1994
Operations
Net Investment Income $ 128,714 $ 222,658 $ 307,015
Realized Gain (Loss) on
Investments (80,900) (145,883) (22,187)
Change in Unrealized Appreciation
(Depreciation) on Investments 70,923 109,637 (214,923)
--------- ---------- ----------
Net Increase in Net
Assets Resulting
From Operations 118,737 186,412 69,905
--------- ----------- ----------
Distributions to Certificateholders
Investment Income 157,343 232,658 307,782
Principal 760,202 1,242,789 163,440
Redemptions
Interest 1,201 1,152 -
Principal 36,464 37,232 -
---------- ---------- ----------
Total Distributions
and Redemptions 955,210 1,513,831 471,222
---------- ---------- ----------
Total Increase (Decrease) (836,473) (1,327,419) (401,317)
Net Assets
Beginning of Year 2,289,769 3,617,188 4,018,505
---------- ---------- ----------
End of Year (Including
Undistributed Net Investment
Income of $36,305, $66,135 and
$77,287, Respectively) $1,453,296 $2,289,769 $3,617,188
========== ========== ==========
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 40
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
1. Organization
Municipal Securities Trust, 40 Series (the "Trust") was organized on
December 15, 1988 by Bear, Stearns & Co., Inc. under the laws of the
State of New York by a Trust Indenture and Agreement, and is
registered under the Investment Company Act of 1940. The Trust was
formed to preserve capital and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee"). Accordingly,
Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Interest Income
The discount on the zero-coupon bonds is accreted by the interest
method over the respective lives of the bonds. The accretion of such
discount is included in interest income; however, it is not
distributed until realized in cash upon maturity or sale of the
respective bonds.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the portfolio is based upon the bid prices for the bonds at the end of
the year, which approximates the fair value of the securities at that
date, except that the market value on the date of deposit represents
the cost to the Trust based on the offering prices for investments on
that date. The difference between cost and market value is reflected
as unrealized appreciation (depreciation) of investments. Securities
transactions are recorded on the trade date. Realized gains (losses)
from securities transactions are determined on the basis of average
cost of the securities sold or redeemed.
<PAGE>
2
Municipal Securities Trust, Series 40
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor Trusts
under the Internal Revenue Code. Under existing law, if the Trust so
qualifies, it will not be subject to federal income tax on net income
and capital gains that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the
accounting records and financial statements of the Trust and is
responsible for establishing and maintaining a system of internal
control related to these to. The Trustee is also responsible for all
estimates of expenses and accruals reflected in the Trust's financial
statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1996 and 1995, 95 and 54
units were redeemed, respectively. No units were redeemed for the year
ended June 30, 1994.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.35 to $1.05 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the year ended June 30, 1996, the "Trustee's Fees" are comprised of
Trustee fees of $1,880, and other expenses of $1,748. The other
expenses include professional, printing and miscellaneous fees.
<PAGE>
3
Municipal Securities Trust, Series 40
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original Cost to Certificateholders $ 4,063,540
Less Initial Gross Underwriting Commission (199,113)
-----------------
3,864,427
Accumulated Cost of Bond Sold,
Matured or Called (2,576,463)
Net Unrealized Appreciation 139,232
Undistributed Net Investment Income 36,305
Distributions in Excess of Proceeds
from Investments (10,205)
-----------------
Total $ 1,453,296
=================
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 4,000 units of
fractional undivided interest of the Trust as of the date of deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
7. Successor Sponsor
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investments trusts previously sponsored by Bear Stearns & Co.
As successor Sponsor, Reich & Tang has assumed all of the obligations
and rights of Bear Stearns & Co., Inc., the previous sponsor.
<PAGE>
4
Municipal Securities Trust, Series 40
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 580.28
Interest Income $ 34.38
Expenses (1.36)
-------
Net Investment Income 33.02
Net Gain or Loss on Investments(1) 9.10
--------
Total from Investment Operations 622.40
Less Distributions
to Certificateholders
Income 40.36
Principal 195.00
for Redemptions
Interest .31
Principal 9.35
-------
Total Distributions 245.02
--------
Net Asset Value, End of Period** $ 377.38
=========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 3,898.5 ([3,946+3,851]/2).
** Based upon actual units outstanding.
<PAGE>
Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus for Future Reference.
MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: October 31, 1996
THE TRUST
Organization
"Municipal Securities Trust" (the "Trust") consists of the "unit
investment trusts" designated as set forth in Part A.* The Trust was created
under the laws of the State of New York pursuant to the Trust Indenture and
Agreements** (collectively, the "Trust Agreement"), dated the Date of Deposit,
among Reich & Tang Distributors L.P. (successor Sponsor to Bear, Stearns & Co.
Inc.), or depending on the particular Trust, among Reich & Tang Distributors
L.P. and Gruntal & Co., Incorporated, as Co-Sponsors (the Sponsors or
Co-Sponsors, if applicable, are referred to herein as the "Sponsor"), Kenny S&P
Evaluation Services, a business unit of J.J. Kenny Company, Inc., a subsidiary
of The McGraw-Hill Companies, as Evaluator, and, depending on the particular
Trust, either The Bank of New York or The Chase Manhattan Bank, as Trustee. The
name of the Sponsor and the Trustee for a particular Trust is contained in the
"Summary of Essential Information" in Part A.
On the Date of Deposit the Sponsor deposited with the Trustee long-term
bonds and/or delivery statements relating to contracts for the purchase of
certain such bonds (the "Bonds") and cash or an irrevocable letter of credit
issued by a major commercial bank in the amount required for such purchases.
Thereafter, the Trustee, in exchange for the Bonds so deposited, delivered to
the Sponsor the Certificates evidencing the ownership of all Units of the
Trust.
The Trust consists of the bonds described under "The Trust" in Part A of
this Prospectus, the interest (including, where applicable earned original
discount) on which, in the opinions of bond counsel to the respective issuers
given at the time of original delivery of the Bonds, is exempt from regular
federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an undivided
interest or pro rata share in the principal and interest of the Trust in the
per Unit ratio set forth under "Summary of Essential Information" in Part A. To
the extent that any Units are redeemed by the Trustee, the
- --------
* This Part B relates to the outstanding series of Municipal Securities
Trust or Municipal Securities Trust Discount Series as reflected in Part A
attached hereto.
** References in this Prospectus to the Trust Agreements are qualified in
their entirety by the respective Trust Indentures and Agreements which are
incorporated herein by reference.
C/M: 11939.0001 1173.4
<PAGE>
fractional undivided interest or pro rata share in the Trust represented by
each unredeemed Unit will increase, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Certificateholders,
which may include the Sponsor or until the termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit investment trusts
formed by the Sponsor, offers investors the opportunity to participate in a
portfolio of long-term tax-exempt bonds with a greater diversification than
they might be able to acquire themselves. The objectives of the Trust are to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers given at the time of original delivery of the Bonds, is,
with certain exceptions, exempt from regular federal income tax under existing
law. Such interest income may, however, be subject to the federal corporate
alternative minimum tax and to state and local taxes. An investor will realize
taxable income upon maturity or early redemption of the market discount bonds
in a Trust portfolio and will realize, where applicable, tax-exempt income to
the extent of the earned portion of interest, including original issue discount
earned on the bonds in a Trust portfolio. Investors should be aware that there
is no assurance the Trust's objectives will be achieved as these objectives are
dependent on the continuing ability of the issuers of the Bonds to meet their
interest and principal payment requirements, on the continuing satisfaction of
the Bonds of the conditions required for the exemption of interest thereon from
regular federal income tax, and on the market value of the Bonds, which can be
affected by fluctuations in interest rates and other factors.
Since disposition of Units prior to final liquidation of the Trust may
result in an investor receiving less than the amount paid for such Units (see
"Comparison of Public Offering Price, Sponsor's Repurchase Price and Redemption
Price"), the purchase of a Unit should be looked upon as a long-term
investment. Neither the Trust nor the Total Reinvestment Plan is designed to be
a complete investment program.
Portfolio
All of the Bonds in the Trust were rated "A" or better by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies ("Standard &
Poor's") or Moody's Investors Service, Inc. ("Moody's") at the time originally
deposited in the Trust. For a list of the ratings of each Bond on the
Evaluation Date, see "Portfolio" in Part A.
For information regarding (i) the number of issues in the Trust, (ii) the
range of fixed maturities of the Bonds, (iii) the number of issues payable from
the income of a specific project or authority and (iv) the number of issues
constituting general obligations of a government entity, see "The Trust" and
"Portfolio" in Part A.
When selecting Bonds for the Trust, the following factors, among others,
were considered by the Sponsor on the Date of Deposit: (a) the quality of the
Bonds and whether such Bonds were rated "A" or better by either Standard &
Poor's or Moody's, (b) the yield and price of the Bonds relative to other
tax-exempt securities of comparable quality and maturity, (c) income to the
Certificateholders of the Trust and (d) the diversification of the Trust
portfolio, as to purpose of issue and location of issuer, taking into account
the availability in the market of issues which meet the Trust's quality,
rating, yield and price criteria. Subsequent to the Evaluation Date, a Bond may
cease to be rated or its rating may be reduced below that specified above.
Neither event requires an elimination of such Bond from a Trust but may be
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<PAGE>
considered in the Sponsor's determination to direct the Trustee to dispose of
the Bond. See "Portfolio Supervision". For an interpretation of the bond
ratings see "Description of Bond Ratings".
Housing Bonds. Some of the aggregate principal amount of the Bonds may
consist of obligations of state and local housing authorities whose revenues
are primarily derived from mortgage loans to rental housing projects for low to
moderate income families. Since such obligations are usually not general
obligations of a particular state or municipality and are generally payable
primarily or solely from rents and other fees, adverse economic developments
including failure or inability to increase rentals, fluctuations of interest
rates and increasing construction and operating costs may reduce revenues
available to pay existing obligations. See "Description of Portfolio" in Part A
for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount of the
Bonds may consist of hospital revenue bonds. Ratings of hospital bonds are
often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary
considerably from such projections. A hospital's gross receipts and net income
will be affected by future events and conditions including, among other things,
demand for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
third-party payors and government programs such as Medicare and Medicaid. Both
private third-party payors and government programs have undertaken cost
containment measures designed to limit payments. Furthermore, government
programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions, all of
which may materially decrease the rate of program payments for health care
facilities. There can be no assurance that payments under governmental programs
will remain at levels comparable to present levels or will, in the future, be
sufficient to cover the costs allocable to patients participating in such
programs. In addition, there can be no assurance that a particular hospital or
other health care facility will continue to meet the requirements for
participation in such programs.
The health care delivery system is undergoing considerable alteration and
consolidation. Consistent with that trend, the ownership or management of a
hospital or health care facility may change, which could result in (i) an early
redemption of bonds, (ii) alteration of the facilities financed by the Bonds or
which secure the Bonds, (iii) a change in the tax exempt status of the Bonds or
(iv) an inability to produce revenues sufficient to make timely payment of debt
service on the Bonds. Future legislation or changes in the areas noted above,
among other things, would affect all hospitals to varying degrees and,
accordingly, any adverse change in these areas may affect the ability of such
issuers to make payment of principal and interest on such bonds. See
"Description of Portfolio" in Part A for the amount of hospital revenue bonds
contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been issued in
connection with the financing of nuclear generating facilities. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsor is unable to
predict whether any such actions or whether any such proposals or litigation,
if enacted or instituted, will have an adverse impact on the revenues available
to pay the debt service on the Bonds in the portfolio issued to finance such
nuclear projects. See "Description of Portfolio" in
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<PAGE>
Part A for the amount of bonds issued to finance nuclear generating facilities
contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy bonds"
which are obligations of which all or a significant portion of the proceeds are
to be used directly or indirectly for mortgages on owner-occupied residences.
Section 103A of the Internal Revenue Code of 1954, as amended, provided as a
general rule that interest on "mortgage subsidy bonds" will not be exempt from
Federal income tax. An exception is provided for certain "qualified mortgage
bonds." Qualified mortgage bonds are bonds that are used to finance
owner-occupied residences and that meet numerous statutory requirements. These
requirements include certain residency, ownership, purchase price and target
area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions and (for bonds issued after December 31, 1984) certain information
reporting, certification, public hearing and policy statement requirements. In
the opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds" will
be exempt from Federal income tax when issued. See "Description of Portfolio"
in Part A for the amount of mortgage subsidy Bonds contained therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue bonds."
Under the Internal Revenue Code of 1986, as amended (the "Code") (and under
similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to
residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting certification, and public hearing requirements. There can
be no assurance that additional federal legislation will not be introduced or
that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bonds proceeds are not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds").
See "Description of Portfolio" in Part A for the amount of mortgage revenue
bonds contained therein.
Private Activity Bonds. The portfolio of the Trust may contain other Bonds
which are "private activity bonds" (often called Industrial Revenue Bonds
("IRBs") if issued prior to 1987) which would be primarily of two types: (1)
Bonds for a publicly owned facility which a private entity may have a right to
use or manage to some degree, such as an airport, seaport facility or water
system and (2) facilities deemed owned or beneficially owned by a private
entity but which were financed with tax-exempt bonds of a public issuer, such
as a manufacturing facility or a pollution control facility. In the case of the
first type, bonds are generally payable from a designated source of revenues
derived from the facility and may further receive the benefit of the legal or
moral obligation of one or more political subdivisions or taxing jurisdictions.
In most cases of project financing of the first type, receipts or revenues of
the Issuer are derived from the project or the operator or from the unexpended
proceeds of the bonds. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which are owned
by or for the benefit of, and are operated by, corporate entities. Ordinarily,
such private activity bonds are not general obligations of governmental
entities and are not backed by the taxing power of such entities,
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<PAGE>
and are solely dependent upon the creditworthiness of the corporate user of the
project or corporate guarantor.
The private activity bonds in the Trust have generally been issued under
bond resolutions, agreements or trust indentures pursuant to which the revenues
and receipts payable under the issuer's arrangements with the users or the
corporate operator of a particular project have been assigned and pledged to
the holders of the private activity bonds. In certain cases a mortgage on the
underlying project has been assigned to the holders of the private activity
bonds or a trustee as additional security. In addition, private activity bonds
are frequently directly guaranteed by the corporate operator of the project or
by another affiliated company. See "Description of Portfolio" in Part A for the
amount of private activity bonds contained therein.
Litigation. Litigation challenging the validity under state constitutions
of present systems of financing public education has been initiated in a number
of states. Decisions in some states have been reached holding such school
financing in violation of state constitutions. In addition, legislation to
effect changes in public school financing has been introduced in a number of
states. The Sponsor is unable to predict the outcome of the pending litigation
and legislation in this area and what effect, if any, resulting changes in the
sources of funds, including proceeds from property taxes applied to the support
of public schools, may have on the school bonds in a Trust.
Legal Proceedings Involving the Trusts. The Sponsor has not been notified
or made aware of any litigation pending with respect to any Bonds which might
reasonably be expected to have a material adverse effect on a Trust. Such
litigation, as, for example, suits challenging the issuance of pollution
control revenue bonds under recently-enacted environmental protection statutes,
may affect the validity of such Bonds or the tax-free nature of the interest
thereon. At any time after the date of this Prospectus litigation may be
instituted on a variety of grounds with respect to any Bond in a Trust. The
Sponsor is unable to predict whether any such litigation may be instituted or,
if instituted, whether it might have a material adverse effect on a Trust.
Other Factors. The Bonds in the Trust, despite their optional redemption
provisions which generally do not take effect until 10 years after the original
issuance dates of such bonds (often referred to as "ten year call protection"),
do contain provisions which require the issuer to redeem such obligations at
par from unused proceeds of the issue within a stated period. In recent periods
there have been increased redemptions of bonds, particularly housing bonds,
pursuant to such redemption provisions. In addition, the Bonds in the Trusts
are also subject to mandatory redemption in whole or in part at par at any time
that voluntary or involuntary prepayments of principal on the underlying
collateral are made to the trustee for such bonds or that the collateral is
sold by the bond issuer. Prepayments of principal tend to be greater in periods
of declining interest rates; it is possible that such prepayments could be
sufficient to cause a bond to be redeemed substantially prior to its stated
maturity date, earliest call date or sinking fund redemption date.
The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an authorized
municipal debtor could more easily seek federal court protection to assist in
reorganizing its debts so long as certain requirements were met. Historically,
very few financially troubled municipalities have sought court
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<PAGE>
assistance for reorganizing their debts; notwithstanding, the Sponsors are
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore, what
effect, if any, the applicable federal bankruptcy law provisions will have on
the Trusts.
The Trust may also include "moral obligation" bonds. Under statutes
applicable to such bonds, if an issuer is unable to meet its obligations, the
repayment of such bonds becomes a moral commitment but not a legal obligation
of the state or municipality in question. See "Description of Portfolio" and
"The Trust" in Part A of this Prospectus for the amount of moral obligations
bonds contained in the Trust.
Certain of the Bonds in the Trust are subject to redemption prior to their
stated maturity dates pursuant to sinking fund or call provisions. A sinking
fund is a reserve fund appropriated specifically toward the retirement of a
debt. A callable bond is one which is subject to redemption or refunding prior
to maturity at the option of the issuer. A refunding is a method by which a
bond is redeemed at or before maturity from the proceeds of a new issue of
bonds. In general, call provisions are more likely to be exercised when the
offering side evaluation of a bond is at a premium over par than when it is at
a discount from par. A listing of the sinking fund and call provisions, if any,
with respect to each of the Bonds is contained under "Portfolio" in Part A of
this Prospectus. Certificateholders will realize a gain or loss on the early
redemption of such Bonds, depending upon whether the price of such Bonds is at
a discount from or at a premium over par at the time Certificateholders
purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds. Because certain of the Bonds
from time to time may be redeemed or will mature in accordance with their terms
or may be sold under certain circumstances, no assurance can be given that a
Trust will retain its present size and composition for any length of time. The
proceeds from the sale of a Bond or the exercise of any redemption or call
provision will be distributed to Certificateholders on the next distribution
date, except to the extent such proceeds are applied to meet redemptions of
Units. See "Trustee Redemption".
Discount and Zero Coupon Bonds
Some of the Bonds in the Municipal Discount Trust and Municipal Trust may
contain original issue discount bonds (see "Description of Portfolio" in the
Part A). The original issue discount, which is the difference between the
initial purchase price of the Bonds and the face value, is deemed to accrue on
a daily basis and the accrued portion will be treated as tax-exempt interest
income for regular federal income tax purposes. Upon sale or redemption, any
gain realized that is in excess of the earned portion of original issue
discount will be taxable as capital gain. (See "Tax Status".) The current value
of an original issue discount bond reflects the present value of its face
amount at maturity. The market value tends to increase more slowly in early
years and in greater increments as the Bonds approach maturity. Of these
original issue discount bonds, a portion of the aggregate principal amount of
the Bonds in the Trust are Zero Coupon Bonds. Zero Coupon Bonds do not provide
for the payment of any current interest and provide for payment at maturity at
face value unless sooner sold or redeemed. The market value of Zero Coupon
Bonds is subject to greater fluctuation than coupon bonds in response to
changes in interest rates. Zero Coupon Bonds generally are subject to
redemption at compound accreted value based on par value at maturity. Because
the issuer is not obligated to make current interest payments, Zero Coupon
Bonds may be less likely to be redeemed than coupon bonds issued at a similar
interest rate.
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Some of the Bonds in the Trust may have been purchased at a "market"
discount from par value at maturity. This is because the coupon interest rates
on the discount bonds at the time they were purchased and deposited in the
Trust were lower than the current market interest rates for newly issued bonds
of comparable rating and type. At the time of issuance the discount bonds were
for the most part issued at then current coupon interest rates. The current
returns (coupon interest income as a percentage of market price) of discount
bonds will be lower than the current returns of comparably rated bonds of
similar type newly issued at current interest rates because discount bonds tend
to increase in market value as they approach maturity and the full principal
amount becomes payable. A discount bond held to maturity will have a larger
portion of its total return in the form of capital gain and less in the form of
tax-exempt interest income than a comparable bond newly issued at current
market rates. Gain on the disposition of a Bond purchased at a market discount
generally will be treated as ordinary income, rather than capital gain, to the
extent of accrued market discount. Discount bonds with a longer term to
maturity tend to have a higher current return and a lower current market value
than otherwise comparable bonds with a shorter term of maturity. If interest
rates rise, the value of discount bonds will decrease; and if interest rates
decline, the value of discount bonds will increase. The discount does not
necessarily indicate a lack of market confidence in the issuer.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is computed by adding
to the aggregate bid price of the Bonds in each Trust divided by the number of
Units outstanding, an amount based on the applicable sales charge times such
aggregate bid price of the Bonds in each Trust.
The method used by the Evaluator for computing the sales charge for
secondary market purchases shall be based upon the number of years remaining to
maturity of each bond in the portfolio. Bonds will be deemed to mature on their
stated maturity dates unless bonds have been called for redemption, funds have
been placed in escrow to redeem them on an earlier call date or are subject to
a "mandatory put," in which case the maturity will be deemed to be such other
date.
The table below sets forth the various sales charges based on the length
of maturity of each Bond.
As Percent of Public
Time to Maturity Offering Price
less than 6 months 0%
6 mos. to 1 year 1%
over 1 yr. to 2 yrs. 1 1/2%
over 2 yrs. to 4 yrs. 2 1/2%
over 4 yrs. to 8 yrs. 3 1/2%
over 8 yrs. to 15 yrs. 4 1/2%
over 15 years 5 1/2%
(see "Public Offering Price" in Part A for the applicable sales charge for the
Trust). A proportionate share of accrued interest on the Bonds to the
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<PAGE>
expected date of settlement for the Units is added to the Public Offering
Price. Accrued interest is the accumulated and unpaid interest on a Bond from
the last day on which interest was paid and is initially accounted for daily by
the Trust at the daily rate set forth under "Summary of Essential Information"
in Part A. The secondary market Public Offering Price can vary on a daily basis
from the amount stated in Part A in accordance with fluctuations in the prices
of the Bonds. The price to be paid by each investor will be computed on the
basis of an evaluation made on the day the Units are purchased. The aggregate
bid price evaluation of the Bonds is determined in the manner set forth under
"Trustee Redemption".
The Evaluator may obtain current prices for the Bonds from investment
dealers or brokers (including the Sponsor) that customarily deal in tax-exempt
obligations or from any other reporting service or source of information which
the Evaluator deems appropriate.
Accrued Interest
An amount of accrued interest which represents accumulated unpaid or
uncollected interest on a Bond from the last day on which interest was paid
thereon will be added to the Public Offering Price and paid by the
Certificate-holder at the time the Units are purchased. Since the Trust
normally receives the interest on Bonds twice a year and the interest on the
Bonds in the Trust is accrued on a daily basis, the Trust will always have an
amount of interest accrued but not actually received and distributed to
Certificateholders. A Certificateholder will not recover his proportionate
share of accrued interest until the Units are sold or redeemed, or the Trust is
terminated. At that time, the Certificateholder will receive his proportionate
share of the accrued interest computed to the settlement date in the case of a
sale or termination and to the date of tender in the case of redemption.
Employee Discounts
Employees (and their immediate families) of Reich & Tang Distributors L.P.
and its affiliates, Gruntal & Co., Incorporated and of any underwriter of a
Trust, pursuant to employee benefit arrangements, may purchase Units of a Trust
at a price equal to the bid side evaluation of the underlying securities in the
Trust divided by the number of Units outstanding plus a reduced sales charge.
Such arrangements result in less selling effort and selling expenses than sales
to employee groups of other companies. Resales or transfers of Units purchased
under the employee benefit arrangements may only be made through the Sponsor's
secondary market, so long as it is being maintained.
Distribution of Units
Certain banks and thrifts will make Units of the Trust available to their
customers on an agency basis. A portion of the sales charge paid by their
customers is retained by or remitted to the banks. Under the Glass-Steagall
Act, banks are prohibited from underwriting Units; however, the Glass-Steagall
Act does permit certain agency transactions and the banking regulators have
indicated that these particular agency transactions are permitted under such
Act. In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor intends to qualify the Units for sale in substantially all
States through dealers who are members of the National Association of
Securities Dealers, Inc. Units may be sold to dealers at prices which represent
a concession of up to (a) 4% of the Public Offering Price for the Municipal
Securities Trust Series or (b) $25.00 per unit for the Municipal
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Securities Trust Discount Series, subject to the Sponsor's right to change the
dealers' concession from time to time. Such Units may then be distributed to
the public by the dealers at the Public Offering Price then in effect. In
addition, for transactions of 1,000,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. The Sponsor reserves the right to reject, in whole or in part,
any order for the purchase of Units. The Sponsor reserves the right to change
the discounts from time to time.
Sponsor's Profits
The Sponsor will receive a gross commission on all Units sold in the
secondary market equal to the applicable sales charge on each transaction. (See
"Offering Price".) In addition, in maintaining a market for the Units (see
"Sponsor Repurchase"), the Sponsor will realize profits or sustain losses in
the amount of any difference between the price at which it buys Units and the
price at which it resells such Units.
Participants in the "Total Reinvestment Plan" can designate a broker as
the recipient of a dealer concession. See "Total Reinvestment Plan".
Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price
The secondary market Public Offering Price of Units will be determined on
the basis of the current bid prices of the Bonds in the Trust, plus the
applicable sales charge. The value at which Units may be resold in the
secondary market or redeemed will be determined on the basis of the current bid
prices of such Bonds without any sales charge. On the Evaluation Date, the
Public Offering Price per Unit (based on the bid prices of the Bonds in the
Trust plus the sales charge) exceeded the Repurchase and Redemption Price per
Unit (based upon the bid prices of the Bonds in the Trust without the sales
charge) by the amount shown under "Summary of Essential Information" in Part A
of this Prospectus. For this reason, among others (including fluctuations in
the market prices of Bonds and the fact that the Public Offering Price includes
the applicable sales charge), the amount realized by a Certificateholder upon
any redemption or repurchase of Units may be less than the price paid for such
Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in a Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in each Trust's portfolio
by weighing each Bond's yield by the market value of the Bond and by the amount
of time remaining to the date to which the Bond is priced (thus creating an
average yield for the portfolio of each Trust); and (3) reducing the average
yield for the portfolio of each Trust in order to reflect estimated fees and
expenses of that Trust and the maximum sales charge paid by Certificateholders.
The resulting Estimated Long Term Return represents a measure of the return to
Certificateholders earned over the estimated life of each Trust. The Estimated
Long Term Return as of the day prior to the
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Evaluation Date is stated for each Trust under "Summary of Essential
Information" in Part A.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolios of each Trust. Moreover, because interest rates on
Bonds purchased at a premium are generally higher than current interest rates
on newly issued bonds of a similar type with comparable rating, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity. On the day prior to the Evaluation Date, the Estimated
Net Annual Interest Income per Unit divided by the Public Offering Price
resulted in the Estimated Current Return stated for each Trust under "Summary
of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to each Trust and with the redemption, maturity, sale or other
disposition of the Bonds in each Trust. The Public Offering Price will vary
with changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future.
A schedule of cash flow projections is available from the Sponsors upon
request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered Certificates
executed by the Trustee and the Sponsor. Certificates may be issued in
denominations of one or more Units and will bear appropriate notations on their
faces indicating which plan of distribution has been selected by the
Certificateholder. Certificates are transferable by presentation and surrender
to the Trustee properly endorsed and/or accompanied by a written instrument or
instruments of transfer. Although no such charge is presently made or
contemplated, the Trustee may require a Certificateholder to pay $2.00 for each
Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
Interest and Principal Distributions
Interest received by the Trust is credited by the Trustee to an Interest
Account and a deduction is made to reimburse the Trustee without interest for
any amounts previously advanced. Proceeds representing principal received from
the maturity, redemption, sale or other disposition of the Bonds are credited
to a Principal Account.
Distributions to each Certificateholder from the Interest Account are
computed as of the close of business on each Record Date for the following
Payment Date and consist of an amount substantially equal to one-twelfth,
one-half or all of each Certificateholder's pro rata share of the Estimated Net
Annual Interest Income in the Interest Account, depending upon the applicable
plan of distribution. Distributions from the Principal Account will be computed
as of each semi-annual Record Date, and will be made to the Certificateholders
on or shortly after the next semi-annual Payment Date. Proceeds
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representing principal received from the disposition of any of the Bonds
between a Record Date and a Payment Date which are not used for redemptions of
Units will be held in the Principal Account and not distributed until the
second succeeding semi-annual Payment Date. No distributions will be made to
Certificateholders electing to participate in the Total Reinvestment Plan,
except as provided thereunder. Persons who purchase Units between a Record Date
and a Payment Date will receive their first distribution on the second Payment
Date after such purchase.
Because interest payments are not received by the Trust at a constant rate
throughout the year, interest distributions may be more or less than the amount
credited to the Interest Account as of a given Record Date. For the purpose of
minimizing fluctuations in the distributions from the Interest Account, the
Trustee will advance sufficient funds, without interest, as may be necessary to
provide interest distributions of approximately equal amounts. All funds in
respect of the Bonds received and held by the Trustee prior to distribution to
Certificateholders may be of benefit to the Trustee and do not bear interest to
Certificateholders.
As of the first day of each month, the Trustee will deduct from the
Interest Account, and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In
addition, the Trustee may withdraw from the Interest and Principal Accounts
such amounts as may be necessary to cover redemptions of Units by the Trustee.
The estimated monthly, semi-annual or annual interest distribution per
Unit will be in the amount shown under Summary of Essential Information and
will change and may be reduced as bonds mature or are redeemed, exchanged or
sold, or as expenses of the Trust fluctuate. No distribution need be made from
the Principal Account until the balance therein is an amount sufficient to
distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually, depending upon
the distribution plan applicable to the Unit purchased. Record Dates are the
first day of each month for monthly distributions, the first day of each June
and December for semi-annual distributions and the first day of each December
for annual distributions. Payment Dates will be the fifteenth day of each month
following the respective Record Dates. Certificateholders purchasing Units in
the secondary market will initially receive distributions in accordance with
the election of the prior owner. Every October each Certificateholder may
change his distribution election by notifying the Trustee in writing of such
change between October 1 and November 1 of each year. (Certificateholders
deciding to change their election should contact the Trustee by calling the
number listed on the back cover hereof for information regarding the procedures
that must be followed in connection with this written notification of the
change of election.) Failure to notify the Trustee on or before November 1 of
each year will result in a continuation of the plan for the following 12
months.
Records
The Trustee shall furnish Certificateholders in connection with each
distribution a statement of the amount of interest, if any, and the
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amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year (normally prior to January 31 of the succeeding year),
the Trustee will furnish to each person who at any time during the calendar
year was a Certificateholder of record, a statement showing (a) as to the
Interest Account: interest received (including any earned original issue
discount and amounts representing interest received upon any disposition of
Bonds), amounts paid for redemptions of Units, if any, deductions for
applicable taxes and fees and expenses of the Trust, and the balance remaining
after such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (b) as to the
Principal Account: the dates of disposition of any Bonds and the net proceeds
received therefrom (including any unearned original issue discount but
excluding any portion representing accrued interest), deductions for payments
of applicable taxes and fees and expenses of the Trust, amounts paid for
redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (c) a list of the Bonds held and the
number of Units outstanding on the last business day of such calendar year; (d)
the Redemption Price per Unit based upon the last computation thereof made
during such calendar year; and (e) amounts actually distributed to
Certificateholders during such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total dollar amounts and as
dollar amounts representing the pro rata share of each Unit outstanding on the
last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate-holders at
all reasonable times during usual business hours, books of record and account
of its transactions as Trustee, including records of the names and addresses of
Certificateholders, Certificates issued or held, a current list of Bonds in the
portfolio and a copy of the Trust Agreement.
TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of opinions of
bond counsel to the issuing governmental authorities given at the time of
original delivery of the Bonds to the effect that the interest thereon is
exempt from regular federal income tax, but such interest may be subject to the
federal corporate alternative minimum tax and to state and local taxes. Neither
the Sponsor nor the Trustee nor their respective counsel have made any review
of the proceedings relating to the issuance of the Bonds or the bases for such
opinions, and express no opinion as to these matters, and neither the Trustee
nor the Sponsor nor their respective counsel have made an independent
examination or verification that the federal income tax status of the Bonds has
not been altered since the time of the original delivery of those opinions.
In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor, under
existing law:
The Trust is not an association taxable as a corporation for federal
income tax purposes under the Internal Revenue Code of 1986 (the
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<PAGE>
"Code"), and income received by the Trust that consists of interest
excludable from federal gross income under the Code will be excludable
from the federal gross income of the Certificateholders of the Trust.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each
Certificateholder will be considered to have received his pro rata share
of Bond interest when it is received by the Trust, and the net income
distributable to Certificateholders that is exempt from federal income tax
when received by the Trust will constitute tax-exempt income when received
by the Certificateholders.
Gain (other than any earned original issue discount) realized on a
sale or redemption of the Bonds or on a sale of a Unit is, however,
includable in gross income for federal income tax purposes, generally as
capital gain, although gain on the disposition of a Bond or a Unit
purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market
discount. (It should be noted in this connection that such gain does not
include any amounts received in respect of accrued interest.) Such gain
may be long or short-term depending on the facts and circumstances.
