Registration No. 33-12257
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 8 to FORM S-6 FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact name of trust:
Multistate Trust,
Series 43
B. Name of depositor:
ADVEST, INC.
C. Complete address of depositor's principal executive offices:
ADVEST, INC.
One Commercial Plaza
280 Trumbull Street
Hartford, Connecticut 06103
D. Name and complete address of agents for service:
LEE G. KUCKRO, Esq.
Advest, Inc.
One Commercial Plaza
280 Trumbull Street
Hartford, Connecticut 06103
Copies of Comments to:
ERIC F. FESS
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate
box)
o immediately upon filing pursuant to paragraph (b)
xx September 29, 1995
o 60 days after filing pursuant to paragraph (a)
o on (date) pursuant to paragraph (a) of rule (485 or 486)
Page 1
Multistate Trust, Series 43
NOTE: Part I of this Prospectus may not be distributed unless
accompanied by Part II.
MULTISTATE TRUST, SERIES 43
12,937 Units
Prospectus, Part I
Dated: September 29, 1995
This Prospectus consists of two parts. The first contains a Summary
of Essential Information as of June 30, 1995 (the "Pricing Date"),
a summary of certain specific information regarding the Trust
and the separate underlying trusts (the "State Trusts") and certified
financial statements of each State Trust as of May 31, 1995 (the
"Date of Determination"), including the related Schedule of Investments
as of the Date of Determination. Part II of this Prospectus contains
a general summary of the Trust.
In the opinion of counsel, under existing law interest income
to the Trust and, with certain exceptions, to Certificateholders
is exempt from Federal income tax. In addition, the interest income
of each State Trust is, in the opinion of counsel, exempt to the
extent indicated from state and local taxes, when held by residents
of the state the name of which appears in the name of such State
Trust. With certain exceptions, capital gains, if any, will be
subject to tax.
The Trust. Multistate Trust, Series 43 (the "Trust"), consists
of four State Trusts designated as Maryland Tax Exempt Unit Trust
43 (the "Maryland Trust"), Massachusetts Tax Exempt Unit Trust
88 (the "Massachusetts Trust"), Massachusetts Tax Exempt Discount
Series 7 (the "Massachusetts Discount Trust") and Virginia Tax
Exempt Unit Trust 43 (the "Virginia Trust"), each formed for the
purpose of investing in a diversified portfolio of tax exempt
bonds (the "Bonds"), with the objectives of preservation of capital
and of earning interest income free from both Federal income tax
and to the extent indicated from state and local taxes in the
State for which a State Trust is named and may include units of
the same State Trust of previously-issued series of the Trust
(the "Trust Units"). All of the Bonds comprising each State Trust
(and all of the bonds underlying any Trust Units held by such
State Trust) are obligations of the State for which such Trust
is named, its political subdivisions, municipalities and public
authorities or of certain United States territories or possessions
and their public authorities. Payment of interest and return of
capital by the issuers of the Bonds are dependent upon the continuing
ability of the issuers of the Bonds (and of the bonds underlying
any Trust Units) to meet their obligations. The Units being offered
hereby are outstanding Units repurchased by the Sponsor in the
secondary market or from the Trustee after having been tendered
for redemption. For a summary of information about the composition
of each State Trust portfolio, see "Schedule of Investments."
Sponsor. Advest, Inc. is the Sponsor of the Trust.
Public Offering Price. The Public Offering Price of a Unit of
each State Trust is equal to the Sponsor's Bid Price per Unit,
plus an amount equal to 3.40% of the Public Offering Price (3.52%
of the Sponsor's Bid Price), 3.71% of the Public Offering Price
(3.85% of the Sponsor's Bid Price), 5.23% of the Public Offering
Price (5.52% of the Sponsor's Bid Price) and 3.40% of the Public
Offering Price (3.52% of the Sponsor's Bid Price) for the Maryland
Trust, Massachusetts Trust, Massachusetts Discount Trust and Virginia
Trust, respectively. If the Bonds in the Trust were available
for direct purchase by investors, the purchase price of the Bonds
would not include the sales charge included in the Public Offering
Price of the Units. Had the Units of the Maryland Trust, Massachusetts
Trust, Massachusetts Discount Trust and Virginia Trust been available
for sale on the Pricing Date, the Public Offering Price would
have been $859.74, $954.04, $604.21 and $753.66, respectively,
plus accrued interest to expected date of settlement (three business
days after such date) of $14.58, $18.59, $11.42 and $13.65, respectively,
semi-annually for a total of $874.32, $972.63, $615.63 and $767.31,
respectively, semi-annually. The Public Offering Price will vary
on a daily basis from the amount stated in accordance with fluctuations
in the prices of the underlying Bonds and the price to be paid
by each investor will be computed as of the date the Units are
purchased (see "Public Offering of Units - Public Offering Price"
in Part II of the Prospectus).
Please retain this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page A-1
Estimated Current Return and Estimated Long-Term Return
The Estimated Current Return per Unit and the Estimated Long-Term
Return per Unit to Certificateholders of the Maryland Trust, Massachusetts
Trust, Massachusetts Discount Trust and Virginia Trust on the
Pricing Date is set forth in "Summary of Essential Information"
(see "The Trust - Interest, Estimated Current Return and Estimated
Long-Term Return" in Part II of the Prospectus).
Distributions
Distributions of interest and principal received by each State
Trust, pro rated on an annual basis, will be made to Certificateholders
semi-annually on the distribution days indicated under "Summary
of Essential Information" to holders of record on the first day
of the month in which any such distribution is made unless the
Certificateholder elects to receive interest distributions monthly
(see "Certificateholders - Rights of Certificateholders" in Part
II of the Prospectus).
Market for the Units
The Sponsor, although not obligated to do so, maintains and intends
to maintain a secondary market for the Units at the related Sponsor's
Bid Price, as more fully described in Part II of the Prospectus
under "Public Offering of Units - Market for Units." If such a
market is not maintained, a Certificateholder may be able to dispose
of his Units only through redemption at prices based upon the
bid prices of the underlying Bonds. Any Units repurchased by the
Sponsor in the secondary market may be reoffered at the then current
Public Offering Price including a sales charge (see "Public Offering
of Units - Market for Units" in Part II of the Prospectus).
Page A-2
INFORMATION REGARDING THE TRUST
As of May 31, 1995
(Except as Otherwise Indicated)
Portfolios - State Risk Factors and Tax Status (N.B. Tax opinions
which appear herein are as rendered on the Date of Deposit. Consult
with your tax advisor to discuss any relevant changes in the tax
laws since the Date of Deposit. Interest income on the Bonds contained
in the portfolio of each State Trust is, in the opinion of bond
counsel to the issuing governmental authorities, excludible from
gross income under the Internal Revenue Code of 1986, as amended
(the "Code"). See "The Trust - Tax Status of the Trust" in Part
II of the Prospectus for information regarding federal taxation.)
PORTFOLIOS - STATE RISK FACTORS AND TAX STATUS (N.B. TAX OPINIONS
WHICH APPEAR HEREIN ARE AS RENDERED ON THE DATE OF DEPOSIT. CONSULT
WITH YOUR TAX ADVISOR TO DISCUSS ANY RELEVANT CHANGES IN THE TAX
LAWS SINCE THE DATE OF DEPOSIT. INTEREST INCOME ON THE BONDS CONTAINED
IN THE PORTFOLIO OF EACH STATE TRUST IS, IN THE OPINION OF BOND
COUNSEL TO THE ISSUING GOVERNMENTAL AUTHORITIES, EXCLUDIBLE FROM
GROSS INCOME UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SEE "THE TRUST - TAX STATUS OF THE TRUST" IN PART
II OF THE PROSPECTUS FOR INFORMATION REGARDING FEDERAL TAXATION.)
Maryland Trust
Some of the significant financial considerations relating to the
investments of the Maryland Trust are summarized below. This information
is derived principally from official statements and preliminary
official statements relating to issues of Maryland obligations
and does not purport to be a complete description.
The State's total expenditures for the fiscal years ending June
30, 1990, June 30, 1991 and June 30, 1992 were $11.019, $11.304
and $11.657 billion, respectively. As of January 13, 1993, it
was estimated that total expenditures for fiscal 1993 would be
$11.897 billion. The State's General Fund, representing approximately
55%-60% of each year's total budget, had a surplus on a budgetary
basis of $57 million in fiscal year 1990, $55 thousand in fiscal
year 1991, and a deficit of $56 million in fiscal 1992. The Governor
of Maryland reduced fiscal 1993 appropriations by $56 million
to offset the fiscal 1992 deficit. The State Constitution mandates
a balanced budget.
The 1993 fiscal year budget was enacted in April 1992 which, together
with legislation enacted in 1992, involved the transfer of certain
funds, new fees and taxes, and alteration of certain statutory
State expenditure programs. When the 1993 budget was enacted,
it was estimated that the General Fund surplus at June 30, 1993
would be approximately $10 million on a budgetary basis. During
the final months of fiscal year 1992 and the initial months of
fiscal year 1993, collections of State revenues were below the
levels estimated at the time of the adoption of the 1993 budget.
The Governor proposed a cost containment plan to address this
revenue shortfall and to provide reserves to finance potential
deficiency appropriations. On September 30, 1992, the Board of
Public Works approved the Governor's proposal to reduce General
Fund apropriations by $168 million. The Board of Public Works
also approved the Governor's proposal to reduce the special fund
appropriations for the Department of Transportation by $30 million.
Legislation was introduced at the 1993 session of the General
Assembly to transfer this $30 million to the General Fund, as
well as $10 million from various other special funds. In a special
session held in November, 1992, the General Assembly enacted legislation
reducing State aid to local governments by $147 million. In addition,
other elements of the Governor's original cost containment plan
are in the process of being implemented or revised.
The public indebtedness of Maryland and its instrumentalities
is divided into three basic types. The State issues general obligation
bonds, to the payment of which the State ad valorem property tax
is exclusively pledged, for capital improvements and for various
State-sponsored projects. The Department of Transportation of
Maryland issues limited, special obligation bonds for transportation
purposes payable primarily from specific, fixed-rate excise taxes
and other revenues related mainly to highway use. Certain authorities
issue obligations payable solely from specific non-tax enterprise
fund revenues and for which the State has no liability and has
given no moral obligation assurance.
According to the most recent available ratings, general obligation
bonds of the State of Maryland are rated "Aaa" by Moody's and
"AAA" by Standard & Poor's as are those of Baltimore County, a
separate political entity surrounding Baltimore City. General
obligation bonds of Montgomery County, located in the suburbs
of Washington, D.C., are rated "Aaa" by Moody's and "AAA" by Standard
& Poor's. General obligation bonds of Prince George's County,
the second largest metropolitan county, which is also in the suburbs
of Washington, D.C., are rated "A1" by Moody's and "AA-" by Standard
& Poor's. The general obligation bonds of other counties of the
State that are rated by Moody's carry an "A" rating or better
except for those of Allegany County, which are rated "Baa." The
most populous municipality in Maryland is Baltimore City, the
general obligation bonds of which are rated "A1" by Moody's and
"A" by Standard & Poor's. The majority of Maryland Health and
Higher Education Authority and State Department of Transportation
revenue bond issues have received an "A" rating or better from Moody's.
While the ratings and other factors mentioned above indicate that
Maryland and its principal subdivisions and agencies are addressing
the effects of the economic recession and, overall, are in satisfactory
economic health, there can, of course, be no assurance that this
will continue or that particular bond issues may not be adversely
affected by changes in state or local economic or political conditions.
Page A-3
In the opinion of Semmes, Bowen & Semmes, special Maryland counsel
on Maryland income and intangible tax matters, which relies on
the opinion of Brown & Wood, regarding Federal income tax matters
relating to the Multistate Trust, under existing Maryland income
tax law, as of the Date of Deposit, applicable to individuals
who are Maryland residents:
The Maryland Trust will be treated as a trust for Maryland income
tax purposes and not as an association taxable as a corporation.
Each transaction of the Maryland Trust will be treated for such
purposes as a transaction of the several Certificateholders and
not as a transaction of the Maryland Trust that could give rise
to Maryland taxable income to the Maryland Trust.
The Maryland income tax is imposed upon the taxable income of
resident individuals. The counties and City of Baltimore are required
by State law to levy local income taxes that "piggyback" the state
income tax; i.e., these taxes are determined as a percentage ranging
from 20% to 50% of the liability of the resident for the state
income tax. The local income tax applies to individuals who are
residents of the local jurisdictions. The calculation of the Maryland
taxable income of a resident individual begins with Federal adjusted
gross income. Certain modifications are specified, but no such
modification requires the addition of interest on obligations
of the State of Maryland, its agencies, authorities or political
subdivisions, or on bonds issued by the Government of Puerto Rico
or by its authority if the interest on such bonds has been determined
by bond counsel for the specific issue to be exempt under Federal
law from Federal and state income taxation. Accordingly, amounts
representing tax exempt interest for Federal income tax purposes
received by the Maryland Trust with respect to such obligations
will not be taxed to the Maryland Trust, or except as described
below, to the resident individual Certificateholder, for Maryland
income tax purposes.
For Federal income tax purposes, interest may be taxable to a
recipient who is, or is a related person to, a substantial user
of facilities financed with proceeds of certain obligations upon
which such interest is paid. Maryland statutory income tax exemptions
are independently provided for interest on certain state, county,
and municipal obligations and on obligations of certain agencies
thereof. Where such an independent exemption is provided, interest
on obligations covered thereby is exempt from Maryland income
tax without regard to any exemption from Federal income taxes
for such interest. In all other cases, the Maryland exemption
would be derived from and, therefore, would be coterminous with
and subject to the exceptions applicable to the Federal exemption.
As a general rule, to the extent that gain from the sale, exchange
or other disposition of obligations held by the Maryland Trust
(whether as a result of a sale or exchange of such obligations
by the Maryland Trust or as a result of a sale or exchange of
a Unit by a Certificateholder) is includable in the Federal adjusted
gross income of a resident individual, such gain will be included
in the calculation of the Certificateholder's Maryland taxable
income. However, under the Maryland income tax law, any profit
realized upon the sale or exchange of bonds issued by the State
of Maryland and its political subdivisions is specifically excluded
from the computation of the Maryland taxable income of individuals.
Additionally, by virtue of other Maryland legislation, profit
made on the sale of obligations of certain Maryland issuers is
expressly exempt from Maryland income taxation. Although there
are no Maryland authorities on point, it is possible that the
taxing authorities in Maryland could take the position that the
statutory exclusion or exemption of profit on obligations requires
a disallowance in the calculation of Maryland income tax of any
loss that may be realized on such obligations.
The Maryland income tax law provides that 50% of the sum of certain
items of tax preference are to be added to Federal adjusted gross
income for purposes of determining Maryland taxable net income.
The Federal net capital gain deduction is considered to be an
item of preference for this purpose. Although the Federal net
capital gain deduction has been repealed by the Code for tax years
beginning after 1986, Maryland law provides for a capital gain
deduction in computing Maryland taxable income. This deduction
is treated as a tax preference item for Maryland tax purposes.
Gain or loss on the Units or as to underlying Bonds for Maryland
income tax purposes would be determined by taking into account
the basis adjustments for Federal income tax purposes described
in the Prospectus.
With respect to the amount of Social Security benefits required
to be included in calculation of Federal adjusted gross income,
a subtraction modification is provided for under the Maryland
income tax law so that such amount is eliminated in determining
Maryland taxable income.
As the Maryland taxable net income of an individual who is a resident
of Maryland is based on Federal adjusted gross income and also
on Federal itemized deductions, interest expense which is disallowed
as a deduction for Federal income tax purposes as is discussed
in more detail in the Prospectus would also be disallowed for
Maryland income tax purposes.