Capital losses are deductible to the extent of capital gains; in addition,
up to $3,000 of capital losses of non-corporate Certificate-holders may be
deducted against ordinary income. Capital assets must be held for more
than one year to qualify for long-term capital gain treatment. Individuals
who realize long-term capital gains will be subject to a reduced maximum
tax rate on such gain.
Each Certificateholder will realize taxable gain or loss when the
Trust disposes of a Bond (whether by sale, exchange, redemption or payment
at maturity), as if the Certificateholder had directly disposed of his pro
rata share of such Bond. The gain or loss is measured by the difference
between (i) the tax cost of such pro rata share and (ii) the amount
received therefor. For this purpose, a Certificateholder's tax cost for
each Bond is determined by allocating the total tax cost of each Unit
among all of the Bonds held in the Trust (in accordance with the portion
of the Trust comprised by each Bond). In order to determine the amount of
taxable gain or loss, the Certificateholder's amount received is similarly
allocated at that time. The Certificateholder may exclude from the amount
received any amounts that represent accrued interest or the earned portion
of any original issue discount but may not exclude amounts attributable to
market discount. Thus, when a Bond is disposed of by the Trust at a gain,
taxable gain will equal the difference between (i) the amount received and
(ii) the amount paid plus any original issue discount (limited, in the
case of Bonds issued after June 8, 1980, to the portion earned from the
date of acquisition to the date of disposition). Gain on the disposition
of a Bond purchased at a market discount generally will be treated as
ordinary income, rather than capital gain, to the extent of accrued market
discount. No deduction is allowed for the amortization of bond premium on
tax-exempt bonds such as the Bonds in computing regular federal income
tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis of
a discount bond is increased by the amount of accrued, tax-exempt original
issue discount thus determined. This method of calculation will produce
higher capital gains (or lower losses) to a Certificate-holder, as
compared to the results produced by the straight-line method of accounting
for original issue discount, upon an early disposition of a Bond by the
Trust or of a Unit by a Certificateholder.
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A Certificateholder may also realize taxable income or loss when a
Unit is sold or redeemed. The amount received is allocated among all the
Bonds in the Trust in the same manner as when the Trust disposes of Bonds
and the Certificateholder may exclude accrued interest and the earned
portion of any original issue discount (but not amounts attributable to
market discount). The return of a Certificateholder's tax cost is
otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross income
for taxpayers whose "modified adjusted gross income" combined with a
portion of their benefits exceeds a base amount. The base amount is
$25,000 for an individual, $32,000 for a married couple filing a joint
return and zero for married persons filing separate returns. Interest on
tax-exempt bonds is to be added to adjusted gross income for purposes of
computing the amount of benefits that are includable in gross income and
determining whether an individual's income exceeds the base amount above
which a portion of the benefits would be subject to tax.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount by
which the adjusted current earnings (which will include tax-exempt
interest) of the corporation exceeds alternative minimum taxable income
(determined without this item). In addition, in certain cases, Subchapter
S corporations with accumulated earnings and profits from Subchapter C
years will be subject to a minimum tax on excess "passive investment
income" which includes tax-exempt interest.
The Trust is not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rata portion
of all or part of the income of the Trust will be treated as the income of
the Certificateholder under the income tax laws of the State and City of
New York. Similar treatment may apply in other states.
The exemption of interest on municipal obligations for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or political subdivision. In general, municipal bond interest exempt
from federal income tax is taxable income to residents of the State or City of
New York under the tax laws of those jurisdictions unless the bonds are issued
by the State of New York or one of its political subdivisions or by the
Commonwealth of Puerto Rico or one of its political subdivisions. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and
instrumentalities, must be included in calculating New York State and New York
City entire net income for purposes of computing New York State and New York
City franchise (income) tax. The laws of the several states and local taxing
authorities vary with respect to the taxation of such obligations and each
Certificateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.
In the case of Bonds that are industrial revenue bonds ("IRBs") or certain
types of private activity bonds, the opinions of bond counsel to the respective
issuing authorities indicate that interest on such Bonds is exempt from regular
federal income tax. However, interest on such Bonds will not be exempt from
regular federal income tax for any period during which such Bonds are held by a
"substantial user" of the facilities financed by the proceeds of such Bonds or
by a "related person" thereof within the meaning of the Code. Therefore,
interest on any such Bonds allocable to a Certificateholder who is such a
"substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue"
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<PAGE>
exemption, the "small issue" exemption will not be available or will be lost
if, at any time during the three-year period beginning on the later of the date
the facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of
an owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events such as prohibited "arbitrage" activities
by the issuer of the Bond or the failure of the Bond to continue to satisfy the
conditions required for the exemption of interest thereon from regular federal
income tax. No investigation has been made as to the current or future owners
or users of the facilities financed by the Bonds, the amount of such persons'
outstanding tax-exempt IRBs, or the facilities themselves, and no assurance can
be given that future events will not affect the tax-exempt status of the Bonds.
Investors should consult their tax advisors for advice with respect to the
effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or carry the
Units is not deductible for federal income tax purposes. In addition, under
rules used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of Units. Also, in the case of certain financial institutions that acquire
Units, in general no deduction is allowed for interest expense allocable to
such Units.
From time to time proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trust, and it can be expected that
similar proposals may be introduced in the future. In particular, Congress may
consider the adoption of some form of a "flat tax," which could have an adverse
impact on the value of tax-exempt bonds.
In South Carolina v. Baker, the U.S. Supreme Court held that the federal
government may constitutionally require states to register bonds they issue and
subject the interest on such bonds to federal income tax if not registered, and
that there is no constitutional prohibition against the federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the federal government to regulate and
control bonds such as the Bonds in the Trust and to tax interest on such bonds
in the future. The decision does not, however, affect the current exemption
from taxation of the interest earned on the Bonds in the Trust in accordance
with Section 103 of the Code.
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt
from regular federal income tax may be limited to law existing at the time the
Bonds were issued, and may not apply to the extent that future changes in law,
regulations or interpretations affect such Bonds. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.
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LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intends to maintain a
secondary market for the Units. The Sponsor's secondary market repurchase price
will be based on the aggregate bid price of the Bonds in the Trust portfolio,
determined by the Evaluator on a daily basis, and will be the same as the
redemption price. See "Trustee Redemption". Certificateholders who wish to
dispose of their Units should inquire of the Sponsor prior to making a tender
for redemption. The Sponsor may discontinue repurchases of Units if the supply
of Units exceeds demand, or for other business reasons. The date of repurchase
is deemed to be the date on which Certificates representing Units are
physically received in proper form by the Sponsor, Reich & Tang Distributors
L.P., 600 Fifth Avenue, New York, N.Y. 10020. Units received after 4:00 P.M.,
New York Time, will be deemed to have been repurchased on the next business
day. In the event a market is not maintained for the Units, a Certificateholder
may be able to dispose of Units only by tendering them to the Trustee for
redemption.
Prospectuses relating to certain other bond trusts indicate an intention
by the respective Sponsors, subject to change, to repurchase units on the basis
of a price higher than the bid prices of the bonds in the trust. Consequently,
depending on the prices actually paid, the secondary market repurchase price of
other trusts may be computed on a somewhat more favorable basis than the
repurchase price offered by the Sponsor for units of this Trust, although in
all bond trusts, the purchase price of a unit depends primarily on the value of
the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be reoffered
for sale by the Sponsor at a price based on the aggregate bid price of the
Bonds in the Trust plus the applicable sales charge (see "Public Offering
Price" in Part A) plus net accrued interest. Any Units that are purchased by
the Sponsor in the secondary market also may be redeemed by the Sponsor if it
determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption. (See "Trustee Redemption".) For example, if in order to meet
redemptions of Units the Trustee must dispose of Bonds, and if such disposition
cannot be made by the redemption date (seven calendar days after tender), the
Sponsor may elect to purchase such Units. Such purchase shall be made by
payment to the Certificateholder not later than the close of business on the
redemption date of an amount equal to the Redemption Price on the date of
tender.
Trustee Redemption
Units also may be tendered to the Trustee for redemption at its corporate
trust office as set forth in Part A of this Prospectus, upon proper delivery of
Certificates representing such Units and payment of any relevant tax. At the
present time there are no specific taxes related to the redemption of Units. No
redemption fee will be charged by the Sponsor or the Trustee. Units redeemed by
the Trustee will be cancelled.
Certificates representing Units to be redeemed must be delivered to the
Trustee and must be properly endorsed or accompanied by proper instruments of
transfer with signature guaranteed (or by providing satisfactory indemnity, as
in the case of lost, stolen or mutilated Certificates). Thus, redemptions of
Units cannot be effected until Certificates representing such Units have been
delivered by the person seeking redemption. (See "Certificates".)
Certificateholders must sign exactly as
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<PAGE>
their names appear on the faces of their Certificates. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator
or certificates of corporate authority.
Within three calendar days following a tender for redemption, or, if such
third day is not a business day, on the first business day prior thereto, the
Certificateholder will be entitled to receive in cash an amount for each Unit
tendered equal to the Redemption Price per Unit computed as of the Evaluation
Time on the date of tender. The "date of tender" is deemed to be the date on
which Units are received by the Trustee, except that with respect to Units
received after the close of trading on the New York Stock Exchange, the date of
tender is the next day on which such Exchange is open for trading, and such
Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. The Trustee is empowered to sell Bonds in order to make
funds available for redemptions. Such sales, if required, could result in a
sale of Bonds by the Trustee at a loss. To the extent Bonds are sold, the size
and diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each Unit in the
Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the Bonds
in the Trust based on the bid prices of such Bonds and (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of the Trust, (b) the accrued expenses of the Trust and (c) cash
allocated for the distribution to Certificateholders of record as of the
business day prior to the evaluation being made. The Evaluator may determine
the value of the Bonds in the Trust for purposes of redemption (1) on the basis
of current bid prices of the Bonds obtained from dealers or brokers who
customarily deal in bonds comparable to those held by the Trust, (2) on the
basis of bid prices for bonds comparable to any Bonds for which bid prices are
not available, (3) by determining the value of the Bonds by appraisal, or (4)
by any combination of the above.
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase a Unit tendered for redemption or if the Sponsor
tenders a Unit for redemption, in lieu of redeeming such Unit, to sell such
Unit in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder an
amount in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission) an
emergency exists as a result of which disposal or evaluation of the Bonds is
not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. The Trustee and the Sponsor are not
liable to any person or in any way for any loss or damage which may result from
any such suspension or postponement.
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A Certificateholder who wishes to dispose of his Units should inquire of
his bank or broker in order to determine if there is a current secondary market
price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual and annual
Certificateholders (except Texas residents*) may elect to have all regular
interest and principal distributions, if any, with respect to their Units
reinvested either in units of various series of "Municipal Securities Trust"
which will have been created shortly before each semi-annual or annual Payment
Date (a "Primary Series") or, if units of a Primary Series are not available,
in units of a previously formed series of the Trust which have been repurchased
by the Sponsor in the secondary market, including the units being offered
hereby (a "Secondary Series") (Primary Series and Secondary Series are
hereafter collectively referred to as "Available Series"). June 15 and December
15 of each year, in the case of semi-annual Certificateholders, and December 15
of each year in the case of annual Certificateholders, are the "Plan
Reinvestment Dates".
Under the Plan (subject to compliance with applicable blue sky laws),
fractional units ("Plan Units") will be purchased from the Sponsor at a price
equal to the aggregate offering price per Unit of the bonds in the Available
Series portfolio during the initial offering of the Available Series or at the
aggregate bid price per Unit of the Available Series if its initial offering
has been completed, plus a sales charge equal to 3.627% of the net amount
invested in such bonds or 3-1/2% of the Reinvestment Price per Plan Unit, plus
accrued interest, divided by one hundred (the "Reinvestment Price per Plan
Unit"). All Plan Units will be sold at this reduced sales charge of 3-1/2% in
comparison to the regular sales charge levied on primary and secondary market
sales of units in any series of "Municipal Securities Trust". Participants in
the Plan will have the opportunity to designate, in the Authorization Form for
the Plan, the name of a broker to whom the Sponsor will allocate a sales
commission of 1-1/2% per Plan Unit, payable out of the 3-1/2% sales charge. If
no such designation is made, the Sponsor will retain the sales commission.
Under the Plan, the entire amount of a participant's income and principal
distributions will be reinvested. For example, a Certificateholder who is
entitled to receive $130.50 interest income from the Trust would acquire 13.05
Plan Units assuming that the Reinvestment Price per Plan Unit, plus accrued
interest, was $10.
A semi-annual or annual Certificateholder may join the Plan at the time he
invests in Units of the Trust or any time thereafter by delivering to the
Trustee an Authorization Form which is available from brokers or the Sponsor.
In order that distributions may be reinvested on a particular Plan Reinvestment
Date, the Authorization Form must be received by the Trustee not later than the
15th day of the month preceding such Date. Authorization Forms not received in
time for a particular Plan Reinvestment Date will be valid only for the second
succeeding Plan Reinvestment Date. Similarly, a participant may withdraw from
the Plan at any time by notifying the Trustee (see below). However, if written
confirmation of withdrawal is not given to the Trustee prior to a particular
distribution, the participant will be deemed to have elected to participate in
the Plan with respect to that particular
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.
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<PAGE>
distribution and his withdrawal would become effective for the next succeeding
distribution.
Once delivered to the Trustee, an Authorization Form will constitute a
valid election to participate in the Plan with respect to Units purchased of
the Trust (and with respect to Plan Units purchased with the distributions from
the Units purchased of the Trust) for each subsequent distribution as long as
the Certificateholder continues to participate in the Plan. However, if an
Available Series should materially differ from the Trust in the opinion of the
Sponsor, the authorization will be voided and participants will be provided
with both a notice of the material change and a new Authorization Form which
would have to be returned to the Trustee before the Certificateholder would
again be able to participate in the Plan. The Sponsor anticipates that a
material difference which would result in a voided authorization would include
such facts as the inclusion of bonds in the Available Series portfolio the
interest income on which was not exempt from federal income tax, or the
inclusion of bonds which were not rated "A" or better by either Standard &
Poor's Corporation or Moody's Investors Service, Inc. on the date such bonds
were initially deposited in the Available Series portfolio.
The Sponsor has the option at any time to use units of a Secondary Series
to fulfill the requirements of the Plan in the event units of a Primary Series
are not available either because a Primary Series is not then in existence or
because the registration statement relating thereto is not declared effective
in sufficient time to distribute final prospectuses to Plan participants (see
below). It should be noted that there is no assurance that the quality and
diversification of the Bonds in any Available Series or the estimated current
return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered on or about
each semi-annual and annual Record Date for determining who is eligible to
receive distributions on the related Payment Date. Such Record Dates are June 1
and December 1 of each year for semi-annual Certificate-holders, and December 1
of each year for annual Certificateholders. On each Record Date, the Sponsor
will send a current Prospectus relating to the Available Series being offered
for the next Plan Reinvestment Date along with a letter which reminds each
participant that Plan Units are being purchased for him as part of the Plan
unless he notifies the Trustee in writing by that Plan Reinvestment Date that
he no longer wishes to participate in the Plan. In the event a Primary Series
has not been declared effective in sufficient time to distribute a final
Prospectus relating thereto and there is no Secondary Series as to which a
registration statement is currently effective, it is the Sponsor's intention to
suspend the Plan and distribute to each participant his regular semi-annual or
annual distribution. If the Plan is so suspended, it will resume in effect with
the next Plan Reinvestment Date assuming units of an Available Series are then
being offered.
To aid a participant who might desire to withdraw either from the Plan or
from a particular distribution, the Trustee has established a toll free number
(see below) for participants to use for notification of withdrawal, which must
be confirmed in writing prior to the Plan Reinvestment Date. Should the Trustee
be so notified, it will make the appropriate cash disbursement. Unless the
withdrawing participant specifically indicates in his written confirmation that
(a) he wishes to withdraw from the Plan for that particular distribution only,
or (b) he wishes to withdraw from the Plan for less than all units of each
series of "Municipal Securities Trust" which he might then own (and
specifically identifies which series are to continue in the Plan), he will be
deemed to have withdrawn completely from the Plan in all respects. Once a
participant withdraws completely, he will only be allowed to again participate
in the Plan by submitting a new Authorization Form. A sale or redemption of a
portion of a participant's Plan Units will not constitute a
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<PAGE>
withdrawal from the Plan with respect to the remaining Plan Units owned by such
participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual
Certificateholder fail to have an annual distribution plan, such
Certificate-holder will be deemed to have elected the semi-annual plan of
distribution, and to participate in the Plan with respect to distributions made
in connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash may
withdraw from the Plan with respect to such Plan Units and remain in the Plan
with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from
the Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor has maintained and intends to
continue to maintain a market for the Plan Units and continuously to offer to
purchase Plan Units at prices based upon the aggregate bid price of the bonds
in the Available Series portfolio, during the initial offering of the Available
Series, or at the aggregate bid price of the Bonds in the Available Series if
its initial offering has been completed. The Sponsor may discontinue such
purchases at any time. The aggregate bid price of the underlying bonds may be
expected to be less than the aggregate offering prices. In the event that a
market is not maintained for Plan Units, a participant desiring to dispose of
his Plan Units may be able to do so only by tendering such Plan Units to the
Trustee for redemption at the Redemption Price of full units in the Available
Series corresponding to such Plan Units, which is based upon the aggregate bid
price of the underlying bonds as described in the "Municipal Securities Trust"
Prospectus for the Available Series in question. If a participant wishes to
dispose of his Plan Units, he should inquire of the Sponsor as to current
market prices prior to making a tender for redemption to the Trustee.
Any participant may tender his Plan Units for redemption to the Available
Series trustee. Participants may redeem Plan Units by making a written request
to the Trustee, at the address listed in the "Summary of Essential Information"
in Part A on the Redemption Form supplied by the Trustee. The redemption price
per Plan Unit will be determined as set forth in the "Municipal Securities
Trust" Prospectus of the Available Series from which such Plan Unit was
purchased following receipt of the request and adjusted to reflect the fact
that it relates to a Plan Unit. There is no charge for the redemption of Plan
Units.
The Trust Agreement requires that the Trustee notify the Sponsor of any
tender of Plan Units for redemption. So long as the Sponsor is maintaining a
bid in the secondary market, the Sponsor will purchase any Plan Units tendered
to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such Plan
Units on the date of tender not later than the day on which such Plan Units
would otherwise have been redeemed by the Trustee.
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Participants in the Plan will not receive individual certificates for
their Plan Units unless the amount of Plan Units accumulated represents the
principal amount of bonds originally underlying each Unit and, in such case, a
written request for certificates is made to the Trustee. All Plan Units will be
accounted for by the Trustee on a book entry system. Each time Plan Units are
purchased under the Plan, a participant will receive a confirmation stating his
cost, number of Units purchased and estimated current return. Questions
regarding a participant's statement should be directed to the Trustee by
calling the Trustee at the number listed in the "Summary of Essential
Information" in Part A.
All expenses relating to the operation of the Plan are borne by the
Sponsor. Both the Sponsor and the Trustee reserve the right to suspend, modify
or terminate the Plan at any time for any reason, including the right to
suspend the Plan if the Sponsor is unable or unwilling to establish a Primary
Series or is unable to provide Secondary Series units. All participants will
receive notice of any such suspension, modification or termination.
Total Reinvestment Plan for Texas Residents
Except as specifically provided under this Section, and unless the context
otherwise requires, all provisions and definitions contained under the heading
"Total Reinvestment Plan" shall be applicable to the Total Reinvestment Plan
for Texas Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are residents
of Texas have the option prior to any semi-annual or annual distribution to
elect affirmatively to reinvest that distribution, including both interest and
principal, if any, in an Available Series.
A resident of Texas who is a semi-annual Certificateholder may join the
Texas Plan for any particular semi-annual or annual distribution by delivering
to the Trustee an Authorization Form For Texas Residents ("Texas Authorization
Form") specifically mentioning the date of the particular semi-annual or annual
distribution he wishes to reinvest. On or about each semi-annual or annual
Record Date, Texas Authorization Forms shall be sent by the Trustee to every
Certificateholder who is a resident of Texas. In the event that the Sponsor
suspends the Plan or the Texas Plan, no Texas Authorization Forms shall be
sent. In order that distributions may be reinvested on a particular Plan
Reinvestment Date, the Texas Authorization Form must be received by the Trustee
on or before such Date. Texas Authorization Forms not received in time for the
Plan Reinvestment Date will be deemed void. A participant who delivers a Texas
Authorization Form to the Trustee may thereafter withdraw said authorization by
notifying the Trustee at its toll free telephone number prior to a Plan
Reinvestment Date. Such notification of a withdrawal must be confirmed in
writing prior to the Plan Reinvestment Date. Under no circumstances shall a
Texas Authorization Form be provided or accepted by the Trustee which provides
for the reinvestment of distributions for more than one Plan Reinvestment Date.
On or about each semi-annual and annual Record Date, the Sponsor will send
a current Prospectus relating to the Available Series being offered on the next
Plan Reinvestment Date along with a letter incorporating a Texas Authorization
Form which specifies the funds available for reinvestment, reminds each
participant that no Plan Units will be purchased for him unless the Texas
Authorization Form is received by the Trustee on or before that particular Plan
Reinvestment Date, and states that the Texas Authorization Form is valid only
for that particular semi-annual or annual distribution. If the Available Series
should materially differ from the Trust, the participant will be provided with
a notice of the material change and a new Texas
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Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired Plan Units
will be deemed to have elected the semi-annual and annual plan of distribution,
respectively, with respect to such Units, but such Certificate-holder will not
be deemed to participate in the Plan for any particular distribution unless and
until he delivers to the Trustee a Texas Authorization Form pertaining to those
Plan Units. (Should the Available Series from which Plan Units are purchased
for the account of an annual Certificateholder fail to have an annual
distribution plan, such Certificateholder will be deemed to have elected the
semi-annual plan of distribution, and to participate in the Plan with respect
to distributions made, in connection with such Plan Units.)
TRUST ADMINISTRATION
Portfolio Supervision
The Sponsor may direct the Trustee to dispose of Bonds upon (i) default in
payment of principal or interest on such Bonds, (ii) institution of certain
legal proceedings with respect to the issuers of such Bonds, (iii) default
under other documents adversely affecting debt service on such Bonds, (iv)
default in payment of principal or interest on other obligations of the same
issuer or guarantor, (v) with respect to revenue Bonds, decline in revenues and
income of any facility or project below the estimated levels calculated by
proper officials charged with the construction or operation of such facility or
project or (vi) decline in price or the occurrence of other market or credit
factors which in the opinion of the Sponsor would make the retention of such
Bonds in the Trust detrimental to the interests of the Certificateholders. If a
default in the payment of principal or interest on any of the Bonds occurs and
if the Sponsor fails to instruct the Trustee to sell or hold such Bonds, the
Trust Agreement provides that the Trustee may sell such Bonds.
The Sponsor is authorized by the Trust Agreement to direct the Trustee to
accept or reject certain plans for the refunding or refinancing of any of the
Bonds. Any bonds received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Agreement to the same extent
as the Bonds originally deposited. Within five days after such deposit, notice
of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the bonds substituted therefor.
Except as stated, the acquisition by the Trust of any securities other than the
bonds initially deposited is prohibited.
Trust Agreement, Amendment and Termination
The Trust Agreement may be amended by the Trustee, the Sponsor and the
Evaluator without the consent of any of the Certificateholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or (3)
to make such other provisions in regard to matters arising thereunder as shall
not adversely affect the interests of the Certificateholders.
The Trust Agreement may also be amended in any respect, or performance of
any of the provisions thereof may be waived, with the consent of the holders of
Certificates evidencing 66-2/3% of the Units then outstanding, for the purpose
of modifying the rights of Certificateholders; provided that no such amendment
or waiver shall reduce any Certificateholder's
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interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the
holders of all Certificates. The Trust Agreement may not be amended, without
the consent of the holders of all Certificates then outstanding, to increase
the number of Units issuable or to permit the acquisition of any bonds in
addition to or in substitution for those initially deposited in the Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.
The Trust Agreement provides that the Trust shall terminate upon the
maturity, redemption or other disposition, as the case may be, of the last of
the Bonds held in the Trust but in no event is it to continue beyond the end of
the calendar year preceding the fiftieth anniversary of the execution of the
Trust Agreement. If the value of the Trust shall be less than the minimum
amount set forth under "Summary of Essential Information" in Part A, the
Trustee may, in its discretion, and shall, when so directed by the Sponsor,
terminate the Trust. The Trust may also be terminated at any time with the
consent of the holders of Certificates representing 100% of the Units then
outstanding. In the event of termination, written notice thereof will be sent
by the Trustee to all Certificateholders. Within a reasonable period after
termination, the Trustee must sell any Bonds remaining in the Trust, and, after
paying all expenses and charges incurred by the Trust, distribute to each
Certificateholder, upon surrender for cancellation of his Certificate for
Units, his pro rata share of the Interest and Principal Accounts.
The Sponsor
The Sponsor, Reich & Tang Distributors L.P. ("Reich & Tang") (successor to
the Unit Investment Trust Division of Bear, Stearns & Co. Inc.), a Delaware
limited partnership, is engaged in the brokerage business and is a member of
the National Association of Securities Dealers, Inc. Reich & Tang is also a
registered investment adviser. Reich & Tang maintains its principal business
offices at 600 Fifth Avenue, New York, New York 10020. Reich & Tang Asset
Management L.P. ("RTAM LP"), a registered investment adviser, having its
principal place of business at 399 Boylston Street, Boston, MA 02116, is the
99% limited partner of the Sponsor. RTAM LP is 99.5% owned by New England
Investment Companies, LP ("NEIC LP") and Reich & Tang Asset Management, Inc., a
wholly owned subsidiary of NEIC LP, owns the remaining .5% interest of RTAM LP
and is its general partner.
NEIC LP's general partner is New England Investment Companies, Inc.
("NEIC"), a holding company offering a broad array of investment styles across
a wide range of asset categories through ten investment advisory/management
affiliates and two distribution affiliates. These affiliates in the aggregate
are investment advisers or managers to over 57 registered investment companies.
Reich & Tang is the successor sponsor for numerous series of unit investment
trusts, including: New York Municipal Trust, Series 1 (and Subsequent Series);
Municipal Securities Trust, Series 1 (and Subsequent Series), 1st Discount
Series (and Subsequent Series), Multi-State Series 1 (and Subsequent Series),
Mortgage Securities Trust, Series 1 (and Subsequent Series), Insured Municipal
Securities Trust, Series 1 (and Subsequent Series), 5th Discount Series (and
Subsequent Series) and Equity Securities Trust, Series 1, Signature Series,
Gabelli Communications Income Trust (and Subsequent Series). The information
included herein is only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations.
On August 30, 1996, the merger of New England Mutual Life Insurance
Company and Metropolitan Life Insurance Company ("MetLife") became effective,
with MetLife being the continuing company. RTAM LP remains a wholly-owned
subsidiary of NEIC LP, a New York Stock Exchange listed company,
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<PAGE>
but its sole general partner is now an indirect subsidiary of MetLife. MetLife
also indirectly owns a majority of the outstanding limited partnership interest
of NEIC LP.
MetLife is a mutual life insurance company with assets of $142.2 billion
at March 31, 1996. It is the second largest life insurance company in the
United States in terms of total assets. MetLife provides a wide range of
insurance and investment products and services to individuals and groups and is
the leader among United States life insurance companies in terms of total life
insurance in force, which exceeded $1.2 trillion at March 31, 1996 for MetLife
and its insurance affiliates. MetLife and its affiliates provide insurance or
other financial services to approximately 36 million people worldwide.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Co-Sponsors are Reich & Tang and Gruntal & Co.,
Incorporated, both of whom have entered into an Agreement among Co-Sponsors
pursuant to which both parties have agreed to act as Co-Sponsors for the Trust.
Reich & Tang has been appointed by Gruntal & Co., Incorporated as agent for
purposes of taking any action required or permitted to be taken by the Sponsors
under the Trust Agreement. If the Sponsors are unable to agree with respect to
action to be taken jointly by them under the Trust Agreement and they cannot
agree as to which Sponsor shall act as sole Sponsor, then Reich & Tang shall
act as sole Sponsor. If one of the Sponsors fails to perform its duties under
the Trust Agreement or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, that Sponsors may be discharged
under the Trust Agreement and a new Sponsor(s) may be appointed or the
remaining Sponsor(s) may continue to act as Sponsors.
Gruntal & Co., Incorporated, a Delaware corporation, operates a regional
securities broker/dealer from its main office in New York City and branch
offices in nine states and the District of Columbia. The firm is very active in
the marketing of investment companies and has signed dealer agreements with
many mutual fund group. Further, through its Syndicate Department,
Gruntal & Co. Incorporated has underwritten a large number of Closed-End Funds
and has been Co-Manager on the following offerings: Cigna High Income Shares;
Dreyfus New York Municipal Income, Inc.; Franklin Principal Maturity Trust and
Van Kampen Merritt Limited Term High Income Trust.
The Sponsor is liable for the performance of its obligations arising from
its responsibilities under the Trust Agreement, but will be under no liability
to Certificateholders for taking any action, or refraining from taking any
action, in good faith pursuant to the Trust Agreement, or for errors in
judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any of its
duties under the Trust Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
The Trustee
The Trustee is The Chase Manhattan Bank with its principal executive
office located at 270 Park Avenue, New York, New York 10017 (800)
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<PAGE>
428-8890 and its unit investment trust office at 770 Broadway, New York, New
York 10003. Effective on or after November 15, 1996 the address of the
Trustee's unit investment trust office will be 4 New York Plaza, New York, New
York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Trustee is The Bank of New York, a trust company
organized under the laws of New York, having its offices at 101 Barclay Street,
New York, New York 10286. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The Trustee must be a banking corporation organized under the laws of the
United States or any state which is authorized under such laws to exercise
corporate trust powers and must have at all times an aggregate capital, surplus
and undivided profits of not less than $5,000,000. The duties of the Trustee
are primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for taking any
action, or for refraining from taking any action, in good faith pursuant to the
Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, Bonds or Certificates in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by the
Evaluator. In addition, the Trustee shall not be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or the Trust which
it may be required to pay under current or future law of the United States or
any other taxing authority having jurisdiction. The Trustee shall not be liable
for depreciation or loss incurred by reason of the sale by the Trustee of any
of the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of the Trustee
under the Trust Agreement, see "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing and filing
the same with the Sponsor, and mailing a copy of a notice of resignation to all
Certificateholders. In such an event the Sponsor is obligated to appoint a
successor Trustee as soon as possible. In addition, if the Trustee becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, the Sponsor may remove the Trustee and appoint a successor as
provided in the Trust Agreement. Notice of such removal and appointment shall
be mailed to each Certificateholder by the Sponsor. If upon resignation of the
Trustee no successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The resignation or
removal of the Trustee becomes effective only when the successor Trustee
accepts its appointment as such or when a court of competent jurisdiction
appoints a successor Trustee. Upon execution of a written acceptance of such
appointment by such successor Trustee, all the rights, powers, duties and
obligations of the original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Trustee shall be a party, shall be the successor Trustee. The
Trustee must always be a banking corporation organized under the laws of the
United States or any State and have at all times an aggregate capital, surplus
and undivided profits of not less than $2,500,000.
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The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a business unit of J.J.
Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies, with main
offices located at 65 Broadway, New York, New York 10006. The Evaluator is a
registered investment advisor and also provides financial information services.
The Trustee, the Sponsor and Certificateholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsor, or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and the Trustee,
and the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation
of the Evaluator no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of creating
and establishing the Trust, including the cost of initial preparation and
execution of the Trust Agreement, registration of the Trust and the Units under
the Investment Company Act of 1940 and the Securities Act of 1933, preparation
and printing of the Certificates, legal and auditing expenses, advertising and
selling expenses, initial fees and expenses of the Trustee and other
out-of-pocket expenses. The fees of the Evaluator, however, incurred during the
initial public offering are paid directly by the Trustee.
The Sponsor will not charge the Trust a fee for its services as such. See
"Sponsor's Profits".
The Trustee will receive for its ordinary recurring services to the Trust
an annual fee in the amount set forth under "Summary of Essential Information"
in Part A of this Prospectus. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see "Trust
Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the Bonds in the
Trust, a fee in the amount set forth under "Summary of Essential Information"
in Part A of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of the Record
Date from the Interest Account to the extent funds are available and then from
the Principal Account. Both fees may be increased without approval of the
Certificateholders by amounts not exceeding proportionate increases in consumer
prices for services as measured by the United States Department of Labor's
Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the Trust: all
expenses (including counsel and auditing fees) of the Trustee incurred and
advances made in connection with its activities under the Trust Agreement,
including the expenses and costs of any action undertaken by the
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Trustee to protect the Trust and the rights and interests of the
Certificate-holders; fees of the Trustee for any extraordinary services
performed under the Trust Agreement; indemnification of the Trustee for any
loss or liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any loss,
liabilities and expenses incurred in acting as Sponsor of the Trust without
gross negligence, bad faith or willful misconduct on its part; and all taxes
and other governmental charges imposed upon the Bonds or any part of the Trust
(no such taxes or charges are being levied, made or, to the knowledge of the
Sponsor, contemplated). The above expenses, including the Trustee's fees, when
paid by or owing to the Trustee are secured by a first lien on the Trust. In
addition, the Trustee is empowered to sell Bonds in order to make funds
available to pay all expenses.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their Units of
these Trusts for Units of one or more of any available series of Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust or Equity Securities Trust (the "Exchange
Trusts") at a reduced sales charge as set forth below. Under the Exchange
Privilege, the Sponsor's repurchase price of the Units being surrendered, and
only after the initial offering period is completed, will be based on the
market value of the Securities in the Trust portfolio or on the aggregate offer
price of the Bonds in the other Trust Portfolios; and, after the initial
offering period has been completed, will be based on the aggregate bid price of
the Bonds in the particular Trust portfolio. Units in an Exchange Trust then
will be sold to the Certificateholder at a price based on the aggregate offer
price of the Bonds in the Exchange Trust portfolio during the initial public
offering period of the Exchange Trust (or for Units of Equity Securities Trust,
based on the market value of the underlying securities in the Equity Trust
portfolio); and after the initial offering period has been completed, based on
the aggregate bid price of the Bonds in the Exchange Trust portfolio if its
initial offering has been completed, plus accrued interest (or for Units of
Equity Securities Trust, based on the market value of the underlying securities
in the Equity Trust portfolio) and a reduced sales charge as set forth below.
Except for unitholders who wish to exercise the Exchange Privilege within
the first five months of their purchase of Units of Trust, the sales charge
applicable to the purchase of units of an Exchange Trust shall be approximately
1.5% of the price of each Exchange Trust unit (or 1,000 Units for the Mortgage
Securities Trust or 100 Units for the Equity Securities Trust). For unitholders
who wish to exercise the Exchange Privilege within the first five months of
their purchase of Units of Trust, the sales charge applicable to the purchase
of units of an Exchange Trust shall be the greater of (i) 1.5% of the price of
each Exchange Trust unit (or 1,000 Units for the Mortgage Securities Trust or
100 Units for the Equity Securities Trust), or (ii) an amount which when
coupled with the sales charge paid by the unitholder upon his original purchase
of Units of the Trust at least equals the sales charge applicable in the direct
purchase of units of an Exchange Trust. The Exchange Privilege is subject to
the following conditions:
(1) The Sponsor must be maintaining a secondary market in both the
Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated its intention to
maintain a market in the Units of all Trusts sponsored by it, the Sponsor
is under no obligation to continue to maintain a
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<PAGE>
secondary market and therefore there is no assurance that the Exchange
Privilege will be available to a Certificateholder at any specific time in
the future. At the time of the Certificateholder's election to participate
in the Exchange Privilege, there also must be Units of the Exchange Trust
available for sale, either under the initial primary distribution or in
the Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and the
selling Certificateholder will not be permitted to advance any new funds
in order to complete an exchange. Units of the Mortgage Securities Trust
may only be acquired in blocks of 1,000 Units. Units of the Equity
Securities Trust may only be acquired in blocks of 100 Units.
(3) The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege. The Sponsor will provide unitholders of the Trust
with 60 days' prior written notice of any termination or material
amendment to the Exchange Privilege, provided that, no notice need be
given if (i) the only material effect of an amendment is to reduce or
eliminate the sales charge payable at the time of the exchange, to add one
or more series of the Trust eligible for the Exchange Privilege or to
delete a series which has been terminated from eligibility for the
Exchange Privilege, (ii) there is a suspension of the redemption of units
of an Exchange Trust under Section 22(e) of the Investment Company Act of
1940, or (iii) an Exchange Trust temporarily delays or ceases the sale of
its units because it is unable to invest amounts effectively in accordance
with its investment objectives, policies and restrictions. During the 60
day notice period prior to the termination or material amendment of the
Exchange Privilege described above, the Sponsor will continue to maintain
a secondary market in the units of all Exchange Trusts that could be
acquired by the affected unitholders. Unitholders may, during this 60 day
period, exercise the Exchange Privilege in accordance with its terms then
in effect. In the event the Exchange Privilege is not available to a
Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be taken
with respect to his Units without further instructions from the
Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should notify the
Sponsor of his desire to exercise his Exchange Privilege. If Units of a
designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange transaction
will operate in a manner essentially identical to a secondary market
transaction except that units may be purchased at a reduced sales charge.
Example: Assume that after the initial public offering has been completed,
a Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificate-holder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder
would be able to acquire four units (or 4,000 Units of the Mortgage Securities
Trust or 400 Units of the Equity Securities Trust) for a total cost of
$2,943.50 ($2,900 for unit and $43.50 for the sales charge). The remaining
$556.50 would be remitted to the Certificateholder in cash. If
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the Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
The Conversion Offer
Unit owners of any registered unit investment trust for which there is no
active secondary market in the units of such trust (a "Redemption Trust") may
elect to redeem such units and apply the proceeds of the redemption to the
purchase of available Units of one or more series of Municipal Securities
Trust, Insured Municipal Securities Trust, Mortgage Securities Trust, New York
Municipal Trust or Equity Securities Trust (the "Conversion Trusts") at the
Public Offering Price for units of the Conversion Trust based on a reduced
sales charge as set forth below. Under the Conversion Offer, units of the
Redemption Trust must be tendered to the trustee of such trust for redemption
at the redemption price, which is based upon the market value of the underlying
securities in the Trust portfolio or the aggregate bid side evaluation of the
underlying bonds in such trust and is generally about 1 1/2% to 2% lower than
the offering price for such bonds. The purchase price of the units in the
Conversion Trust will be based on the aggregate offer price of the bonds in the
Conversion Trust Portfolio during its initial offering price, or, at a price
based on the aggregate bid price of the underlying bonds if the initial public
offering of the Conversion Trust has been completed, plus accrued interest and
a sales charge as set forth below. If the participant elects to purchase units
of the Equity Securities Trust under the Conversion Offer, the purchase price
of the units will be based, at all times, on the market value of the underlying
securities in the Trust portfolio plus a sales charge.
Except for Unitholders who wish to exercise the Conversion Offer within
the first five months of their purchase of units of a Redemption Trust, the
sales charge applicable to the purchase of Units of the Conversion Trust shall
be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust or per
100 Units for the Equity Securities Trust). For unitholders who wish to
exercise the Conversion Offer within the first five months of their purchase of
units of a Redemption Trust, the sales charge applicable to the purchase of
Units of a Conversion Trust shall be the greater of (i) 1.5% per Unit (or per
1,000 Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust) or (ii) an amount which when coupled with the sales charge
paid by the unitholder upon his original purchase of units of the Redemption
Trust at least equals the sales charge applicable in the direct purchase of
Units of a Conversion Trust. The Conversion Offer is subject to the following
limitations:
(1) The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there is no
active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's
election to participate in the Conversion Offer, there also must be
available units of a Conversion Trust, either under a primary distribution
or in the Sponsor's secondary market.
(2) Exchanges under the Conversion Offer will be effected in whole
units only. Unit owners will not be permitted to advance any new funds in
order to complete an exchange under the Conversion Offer. Any excess
proceeds from units being redeemed will be returned to the unit owner.
Units of the Mortgage Securities Trust may only be acquired in blocks of
1,000 units. Units of the Equity Securities Trust may only be acquired in
blocks of 100 Units.
-29-
C/M: 11939.0001 1173.4
<PAGE>
(3) The Sponsor reserves the right to modify, suspend or terminate
the Conversion Offer at any time without notice to unit owners of
Redemption Trusts. In the event the Conversion Offer is not available to a
unit owner at the time he wishes to exercise it, the unit owner will be
notified immediately and no action will be taken with respect to his units
without further instruction from the unit owner. The Sponsor also reserves
the right to raise the sales charge based on actual increases in the
Sponsor's costs and expenses in connection with administering the program,
up to a maximum sales charge of 2% per unit (or per 1,000 units for the
Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust).
To exercise the Conversion Offer, a unit owner of a Redemption Trust
should notify his retail broker of his desire to redeem his Redemption Trust
Units and use the proceeds from the redemption to purchase Units of one or more
of the Conversion Trusts. If Units of a designated, outstanding series of a
Conversion Trust are at that time available for sale and if such Units may
lawfully be sold in the state in which the unit owner is a resident, the unit
owner will be provided with a current prospectus or prospectuses relating to
each Conversion Trust in which he indicates an interest. He then may select the
Trust or Trusts into which he decides to invest the proceeds from the sale of
his Units. The transaction will be handled entirely through the unit owner's
retail broker. The retail broker must tender the units to the trustee of the
Redemption Trust for redemption and then apply the proceeds to the redemption
toward the purchase of units of a Conversion Trust at a price based on the
aggregate offer or bid side evaluation per Unit of the Conversion Trust,
depending on which price is applicable, plus accrued interest and the
applicable sales charge. The certificates must be surrendered to the broker at
the time the redemption order is placed and the broker must specify to the
Sponsor that the purchase of Conversion Trust Units is being made pursuant to
the Conversion Offer. The unit owner's broker will be entitled to retain $5 of
the applicable sales charge.
Example: Assume a unit owner has five units of a Redemption Trust which
has held for more than 5 months with a current redemption price of $675 per
unit based on the aggregate bid price of the underlying bonds and the unit
owner wishes to participate in the Conversion Offer and exchange the proceeds
for units of a secondary market Conversion Trust with a current price of $750
per Unit. The proceeds from the unit owner's redemption of units will aggregate
$3,375. Since only whole units of a Redemption Trust may be purchased under the
Conversion Offer, the unit owner will be able to acquire four units of the
Conversion Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units
for the Equity Securities Trust) for a total cost of $3,045 ($3,000 for units
and $45 for the sales charge). The remaining $330 would be remitted to the unit
owner in cash. If the unit owner acquired the same number of Conversion Trust
units at the same time in a regular secondary market transaction, the price
would have been $3,165 ($3,000 for units and $165 sales charge, assuming a 5
1/2% sales charge times the public offering price).
Description Of The Exchange Trusts And The Conversion Trusts
Municipal Securities Trust and New York Municipal Trust may be appropriate
investment vehicles for an investor who is more interested in tax-exempt
income. The interest income from New York Municipal Trust is, in general, also
exempt from New York State and local New York income taxes, while the interest
income from Municipal Securities Trust is subject to applicable New York State
and local New York taxes, except for that portion of the income which is
attributable to New York obligations in the Trust portfolio, if any. The
interest income from each State Trust of the Municipal Securities Trust,
Multi-State Series is, in general, exempt from state and local taxes when held
by residents of the state where the issuers of bonds in
-30-
C/M: 11939.0001 1173.4
<PAGE>
such State Trusts are located. The Insured Municipal Securities Trust combines
the advantages of providing interest income free from regular federal income
tax under existing law with the added safety of irrevocable insurance. Insured
Navigator Series further combines the advantages of providing interest income
free from regular federal income tax and state and local taxes when held by
residents of the state where issuers of bonds in such state trusts are located
with the added safety of irrevocable insurance. Mortgage Securities Trust
offers an investment vehicle for investors who are interested in obtaining
safety of capital and a high level of current distribution of interest income
through investment in a fixed portfolio of collateralized mortgage obligations.
Equity Securities Trust offers investors an opportunity to achieve capital
appreciation together with a high level of current income.
Tax Consequences Of The Exchange Privilege And The Conversion Offer
A surrender of units pursuant to the Exchange Privilege or the Conversion
Offer normally will constitute a "taxable event" to the Certificateholder under
the Code. The Certificateholder will recognize a tax gain or loss that will be
of a long or short-term capital or ordinary income nature depending on the
length of time the units have been held and other factors. A
Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such
Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions
The legality of the Units originally offered and certain matters relating
to federal tax law have been passed upon by Battle Fowler LLP, 75 East 55th
Street, New York, New York 10022, or Berger Steingut Tarnoff & Stern, 600
Madison Avenue, New York, New York 10022, as counsel for the Sponsor. Carter,
Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted as
counsel for The Chase Manhattan Bank. On the initial date of deposit, Booth &
Baron acted as counsel for The Bank of New York.
Independent Accountants
The financial statements of the Trusts for the year ended June 30, 1996
included in Part A of this Prospectus have been examined by Price Waterhouse
LLP, independent accountants. The financial statements of Price Waterhouse LLP
have been so included in reliance on their report given upon the authority of
said firm as experts in accounting and auditing. KPMG Peat Marwick LLP has
consented to the incorporation by reference of their report on the statements
of operations and changes in net assets for the Trusts included in Part A of
this Prospectus for the periods ended June 30, 1994 and June 30, 1995,
respectively.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Ratings Services
A brief description of the applicable Standard & Poor's rating symbols and
their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
- --------
* As described by the rating agencies.
-31-
C/M: 11939.0001 1173.4
<PAGE>
specific debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
(1) Likelihood of default--capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation.
(2) Nature of and provisions of the obligation.
(3) Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and they differ from AAA
issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings -- (Prov.) following a rating indicates the rating is
provisional, which assumes the successful completion of the project being
financed by the issuance of the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. Accordingly, the
investor should exercise his own judgment with respect to such likelihood and
risk.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's Investors Service, Inc.'s
rating symbols and their meanings is as follows:
-32-
C/M: 11939.0001 1173.4
<PAGE>
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Those bonds in the A and Baa group which Moody's believes possess the
strongest investment attributes are designated by the symbol A 1 and Baa 1.
Other A bonds comprise the balance of the group. These rankings (1) designate
the bonds which offer the maximum in security within their quality group, (2)
designate bonds which can be bought for possible upgrading in quality and (3)
additionally afford the investor an opportunity to gauge more precisely the
relative attractiveness of offerings in the market place.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Con-Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are debt
obligations secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
-33-
C/M: 11939.0001 1173.4
<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 1-25
1st-34th DISCOUNT SERIES
===============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
of Series ___/___ Discount Series.
I hereby authorize The Bank of New York, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Municipal Securities
Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
===============================================================================
Mail to your Broker
or
The Bank of New York
101 Barclay Street
New York, New York 10286
C/M: 11939.0001 1173.4
<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 26-55
35th-79th DISCOUNT SERIES
===============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
of Series ___/___ Discount Series.
I hereby authorize The Chase Manhattan Bank, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Chase Manhattan Bank, as TRP Plan Agent, who shall immediately
invest the distributions in units of the available series of Municipal
Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
===============================================================================
Mail to your Broker
or
The Chase Manhattan Bank
Attn: UIT Reinvestment Unit A
770 Broadway
New York, New York 10003
C/M: 11939.0001 1173.4
<PAGE>
<TABLE>
<CAPTION>
INDEX MUNICIPAL SECURITIES TRUST
(Unit Investment Trust)
Prospectus
Title Page
Dated: October 31, 1996
<S> <C> <C>
Summary of Essential Information..................................A-4
Information Regarding the Trust...................................A-6 Sponsor:
Financial and Statistical Information.............................A-7
Audit and Financial Information Reich & Tang Distributors L.P.
600 Fifth Avenue
Report of Independent Accountants...............................F-1 New York, New York 10020
Statements of Net Assets........................................F-2 212-830-5200
Statements of Operations........................................F-3
Statements of Changes in Net Assets.............................F-4 (and for certain Trusts:)
Notes to Financial Statements...................................F-5 Gruntal & Co., Incorporated
Portfolio.......................................................F-7 14 Wall Street
New York, New York 10005
PART B 212-267-8800
The Trust.......................................................... 1
Public Offering.................................................... 7 Trustee:
Estimated Long Term Return and
Estimated Current Return......................................... 9 The Chase Manhattan Bank
Rights of Certificateholders.......................................10 770 Broadway
Tax Status.........................................................12 New York, New York 10003
Liquidity..........................................................16 1-800-882-9898
Total Reinvestment Plan............................................18
Trust Administration...............................................22 or
Trust Expenses and Charges.........................................26
Exchange Privilege and Conversion Offer............................27 The Bank of New York
Other Matters......................................................31 101 Barclay Street
Description of Bond Ratings........................................31 New York, New York 10286
1-800-431-8002
Parts A and B of this Prospectus do not Evaluator:
contain all of the information set forth in
the registration statement and exhibits Kenny S&P Evaluation Services
relating thereto, filed with the Securities 65 Broadway
and Exchange Commission, Washington, D.C., New York, New York 10006
under the Securities Act of 1933, and to
which reference is made.
</TABLE>
* * *
This Prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, securities in any state to any person to whom it is not lawful
to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the Trust
or any of its Units have been guaranteed, sponsored, recommended or approved by
the United States or any state or any agency or officer thereof.
C/M: 11939.0001 1173.4
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Consent of Independent Auditors.
Consent of Counsel (included in Exhibit 99.3.1).
Consents of the Evaluator including Confirmation of Ratings (included in
Exhibit 99.5.1).
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain Amendments to
the Trust Indenture and Agreement referred to under
Exhibit 1.1.1 below (filed as Exhibit 1.1 to
Post-Effective Amendment Nos. 10 and 8 to Form S-6
Registration Statements Nos. 33-08699, 33-24031 and
33-25127 of Municipal Securities Trust, Series 35, Series
39 and Series 40, respectively, on October 25, 1996 and
incorporated herein by reference).
99.1.1.1 -- Trust Indenture and Agreement for Municipal Securities
Trust, Series 26 (and Subsequent Series) dated April 25,
1985 (filed as Exhibit 1.1.1 to Post-Effective Amendment
No. 9 to Form S-6 Registration Statement No. 33-10963 of
Municipal Securities Trust, Series 36 on April 26, 1996
and incorporated herein by reference).
99.1.3.4 -- Certificate of Formation and Agreement among Limited
Partners, as amended, of Reich & Tang Distributors L.P.
(filed as Exhibit 99.1.3.4 to Post-Effective Amendment No.
10 to Form S-6 Registration Statements Nos. 2-98914,
33-00376, 33-00856 and 33-01869 of Municipal Securities
Trust, Series 28, 39th Discount Series, Series 29 & 40th
Discount Series and Series 30 & 41st Discount Series,
respectively, on October 31, 1995 and incorporated herein
by reference).
*99.1.4 -- Form of Agreement Among Underwriters dated June 11, 1985
and December 31, 1986, respectively (filed as Exhibit 1.4
to Post-Effective Amendment Nos. 10 and 8 to Form S-6
Registration Statements Nos. 33-08699, 33-24031 and
33-25127 of Municipal Securities Trust, Series 35, Series
39 and Series 40 on October 25, 1996 and incorporated
herein by reference).
*99.2.1 -- Form of Certificates (filed as Exhibit 2.1 to
Post-Effective Amendment Nos. 10 and 8 to Form S-6
Registration Statements Nos. 33-08699, 33-24031 and
33-25127 of Municipal Securities Trust, Series 35, Series
39 and Series 40 on October 25, 1996 and incorporated
herein by reference).
*99.3.1 -- Opinion of Berger Steingut Tarnoff & Stern (formerly
Berger & Steingut) (formerly Baskin and Steingut, P.C.)
(formerly Baskin and Sears, P.C.) as to the legality of
the securities being registered including their consent to
the filing thereof and to
- --------
* Being filed by this Amendment.
II-1
932.1
<PAGE>
the use of their name under the heading "Legal Opinions"
in the Prospectus (filed as Exhibit 3.1 to Post-Effective
Amendment Nos. 10 and 8 to Form S-6 Registration
Statements Nos. 33-08699, 33-24031 and 33-25127 of
Municipal Securities Trust, Series 35, Series 39 and
Series 40, respectively, on October 25, 1996 and
incorporated herein by reference).
*99.3.1.2 -- Opinion of Battle Fowler LLP as to tax status of
securities being registered including their consent to the
filing thereof and to the use of their name under the
heading "Tax Status" in the Prospectus (filed as Exhibit
3.1.2 to Post-Effective Amendment Nos. 10 and 8 to
Registration Statements Nos. 33-08699, 33-24031 and
33-25127 of Municipal Securities Trust, Series 35, Series
39 and Series 40, respectively, on October 25, 1996 and
incorporated herein by reference).
*99.5.1 -- Consents of the Evaluator including Confirmation of
Ratings.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities
Trust, Series 6, Signature Series, Gabelli Entertainment
and Media Trust on November 16, 1995 and incorporated
herein by reference).
*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-2
932.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Municipal Securities Trust, Series 35, Series 39 and Series 40,
certify that they have met all of the requirements for effectiveness of this
Post-Effective Amendment to the Registration Statements pursuant to Rule 485(b)
under the Securities Act of 1933. The registrants have duly caused this
Post-Effective Amendment to the Registration Statements to be signed on their
behalf by the undersigned thereunto duly authorized, in the City of New York
and State of New York on the 25th day of October, 1996.
MUNICIPAL SECURITIES TRUST,
SERIES 35
SERIES 39
and SERIES 40
(Registrants)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: /s/ PETER J. DEMARCO
------------------------
Peter J. DeMarco
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons who constitute the principal officers and a majority of
the directors of Reich & Tang Asset Management, Inc., the general partner of
Reich & Tang Distributors L.P., the Depositor, in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) October 25, 1996
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director ) By: /s/ PETER J. DEMARCO
STEVEN W. DUFF Director --------------------
BERNADETTE N. FINN Vice President ) Peter J. DeMarco
LORRAINE C. HYLSLER Secretary ) Attorney-in-Fact*
RICHARD DE SANCTIS Vice President and Treasurer )
</TABLE>
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-62627 on
November 16, 1995.
II-3
932.1
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus Part A constituting part of
this Post-Effective Amendment to the registration statement on Form S-6 of our
reports dated October 16, 1996, relating to the financial statements and
financial highlights for the year ended June 30, 1996 of the Municipal
Securities Trust, Series 35, Municipal Securities Trust, Series 39 and Municipal
Securities Trust, Series 40, which appear in such Prospectus. We also consent to
the reference to us under the heading "Independent Accountants" in the
Prospectus Part B.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
October 25, 1996
<PAGE>
Independent Auditors' Consent
Re: Municipal Securities Trust, Series 35
Municipal Securities Trust, Series 39
Municipal Securities Trust, Series 40
We consent to the incorporation by reference of our report dated
September 15, 1995, with exception to note 7, as to which the date is September
28, 1995, on the statements of operations and changes in net assets for the
subject trusts for each of the years in the two year period ended June 30,
1995, and to the reference to our firm under the heading "Independent
Accountants" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
October 16, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of
the end of the most current period and is
qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000801327
<NAME> MST, SERIES 35
<SERIES>
<NUMBER> 1
<NAME> MST, SERIES 35
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 456547
<INVESTMENTS-AT-VALUE> 515378
<RECEIVABLES> 14590
<ASSETS-OTHER> 289971
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 819939
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 285
<TOTAL-LIABILITIES> 285
<SENIOR-EQUITY> 819654
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21616
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 286002
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 58831
<NET-ASSETS> 819654
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 66601
<OTHER-INCOME> 0
<EXPENSES-NET> 3722
<NET-INVESTMENT-INCOME> 62879
<REALIZED-GAINS-CURRENT> (49794)
<APPREC-INCREASE-CURRENT> 37635
<NET-CHANGE-FROM-OPS> 50720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71845
<DISTRIBUTIONS-OF-GAINS> 260167
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 48
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (281292)
<ACCUMULATED-NII-PRIOR> 30582
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 558.01
<PER-SHARE-NII> 32.26
<PER-SHARE-GAIN-APPREC> 5.87
<PER-SHARE-DIVIDEND> 36.86
<PER-SHARE-DISTRIBUTIONS> 133.49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 425.79
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of the end
of the most current period and is qualified in
its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000838541
<NAME> MST, SERIES 39
<SERIES>
<NUMBER> 1
<NAME> MST, SERIES 39
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1189695
<INVESTMENTS-AT-VALUE> 1242473
<RECEIVABLES> 30152
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1272625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13957
<TOTAL-LIABILITIES> 13957
<SENIOR-EQUITY> 1258668
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29598
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (13401)
<ACCUM-APPREC-OR-DEPREC> 52778
<NET-ASSETS> 1258668
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 109053
<OTHER-INCOME> 0
<EXPENSES-NET> 4415
<NET-INVESTMENT-INCOME> 104638
<REALIZED-GAINS-CURRENT> (52588)
<APPREC-INCREASE-CURRENT> 45231
<NET-CHANGE-FROM-OPS> 97281
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 119909
<DISTRIBUTIONS-OF-GAINS> 525903
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 51
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (548531)
<ACCUMULATED-NII-PRIOR> 44869
<ACCUMULATED-GAINS-PRIOR> 2
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 743.09
<PER-SHARE-NII> 43.48
<PER-SHARE-GAIN-APPREC> 10.42
<PER-SHARE-DIVIDEND> 49.83
<PER-SHARE-DISTRIBUTIONS> 218.53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 528.63
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of
the end of the most current period and is
qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000841718
<NAME> MST, SERIES 40
<SERIES>
<NUMBER> 1
<NAME> MST, SERIES 40
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1287962
<INVESTMENTS-AT-VALUE> 1427194
<RECEIVABLES> 30943
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1458137
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4841
<TOTAL-LIABILITIES> 4841
<SENIOR-EQUITY> 1453296
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 36305
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (10205)
<ACCUM-APPREC-OR-DEPREC> 139232
<NET-ASSETS> 1453296
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 134011
<OTHER-INCOME> 0
<EXPENSES-NET> 5297
<NET-INVESTMENT-INCOME> 128714
<REALIZED-GAINS-CURRENT> (80900)
<APPREC-INCREASE-CURRENT> 70923
<NET-CHANGE-FROM-OPS> 118737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 158544
<DISTRIBUTIONS-OF-GAINS> 796666
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 95
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (836473)
<ACCUMULATED-NII-PRIOR> 66135
<ACCUMULATED-GAINS-PRIOR> 11
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 580.28
<PER-SHARE-NII> 33.02
<PER-SHARE-GAIN-APPREC> 9.10
<PER-SHARE-DIVIDEND> 40.67
<PER-SHARE-DISTRIBUTIONS> 204.35
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 377.38
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
MUNICIPAL SECURITIES TRUST, SERIES 35
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement, dated October 15, 1986 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee, and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Municipal Securities Trust, Series 26, and Subsequent Series,
Trust Indenture and Agreement," dated April 25, 1985 (herein as amended or
supplemented called the "Indenture"), and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
W I T N E S S E T H T H A T :
In consideration of the premises and of the mutual agreements
contained herein, the Depositor, the Trustee, and the Evaluator agree as
follows:
PART I
STANDARD TERMS AND
CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to the
same extent as if those said provisions had been set forth in full in this
instrument, except that for all purposes of this Series 35 and all subsequent
Series, the following sections are hereby amended as follows:
(a) Section 1.01(b) is amended by adding the word "Inc." immediately
after the words "Bear, Stearns & Co.";
(b) Section 1.02 is amended by adding the word "Inc." immediately
after the words "Bear, Stearns & Co." wherever the former shall appear in said
Section;
(c) Section 9.05 is amended by adding the word "Inc." immediately
after the words "Bear, Stearns & Co."
C/M: 11939.0001 407314.1
<PAGE>
PART II
SPECIAL TERMS AND
CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/2,000.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on March 1, 1987 for monthly
distributions, June 1 and December 1 of each year for semi-annual distributions
(commencing on June 1, 1987) and December 1 of each year-for annual
distributions (commencing on December 1, 1987).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on March 15, 1987 for
monthly distributions, June 15 and December 15 of each year for semi-annual
distributions (commencing on June 15, 1987) and December 15 of each year for
annual distributions (commencing on December 15, 1987).
(e) All Certificateholders of record on February 1, 1987 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after February 15, 1987 (the "First
Payment Date"), and thereafter distributions will be made monthly, semi-annually
or annually, depending upon the plan of distribution chosen by each
Certificateholder.
(f) The First Settlement Date shall mean October 22, 1986.
(g) The number of Units referred to in Section 2.03 is 2,000.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $12, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess of
50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the
C/M: 11939.0001 407314.1
<PAGE>
liquidation amount is hereby specified to be $800,000.
(j) For the purposes of Section 6.04, the Trustee shall be paid per
annum $1.02 per $1,000 principal amount of Bonds for that portion of the Trust
under the monthly distribution plan, $.54 per $1,000 principal amount of Bonds
for that portion of the Trust under the semi-annual distribution plan and $.35
per $1,000 principal amount of Bonds for that portion of the Trust under the
annual distribution plan. During the first year after the date hereof, such
payments to the Trustee will be reduced by a portion [a maximum of $.85 per Unit
times the number of Units on the monthly distribution plan, $.54 per Unit plus
$.31 of Trust expenses (to be assumed and paid by the Trustee) times the number
of Units on the semi-annual distribution plan and $.35 per Unit plus $.50 of
Trust expenses (to be assumed and paid by the Trustee) times the number of Units
on the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's annual fee is hereby
specified to be $.25 per $1,000 principal amount of Bonds in the Trust.
(l) For purposes of this Series of Municipal Secu- rities Trust, the
form of Certificate set forth in this Indenture shall be appropriately modified
to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
C/M: 11939.0001 407314.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By
Authorized Signatory
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 15th day of October, 1986, before me personally appeared Peter
J. De Marco, to me known, who being by me duly sworn, said that he is an
Authorized Signatory of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
Notary Public
Municipal Securities Trust,
Series 35
C/M: 11939.0001 407314.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By
Assistant Vice President
(SEAL)
ATTEST:
Assistant Secretary
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 14th day of October, 1986, before me personally appeared
Anthony DeLuca , to me known, who being by me duly sworn, said that he is an
Authorized Signatory of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that he signed his name thereto by like
authority.
Notary Public
Municipal Securities Trust,
Series 35
C/M: 11939.0001 407314.1
<PAGE>
STANDARD & POOR'S CORPORATION Evaluator
By
Vice President
(SEAL)
ATTEST:
Vice President
Municipal Securities Trust,
Series 35
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
SCHEDULE A
MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 35
As of October 15, 1986
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
<CAPTION>
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2)
--- ------ ----------------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. $175,000 Illinois Development Finance Authority A 10.750% No Sinking Fund
Pollution Control Revenue Bonds, 1985 3/01/2015 3/01/95 @ 102 Ref.
Series A (Illinois Power Company Project)
2. 200,000 Illinois Health Facilities Authority Revenue A* 9.750% 1/01/94 @ 100 S.F.
Bonds, Series 1983 (Westlake Community 1/01/2013 1/01/93 @ 102 Ref.
Hospital Project) Melrose Park, Illinois
3. 200,000 Metropolitan Fair and Exposition Authority A+ 8.000% 6/01/02 @ 100 S.F.
(Illinois) Dedicated State Tax Revenue Bonds 6/01/2006 6/01/96 @ 102 Ref.
Series 1986
4. 200,000 City of Chicago (Illinois) Chicago O'Hare A 8.750% 1/01/07 @ 100 S.F.
International Airport General Airport 1/01/2016 1/01/94 @ 102 Ref.
Revenue Bonds, 1985 Series A
5. 100,000 Kentucky Development Finance Authority A* 10.250% 9/01/02 @ 100 S.F.
Hospital Revenue Refunding Bonds Baptist 9/01/2011 9/01/93 @ 102 Ref.
Hospitals, Inc. Issue, Series 1983
6. 100,000 Kentucky State Turnpike Authority A 8.500% 1/01/99 @ 100 S.F.
Toll Road Revenue Bonds, Series A 7/01/2004 7/01/96 @ 102 Ref.
7. 200,000 North Carolina Eastern Municipal Power A* 4.000% 1/01/17 @ 100 S.F.
Agency Power System Revenue Bonds, 1/01/2018 1/01/96 @ 102 Ref.
Refunding Series 1986A
8. 100,000 Fargo, North Dakota Hospital Revenue A+ 9.500% 6/01/00 @ 100 S.F.
Facilities - St. Luke's Hospital Fargo Project 6/01/2015 6/01/96 @ 102 Ref.
9. 150,000 Tulsa, Oklahoma Municipal Airport Revenue A- 9.500% No Sinking Fund
Industrial Development Revenue Bonds - 6/01/2020 12/01/95 @ 102 Ref.
American Airlines
10. 150,000 Memphis-Shelby County, Tennessee Airport A+ 7.875% No Sinking Fund
Authority, Special Facility and Project 9/01/2009 9/01/01 @ 103 Ref.
Revenue Bonds (Federal Express Corp.)
11. 100,000 Trinity River Authority, Texas Revenue A* 9.300% No Sinking Fund
Bonds, Tarrant County Water Authority 2/01/2003 2/01/95 @ 103 Ref.
12. 100,000 Intermountain Power Agency (a political A+ 5.000% 7/01/18 @ 100 S.F.
subdivision of the State of Utah) Power 7/01/2021 7/01/96 @ 100 Ref.
Supply Revenue Bonds Series A
13. 100,000 Washington State Health Care Facilities A 9.500% 11/01/00 @ 100 S.F.
Authority Revenue Bonds Deaconess Medical 11/01/2010 11/01/95 @ 102 Ref.