Reference is made to the discussion in the Prospectus relating
to the Tax Reform Act of 1986. As stated above, certain bonds
in the Maryland Trust may derive their Maryland income tax exemption
from the corresponding Federal income tax exemption. As a result,
any loss of the Federal income tax exemption because of noncompliance
with the provisions of the Code (or because of the relationship
of the holder of the bond to the user of the facility financed
therewith) could, with respect to these Bonds, result in a loss
of the Maryland income tax exemption. Additionally, the inclusion
in Maryland taxable income of 50% of the tax preference items
specified in the Code is required as described above. Under the
Code interest on certain obligations
Page A-4
may be subject to the Federal alternative minimum income tax and,
as such, could be includable, in part, in Maryland taxable income.
Under Maryland law intangible personal property is not subject
to assessment and property taxation. This exemption may not be
available to a corporation that is entitled, under a contract
with the State, to an exemption from tangible property taxation.
Certain bond authorization statutes also provide that the principal
amount of the authorized bond is exempt from state and local taxation.
However, these statutes do not refer to estate or inheritance
taxes, Maryland taxes on financial institutions or any other tax
not levied or assessed directly on the bonds or their transfer.
Tax counsel should be consulted as to other Maryland tax consequences
not specifically considered herein, and as to the Maryland tax
status of taxpayers other than resident individuals who are Certificateholders
in the Maryland Trust. By way of example, no opinion is expressed
as to the tax consequences under the Maryland franchise tax applicable
to a financial institution which is a Certificateholder in the
Maryland Trust. Further, no opinion is being rendered as to the
Maryland tax consequences resulting from any proposed or future
Federal tax legislation.
As no opinion is expressed regarding the Maryland tax consequences
of Certificateholders other than individuals who are Maryland
residents, tax counsel should be consulted by other prospective
Certificateholders. The Code contains provisions relating to investing
in tax exempt obligations (including, for example, corporate minimum
tax provisions which treat certain tax exempt interest and corporate
book income which may include tax exempt interest, as tax preference
items, provisions reducing the deductibility of losses of certain
types of insurance companies, and provisions affecting the deductibility
of interest expense by financial institutions) which could have
a corresponding effect on the Maryland tax liability of the Certificateholder.
Massachusetts Trust and Massachusetts Discount Trust
An expected economic effect of investing in the Massachusetts
Discount Trust is that the investor who purchases Units at the
initial Public Offering Price and holds such Units until maturity
or redemption of the underlying Bonds will receive the offering
yield on his original investment as well as on all earned discount
attributed to those Bonds during the life of the Bonds. The offering
yield reflects current market conditions relating to interest
rates on comparable debt offerings. The assumed or implicit automatic
reinvestment of the portion of the yield represented by earned
discount of market discount and/or zero coupon bonds differentiates
the Massachusetts Discount Trust from state trusts comprised solely
of customary securities on which periodic interest is paid at
market rates existing at the time of issue. Accordingly, an investor
in the Massachusetts Discount Trust, unlike an investor in a state
trust comprised solely of customary securities, lessens his risk
of being unable to invest distributions at a rate as high as the
yield on the Massachusetts Discount Trust, but may forego the
ability to reinvest fully at higher rates in the future. See "Portfolios_
Risk Factors and Tax Status" for a description of market discount
which may result in taxable income and capital gain to investors.
Without intending to be complete, the following briefly summarizes
the current financial situation, as well as some of the complex
factors affecting the financial situation, in the Commonwealth
of Massachusetts (the "Commonwealth"). It is derived from sources
that are generally available to investors and is based in part
on information obtained from various agencies in Massachusetts.
No independent verification has been made of the accuracy or completeness
of the following information.
There can be no assurance that current or future statewide or
regional economic difficulties, and the resulting impact on Commonwealth
or local governmental finances generally, will not adversely affect
the market value of Massachusetts Obligations in the Trust or
the ability of particular obligors to make timely payments of
debt service on (or relating to) those obligations.
Since 1988, there has been a significant slowdown in the Commonwealth's
economy, as indicated by a rise in unemployment, a slowing of
its per capita income growth and declining state revenues. In
fiscal 1991, the Commonwealth's expenditures for state government
programs exceeded current revenues, and although fiscal 1992,
1993 and 1994 revenues exceeded expenditures, no assurance can
be given that lower than expected revenues will not resume and continue.
1995 Fiscal Year Budget. On July 10, 1994 the Governor signed
the Commonwealth's budget for fiscal 1995. The fiscal 1995 budget
is based on estimated budgeted revenues and other sources of approximately
$16.364 billion, which includes tax revenue estimates of approximately
$11.234 billion. Tax revenues for fiscal 1995 were originally
estimated at $11.328 billion in May, 1994, however, due to the
slowing of the rate of growth in certain tax revenue categories
in the months following the signing of the budget, particularly
income tax, the Secretary of the Administration on September 26,
1994, as required by law, reduced the fiscal 1995 tax revenue
estimate by $75 million. The tax revenue estimate includes $19.3
million of tax cuts signed by the Governor in the fiscal 1995
budget. Estimated fiscal 1995 tax revenues are approximately $627
million higher than fiscal 1994 tax revenues of $10.607 billion.
As signed by the Governor, the budget authorizes approximately
$16.482 billion in fiscal 1995 expenditures. The Governor exercised
his authority to veto and reduce individual line items and reduced
total expenditures by approximately $298.2
Page A-5
million and vetoed certain other law changes contained in the
fiscal 1995 budget. The $16.482 billion of fiscal 1995 esxpenditures
includes a reserve against certain contingencies currently in
the amount of $102.7 million. On October 7, 1994, the Governor
filed a supplemental appropriation recommendation aggregating
approximately $44.5 million, which expenditures are included in
the $102.7 million contingency reserve for fiscal 1995 expenditures.
The fiscal 1995 budget is based on numerous spending and revenue
estimates the achievement of which cannot be assured.
On November 8, 1994, the voters in the statewide general election
approved an initiative petition that would slightly increase the
portion of the gasoline tax revenue credited to the Highway Fund,
one of the Commonwealth's three major budgetary funds, prohibit
the transfer of money from the Highway Fund to other funds for
non-highway purposes and not permit including the Highway Fund
balance in the computation "consolidated net surplus" for purposes
of state finance laws. The initiative petition also provides that
no more than 15% of gasoline tax revenues may be used for mass
transportation purposes, such as expenditures related to the Massaschusetts
Bay Transit Authority. The Executive Office of Administration
and Finance is analyzing the effect, if any, this initiative petition,
which became law on December 8, 1994, may have on the fiscal 1995
budget and it currently does not expect it to have any materially
adverse impact. This is not a constitutional amendment and is
subject to amendment or repeal by the Legislature, which may also,
notwithstanding the terms of the petition, appropriate moneys
from the Highway Fund in such amounts and for such purposes as
it determines, subject only to a constitutional restriction that
such moneys be used for highways or mass transit purposes.
1994 Fiscal Year. The Commonwealth is in the process of closing
its fiscal 1994 financial records. Financial information for fiscal
1994 is unaudited and provided by the office of the Comptroller
based upon the Preliminary Financial Report of the Commonwealth
for fiscal 1994 issued by the Comptroller on September 15, 1994.
Audited financial information is expected to be published in January, 1995.
Fiscal 1994 tax revenue collections were approximately $10.607
billion, $87 million below the Department of Revenue's fiscal
year 1994 tax revenue estimate of $10.694 billion and $677 million
above fiscal 1993 tax revenues of $9.930 billion. Budgeted revenues
and other sources, including non-tax revenues, collected in fiscal
1994 were approximately $15.551 billion. Budgeted expenditures
and other uses of funds in fiscal 1994 were approximately $15.533 billion.
As of June 30, 1994, the Commonwealth showed a year-end cash position
of approximately $757 million, as compared to a projected position
of $599 million.
In June, 1993, the Legislature adopted and the Governor signed
into law comprehensive education reform legislation. This legislation
required an increase in expenditures for education purposes above
fiscal 1993 base spending of $1.288 billion of approximately $175
million in fiscal 1994. The Executive Office for Administration
and Finance expects the annual increases in expenditures above
the fiscal 1993 base spending of $1.288 billion to be approximately
$396 million in fiscal 1995, $632 million in fiscal 1996 and $875
million in fiscal 1997. Additional annual increases are also expected
in later fiscal years. The fiscal 1995 budget as signed by the
Governor includes $396 million in appropriations to satisfy this
legislation.
1993 Fiscal Year. The Commonwealth's budgeted expenditures and
other uses were approximately $14.696 billion in fiscal 1993,
which is approximately $1.280 billion or 9.6% higher than fiscal
1992 expenditures and other uses. Final fiscal 1993 budgeted expenditures
were $23 million lower than the initial July 1992 estimates of
fiscal 1993 budgeted expenditures. Budgeted revenues and other
sources for fiscal 1993 totalled approximately $14.710 billion,
including tax revenues of $9.930 billion. Total revenues and other
sources increased by approximately 6.9% from fiscal 1992 to fiscal
1993, while tax revenues increased by 4.7% for the same period.
Overall, fiscal 1993 ended with a surplus of revenues and other
sources over expenditures and other uses of $13.1 million and
aggregate ending fund balances in the budgeted operating funds
of the Commonwealth of approximately $562.5 million. After payment
in full of the distribution of local aid to the Commonwealth's
cities and towns ("Local Aid") and the retirement of short term
debt, the Commonwealth showed a year end cash position of approximately
$622.2 million, as compared to a projected position of $485.1 million.
1992 Fiscal Year. The Commonwealth's budgeted expenditures and
other uses were approximately $13.4 billion in fiscal 1992, which
is $238.7 million or 1.7% lower than fiscal 1991 budgeted expenditures.
Final fiscal 1992 budgeted expenditures were $300 million more
than the initial July 1991 estimates of budgetary expenditures,
due in part to increases in certain human services programs, including
an increase of $268.7 million for the Medicaid program and $50.0
million for mental retardation consent decree requirements. Budgeted
revenues and other sources for fiscal 1992 totaled approximately
$13.7 billion (including tax revenues of $9.5 billion), reflecting
an increase of approximately 0.7% from fiscal 1991 to 1992 and
an increase of 5.4% in tax revenues for the same period. Overall,
fiscal 1992 is estimated to have ended with an excess of revenues
and other sources over expenditures and other uses of $312.3 million.
After payment in full of Local Aid in the amount of $514.0 million
due on June 30, 1992, retirement of the Commonwealth's outstanding
commercial paper (except for approximately $50 million of bond
anticipation notes) and certain other short term borrowings, as
of June 30, 1992, the end of fiscal 1992, the Commonwealth showed
a year-end cash position of approximately $731 million, as compared
with the Commonwealth's cash balance of $182.3 million at the
end of fiscal 1991.
Page A-6
1991 Fiscal Year. Budgeted expenditures for fiscal 1991 were approximately
$13.659 billion, as against budgeted revenues and other sources
of approximately $13.634 billion. The Commonwealth suffered an
operating loss of approximately $21.2 million. Application of
the adjusted fiscal 1990 fund balances of $258.3 million resulted
in a fiscal 1991 budgetary surplus of $237.1 million. State law
requires that approximately $59.2 million of the fiscal year ending
balances of $237.1 million be placed in the Stabilization Fund,
a reserve from which funds can be appropriated (i) to make up
any difference between actual state revenues in any fiscal year
in which actual revenues fall below the allowable amount, (ii)
to replace state and local losses by federal funds or (iii) for
any event, as determined by the legislature, which threatens the
health, safety or welfare of the people or the fiscal stability
of the Commonwealth or any of its political subdivisions.
Upon taking office in January 1991, the new Governor proposed
a series of legislative and administrative actions, including
withholding of allotments under Section 9C of Chapter 29 of the
General Laws, intended to eliminate the projected deficits. The
new Governor's review of the Commonwealth's budget indicated projected
spending of $14.1 billion with an estimated $850 million in budget
balancing measures that would be needed prior to the close of
fiscal 1991. At that time, estimated tax revenues were revised
to $8.8 billion, $903 million less than was estimated at the time
the fiscal 1991 budget was adopted. The Legislature adopted a
number of the Governor's recommendations and the Governor took
certain administrative actions not requiring legislative approval,
including the adoption of a state employee furlough program. It
is estimated by the Commonwealth that spending reductions achieved
through savings initiatives and withholding of allotments total
approximately $484.3 million in aggregate for fiscal 1991. However,
these savings and reductions may be impacted negatively by litigation
pursued by third parties concerning the Governor's action under
Section 9C of Chapter 29 of the General Laws and with regard to
the state employee furlough program.
In addition, the new administration in May 1991 filed an amendment
to its Medicaid state plan that enables it to claim 50% federal
reimbursement on uncompensated care payments for certain hospitals
in the Commonwealth. As a result, in fiscal 1991 the Commonwealth
obtained additional non-tax revenues in the form of federal reimbursements
equal to approximately $513 million on account of uncompensated
care payments. This reimbursement claim was based upon recent
amendments of federal law contained in the Omnibus Budget Reconciliation
Act of 1990 and, consequently, on relatively undeveloped federal
laws, regulations and guidelines. At the request of the federal
Health Care Financing Administration, the Office of Inspector
General of the United States Department of Health and Human Services
has commenced an audit of the reimbursement. The administration,
which had reviewed the matter with the Health Care Financing Administration
prior to claiming the reimbursement, believes that the Commonwealth
will prevail in the audit. If the Commonwealth does not prevail,
the Commonwealth would have the right to contest an appeal, but
could be required to pay all or part of Medicaid reimbursements
with interest and to have such amount deducted from future reimbursement
payments.
1990 and 1989 Fiscal Years. In July 1989, the former Governor
vetoed certain provisions included in the budget legislation for
fiscal 1990, including approximately $273 million of the fiscal
1990 appropriations, including $100 million for Local Aid. One
of the Governor's vetoes occasioned a default by the Commonwealth
on a September 1, 1989 payment of $2.5 million on a general obligation
contract with the Massachusetts Community Development Finance
Corporation to which its full faith and credit have been pledged,
which payment was made on September 17, 1990 after a supplemental
appropriation was proposed by the Governor and passed by the legislature.
The legislature overrode the Governor's veto of $100 million of
Local Aid and the Governor then indicated that he was withholding
the allotment for such expenditure. The Supreme Judicial Court
invalidated the Governor's withholding of $210 million of appropriated
funds for certain Local Aid purposes in May 1990.
Budgeted expenditures for fiscal 1989 and 1990 totaled approximately
$12.6 billion and $13.3 billion, respectively. Budgeted revenues
for fiscal 1989 and 1990 totaled approximately $12.0 billion and
$12.0 billion, respectively.
Employment. Reversing a trend of relatively low unemployment during
the early and mid 1980s, the Massachusetts unemployment rate has
increased significantly during the last three years to where the
Commonwealth's unemployment rate exceeds the national unemployment
rate. During 1990, the Massachusetts unemployment rate increased
from 4.5% in January to 6.1% in July to 6.7% in August. During
1991, the Massachusetts unemployment rate averaged 9.0% while
the United States unemployment rate was 6.7%. The Massachusetts
unemployment rate in 1992 averaged 8.5%, while the average United
States unemployment rate was 7.4%. Since 1993, the average monthly
unemployment rate has declined steadily. The Massachusetts unemployment
rate in August 1994 was 5.9%, as compared with the United States
unemployment rate of 6.1% for the same period. Other factors which
may significantly and adversely affect the employment rate in
the Commonwealth include reductions in federal government spending
on defense-related industries. Due to this and other considerations,
there can be no assurances that unemployment in the Commonwealth
will not increase in the future.
Debt Ratings. S&P currently rates the Commonwealth's uninsured
general obligation bonds at A+. At the same time, S&P currently
rates state and agency notes at SP1. From 1989 to 1992, the Commonwealth
had experienced a steady decline
Page A-7
in its S&P rating, with its most recent decline beginning in May
1989, when S&P lowered its rating on the Commonwealth's general
obligation bonds and other Commonwealth obligations from AA to
AA and continuing a series of further reductions until March 1992,
when the rating was affirmed at BBB.