Center - Spokane, Washington Project
</TABLE>
Portfolio Cost of Bonds
No. to Trust(3)
--- -----------
1. $209,335
2. 225,372
3. 210,828
4. 218,250
5. 116,344
6. 109,125
7. 116,024
8. 115,257
9. 170,010
10. 156,375
11. 112,576
12. 69,243
13. 114,699
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
<CAPTION>
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2)
--- ------ ----------------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
14. 125,000 Housing Finance Authority of Dade county AA 0.000% 1/01/08 @ 14.412 S.F.
(Florida) Multifamily Mortgage Revenue 7/01/2026 1/01/97 @ 4.828 Ref.
Bonds, 1984 Series B (T.M. Alexander Plaza
Project-FHA Insured Mortgage Loan)
$2,000,000
==========
</TABLE>
Portfolio Cost of Bonds
No. to Trust(3)
--- -----------
14. 2,438
----------
$1,946,076
==========
C/M: 11939.0001 407314.1
<PAGE>
MUNICIPAL-SECURITIES TRUST, SERIES 39
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement, dated October 13, 1988, among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee, and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Municipal Securities Trust, Series 26, and Subsequent Series,
Trust Indenture and Agreement," dated April 25, 1985 (herein as amended or
supplemented called the "Indenture"), and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
W I T N E S S E T H T H A T
:
In consideration of the premises and of the mutual agreements
contained herein, the Depositor, the Trustee, and the Evaluator agree as
follows:
PART I
STANDARD TERMS AND
CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to the
same extent as if those said provisions had been set forth in full in this
instrument, except that for all purposes of this Series 39 and all subsequent
Series, the following amendments shall apply:
(a) The Indenture is amended by adding the words, "35th Discount
Series (and Subsequent Series) and High Income Series 1 (and Subsequent Series)"
immediately after the words "Municipal Securities Trust, Series 26 (and
Subsequent Series)" wherever the latter shall appear in the Indenture;
(b) Section 1.01(6) is amended by adding the word "Inc." immediately
after the words "Bear, Stearns & Co.";
(c) Section 1.01(16) is amended by adding the words "sequentially
numbered" immediately after the word "particular" and by adding the words "a
Series of" immediately before the words "Municipal Securities Trust";
(d) Section 1.01(17) is amended by redesignating it Section 1.01(19);
(e) A new Section 1.01(17) is added as follows: "The
C/M: 11939.0001 407314.1
<PAGE>
term 'sequentially numbered series' shall mean the numbered series of any
designated series of Municipal Securities Trust as to which this Indenture shall
be applicable.";
(f) Section 1.01(18) is amended by redesignating it Section 1.01(20),
and by adding the words "any sequentially numbered series of Municipal
Securities" immediately after the words "shall mean" and substituting the word
"each" for the word "the" immediately after the words "excluded from";
(g) A new Section 1.01(18) is added as follows: "'Series' shall mean
the individual trusts comprising municipal Securities Trust, which Series
consist of indefinite sequentially numbered series.";
(h) Section 1.01(19) is amended by redesignating it Section 1.01(21);
(i) Section 1.01(20) is amended by redesignating it Section 1.01(22)
and by adding the words "equal to the fraction" immediately after the word
"initially", and the word "fraction" immediately after the words "denominator of
which";
(j) Section 1.01(21) is amended by redesignating it Section 1.01(23);
(k) Section 1.02 is amended by substituting the following form of
Certificate for the form of Certificate appearing in said Section:
C/M: 11939.0001 407314.1
<PAGE>
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest in
No. UNITS
MUNICIPAL SECURITIES TRUST
SERIES
PLAN OF DISTRIBUTION:
CUSIP
THIS IS TO CERTIFY THAT is the owner and registered holder of this Certificate
evidencing the ownership of Unit(s) of fractional undivided interest in
Municipal Securities Trust of the above Series (hereinafter called the "Trust")
created under the laws of the State of New York by the Trust Indenture and
Agreement as modified by the Reference Trust Agreement relating to the
sequentially numbered series of the Series noted on the face hereof (hereinafter
called the "Indenture") among BEAR, STEARNS & CO. INC. (hereinafter called the
"Depositor"), UNITED STATES TRUST COMPANY OF NEW YORK (hereinafter called the
"Trustee"), and STANDARD & POOR'S CORPORATION (hereinafter called the
"Evaluator"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound, a summary
of certain of the pertinent provisions of which is set forth on the reverse
hereof. The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the corporate trust office of the Trustee upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Trustee and payment of the fees and expenses
applicable hereto set forth herein.
C/M: 11939.0001 407314.1
<PAGE>
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as Depositor, has caused
this Certificate to be executed in facsimile by an authorized signatory and
United States Trust Company of New York, as Trustee, has caused this Certificate
to be executed in its corporate name by an authorized officer.
Date:
BEAR, STEARNS & CO. INC. UNITED STATES TRUST COMPANY
Depositor OF NEW YORK
Trustee
By:
Authorized Signatory By:
Authorized Officer
The following is a summary of certain provisions of the Indenture (a
copy of which is on file and available for inspection to the holder hereof at
the corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the Indenture are incorporated herein by reference as fully as if
set forth herein. The Trust consists of (1) such of the interest-bearing debt
securities and obligations that may be deposited in trust and listed in Schedule
A of the Indenture (including contracts, if any, for the purchase of certain of
such securities and obligations together with the cash, cash equivalents and/or
an irrevocable letter of credit issued by a commercial bank in the amount
required for such purchase) and any other securities that may be deposited in
the Trust in exchange or substitution therefor in accordance with the Indenture,
as may from time to time continue to be held in the Trust and (2) such cash
amounts as from time to time may be held in the Interest Account and the
Principal Account maintained under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of units set forth on the face hereof and the denominator of which shall
be the total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon
tender of this Certificate to the Trustee at its corporate trust office in the
City of New York, endorsed in blank or accompanied by all necessary instruments
of assignment and
C/M: 11939.0001 407314.1
<PAGE>
transfer in proper form, and upon payment of any tax or other governmental
charges, to receive on the seventh calendar day following the day on which such
tender is made, or, if such calendar day is not a business day, on the first
business day prior to such calendar day, an amount in cash equal to the
evaluation of the fractional undivided interest in the Trust evidenced by this
Certificate, upon the basis provided for in the Indenture (the "Redemption
Price"). The right of redemption may be suspended and the date of payment may be
postponed for any period during which the New York Stock Exchange is closed or
trading on that,Exchange is restricted, or for any period during which an
emergency exists so that disposal of the obligations held in the Trust is not
reasonably practicable or it is not reasonably practicable fairly to determine
the value of such obligations in accordance with the Indenture or for such other
periods as the Securities and Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of
redeeming this Certificate if tendered for redemption, to sell this Certificate
in the over-the-counter market or by private sale for the account of the
Certificateholder at a price which will return to the Certificateholder an
amount in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Price for this
Certificate. In the event of any such sale the Trustee shall pay the net
proceeds thereof to the Certificateholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.
Interest received by the Trustee as part of the Trust (including
interest accrued and unpaid prior to the day of deposit of any obligation in the
Trust and that part of the proceeds of the sale, liquidation, redemption or
maturity of any such obligation which represents accrued interest) shall be
credited by the Trustee to the Interest Account. The fractional undivided
interest represented by this Certificate in the balance in the Interest Account
(after the deductions referred to below) shall first be computed as of the
semi-annual Record Date (as defined in the Indenture). The next computation
shall be made as of the next succeeding semi-annual Record Date, and thereafter
as of the first day of June and December of each year commencing with the first
such day following the date of this Certificate.
An amount in cash equal to the fractional undivided interest in the
Interest Account (on the basis set forth below) computed as set forth above,
shall be distributed on the 15th day of the respective months, or within a
reasonable period of time thereafter, to the registered holder of this
Certificate at the close of business on the first day of the month in which such
distribution is made.
C/M: 11939.0001 407314.1
<PAGE>
The Trustee shall make semi-annual distributions from the Interest
Account on the basis of one-half of the estimated annual interest income
expected by the Trustee to be received by the Trust in the ensuing twelve month
period, after deduction of the estimated costs and expenses to be incurred
during such period, except as otherwise hereafter provided. To the extent cash
in the Interest Account is insufficient for any distribution the Trustee shall
advance its own funds sufficient therefor and shall be entitled to
reimbursement, without interest, out of interest received by the Trust
subsequent to such advance.
All moneys (other than interest) received by the Trustee, as part of
the Trust (including amounts received from the sale, liquidation, redemption or
maturity of any obligation held in the Trust) shall be credited by the Trustee
to a separate Principal Account. The fractional undivided interest represented
by this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the semi-annual Record Date. An amount in
cash equal to the fractional undivided interest in the Principal Account,
computed as set forth above, shall be distributed on the fifteenth day of the
respective months, or within a reasonable time thereafter, to the registered
holder of this Certificate at the close of business on the first day of such
month. The Trustee shall not be required to make a distribution from the
Principal Account unless the cash balance on such deposit therein available for
such distribution shall be sufficient to permit the distribution of at least
$1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made
to the registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account
and Principal Account, as more fully set forth in the Indenture, for
redemptions, compensation of the Trustee, compensation of the Evaluator, payment
of the Depositor's fee for services as such, reimbursement of certain expenses
incurred or advances made by or on behalf of the Trustee, certain legal
expenses, and payment of, or the establishment of a reserve for, applicable
taxes or governmental charges, if any.
Within a reasonable period of time after the end of each calendar year
the Trustee shall furnish to the registered holder of this Certificate a
statement setting forth, among other things, the amounts received by the Trust
and deductions therefrom and the amounts distributed during the preceding year
in respect of interest on, payments and prepayments of principal of, and sales,
redemptions or maturities of, obligations held in the Trust.
C/M: 11939.0001 407314.1
<PAGE>
This Certificate shall be transferable by the registered holder hereof
by presentation and surrender at the corporate trust office of.the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any whole multiple thereof.
The holder of this Certificate may be required to pay a transfer
charge in connection with the transfer or exchange of this Certificate, as well
as any tax or other governmental charge that may be imposed in connection with
the transfer, exchange or other surrender of this Certificate.
The holder of this Certificate, by virtue of the acceptance hereof,
assents to and shall be bound by the terms of the Indenture, a copy of which is
on file and available for inspection at the corporate trust office of the
Trustee, to which reference is made for all the terms, conditions and covenants
thereof.
The Trustee may deem and treat the person in whose name this
Certificate is registered upon the books of the Trustee as the owner hereof for
all purposes and the Trustee shall not be affected by any notice to the
contrary.
The Indenture and the Trust created thereby shall terminate upon the
maturity, redemption, sale or other disposition of the last security held
thereunder, provided, however, that in no event shall the Indenture and the
Trust continue beyond the end of the calendar year preceding the fiftieth
anniversary of the execution of the Indenture. The Indenture also provides that
the Trust may be terminated at any time by the written consent of the holders of
Certificates representing all of the Units outstanding and under certain
circumstances which include a decrease in the value of the Trust to less than
40% of the initial aggregate principal amount of the securities deposited in the
Trust. Upon any termination the Trustee shall fully liquidate the securities
then held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture. Upon
termination, the Trustee shall be under no further obligation with respect to
the Trust, except to hold the funds in trust without interest until distribution
as aforesaid and shall have no duty upon any such termination to communicate
with the holder hereof other than by mail at the address of such holder
appearing on the registration books of the Trustee.
C/M: 11939.0001 407314.1
<PAGE>
STATEMENT REGARDING DISTRIBUTION
On the face of this Certificate it is indicated whether the registered
holder hereof has elected to receive distributions from the Interest Account
monthly, semi-annually, or annually.
This Certificate by its terms provides that distributions from the
Interest Account shall first be computed as of the semi-annual Record Date, and
thereafter as of the next succeeding semi-annual Record Date commencing with the
first such day following the date of the Certificate, and an amount in cash
equal to the share of the Interest Account represented by this Certificate
distributed on the fifteenth day of the respective months next following such
computations, or within a reasonable period of time thereafter, to the
registered holder of this Certificate at the close of business on the first day
of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest Account,
after the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing with
the monthly Record Date, and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly after
the fifteenth day of each month.
If annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest Account,
after the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly after
the fifteenth day of each December.
All Certificateholders of record as of the First Record Date (as
defined in the Indenture) however, regardless of the plan of distribution
selected, will receive the distribution to be made on or shortly after the First
Payment Date (as defined in the Indenture) and thereafter, distributions will be
made monthly, semi-annually or annually depending upon the plan of distribution,
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be
changed by written notice to the Trustee not later than November 1 in any
calendar year by surrender to the Trustee of this Certificate, together with a
completed form for selection of plan of distribution provided by the Trustee. A
plan of distribution shall continue in effect until changed as
C/M: 11939.0001 407314.1
<PAGE>
herein provided. A change in a plan of distribution may only be made as
indicated herein and will be effective as of December 2 for the ensuing twelve
months. Distributions to Certificateholders who are participating in one of the
optional plans for distribution of interest shall not be affected because of
advancements of the Trustee for the purpose of equalizing distributions to
Certificateholders participating in a different plan.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF TRANSFERS MIN ACT-.....Custodian......
(Cust): (Minor)
under Uniform Transfers to Minors
Act.............................
(State)
Additional abbreviations may also be used though not in the above list.
C/M: 11939.0001 407314.1
<PAGE>
ASSIGNMENT
For Value Received hereby sells,
assigns and transfers unto the
within Certificate and does hereby irrevocably constitute and appoint
attorney, to transfer the within Certificate
on the books of the Trustee, with full power of substitution in the premises.
Dated:
NOTICE: The signatures to this assignment
must correspond with the name(s) as
written above upon the face of this
Certificate in every particular, without
alteration or enlargement or any change
whatever.
Signature Guaranteed
[end of Certificate]
(1) Section 9.05 is amended as follows:
(i) the word "Inc." is added immediately after the
words "Bear, Stearns & Co."; and
(ii) the address of the Depositor is changed to "245
Park Avenue, New York, New York 10167".
C/M: 11939.0001 407314.1
<PAGE>
PART II
SPECIAL TERMS AND
CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/2,500.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on March 1, 1989 for monthly
distributions, June 1 and December 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on March 15, 1989 for
monthly distributions, June 15 and December 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on February 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after February 15, 1989 (the "First
Payment Date"), and thereafter distributions will be made monthly, semi-annually
or annually, depending upon the plan of distribution chosen by each
Certificateholder.
(f) The First Settlement Date shall mean October 20, 1988.
(g) The number of Units referred to in Section 2.03 is 2,500.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess of
50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the
C/M: 11939.0001 407314.1
<PAGE>
liquidation amount is hereby specified to be $1,000,000.
(j) For the purposes of Section 6.04, the Trustee shall be paid per
annum $1.05 per $1,000 principal amount of Bonds for that portion of the Trust
under the monthly distribution plan, $.60 per $1,000 principal amount of Bonds
for that portion of the Trust under the semi-annual distribution plan and $.35
per $1,000 principal amount of Bonds for that portion of the Trust under the
annual distribution plan. During the first year after the date hereof, such
payments to the Trustee will be reduced by a portion [a maximum of $.88 per Unit
times the number of Units on the monthly distribution plan, $.60 per Unit plus
$.28 of Trust expenses (to be assumed and paid by the Trustee) times the number
of Units on the semi-annual distribution plan and $.35 per Unit plus $.53 of
Trust expenses (to be assumed and paid by the Trustee) times the number of Units
on the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's annual fee is hereby
specified to be $.25 per $1,000 principal amount of Bonds in the Trust.
(l) For purposes of this Series of Municipal Secu- rities Trust, the
form of Certificate set forth in this Indenture shall be appropriately modified
to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
C/M: 11939.0001 407314.1
<PAGE>
BEAR, STEARNS & CO. INC. Depositor
By
Authorized Signatory
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 13th day of October 1988, before me personally appeared Peter
J. DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signatory of Bear, Stearns Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
Notary Public
Municipal Securities Trust,
Series 39
C/M: 11939.0001 407314.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By
Assistant Vice President
(SEAL)
ATTEST:
Assistant Secretary
Municipal Securities Trust,
Series 39
C/M: 11939.0001 407314.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By
Vice President
(SEAL)
ATTEST:
Vice President
Municipal Securities Trust,
Series 39
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
SCHEDULE A
MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 39
As of October 13, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
<CAPTION>
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2)
--- ------ ----------------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1. $250,000 Reg. Arpts. Imprvmt. Corp. Facs. Sublease A2* 11.250% 11/01/06 @ 100 S.F.
Rev. Bonds 1985 Issue Western Air Lines 11/01/2025 11/01/95 @ 103 Ref.
Inc. (L.A. Intrntl. Arpt.)
2. 250,000 Burke Cnty. Ga. Dev. Auth. Poll. Cntrl. Rev. AA- 9.875% 1/01/06 @ 100 S.F.
Bonds (Oglethorpe Pwr. Corp. Vogtle Prjt.) 1/01/2010 1/01/95 @ 102 Ref.
Series 1985
3. 250,000 Ind. Bond Bank 1985B Series A 9.250% 2/01/96 @ 100 S.F.
2/01/2016 8/01/95 @ 103 Ref.
4. 100,000 N.J. Hlth. Care Fac. Fncg. Auth. Rev. Bonds AA 9.000% 8/01/02 @ 100 S.F.
(Elizabeth Gen. Med. Cntr. Issue) (FHA 8/01/2005 2/01/93 @ 105 Ref.
Insrd. Mtg) Series B)
5. 250,000 Salem Cnty. N.J. Indus. Poll Cntrl. Fncg. A- 10.500% No Sinking Fund
Auth. Rev. Bonds Publ Serv. Elec. & Gas 11/01/2014 11/01/94 @ 102 Ref.
Co. Prjt. Series C
6. 250,000 N.C. Eastern Muni. Pwr. Agncy. Pwr. Sys. AAA 4.500% 7/01/20 @ 100 S.F.
Rev. Rfndg Bonds Series 1987A (Financial 1/01/2024 1/01/97 @ 100 Ref.
Guaranty)
7. 100,000 Philadelphia Penn. Arpt. Rev. Bonds Series A 9.000% 6/15/06 @ 100 S.F.
1985 (Philadelphia Arpt. Systems) 6/15/2015 6/15/96 @ 103 Ref.
8. 175,000 Westmoreland Cnty. Penn. Indus. Dev. Auth. A* 6.500% 7/01/99 @ 100 S.F.
Hosp. Rev. Rfndg. Bonds (Citizens Gen. 7/01/2015 7/01/97 @ 102 Ref.
Hosp.) Series A1987
9. 250,000 Metro. Nashville Tenn. Arpt. Auth. Special A2* 9.875% No Sinking Fund
Fac. Rev. Bonds (American Airlines Inc. 10/01/2005 10/01/95 @ 102 Ref.
Prjt.) Series 1985
10. 250,000 Wichita Cnty. Tax. Hosp. Rev. Rfndg. Bonds A* 6.000% 9/01/10 @ 100 S.F.
(Wichita Falls Gen. Hosp. Brd.) Series 1987 9/01/2013 9/01/97 @ 102 Ref.
11. 250,000 Peninsula Ports Authority of Virginia Hosp. AAA 8.700% 2/01/95 @ 100 S.F.
Rev. Rfndg. Bonds 1987 Series (Whittaker 8/01/2023 8/01/97 @ 102 Ref.
Mem. Hosp. Prjt.-FHA Insrd. Mtg.)
12. 125,000 Allegheny Cnty. Penn. Rsdntl. Finc. Auth. Aa(Con)* 0.000% 12/01/14 @ 22.971 S.F
Multi-Fam. Mtg. Rev. Bonds (FHA Insrd. 12/01/2027 6/01/96 @ 3.100 Ref.
Mtg. Loans) 1985 Series A
$2,500,000
===========
</TABLE>
Portfolio Cost of Bonds
No. to Trust(3)
--- -----------
1. $308,975
2. 283,527
3. 280,333
4. 108,664
5. 293,818
6. 155,370
7. 110,138
8. 150,447
9. 284,755
10. 198,590
11. 266,175
12. 2,375
$2,443,167
===========
C/M: 11939.0001 407314.1
<PAGE>
MUNICIPAL SECURITIES TRUST, SERIES 40
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement, dated December 15, 1988, among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee, and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Municipal Securities Trust, Series 26, and Subsequent Series,
Trust Indenture and Agreement," dated April 25, 1985 (herein as amended or
supplemented called the "Indenture"), and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
W I T N E S S E T H T H A T
:
In consideration of the premises and of the mutual agreements
contained herein, the Depositor, the Trustee, and the Evaluator agree as
follows:
PART I
STANDARD TERMS AND
CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to the
same extent as if those said provisions had been set forth in full in this
instrument, except that for all purposes of this Series 40 and all subsequent
Series, the following amendments shall apply:
(a) The Indenture is amended by adding the words, ",35th Discount
Series (and Subsequent Series) and High Income Series 1 (and Subsequent Series)"
immediately after the words "Municipal Securities Trust, Series 26 (and
Subsequent Series)" wherever the latter shall appear in the Indenture;
(b) Section 1.01(6) is amended by adding the word "Inc." immediately
after the words "Bear, Stearns & Co.";
(c) Section 1.01(16) is amended by adding the words sequentially
numbered" immediately after the word "particular" and by adding the words "a
Series of" immediately before the words "Municipal Securities Trust";
(d) Section 1.01(17) is amended by redesignating it Section 1.01(19);
C/M: 11939.0001 407314.1
<PAGE>
(e) A new Section 1.01(17) is added as follows: "The term
'sequentially numbered series' shall mean the numbered series of any designated
Series of Municipal Securities Trust as to which this Indenture shall be
applicable.";
(f) Section 1.01(18) is amended by redesignating it Section 1.01(20),
and by adding the words "any sequentially numbered series of Municipal
Securities" immediately after the words "shall mean" and substituting the word
"each" for the word "the" immediately after the words "excluded from";
(g) A new Section 1.01(18) is added as follows: "'Series' shall mean
the individual trusts comprising Municipal Securities Trust, which Series
consist of indefinite sequentially numbered series.";
(h) Section 1.01(19) is amended by redesignating it Section 1.01(21);
(i) Section 1.01(20) is amended by redesignating it Section 1.01(22)
and by adding the words "equal to the fraction" immediately after the word
"initially", and the word "fraction" immediately after the words "denominator of
which";
(j) Section 1.01(21) is amended by redesignating it Section 1.01(23);
(k) Section 1.02 is amended by substituting the following form of
Certificate for the form of Certificate appearing in said Section:
C/M: 11939.0001 407314.1
<PAGE>
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest in
No. UNITS
MUNICIPAL SECURITIES TRUST
SERIES
PLAN OF DISTRIBUTION:
CUSIP
THIS IS TO CERTIFY THAT is the owner and registered
holder of this Certificate evidencing the ownership of Unit(s) of
fractional undivided interest in Municipal Securities Trust of the above Series
(hereinafter called the "Trust") created under the laws of the State of New York
by the Trust Indenture and Agreement as modified by the Reference Trust
Agreement relating to the sequentially numbered series of the Series noted on
the face hereof (hereinafter called the "Indenture") among BEAR, STEARNS & CO.
INC. (hereinafter called the "Depositor"), UNITED STATES TRUST COMPANY OF NEW
YORK (hereinafter called the "Trustee"), and STANDARD & POOR'S CORPORATION
(hereinafter called the "Evaluator"). This Certificate is issued under and is
subject to the terms, provisions and conditions of the Indenture to which the
holder of this Certificate by virtue of the acceptance hereof assents and is
bound, a summary of certain of the pertinent provisions of which is set forth on
the reverse hereof. The Depositor hereby grants and conveys all of its right,
title and interest in and to the Trust to the extent of the fractional undivided
interest represented hereby to the registered holder of this Certificate subject
to and in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the corporate trust office of the Trustee upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Trustee and payment of the fees and expenses
applicable hereto set forth herein.
C/M: 11939.0001 407314.1
<PAGE>
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as Depositor has caused
this Certificate to be executed in facsimile by an authorized signatory and
United States Trust Company of New York, as Trustee, has caused this Certificate
to be executed in its corporate name by an authorized officer.
Date:
BEAR, STEARNS & CO. INC. UNITED STATES TRUST COMPANY
Depositor OF NEW YORK
Trustee
By:
Authorized Signatory By:
Authorized Officer
The following is a summary of certain provisions of the Indenture (a
copy of which is on file and available for inspection to the holder hereof at
the corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the Indenture are incorporated herein by reference as fully as if
set forth herein. The Trust consists of (1) such of the interest-bearing debt
securities and obligations that may be deposited in trust and listed in Schedule
A of the Indenture (including contracts, if any, for the purchase of certain of
such securities and obligations together with the cash, cash equivalents and/or
an irrevocable letter of credit issued by a commercial bank in the amount
required for such purchase) and any other securities that may be deposited in
the Trust in exchange or substitution therefor in accordance with the Indenture,
as may from time to time continue to be held in the Trust and (2) such cash
amounts as from time to time may be held in the Interest Account and the
Principal Account maintained under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of units set forth on the face hereof and the denominator of which shall
be the total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon
tender of this Certificate to the Trustee at its
C/M: 11939.0001 407314.1
<PAGE>
corporate trust office in the City of New York, endorsed in blank or accompanied
by all necessary instruments of assignment and transfer in proper form, and upon
payment of any tax or other governmental charges, to receive on the seventh
calendar day following the day on which such tender is made, or, if such
calendar day is not a business day, on the first business day prior to such
calendar day, an amount in cash equal to the evaluation of the fractional
undivided interest in the Trust evidenced by this Certificate, upon the basis
provided for in the Indenture (the "Redemption Price"). The right of redemption
may be suspended and the date of payment may be postponed for any period during
which the New York Stock Exchange is closed or trading on that Exchange is
restricted, or for any period during which an emergency exists so that disposal
of the obligations held in the Trust is not reasonably practicable or it is not
reasonably practicable fairly to determine the value of such obligations in
accordance with the Indenture or for such other periods as the Securities and
Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of
redeeming this Certificate if tendered for redemption, to sell this Certificate
in the over-the-counter market or by private sale for the account of the
Certificateholder at a price which will return to the Certificateholder an
amount in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Price for this
Certificate. In the event of any such sale the Trustee shall pay the net
proceeds thereof to the Certificateholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.
Interest received by the Trustee as part of the Trust (including
interest accrued and unpaid prior to the day of deposit of any obligation in the
Trust and that part of the proceeds of the sale, liquidation, redemption or
maturity of any such obligation which represents accrued interest) shall be
credited by the Trustee to the Interest Account. The fractional undivided
interest represented by this Certificate in the balance in the Interest Account
(after the deductions referred to below) shall first be computed as of the
semi-annual Record Date (as defined in the Indenture). The next computation
shall be made as of the next succeeding semi-annual Record Date, and thereafter
as of the first day of June and December of each year commencing with the first
such day following the date of this Certificate.
An amount in cash equal to the fractional undivided interest in the
Interest Account (on the basis set forth below) computed as set forth above,
shall be distributed on the 15th day of the respective months, or within a
reasonable period of time thereafter, to the registered holder of this
Certificate at the close of business on the first day of the month in which such
C/M: 11939.0001 407314.1
<PAGE>
distribution is made.
The Trustee shall make semi-annual distributions from the Interest
Account on the basis of one-half of the estimated annual interest income
expected by the Trustee to be received by the Trust in the ensuing twelve month
period, after deduction of the estimated costs and expenses to be incurred
during such period, except as otherwise hereafter provided. To the extent cash
in the Interest Account is insufficient for any distribution the Trustee shall
advance its own funds sufficient therefor and shall be entitled to
reimbursement, without interest, out of interest received by the Trust
subsequent to such advance.
All moneys (other than interest) received by the Trustee, as part of
the Trust (including amounts received from the sale, liquidation, redemption or
maturity of any obligation held in the Trust) shall be credited by the Trustee
to a separate Principal Account. The fractional undivided interest represented
by this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the semi-annual Record Date. An amount in
cash equal to the fractional undivided interest in the Principal Account,
computed as set forth above, shall be distributed on the fifteenth day of the
respective months, or within a reasonable time thereafter, to the registered
holder of this Certificate at the close of business on the first day of such
month. The Trustee shall not be required to make a distribution from the
Principal Account unless the cash balance on such deposit therein available for
such distribution shall be sufficient to permit the distribution of at least
$1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made
to the registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account
and Principal Account, as more fully set forth in the Indenture, for
redemptions, compensation of the Trustee, compensation of the Evaluator, payment
of the Depositor's fee for services as such, reimbursement of certain expenses
incurred or advances made by or on behalf of the Trustee, certain legal expenses
and payment of, or the establishment of a reserve for, applicable taxes or
governmental charges, if any.
Within a reasonable period of time after the end of each calendar year
the Trustee shall furnish to the registered holder of this Certificate a
statement setting forth, among other things, the amounts received by the Trust
and deductions therefrom and the amounts distributed during the preceding year
in respect of interest on, payments and prepayments of principal
C/M: 11939.0001 407314.1
<PAGE>
of, and sales, redemptions or maturities of, obligations held in
the Trust.
This Certificate shall be transferable by the registered holder hereof
by presentation and surrender at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any whole multiple thereof.
The holder of this Certificate may be required to pay a transfer
charge in connection with the transfer or exchange of this Certificate, as well
as any tax or other governmental charge that may be imposed in connection with
the transfer, exchange or other surrender of this Certificate.
The holder of this Certificate, by virtue of the acceptance hereof,
assents to and shall be bound by the terms of the Indenture, a copy of which is
on file and available for inspection at the corporate trust office of the
Trustee, to which reference is made for all the terms, conditions and covenants
thereof.
The Trustee may deem and treat the person in whose name this
Certificate is registered upon the books of the Trustee as the owner hereof for
all purposes and the Trustee shall not be affected by any notice to the
contrary.
The Indenture and the Trust created thereby shall terminate upon the
maturity, redemption, sale or other disposition of the last security held
thereunder, provided, however, that in no event shall the Indenture and the
Trust continue beyond the end of the calendar year preceding the fiftieth
anniversary of the execution of the Indenture. The Indenture also provides that
the Trust may be terminated at any time by the written consent of the holders of
Certificates representing all of the Units outstanding and under certain
circumstances which include a decrease in the value of the Trust to less than
40% of the initial aggregate principal amount of the securities deposited in the
Trust. Upon any termination the Trustee shall fully liquidate the securities
then held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture. Upon
termination, the Trustee shall be under no further obligation with respect to
the Trust, except to hold the funds in trust without interest until distribution
as aforesaid and shall have no duty upon any such termination to communicate
C/M: 11939.0001 407314.1
<PAGE>
with the holder hereof other than by mail at the address of such bolder
appearing on the registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTION
On the face of this Certificate it is indicated whether the registered
holder hereof has elected to receive distributions from the Interest Account
monthly, semi-annually, or annually.
This Certificate by its terms provides that distributions from the
Interest Account shall first be computed as of the semi-annual Record Date, and
thereafter as of the next succeeding semi-annual Record Date commencing with the
first such day following the date of the Certificate, and an amount in cash
equal to the share of the Interest Account represented by this Certificate
distributed on the fifteenth day of the respective months next following such
computations, or within a reasonable period of time thereafter, to the
registered holder of this Certificate at the close of business on the first day
of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest Account,
after the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing with
the monthly Record Date, and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly after
the fifteenth day of each month.
If annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest Account,
after the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed,ill be distributed
to the holder hereof at such date of computation on or shortly after the
fifteenth day of each December.
All Certificateholders of record as of the First Record Date (as
defined in the Indenture) however, regardless of the plan of distribution
selected, will receive the distribution to be made on or shortly after the First
Payment Date (as defined in the Indenture) and thereafter, distributions will be
made monthly, semi-annually or annually depending upon the plan of distribution,
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be
changed by written notice to the Trustee not later than November 1 in any
calendar year by surrender to the
C/M: 11939.0001 407314.1
<PAGE>
Trustee of this Certificate, together with a completed form for selection of
plan of distribution provided by the Trustee. A plan of distribution shall
continue in effect until changed as herein provided. A change in a plan of
distribution may only be made as indicated herein and will be effective as of
December 2 for the ensuing twelve months. Distributions to Certificateholders
who are participating in one of the optional plans for distribution of interest
shall not be affected because of advancements of the Trustee for the purpose of
equalizing distributions to Certificateholders participating in a different
plan.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF TRANSFERS MIN ACT-..... Custodian.....
(Cust) (Minor)
under Uniform Transfers to Minors
Act.............................
(State)
Additional abbreviations may also be used though not in the above list.
C/M: 11939.0001 407314.1
<PAGE>
ASSIGNMENT
For Value Received hereby sells,
assigns and transfers unto the within
Certificate and does hereby irrevocably constitute and appoint
attorney, to transfer the within Certificate on the books
of the Trustee, with full power of substitution in the premises.
Dated:
NOTICE: The signatures to this assignment
must correspond with the name(s) as
written above upon the face of this
Certificate in every particular, without
alteration or enlargement or any change
whatever.
Signature Guaranteed
[end of Certificate]
(1) Section 9.05 is amended as follows:
(i) the word "Inc." is added immediately after the
words "Bear, Stearns & Co."; and
(ii) the address of the Depositor is changed to "245
Park Avenue, New York, New York 10167".
C/M: 11939.0001 407314.1
<PAGE>
PART II
SPECIAL TERMS AND
CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/4,000.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on May 1, 1989 for monthly
distributions, June 1 and December 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on May 15, 1989 for monthly
distributions, June 15 and December 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on April 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after April 15, 1989 (the "First Payment
Date"), and thereafter distributions will be made monthly, semi-annually or
annually, depending upon the plan of distribution chosen by each
Certificateholder.
(f) The First Settlement Date shall mean December 22, 1988.
(g) The number of Units referred to in Section 2.03 is 4,000.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess of
50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the
C/M: 11939.0001 407314.1
<PAGE>
liquidation amount is hereby specified to be $1,600,000.
(j) For the purposes of Section 6.04, the Trustee shall be paid per
annum $1.05 per $1,000 principal amount of Bonds for that portion of the Trust
under the monthly distribution plan, $.60 per $1,000 principal amount of Bonds
for that portion of the Trust under the semi-annual distribution plan and $.35
per $1,000 principal amount of Bonds for that portion of the Trust under the
annual distribution plan. During the first year after the date hereof, such
payments to the Trustee will be reduced by a portion [a maximum of $.88 per Unit
times the number of Units on the monthly distribution plan, $.60 per Unit plus
$.28 of Trust expenses (to be assumed and paid by the Trustee) times the number
of Units on the semi-annual distribution plan and $.35 per Unit plus $.53 of
Trust expenses (to be assumed and paid by the Trustee) times the number of Units
on the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's annual fee is hereby
specified to be $.25 per $1,000 principal amount of Bonds in the Trust.
(l) For purposes of this Series of Municipal Secu- rities Trust, the
form of Certificate set forth in this Indenture shall be appropriately modified
to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
C/M: 11939.0001 407314.1
<PAGE>
BEAR, STEARNS & CO. INC. Depositor
By
Authorized Signatory
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this 15th day of December, 1988, before me personally appeared
Peter J. DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signatory of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of said corporation.
Notary Public
Municipal Securities Trust,
Series 40
C/M: 11939.0001 407314.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By
Assistant Vice President
(SEAL)
ATTEST:
Assistant Secretary
Municipal Securities Trust,
Series 40
C/M: 11939.0001 407314.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By
Vice President
(SEAL)
ATTEST:
Vice President
Municipal Securities Trust,
Series 40
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
SCHEDULE A
MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 40
As of December 15, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
<CAPTION>
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2)
--- ------ ----------------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
1. $100,000 Maricopa Cnty. Ariz. Indus. Dev. Auth. AA- 9.100% No Sinking Fund
(Mercy Hlth. Sys.) Hlth. Fac. Rev. Bonds 7/01/2001 7/01/95 @ 102 Ref.
Series 1986D
2. 250,000 Reg. Arpts. Imprvmt. Corp. Facs. Sublease A2* 11.250% 11/01/06 @ 100 S.F.
Rev. Bonds 1985 Issue Western Air Lines 11/01/2025 11/01/95 @ 103 Ref.
Inc. (L.A. Intrn'l Arpt.)
3. 100,000 Jacksonville Fla. Port Auth. Poll. Cntrl. Rev. Aa3* 11.375% No Sinking Fund
Bonds (Fla. Pwr. & Lt. Co. Prjt.) Series 1984 5/01/2019 5/01/94 @ 103 Ref.
4. 250,000 Palm Beach Fla. Solid Waste Auth. Rfndg. & A(Con)* 10.000% 12/01/99 @ 100 S.F.
Imprvmt. Rev. Bonds Series 1985 12/01/2005 12/01/95 @ 102 Ref.
5. 250,000 Monroe Cnty. Ga. Dev. Auth. Poll. Cntrl. A2* 10.500% No Sinking Fund
Rev. Bonds (Gulf Pwr. Co. Plant Scherer 12/01/2014 12/01/94 @ 102 Ref.
Prjt.) First Series 1984
6. 250,000 Ill. Hlth. Facs. Auth. Rev. Rfndg. Bonds AA 10.000% 4/01/97 @ 100 S.F.
(Lutheran Institute of Human Ecology) Series 4/01/2015 4/01/95 @ 102 Ref.
1985A
7. 280,000 Ill. Hsg. Dev. Auth. Hsg. Dev. Bonds Series AA 5.600% No Sinking Fund
1972A 7/01/2009 1/01/89 @ 103 Ref.
8. 100,000 Mass. Hlth. & Ed. Facs. Auth. Rev. Bonds A 8.125% 7/01/08 @ 100 S.F.
(Stonehill Cllge. Issue) Series C 7/01/2017 7/01/92 @ 102 Ref.
9. 250,000 Detroit Mi. Cnvntn. Fac. Ltd. Tax Rev. A 9.000% 9/30/03 @ 100 S.F.
Bonds (Cobo Hall Expansion Prjt.) Series 9/30/2010 9/30/94 @ 103 Ref.
1985
10. 105,000 Univ. Dev. Auth. (Mo.) Pwr. Plant Equip. A+ 9.250% 5/01/01 @ 100 S.F.
Leasehold Rev. Bonds 1985 Series 5/01/2005 5/01/96 @ 103 Ref.
11. 400,000 N.C. Eastern Muni. Pwr. Agncy. Pwr. Sys. A* 4.500% 7/01/20 @ 100 S.F.
Rev. Rfndg. Bonds Series 1987A 1/01/2024 1/01/97 @ 100 Ref.
12. 200,000 Tulsa Ok. Muni. Arpt. Trust Rev. Indus. Dev. A2* 9.375% 6/01/03 @ 100 S.F.
Rev. Bonds-American Airlines 6/01/2004 12/01/95 @ 102 Ref.
13. 50,000 Montgomery Cnty. Penn. Indus. Auth. Rev. A- 10.500% No Sinking Fund
Bonds Mary Penn. Prop. Inc. Indus. Dev. 3/01/2003 3/01/93 @ 103 Ref.
Bonds
14. 250,000 Philadelphia Penn. Arpt. Rev. Bonds Series A 9.000% 6/15/06 @ 100 S.F.
1985 (Philadelphia Arpt. Sys.) 6/15/2015 6/15/95 @ 103 Ref.
15. 250,000 York Cnty. Penn. Indus. Dev. Auth. Poll. A- 10.375% No Sinking Fund
Cntrl. Rev. Bonds (Pub. Serv. Elec. & Gas 11/01/2012 11/01/94 @ 102 Ref.
Co. Peach Bottom Prjt.) 1984 Series A
</TABLE>
Portfolio Cost of Bonds
No. to Trust(3)
--- ----------
1. $109,932
2. 304,915
3. 119,888
4. 287,880
5. 287,442
6. 284,683
7. 219,791
8. 101,434
9. 272,210
10. 115,821
11. 245,516
12. 221,292
13. 56,422
14. 273,668
15. 288,815
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
<CAPTION>
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2)
--- ------ ----------------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
16. $250,000 Baytown Tex. Indus. Dev. Corp. Indus. Dev. AA 10.625% 11/01/95 @ 100 S.F.
Rev. Bonds Walmart Stores Inc. 11/01/2009 11/01/94 @ 103 Ref.
17. 115,000 Richardson Tex. Hosp. Auth. Hosp. Rev. AA 10.000% 12/01/00 @ 100 S.F.
Rfndg. Bonds (Richardson Med. Cntr. BB 12/01/2009 12/02/95 @ Ref.
Owen Mem. Hosp.)(HIBI)
18. 350,000 Intermountain Pwr. Agncy. Utah Pwr. Supply AA 5.000% 7/01/12 @ 100 S.F.
Spec. Oblig. First Crossover Series 7/01/2016 7/01/96 @ 100 Ref.
19. 200,000 Modesto Calif. Mtg. Rev. Bonds (FHA Insrd. A- 0.000% 6/01/96 @ 5.314 S.F.
Mtg. Ln. Stonebridge Aprtmts. Prft.) Series 12/01/2025 6/01/94 @ 4.486 Ref.
1984
$4,000,000
===========
</TABLE>
Portfolio Cost of Bonds
No. to Trust(3)
--- --------------
16. 292,733
17. 132,425
18. 244,072
19. 5,488
-------------
$3,864,427
=============
C/M: 11939.0001 407314.1
<PAGE>
<TABLE>
<S> <C>
"Municipal Securities Trust" Series / / "Municipal Securities Trust" / /
37 Discount Series
"Insured Municipal Securities Trust" / / "Insured Municipal Securities Trust / /
Series Discount Series
"Municipal Securities Trust" Multi-State / / "Municipal Securities Trust" Multi- / /
Series State Series................Multiplier Portfolio
California Trust / / California Trust / /
Massachusetts Trust / / Massachusetts Trust / /
Michigan Trust / / Michigan Trust / /
Minnesota Trust / / Minnesota Trust / /
New York Trust / / New York Trust / /
Pennsylvania Trust / / Pennsylvania Trust / /
________________ Trust / / ____________ Trust / /
________________ Trust / / ____________ Trust / /
________________ Trust / / ____________ Trust / /
</TABLE>
Dated: June 11, 1985
BEAR, STEARNS & CO.
55 Water Street
New York, new York 10041
AGREEMENT AMONG UNDERWRITERS
Participation 100 Units
Gentlemen:
We hereby agree with you and the other Underwriters listed in Schedule
A hereto, severally (the "Underwriters") with respect to the underwriting of
_______ Units, subject to adjustment as provided in Section 13, (the "Units")
of fractional undivided interest in the above unit investment trust (the
"Trust") to be created by a Trust Agreement substantially in the form delivered
to us (the "Trust Agreement") under which you will act as Depositor, United
States Trust Company of New York will act as Trustee and Standard & Poor's
Corporation will act as Evaluator. The Units shall be represented by the
certificates of ownership (the "Certificates") to be received in exchange for
the debt obligations ("Debt Obligations") to be acquired hereunder upon the
deposit of such Debt Obligations in the Trust.
We authorize you, acting as Managing Underwriter and in our behalf, to
take all such action as you in your discretion may deem necessary or advisable
in order to carry out the provisions of this Agreement and of the Trust
Agreement and the sale and distribution of the Units. We agree to execute such
powers of attorney evidencing the powers granted to you under this Agreement
upon your request in such form and at such times as you deem appropriate and
advisable.
C/M: 11939.0001 407242.1
<PAGE>
We hereby agree to sell Trust Units only in those states where the
Units have been qualified for sale as indicated in the Blue Sky memorandum
provided to us by you. We further agree to provide you with such additional
information that you may request in connection with the registration of Trust
Units in any state.
1. REGISTRATION OF TRUST AND UNITS. We understand that (i) a
registration statement will be filed with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of registering the Trust under the 1940 Act; (ii) a
registration statement will be filed with the Commission under the Securities
Act of 1933, as amended (the "1933 Act"), to register the Units under the 1933
Act (The 1933 Act Registration Statement as amended at the time it becomes
effective is hereafter referred to as the "Registration Statement" and the
related Prospectus contained therein is hereafter referred to as the
"Prospectus". The date as of which such Registration Statement is declared
effective by the Commission is hereafter referred to as the "Effective Date");
and (iii) the Trust will take all necessary action under the Blue Sky or
securities laws of the states where it is proposed that the Units may be
offered and sold to qualify the Units for public offer and sale as indicated in
the preliminary Blue Sky memorandum that has been provided to us. We understand
that neither you nor any of the other Underwriters make any representations or
warranties or assume any responsibility with respect to the foregoing except
pursuant to the indemnity set forth in Section 10 hereof and except to the
extent required by express provisions of the 1933 Act, the 1940 Act or other
applicable law.
We hereby authorize you to take all such action on our behalf related
to the above as you or your counsel shall deem necessary and advisable and to
file and approve on our behalf any and all amendments or supplements to said
registration statements and related filings as you or your counsel deem
necessary and advisable. We confirm that we agree to furnish you upon your
request with such information as will be required to insure that such
registration statements. the Prospectus and all other related documents are
correct in so far as they relate to us,
2. ACCUMULATION ACCOUNT. We authorize you as our agent and attorney in
fact and as Depositor to purchase and accumulate Debt Obligations for deposit
in the Trust. Debt Obligations so purchased shall be deposited in an
"Accumulation Account" and shall hereafter be referred to as the "Underlying
Debt Obligations". The Underlying Debt Obligations shall consist of obligations
of the type and quality described in the Prospectus. We agree that you shall
have no liability with respect to the issue, form, validity, legality,
enforceability, value of, tax status or title to the Underlying Debt
Obligations. We authorize you to execute on our behalf an appropriate
"investment letter" with respect to any Underlying Debt Obligations purchased
on a private placement basis.
You are authorized to sell. exchange or otherwise dispose of
Underlying Debt Obligations from the Accumulation Account, including those
Underlying Debt Obligations purchased for the Account but not deposited in the
Trust, for such consideration as you shall deem appropriate and in the best
interests of the Accumulation Account. All profits and losses from such
transactions shall be included in the final computation of profit and losses of
the Accumulation Account. All profits and losses from the purchase,
accumulation and deposit of the Underlying Debt Obligations in the Trust.
adjusted to reflect expenses and carrying charges, shall be recorded in the
Accumulation Account and shall be shared among the Underwriters in accord with
their respective elections set forth on the signature page hereof. As
Depositor. you shall be entitled to all remaining profit and correspondingly,
shall be obligated for all losses of the Accumulation Account not expressly
allocated among the Underwriters in accord with such elections.
C/M: 11939.0001 407242.1
-2-
<PAGE>
The principal amount of the Underlying Debt Obligations to be
purchased shall not exceed $1,000 per Unit and their average cost to the
Accumulation Account shall not exceed $1,025 per Unit.
We authorize you to purchase Underlying Debt Obligations for the
Accumulation Account from any seller, including you and any of the
Underwriters. Such purchases may be at the current market price then in effect
(as reasonably determined by you); provided, however, if any Underwriter is a
member of a syndicate underwriting an original issue and is prohibited by price
restrictions of the syndicate from reselling Debt Obligations at less than a
certain price, then the purchase price of such Underlying Debt Obligations to
the Accumulation Account shall be the lowest price permitted by such
restrictions.
We shall furnish to you in writing any information regarding
Underlying Debt Obligations sold by us to the Accumulation Account which you
deem necessary for inclusion in the Prospectus, including the date on which
such Debt Obligations were acquired by us, the price of acquisition, and, if
the sale is made by us as a member of another underwriting syndicate, our
takedown retained as a member of such syndicate. If Underlying Debt Obligations
purchased from us were initially acquired by us from the manager of a syndicate
of which we are or were a member or manager, we agree that there shall be
furnished to you in writing such estimates as to our participation in the
profit to the syndicate resulting from such sale as may be practicable under
the circumstances.
If at any time prior to the deposit of Underlying Debt Obligations in
the Trust you shall determine that it is impracticable or inadvisable to
complete the acquisition of Underlying Debt Obligations because of unfavorable
market conditions or for other reasons adversely affecting such acquisition or
the offering of Units hereunder, we authorize you to sell for the Accumulation
Account the Underlying Debt Obligations acquired prior to such determination in
such manner, at such times and at such prices as you shall deem advisable. As
soon as practicable after all of the Underlying Debt Obligations have been sold
pursuant to this paragraph, this Agreement shall be terminated and our account
hereunder settled in the manner stated in Section 12.
3. FINANCING OF ACCUMULATION ACCOUNT. From time to time during the
term of this Agreement, we agree to transmit to you upon your request a
certified or official bank check to your order in an amount not in excess of
10% of our respective Underwriting Percentage shares in the Accumulation
Account to serve as margin in carrying the Underlying Debt Obligations and the
Units received upon deposit of the Underlying Debt Obligations in the Trust and
for the other purposes of this Agreement.
We authorize you to advance your own funds or to arrange loans
(including repurchase agreements) for the Accumulation Account for the purposes
of carrying the Underlying Debt Obligations and the Units and of carrying out
the other purposes of this Agreement and in connection therewith to hold or
pledge as security all or any of the Underlying Debt Obligations and the Units.
You may deliver any note or other instrument in connection with such
transactions as you may deem necessary or advisable. Any lender or purchaser is
hereby authorized to accept your instructions with respect thereto.
4. TRUST DEPOSIT AND CERTIFICATES. We authorize you, acting as our
agent and in our behalf, to deposit the Underlying Debt Obligations in the
Trust at such time after the acquisition of the Underlying Debt Obligations as
you deem appropriate and to receive in exchange therefor for our account
Certificates representing our Unit Commitment in the Trust. We authorize you to
retain custody of the Certificates until delivered to us or sold for our
account in accordance with this Agreement.
C/M: 11939.0001 407242.1
-3-
<PAGE>
You may deliver to us from time to time against payment, for carrying
purposes only, any Certificates representing Units which you are holding for
sale for our account but which have not been sold and paid for. We will
redeliver to you against payment any such Certificates so delivered to us for
carrying purposes at such times as you may demand.
5. PUBLIC OFFERING OF TRUST UNITS. A public offering of the Units is
to be made as soon after the Effective Date as in your judgment is advisable.
You shall notify us promptly be telephone and confirm by mail or telegram when
the public offering is to commence (the "Public Offering Date"). The public
offering is to be made by means of the prospectus and at the public offering
price, terms and conditions set forth in the Prospectus. We authorize you to
change the terms and conditions of the public offering as you deem advisable.
You are authorized to make public advertisements of the offering on such dates
and in such form as you shall determine.
We also confirm that we will take reasonable steps to provide the
preliminary prospectus prior to the Effective Date and the Prospectus
thereafter to any person making written request to us. We understand that our
requests for sufficient copies of such prospectuses will be processed by your
printer.
6. PURCHASE OF UNITS BY THE UNDERWRITERS. The sales charge
contemplated in this transaction is an amount per Unit as described in the
Prospectus. The amount set forth in Schedule B hereto will constitute the per
Unit sales takedown ("Underwriters' Takedown"). The sales charge less the
Underwriters' Takedown will accrue to you as Managing Underwriter.
Upon notification from you that the public offering is to commence, we
hereby agree with you and the several other Underwriters to purchase
Certificates representing our Unit Commitment on the Public Offering Date. The
price to be paid for each such Unit shall be the public offering price on such
Date plus the per Unit accrual of interest to the settlement date (estimated at
five business days thereafter) less the Underwriters' Takedown. Such payment is
to be made by delivering to you within five business days of the Public
Offering date, a certified or bank cashier's check in New York City Clearing
House funds payable to the order of Bear, Steams & Co. At the Public Offering
Date, we will become the owner of such Units and be entitled to the benefits
and subject to the risks inherent therein.
We will offer to the public in conformity with the terms of the
offering and at the then effective public offering price described in the
Prospectus any of our Units not reserved by you for sale to retail accounts or
to dealers or sold by us directly to dealers as herein authorized. When
requested by us from time to time, you shall furnish to us the then effective
public offering price.
We may sell to dealers part or all of the Units delivered to us for
direct sale at the then effective public offering price, plus accrued interest,
less he dealer' concession set forth in the Prospectus, subject to your right
to change such concession from time to time. Any Units purchased by us after
the Public Offering Date as a result of an increase in our Unit Commitment
pursuant to Section 11 or which are delivered to us for direct sale pursuant to
Section 7 will be purchased by us at the then effective public offering price
plus accrued interest, less the Underwriters' Takedown.
7. DIRECT SALES AUTHORIZATION. We authorize you to sell for our
account to retail accounts or to dealers (including one or more of the
Underwriters) such of our Units as you shall determine. Sales of Units to
retail accounts or to dealers shall be made for the account of any Underwriter
in such manner as you may deem appropriate. Our liability to take and pay for
Units under this Agreement shall be reduced to reflect any such sales of Units
for our account. You shall advise us
C/M: 11939.0001 407242.1
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<PAGE>
promptly on the Public Offering Date as to our Units reserved by you for sale
to retail accounts or to dealers pursuant to this paragraph. You may advise us
at any time thereafter that any Units so reserved for sale for our account and
not sold are no longer so reserved and we shall then be responsible to take and
pay for such Units as if they had not been reserved.
You shall deliver to us for direct sale any Units held by you for our
account and not reserved for sale to retail accounts or to dealers, and, with
your consent, any Units held for our account which are so reserved from time to
time in accordance with our instructions, and, upon payment to you by us of the
then effective public offering price of such Units, plus accrued interest,
adjusted for the Underwriters' Takedown.
We authorize you to sell for our account to other Underwriters such of
our Units held by you for our account as you shall determine which are not
reserved by you for sale to retail accounts or to dealers or, in accord with
the preceding paragraph, delivered to us for direct sale provided that (i) such
sales shall be made only to Underwriters to whom you shall have delivered all
of their Units not reserved for sale to retail accounts or to dealers and (ii)
such sales shall be made for the account of each Underwriter for whose account
you hold unreserved Units in such manner as you may deem appropriate.
You may, and any of the other Underwriters may with your consent, make
purchases and sales of Units from or to any other Underwriter at the then
effective public offering price, plus accrued interest, adjusted for the
Underwriters' Takedown.
You shall advise us as soon as practicable of any sales made by you
for our account pursuant to this Section 7.
From time to time prior to the termination of this Agreement. on your
request, we will advise you of Units remaining unsold which were delivered to
us, and, on your request, we shall deliver to you any such Units remaining
unsold for sale for our account to retail accounts or, adjusted for the
Underwriters' Takedown, to other Underwriters or dealers, all in the manner and
subject to the limitations stated above.
We understand that any Units sold for our account to retail accounts
will be subject to a discount per Unit on purchases of 100 Units or more, as
described in the Prospectus.
8. UNIT REPURCHASES. We understand and agree that you may, but are not
obligated, to repurchase any Units which are tendered or offered to you by the
holders thereof. If, during the term of this Agreement, you purchase or
contract to purchase for the account of any Underwriter in the open market or
otherwise Certificates for any Units which were retained by, or released to, us
for direct sale, or any Certificates which may have been issued in exchange
therefor or if any such Units shall be tendered to the Trustee for redemption,
and which Units were therefore not effectively placed for investment by us, we
authorize you either to charge our account with an amount equal to the
concession to dealers with respect thereto, or to require us to repurchase such
Units at a price equal to the total cost of such purchase, including accrued
interest and commissions, if any, and transfer taxes on the redelivery.
We agree that, until the termination of this Agreement, we will make
no purchase of the Units other than (i) purchases provided for in this
Agreement, (ii) purchases approved by you and (iii) purchases as a broker in
executing unsolicited orders.
C/M: 11939.0001 407242.1
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<PAGE>
9. LEGAL OPINION AND ACCOUNTANTS' LETTER. After notification of the
Effective Date has been released by the Securities and Exchange Commission,
there shall be furnished to us copies of all legal opinions and accountants'
reports which are delivered to you as Depositor, the Trustee and the Trust.
10. INDEMNIFICATION. We agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act of 1933 from and against any and
all losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus as amended and supplemented or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon or in conformity with
information furnished to you by us for use in the preparation of the
Registration Statement or the Prospectus or any amendment or supplement
thereto. This indemnity agreement will be in addition to any liability which we
may otherwise have.
In case any action shall be brought against any Underwriter or any
person controlling such Underwriter based upon the Registration Statement or
the Prospectus or any amendment or supplement thereto in respect of which
indemnity may be sought against us, if such Underwriter shall promptly notify
us in writing, we shall assume the defense thereof, including the employment of
counsel and the payment of all expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Underwriter or such controlling
person unless the employment of such counsel has been specifically authorized
by us. We shall not be liable for any settlement of any such action effected
without our consent but if settled with our consent or if there be a final
judgment for the plaintiff in any such action, we agree to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement or judgment.
The indemnity agreement contained in this Section 10 shall remain
operative and in full force and effect regardless of (i) the termination of
this Agreement and (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter.
11. SUBSTITUTION. Until the termination of this Agreement, we
authorize you to arrange for the substitution hereunder of other persons, who
may include you and us, for all or any part of the commitment of any
non-defaulting Underwriter with the consent of such Underwriter, and of any
defaulting Underwriter without his consent, upon such terms and conditions as
you may deem advisable, provided that such substitution shall not in any way
affect the liability of any defaulting Underwriter to the other Underwriters
for damages from such default, nor relieve any other Underwriter of any
obligation under this Agreement. The expenses chargeable to the account of any
defaulting Underwriter and not paid for by it or by the person substituted for
such Underwriter and any additional losses or expenses arising from such
default shall be considered to be expenses of the underwriting account and
shall be charged against the accounts of the non-defaulting Underwriters in
proportion to their respective Underwriting Percentages.
In the event that you shall for any reason cease to act as Depositor
of the Trust prior to the termination of the Trust Agreement, we hereby
authorize the Trustee to select a substitute Depositor as provided in the Trust
Agreement.
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<PAGE>
12. TERMINATION. This Agreement shall terminate 30 days after the
Public Offering Date unless sooner terminated by you, provided that you may
extend this Agreement for not more than four successive periods of 30 days each
upon notice to us and each of the other Underwriters.
Upon termination of this Agreement, or prior thereto, at your
discretion, (i) you shall deliver to us Certificates for any Units received by
you for our account and not theretofore delivered to us and Certificates for
any Units held by you for our account and (ii) after (a) crediting to our
account advances made by us to you pursuant to Section 3 and payments made to
you on account of Units sold by you for our account or delivered by you to us,
(b) charging or crediting to our account our share of any profit or loss in the
Accumulation Account and (c) making such other credits or charges to our
account as are authorized by the provisions of this Agreement, our account
hereunder shall be settled and any amount due and owing thereunder shall be
paid by you or by us, as the case may be. The determination by you as Depositor
and Managing Underwriter of the amount to be paid to or by us in settlement of
our account shall be final and conclusive.
Notwithstanding any settlement on the termination of this Agreement,
we agree to pay our Underwriting Percentage share of any amount payable on
account of any claim, demand or liability which may be asserted against the
Underwriters, or any of them, based on the claim that the Underwriters
constitute an association, unincorporated business or other separate entity and
our Underwriting Percentage of any expenses incurred by you in defending
against any such claim, demand or liability. We also agree to pay any stamp
taxes which may be assessed and paid after such settlement on account of any
Units received or sold hereunder for our account.
Notwithstanding any termination of this Agreement, no sale of the
Units shall be made by us at any time except in conformity with the provisions
of Section 22(d) of the 1940 Act.
We agree that if, within ninety days from the time the Registration
Statement shall have become effective, either (i) the net worth of the Trust
shall be reduced to less than $100,000 or (ii) the Trust shall have been
terminated, then we will refund, on demand and without deduction, all sales
charges to purchasers of Units from us or any dealer participating in the
distribution of our Units.
13. UNDERWRITING COMMITMENT. We hereby commit on the terms and
conditions of this Agreement to purchase and pay for the number of Units set
forth opposite our name in Schedule A ("Unit Commitment"). Except for the right
to decrease our Unit Commitment granted to you above, and except as provided in
Section 11, our Unit Commitment may be increased or decreased only by mutual
written agreement between us and you at any time prior to the date the
Underlying Debt Obligations are deposited in the Trust.
Our percentage interest ("Underwriting Percentage") and the percentage
interest of each Underwriter in the total Units to be offered shall be as
expressed by the following ratio:
Unit commitment = Underwriting Percentage
Total Units
The final determination of the respective Underwriting Percentages of
all Underwriters shall be made by you as of the date the Underlying Debt
Obligations are deposited in the Trust.
You are authorized to increase or decrease the number of Units (and,
correspondingly, the amount of Underlying Debt Obligations) to be offered by a
maximum of 50% if you shall deem it advisable and practicable to do so. In the
event you shall elect to decrease the number of Units hereunder, you shall
C/M: 11939.0001 407242.1
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<PAGE>
have the right but not the obligation to decrease our Unit Commitment
proportionately by notifying us of such election by telephone and promptly
confirm by telegraph or writing.
You are authorized to amend Schedule A to add additional Underwriters
as you deem advisable in which case such Underwriters shall be deemed to have
been parties to this Agreement as of the date of its confirmation by you. Any
deletion of Underwriters from Schedule A by you to reflect their withdrawal
from this underwriting participation shall be subject to reservation of all our
rights with respect to them conferred in us by this Agreement.
14. MISCELLANEOUS. Default by any one or more of the other
Underwriters in respect of their several obligations under this Agreement shall
not release us from any of our obligations hereunder.
Nothing herein contained constitutes us partners with you or with the
other Underwriters and the obligations of ourselves and of each of the other
Underwriters are several and not joint.
Nothing herein contained shall be deemed to protect or purport to
protect any person against any liability to the Trust or the Certificateholders
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the duties of
such person, or by reason of such person's reckless disregard of such person's
obligations and duties under this Agreement.
Notices hereunder shall be deemed to have been duly given if
telephoned and then promptly mailed or telegraphed to us at our address set
forth in the Underwriters' Questionnaire which we have furnished to you, or to
you at your address set forth at the head of this Agreement.
The headings contained in this Agreement are for reference purposes
only and shall not affect its meaning or interpretation.
15. UNDERWRITING PARTICIPANTS. This Agreement is being executed by us
and delivered to you in duplicate. Upon your confirmation hereof and of
Agreements in identical form with each of the other Underwriters, this
Agreement shall constitute a valid and binding contract between us.
If you elect Option A with respect to your participation in the
Accumulation Account, you must return a signed copy of this Agreement, noting
your election, to the undersigned, not later than the date set forth on page 1
of this Agreement.
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<PAGE>
We hereby elect to participate in the Accumulation Account, as
follows:
A. __________ We shall share in the aggregate
initial profit or loss, as the case may be,
of the Accumulation Account to the
extent of our Underwriting Percent-
age of such aggregate profit or loss.
B. __________ We shall share in only the aggre-
initial gate profit of the Accumulation
Account to the extent of 50% of our
Underwriting Percentage of such profit and
shall not be liable for any loss in such
account.
Very truly yours,
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<PAGE>
Confirmed as of the date set forth
on page 1 of this Agreement.
BEAR, STEARNS & CO.
Depositor and Managing Underwriter
Acting severally on its own behalf
and on behalf of the other several
Underwriters named in Schedule A hereto.
<TABLE>
Schedule A
Underwriting Participation
<CAPTION>
Name and Address Unit Commitment Underwriting Percentage
<S> <C>
Bear, Steams & Co. [Pending delivery of the definitive Schedule A, Bear, Stearns & Co.'s
55 Water Street Unit Commitment (and Underwriting Percentage shall be the number of
Units which have not been committed for by other Under-
New York, N.Y. 10041 writers we have become parties to this Agreement.]
</TABLE>
Schedule B
Underwriters' Takedown*
Municipal Trusts: $38.00 per unit
Municipal Discount Trusts: $22.50 per unit
- -----------------
* Subject to change upon written notice to each Underwriter by the
Depositor.
C/M: 11939.0001 407242.1
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<PAGE>
Dated As Of December 31, 1986
Bear, Stearns & Co. Inc.
55 Water Street
New York, New York 10041
MASTER AGREEMENT AMONG UNDERWRITERS
Bear, Stearns & Co. Inc. Unit investment Trusts
Gentlemen:
We understand that you, Bear, Stearns & Co. Inc. ("Bear
Stearns") are entering into this agreement (the "Agreement") in counterparts
with us and other firms who may be underwriters for issues of any Bear Stearns
Unit Investment Trust for which you will act as depositor (the "Depositor").
This Agreement shall apply to any offering on or after December 31, 1986 of
units of fractional undivided interests (the "Units") in any Bear Stearns Unit
Investment Trust, in which we elect to act as an underwriter (the underwriters
with respect to each such trust, including you, being hereinafter called the
"Underwriters") after receipt of an oral or written notice ("Notice") from you
stating the name, size and proposed date of offering of such trust and that our
participation as an underwriter in the proposed offering shall be subject to
the provisions of this Agreement. We understand that you are not obligated to
give Notice to us and invite us to participate in the underwriting of any such
trust. We understand that each trust is to be created by a Trust Agreement
substantially in the form delivered to us (the "Trust Agreement") under which
you will act as Depositor, United States Trust Company of New York will act as
Trustee and Standard & Poor's Corporation will act as Evaluator. The Units
shall be represented by the certificates of ownership (the "Certificates") to
be received in exchange for the underlying debt obligations ("Debt
Obligations") to be acquired hereunder upon the deposit of such Debt
Obligations in the trust. Each trust which we agree to underwrite subject to
this Agreement is hereinafter referred to as the "Trust".
We hereby appoint you Managing Underwriter and authorize you in
our behalf, to take all such action as you in your discretion may deem
necessary or advisable in order to carry out the provisions of this Agreement
and of the Trust Agreement and the sale and distribution of the Units. We agree
to execute such powers of attorney evidencing the powers granted to you under
this Agreement upon your request in such form and at such times as you deem
appropriate and advisable.
We hereby agree to sell Units only in those states where the
Units have been qualified for sale as indicated in the Blue Sky memorandum
provided to us by you. We further agree to provide you with such additional
information that you may request in connection with the registration of Units
in any state.
It is understood that you assume no responsibility with respect
to the right of any Underwriter or other person to offer or to sell Units in
any jurisdiction, notwithstanding any information which you may furnish as to
the jurisdictions under the securities laws of which it is believed, based upon
a Blue Sky survey performed by your counsel, the Units may be sold.