Moody's currently rates the Commonwealth's uninsured general obligation
bonds at A1. From 1989 through 1992, the Commonwealth had experienced
a steady decline in its rating by Moody's since May 1989. In May
1989, Moody's lowered its rating on the Commonwealth's notes from
MIG-1 to MIG-2, and its rating on the Commonwealth's commercial
paper from P-1 to P-2. On June 21, 1989 Moody's reduced the Commonwealth's
general obligation rating from Aa to A. On November 15, 1989,
Moody's reduced the rating on the Commonwealth's general obligations
from A to Baa1, and on March 9, 1990, Moody's reduced the rating
of the Commonwealth's general obligation bonds from Baa1 to Baa.
There can be no assurance that these ratings will continue.
In recent years, the Commonwealth and certain of its public bodies
and municipalities have faced serious financial difficulties which
have affected the credit standing and borrowing abilities of Massachusetts
and its respective entities and may have contributed to higher
interest rates on debt obligations. The continuation of, or an
increase in, such financial difficulties could result in the market
values of, or default on, existing obligations including Massachusetts
Obligations in the Trust. Should there be during the term of a
Trust a financial crisis relating to Massachusetts, its public
bodies or municipalities, the market value and marketability of
all outstanding bonds issued by the Commonwealth and its public
authorities or municipalities including the Massachusetts Obligations
in a Trust and interest income to such Trust could be adversely
affected.
Total Bond and Note Liabilities. The total general obligation
bond indebtedness of the Commonwealth (including Fiscal Recovery
Bonds) as of October 1, 1994 was approximately $9.1 billion. There
were also outstanding approximately $289 million in general obligation
notes and other short term general obligation debt. The total
bond and note liabilities of the Commonwealth as of October 1,
1994, including guaranteed bond and contingent liabilities, was
approximately $12.8 billion.
Debt Service. During the 1980s, capital expenditures were increased
substantially, which has had a short term impact on the cash needs
of the Commonwealth and also accounts for a significant rise in
debt service during that period. Payments for debt service on
Commonwealth general obligation bonds and notes have risen at
an average annual rate of 22.2% from $770.9 million in fiscal
1990 to an estimated $942.3 million in fiscal 1991. Debt service
payments in fiscal 1992 were $898.3 million. Debt service payments
for fiscal 1992 reflect a $261 million one-time reduction achieved
as a result of the issuance of the refunding bonds in September
and October 1991. Debt service expenditures are projected to be
$1.140 billion and $1.155 billion for fiscal 1993 and 1994, respectively,
and are projected to be approximately $1.249 billion for fiscal
1995. The fiscal 1993 and fiscal 1994 debt service expenditures
reflect savings of $62.9 million and $57.3 million, respectively,
achieved through the issuance of refunding bonds in October 1992,
and March, May and August 1993. The amounts represented do not
include debt service on notes issued to finance the fiscal 1989
deficit and certain Medicaid related liabilities, certain debt
service contract assistance to the Massachusetts Bay Transportation
Authority ($181.9 million projected in fiscal 1995), the Massachusetts
Convention Center Authority ($24.6 million projected in fiscal
1995), the Massachusetts Government Land Bank ($6.0 million projected
in fiscal 1995) and the Massachusetts Water Pollution Abatement
Trust ($13.9 million projected in fiscal 1995), as well as grants
to municipalities under the school building assistance program
to defray a portion of the debt service costs on local school
bonds ($179.2 million projected in 1995).
In January 1990, legislation was passed to impose a limit on debt
service beginning in fiscal 1991, providing that no more than
10% of the total appropriations in any fiscal year may be expended
for payment of interest and principal on general obligation debt
(excluding the Fiscal Recovery Bonds). The percentage of total
appropriations expended from the budgeted operating funds for
debt service (excluding debt service on Fiscal Recovery Bonds)
for fiscal 1994 is 5.7% (on a preliminary unaudited basis) which
is projected to increase to 5.9% in fiscal 1995.
Certain Liabilities. Among the material future liabilities of
the Commonwealth are significant unfunded general liabilities
of its retirement systems and a program to fund such liabilities;
a program whereby, starting in 1978, the Commonwealth began assuming
full financial responsibility for all costs of the administration
of justice within the Commonwealth; continuing demands to raise
aggregate aid to cities, towns, schools and other districts and
transit authorities above current levels; and Medicaid expenditures
which have increased each year since the program was initiated.
The Commonwealth has signed consent decrees to continue improving
mental health care and programs for the mentally retarded in order
to meet federal standards, including those governing receipt of
federal reimbursements under various programs, and the parties
in those cases have worked cooperatively to resolve the disputed issues.
As a result of comprehensive legislation approved in January,
1988, the Commonwealth is required, beginning in fiscal 1989 to
fund future pension liabilities currently and to amortize the
Commonwealth's unfunded liabilities over 40 years. Total pension
costs increased at an average annual rate of 5.8% from $600.2
million in fiscal 1988 to $751.5 million in fiscal 1992. The
Page A-8
estimated pension costs (inclusive of current benefits and pension
reserves) for fiscal year 1993 are $873.8 million, representing
an increase of 16.2% over fiscal 1992 expenditures.
Litigation. The Commonwealth is engaged in various lawsuits involving
environmental and related laws, including an action brought on
behalf of the U.S. Environmental Protection Agency alleging violations
of the Clean Water Act and seeking to enforce the clean-up of
Boston Harbor. The MWRA, successor in liability to the Metropolitan
District Commission, has assumed primary responsibility for developing
and implementing a court-approved plan for the construction of
the treatment facilities necessary to achieve compliance with
federal requirements. Under the Clean Water Act, the Commonwealth
may be liable for costs of compliance in these or any other Clean
Water cases if the MWRA or a municipality is prevented from raising
revenues necessary to comply with a judgment. The MWRA currently
projects that the total cost of construction of the treatment
facilities required under the court's order is approximately $3.5
billion in current dollars with approximately $1.78 billion to
be spent on or after January 1, 1994.
The Department of Public Welfare has been sued for the alleged
unlawful denial of personal care attendant services to certain
disabled Medicaid recipients. The Superior Court has denied the
plaintiff's motion for preliminary injunction and has also denied
the plaintiff's motion for class certification. If the Plaintiffs
were to prevail on their claims and the Commonwealth were required
to provide all of the services sought by the plaintiffs to all
similarly situated persons, it would substantially increase in
the annual cost to the Commonwealth that these services might
eventually be required. The Department of Public Welfare currently
estimates this increase to be as much as $200 million per year.
There are also actions pending in which recipients of human services
benefits, such as welfare recipients, the mentally retarded, the
elderly, the handicapped, children, residents of state hospitals
and inmates of corrections institutions, seek expanded levels
of services and benefits and in which providers of services to
such recipients challenge the rates at which they are reimbursed
by the Commonwealth. To the extent that such actions result in
judgments requiring the Commonwealth to provide expanded services
or benefits or pay increased rates, additional operating and capital
expenditures might be needed to implement such judgments.
The Massachusetts Hospital Association has brought an action challenging
an element of the Medicaid rate-setting methodologies for hospitals.
On October 12, 1993, the case was settled with the hospital association
and most acute hospitals, thereby reducing the Commonwealth's
potential liability in the pending case or in related appeals
to approximately $10 million.
In addition there are several tax matters in litigation which
could result in significant refunds to taxpayers if decisions
unfavorable to the Commonwealth are rendered. In BayBank, et al.
v. Commissioner of Revenue, the banks challenge the inclusion
of income from tax exempt obligations in the measure of the bank
excise tax. The Appellate Tax Board issued findings of fact and
a report in favor of the Commissioner of Revenue on September
30, 1993. The case is pending before the Supreme Judicial Court
and is expected to be heard in March 1995. Taking into account
all banks and all years at issue (1974 through 1986), there are
142 appeals consolidated in this case. The amount at issue is
estimated to be approximately $1.2 billion, which amount includes
interest of approximately $900 million and amounts involved in
other related applications for abatement pending with the Commissioner
of Revenue or with the Appellate Tax Board. The amount of taxes
and interest at issue in those cases is approximately $150 million.
In National Association of Government Employees v. Commonwealth,
the Superior Court declared that a line item in the Commonwealth's
general appropriations act for fiscal 1994 that increased the
state employees' percentage share of their group health insurance
premiums from 10% to 15% violated the terms of several collective
bargaining agreements, and therefore was invalid under the United
States Constitution as regards employees covered by the agreements.
The Commonwealth appealed the Superior Court's decision and the
Supreme Judicial Court has granted direct appellate review. Several
other unions have filed a companion suit asserting that the premium
increase similarly violated other collective bargaining agreements.
The latter suit is in its initial stages. If the Superior Court
decision in favor of the state employees is upheld, the Commonwealth's
aggregate liability is estimated to be approximately $32 million.
A variety of other civil suits pending against the Commonwealth
may also affect its future liabilities. These include challenges
to the Commonwealth's allocation of school aid under Section 9C
of Chapter 29 of the General Laws and to adopt a state employee
furlough program. No prediction is possible as to the ultimate
outcome of these proceedings. Many factors, in addition to those
cited above, do or may have a bearing upon the financial condition
of the Commonwealth, including social and economic conditions,
many of which are not within the control of the Commonwealth.
Expenditure and Tax Limitation Measures. Limits have been established
on state tax revenues by legislation approved by the Governor
on October 25, 1986 and by an initiative petition approved by
the voters on November 4, 1986. The Executive Office for Administration
and Finance currently estimates that state tax revenues will
not reach the limit imposed by either the initiative petition
or the legislative enactment in fiscal 1992.
Proposition 2#, passed by the voters in 1980, led to large reductions
in property taxes, the major source of income for cities and towns,
and large increases in state aid to offset such revenue losses.
According to the Executive Office for Administration
Page A-9
and Finance, all of the 351 cities and towns have now achieved
a property tax level of no more than 2.5% of full property values.
Under the terms of Proposition 2#, the property tax levy can now
be increased annually for all cities and towns, almost all by
2.5% of the prior fiscal year's tax levy plus 2.5% of the value
of new properties and of significant improvements to property.
Legislation has also been enacted providing for certain local
option taxes. A voter initiative petition approved at the statewide
general election in November, 1990 further regulates the distribution
of Local Aid of no less than 40% of collections from individual
income taxes, sales and use taxes, corporate excise taxes, and
the balance of the state lottery fund. If implemented in accordance
with its terms (including appropriation of the necessary funds),
the petition as approved would shift several hundred million dollars
to direct Local Aid.
Other Tax Measures. To provide revenue to pay debt service on
both the deficit and Medicaid-related borrowings and to fund certain
direct Medicaid expenditures, legislation was enacted imposing
an additional tax on certain types of personal income for 1989
and 1990 taxable years at rates of 0.375% and 0.75% respectively,
effectively raising the tax rate of 1989 from 5% to 5.375% and
for 1990 to 5.75%. Recent legislation has effectively further
increased tax rates to 5.95% for tax year 1990 to 6.25% for tax
year 1991 and returning to 5.95% for tax year 1992 and subsequent
years. The tax is applicable to all personal income except income
derived from dividends, capital gains, unemployment compensation,
alimony, rent, interest, pensions, annuities and IRA/Keogh distributions.
The income tax rate on other interest (excluding interest on obligations
of the United States and of the Commonwealth and its subdivisions),
dividends and net capital gains (after a 50% reduction) was increased
from 10% to 12% for tax year 1990 and subsequent years, by recently
enacted legislation.
Estate Tax Revisions. The fiscal 1993 budget included legislation
which gradually phases out the current Massachusetts estate tax
and replaces it with a "sponge tax" in 1997. The "sponge tax"
is based on the maximum amount of the credit for state taxes allowed
for federal estate tax purposes. The estate tax is phased out
by means of annual increases in the basic exemption from the current
$200,000 level. The exemption is increased to $300,000 for 1993,
$400,000 for 1994, $500,000 for 1995 and $600,000 for 1996. In
addition, the legislation includes a full marital deduction starting
July 1, 1994. Currently the marital deduction is limited to 50%
of the Massachusetts adjusted gross estate. The static fiscal
impact of the phase out of the estate tax was estimated to be
approximately $24.8 million in fiscal 1994 and is estimated to
be approximately $72.5 million in fiscal 1995.
Other Issuers of Massachusetts Obligations. There are a number
of state agencies, instrumentalities and political subdivisions
of the Commonwealth that issue Municipal Obligations, some of
which may be conduit revenue obligations payable from payments
from private borrowers. These entities are subject to various
economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit
quality of obligations backed by the full faith and credit of
the Commonwealth. The brief summary above does not address, nor
does it attempt to address, any difficulties and the financial
situations of those other issuers of Massachusetts Obligations.
In the opinion of Choate, Hall & Stewart, special counsel to the
Multistate Trust for Massachusetts tax matters, which relies on
the opinion of Brown & Wood stated above as to matters of Federal
tax law, for Massachusetts personal income tax purposes under
Chapter 62 of the Massachusetts General Laws:
The Massachusetts Trust and Massachusetts Discount Trust each
will be treated as a corporate trust under Section 8 of Chapter
62 of the Massachusetts General Laws and not as a grantor trust
under Section 10(e) of Chapter 62 of the Massachusetts General Laws.
Neither the Massachusetts Trust nor the Massachusetts Discount
Trust will be engaged in any business, activity or transaction
subject to tax under Section 8 of Chapter 62 of the Massachusetts
General Laws; and, therefore, neither of such Trusts will be subject
to Massachusetts personal income taxation under Chapter 62 of
the Massachusetts General Laws.
Each Certificateholder of the Massachusetts Trust or of the Massachusetts
Discount Trust will be treated as the owner pro rata of an undivided
interest in such Trust's property.
Each person receiving a Unit of the Massachusetts Trust or the
Massachusetts Discount Trust will be treated as if he received
an undivided interest in such Trust's property and each person
transferring such a Unit will be treated as transferring an undivided
interest in such Trust's property.
No earnings from or on account of the property of the Massachusetts
Trust or the Massachusetts Discount Trust will be deemed to have
been received by such Trust and any income from such property
will be taxed to such Trust's Certificateholders at the times
the income would be taxed to them if they held such Trust's property
directly.
The items of income, deduction and credit against tax that are
attributable to the property of the Massachusetts Trust or of
the Massachusetts Discount Trust will not be taken into account
in computing the taxable income of such Trust but (except as noted
below) will be taken into account to the same extent as for Federal
income tax purposes in computing the taxable income and credits
against tax of its Certificateholders who are subject to the Massachusetts
personal income tax under Chapter 62 of the Massachusetts General
Law. Consequently, Certificateholders of such Trust who are subject
to Massachusetts personal income taxes under Chapter 62 of the
Massachusetts General Laws will be required to include in their
Massachusetts gross income as capital gains or capital losses
all capital gains and capital losses includible in their Federal
Page A-10
gross income as a result of their ownership of such Units, except
that capital gains and capital losses on bonds that are specifically
excepted from taxation in Massachusetts by the act authorizing
the issuance of such bonds will not be taken into account in computing
such Certificateholder's Massachusetts taxable income and credits
against tax. For this purpose, the amount excludible from or includible
in Massachusetts gross income shall be equal to the amount excludible
from or includible in Federal gross income determined in accordance
with the U.S. Internal Revenue Code of 1954, as amended on January
1, 1985 and in effect for such Certificateholder's taxable year.
Virginia Trust
The Trust is susceptible to political, economic or regulatory
factors affecting issuers of Virginia Bonds. Without intending
to be complete, the following briefly summarizes some of these
matters, as well as some of the complex factors affecting the
financial situation in the Commonwealth of Virginia (the "Commonwealth"
or "Virginia"). This information is derived from sources that
are generally available to investors and is based in part on information
obtained from various agencies in Virginia. No independent verification
has been made of the accuracy or completeness of the following
information. Only Units of the Virginia Trust (and any other trust
specified which has been registered for sale to Virginia residents)
will be offered to residents of Virginia by this Prospectus.