If any Underwriter proposes to offer Units outside the United
States, or in a state in which the offering has not been registered, its
territories or its possessions, such Underwriter will take, at its own
C/M 11939.0001 407239.1
<PAGE>
expense, such action, if any, as may be necessary to comply with the laws of
each jurisdiction, domestic or foreign, in which it proposes to offer Units.
1. Registration Of Trust And Units. We understand that (i) a
registration statement will be filed with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of registering the Trust under the 1940 Act; (ii) a
registration statement will be filed with the Commission under the Securities
Act of 1933, as amended (the "1933 Act"), to register the Units under the 1933
Act (The 1933 Act Registration Statement as amended at the time it becomes
effective is hereafter referred to as the "Registration Statement" and the
related Prospectus contained therein is hereafter referred to as the
"Prospectus." The date as of which such Registration Statement becomes
effective pursuant to the 1933 Act by Commission order is hereafter referred to
as the "Effective Date"); and (iii) the Trust will take all necessary action
under the Blue Sky or securities laws of the states where it is proposed that
the Units may be offered and sold to qualify the Units for public offer and
sale as indicated in the preliminary Blue Sky memorandum that is provided to
us. We understand that neither you nor any of the other Underwriters make any
representations or warranties or assume any responsibility with respect to the
foregoing except pursuant to the indemnity set forth in Section 11 hereof and
except to the extent required by express provisions of the 1933 Act, the 1940
Act or other applicable law.
We hereby authorize you to take all such action on our behalf
related to the above as you or your counsel shall deem necessary and advisable
and to file and approve on our behalf any and all amendments or supplements to
said registration statements and related filings as you or your counsel deem
necessary and advisable. We confirm that we agree to furnish you upon your
request with such information as will be required to insure that such
registration statements, the Prospectus and all other related documents are
correct in so far as they relate to us.
2. Unit Commitment. We authorize you, acting as our agent and on
our behalf, to receive in exchange for the Underlying Debt Obligations, the
Units representing a fractional undivided interest in the Trust up to the
number of Units which we have advised you by telegraph, telegram or other form
of facsimile transmission substantially in the form of Schedule B hereto that
we agree to purchase (the "Acceptance"). We understand that the Acceptance must
be received by you by the close of business on the day preceding the Date of
Deposit (as defined in the Indenture). We further agree that the Underwriters
to be subject to this Agreement for the Trust shall be those who have given
Acceptances and are named in the Prospectus. We herewith authorize you to cause
the Registration Statement as first filed with the Securities and Exchange
Commission in accordance with Paragraph 1 hereof (the "Registration Statement")
to be amended to include in the Prospectus the amount of Units of the Trust
which we have agreed to underwrite (our "Unit Commitment"). We agree that
notwithstanding our failure to send the Acceptance to you in the manner set
forth in this paragraph, our acceptance of delivery of the Units subsequent to
the Date of Deposit shall be deemed to be an Acceptance in accordance with the
provisions hereof.
The number of Units of each Trust to be underwritten hereunder
is unlimited and it is understood that you may increase the number of Units
specified in the Registration Statement, or you may decrease the number of
Units, if you shall deem it advisable and practicable to do so. You may permit
any Underwriter to increase its Unit Commitment (by written agreement) or
additional underwriters to become parties to this Agreement (the addition of
new parties hereto to be evidenced in each case by an agreement substantially
in the form of this Agreement to be entered into between you and
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C/M 11939.0001 407239.1
<PAGE>
any such new party). You may decrease our Unit Commitment by any amount,
including to zero, by notifying us by telephone, such notice to be confirmed in
writing. Apart from the authorized decrease provided for in this Paragraph, the
number of Units to be underwritten by each of us shall not be changed from the
amount set forth in our Acceptance without our written consent.
3. Accumulation Account. We authorize you as our agent and
attorney in fact and as Depositor to purchase and accumulate Debt Obligations
for deposit in the Trust. Debt Obligations so purchased shall be deposited in
an "Accumulation Account" and shall hereafter be referred to as the "Underlying
Debt Obligations." The Underlying Debt Obligations shall consist of obligations
of the type and quality described in the Prospectus. We agree that you shall
have no liability with respect to the issue, form, validity, legality,
enforceability, value of, tax status or title to the Underlying Debt
Obligations. We authorize you to execute on our behalf an appropriate
"investment letter" with respect to any Underlying Debt Obligations purchased
on a private placement basis.
You are authorized to sell, exchange or otherwise dispose of
Underlying Debt Obligations from the Accumulation Account, including those
Underlying Debt Obligations purchased for the Accumulation Account but not
deposited in the Trust, for such consideration as you shall deem appropriate
and in the best interests of the Accumulation Account. All profits and losses
from such transactions shall be included in the final computation of profit and
losses of the Accumulation Account. All profits and losses from the purchase,
accumulation and deposit of the Underlying Debt Obligations in the Trust,
adjusted to reflect expenses and carrying charges, shall be recorded in the
Accumulation Account and shall be shared among the Underwriters in accord with
their respective elections set forth in Schedule B. In addition, you are
authorized to deduct from the Accumulation Account the costs of any advertising
that you purchase on behalf of you and all the Underwriters in accordance with
Section 15 hereof. As Depositors, you shall be entitled to all remaining profit
and, correspondingly, shall be obligated for all losses of the Accumulation
Account not expressly allocated among the Underwriters in accord with such
elections.
We authorize you to purchase Underlying Debt Obligations for the
Accumulation Account from any seller, including you and any of the
Underwriters. Such purchases may be at the current market price then in effect
(as reasonably determined by you); provided, however, if any Underwriter is a
member of a syndicate underwriting an original issue and is prohibited by price
restrictions of the syndicate from reselling Debt Obligations at less than a
certain price, the purchase price of such Underlying Debt Obligations to the
Accumulation Account shall be the lowest price permitted by such restrictions.
We shall furnish to you in writing any information regarding
Underlying Debt Obligations sold by us to the Accumulation Account which you
deem necessary for inclusion in the Prospectus, including the date on which
such Debt Obligations were acquired by us, the price of acquisition, and, if
the sale is made by us as a member of another underwriting syndicate, our
takedown retained as a member of such syndicate. If Underlying Debt Obligations
purchased from us were initially acquired by us from the manager of a syndicate
of which we are or were a member or manager, we agree that there shall be
furnished to you in writing such estimates as to our participation in the
profit to the syndicate resulting from such sale as may be practicable under
the circumstances.
If at any time prior to the deposit of Underlying Debt
Obligations in the Trust you shall determine that it is impracticable or
inadvisable to
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<PAGE>
complete the acquisition of Underlying Debt Obligations because of unfavorable
market conditions or for other reasons adversely affecting such acquisition or
the offering of Units hereunder, we authorize you to sell for the Accumulation
Account the Underlying Debt Obligations acquired prior to such determination in
such manner, at such times and at such prices as you shall deem advisable. As
soon as practicable after all of the Underlying Debt Obligations have been sold
pursuant to this paragraph, this Agreement shall be terminated and our account
hereunder settled in the manner stated in Section 13.
4. Financing Of Accumulation Account. From time to time during
the term of this Agreement, we agree to transmit to you upon your request a
certified or official bank check to your order in an amount not in excess of
10% of our respective Underwriting Percentage shares in the Accumulation
Account to serve as margin in carrying the Underlying Debt Obligations and the
Units received upon deposit of the Underlying Debt Obligations in the Trust and
for the other purposes of this Agreement.
We authorize you to advance your own funds or to arrange loans
(including repurchase agreements) for the Accumulation Account for the purposes
of carrying the Underlying Debt Obligations and the Units and of carrying out
the other purposes of this Agreement and in connection therewith to hold or
pledge as security all or any of the Underlying Debt obligations and the Units.
You may deliver any note or other instrument in connection with such
transactions as you may deem necessary or advisable. Any lender or purchaser is
hereby authorized to accept your instructions with respect thereto.
5. Trust Deposit And Certificates. We authorize you, acting as
our agent and in our behalf, to deposit the Underlying Debt Obligations in the
Trust at such time after the acquisition of the Underlying Debt Obligations as
you deem appropriate and to receive in exchange therefor for our account
Certificates representing our Unit Commitment in the Trust. We authorize you to
retain custody of the Certificates until delivered to us or sold for our
account in accordance with this Agreement.
You may deliver to us from time to time against payment, for
carrying purposes only, any Certificates representing Units which you are
holding for sale for our account but which have not been sold and paid for. We
will redeliver to you against payment any such Certificates so delivered to us
for carrying purposes at such times as you may demand.
6. Public Offering Of Trust Units. A public offering of the
Units is to be made as soon after the Effective Date as in your judgment is
advisable. You shall notify us promptly by telephone and confirm by mail or
telegram when the public offering is to commence (the "Public Offering Date").
The public offering is to be made by means of the Prospectus and at the public
offering price, terms and conditions set forth in the Prospectus. We authorize
you to change the terms and conditions of the public offering as you deem
advisable.
We also confirm that we will take reasonable steps to provide
the preliminary prospectus prior to the Effective Date and the Prospectus
thereafter to any person making written request to us. We understand that our
requests for sufficient copies of such prospectuses will be processed by your
printer.
7. Purchase Of Units By The Underwriters. The sales charge
contemplated in this transaction is an amount per Unit as described in the
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<PAGE>
Prospectus. The amount set forth in Schedule B hereto will constitute the per
Unit sales takedown ("Underwriters' Takedown"). The sales charge less the
Underwriters' Takedown will accrue to you as Managing Underwriter.
Upon notification from you that the public offering is to
commence, we hereby agree with you and the several other Underwriters to
purchase Certificates representing our Unit Commitment on the Public Offering
Date. The price to be paid for each such Unit shall be the public offering
price on such Date plus the per Unit accrual of interest to the settlement date
(estimated at five business days thereafter) less the Underwriters' Takedown.
Such payment is to be made by delivering to you within five business days of
the Public Offering Date, a certified or bank cashier's check in New York City
Clearing House funds payable to the order of Bear, Stearns & Co. Inc. At the
Public Offering Date, we will become the owner of such Units and be entitled to
the benefits and subject to the risks inherent therein.
We will offer to the public in conformity with the terms of the
offering and at the then effective public offering price described in the
Prospectus any of our Units not reserved by you for sale to retail accounts or
to dealers or sold by us directly to dealers as herein authorized. When
requested by us from time to time, you shall furnish to us the then effective
public offering price.
We may sell to dealers part or all of the Units delivered to us
for direct sale at the then effective public offering price, plus accrued
interest, less the dealer's concession set forth in the Prospectus, subject to
your right to change such concession from time to time. Any Units purchased by
us after the Public Offering Date as a result of an increase in our Unit
Commitment pursuant to Section 12 or which are delivered to us for direct sale
pursuant to Section 8 will be purchased by us at the then effective public
offering price plus accrued interest, less the Underwriters' Takedown, with no
additional accumulation profit participation.
8. Direct Sales Authorization. We authorize you to sell for our
account to retail accounts or to dealers (including one or more of the
Underwriters) such of our Units as you shall determine. Sales of Units to
retail accounts or to dealers shall be made for the account of any Underwriter
in such manner as you may deem appropriate. Our liability to take and pay for
Units under this Agreement shall be reduced to reflect any such sales of Units
for our account. You shall advise us promptly on the Effective Date as to our
Units reserved by you for sale to retail accounts or to dealers pursuant to
this paragraph. You may advise us at any time thereafter that any Units so
reserved for sale for our account and not sold are no longer so reserved and we
shall then be responsible to take and pay for such Units as if they had not
been reserved.
You shall deliver to us for direct sale any Units held by you
for our account and not reserved for sale to retail accounts or to dealers,
and, with your consent, any Units held for our account which are so reserved
from time to time in accordance with our instructions, and, upon payment to you
by us of the then effective public offering price of such Units, plus accrued
interest, adjusted for the Underwriters' Takedown.
We authorize you to sell for our account to other Underwriters
such of our Units held by you for our account as you shall determine which are
not reserved by you for sale to retail accounts or to dealers or, in accord
with the preceding paragraph, delivered to us for direct sale provided that (i)
such sales shall be made only to Underwriters to whom you shall have delivered
all of their Units not reserved for sale to retail accounts or to dealers and
(ii) such sales shall be mode for the account of each Underwriter
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C/M 11939.0001 407239.1
<PAGE>
for whose account you hold unreserved Units in such manner as you may deem
appropriate.
You may, and any of the other Underwriters may with your
consent, make purchases and sales of Units from or to any other Underwriter at
the then effective public offering price, plus accrued interest, adjusted for
the Underwriters' Takedown.
You shall advise us as soon as practicable of any sales made by
you for our account pursuant to this Section 8.
From time to time prior to the termination of this Agreement, on
your request, we will advise you of Units remaining unsold which were delivered
to us, and, on your request, we shall deliver to you any such Units remaining
unsold for sale for our account to retail accounts or, adjusted for the
Underwriters' Takedown, to other Underwriters or dealers, all in the manner and
subject to the limitations stated above.
We understand that any Units sold for our account to retail
accounts will be subject to a discount per Unit on purchases of 100 Units or
more, as described in the Prospectus.
9. Unit Repurchases. We understand and agree that you may, but
are not obligated to, repurchase any Units which are tendered or offered to you
by the holders thereof. If, during the term of this Agreement, you purchase or
contract to purchase for the account of any Underwriter in the open market or
otherwise Certificates for any Units which were retained by, or released to, us
for direct sale, or any Certificates which may have been issued in exchange
therefore or if any such Units shall be tendered to the Trustee for redemption,
and which Units were therefore not effectively placed for investment by us, we
authorize you to charge our account with an amount equal to the underwriter's
concession with respect thereto, or to require us to repurchase such Units at a
price equal to the total cost of such purchase, including accrued interest and
commissions, if any, and transfer taxes on the redelivery.
If, for any reason, during the term of this Agreement we do not
sell all of our Unit Commitment, you agree to buy from us any unsold Units we
have in our account at the then current bid price plus accrued interest.
We agree that, until the termination of this Agreement, we will
make no purchase of the Units other than (i) purchases provided for in this
Agreement, (ii) purchases approved by you and (iii) purchases as a broker in
executing unsolicited orders.
10. Legal Opinion And Accountants' Letter. After notification of
the Effective Date has been released by the Securities and Exchange Commission,
there shall be furnished to us copies of all legal opinions and accountants'
reports which are delivered to you as Depositor, the Trustee and the Trust.
11. Indemnification. We agree to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the 1933 Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus as amended and supplemented or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each
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C/M 11939.0001 407239.1
<PAGE>
case to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon or in conformity with
information furnished to you by us for use in the preparation of the
Registration Statement or the Prospectus or any amendment or supplement
thereto. This indemnity agreement will be in addition to any liability which we
may otherwise have.
In case any action shall be brought against any Underwriter or
any person controlling such Underwriter based upon the Registration Statement
or the Prospectus or any amendment or supplement thereto in respect of which
indemnity may be sought against us, if such Underwriter shall promptly notify
us in writing, we shall assume the defense thereof, including the employment of
counsel and the payment of all expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Underwriter or such controlling
person unless the employment of such counsel has been specifically authorized
by us. We shall not be liable for any settlement of any such action effected
without our consent but if settled with our consent or if there will be a final
judgment for the plaintiff in any such action, we agree to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement or judgment.
The indemnity agreement contained in this Section 11 shall
remain operative and in full force and effect regardless of (i) the termination
of this Agreement and (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter.
12. Substitution. Until the termination of this Agreement, we
authorize you to arrange for the substitution hereunder of other persons, who
may include you and us, for all or any part of the commitment of any
non-defaulting Underwriter with the consent of such Underwriter, and of any
defaulting Underwriter without his consent, upon such terms and conditions as
you may deem advisable, provided that such substitution shall not in any way
affect the liability of any defaulting Underwriter to the other Underwriters
for damages from such default, nor relieve any other Underwriter of any
obligation under this Agreement. The expenses chargeable to the account of any
defaulting Underwriter and not paid for by it or by the person substituted for
such Underwriter and any additional losses or expenses arising from such
default shall be considered to be expenses of the underwriting account and
shall be charged against the accounts of the non-defaulting Underwriters in
proportion to their respective Underwriting Percentages.
In the event that you shall for any reason cease to act as
Depositor of the Trust prior to the termination of the Trust Agreement, we
hereby authorize the Trustee to select a substitute Depositor as provided in
the Trust Agreement.
13. Termination. This Agreement shall terminate 30 days after
the Public Offering Date unless sooner terminated by you, provided that you may
extend this Agreement for not more than four successive periods of 30 days each
upon notice to us and each of the other Underwriters.
Upon termination of this Agreement, or prior thereto, at your
discretion, (i) you shall deliver to us Certificates for any Units received by
you for our account and not theretofore delivered to us and Certificates for
any Units held by you for our account and (ii) after (a) crediting to our
account advances made by us to you pursuant to Section 4 and payments made to
you on account of Units sold by you for our account or delivered by you to us,
(b) charging or crediting to our account our share of any profit or loss in
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<PAGE>
the Accumulation Account and (c) making such other credits or charges to our
account as are authorized by the provisions of this Agreement, our account
hereunder shall be settled and any amount due and owing thereunder shall be
paid by you or by us, as the case may be. The determination by you as Depositor
and Managing Underwriter of the amount to be paid to or by us in settlement of
our account shall be final and conclusive.
Notwithstanding any settlement on the termination of this
Agreement, we agree to pay our Underwriting Percentage share of any amount
payable on account of any claim, demand or liability which may be asserted
against the Underwriters, or any of them, based on the claim that the
Underwriters constitute an association, unincorporated business or other
separate entity and our Underwriting Percentage of any expenses incurred by you
in defending against any such claim, demand or liability. We also agree to pay
any stamp taxes which may be assessed and paid after such settlement on account
of any units received or sold hereunder for our account.
Notwithstanding any termination of this Agreement, no sale of
the Units shall be made by us at any time except in conformity with the
provisions of Section 22(d) of the 1940 Act.
We agree that if, within ninety days from the time the
Registration Statement shall have become effective, either (i) the net worth of
the Trust shall be reduced to less than $100,000 or (ii) the Trust shall have
been terminated, then we will refund, on demand and without deduction, all
sales charges to purchasers of Units from us or any dealer participating in the
distribution of our Units.
14. Underwriting Commitment. We hereby commit on the terms and
conditions of this Agreement to purchase and pay for the number of Units set
forth opposite our name in Schedule B ("Unit Commitment"). Except for the right
to decrease our Unit Commitment granted to you above, and except as provided in
Section 11, our Unit Commitment may be increased or decreased only by mutual
written agreement between us and you at any time prior to the date the
Underlying Debt Obligations are deposited in the Trust.
Our percentage interest ("Underwriting Percentage") and the
percentage interest of each Underwriter in the total Units to be offered shall
be expressed by the following ratio:
Unit Commitment = Underwriting Percentage
---------------
Total Units
The final determination of the respective Underwriting Percentages of all
Underwriters shall be made by you as of the date the Underlying Debt
Obligations are deposited in the Trust.
You are authorized to increase or decrease the number of Units
(and, correspondingly, the amount of Underlying Debt Obligations) to be offered
if you shall deem it advisable and practicable to do so. In the event you shall
elect to decrease the number of Units hereunder, you shall have the right to
decrease our Unit Commitment proportionately by notifying us of such election
by telephone and promptly confirm by telegraph or writing.
You are authorized to amend Schedule A to add additional
Underwriters as you deem advisable in which case such Underwriters shall be
deemed to have been parties to this Agreement as of the date of its
confirmation by you. Any deletion of Underwriters from Schedule A by you to
reflect their withdrawal from this underwriting participation shall be subject
to reservation of all our rights with respect to them conferred in us by this
Agreement.
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C/M 11939.0001 407239.1
<PAGE>
15. Advertising. Public advertisement of the offering may (but
need not) be made by you on your behalf or on behalf of the Underwriters on
such date as you shall determine. Such public advertisement may bear the name
of the Sponsor alone or the names of any or all Underwriters unless any
Underwriter shall notify you that it does not wish its name to so appear. Any
advertisement any Underwriter makes, or which any Underwriter permits any
dealer which purchases Units from it to make, will be at the responsibility of
such Underwriter and at such Underwriter's or dealer's expense, provided,
however, that all such public advertisement shall conform to the rules and
regulations of the Securities and Exchange Commission relating thereto and of
the National Association of Securities Dealers, Inc. (the "NASD").
16. Miscellaneous. Default by any one or more of the other
Underwriters in respect of their several obligations under this Agreement
shall not release us from any of our obligations hereunder.
Nothing herein constitutes us partners with you or with the
other Underwriters and the obligations of ourselves and of each of the other
Underwriters are several and not joint.
Nothing herein contained shall be deemed to protect or purport
to protect any person against any liability to the Trust or the
Certificateholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
duties of such person, or by reason of such person's reckless disregard of such
person's obligations and duties under this Agreement.
Notices hereunder shall be deemed to have been duly given if
telephoned and then promptly mailed or telegraphed to us at our address set
forth in the Underwriters' Questionnaire, attached hereto as Exhibit A, or to
you at your address set forth at the head of this Agreement.
The headings contained in this Agreement are for reference
purposes only and shall not affect its meaning or interpretation. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
17. Underwriting Participants. This Agreement is being executed
by us and delivered to you in duplicate. Upon your confirmation hereof and of
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<PAGE>
Agreements in identical form with each of the other Underwriters, this
Agreement shall constitute a valid and binding contract among us.
Very truly yours,
Name of Firm:
By:
(Authorized Signator)
Address:
Confirmed as of the date set forth on
page 1 of this Agreement.
BEAR, STEARNS & CO. INC.
Depositor and Managing Underwriter
Acting severally on its own behalf and
on behalf of the other several
Underwriters named in Schedule A hereto.
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C/M 11939.0001 407239.1
<PAGE>
EXHIBIT A
UNDERWRITERS' QUESTIONNAIRE
Municipal Securities Trust
Bear, Stearns & Co. Inc.
55 Water Street
New York, New York 10041
Dear Sirs:
In connection with the proposed public offering of Units of
fractional undivided interest (the "Units") in Bear, Stearns Unit Investment
Trust (the "Trust") and for use in any registration statement or prospectus
relating to such Units and pursuant to the Master Agreement Among Underwriters
dated as of December 31, 1986, the undersigned, as a proposed underwriter,
advises you as follows:
Our exact name and address (including zip code) as they should
appear in the prospectus, are as follows:
We are a (check one) Corporation Partnership Sole Proprietorship
organized or existing under the laws of the State of ______________________.
We are a member of the National Association of Securities
Dealers, Inc. and are registered with the Securities and Exchange Commission as
a broker or dealer pursuant to Section 15(b) of the Securities Exchange Act of
1934.
We represent that our participation in the offering of the Units
will not place us in violation of Rule 15c3-1 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934 or the rules of any
securities exchange of which we are a member.
Except as indicated below, other than as may be stated in the
Registration Statement under the Securities Act of 1933 relating to the Units
or in any prospectus filed as part thereof, or any registration statement
relating to the Trust under the Investment Company Act of 1940, or the
Agreement Among Underwriters:
(a) neither we nor any "affiliated person", as defined in
Section 2(a)(3) of the Investment Company Act of 1940, have received, nor do we
know of any arrangement whereby we or any such persons will receive, any
profits or other benefits through the sale or purchase of the Units or
interests therein, or the deposited bonds or interests herein;
(b) we do not know of any arrangement to limit or restrict the
sale of the Units for the period of distribution, to stabilize the market for
the Units or the deposited bonds, for withholding commissions, or otherwise to
hold each underwriter or dealer responsible for the distribution of its
participation, nor do we know of any current agreements or arrangements with
dealers, agents or salesmen with respect to commissions, discounts, overriding
commissions, territories, franchises and the like with respect to the offering
of the Units.
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C/M 11939.0001 407239.1
<PAGE>
(c) we have not received, nor do we know of any arrangement
whereby we are to receive any fees from the sale of the Units or from any other
functions to be performed by us in connection therewith.
We have never acted in any capacity with respect to any
investment company or companies other than the Trust except to sell securities
of other investment companies as a member of underwriting groups or selling
groups or as agents of such companies, to execute orders for the purchase and
sale of securities of such companies, or to sell securities to or purchase
securities from any such companies in our capacity as a broker or dealer in
securities.
(State exceptions, if any)
We will notify you immediately in the event of any development
before the date of completion of the public offering of the Units which makes
untrue or incomplete any of the above statements.
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C/M 11939.0001 407239.1
<PAGE>
We will keep an accurate record of the names and addresses of
all persons to whom we give copies of the Registration Statement or any
amendments thereto, or any preliminary or final prospectus relating to the
Units and, when furnished with copies of any subsequent amendment or supplement
to the Registration Statement or any prospectus or any memorandum outlining
changes in the Registration Statement or any prospectus, we will promptly
forward copies to such persons.
Very truly yours,
----------------------------
(Official Firm Signature)
By:
(Signature of Officer or Partner)
Title:
Dated:
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C/M 11939.0001 407239.1
<PAGE>
SCHEDULE A
[List of Underwriters]
C/M 11939.0001 407239.1
<PAGE>
SCHEDULE B
TO
MASTER AGREEMENT AMONG UNDERWRITERS
FORM OF ACCEPTANCE
_______________, 198_
Name of Underwriter: ____________________________________
[insert name]
Re: Bear Stearns Unit Investment Trust:________________ Municipal Securities
Trust, ____________ Series _____________________/____ Discount Series [insert
series name and number]
Unit Commitment: __________Units Expected Date of Proposed Offering: _________
[number] [insert]
For purposes of this Trust, the Underwriters' Takedown per unit
shall be as follows: Municipal Trusts - $38.00; Municipal Discount Trusts -
$22.50
We accept the invitation to participate as one of the
Underwriters of the above-referenced Trust, with a commitment up to the amount
specified above, and have indicated below our preference with respect to the
Accumulation Account, pursuant to the Master Agreement Among Underwriters dated
as of December 31, 1986, and confirm that the representations and warranties
set forth in Exhibit A thereto are true and correct as of the date hereof.
Name of Firm:
By:
(Signature of Authorized Signator)
Address:
Schedule of Accumulation Account
Profit Participation
Units Participation
100-249 60% per Unit
250+ 75% per Unit
C/M 11939.0001 407239.1
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest In
No. MUNICIPAL SECURITIES TRUST UNITS
PLAN OF DISTRIBUTION
CUSIP
THIS IS TO
CERTIFY THAT
is the owner and registered holder of this
Certificate evidencing the ownership of
Unit(s)
of fractional undivided interest in Municipal Securities Trust, of the above
Series (hereinafter called the "Trust") created under the laws of the State of
New York by the Trust Indenture and Agreement (hereinafter called the
"Indenture"), among BEAR, STEARNS & CO. INC. (hereinafter called the
"Depositor"), UNITED STATES TRUST COMPANY OF NEW YORK (hereinafter called the
"Trustee") and STANDARD & POOR'S CORPORATION (hereinafter called the
"Evaluator"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound, a summary
of certain of the pertinent provisions of which is set forth on the reverse
hereof. The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the corporate trust office of the Trustee upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and payment of the fees and
expenses applicable hereto set forth on the reverse hereof.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
C/M: 11939.0001 409240.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc. has caused this
Certificate to be executed in its corporate name by a duly authorized officer
thereof, and United States Trust Company of New York, as Trustee, has caused
this Certificate to be executed in its corporate name by an authorized officer.
Date:
BEAR, STEARNS & CO. INC.,
Depositor
By:
Authorized Officer
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
By:
Authorized Officer
C/M: 11939.0001 409240.1
<PAGE>
MUNICIPAL SECURITIES TRUST
The following is a summary of certain provisions of the Indenture (a copy of
which is on file and available for inspection to the holder hereof at the
corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the Indenture are incorporated herein by reference as fully as if
set forth herein.
The Trust consists of (1) such of the interest-bearing debt securities and
obligations deposited in trust and listed in Schedule A of the Indenture and
any other securities that may be deposited in the Trust in exchange or
substitution therefor, in accordance with the Indenture, as may from time to
time continue to be held in the Trust and (2) such cash amounts as from time to
time may be held in the Interest Account and the Principal Account maintained
under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
units set forth on the face hereof and the denominator of which shall be the
total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon tender
of this Certificate to the Trustee at its corporate trust office in the City of
New York, and upon payment of any tax or other governmental charges, to receive
on the seventh calendar day following the day on which such tender is made, or,
if such calendar day is not a business day, on the first business day prior to
such calendar day, an amount in cash equal to the evaluation of the fractional
undivided interest in the Trust evidenced by this Certificate, upon the basis
provided for in the Indenture. The right of redemption may be suspended and the
date of payment may be postponed for any period during which the New York Stock
Exchange is closed or trading on the Exchange is restricted, or for any period
during which an emergency exists so that disposal of the obligations held in
the Trust is not reasonably practicable or it is not reasonably practicable
fairly to determine the value of such obligations or for such other periods as
the Securities and Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of redeeming
this Certificate if tendered for redemption, to sell this Certificate in the
over-the-counter market or by private sale for the account of the
Certificateholder at a price which will return to the Certificateholder an
amount in cash, net after deducting brokerage commissions, transfer taxes and
other
C/M: 11939.0001 409240.1
<PAGE>
charges, equal to or in excess of the redemption price for this Certificate. In
the event of any such sale the Trustee shall pay the net proceeds thereof to
the Certificateholder on the day he would otherwise be entitled to receive
payment of the redemption price.
Interest received by the Trustee as part of the Trust (including interest
accrued and unpaid prior to the day of deposit of any obligation in the Trust
and that part of the proceeds of the sale, liquidation, redemption or maturity
of any such obligation which represents accrued interest) shall be credited by
the Trustee to the Interest Account. The fractional undivided interest
represented by this Certificate in the balance in the Interest Account (after
the deductions referred to below) shall first be computed and paid to all
Certificateholders as of the semi-annual Record Date (as defined in the
Indenture). The next computation shall be made as of the next succeeding
semi-annual Record Date, and thereafter as of the first day of June and
December of each year commencing with the first such day following the date of
this Certificate.
An amount in cash equal to the fractional undivided interest in the Interest
Account (on the basis set forth below) computed as set forth above, shall be
distributed on the 15th day of the respective months, or within a reasonable
period of time thereafter, to the registered holder of this Certificate at the
close of business on the first day of the month in which such distribution is
made.
The Trustee shall make semi-annual distributions from the Interest Account on
the basis of one-half of the estimated annual interest income expected by the
Trustee to be received by the Trust in the ensuing twelve month period, after
deduction of the estimated costs and expenses to be incurred during such
period, except as otherwise hereafter provided. To the extent cash in the
Interest Account is insufficient for any distribution the Trustee shall advance
its own funds sufficient therefor and shall be entitled to reimbursement,
without interest, out of interest received by the Trust subsequent to such
advance. The estimated annual interest income expected by the Trustee to be
received by the Trust shall be recomputed by the Trustee whenever bonds in the
Trust mature, are redeemed, retired, sold or replaced.
All moneys (other than interest) received by the Trustee, as part of the Trust
(including amounts received from the sale, liquidation, redemption or maturity
of any obligation held in the Trust) shall be credited by the Trustee to a
separate Principal Account. The fractional undivided interest represented by
this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the semi-annual Record Date. An amount
in cash equal to the
C/M: 11939.0001 409240.1
<PAGE>
fractional undivided interest in the Principal Account, computed as set forth
above, shall be distributed on the fifteenth day of the respective months, or
within a reasonable time thereafter, to the registered holder of this
Certificate at the close of business on the first day of each such month. The
Trustee shall not be required to make a distribution from the Principal Account
unless the cash balance on deposit therein available for such distribution
shall be sufficient to permit the distribution of at least $1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made to the
registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account and
Principal Account, as more fully set forth in the Indenture, for redemptions,
compensation of the Trustee, compensation of the Evaluator, reimbursement of
certain expenses incurred or advances made by or on behalf of the Trustee,
including the Sponsor's fee, certain legal expenses, and payment of, or the
establishment of a reserve for, applicable taxes, if any.
Within a reasonable period of time from the end of each calendar year the
Trustee shall furnish to the registered holder of this Certificate a statement
setting forth, among other things, the amounts received and deductions
therefrom and the amounts distributed during the preceding year in respect of
interest on, and sale, redemptions or maturities of, obligations held in the
Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any multiple thereof.
The holder of this Certificate, by virtue of the acceptance hereof, assents to
and shall be bound by the terms of the Indenture, a copy of which is on file
and available for inspection at the corporate trust office of the Trustee, to
which reference is made for all the terms, conditions and covenants thereof.
C/M: 11939.0001 409240.1
<PAGE>
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the Trust created thereby shall terminate upon the maturity,
redemption, sale or other disposition of the last security held thereunder,
provided, however, that in no event shall the Indenture and the Trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of the Indenture. The Indenture also provides that the Trust may be
terminated at any time by the written consent of the holders of Certificates
representing 100% of the Units outstanding and under certain circumstances
which include a decrease in the value of the Trust to less than 40% of the
initial aggregate principal amount of the securities deposited in the Trust.
Upon any termination the Trustee shall fully liquidate the securities then
held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture.
Upon termination, the Trustee shall be under no further obligation with respect
to the Trust, except to hold the funds in trust without interest until
distribution as aforesaid and shall have no duty upon any such termination to
communicate with the holder hereof other than by mail at the address of such
holder appearing on the registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTIONS
On the face of this Certificate it is indicated whether the registered holder
hereof has elected to receive distributions from the Interest Account monthly,
semi-annually, or annually.
This Certificate by its terms provides that distributions from the Interest
Account shall first be computed as of the semi-annual Record Date and
thereafter as of the first day of June and December of each year, commencing
with the first such day following the date of this Certificate, and an amount
in cash equal to the share of the Interest Account represented by this
Certificate distributed on the fifteenth day of the respective months next
following such computations, or within a reasonable period of time thereafter,
to the registered holder of this Certificate at the close of business on the
first day of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing
with the monthly Record Date and an amount in cash as thus computed will
C/M: 11939.0001 409240.1
<PAGE>
be distributed to the holder hereof at such date of computation on or shortly
after the fifteenth day of each month.
If semi-annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest
Account, after the first distribution and after the deductions referred to
above, will be computed semi-annually as of the first day of each June and
December of each year, commencing with the semi-annual Record Date and an
amount in cash as thus computed will be distributed to the holder hereof at
such date of computation on or shortly after the fifteenth day of each June and
December.
If annual distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly
after the fifteen day of each December.
All Certificateholders of record as of the First Record Date (as defined in the
Indenture), however, regardless of the plan of distribution selected, will
receive the distribution to be made on or shortly after the First Payment Date
(as defined in the Indenture), and thereafter, distributions will be made
monthly, semi-annually or annually, depending upon the plan of distribution
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be changed
by written notice to the Trustee not later than November 1 in any calendar year
by surrender to the Trustee of this Certificate, together with a completed form
for selection of plan of distribution provided by the Trustee. A plan of
distribution shall continue in effect until changed as herein provided. A
change in a plan of distribution may only be made as indicated herein and will
be effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
C/M: 11939.0001 409240.1
<PAGE>
ASSIGNMENT
For Value Received, _________________________________________________
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
the within Certificate and does hereby irrevocably constitute and
appoint
attorney,
to transfer the within Certificate on the books of the Trustee, with full power
of substitution in the premises.
Date:
NOTICE: The
signature(s) of this
assignment must
correspond with the
name(s) as written
above upon the face
of this Certificate
in every particular,
without alteration or
enlargement or any
change whatever.
____________________________________________
Signature Guaranteed
C/M: 11939.0001 409240.1
<PAGE>
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest In
No. MUNICIPAL SECURITIES TRUST UNITS
PLAN OF DISTRIBUTION
CUSIP
THIS IS TO
CERTIFY THAT
is the owner and registered holder of this
Certificate evidencing the ownership of
Unit(s)
of fractional undivided interest in Municipal Securities Trust, of the above
Series (hereinafter called the "Trust") created under the laws of the State of
New York by the Trust Indenture and Agreement (hereinafter called the
"Indenture"), among BEAR, STEARNS & CO. INC. (hereinafter called the
"Depositor"), UNITED STATES TRUST COMPANY OF NEW YORK (hereinafter called the
"Trustee") and STANDARD & POOR'S CORPORATION (hereinafter called the
"Evaluator"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound, a summary
of certain of the pertinent provisions of which is set forth on the reverse
hereof. The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the corporate trust office of the Trustee upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and payment of the fees and
expenses applicable hereto set forth on the reverse hereof.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
C/M: 11939.0001 409240.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc. has caused this
Certificate to be executed in its corporate name by a duly authorized officer
thereof, and United States Trust Company of New York, as Trustee, has caused
this Certificate to be executed in its corporate name by an authorized officer.
Date:
BEAR, STEARNS & CO. INC.,
Depositor
By:
Authorized Officer
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
By:
Authorized Officer
C/M: 11939.0001 409240.1
<PAGE>
MUNICIPAL SECURITIES TRUST
DISCOUNT SERIES
The following is a summary of certain provisions of the Indenture (a copy of
which is on file and available for inspection to the holder hereof at the
corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the Indenture are incorporated herein by reference as fully as if
set forth herein.
The Trust consists of (1) such of the interest-bearing debt securities and
obligations deposited in trust and listed in Schedule A of the Indenture and
any other securities that may be deposited in the Trust in exchange or
substitution therefor, in accordance with the Indenture, as may from time to
time continue to be held in the Trust and (2) such cash amounts as from time to
time may be held in the Interest Account and the Principal Account maintained
under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
units set forth on the face hereof and the denominator of which shall be the
total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon tender
of this Certificate to the Trustee at its corporate trust office in the City of
New York, and upon payment of any tax or other governmental charges, to receive
on the seventh calendar day following the day on which such tender is made, or,
if such calendar day is not a business day, on the first business day prior to
such calendar day, an amount in cash equal to the evaluation of the fractional
undivided interest in the Trust evidenced by this Certificate, upon the basis
provided for in the Indenture. The right of redemption may be suspended and the
date of payment may be postponed for any period during which the New York Stock
Exchange is closed or trading on the Exchange is restricted, or for any period
during which an emergency exists so that disposal of the obligations held in
the Trust is not reasonably practicable or it is not reasonably practicable
fairly to determine the value of such obligations or for such other periods as
the Securities and Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of redeeming
this Certificate if tendered for redemption, to sell this Certificate in the
over-the-counter market or by private sale for the account of the
Certificateholder at a price which will return to the Certificateholder an
amount in cash, net after
C/M: 11939.0001 409240.1
<PAGE>
deducting brokerage commissions, transfer taxes and other charges, equal to or
in excess of the redemption price for this Certificate. In the event of any
such sale the Trustee shall pay the net proceeds thereof to the
Certificateholder on the day he would otherwise be entitled to receive payment
of the redemption price.
Interest received by the Trustee as part of the Trust (including interest
accrued and unpaid prior to the day of deposit of any obligation in the Trust
and that part of the proceeds of the sale, liquidation, redemption or maturity
of any such obligation which represents accrued interest) shall be credited by
the Trustee to the Interest Account. The fractional undivided interest
represented by this Certificate in the balance in the Interest Account (after
the deductions referred to below) shall first be computed and paid to all
Certificateholders as of the semi-annual Record Date (as defined in the
Indenture). The next computation shall be made as of the next succeeding
semi-annual Record Date, and thereafter as of the first day of June and
December of each year commencing with the first such day following the date of
this Certificate.
An amount in cash equal to the fractional undivided interest in the Interest
Account (on the basis set forth below) computed as set forth above, shall be
distributed on the 15th day of the respective months, or within a reasonable
period of time thereafter, to the registered holder of this Certificate at the
close of business on the first day of the month in which such distribution is
made.
The Trustee shall make semi-annual distributions from the Interest Account on
the basis of one-half of the estimated annual interest income expected by the
Trustee to be received by the Trust in the ensuing twelve month period, after
deduction of the estimated costs and expenses to be incurred during such
period, except as otherwise hereafter provided. To the extent cash in the
Interest Account is insufficient for any distribution the Trustee shall advance
its own funds sufficient therefor and shall be entitled to reimbursement,
without interest, out of interest received by the Trust subsequent to such
advance. The estimated annual interest income expected by the Trustee to be
received by the Trust shall be recomputed by the Trustee whenever bonds in the
Trust mature, are redeemed, retired, sold or replaced.
All moneys (other than interest) received by the Trustee, as part of the Trust
(including amounts received from the sale, liquidation, redemption or maturity
of any obligation held in the Trust) shall be credited by the Trustee to a
separate Principal Account. The fractional undivided interest represented by
this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the
C/M: 11939.0001 409240.1
<PAGE>
semi-annual Record Date. An amount in cash equal to the fractional undivided
interest in the Principal Account, computed as set forth above, shall be
distributed on the fifteenth day of the respective months, or within a
reasonable time thereafter, to the registered holder of this Certificate at the
close of business on the first day of each such month. The Trustee shall not be
required to make a distribution from the Principal Account unless the cash
balance on deposit therein available for such distribution shall be sufficient
to permit the distribution of at least $1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made to the
registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account and
Principal Account, as more fully set forth in the Indenture, for redemptions,
compensation of the Trustee, compensation of the Evaluator, reimbursement of
certain expenses incurred or advances made by or on behalf of the Trustee,
including the Sponsor's fee, certain legal expenses, and payment of, or the
establishment of a reserve for, applicable taxes, if any.
Within a reasonable period of time from the end of each calendar year the
Trustee shall furnish to the registered holder of this Certificate a statement
setting forth, among other things, the amounts received and deductions
therefrom and the amounts distributed during the preceding year in respect of
interest on, and sale, redemptions or maturities of, obligations held in the
Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any multiple thereof.
The holder of this Certificate, by virtue of the acceptance hereof, assents to
and shall be bound by the terms of the Indenture, a copy of which is on file
and available for inspection at the corporate trust office of the Trustee, to
which reference is made for all the terms, conditions and covenants thereof.
C/M: 11939.0001 409240.1
<PAGE>
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the Trust created thereby shall terminate upon the maturity,
redemption, sale or other disposition of the last security held thereunder,
provided, however, that in no event shall the Indenture and the Trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of the Indenture. The Indenture also provides that the Trust may be
terminated at any time by the written consent of the holders of Certificates
representing 100% of the Units outstanding and under certain circumstances
which include a decrease in the value of the Trust to less than 40% of the
initial aggregate principal amount of the securities deposited in the Trust.
Upon any termination the Trustee shall fully liquidate the securities then
held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture.
Upon termination, the Trustee shall be under no further obligation with respect
to the Trust, except to hold the funds in trust without interest until
distribution as aforesaid and shall have no duty upon any such termination to
communicate with the holder hereof other than by mail at the address of such
holder appearing on the registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTIONS
On the face of this Certificate it is indicated whether the registered holder
hereof has elected to receive distributions from the Interest Account monthly,
semi-annually, or annually.
This Certificate by its terms provides that distributions from the Interest
Account shall first be computed as of the semi-annual Record Date and
thereafter as of the next succeeding semi-annual Record Date, commencing with
the first such day following the date of this Certificate, and an amount in
cash equal to the share of the Interest Account represented by this Certificate
distributed on the fifteenth day of the respective months next following such
computations, or within a reasonable period of time thereafter, to the
registered holder of this Certificate at the close of business on the first day
of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of year, commencing with the
monthly Record Date and an amount in cash as thus computed will be
C/M: 11939.0001 409240.1
<PAGE>
distributed to the holder hereof at such date of computation on or shortly
after the fifteenth day of each month.
If semi-annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest
Account, after the first distribution and after the deductions referred to
above, will be computed semi-annually as of the first day of each June and
December of each year, commencing with the semi-annual Record Date and an
amount in cash as thus computed will be distributed to the holder hereof at
such date of computation on or shortly after the fifteenth day of each June and
December.
If annual distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly
after the fifteen day of each December.
All Certificateholders of record as of the First Record Date (as defined in the
Indenture), however, regardless of the plan of distribution selected, will
receive the distribution to be made on or shortly after the First Payment Date
(as defined in the Indenture), and thereafter, distributions will be made
monthly, semi-annually or annually, depending upon the plan of distribution
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be changed
by written notice to the Trustee not later than November 1 in any calendar year
by surrender to the Trustee of this Certificate, together with a completed form
for selection of plan of distribution provided by the Trustee. A plan of
distribution shall continue in effect until changed as herein provided. A
change in a plan of distribution may only be made as indicated herein and will
be effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
C/M: 11939.0001 409240.1
<PAGE>
ASSIGNMENT
For Value Received, ________________________________________________
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
the within Certificate and does hereby irrevocably constitute and
appoint
_______________________________________________________ attorney,
to transfer the within Certificate on the books of the Trustee, with full power
of substitution in the premises.
Date:
NOTICE: The
signature(s) of this
assignment must
correspond with the
name(s) as written
above upon the face
of this Certificate
in every particular,
without alteration or
enlargement or any
change whatever.
_______________________________________
Signature Guaranteed
C/M: 11939.0001 409240.1
<PAGE>
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest In
No. MUNICIPAL SECURITIES TRUST UNITS
PLAN OF DISTRIBUTION
CUSIP
THIS IS TO
CERTIFY THAT
is the owner and registered holder of this
Certificate evidencing the ownership of
Unit(s)
of fractional undivided interest in Municipal Securities Trust, of the above
Series (hereinafter called the "Trust") created under the laws of the State of
New York by the Trust Indenture and Agreement (hereinafter called the
"Indenture"), among BEAR, STEARNS & CO. INC. (hereinafter called the
"Depositor"), UNITED STATES TRUST COMPANY OF NEW YORK (hereinafter called the
"Trustee") and STANDARD & POOR'S CORPORATION (hereinafter called the
"Evaluator"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound, a summary
of certain of the pertinent provisions of which is set forth on the reverse
hereof. The Depositor hereby grants and conveys all of its right, title and
interest in and to the Trust to the extent of the fractional undivided interest
represented hereby to the registered holder of this Certificate subject to and
in pursuance of the Indenture. This Certificate is transferable and
interchangeable by the registered holder in person or by his duly authorized
attorney at the corporate trust office of the Trustee upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and payment of the fees and
expenses applicable hereto set forth on the reverse hereof.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
C/M: 11939.0001 409240.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc. has caused this
Certificate to be executed in its corporate name by a duly authorized officer
thereof, and United States Trust Company of New York, as Trustee, has caused
this Certificate to be executed in its corporate name by an authorized officer.
Date:
BEAR, STEARNS & CO. INC.,
Depositor
By:
Authorized Officer
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
By:
Authorized Officer
C/M: 11939.0001 409240.1
<PAGE>
MUNICIPAL SECURITIES TRUST
HIGH INCOME SERIES
The following is a summary of certain provisions of the Indenture (a copy of
which is on file and available for inspection to the holder hereof at the
corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the Indenture are incorporated herein by reference as fully as if
set forth herein.
The Trust consists of (1) such of the interest-bearing debt securities and
obligations deposited in trust and listed in Schedule A of the Indenture and
any other securities that may be deposited in the Trust in exchange or
substitution therefor, in accordance with the Indenture, as may from time to
time continue to be held in the Trust and (2) such cash amounts as from time to
time may be held in the interest Account and the Principal Account maintained
under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
units set forth on the face hereof and the denominator of which shall be the
total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon tender
of this Certificate to the Trustee at its corporate trust office in the City of
New York, and upon payment of any tax or other governmental charges, to receive
on the seventh calendar day following the day on which such tender is made, or,
if such calendar day is not a business day, on the first business day prior to
such calendar day, an amount in cash equal to the evaluation of the fractional
undivided interest in the Trust evidenced by this Certificate, upon the basis
provided for in the Indenture. The right of redemption may be suspended and the
date of payment may be postponed for any period during which the New York Stock
Exchange is closed or trading on the Exchange is restricted, or for any period
during which an emergency exists so that disposal of the obligations held in
the Trust is not reasonably practicable or it is not reasonably practicable
fairly to determine the value of such obligations or for such other periods as
the Securities and Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of redeeming
this Certificate if tendered for redemption, to sell this Certificate in the
over-the-counter market or by private sale for the account of the
Certificateholder at a price which will return to the Certificateholder an
amount in cash, net after
C/M: 11939.0001 409240.1
<PAGE>
deducting brokerage commissions, transfer taxes and other charges, equal to or
in excess of the redemption price for this Certificate. In the event of any
such sale the Trustee shall pay the net proceeds thereof to the
Certificateholder on the day he would otherwise be entitled to receive payment
of the redemption price.
Interest received by the Trustee as part of the Trust (including interest
accrued and unpaid prior to the day of deposit of any obligation in the Trust
and that part of the proceeds of the sale, liquidation, redemption or maturity
of any such obligation which represents accrued interest) shall be credited by
the Trustee to the Interest Account. The fractional undivided interest
represented by this Certificate in the balance in the Interest Account (after
the deductions referred to below) shall first be computed and paid to all
Certificateholders as of the semi-annual Record Date (as defined in the
Indenture). The next computation shall be made as of the next succeeding
semi-annual Record Date, and thereafter as of the first day of June and
December of each year commencing with the first such day following the date of
this Certificate.
An amount in cash equal to the fractional undivided interest in the Interest
Account (on the basis set forth below) computed as set forth above, shall be
distributed on the 15th day of the respective months, or within a reasonable
period of time thereafter, to the registered holder of this Certificate at the
close of business on the first day of the month in which such distribution is
made.
The Trustee shall make semi-annual distributions from the Interest Account on
the basis of one-half of the estimated annual interest income expected by the
Trustee to be received by the Trust in the ensuing twelve month period, after
deduction of the estimated costs and expenses to be incurred during such
period, except as otherwise hereafter provided. To the extent cash in the
Interest Account is insufficient for any distribution the Trustee shall advance
its own funds sufficient therefor and shall be entitled to reimbursement,
without interest, out of interest received by the Trust subsequent to such
advance. The estimated annual interest income expected by the Trustee to be
received by the Trust shall be recomputed by the Trustee whenever bonds in the
Trust mature, are redeemed, retired, sold or replaced.
All moneys (other than interest) received by the Trustee as part of the Trust,
(including amounts received from the sale, liquidation, redemption or maturity
of any obligation held in the Trust) shall be credited by the Trustee to a
separate Principal Account. The fractional undivided interest represented by
this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the
C/M: 11939.0001 409240.1
<PAGE>
semi-annual Record Date. An amount in cash equal to the fractional undivided
interest in the Principal Account, computed as set forth above, shall be
distributed on the fifteenth day of the respective months, or within a
reasonable time thereafter, to the registered holder of this Certificate at the
close of business on the first day of each such month. The Trustee shall not be
required to make a distribution from the Principal Account unless the cash
balance on deposit therein available for such distribution shall be sufficient
to permit the distribution of at least $1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made to the
registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account and
Principal Account, as more fully set forth in the Indenture, for redemptions,
compensation of the Trustee, compensation of the Evaluator, reimbursement of
certain expenses incurred or advances made by or on behalf of the Trustee,
including the Sponsor's fee, certain legal expenses, and payment of, or the
establishment of a reserve for, applicable taxes, if any.
Within a reasonable period of time from the end of each calendar year the
Trustee shall furnish to the registered holder of this Certificate a statement
setting forth, among other things, the amounts received and deductions
therefrom and the amounts distributed during the preceding year in respect of
interest on and sale, redemptions or maturities of, obligations held in the
Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any multiple thereof.
The holder of this Certificate, by virtue of the acceptance hereof, assents to
and shall be bound by the terms of the Indenture, a copy of which is on file
and available for inspection at the corporate trust office of the Trustee, to
which reference is made for all the terms, conditions and covenants thereof.
C/M: 11939.0001 409240.1
<PAGE>
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the Trust created thereby shall terminate upon the maturity,
redemption, sale or other disposition of the last security held thereunder,
provided, however, that in no event shall the Indenture and the trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of the Indenture. The Indenture also provides that the Trust may be
terminated at any time by the written consent of the holders of Certificates
representing 100% of the Units outstanding and under certain circumstances
which include a decrease in the value of the Trust to less than 40% of the
initial aggregate principal amount of the securities deposited in the Trust.
Upon any termination the Trustee shall fully liquidate the securities then
held, if any, and distribute pro rata the funds then held in the Trust upon
surrender of the Certificates, all in the manner provided in the Indenture.
Upon termination, the Trustee shall be under no further obligation with respect
to the Trust, except to hold the funds in trust without interest until
distribution as aforesaid and shall have no duty upon any such termination to
communicate with the holder hereof other than by mail at the address of such
holder appearing on the registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTIONS
On the face of this Certificate it is indicated whether the registered holder
hereof has elected to receive distributions from the Interest Account monthly,
semi-annually, or annually.
This Certificate by its terms provides that distributions from the Interest
Account shall first be computed as of the semi-annual Record Date and
thereafter as of the first day of June and December of each year, commencing
with the first such day following the date of this Certificate, and an amount
in cash equal to the share of the Interest Account represented by this
Certificate distributed on the fifteenth day of the respective months next
following such computations, or within a reasonable period of time thereafter,
to the registered holder of this Certificate at the close of business on the
first day of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing
with the monthly Record Date and an amount in cash as thus computed will
C/M: 11939.0001 409240.1
<PAGE>
be distributed to the holder hereof at such date of computation on or shortly
after the fifteenth day of each month.
If semi-annual distributions have been selected, the fractional undivided
interest represented by this Certificate in the balance in the Interest
Account, after the first distribution and after the deductions referred to
above, will be computed semi-annually as of the first day of each June and
December of each year, commencing with the semi-annual Record Date and an
amount in cash as thus computed will be distributed to the holder hereof at
such date of computation on or shortly after the fifteenth day of each June and
December.
If annual distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly
after the fifteen day of each December.
All Certificateholders of record as of the First Record Date (as defined in the
Indenture), however, regardless of the plan of distribution selected, will
receive the distribution to be made on or shortly after the First Payment Date
(as defined in the Indenture), and thereafter, distributions will be made
monthly, semi-annually or annually, depending upon the plan of distribution
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be changed
by written notice to the Trustee not later than November 1 in any calendar year
by surrender to the Trustee of this Certificate, together with a completed form
for selection of plan of distribution provided by the Trustee. A plan of
distribution shall continue in effect until changed as herein provided. A
change in a plan of distribution may only be made as indicated herein and will
be effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
C/M: 11939.0001 409240.1
<PAGE>
ASSIGNMENT
For Value Received,___________________________________________________
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
the within Certificate and does hereby irrevocably constitute and
appoint
attorney,
to transfer the within Certificate on the books of the Trustee, with full power
of substitution in the premises.
Date:
NOTICE: The
signature(s) of this
assignment must
correspond with the
name(s) as written
above upon the face
of this Certificate
in every particular,
without alteration or
enlargement or any
change whatever.
________________________________________
Signature Guaranteed
C/M: 11939.0001 409240.1
<PAGE>
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest in
No. MUNICIPAL SECURITIES TRUST UNITS
SERIES PLAN OF DISTRIBUTION:
CUSIP
THIS IS TO
CERTIFY THAT
is the owner and registered holder of this
Certificate evidencing the ownership of
Unit(s)
of fractional undivided interest in Municipal Securities Trust of the above
Series (hereinafter called the "Trust") created under the laws of the State of
New York by the Trust Indenture and Agreement as modified by the Reference
Trust Agreement relating to the sequentially numbered series of the Series
noted on the face hereof (hereinafter called the "Indenture") among BEAR,
STEARNS & CO. INC. (hereinafter called the "Depositors"). UNITED STATES TRUST
COMPANY OF NEW YORK (hereinafter called the "Trustee"), and STANDARD & POOR'S
CORPORATION (hereinafter called the "Evaluator"). This Certificate is issued
under and is subject to the terms, provisions and conditions of the Indenture
to which the holder of this Certificate by virtue of the acceptance hereof
assents and is bound, a summary of certain of the pertinent provisions of which
is set forth on the reverse hereof. The Depositor hereby grants and conveys all
of its right, title and interest in and to the Trust to the extent of the
fractional undivided interest represented hereby to the registered holder of
this Certificate subject to and in pursuance of the Indenture. This Certificate
is transferable and interchangeable by the registered holder in person or by
his duly authorized attorney at the corporate trust office of the Trustee upon
surrender of this Certificate property endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and payment of the
fees and expenses applicable hereto set forth herein.
This Certificate shall not become valid or binding for any purpose
until properly executed by the Trustee under the Indenture.
C/M 11939.0001 409240.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as Depositor, has caused
this Certificate to be executed in facsimile by an authorized signatory and
United States Trust Company of New York, as Trustee, has caused this
Certificate to be executed in its corporate name by an authorized officer.
BEAR, STEARNS & CO. INC., Date:
Depositor
By
Authorized Signatory
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By
Authorized Officer
C/M 11939.0001 409240.1
<PAGE>
The following is a summary of certain provisions of the indenture (a copy of
which is on file and available for inspection to the holder hereof at the
corporate trust office of the Trustee), to which this Certificate is subject
and to which reference is hereby made. All of the terms, conditions and
covenants of the indenture are incorporated herein by reference as fully as if
set forth herein. The Trust consists of (1) such of the interest-bearing debt
securities and obligations that may be deposited in trust and listed in
Schedule A of the indenture (including contracts, if any, for the purchase of
certain of such securities and obligations together with the cash, cash
equivalents and/or an irrevocable letter of credit issued by a commercial bank
in the amount required for such purchase) and any other securities that may be
deposited in the Trust in exchange or substitution therefor in accordance with
the Indenture, as may from time to time continue to be held in the Trust and
(2) such cash amounts as from time to time may be held in the Interest Account
and the Principal Account maintained under the Indenture in the manner
described below.
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
units set forth on the face hereof and the denominator of which shall be the
total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon tender
of this Certificate to the Trustee at its corporate trust office in the City of
New York, endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form, and upon payment of any tax or other
governmental charges, to receive on the seventh calendar day following the day
on which such tender is made, or, if such calendar day is not a business day,
on the first business day prior to such calendar day, an amount in cash equal
to the evaluation of the fractional undivided interest in the Trust evidenced
by this Certificate, upon the basis provided for in the indenture (the
"Redemption Price"). The right of redemption may be suspended and the date of
payment may be postponed for any period during which the New York Stock
Exchange is closed or trading on the Exchange is restricted, or for any period
during which an emergency exists so that disposal of the obligations held in
the Trust is not reasonably practicable or it is not reasonably practicable
fairly to determine the value of such obligations in accordance with the
Indenture or for such other periods as the Securities and Exchange Commission
may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of redeeming
this Certificate if tendered for redemption, to sell this Certificate in the
over-the-counter market or by private sale for the account of the
Certificateholder at a price which
C/M 11939.0001 409240.1
<PAGE>
will return to the Certificateholder an amount in cash, net after deducting
brokerage commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for this Certificate. In the event of any such sale the
Trustee shall pay the net proceeds thereof to the Certificateholder on the day
he would otherwise be entitled to receive payment of the Redemption Price.
Interest received by the Trustee as part of the Trust (including interest
accrued and unpaid prior to the day of deposit of any obligation in the Trust
and that part of the proceeds of the sale, liquidation, redemption or maturity
of any such obligation which represents accrued interest) shall be credited by
the Trustee to the Interest Account. The fractional undivided interest
represented by this Certificate in the balance in the Interest Account (after
the deductions referred to below) shall first be computed as of the semi-annual
Record Date (as defined in the Indenture). The next computation shall be made
as of the next succeeding semi-annual Record Date, and thereafter as of the
first day of June and December of each year commencing with the first such day
following the date of this Certificate.
An amount in cash equal to the fractional undivided interest in the Interest
Account (on the basis set forth below) computed as set forth above, shall be
distributed on the 15th day of the respective months, or within a reasonable
period of time thereafter, to the registered holder of this Certificate at the
close of business on the first day of the month in which such distribution is
made.
The Trustee shall make semi-annual distributions from the Interest Account on
the basis of one-half of the estimated annual interest income expected by the
Trustee to be received by the Trust in the ensuing twelve month period, after
deduction of the estimated costs and expenses to be incurred during such
period, except as otherwise hereafter provided. To the extent cash in the
Interest Account is insufficient for any distribution the Trustee shall advance
its own funds sufficient therefor and shall be entitled to reimbursement,
without interest, out of interest received by the Trust subsequent to such
advance.
All moneys (other than interest) received by the Trustee, as part of the Trust
(including amounts received from the sale, liquidation, redemption or maturity
of any obligation held in the Trust) shall be credited by the Trustee to a
separate Principal Account. The fractional undivided interest represented by
this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the semi-annual Record Date. An amount
in cash equal to the fractional undivided interest in the Principal Account,
computed as set forth above, shall be distributed on the fifteenth day of the
respective months, or within a reasonable time thereafter, to
C/M 11939.0001 409240.1
<PAGE>
the registered holder of this Certificate at the close of business on the first
day of such month. The Trustee shall not be required to make a distribution
from the Principal Account unless the cash balance on such deposit therein
available for such distribution shall be sufficient to permit the distribution
of at least $1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made to the
registered holder hereof by check mailed to the address of such holder
appearing in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account and
Principal Account, as more fully set forth in the Indenture, for redemptions,
compensation of the Trustee, compensation of the Evaluator, payment of the
Depositor's fee for services as such, reimbursement of certain expenses
incurred or advances made by or on behalf of the Trustee, certain legal
expenses, and payment of, or the establishment of a reserve for, applicable
taxes or government charges, if any.
Within a reasonable period of time after the end of each calendar year the
Trustee shall furnish to the registered holder of this Certificate a statement
setting forth, among other things, the amounts received by the Trust and
deductions therefrom and the amounts distributed during the preceding year in
respect of interest on, payments and prepayments of principal of, and sales,
redemptions or maturities of, obligations held in the Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the registered
holder hereof or his authorized attorney. Certificates of this Series are
interchangeable for one or more Certificates in an equal aggregate number of
Units of fractional undivided interest at the corporate trust office of the
Trustee, in denominations of a single Unit of fractional undivided interest or
any whole multiple thereof.
The holder of this Certificate may be required to pay a transfer charge in
connection with the transfer or exchange of this Certificate, as well as any
tax or other governmental charge that may be imposed in connection with the
transfer, exchange or other surrender of this Certificate.
The holder of this Certificate, by virtue of the acceptance hereof, assents to
and shall be bound by the terms of the Indenture, a copy of which is on file
and available for inspection at the corporate trust office of the Trustee, to
which reference is made for all the terms, conditions and covenants thereof.
C/M 11939.0001 409240.1
<PAGE>
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the Trust created thereby shall terminate upon the maturity,
redemption, sale or other disposition of the last security held thereunder,
provided, however, that in no event shall the Indenture and the Trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of the Indenture. The Indenture also provides that the Trust may be
terminated at any time by the written consent of the holders of Certificates
representing all of the Units outstanding and under certain circumstances which
includes a decrease in the value of the Trust to less than 40% of the initial
aggregate principal amount of the securities deposited in the Trust. Upon any
termination the Trustee shall fully liquidate the securities then held, if any,
and distribute pro rata the funds then held in the Trust upon surrender of the
Certificates, all in the manner provided in the Indenture. Upon termination,
the Trustee shall be under no further obligation with respect to the Trust,
except to hold the funds in trust without interest until distribution as
aforesaid and shall have no duty upon any such termination to communicate with
the holder hereof other than by mail at the address of such holder appearing on
the registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTIONS
On the face of this Certificate it is indicated whether the registered holder
hereof has elected to receive distributions from the Interest Account monthly,
semi-annually, or annually.
This Certificate by its terms provides that distributions from the Interest
Account shall first be computed as of the semi-annual Record Date and
thereafter as of the next succeeding semi-annual Record Date, commencing with
the first such day following the date of this Certificate, and an amount in
cash equal to the share of the Interest Account represented by this Certificate
distributed on the fifteenth day of the respective months next following such
computations, or within a reasonable period of time thereafter, to the
registered holder of this Certificate at the close of business on the first day
of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing
with the monthly Record Date, and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly
after the fifteenth day of each month.
C/M 11939.0001 409240.1
<PAGE>
If annual distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly
after the fifteen day of each December.
All Certificateholders of record as of the First Record Date (as defined in the
Indenture) however, regardless of the plan of distribution selected, will
receive the distribution to be made on or shortly after the First Payment Date
(as defined in the Indenture), and thereafter, distributions will be made
monthly, semi-annually or annually depending upon the plan of distribution
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be changed
by written notice to the Trustee not later than November 1 in any calendar year
by surrender to the Trustee of this Certificate, together with a completed form
for selection of plan of distribution provided by the Trustee. A plan of
distribution shall continue in effect until changed as herein provided. A
change in a plan of distribution may only be made as indicated herein and will
be effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF TRANSFERS MIN ACT - ________________ Custodian ______________________
(Cust) (Minor)
under Uniform Transfers to Minors Act
______________________________________________
(State)
Additional abbreviations may also be used though not in the above list.
C/M 11939.0001 409240.1
ASSIGNMENT
For Value Received __________________________________ hereby
sells, assigns and transfers unto ______________________________
___________________________________________________________________
the within Certificate and does hereby irrevocably constitute and
appoint
_______________________________________________________ attorney,
to transfer the within Certificate on the books of the Trustee, with full power
of substitution in the premises.
Dated:
NOTICE: The
signature(s) to this
assignment must
correspond with the
name(s) as written
above upon the face
of this Certificate
in every particular,
without alteration or
enlargement or any
change whatever.
__________________________________________
Signature Guaranteed
C/M 11939.0001 409240.1
[LETTERHEAD OF BERGER & STEINGUT]
October 15, 1986
Bear, Stearns & Co. Inc.
55 Water Street
New York, New York 10041
Re: Municipal Securities Trust, Series 35 and 50th
Discount Series
Gentlemen:
We have acted as special counsel to Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Municipal
Securities Trust, Series 35 and 50th Discount Series (the "Trusts"), in
connection with the issuance by the Trusts of 2,000 and 12,000 units,
respectively, of fractional undivided interest (collectively, the "Units"). We
have been requested to render our opinion as to the validity of the Trust
Agreements (as hereinafter defined) and the Units. Pursuant to the Trust
Agreements, the Depositor has transferred to the Trusts certain long-term bonds
and contracts to purchase certain long-term bonds (collectively, the "Bonds"),
together with an irrevocable letter of credit to be held by the Trustee upon
the terms and conditions set forth in the Trust Agreements.