There can be no assurance that current or future statewide or
regional economic difficulties, and the resulting impact on State
or local governmental finances generally will not adversely affect
the market value of Virginia Bonds held in the portfolio of the
Trust or the ability of particular obligors to make timely payments
of debt service on (or relating to) those obligations.
The Commonwealth's financial condition is supported by a broad-based
economy, including manufacturing, tourism, agriculture, ports,
mining and fisheries. Manufacturing continues to be a major source
of employment, ranking behind only services, wholesale and retail
trade, and government (federal, state and local). The federal
government is a major employer in Virginia due to the heavy concentration
of federal employees in the metropolitan Washington, D.C., segment
of Northern Virginia and the military employment in the Hampton
Roads area, which houses the nation's largest concentration of
military installations, although civilian defense employment has
been affected by the retrenchment of the military sector and is
likely to decrease further.
Although the Commonwealth enjoyed an economic boom in the mid-1980s,
the Commonwealth's economy began to slow toward the end of the
decade, and went into a recession with the rest of the nation
after July, 1990. Gradual recovery has continued since the recession's
end in March, 1991, with the Virginia economy providing reason
for restrained optimism in fiscal year 1994. Employment figures
furnished more encouragement than did income data. The state unemployment
rates continued to be a bright spot, dropping to 4.9 percent for
fiscal year 1994, compared to 6.4 percent nationally. However,
the possibility of more defense cutbacks and additional plant
downsizings provided two cautionary notes. Real taxable sales
have nearly reached the pre-recession level of fiscal year 1990.
The impact of national trends on the Commonwealth is clearly seen
in personal income figures. While year-to-year percentage changes
in the Commonwealth personal income generally parallel those at
the national level, the Commonwealth figures were higher during
the first half of the 1980s. The differential has narrowed since
1988. In the first quarter of 1994, the most recent available,
Virginia's growth rate was 6.1 percent compared to 3.9 percent
for the nation. While Virginia's real per capita personal income
surpassed the national figure in 1982 and has continued to exceed
it, the relative differential has been narrowing since 1989 and
is now the smallest since 1985. Virginia's 1989 maximum was 106
percent of national per capita income while the 1993 figure was
104 percent. In comparison with the South Atlantic region, Virginia's
real per capita income has declined from a peak of 108 percent
in 1989 to 106 percent in 1993.
Virginia's nonagricultural employment figure has also mirrored
the national economy. For fiscal year 1994 Virginia's nonagricultural
employment rose 2.9 percent, comparable to the pre-recession rate.
Total nonagricultural employment for Virginia in June 1994 was
a record high. During the period 1983-1990, the Commonwealth substantially
outpaced the nation in growth of nonagricultural employment, with
4.1 percent average annual growth compared to 2.8 percent nationally;
however, the trend lines for both have been nearly parallel since
1990. For the period 1985-1990, the Commonwealth went ahead of
the South Atlantic region, but was hit harder during the recession
in 1990 and the defense adjustment. Since then, the region has
outperformed the Commonwealth.
With respect to unemployment, Virginia's unemployment rate has
consistently been below that of the nation. For the decade of
1980 to 1990, the differential has been two percentage points,
although it decreased to below one percentage point in 1991 and
1992. For the first six months of FY 1994, the Commonwealth's
unemployment rate was 4.9 percent, compared to the national rate
of 6.4 percent.
Employment trends in Virginia are varied from sector to sector
and from region to region. Most sectors showed dramatic improvement
compared to the anemic performance in fiscal year 1993. Employment
grew in seven of ten categories. This past fiscal year's growth
was led by a 5.4 percent employment jump in the construction sector
and 5.3 percent in services. Federal civilian employment slipped
3 percent, the result of continued defense cutbacks and an effort
to downsize.
Page A-11
Once again, the greatest percent loss was in mining, which suffered
a 7.7 percent drop, a 40 percent greater loss than the previous
year. The service sector continued to grow and mining and manufacturing
are now at lower levels than in 1980. Employment trends also varied
among regions. All of the Commonwealth's metropolitan statistical
areas showed increased employment from fiscal year 1993 to fiscal
year 1994, ranging from 1.1 percent to 4.3 percent, with most
employment increases being experienced in metropolitan areas.
Highest rates of unemployment were found in southwest Virginia
where mining jobs have been lost and the lowest unemployment rates
were seen in Northern Virginia where much federally-related employment
is concentrated. As would be expected, there was great overlap
between areas of lowest unemployment and those of highest per capita income.
Virginia appears to have fully participated in the national economic
recovery, which has been slow by historic standards. The state
has not yet returned to pre-recession growth rates for several
measures, particularly real per capita personal income. The next
round of defense cutbacks and the uncertain duration of the economic
recovery are continuing sources of concern. A growing diversification
of the state's export base is encouraging for the long-term but
will not insulate the state from vulnerability to increased competition
against its major products and to economic conditions abroad.
The Commonwealth of Virginia has historically operated on a fiscally
conservative basis and is required by its Constitution to have
a balanced biennial budget. At the end of June 30, 1994, fiscal
year, the General Fund had an ending fund balance, computed on
a budgetary cash basis, of $518.7 million, of which $81 million
was in required reserves. Approximately $430 million of the general
fund balance was designated for expenditure during the next fiscal
year, leaving an undesignated, unreserved fund balance of $59.7
million, the third consecutive such undesignated fund balance.
Computed on a modified accrual basis in accordance with generally
accepted accounting principles, the General Fund balance at the
end of the fiscal year ended June 30, 1994, was $185.3 million,
compared with a General Fund balance of minus $78.8 million at
the end of the fiscal year ended June 30, 1993. This is the second
year since 1989 that the General Fund, measured on a modified
accrual basis, has shown a positive fund balance.
As of June 30, 1994, total debt for the Commonwealth aggregated
$8.4 billion. Of that amount, $2.5 billion was tax-supported.
Outstanding general obligation bonded debt backed by the full
faith and credit of the Commonwealth was $792 million at June
30, 1994. Of that amount, $500 million was also secured by revenue
producing capital projects.
The Virginia Constitution contains limits on the amount of general
obligation bonds which the Commonwealth can issue. These limits
are substantially in excess of current levels of outstanding bonds,
and at June 30, 1994 would permit an additional total of approximately
$5.6 billion of bonds secured by revenue-producing projects and
approximately $5.8 billion of unsecured general obligation bonds
for capital projects, with not more than approximately $921 million
of the latter to be issued in any four-year period. Bonds which
are not secured by revenue-producing projects must be approved
in a State-wide election.
The Commonwealth of Virginia maintains a "triple A" bond rating
from Standard & Poor's, Moody's Investors Service and Fitch Investors
Service on its general obligation indebtedness, reflecting in
part its sound fiscal management, diversified economic base and
low debt ratios. There can be no assurances that these conditions
will continue. Nor are these same conditions necessarily applicable
to securities which are not general obligations of the Commonwealth.
Securities issued by specific municipalities, governmental authorities
or similar issuers may be subject to economic risks or uncertainties
peculiar to the issuers of such securities or the sources from
which they are to be paid.
In the opinion of Wilcox & Savage, P.C., special Virginia counsel
on Virginia tax matters, which relies on the opinion of Brown
& Wood regarding Federal income tax matters relating to the Multistate
Trust, under existing law, as of the Date of Deposit, applicable
to individuals who are Virginia residents:
(1) The Virginia Trust will be treated as a trust and not as
an association taxable as a corporation for Virginia income tax purposes.
(2) Since the Virginia Trust will be treated as a grantor trust
for Federal income tax purposes, it will not be deemed to have
any Virginia taxable income subject to the Virginia income tax
on trusts. All Virginia Trust income will instead be treated as
received directly by the Virginia Trust Certificateholders in
proportion to their respective number of Units.
(3) The ownership of Virginia Trust Units will not subject a
nonresident Certificateholder (not otherwise subject to Virginia
tax jurisdiction) to the Virginia income tax on nonresidents.
Nor will amounts received from or accrued with respect to the
Virginia Trust by nonresident Certificateholders (who are otherwise
subject to Virginia tax jurisdiction) constitute income from Virginia
sources subject to the Virginia income tax.
(4) Virginia income taxes are assessed upon the modified Federal
adjusted gross income of a resident individual, corporation, estate
or trust. Interest paid on or accrued with respect to obligations
held by the Virginia Trust will not be taxed to resident Certificateholders
for Virginia income tax purposes to the extent such interest would
be exempt from Federal income taxation if received directly by
an individual and to the extent the obligations held by the Virginia
Trust are (i) obligations of the Commonwealth of Virginia, its
political subdivisions, municipalities and public
Page A-12
authorities, (ii) obligations issued by or by authority of Guam,
Puerto Rico or the Virgin Islands the interest on which is by
Federal statute exempt from income taxation by all states, including
Virginia, or (iii) units of a Virginia trust of a previously issued
series of the Multistate Trust containing only such obligations.
Additionally, independent of the Federal income tax treatment
accorded such interest, interest on obligations of the Commonwealth
of Virginia, its political subdivisions, and instrumentalities
is exempt from Virginia income tax by express provisions of Virginia law.
(5) Generally, to the extent that a resident Certificateholder
recognizes gain or loss for Federal income tax purposes as a result
of a disposition of an obligation in the Virginia Trust (whether
by sale, payment at maturity, exchange or redemption) or a sale
or redemption of his Units, such gain or loss will also be taken
into account in determining the Certificateholder's Virginia taxable
income. Under certain enabling legislation, such as the Virginia
Industrial and Development Revenue Bond Act, the Virginia Education
Loan Authority Act, and the Virginia Housing Development Authority
Act, however, profit from the sale of obligations issued by authorities
created thereunder is exempt from all Virginia taxation. Thus,
to the extent an obligation held by the Virginia Trust is an obligation
of the type described in the preceding sentence, transfer of such
obligation (including any profit made on the sale thereof) is
free from Virginia taxation. Inasmuch as the legislation described
above refers specifically and only to profit on the sale of the
described obligations, counsel does not construe the exemption
of such profit from Virginia taxation to require a similar disallowance
of losses with respect to the sale or disposition of such obligations.
Counsel is advised, however, that the Virginia Department of Taxation
takes a contrary view.
(6) Interest expense incurred or continued by a Virginia resident
to purchase Virginia Trust Units which is not deductible for Federal
income tax purposes would also not be deductible for purposes
of the Virginia income tax.
(7) Income and intangible personal property, such as the Virginia
Trust Units and the obligations represented thereby, are subject
to State taxation only and may not be taxed by any political subdivision
of the State. The obligations in the Virginia Trust and the Units
therein are not subject to any Virginia taxes on capital or intangible
personal property applicable to individuals who are Virginia residents.
(8) Virginia does not impose a tax on gifts. In the case of a
resident decedent, Virginia imposes an estate tax equal to the
maximum state death tax credit allowable against the estate's
Federal estate tax. Accordingly, inclusion of the Units in an
estate would increase by equal amounts both the applicable Virginia
estate tax and the corresponding Federal state death tax credit.
The determination of whether the Units are subject to the Virginia
estate tax will therefore have no effect upon the aggregate amount
of Federal and Virginia estate taxes payable. In the case of a
non-resident decedent, Virginia imposes a tax equal to the apportioned
Federal state death tax credit, but we are of the opinion that
the Units will be deemed to be located in the state in which the
decedent Certificateholder is domiciled for purposes of computing
such apportionment.
(9) No opinion is expressed with respect to the effect of any
proposed or future legislation on the Virginia tax liability of
any Certificateholder. Prospective investors should consult tax
counsel as to the potential effect of such legislation and as
to Virginia taxation of Certificateholders who are not individual
Virginia residents.
Page A-13
Multistate Tax Exempt Unit Trust, Series 1-7
and
Multistate Trust, Series 8
and Subsequent Series
PROSPECTUS, Part II
Note: Part II of this Prospectus may not be distributed unless
accompanied by Part I.
THE TRUST
The Units being offered by this Prospectus are issued and outstanding
Units which have been purchased by Advest, Inc. (the "Sponsor")
in the secondary market or from the Trustee, after having been
tendered for redemption. The Units are being offered by the Sponsor
at the Public Offering Price plus accrued interest to the expected
date of settlement. The profit or loss resulting from the sale
of Units will accrue to the Sponsor. No proceeds from the sale
will be received by the Trust. The minimum investment which may
be made is one Unit.
Objectives
The Trust (herein referred to as the "Trust" or the "Multistate
Trust") is one of a series of separate unit trusts formed by Moseley
Securities Corporation ("Moseley"), formerly a sponsor of the
Trust, and the Sponsor under the name Multistate Tax Exempt Unit
Trust, in the case of Series 1 through 7, and under the name Multistate
Trust, in the case of Series 8 and subsequent Series. Effective
December 29, 1987 Moseley resigned as a sponsor and the agent
of the various series of the Trust. The objectives of the Trust,
consisting of the underlying State Trusts, are to provide investors
with preservation of capital and interest income free from Federal
income tax and to the extent indicated from state and local taxes
in the State for which the State Trust is named through investment
in a portfolio of tax exempt securities. Each State Trust shall
consist of interest bearing debt obligations or contracts to purchase
such obligations of the State for which the Trust is named, its
political subdivisions, municipalities, and public authorities,
or of certain United States territories or possessions and their
public authorities and may include Trust Units, all described
under "Schedule of Investments" (the "Bonds" or "Securities"),
dated as of the Date of Determination for the applicable State
Trust in Part I of the Prospectus. In the opinion of bond counsel
to the respective issuers of the Bonds (and the bonds underlying
any Trust Units), under existing law interest on the Bonds is
exempt from Federal income tax. In addition, the interest income
of each State Trust is, in the opinion of counsel, exempt to the
extent indicated from state and local taxes when held by residents
of the state the name of which appears in the name of such State
Trust. With certain exceptions, capital gains realized upon a
sale of Units by an investor or upon disposition of Securities
by the Trust will be subject to tax. (See "The Trust-Tax Status
of the Trust.") Certain of the Bonds in a State Trust may have
been purchased at prices which resulted in the portfolio as a
whole being purchased at a market discount. See "Portfolios-State
Risk Factors and Tax Status" in Part I of the Prospectus for a
description of market discount which may result in taxable income
and capital gain to investors.
Page 1
The Multistate Trust offers investors an opportunity to participate
in a portfolio of tax exempt securities with greater diversification
than they might be able to acquire individually. The rate of current
interest income, in part, reflects the various factors described
in Part I of the Prospectus for each State Trust. Investors should
be aware that there is no guarantee that the Multistate Trust's
objectives will be achieved because they are subject to the continuing
ability of the respective issuers of the Bonds (and the Bonds
underlying any Trust Units) to meet the interest and principal
payment obligations of such Bonds and of the insurer for that
series of the Guaranteed Trust (the "Insurer")* to meet their
obligations under the insurance policies guaranteeing the payment,
when due, of all principal of and interest on each of the Bonds
held in any Guaranteed Trust, and because the market value of
such Bonds can be affected by fluctuations in interest rates.
______________
* Municipal Bond Insurance Association is the Insurer of any Guaranteed
Trust for Series 1 through Series 36. MBIA Insurance Corporation
is the Insurer of any Guaranteed Trust for Series 37 and Subsequent Series.
Guaranteed Trust Insurance
Insurance guaranteeing the payment of all principal (either at
the stated maturity or by any advancement of maturity pursuant
to a mandatory sinking fund payment) and interest on each of the
Securities in a Guaranteed Trust as such payment shall become
due but shall not be paid has been obtained by such Guaranteed
Trust from the Insurer. Certain issues of Securities in a Guaranteed
Trust may be Pre-insured Bonds, which are also insured under insurance
obtained by its issuer or other parties. Insurance obtained by
a Guaranteed Trust is effective only while the Bonds thus insured
are held in such Guaranteed Trust; however, any insurance previously
obtained by the issuer or any other party, for which a single
premium has been paid, is effective so long as the Pre-insured
bonds are outstanding. Regardless of whether the insurer of a
Pre-insured Bond fulfills its obligations, such Bond will, in
any case, continue to be insured under the policy obtained by
a Guaranteed Trust from the Insurer, as long as the Bond is held
in such Guaranteed Trust and, such Bond will continue to be insured
by the Insurer after such Bond is sold from a Guaranteed Trust
assuming the Trustee exercises its right to obtain permanent insurance
on such Bond, as discussed below. No representation is made as
to any Insurer's ability to meet its commitments.
Neither the Public Offering Price nor any evaluation of Units
for purposes of repurchases or redemptions reflects any element
of value for the insurance obtained by a Guaranteed Trust unless
Securities are in default in payment of principal or interest
or in significant risk of such default. (See "Public Offering
of Units-Public Offering Price.") On the other hand, the value,
if any, of insurance obtained by the issuer of the Securities
is reflected and included in the market value of such Securities.
Insurance is not a substitute for the basic credit of an issuer
but supplements the existing credit and provides additional security
therefor. If an issue is accepted for insurance, a non-cancellable
policy for the payment of interest and principal on the bonds
is issued by the Insurer. A single premium is paid by the issuer
or any other party for its insurance on Pre-insured Bonds, and
a monthly premium is paid by a Guaranteed Trust for the insurance
it obtains from the Insurer on all of the Bonds in such Guaranteed
Trust that are not pre-insured by either Municipal Bond Insurance
Association ("MBIA") or MBIA Insurance Corporation (the "Corporation").
No premium will be paid by a Guaranteed Trust on Bonds pre-insured
by either MBIA or the Corporation. Pursuant to an irrevocable
commitment of the Insurer, upon the sale of a Bond from a Guaranteed
Trust, the Trustee has the right to obtain permanent insurance
with respect to such Bond upon the payment of a single predetermined
insurance premium from the proceeds of the sale of such Bond.
It is expected that the Trustee will exercise the right to obtain
permanent insurance for a Bond in a Guaranteed Trust upon instruction
from the Sponsor whenever the value of that Bond insured to its
maturity less the applicable permanent insurance
Page 2
premium and the related custodial fee exceeds the value of the
Bond without such insurance. (See "The Trust-General Considerations-
Guaranteed Trust Insurance.")
Organization
The Multistate Trust is one of a series of unit investment trusts
created by Moseley and the Sponsor under the name Multistate Tax
Exempt Unit Trust, in the case of Series 1 through 7, and the
name Multistate Trust, in the case of Series 8 and subsequent
Series. The Multistate Trust was created under the laws of New
York pursuant to a Trust Agreement** (the "Agreement"), dated
as of the Date of Deposit as set forth under the "Summary of Essential
Information" in Part I of the Prospectus, among Moseley and the
Sponsor, the trustee and the evaluator. The Bank of New York (the
"Trustee") acts as successor trustee for Series 1 through 23 and
as trustee for Series 24 and subsequent Series. Securities Evaluation
Service, Inc. (the "Evaluator") acts as successor evaluator for
each Series of the Multistate Trust.
______________
**References in this Prospectus to the Agreement are qualified
in their entirety by the Agreement which is incorporated herein
by reference.
On the Pricing Date as defined in Part I of the Prospectus, each
Unit of each State Trust represented the fractional undivided
interest in the principal and net income of such State Trust set
forth under "Summary of Essential Information" in Part I of the
Prospectus. If any Units of a State Trust are redeemed by the
Trustee, the principal amount of Securities in such State Trust
will be reduced by the amount allocable to such redeemed Units
and the fractional undivided interest represented by each Unit
will be increased. The number of Units comprising each State Trust
will not be increased.
Portfolio
All of the issues of Bonds in each State Trust were rated by Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's") or Moody's Investors Service, Inc.
on the date such State Trust was originally established (the "Date
of Deposit"). (See "Description of Bond Ratings.") A further explanation
of the significance of such ratings may be obtained from the rating
agencies furnishing them. There can be no assurance that the economic
and political conditions on which these ratings are based will
continue or that particular Bond issues may not be adversely affected
by changes in economic, political or other conditions that do
not affect the above ratings. Subsequent to the Date of Deposit,
a Bond may cease to be rated or its rating may be reduced. (See
"The Trust" in Part I of the Prospectus for a statement regarding
ratings of the Bonds on the Date of Determination.) Neither event
requires an elimination of such Bond from the portfolio of a State
Trust, but may be considered in the Sponsor's determination to
direct the Trustee to dispose of the Bonds. (See "Investment Supervision.")
Moseley and the Sponsor selected the Bonds for the portfolio of
each State Trust based upon, among other things, the following
primary criteria: (a) a minimum rating of "A" either by Standard
& Poor's or Moody's Investors Service, Inc., or, in the case of
Series 25 and subsequent Series, in the opinion of Moseley and
the Sponsor, possess similar credit characteristics, except any
Guaranteed Trust (see "Description of Bond Ratings"); (b) price
of the Bonds relative to other issues of similar quality and maturity;
(c) income to the Certificateholders of each State Trust; (d)
all the Bonds in each State Trust are obligations of the State
for which such State Trust is named and counties, municipalities,
authorities or public authorities thereof or issued by certain
United States territories or possessions and their public authorities;
and (e) in the case of a Guaranteed Trust, the availability of
insurance from the Insurer for the payment of principal and interest
on the Securities held in the portfolio of such Guaranteed Trust.
A purpose of the insurance on the Bonds in the portfolio obtained
by a Guaranteed Trust is to obtain a higher yield on such Guaranteed
Trust portfolio than would be available if all the Securities
in such portfolio had Standard
Page 3
& Poor's "AAA" rating but were uninsured and yet at the same time
to have the protection of insurance of payment of interest and
principal on the Securities. There is, of course, no certainty
that this result will be achieved. Any Pre-insured Bonds in a
Guaranteed Trust (all of which are rated "AAA" by Standard & Poor's)
may or may not have a higher yield than uninsured bonds rated
"AAA" by Standard & Poor's. In considering Pre-insured Bonds for
the portfolio, the Sponsor has applied the criteria hereinbefore
described.
Because the Securities in a Guaranteed Trust are insured by the
Insurer as to the payment of principal and interest, Standard
& Poor's has assigned to the Units of a Guaranteed Trust and in
the case of Series 21 and subsequent Series to all the Bonds while
in such Guaranteed Trust its "AAA" investment rating and Moody's
Investors Service, Inc. has assigned a rating of "Aaa" to all
of the Bonds in such Guaranteed Trust. (See "Description of Bond
Ratings"). The obtaining of this rating by a Guaranteed Trust
should not be construed as an approval of the offering of the
Units by Standard & Poor's or as a guarantee of the market value
of such Guaranteed Trust or of the Units.
Certain of the Securities in a State Trust may consist of Trust
Units. ANY SUCH TRUST UNITS DEPOSITED WITH THE TRUSTEE REPRESENT
DIFFERENT PREVIOUSLY-ISSUED SERIES OF THE MULTISTATE TRUST (no
one of which represented at the Date of Deposit more than 5%,
and all of which represented at the Date of Deposit no more than
10%, of the value of the portfolio of a State Trust) the portfolios
of which contain long-term obligations of the State for which
the Trust is named, its political subdivisions, municipalities
and public authorities and of certain United States territories
or possessions and their public authorities. On the respective
Dates of Deposit of said series, the underlying bonds were rated
"A" or better by either Standard & Poor's or Moody's Investors
Service, Inc. or, in the case of Series 25 and subsequent Series,
in the Sponsor's opinion, possess similar credit characteristics.
While certain of such bonds included in the portfolios of said
series may not presently meet such criteria, they will in no event
represent more than 0.5% of the face amount of the portfolio of
a State Trust. The investment objectives of the various series
are similar to the investment objective of the Trust.
An investment in Units of a State Trust should be made with an
understanding of the risks entailed in investments in fixed-rate
bonds, including the risk that the value of such bonds (and, therefore,
of the Units) will decline with increases in interest rates. Inflation
and recession, as well as measures implemented to address these
and other economic problems contribute to the fluctuations in
the interest rates and the values of fixed-rate bonds generally.
The Sponsor cannot predict future economic policies or their consequences;
nor, therefore, can it predict the course or extent of such fluctuations
in the future.
For a summary of the types of Securities held in a State Trust,
see Part I of the Prospectus, and for a discussion of any risk
factors relating to the state for which such State Trust is named,
see "Information Regarding the Trust--Portfolios-State Risk Factors
and Tax Status" in Part I of the Prospectus.
General Considerations
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance
with their terms and the proceeds from such events will be distributed
to certificate holders and will not be reinvested, no assurance
can be given that the Trust will retain for any length of time
its present size and composition. The inclusion of unrated Bonds
in certain Series of the Trust may result in less flexibility
in their disposal and a loss to the Trust upon their disposition.
Except as described in footnotes to "Summary of Essential Information"
in Part I of this Prospectus, interest accrues to the benefit
of certificate holders commencing with the expected date of settlement
for purchase of the Units. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect
in any Security.
The following paragraphs discuss the characteristics of the Bonds
in the State Trusts and of certain types of issuers of the Bonds
in the State Trusts. These paragraphs discuss, among other things,
certain circumstances which
Page 4
may adversely affect the ability of such issuers to make payment
of principal and interest on Bonds held in any of the State Trusts
or which may adversely affect the ratings of such Bonds. Because
of the insurance obtained by the Sponsor or by the issuers, however,
such changes should not adversely affect the Guaranteed Trusts'
receipt of principal and interest, the Standard & Poor's AAA rating
in the case of Series 21 and subsequent Series or Moody's Investors
Service, Inc.'s Aaa rating of the Bonds in the Guaranteed Trusts
or the Standard & Poor's rating of the Units of the Guaranteed
Trusts. An investment in Units of the Multistate Trust should
be made with an understanding of the risks that such an investment
may entail, certain of which are described below. Certificateholders
may obtain additional information concerning a particular Bond
by requesting an official statement from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal
and interest. The taxing power of any governmental entity may
be limited, however, by provisions of state constitutions or laws,
and an entity's credit will depend on many factors, including
potential erosion of the tax base due to population declines,
natural disasters, declines in the state's industrial base or
inability to attract new industries, economic limits on the ability
to tax without eroding the tax base, state legislative proposals
or voter initiatives to limit ad valorem real property taxes and
the extent to which the entity relies on Federal or state aid,
access to capital markets or other factors beyond the state's
or entity's control.
Appropriations Bonds
Many state and local governmental entities enter into lease purchase
obligations as a means for financing the acquisition of capital
projects (e.g., buildings or equipment, among other things). Such
obligations are often made subject to annual appropriations. Certain
Bonds in the State Trusts may be Bonds that are, in whole or in
part, subject to and dependent upon (i) the governmental entity
making appropriations from time to time or (ii) the continued
existence of special temporary taxes which require legislative
action for their reimposition. The availability of any appropriation
generally is subject to the willingness of the governmental entity
to continue to make such special appropriations or to reimpose
such special taxes. The obligation to make lease payments generally
exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental
entity beyond the monies so appropriated. Subject to the foregoing,
once an annual appropriation is made, the governmental entity's
obligation to make lease rental payments generally is absolute
and unconditional without setoff or counterclaim, regardless of
contingencies, whether a given project is completed or used by
the governmental entity and notwithstanding any circumstances
or occurrences which might arise. In the event of nonappropriation,
bondowners' sole remedy (absent credit enhancement) generally
is limited to repossession of the collateral for resale or releasing,
and the obligation of the governmental lessee is not backed by
a pledge of the general credit of the governmental lessee. In
the event of nonappropriation, the Sponsor may instruct the Trustee
to sell such Bonds.
Moral Obligation Bonds. Certain of the Securities in a State Trust
may be secured by pledged revenues and additionally by the so-called
"moral obligation" of the related state or local governmental
body. Should the pledged revenues prove insufficient, the payment
of such Bonds is not a legal obligation of the related state or
local government, and is subject to its willingness to appropriate
funds therefor.
Revenue Bonds
Single Family Housing Bonds and Multifamily Housing Bonds. Single
family housing bonds and multifamily housing bonds are obligations
of state and local housing authorities that have been issued in
connection with a variety of single and multifamily housing projects.
Economic developments, including fluctuations in interest rates,
increasing construction and operating costs, increasing real estate
taxes and declining occupancy rates, and
Page 5
investment risks may have an adverse effect upon the revenues
of such projects and such housing authorities. Multifamily housing
bonds may be subject to mandatory redemption prior to maturity,
including redemption from noncompletion of the project or upon
receipt of Federal Housing Authority or certain other insurance
proceeds. Certain housing bonds used in a State Trust may also
be secured by Government National Mortgage Association certificates
or be guaranteed by the U.S. Government. Bonds issued by state
or local units or authorities and payable from revenues from single
family residential mortgages may be subject to mandatory redemption
prior to maturity, including redemption from mortgage loan prepayments
and undisbursed bond proceeds reserved for the purpose of purchasing
mortgage loans. Housing bonds may also be subject to changes in
creditworthiness due to potential weaknesses of mortgage insurance
companies providing various policies; fluctuations in the valuation
of invested funds and in the strengths of banks and other entities
which may provide investment agreements; and smaller than expected
mortgage portfolios due to partial non-origination.
Single family housing bonds and multifamily housing bonds must
meet certain requirements in order to maintain their exemption
from Federal income taxation after the date of their issuance.
The Internal Revenue Code of 1954, as amended (the "1954 Code"),
provided, in general, that interest on "mortgage subsidy bonds"
(generally those obligations all or a significant portion of the
proceeds of which are to be used directly or indirectly for mortgages
on owner-occupied residences) issued after April 24, 1979* is
not exempt from Federal income taxation unless the bonds are "qualified
mortgage bonds" issued on or before December 31, 1987, as part
of a "qualified mortgage issue" wherein certain requirements are
and will continue to be met with respect to the terms, amount
and purpose of the bonds, the use of the funds generated by the
issue, the nature of the residences and the mortgages, and the
eligibility of the borrower executing the mortgage. The Internal
Revenue Code of 1986 (the "Code"), as amended by the Tax Reform
Act of 1986 and the Tax Extension Act of 1991, now provides that
a "qualified mortgage bond" must be part of a "qualified mortgage
issue" issued on or before June 30, 1992. A "qualified mortgage
issue" is an issue all of the proceeds of which (exclusive of
issuance costs and a reasonably required reserve) are to be used
to finance owner-occupied residences, no bond of which meets the
private business use and private security or payment tests of
the Code, and which meets certain requirements regarding the timely
use of mortgage payments to redeem the bonds, the nature of the
residences financed, the nature of the mortgages, the eligibility
of the borrowers executing the mortgages and certain arbitrage
and targeting requirements. The Code provides that, if an issue
fails to meet one or more of the qualified mortgage bond eligibility
requirements but the issuer makes certain good faith efforts to
comply with such requirements, then the issue will be treated
as a qualified mortgage issue. In addition, interest on obligations
issued to finance residential rental property will be exempt from
Federal income taxes when the proceeds are used to finance multifamily
rental property and specified percentages of the units are occupied
by low income tenants as defined by the Code. The regulations
under the Code provide relief from noncompliance with the qualified
residential rental project bond requirements if the issuer corrects
any noncompliance occurring after the issuance of the bonds within
a reasonable period after such noncompliance is first discovered
______________
*Such provisions and regulations of the 1954 Code did not apply
to obligations if official action taken before April 25, 1979
by the governing body of the unit having authority to issue such
obligations indicated an intent to issue such obligations. Such
provisions and regulations do not apply to obligations issued
before January 1, 1981 if such obligations are part of an issue
substantially all the proceeds of which are committed by firm
commitment letters or, in the case of rental housing, committed
by the commencement of the construction or acquisition of the
project. The Sponsor is unable to determine the effect of these
requirements on any Bonds in any State Trust issued prior to January
1, 1981. Qualified mortgage bonds issued after December 31, 1980,
in the opinion of bond counsel, are or will be tax-exempt for
Federal income tax purposes at the time of issuance. There can
be no assurance, however, that the interest on such Bonds will
continue to be exempt from Federal income taxation in the event
that the requirements of the Code are not met subsequently.