In connection with our representation, we have examined copies
of the following documents relating to the creation of the Trusts and the
issuance and sale of the Units:
(a) the Reference Trust Agreements bearing today's date relating
to each Trust (the "Trust Agreements") among the Depositor,
United States Trust Company of New York, as Trustee (the
"Trustee"), and Standard & Poor's
Corporation, as Evaluator;
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
October 15, 1986
Page 2
(b) the Registration Statement on Form S-6 (File No. 33-08699)
filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as
amended, Amendment No. 1 thereto, containing the proposed form
of the final Prospectus relating to the Units (the "Prospectus")
(collectively, the "Registration Statement"), which is expected
to be filed with the Commission this day; and
(c) the Certificate of Incorporation, By-Laws,
Certified Board of Directors resolutions and power of
attorney of the Depositor.
We have assumed the genuineness of all signatures and the
conformity to original documents of all documents provided to us as such.
We have not reviewed the financial statements, compilation of
the Bonds held by the Trusts, and other financial data contained in the
Registration Statement and the Prospectus, as to which you have been furnished
with the reports of the accountants appearing in the Registration Statement and
the Prospectus.
Based on the foregoing and upon an investigation of such matters
of law as we have deemed necessary, we are of the opinion that:
(1) The Trust Agreements have been duly authorized and
entered into by an authorized officer of the Depositor and are
valid and binding obligations of the Depositor in accordance
with their respective terms, subject to laws of general
application affecting the rights and remedies of creditors.
(2) The execution and delivery of the certificates
evidencing the Units have been authorized by the Depositor and
such certificates when executed by the Trustee and the Depositor
in accordance with the provisions of the certificates and the
Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests in the
respective Trusts, will be entitled to the benefits of the Trust
Agreements, and will conform to the description thereof
contained in the Prospectus. Upon payment of the consideration
for the Units as provided
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
October 15, 1986
Page 3
in the Trust Agreements and the Registration Statement, the
Units will be fully paid and non-assessable by the Trusts.
We hereby consent to the filing of this opinion and our opinion
regarding the tax status of the Trusts as Exhibits to the Registration
Statement and to the use of our name in the Registration Statement and in the
Prospectus under the headings "Tax Status" and "Legal Opinions".
Very truly yours,
BERGER & STEINGUT
C/M 11939.0001 407294.1
<PAGE>
[LETTERHEAD OF BERGER & STEINGUT]
October 13, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Municipal Securities Trust, Series 39 and 67th
Discount Series
Gentlemen:
We have acted as special counsel to Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Municipal
Securities Trust, Series 39 and 67th Discount Series (the "Trusts"), in
connection with the issuance by the Trusts of 2,500 and 9,000 units,
respectively, of fractional undivided interest (collectively, the "Units"). We
have been requested to render our opinion as to the validity of the Trust
Agreements (as hereinafter defined) and the Units. Pursuant to the Trust
Agreements, the Depositor has transferred to the Trusts certain long-term bonds
and contracts to purchase certain long-term bonds (collectively, the "Bonds"),
together with an irrevocable letter of credit to be held by the Trustee upon
the terms and conditions set forth in the Trust Agreements.
In connection with our representation, we have examined copies
of the following documents relating to the creation of the Trusts and the
issuance and sale of the Units:
(a) the Reference Trust Agreements bearing today's date relating
to each Trust (the "Trust Agreements") among the Depositor,
United States Trust Company of New York, as Trustee (the
"Trustee"), and Standard & Poor's
Corporation, as Evaluator;
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
October 13, 1988
Page 2
(b) the Registration Statement on Form S-6 (File No. 33-24031)
filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as
amended, Amendment No. 1 thereto containing the proposed form of
the final Prospectus relating to the Units (the "Prospectus")
(collectively, the "Registration Statement"), which is expected
to be filed with the Commission this day; and
(c) the Certificate of Incorporation, By-Laws, Foreign Bid
Certificate, Certified Board of Directors resolutions and power
of attorney of the Depositor.
We have assumed the genuineness of all signatures and the
conformity to original documents of all documents provided to us as such.
We have not reviewed the financial statements, compilation of
the Bonds held by the Trusts, and other financial data contained in the
Registration Statement and the Prospectus, as to which you have been furnished
with the reports of the accountants appearing in the Registration Statement and
the Prospectus.
Based on the foregoing and upon an investigation of such matters
of law as we have deemed necessary, we are of the opinion that:
(1) The Trust Agreements have been duly authorized and
entered into by an authorized officer of the Depositor and are
valid and binding obligations of the Depositor in accordance
with their respective terms, subject to laws of general
application affecting the rights and remedies of creditors.
(2) The execution and delivery of the certificates
evidencing the Units have been authorized by the Depositor and
such certificates when executed by the Trustee and the Depositor
in accordance with the provisions of the certificates and the
Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests in the
respective Trusts, will be entitled to the benefits of the Trust
Agreements, and will conform to the description thereof
contained in the Prospectus. Upon payment of the consideration
for the Units as provided in the Trust Agreements and the
Registration Statement,
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
October 13, 1988
Page 3
the Units will be fully paid and non-assessable by the
Trusts.
We hereby consent to the filing of this opinion and our opinion
regarding the tax status of the Trusts as Exhibits to the Registration
Statement and to the use of our name in the Registration Statement and in the
Prospectus under the headings "Tax Status" and "Legal Opinions".
Very truly yours,
BERGER & STEINGUT
C/M 11939.0001 407294.1
<PAGE>
[LETTERHEAD OF BERGER & STEINGUT]
December 15, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Municipal Securities Trust, Series 40 and 68th
Discount Series
Gentlemen:
We have acted as special counsel to Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Municipal
Securities Trust, Series 40 and 68th Discount Series (the "Trusts"), in
connection with the issuance by the Trusts of 4,000 and 12,000 units,
respectively, of fractional undivided interest (collectively, the "Units"). We
have been requested to render our opinion as to the validity of the Trust
Agreements (as hereinafter defined) and the Units. Pursuant to the Trust
Agreements, the Depositor has transferred to the Trusts certain long-term bonds
and contracts to purchase certain long-term bonds (collectively, the "Bonds"),
together with an irrevocable letter of credit to be held by the Trustee upon
the terms and conditions set forth in the Trust Agreements.
In connection with our representation, we have examined copies
of the following documents relating to the creation of the Trusts and the
issuance and sale of the Units:
(a) the Reference Trust Agreements bearing today's date relating
to each Trust (the "Trust Agreements") among the Depositor,
United States Trust Company of New York, as Trustee (the
"Trustee"), and Standard & Poor's
Corporation, as Evaluator;
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
December 15, 1988
Page 2
(b) the Registration Statement on Form S-6 (File No. 33-25127)
filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as
amended, Amendment No. 1 thereto containing the proposed form of
the final Prospectus relating to the Units (the "Prospectus")
(collectively, the "Registration Statement"), which is expected
to be filed with the Commission this day; and
(c) the Certificate of Incorporation, By-Laws, Foreign Bid
Certificate, Certified Board of Directors resolutions and power
of attorney of the Depositor.
We have assumed the genuineness of all signatures and the
conformity to original documents of all documents provided to us as such.
We have not reviewed the financial statements, compilation of
the Bonds held by the Trusts, and other financial data contained in the
Registration Statement and the Prospectus, as to which you have been furnished
with the reports of the accountants appearing in the Registration Statement and
the Prospectus.
Based on the foregoing and upon an investigation of such matters
of law as we have deemed necessary, we are of the opinion that:
(1) The Trust Agreements have been duly authorized and
entered into by an authorized officer of the Depositor and are
valid and binding obligations of the Depositor in accordance
with their respective terms, subject to laws of general
application affecting the rights and remedies of creditors.
(2) The execution and delivery of the certificates
evidencing the Units have been authorized by the Depositor and
such certificates when executed by the Trustee and the Depositor
in accordance with the provisions of the certificates and the
Trust Agreements and issued for the consideration contemplated
therein, will constitute fractional undivided interests in the
respective Trusts, will be entitled to the benefits of the Trust
Agreements, and will conform to the description thereof
contained in the Prospectus. Upon payment of the consideration
for the Units as provided in the Trust Agreements and the
Registration Statement,
C/M 11939.0001 407294.1
<PAGE>
Bear, Stearns & Co. Inc.
December 15, 1988
Page 3
the Units will be fully paid and non-assessable by the
Trusts.
We hereby consent to the filing of this opinion and our opinion
regarding the tax status of the Trusts as Exhibits to the Registration
Statement and to the use of our name in the Registration Statement and in the
Prospectus under the headings "Tax Status" and "Legal Opinions".
Very truly yours,
BERGER & STEINGUT
C/M 11939.0001 407294.1
BATTLE FOWLER
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
280 PARK AVENUE
NEW YORK, N.Y. 10017
(212) 856-7000
CABLE ADDRESS
"COUNSELLOR"
--------
TELEX 127053
--------
FACSIMILE
(212) 986-5135
WRITER'S DIRECT DIAL NUMBER
October 15, 1987
Bear, Stearns & Co. Inc.
55 Water Street
New York, New York 10041
Re: Municipal Securities Trusts
47th Discount Series
Series 34 and 48th Discount Series
49th Discount Series
Series 35 and 50th Discount Series
Dear Sirs:
You have asked for our opinion on the status, for purposes of federal
income tax, New York State franchise tax and New York City general corporation
tax, of Municipal Securities Trust, 47th Discount Series, Municipal Securities
Trust, Series 34 and 48th Discount Series, Municipal Securities Trust, 49th
Discount Series, and Municipal Securities Trust, Series 35 and 50th Discount
Series (collectively referred to as the "Trusts"), trusts created under the
laws of the State of New York pursuant to Reference Trust Agreements (the
"Agreements") dated July 24, 1986, August 14, 1986, September 11, 1986, and
October 15, 1986, respectively, among Bear, Stearns & Co. Inc., United States
Trust Company of New York (the "Trustee") and Standard & Poor's Corporation.
In rendering this opinion, we have examined the Agreements, the proposed
form of final Prospectus relating to each Trust dated October 15, 1987 (the
"Prospectus") and the documents referred to therein, among others, and we have
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein. We have assumed that each Trust has been and will
continue to be operated in accordance with its governing instrument.
You have represented that all bonds acquired by the Trusts pursuant to the
contracts of purchase described in the Prospectus (the "Bonds") were
accompanied by copies of opinions
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 2
of bond counsel to the issuing Governmental authorities, given at the time of
original delivery of the Bonds, to the effect that the interest thereon is
exempt from regular federal income tax, but we have not made any review of the
proceedings relating to the issuance of the Bonds or the bases for such
opinions. You have represented that none of the Bonds in the Trust are subject
to the federal individual alternative minimum tax under the Tax Reform Act of
1986.
Based on the foregoing, it is our opinion that, under existing law:
The Trusts are not associations taxable as corporations for federal
income tax purposes under the Internal Revenue Code of 1986, as amended
(the "Code"), and income received by each Trust that consists of interest
excludable from gross income under the Code will be excludable from the
federal gross income of the Certificateholders (as defined in the
Prospectus) of such Trust.
Each Certificateholder of a Trust will be considered the owner of a
pro rata portion of such Trust under Section 676(a) of the Code. Thus,
each Certificateholder of a Trust will be considered to have received his
pro rata share of Bond interest when it is received by such Trust, and the
entire net income distributable to Certificateholders that is exempt from
federal income tax when received by the Trust will constitute tax-exempt
income when received by the Certificateholders.
Gain (other than any earned original issue discount) realized on sale
or redemption of the Bonds or on sale of a Unit is, however, includible in
gross income for federal income tax purposes, generally as capital gain.
(It should be noted in this connection that such gain does not include any
amounts received in respect of accrued interest.) Such gain may be long or
short-term depending on the facts and circumstances. A capital asset
acquired before January 1, 1988 must be held for more than six months to
qualify for long-term capital gain treatment. The maximum federal tax rate
on long-term capital gains in 1987 is 28 percent for taxpayers other than
corporations and 34 percent for corporations. In 1988 and thereafter,
long-term capital gains are scheduled to be taxed at the same rates
applicable to ordinary income. Thus, Certificateholders who realize gain
on a sale or redemption of Bonds or on a sale of a Unit may incur greater
federal income tax liability in 1987 and thereafter than if such sale or
redemption occurred prior to 1987.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 3
Each Certificateholder of a Trust will realize taxable gain or loss
when such Trust disposes of a Bond (whether by sale, exchange, redemption
or payment at maturity), as if the Certificateholder had directly disposed
of his pro rata share of such Bond. The gain or loss is measured by the
difference between (i) the tax cost of such pro rata share and (ii) the
amount received therefor. For this purpose, a Certificateholder's tax cost
for each Bond is determined by allocating the total tax cost of each Unit
among all of the Bonds held in the Trust (in accordance with the portion
of such Trust comprised by each Bond). In order to determine the amount of
taxable gain or loss, the Certificateholder's amount received is similarly
allocated at that time. The Certificateholder may exclude from the amount
received any amounts that represent accrued interest or the earned portion
of any original issue discount but may not exclude amounts attributable to
market discount. Thus, when a Bond is disposed of by a Trust at a gain,
taxable gain will equal the difference between (i) the amount received and
(ii) the amount paid plus any original issue discount (limited, in the
case of Bonds issued after June 8, 1980, to the portion earned from the
date of acquisition to the date of disposition). No deduction is allowed
for the amortization of bond premium on tax-exempt bonds such as the Bonds
in computing regular federal income tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis of
a discount bond is increased by the amount of accrued, tax-exempt original
issue discount thus determined. This method of calculation will produce
higher capital gains (or lower losses) to a Certificateholder, as compared
to the results produced by the straight-line method of accounting for
original issue discount, upon an early disposition of a Bond by a Trust or
of a Unit by a Certificateholder.
A Certificateholder of a Trust may also realize taxable gain or loss
when a Unit of such Trust is sold or redeemed. The amount received is
allocated among all the Bonds in such Trust in the same manner as when the
Trust disposes of Bonds and the Certificateholder may exclude accrued
interest and the earned portion of any original issue discount (but not
amounts attributable to market discount). The return of a
Certificateholder's tax cost is otherwise a tax-free return of capital.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 4
A portion of social security benefits is includible in gross income
for taxpayers whose "modified adjusted gross income" combined with 50% of
their benefits exceeds a base amount. The base amount is $25,000 for an
individual, $32,000 for a married couple filing a joint return and zero
for married persons filing separate returns. Interest on tax-exempt bonds
is to be added to adjusted gross income for purposes of computing the
amount of benefits that are includible in gross income and determining
whether an individual's income exceeds the base amount above which a
portion of the benefits would be subject to tax.
Effective for taxable years beginning in 1987-89, corporate
Certificateholders are required to include as an item of tax preference
for purposes of the federal corporate alternative minimum tax 50 percent
of the amount by which the adjusted net book income (which will include
tax-exempt interest) of the corporation exceeds the alternative minimum
taxable income (determined without this tax preference item). A similar
provision based on adjusted earnings and profits (but with a 75% inclusion
rate) will apply for taxable years beginning after 1989. Further, interest
on the Bonds is includible in a 0.12% additional corporate minimum tax
imposed by the Superfund Amendments and Reauthorization Act of 1986. In
addition, in certain cases, Subchapter S corporations with accumulated
earnings and profits from Subchapter C years will be subject to a minimum
tax on excess "passive investment income" which includes tax-exempt
interest.
The Trusts are not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder of a Trust who is a New York resident, however, a pro
rata portion of all or part of the income of such Trust, including the
earned portion of original issue discount, will be treated as the income
of the Certificateholder under the personal income tax laws of the State
and City of New York. Similar treatment may apply in other states.
The exemption of interest on municipal obligations for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or political subdivision. In general, municipal bond interest exempt
from federal income tax is taxable income to residents of the State or City of
New York under the tax laws of those jurisdictions unless the bonds are issued
by the State of New York or one of its political subdivisions or by the
Commonwealth of Puerto Rico
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 5
or one of its political subdivisions. For corporations doing business in New
York State, interest earned on state and municipal obligations that are exempt
from federal income tax, including obligations of New York State, its political
subdivisions and instrumentalities, must be included in calculating New York
State entire net income for purposes of calculating New York State franchise
(income) tax. The laws of the several states and local taxing authorities vary
with respect to the taxation of such obligations and each Certificateholder is
advised to consult his own tax advisor as to tax consequences of his
Certificates under state and local tax laws.
In the case of certain of the Bonds that are "industrial revenue bonds"
("IRBs"), you have informed us that the opinions of bond counsel to the
respective issuing authorities indicate that interest on such Bonds is exempt
from regular federal income tax. Interest on such Bonds will not be exempt from
federal income tax, however, for any period during which such Bonds are held by
a "substantial user" of the facilities financed by the proceeds of such Bonds
or by a "related person" thereof within the meaning of the Code. Therefore,
interest on any such Bonds allocable to a Certificateholder who is such a
"substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of
an owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such Bonds will become taxable if the face amount of the
Bonds plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events, such as prohibited "arbitrage" activities
by the issuer of the Bond. We have made no investigation as to the current or
future owners or users of the facilities financed by the Bonds, the amount of
such persons' outstanding tax-exempt IRBs, or the facilities themselves, and no
assurance can be given that future events will not affect the tax-exempt status
of the Bonds. In rendering this opinion we have relied upon your representation
noted above concerning the opinions of bond counsel relating to any Bonds that
are IRBs.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 6
Interest on indebtedness incurred or continued to purchase or carry the
Units is not deductible for federal income tax purposes. In addition, under
rules used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of Units. Also, in the case of certain financial institutions that acquire
Units, no deduction is allowed for interest expense allocable to the Units.
The Tax Reform Act of 1986 (the "Act") results in many important changes
to the federal income tax system, including a reduction in marginal tax rates,
the elimination of preferential treatment for capital gains after 1987 and the
elimination or reduction of many exclusions and deductions. Included in the Act
are provisions relating to tax-exempt bonds that: a) require tax-exempt
interest on certain bonds to be included as an item of tax preference for
purposes of the individual alternative minimum tax; b) provide for a new volume
cap in lieu of the prior-law private activity bond and qualified mortgage bond
volume caps; c) place restrictions on arbitrage and advance refundings; d)
require that tax-exempt interest be shown on tax returns for taxable years
beginning after 1986; e) disallow 100% of deductions for interest expense
allocable to tax-exempt obligations acquired by financial institutions; and f)
make certain technical modifications. The enactment of the Act may affect the
character of the income that the Certificateholder receives. The Act
significantly lowers individual and corporate income tax rates. In general, a
lower overall rate of income taxation could make tax-exempt bonds less
attractive to investors and could decrease the value of tax-exempt Bonds held
by the Trusts.
From time to time proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trusts, and it can be expected that
similar proposals may be introduced in the future. We cannot predict what
legislation in respect of the tax status of interest on such debt obligations
may be proposed by the Federal executive branch or by members of Congress, nor
can we predict which proposals, if any, might be enacted or whether any
legislation, if enacted, would apply to the Bonds in the Trusts.
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt
from regular federal income tax may be
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 7
limited to law existing at the time the Bonds were issued, and may not apply to
the extent future changes in law, regulations or interpretations affect such
Bonds. Investors are advised to consult their own tax advisors for advice with
respect to the effect of any legislative changes.
The material set forth under the section entitled "Tax Status" in the
Prospectus is a fair summary of our opinion.
We hereby consent to the filing of this opinion regarding the Tax Status
of the Trusts as an exhibit to the Registration Statement and to the use of our
name in the Registration Statement and in the Prospectus under the headings
"Tax Status" and "Legal Opinions."
Very truly yours,
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
280 PARK AVENUE
NEW YORK, N.Y. 10017
(212) 856-7000
CABLE ADDRESS
"COUNSELLOR"
--------
TELEX 127053
--------
FACSIMILE
(212) 986-5135
WRITER'S DIRECT DIAL NUMBER
October 31, 1989
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Municipal Securities Trusts,
Series 38 and 66th Discount Series
Series 39 and 67th Discount Series and
Series 40 and 68th Discount Series
Dear Sirs:
You have asked for our opinion on the status, for purposes of federal
income tax, New York State franchise tax and New York City general corporation
tax, of Municipal Securities Trust, Series 38 and 66th Discount Series,
Municipal Securities Trust, Series 39 and 67th Discount Series, and Municipal
Securities Trust, Series 40 and 68th Discount Series (collectively referred to
as the "Trusts"), trusts created under the laws of the State of New York
pursuant to Reference Trust Agreements (the "Agreements") dated July 21, 1988,
October 13, 1988 and December 15, 1988, respectively, among Bear, Stearns & Co.
Inc., United States Trust Company of New York (the "Trustee") and Standard &
Poor's Corporation.
In rendering this opinion, we have examined the Agreements, the proposed
form of final Prospectus relating to each Trust dated October 31, 1989 (the
"Prospectus") and the documents referred to therein, among others, and we have
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein. We have assumed that each Trust has been and will
continue to be operated in accordance with its governing instrument.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 2
You have represented that all bonds acquired by the Trusts pursuant to the
contracts of purchase described in the Prospectus (the "Bonds") were
accompanied by copies of opinions of bond counsel to the issuing governmental
authorities, given at the time of original delivery of the Bonds, to the effect
that the interest thereon is currently exempt from regular federal income tax,
but we have not made any review of the proceedings relating to the issuance of
the Bonds or the bases for such opinions and express no opinion as to them, and
neither the Trustee nor the Sponsor has made an independent examination or
verification that the federal income tax status of the Bonds has not been
altered since the time of the original delivery of those opinions. You have
represented that none of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986.
Based on the foregoing, it is our opinion that, under existing law:
The Trusts are not associations taxable as corporations for federal
income tax purposes under the Internal Revenue Code of 1986, as amended
(the "Code"), and income received by each Trust that consists of interest
excludable from gross income under the Code will be excludable from the
federal gross income of the Certificateholders (as defined in the
Prospectus) of such Trust.
Each Certificateholder of a Trust will be considered the owner of a
pro rata portion of such Trust under Section 676(a) of the Code. Thus,
each Certificateholder of a Trust will be considered to have received his
pro rata share of Bond interest when it is received by such Trust, and the
net income distributable to Certificateholders that is exempt from federal
income tax when received by that Trust will constitute tax-exempt income
when received by the Certificateholders.
Gain (other than any earned original issue discount) realized on sale
or redemption of the Bonds or on sale of a Unit is, however, includable in
gross income for federal income tax purposes, generally as capital gain.
(It should be noted in this connection that such gain does not include any
amounts received in respect of accrued interest.) Such gain may be long or
short-term depending on the facts and circumstances. Capital losses are
deductible to the extent of capital gains; in addition, up to $3,000 of
capital losses of non-corporate Certificateholders may be deducted against
ordinary income. A capital asset acquired on or
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 3
after January 1, 1988 must be held for more than one year to qualify for
long-term capital gain treatment. Long-term capital gains are taxed at the
same rates applicable to ordinary income.
Each Certificateholder of a Trust will realize taxable gain or loss
when such Trust disposes of a Bond (whether by sale, exchange, redemption
or payment at maturity), as if the Certificateholder had directly disposed
of his pro rata share of such Bond. The gain or loss is measured by the
difference between (i) the tax cost of such pro rata share and (ii) the
amount received therefor. For this purpose, a Certificateholder's tax cost
for each Bond is determined by allocating the total tax cost of each Unit
among all of the Bonds held in the Trust (in accordance with the portion
of such Trust comprised by each Bond). In order to determine the amount of
taxable gain or loss, the Certificateholder's amount received is similarly
allocated at that time. The Certificateholder may exclude from the amount
received any amounts that represent accrued interest or the earned portion
of any original issue discount but may not exclude amounts attributable to
market discount. Thus, when a Bond is disposed of by a Trust at a gain,
taxable gain will equal the difference between (i) the amount received and
(ii) the amount paid plus any original issue discount (limited, in the
case of Bonds issued after June 8, 1980, to the portion earned from the
date of acquisition to the date of disposition). No deduction is allowed
for the amortization of bond premium on tax-exempt bonds such as the Bonds
in computing regular federal income tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis of
a discount bond is increased by the amount of accrued, tax-exempt original
issue discount thus determined. This method of calculation will produce
higher capital gains (or lower losses) to a Certificateholder, as compared
to the results produced by the straight-line method of accounting for
original issue discount, upon an early disposition of a Bond by a Trust or
of a Unit by a Certificateholder.
A Certificateholder of a Trust may also realize taxable gain or loss
when a Unit of such Trust is sold or redeemed. The amount received is
allocated among all the Bonds in such Trust in the same manner as when the
Trust disposes of Bonds
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 4
and the Certificateholder may exclude accrued interest and the earned
portion of any original issue discount (but not amounts attributable to
market discount). The return of a Certificateholder's tax cost is
otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross income
for taxpayers whose "modified adjusted gross income" combined with 50% of
their benefits exceeds a base amount. The base amount is $25,000 for an
individual, $32,000 for a married couple filing a joint return and zero
for married persons filing separate returns. Interest on tax-exempt bonds
is to be added to adjusted gross income for purposes of computing the
amount of benefits that are includable in gross income and determining
whether an individual's income exceeds the base amount above which a
portion of the benefits would be subject to tax.
Effective for taxable years beginning in 1987-89, corporate
Certificateholders are required to include as an item of tax preference
for purposes of the federal corporate alternative minimum tax 50 percent
of the amount by which the adjusted net book income (which will include
tax-exempt interest) of the corporation exceeds the alternative minimum
taxable income (determined without this tax preference item). A similar
provision based on adjusted earnings and profits (but with a 75% inclusion
rate) will apply for taxable years beginning after 1989. Further, interest
on the Bonds is includable in a 0.12% additional corporate minimum tax
imposed by the Superfund Amendments and Reauthorization Act of 1986 for
taxable years beginning after December 31, 1986 and before January 1,
1992. In addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject
to a minimum tax on excess "passive investment income" which includes
tax-exempt interest.
The Trusts are not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder of a Trust who is a New York resident, however, a pro
rata portion of all or part of the income of such Trust, including the
earned portion of original issue discount, will be treated as the income
of the Certificateholder under the personal income tax laws of the State
and City of New York. Similar treatment may apply in other states.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 5
The exemption of interest on municipal obligations for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or political subdivision. In general, municipal bond interest exempt
from federal income tax is taxable income to residents of the State or City of
New York under the tax laws of those jurisdictions unless the bonds are issued
by the State of New York or one of its political subdivisions or by the
Commonwealth of Puerto Rico or one of its political subdivisions. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and
instrumentalities, must be included in calculating New York State entire net
income for purposes of calculating New York State franchise (income) tax. The
laws of the several states and local taxing authorities vary with respect to
the taxation of such obligations and each Certificateholder is advised to
consult his own tax advisor as to the tax consequences of his Certificates
under state and local tax laws.
In the case of certain of the Bonds that are "industrial revenue bonds"
("IRBs"), you have informed us that the opinions of bond counsel to the
respective issuing authorities indicate that interest on such Bonds is exempt
from regular federal income tax. Interest on such Bonds will not be exempt from
federal income tax, however, for any period during which such Bonds are held by
a "substantial user" of the facilities financed by the proceeds of such Bonds
or by a "related person" thereof within the meaning of the Code. Therefore,
interest on any such Bonds allocable to a Certificateholder who is such a
"substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of
an owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events, such as prohibited "arbitrage" activities
by the issuer of the Bond or the failure of the Bond to continue to satisfy the
conditions necessary for the interest thereon to be exempt from regular federal
income tax. We have made no investigation as to the
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 6
current or future owners or users of the facilities financed by the Bonds, the
amount of such persons' outstanding tax-exempt IRBs, or the facilities
themselves, and no assurance can be given that future events will not affect
the tax-exempt status of the Bonds. In rendering this opinion we have relied
upon your representation noted above concerning the opinions of bond counsel
relating to any Bonds that are IRBs.
Interest on indebtedness incurred or continued to purchase or carry the
Units is not deductible for federal income tax purposes. In addition, under
rules used by the Internal Revenue Service for determining when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of Units. Also, in the case of certain financial institutions that acquire
Units, in general no deduction is allowed for interest expense allocable to the
Units.
The Tax Reform Act of 1986 (the "Act") resulted in many important changes
to the federal income tax system, including a reduction in marginal tax rates,
the elimination of preferential treatment for capital gains after 1987 and the
elimination or reduction of many exclusions and deductions. Included in the Act
are provisions relating to tax-exempt bonds that: (a) require tax-exempt
interest on certain bonds to be included as an item of tax preference for
purposes of the individual alternative minimum tax; (b) provide for a new
volume cap in lieu of the prior-law private activity bond and qualified
mortgage bond volume caps; (c) place restrictions on arbitrage and advance
refundings; (d) require that tax-exempt interest be shown on tax returns for
taxable years beginning after 1986; (e) disallow 100% of deductions for
interest expense allocable to tax-exempt obligations acquired by financial
institutions; and (f) make certain technical modifications. The enactment of
the Act may affect the character of the income that the Certificateholder
receives. The Act significantly lowered individual and corporate income tax
rates. In general, a lower overall rate of income taxation could make
tax-exempt bonds less attractive to investors and could decrease the value of
tax-exempt Bonds held by the Trusts.
From time to time proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trusts, and it can be expected that
similar proposals may be introduced in the future. The 1987 budget
reconciliation legislation proposed a provision that would have required
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 7
market discount on tax-exempt bonds to be included in income throughout the
term of the bonds. Although this provision was deleted from the Revenue Act of
1987, it or a similar proposal could be re-introduced and enacted in the
future.
H.R. 3299, approved by the House Ways & Means Committee, and introduced in
the House on September 20, 1989, contains a proposal to reduce the capital
gains tax rate for sales and exchange of most capital assets occurring on or
after September 14, 1989 and on or before December 31, 1991. Such reduction
would generally result in a maximum regular income tax rate of 19.6% on net
capital gains during such period. H.R. 3299 also provides for an inflation
adjustment to the basis of certain assets (which includes real property used in
a trade or business) for purposes of determining gain (but not loss) on sale or
other disposition. This provision would apply only to assets held by taxpayers
other than corporations that are acquired after December 31, 1991 and held for
more than one year. On October 4, 1989, the Senate Finance Committee approved a
bill that did not include the preferential capital gains provisions of H.R.
3299. Under the Senate Finance Committee bill, capital gains and ordinary
income would continue to be taxed at the same rate. The recent proposal to
alter the calculation of the federal corporate alternative minimum tax by
including the entire amount of tax-exempt interest income was not included in
either H.R. 3299 or the Senate Finance Committee bill. We cannot predict what
legislation in respect of (i) the tax status of interest on such debt
obligations, (ii) the preference for capital gains, or (iii) the determination
of the alternative minimum tax may be proposed by the Federal executive branch
or by members of Congress, nor can we predict which proposals, if any, might be
enacted or whether any legislation, if enacted, would apply to the Bonds in the
Trusts.
In a recent decision (South Carolina v. Baker), the U.S. Supreme Court
held that the federal government may constitutionally require states to
register bonds they issue and subject the interest on such bonds to federal
income tax if not registered, and that there is no constitutional prohibition
against the federal government's taxing the interest earned on state or other
municipal bonds.
The Supreme Court decision affirms the authority of the federal government
to regulate and control bonds such as the Bonds in the Trust and to tax
interest on such bonds in the future. The decision does not, however, affect
the current exemption from taxation of the interest earned on the Bonds in the
Trust in accordance with Section 103 of the Code.
C/M: 11939.0001 407919.1
<PAGE>
BATTLE FOWLER PAGE 8
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt
from regular federal income tax may be limited to law existing at the time the
Bonds were issued, and may not apply to the extent future changes in law,
regulations or interpretations affect such Bonds. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.
The material set forth under the section entitled "Tax Status" in the
Prospectus is a fair summary of our opinion.
We hereby consent to the filing of this opinion regarding the Tax Status
of the Trusts as an exhibit to the Registration Statement and to the use of our
name in the Registration Statement and in the Prospectus under the headings
"Tax Status" and "Legal Opinions."
Very truly yours,
C/M: 11939.0001 407919.1
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Municipal Securities Trust,
Series 35
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-08699 for the above-captioned trust. We hereby
acknowledge that Kenny S&P Evaluation Services, a division of J.J. Kenny Co.,
Inc. is currently acting as the evaluator for the trust. We hereby consent to
the use in the Amendment of the reference to Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Municipal Securities Trust,
Series 39
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-24031 for the above-captioned trust. We hereby
acknowledge that Kenny S&P Evaluation Services, a division of J.J. Kenny Co.,
Inc. is currently acting as the evaluator for the trust. We hereby consent to
the use in the Amendment of the reference to Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Municipal Securities Trust,
Series 40
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-25127 for the above-captioned trust. We hereby
acknowledge that Kenny S&P Evaluation Services, a division of J.J. Kenny Co.,
Inc. is currently acting as the evaluator for the trust. We hereby consent to
the use in the Amendment of the reference to Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