Page 6
or would have been discovered by the exercise of reasonable diligence.
If the interest on any single family housing bonds or multifamily
housing bonds in a State Trust should ultimately be deemed to
be taxable, the Sponsor may instruct the Trustee to sell such
Bonds and, since they would be sold as taxable securities, it
is expected that such Bonds would have to be sold at a substantial
discount from current market prices.
Public Power Revenue Bonds. General problems of the electric utility
industry include difficulty in financing large construction programs
during an inflationary period; restrictions on operations and
increased costs and delays attributable to environmental considerations;
the difficulty of the capital markets in absorbing utility debt
and equity securities; the availability of fuel for electric generation
at reasonable prices, including among other considerations the
potential rise in fuel costs and the costs associated with conversion
to alternate fuel sources such as coal; technical cost factors
and other problems associated with construction, licensing, regulation
and operation of nuclear facilities for electric generation, including
among other considerations the problems associated with the use
of radioactive materials and the disposal of radioactive waste;
and the effects of energy conservation. Certain of the issuers
of the Bonds may own or operate nuclear generating facilities.
Federal, state and municipal governmental authorities may, from
time to time, review and revise existing requirements, and impose
additional requirements governing the licensing, construction
and operation of nuclear power plants. The Sponsor is unable to
predict whether any such actions 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. Each of
the problems referred to above could adversely affect the ability
of the issuers of public power revenue bonds to make payments
of principal and/or interest on such bonds. Certain municipal
utilities or agencies may have entered into contractual arrangements
with investor-owned utilities and large industrial users and consequently
may be dependent in varying degrees on the performance of such
contracts for repayment of bond debt service.
Health Care Revenue Bonds. Some of the bonds may be obligations
of issuers whose revenues are derived from services provided by
hospitals or other health care facilities, including nursing homes.
Ratings of bonds issued for health care facilities are sometimes
based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and
net income available for debt service may be affected by future
events and conditions including, among other things, demand for
services, the ability of the facility to provide the services
required, an increasing shortage of qualified nurses or a dramatic
rise in nursing salaries, physicians' confidence in the facility,
management capabilities, economic developments in the service
area, competition from other similar providers, efforts by insurers
and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, government regulation,
the cost and possible unavailability of malpractice insurance,
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar
third party payor programs. Medicare reimbursements are currently
calculated on a prospective basis and are not based on a provider's
actual costs. Such method of reimbursement may adversely affect
reimbursements to hospitals and other facilities for services
provided under the Medicare program and thereby may have an adverse
effect on the ability of such institutions to satisfy debt service
requirements. In the event of a default upon a bond secured by
hospital or other health care facilities, the limited alternative
uses for such facilities may result in the recovery upon such
collateral not providing sufficient funds to fully repay the bonds.
A number of legislative proposals concerning health care have
been introduced in Congress or have been reported to be under
consideration by the Clinton Administration. These proposals span
a wide range of topics, including cost controls, national health
insurance, incentives for competition in the provision of health
care services, tax incentives and penalties related to health
care insurance premiums, and promotion of prepaid health
Page 7
care plans. The Sponsor is unable to predict the effect of any
of these proposals, if enacted, on any of the Securities.
Higher Education Revenue Bonds. Higher education revenue bonds
include debt of state and private colleges, universities and systems,
and parental and student loan obligations. The ability of universities
and colleges to meet their obligations is dependent upon various
factors, including the revenues, costs and enrollment levels of
the institutions. In addition, their ability may be affected by
declines in Federal, state and alumni financial support, fluctuations
in interest rates and construction costs, increased maintenance
and energy costs, failure or inability to raise tuition or room
charges and adverse results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution
control facilities category include securities issued on behalf
of a private corporation,** including utilities, to provide facilities
for the treatment of air, water and solid waste pollution. Repayment
of these bonds is dependent upon income from the specific pollution
control facility and/or the financial condition of the corporation.
(See also "Industrial Development Bonds.")
______________
**For purposes of the description of users of facilities, all
references to "corporations" shall be deemed to include any other
nongovernmental person or entity.
Other Utility Revenue Bonds. Bonds in this category include securities
issued to finance natural gas supply, distribution and transmission
facilities, public water supply, treatment and distribution facilities,
as well as sewage collection, treatment and disposal facilities.
Repayment of these bonds is dependent primarily on revenues derived
from the billing of residential, commercial and industrial customers
for utility services, as well as, in some instances, connection
fees and hook-up charges. Such utility revenue bonds may be adversely
affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this
category include securities issued to finance facilities for removal
and disposal of solid municipal waste. Repayment of these bonds
is dependent on factors which may include revenues from appropriations
from a governmental entity, the financial condition of the private
corporation and revenues derived from the collection of charges
for disposal of solid waste. Repayment of resource recovery bonds
may also be dependent to various degrees on revenues from the
sale of electric energy or steam. Bonds in this category may be
subject to mandatory redemption in the event of project noncompletion,
if the project is rendered uneconomical or if it is considered
an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds
issued for airport facilities, bridges, turnpikes, port authorities,
railroad systems or mass transit systems. Generally, airport facility
revenue bonds are payable from and secured by the revenues derived
from the ownership and operation of a particular airport. Airport
operating income may therefore be affected by the ability of the
airlines to meet their obligations under the use agreements. The
air transport industry is experiencing significant variations
in earnings and traffic, due to increased competition, excess
capacity, increased costs, deregulation, traffic constraints and
other factors, and several airlines are experiencing severe financial
difficulties. In particular, facilities with use agreements involving
airlines experiencing financial difficulty may experience a reduction
in revenue due to the possible inability of these airlines to
meet their use agreement obligations because of such financial
difficulties and possible bankruptcy. The Sponsor cannot predict
what effect these industry conditions may have on airport revenues
which are dependent for payment on the financial condition of
the airlines and their usage of the particular airport facility.
Payment on other transportation bonds is often dependent primarily
or solely on revenues from financed facilities, including user
fees, charges, tolls and rents. Such revenues may be adversely
affected by increased construction and maintenance costs or taxes,
decreased use, competition from alternative facilities, scarcity
of fuel, reduction or loss of rents or the impact of environmental
considerations. Other
Page 8
transportation bonds may be dependent primarily or solely on Federal,
state or local assistance including motor fuel and motor vehicle
taxes, fees and licenses and, therefore, may be subject to fluctuations
in such assistance.
Industrial Development Bonds ("IDBs"). IDBs are tax-exempt securities
issued by states, municipalities or public authorities and are
issued to provide funds, usually through a loan or lease arrangement,
to a private corporation, partnership or individual ("beneficiary")
for the purpose of financing construction or improvement of a
facility to be used by the beneficiary. The issuer of an IDB is
not obligated to pay the principal of or premium, if any, or interest
on such bonds or other costs incident thereto, except from the
revenues assigned and pledged by the beneficiary therefor. Such
bonds are secured primarily by revenues derived from loan repayments
or installment sale or lease payments due from a beneficiary which
may or may not be guaranteed by a parent company or otherwise
secured. In view of this, an investor should be aware that repayment
of such bonds depends on the revenues of a private beneficiary
and be aware of the risks that such an investment may entail.
Continued ability of a beneficiary to generate sufficient revenues
for the payment of principal and interest on such bonds will be
affected by many factors including the size of the beneficiary,
its capital structure, demand for its products or services, competition,
general economic conditions, government regulation and the beneficiary's
dependence for revenues on the operation of the particular facility
being financed. In addition, interest on the IDBs is excludible
from gross income for Federal income tax purposes provided the
issuer and beneficiary continue to meet certain Code requirements.
If the interest on these debt obligations should ultimately be
deemed to be taxable, the Sponsor may instruct the Trustee to
sell them, and, since they would be sold as taxable securities,
it is expected that they would have to be sold at a substantial
discount from current market prices. Debt of private beneficiaries
may be subject to deterioration in creditworthiness or redemption
in events of mergers, acquisitions or reorganizations or as a
result of adverse court decisions. Such bonds may also be subject
to mandatory redemption upon the determination that the project
has become uneconomical or in the event that the bonds are rendered
taxable.
Special Tax Revenue Bonds. Bonds in this category are bonds secured
primarily or solely by receipts of certain state or local taxes,
including sales and use taxes or excise taxes. Consequently, such
bonds may be subject to fluctuations in the collection of such
taxes. Such bonds do not include tax increment bonds or special
assessment bonds.
Other Revenue Bonds. Certain of the Bonds in the State Trusts
may be revenue bonds which are payable from and secured primarily
or solely by revenues from the ownership and operation of particular
facilities, such as correctional facilities, parking facilities,
convention centers, arenas, museums and other facilities owned
or used by a charitable entity. Payment on bonds related to such
facilities is, therefore, primarily or solely dependent on revenues
from such projects, including user fees, charges and rents. Such
revenues may be affected adversely by increased construction and
maintenance costs or taxes, decreased use, competition from alternative
facilities, reduction or loss of rents or the impact of environmental
considerations.
Certain of the Bonds in the State Trusts are secured by direct
obligations of the U.S. Government, or in some cases, obligations
guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. In a few isolated instances to date, bonds which
were thought to be escrowed to maturity have been called for redemption
prior to maturity.
Puerto Rico Bonds
Certain State Trusts may contain Bonds of issuers located in the
Commonwealth of Puerto Rico or issuers which will be affected
by general economic conditions of Puerto Rico. Puerto Rico's unemployment
rate remains significantly higher than the U.S. unemployment rate.
Furthermore, the economy is largely dependent for its development
upon U.S. policies and programs that are being reviewed and may
be eliminated.
Page 9
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism.
Most of the island's manufacturing output is shipped to the mainland
United States, which is also the chief source of semi-finished
manufactured articles on which further manufacturing operations
are performed in Puerto Rico. Since World War II the economic
importance of agriculture for Puerto Rico, particularly in the
dominance of sugar production, has declined. Nevertheless, the
Commonwealth-controlled sugar monopoly remains an important economic
factor and is largely dependent upon Federal maintenance of sugar
prices, the discontinuation of which could severely affect Puerto
Rico sugar production. The level of tourism is affected by various
factors including the strength of the U.S. dollar. During periods
when the dollar is strong, tourism in foreign countries becomes
relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the Federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of the Bonds are
subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not
within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of Puerto Rico
and various agencies and political subdivisions located in Puerto
Rico. The Sponsor is unable to predict whether or to what extent
such factors or other factors may affect the issuers of Bonds,
the market value or marketability of the Bonds
Page 10
or the ability of the respective issuers of the Bonds acquired
by the State Trusts to pay interest on or principal of the Bonds.
Original Issue Discount Bonds and Zero Coupon Bonds
Certain of the Securities in a State Trust may have been acquired
at a market discount from par value at maturity. The coupon interest
rates on the discount bonds at the time they were purchased and
deposited in the State Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued comparable bonds
increase, the market discount of previously issued bonds will
become greater, and if such interest rates for newly issued comparable
bonds decline, the market discount of previously issued bonds
will be reduced, other things being equal. Investors should also
note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase,
the value of bonds purchased at a market discount will decrease
faster than bonds purchased at a market premium. In addition,
if interest rates rise, the prepayment risk of higher yielding,
premium bonds and the prepayment benefit for lower yielding, discount
bonds will be reduced. A discount bond held to maturity will have
a larger portion of its total return in the form of taxable income
and capital gain and less in the form of tax-exempt interest income
than a comparable bond newly issued at current market rates. See
"Portfolios-State Risk Factors and Tax Status" in Part I of the
Prospectus for each Trust. Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds.
Certain of the Securities in a State Trust may be original issue
discount bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at
maturity and the issue price of the Bonds, is deemed to accrue
on a daily basis and the accrued portion is treated as tax-exempt
interest income for Federal income tax purposes. On sale or redemption,
any gain realized that is in excess of the earned portion of original
issue discount will be taxable as capital gain unless the gain
is attributable to market discount in which case the accretion
of market discount is taxable as ordinary income. See "Portfolios-State
Risk Factors and Tax Status" in Part I of the Prospectus for each
Trust. The current value of an original issue discount bond reflects
the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the
Securities approach maturity.
Certain of the original issue discount bonds may be Zero Coupon
Bonds (including bonds known as multiplier bonds, money multiplier
bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds).
Zero Coupon Bonds do not provide for the payment of any current
interest and generally provide for payment at maturity at face
value unless sooner sold or redeemed. Zero Coupon Bonds may be
subject to more price volatility than conventional bonds. While
some types of Zero Coupon Bonds, such as multipliers and capital
appreciation bonds, define par as the initial offering price rather
than the maturity value, they share the basic Zero Coupon Bond
features of (1) not paying interest on a semi-annual basis and
(2) providing for the reinvestment of the bond's semi-annual earnings
at the bond's stated yield to maturity. While Zero Coupon Bonds
are frequently marketed on the basis that their fixed rate of
return minimizes reinvestment risk, this benefit can be negated
in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value
of the bond.
There can be no assurance that additional Federal legislation
will not be enacted or that existing legislation will not be amended
hereafter with the effect that interest on the Bonds becomes subject
to Federal income taxation. If the interest on the Bonds should
ultimately be deemed to be taxable, the Sponsor may instruct the
Trustee to sell them, and, since they would be sold as taxable
securities, it is expected that they would have to be sold at
a substantial discount from current market prices.
Page 11
Most of the Bonds in the Trust are subject to redemption prior
to their stated maturity date pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund accumulated over
a period of time for retirement of debt. Sinking fund provisions
are designed to redeem a significant portion of an issue gradually
over the life of the issue. Obligations to be redeemed are generally
chosen by lot. The portfolio in Part I of this Prospectus contain
a listing of the sinking fund and call provisions, if any, with
respect to each of the Bonds therein.
To the Sponsor's knowledge, there is no litigation pending as
of the Date of Deposit in respect to any Securities which might
reasonably be expected to have a material adverse effect on any
of the respective State Trusts. At any time after the date of
this Prospectus, litigation may be instituted on a variety of
grounds with respect to Securities in any State 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 Securities or the tax-free
nature of the interest thereon. 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 the Multistate
Trust. In addition, other litigation may arise from time to time
which might impair the ability of issuers to make payments due
on the Securities.
The Federal Bankruptcy Act contains provisions relating to the
adjustment of indebtedness owed by any political subdivision or
public agency or instrumentality of any state, including municipalities.
Among other things, these provisions facilitate the use of the
bankruptcy laws by such entities to restructure or otherwise alter
the terms of their obligations, including long-term debt obligations
of the type comprising each of the State Trust's portfolio. The
Sponsor is unable to predict at this time what effect, if any,
this legislation will have on the Multistate Trust.
The percentage of Bonds in a State Trust which are subject to
redemption prior to their maturity dates pursuant to sinking fund
or call provisions is stated in Part I of the Prospectus. A sinking
fund is a reserve fund accumulated over a period of time for retirement
of 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 issue is redeemed at or
before maturity from the proceeds of a new bond issue. In general,
a call or redemption provision is more likely to be exercised
when the offering price evaluation of a Bond is higher than its
call or redemption price. The "Schedule of Investments" relating
to each State Trust in Part I of the Prospectus contains a listing
of the maturity date and sinking fund and call provisions for each Bond.
In the case of a Guaranteed Trust, the insurance guarantees payment
of principal of and interest on the Bonds held in such Guaranteed
Trust as such payments shall become due but not be paid, except
that in the event of any acceleration of the due date of principal
by reason of mandatory or optional redemption (other than a mandatory
sinking fund redemption), default or otherwise, the payments guaranteed
will be made in such amounts and at such times as would have been
due had there not been an acceleration. With respect to small
issue industrial development bonds and pollution control revenue
bonds held in such Guaranteed Trust, the Insurer guarantees the
full and complete payments required to be made by or on behalf
of an issuer of such bonds if there occurs pursuant to the terms
of the Bonds an event which results in the loss of the tax-exempt
status of interest on such bonds, including principal, interest
or premium payments payable thereon, if any, as and when thereby required.
Certain of the Bonds may from time to time be sold under certain
extraordinary circumstances (see "Investment Supervision") or
may be redeemed or mature in accordance with their terms, and
the proceeds from such sales, redemptions and maturities will
be distributed to Certificateholders and will not be reinvested.
Therefore, no assurance can be given that any of the State Trusts
will retain its present size and composition for any length of
time and such sales, redemptions or maturities may result in a
corresponding reduction of interest income distributions. Each
of the State Trusts may be terminated if the value of such State
Trust becomes less than
Page 12
the amount shown under "Summary of Essential Information." (See
also "The Trust-Interest and Estimated Current Return" and "The
Trust-Tax Status of the Trust" for additional information on the
effects of redemptions.)
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Bond or in any Bond
underlying any Trust Units.
The Sponsor believes the information summarized above describes
some of the more significant events relating to the Multistate
Trust. The sources of such information, particularly as they relate
to the respective State Trusts, are the official statements of
issuers located in the states for which such Trusts are named
as well as other publicly available documents. The Sponsor has
not independently verified any of the information contained in
such official statements and other publicly available documents
and is not aware of any facts which would render such information
inaccurate.
Guaranteed Trust Insurance
For Series 10 through 36 of any Guaranteed State Trust
Insurance guaranteeing the timely payment, when due, of all principal
and interest on the bonds in any Guaranteed Trust(s) has been
obtained from MBIA by such Guaranteed Trust. Such insurance has
not been obtained by any State Trust in this Series other than
such Guaranteed Trust(s). MBIA has issued a policy or insurance
covering each of the Bonds in a Guaranteed Trust, including bonds
which may previously have been insured. The MBIA policy shall
continue in force only with respect to Bonds held in and owned
by a Guaranteed Trust, and MBIA shall not have any liability under
the policy with respect to any Bonds which do not constitute part
of such Guaranteed Trust. In determining to insure the Bonds held
in a Guaranteed Trust, MBIA has applied its own standards which
correspond generally to the standards it has established for determining
the insurability of new issues of municipal bonds.
By the terms of its policy, MBIA will unconditionally guarantee
to a Guaranteed Trust the payment, when due, required of the issuer
of the Bonds held in such Guaranteed Trust of any amount equal
to the principal of (either at the stated maturity or by any advancement
of maturity pursuant to a mandatory sinking fund payment) and
interest on such Bonds as such payments shall become due but not
paid, except that in the event of any acceleration of the due
date of principal by reason of mandatory or optional redemption
(other than a mandatory sinking fund redemption), default or otherwise,
the payments guaranteed will be made in such amounts and at such
times as would have been due had there not been an acceleration
by reason of mandatory or optional redemption (other than mandatory
sinking fund redemption). MBIA will be responsible for such payments
less any amounts received by a Guaranteed Trust from any trustee
for the Bond issuers or from any other source. The MBIA policy
does not guarantee payment on an accelerated basis, the payment
of any redemption premium or the value of the Units of a Guaranteed
Trust. The MBIA policy also does not insure against nonpayment
of principal of or interest on the Bonds resulting from the insolvency,
negligence or any other act or omission of the Trustee or other
paying agent for the Bonds. However, with respect to small issue
industrial development bonds and pollution control revenue bonds
covered by the policy which are held in a Guaranteed Trust, MBIA
guarantees the full and complete payments required to be made
by or on behalf of an issuer of such Bonds if there occurs pursuant
to the terms of the Bonds an event which results in the loss of
the tax-exempt status of interest on such Bonds, including principal,
interest or premium payments payable thereon, if any, as and when
thereby required to be made by or on behalf of the issuer pursuant
to the terms of such Bonds. The MBIA policy does not insure the
payment of principal or interest on Bonds which is not required
to be paid by the issuer thereof because the Bonds were not validly
issued. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof was rendered by bond counsel
to the respective authorities.
Page 13
The MBIA policy is non-cancellable and will continue in force
so long as a Guaranteed Trust is in existence and the Bonds described
in the policy continue to be held in and owned by such Guaranteed
Trust. (See "The Trust-Portfolio"). Failure to pay premiums on
the MBIA policy will not result in the cancellation of insurance
but will force MBIA to take action against the Trustee to recover
premium payments due it. The Trustee in turn will be entitled
to recover such payments from a Guaranteed Trust.
The MBIA policy shall terminate as to any Bond which has been
redeemed from or sold by the Trustee or Guaranteed Trust on the
date of such redemption or on the settlement date of such sale,
and MBIA shall not have any liability under the policy as to any
such Bond thereafter. If the date of such redemption or the settlement
date of such sale occurs between a record date and a date of payment
of any such Bonds, the MBIA policy will terminate as to such Bond
on the business day next succeeding such date of payment. The
termination of the MBIA policy as to any Bond shall not affect
MBIA's obligations regarding any other Bond in a Guaranteed Trust.
The MBIA policy will terminate as to all Bonds on the date on
which the last of the Bonds mature, are redeemed or are sold by
a Guaranteed Trust.
In the case of Series 23 through Series 36, pursuant to an irrevocable
commitment of MBIA, the Trustee upon sale of a Bond in a Guaranteed
Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds) (the "Permanent
Insurance") upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly,
any Bond in a Guaranteed Trust is eligible to be sold on an insured
basis. It is expected that the Trustee will exercise the right
to obtain Permanent Insurance for a Bond in a Guaranteed Trust
upon instruction from the Sponsor only if upon such exercise such
Guaranteed Trust would receive net proceeds (sale of Bond proceeds
less the insurance premium attributable to the Permanent Insurance
and the related custodial fee) from such sale in excess of the
sale proceeds if such Bond was sold on an uninsured basis. The
Permanent Insurance premium with respect to each Bond is determined
based upon the insurability of each Bond as of the Date of Deposit
and will not be increased or decreased for any change in creditworthiness
of such Bond unless such Bond is in default as to payment of principal
and/or interest. In such event, the Permanent Insurance premium
shall be subject to an increase predetermined at the Date of Deposit
and payable from the proceeds of the sale of such Bond.
Except as indicated below, insurance obtained by a Guaranteed
Trust has no effect on the price or redemption value of Units
thereof. It is the present intention of the Evaluator to attribute
a value to the insurance obtained by a Guaranteed Trust (including,
as to Series 23 through 36, the right to obtain Permanent Insurance)
for the purpose of computing the price or redemption value of
Units thereof only if the Bonds covered by such insurance are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default ("Defaulted Bonds").
The value of the insurance obtained by a Guaranteed Trust will
be equal to the difference between (i) the market value of a Defaulted
Bond insured by a Guaranteed Trust (as to Series 23 through Series
36, the market value of a Defaulted Bond assuming the exercise
of the right to obtain Permanent Insurance less the insurance
premium attributable to the purchase of Permanent Insurance and
the related custodial fee) and (ii) the market value of similar
securities not in default or significant risk thereof (as to Series
23 through Series 36 the market value of such Defaulted Bonds
not covered by Permanent Insurance). See "Public Offering of Units-Public
Offering Price" for a more complete description of the Evaluator's
method of valuing Defaulted Bonds. Insurance obtained by the issuer
of a Bond or by other parties is effective so long as such Pre-insured
Bond is outstanding and the insurer of such Pre-insured Bond continues
to fulfill its obligations. Regardless of whether the Insurer
of a Pre-insured Bond continues to fulfill its obligations, however,
such Bond will continue to be insured under the policy obtained
by a Guaranteed Trust from MBIA as long as the bond is held in
such Guaranteed Trust. Insurance obtained by the issuer of a Bond
or by other parties may be considered
Page 14
to represent an element of market value in regard to the Bonds
thus insured but the exact effect, if any, of this insurance on
such market value cannot be predicted.
Upon notification from a Guaranteed Trust or the paying agent
for a Bond held in such Guaranteed Trust that the payment of principal
or interest which is then due the paying agent for such Bonds
has not been made to such paying agent, MBIA will be obliged to
deposit funds promptly with Citibank, N.A., New York, New York
as fiscal agent for MBIA, sufficient to cover the deficit. If
notice of nonpayment is received on or after the due date, MBIA
will provide for payment within one business day following receipt
of the notice. Upon payment by MBIA of any principal or interest
payments with respect to any Bonds, MBIA shall succeed to the
rights of the owner of such Bonds with respect to such payment.
Each insurance company comprising MBIA will be severally and not
jointly obligated under the MBIA policy in the following respective
percentages: the AEtna Casualty and Surety Company, 33%; Fireman's
Fund Insurance Company, 30%; The Travelers Indemnity Company,
15%; CIGNA Property and Casualty Company (formerly AEtna Insurance
Company), 12%; and The Continental Insurance Company, 10%. As
a several obligor, each such insurance company will be obligated
only to the extent of its percentage of any claim under the MBIA
policy and will not be obligated to pay any unpaid obligations
of any other member of MBIA. Each insurance company's participation
is backed by all its assets. However, each insurance company is
a multiline insurer involved in several lines of insurance other
than municipal bond insurance, and the assets of each insurance
company also secure all of its other insurance policy and surety
bond obligations.
The following table sets forth unaudited financial information
with respect to the five insurance companies comprising MBIA.
The statistics, which have been furnished by MBIA, are as reported
by the insurance companies to the New York State Insurance Department
and are determined in accordance with statutory accounting principles.
No representation is made herein as to the accuracy or adequacy
of such information or as to the absence of material adverse changes
in such information subsequent to the date thereof. In addition,
these numbers are subject to revision by the New York State Insurance
Department which, if revised, could either increase or decrease
the amounts. The Sponsor is not aware that the information herein
is inaccurate or incomplete as of the date hereof.
<TABLE>
<CAPTION>
MUNICIPAL BOND INSURANCE ASSOCIATION, INC.
STATUTORY ASSETS, LIABILITIES AND POLICYHOLDERS' SURPLUS
OF MEMBER COMPANIES - SEPTEMBER 30, 1994
(000's omitted)
New York New York New York
Statutory Statutory Policyholders'
Assets Liabilities Surplus
__________ ____________ ______________
<S> <C> <C> <C>
The AEtna Casualty & Surety Company $10,030,200 $ 8,275,300 $ 1,754,900
Fireman's Fund Insurance Company 6,815,775 4,904,534 1,911,241
The Travelers Indemnity Company 10,295,359 8,515,392 1,779,967
CIGNA Property and Casualty Company
(formerly AEtna Insurance Company) 5,112,251 4,842,235 270,016
The Continental Insurance Company 2,794,536 2,449,805 344,731
___________ ___________ ___________
Total $35,048,121 $28,987,266 $ 6,060,855
</TABLE>
Some of the members of MBIA are among the shareholders of MBIA
Inc. MBIA Inc. is the parent of the Corporation. The Corporation
commenced municipal bond insurance operations on January 5, 1987.
The Corporation is a separate and distinct entity from MBIA. THE
CORPORATION HAS NO LIABILITY TO THE BONDHOLDERS FOR THE OBLIGATIONS
OF MBIA UNDER ANY OF MBIA'S POLICIES.
Page 15
MBIA's principal offices are located at 113 King Street, Armonk,
New York 10504.
For Series 37 and subsequent Series of any Guaranteed State Trust
Insurance guaranteeing the timely payment, when due, of all principal
and interest on the bonds in any Guaranteed Trust(s) has been
obtained from the Corporation by such Guaranteed Trust. SUCH INSURANCE
HAS NOT BEEN OBTAINED BY ANY STATE TRUST IN THIS SERIES OTHER
THAN SUCH GUARANTEED TRUST(S). The Corporation has issued a policy
of insurance covering each of the Bonds in a Guaranteed Trust,
including Bonds which may previously have been insured. The Corporation
policy shall continue in force only with respect to Bonds held
in and owned by a Guaranteed Trust, and the Corporation shall
not have any liability under the policy with respect to any Bonds
which do not constitute part of such Guaranteed Trust. In determining
to insure the Bonds held in a Guaranteed Trust, the Corporation
has applied its own standards which correspond generally to the
standards it has established for determining the insurability
of new issues of municipal bonds.
By the terms of its policy, the Corporation will unconditionally
guarantee to a Guaranteed Trust the payment, when due, required
of the issuer of the Bonds held in such Guaranteed Trust of any
amount equal to the principal of (either at the stated maturity
or by any advancement of maturity pursuant to a mandatory sinking
fund payment) and interest on such Bonds as such payments shall
become due but not paid, except that in the event of any acceleration
of the due date of principal by reason of mandatory or optional
redemption (other than a mandatory sinking fund redemption), default
or otherwise, the payments guaranteed will be made in such amounts
and at such times as would have been due had there not been an
acceleration by reason of mandatory or optional redemption (other
than mandatory sinking fund redemption). The Corporation will
be responsible for such payments less any amounts received by
a Guaranteed Trust from any trustee for the Bond issuers or from
any other source. The Corporation policy does not guarantee payment
on an accelerated basis, the payment of any redemption premium
or the value of the Units of a Guaranteed Trust. The Corporation
policy also does not insure against nonpayment of principal of
or interest on the Bonds resulting from the insolvency, negligence
or any other act or omission of the Trustee or other paying agent
for the Bonds. However, with respect to small issue industrial
development bonds and pollution control revenue bonds covered
by the policy which are held in a Guaranteed Trust, the Corporation
guarantees the full and complete payments required to be made
by or on behalf of an issuer of such Bonds if there occurs pursuant
to the terms of the Bonds an event which results in the loss of
the tax-exempt status of interest on such Bonds, including principal,
interest or premium payments payable thereon, if any, as and when
thereby required to be made by or on behalf of the issuer pursuant
to the terms of such Bonds. The Corporation policy does not insure
the payment of principal or interest on Bonds which is not required
to be paid by the issuer thereof because the Bonds were not validly
issued. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof were rendered by bond counsel
to the respective authorities.
The Corporation policy is non-cancellable and will continue in
force so long as a Guaranteed Trust is in existence and the Bonds
described in the policy continue to be held in and owned by such
Guaranteed Trust. (See "The Trust-Portfolio"). Failure to pay
premiums on the Corporation policy will not result in the cancellation
of insurance but will force the Corporation to take action against
the Trustee to recover premium payments due it. The Trustee in
turn will be entitled to recover such payments from a Guaranteed Trust.
The Corporation policy shall terminate as to any Bond which has
been redeemed from or sold by the Trustee or Guaranteed Trust
on the date of such redemption or on the settlement date of such
sale, and the Corporation shall not have any liability under the
policy as to any such Bond thereafter. If the date of such redemption
or the settlement date of such sale occurs between a record date
and a date of payment of any such Bonds, the Corporation policy
will terminate as to such Bond on the business day next succeeding
such date of payment. The termination of the Corporation policy
as to any Bond shall not affect the Corporation's obligations
regarding any
Page 16
other Bond in a Guaranteed Trust. The Corporation policy will
terminate as to all Bonds on the date on which the last of the
Bonds mature, are redeemed or are sold by a Guaranteed Trust.
Pursuant to an irrevocable commitment of the Corporation, the
Trustee upon sale of a Bond in a Guaranteed Trust has the right
to obtain permanent insurance with respect to such Bond (i.e.,
insurance to maturity of the Bonds) (the "Permanent Insurance")
upon the payment of a single predetermined insurance premium from
the proceeds of the sale of such Bond. Accordingly, any Bond in
a Guaranteed Trust is eligible to be sold on an insured basis.
It is expected that the Trustee will exercise the right to obtain
Permanent Insurance for a Bond in a Guaranteed Trust upon instruction
from the Sponsor only if upon such exercise such Guaranteed Trust
would receive net proceeds (sale of Bond proceeds less the insurance
premium attributable to the Permanent Insurance and the related
custodial fee) from such sale in excess of the sale proceeds if
such Bond was sold on an uninsured basis. The Permanent Insurance
premium with respect to each Bond is determined based upon the
insurability of each Bond as of the Date of Deposit and will not
be increased or decreased for any change in the creditworthiness
of such Bond unless such Bond is in default as to payment of principal
and/or interest. In such event, the Permanent Insurance premium
shall be subject to an increase predetermined at the Date of Deposit
and payable from the proceeds of the sale of such Bond.
Except as indicated below, insurance obtained by a Guaranteed
Trust has no effect on the price or redemption value of Units
thereof. It is the present intention of the Evaluator to attribute
a value to the insurance obtained by a Guaranteed Trust (including
the right to obtain Permanent Insurance) for the purpose of computing
the price or redemption value of Units thereof only if the Bonds
covered by such insurance are in default in payment of principal
or interest or, in the Sponsor's opinion, in significant risk
of such default ("Defaulted Bonds"). The value of the insurance
obtained by a Guaranteed Trust will be equal to the difference
between (i) assuming no exercise of the right to obtain Permanent
Insurance, the market value of a Defaulted Bond insured by a Guaranteed
Trust and the market value of similar securities not in default
or significant risk thereof or (ii) assuming the exercise of the
right to obtain Permanent Insurance, the market value of a Defaulted
Bond less the insurance premium attributable to the purchase of
Permanent Insurance and the related custodial fee and the market
value of such Defaulted Bond not covered by Permanent Insurance.
See "Public Offering of Units-Public Offering Price" for a more
complete description of the Evaluator's method of valuing Defaulted
Bonds. Insurance obtained by the issuer of a Bond or by other
parties is effective so long as such Pre-insured Bond is outstanding
and the Insurer of such Pre-insured Bond continues to fulfill
its obligations. Regardless of whether the Insurer of a Pre-insured
Bond continues to fulfill its obligations, however, such Bond
will continue to be insured under the policy obtained by a Guaranteed
Trust from the Corporation as long as the bond is held in such
Guaranteed Trust. Insurance obtained by the issuer of a Bond or
by other parties may be considered to represent an element of
market value in regard to the Bonds thus insured but the exact
effect, if any, of this insurance on such market value cannot be predicted.
Upon notification from a Guaranteed Trust or the paying agent
for a Bond held in such Guaranteed Trust that the payment of principal
or interest which is then due the paying agent for such Bonds
has not been made to such paying agent, the Corporation will be
obliged to deposit funds promptly with Citibank, N.A., New York,
New York as fiscal agent for the Corporation, sufficient to cover
the deficit. If notice of nonpayment is received on or after the
due date, the Corporation will provide for payment within one
business day following receipt of the notice. Upon payment by
the Corporation of any principal or interest payments with respect
to any Bonds, the Corporation shall succeed to the rights of the
owner of such Bonds with respect to such payment.
The Corporation is the principal operating subsidiary of MBIA
Inc. The principal shareholders of MBIA Inc. are AEtna Casualty
and Surety Company, The Fund American Companies, Inc., Insurance
Company of North America, CIGNA Property and Casualty Insurance
Company and Credit Local de France, and they own approximately
Page 17
13.4% of the outstanding common stock of MBIA Inc. Neither MBIA
Inc. nor its shareholders are obligated to pay the debts of or
claims against the Corporation. The Corporation, which commenced
municipal bond insurance operations on January 5, 1987, is a limited
liability corporation rather than a several liability association.
The Corporation is domiciled in the State of New York and licensed
to do business in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. The Corporation has one European branch in
the Republic of France. As of December 31, 1993, the Corporation
had admitted assets of $3.1 billion (audited), total liabilities
of $2.1 billion (audited), and total capital and surplus of $978
million (audited), according to financial statement prepared in
accordance with statutory accounting practices prescribed or permitted
by insurance regulatory authorities. As of December 31, 1994,
the Corporation had admitted assets of $3.4 billion (audited),
total liabilities of $2.3 billion (audited), and total capital
and surplus of $1.1 billion (audited), according to financial
statement prepared in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Copies
of the Corporation's financial statements prepared in accordance
with statutory accounting practices are available from the Corporation.
The address of the Corporation is 113 King Street, Armonk, New York 10504.
Some of the shareholders of MBIA Inc. are among the members of
MBIA; however, the Corporation is a separate and distinct entity
from MBIA. MBIA HAS NO LIABILITY FOR THE OBLIGATIONS OF THE CORPORATION
UNDER ANY OF THE CORPORATION'S POLICIES.
No representation is made herein as to the accuracy or adequacy
of the foregoing information regarding the Corporation and MBIA
or as to the absence of material adverse changes in such information
subsequent to the date thereof. The Sponsor is not aware that
the information herein is inaccurate or incomplete as of the date hereof.
Standard & Poor's has assigned to the Units of a Guaranteed Trust
and in the case of Series 21 and subsequent Series to all Bonds
a rating of "AAA" and Moody's Investors Service, Inc. has assigned
a rating of "Aaa" to all of the Bonds in such Guaranteed Trust,
as insured. These ratings apply only to such Bonds while they
are held in such Guaranteed Trust. Also, these ratings reflect
Standard & Poor's and Moody's current assessment of the creditworthiness
of the Corporation and MBIA and their ability to pay claims on
their respective policies of insurance.
Interest, Estimated Current Return and Estimated Long-Term Return
The estimated net annual interest income per Unit of each State
Trust is computed by dividing the estimated annual interest income
to each State Trust from all of the Securities in such State Trust
by the number of Units of the State Trust, less estimated annual
fees and expenses per Unit of such State Trust, as set forth under
"Expenses of the Trust."
Units of the Trust are offered on a "dollar price" basis. In contrast,
tax-exempt bonds customarily are offered on a "yield price" basis.
Therefore, the rate of return on each Unit is measured in terms
of both Estimated Current Return and Estimated Long-Term Return.
Estimated Current Return based on the Public Offering Price per
Unit and Estimated Long-Term Return per Unit is set forth under
"Summary of Essential Information" in Part I of the Prospectus.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price.
Estimated Net Annual Interest Income per Unit will vary with changes
in fees and expenses of the Trustee and the Evaluator and with
principal prepayment, redemption, maturity, exchange or sale of
Bonds. The Public Offering Price per Unit will vary with changes
in the offering price of the Bonds. Estimated Current Return takes
into account only the interest payable on the Bonds and does not
involve a computation of yield
Page 18
to maturity or to an earlier redemption date nor does it reflect
any amortization of premium or discount from par value in the
Bond's purchase price. 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
ratings, the Estimated Current Return per Unit may be affected
adversely if such Bonds are redeemed prior to their maturity.
Therefore, there is no assurance that the Estimated Current Return
as set forth under "Summary of Essential Information" will be
realized in the future.
Estimated Long-Term Return is calculated using a formula that
(i) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (taking into
account the amortization of premiums and the accretion of discounts)
and estimated retirements of all the Bonds in the portfolio and
(ii) takes into account the expenses and sales charge associated
with each Unit. The Estimated Long-Term Return assumes that each
Bond is retired on its pricing life date (i.e., that date which
produces the lowest dollar price when yield price calculations
are done for each optional call date and the maturity date of
a callable security). If the Bond is retired on any optional call
or maturity date other than the pricing life date, the yield to
the holder of that Bond will be different from the initial quoted
yield. Since the market values and estimated retirements of the
Bonds, the expenses of the Trust and the Net Annual Interest Income
and Public Offering Price per Unit may change, there is no assurance
that the Estimated Long-Term Return as set forth under "Summary
of Essential Information" will be realized in the future.
Tax Status of the Trust
Interest income on the Bonds contained in the Trust portfolio
is, in the opinion of bond counsel to the issuing governmental
authorities, which opinion was rendered at the time of original
issuance of the Bonds, excludible from Federal gross income under
the Internal Revenue Code of 1986, as amended (the "Code"). See
"The Trust Portfolio."
Gain (or loss) realized on sale, maturity, or redemption of the
Bonds or on sale or redemption of a Unit is, however, includible
in gross income for Federal, state and local income tax purposes.
Such gain (or loss) does not include any amount received in respect
of accrued interest. Bonds selling at a market discount tend to
increase in market value as they approach maturity when the principal
amount is payable, thus increasing the potential for taxable gain
(or reducing the potential for loss) on their redemption, maturity
or sale. It should be noted that under provisions of the Revenue
Reconciliation Act of 1993 (the "1993 Tax Act") that subject accretion
of market discount on tax-exempt bonds to taxation as ordinary
income, gain realized on the sale or redemption of Bonds by the
Trustee or of Units by a Certificateholder that would have been
be treated as capital gain under prior law is treated as ordinary
income to the extent it is attributable to accretion of market
discount. Market discount can arise based on the price the Trust
pays for the Bonds or the price a Certificateholder pays for his Units.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compound interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which accrued to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date
a Certificateholder acquires his Units, and the price the Certificateholder
pays for his Units. Because of the complexity of these rules relating
to the accrual of original issue discount, Certificateholders
should consult their tax advisors as to how these rules apply.
Certificateholders should also consult their own tax advisors
with respect to the state and local tax consequences of owning
original issue discount Bonds. It is possible that under applicable
provisions governing determination of such state and local taxes
Page 19
interest on tax-exempt Bonds such as any Bonds issued with original
issue discount may be deemed to be received in the year of accrual
even though there are no corresponding cash payments until a later year.
If a Certificateholder's cost for his pro rata interest in a Bond
exceeds his pro rata interest in the Bond's face amount, such
Certificateholder will be considered to have purchased his pro
rata interest in the Bond at a "premium." The Certificateholder
will be required to amortize any premium relating to his pro rata
interest in a Bond prior to the maturity of the Bond. Amortization
of premium on a Bond will reduce a Certificateholder's tax basis
for his pro rata interest in the Bond, but will not result in
any deduction from the Certificateholder's income. Thus, for example,
a Certificateholder who purchases a pro rata interest in a Bond
at a premium and resells it at the same price will recognize taxable
gain equal to the portion of the premium that was amortized during
the period the Certificateholder is considered to have held such
interest. A Certificateholder should consult his own tax advisor
regarding the proper method of amortizing bond premium.
The 1993 Tax Act subjects tax-exempt bonds to the market discount
rules of the Code effective for bonds purchased after April 30,
1993. In general, market discount is the amount (if any) by which
the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued),
subject to a statutory de minimis rule. Under the 1993 Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law, the accretion had been treated as capital gain. Market
discount that accretes while the Trust holds a Bond would be recognized
as ordinary income by the Certificateholders when principal payments
are received on the Bond, upon sale or at redemption (including
early redemption), or upon the sale or redemption of his Units
unless a Certificateholder elects to include market discount in
taxable income as it accrues. The market discount rules are complex
and Certificateholders should consult their tax advisors regarding
these rules and their application.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing bonds) issued on or after August 8, 1986 is included
as a preference item. The Trust does not include any such bonds.
Present Federal income tax law also provides for an alternative
minimum tax for corporations levied at a rate of 20% of alternative
minimum taxable income. The alternative minimum tax and the Superfund
Tax depend upon the corporation's alternative minimum taxable
income, which is the corporation's taxable income with certain
adjustments. One of the adjustment items used in computing the
alternative minimum taxable income and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment
Company, Real Estate Investment Trust, or REMIC) is an amount
equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its alternative minimum taxable
income (determined before such adjustment item and the alternative
tax net operating loss deduction). Although tax-exempt interest
received by the Trust on Bonds deposited therein will not be included
in the gross income of corporations for Federal income tax purposes,
"adjusted current earnings" include all tax-exempt interest, including
interest on all of the Bonds in the Trust. Corporate Certificateholders
are urged to consult their tax advisors with respect to the particular
tax consequences to them resulting from purchasing Units, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code. In addition,
certain "S Corporations" may have a tax imposed on passive income
including tax-exempt interest, such as interest on the Bonds.
Under Section 265 of the Code, interest on indebtedness incurred
or continued to purchase or carry Units of the Trust is not deductible
for Federal income tax purposes. The Internal Revenue Service
has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units. However, these
rules do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature (such as a mortgage
Page 20
incurred to purchase or improve a personal residence). Also, under
Section 265 of the Code certain financial institutions that acquire
Units would generally not be able to deduct any of the interest
expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisors.
In the case of certain of the Bonds in the State Trusts, the opinions
of bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be exempt from Federal income taxes, although
interest on such securities received by others would be exempt
from Federal income taxes. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his or her tax advisor.
All statements in Part I of the Prospectus concerning exclusion
from gross income for Federal, state or other taxes are the opinions
of counsel and are to be so construed.
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income are rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor nor its special
counsel made any special review of the proceedings relating to
the issuance of the Bonds held by the State Trusts or of the basis
of such opinions. One or more issues of Bonds in the State Trusts
may have been issued after the effective date of the Tax Reform
Act of 1986 (the "1986 Tax Act") but before the release of the
Conference Committee Report relating to the 1986 Tax Act. As a
result, bond counsel's opinion may not have addressed the tax-exempt
status of such Bonds under the 1986 Tax Act as signed into law.
Any such Bonds are designated under the applicable State Trust
under "Information Regarding the Trust-Portfolios-State Risk Factors
and Tax Status" in Part I of this Prospectus. The continued tax-exempt
status of such Bonds may depend upon the issuer's ability to comply
with the provisions of the 1986 Tax Act. It should be noted that
the tax-exempt status of certain Bonds may be based upon compliance
with certain requirements after the Bonds were issued.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning
after December 31, 1993, up to 85% of Social Security benefits
are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of Social Security benefits received
exceeds an "adjusted base amount." The adjusted base amount is
$34,000 for unmarried taxpayers, $44,000 for married taxpayers
filing a joint return, and zero for married taxpayers who do not
live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from the
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified
Page 21
adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security
benefits in gross income.
The Tax Act raised tax rates on ordinary income while capital
gains remain subject to a 28% maximum stated rate for taxpayers
other than corporations. Because some or all capital gains are
taxed at a comparatively lower rate under the Tax Act, the Tax
Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Certificateholders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
For taxpayers other than corporations, net capital gains are subject
to a maximum marginal tax rate of 28 percent. However, it should
be noted that legislative proposals are introduced from time to
time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
All taxpayers are presently required to disclose to the Internal
Revenue Service the amount of tax-exempt interest earned during the year.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL
INCOME TAX PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER
THE INCOME OR OTHER TAX LAWS OF ANY STATE OR POLITICAL SUBDIVISION.
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 STATUS OF
HIS CERTIFICATES UNDER STATE AND LOCAL TAX LAWS. (SEE "CERTIFICATEHOLDERS-
STATEMENTS TO CERTIFICATEHOLDERS.")
Each Certificateholder is also advised to consult his own tax
advisor regarding the recently enacted legislation discussed above
concerning market discount, inclusion in taxable income of Social
Security benefits, and changes in tax rates.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price per Unit of a State Trust is computed
by adding, to the Sponsor's Bid Price of the Securities in such
State Trust divided by the number of Units of such State Trust
outstanding, a sales charge calculated as set forth under the
caption "Market for Units."
In addition, a proportionate share of interest accrued (see "Accrued
Interest" below) on a Unit of such State Trust to the date of
delivery of the Units to the purchaser (settlement date) is added
to the Public Offering Price. The Public Offering Price of such
Units will vary on a daily basis from the amount stated on the
cover page of Part I of the Prospectus in accordance with fluctuations
in the prices of the underlying Securities and the price to be
paid by each investor will be computed as of the date Units are purchased.
Accrued Interest
Accrued interest is the accumulation of unpaid interest on an
obligation from the last day on which interest thereon was paid.
In the case of the Multistate Trust, interest accrued on the Securities
held in each of the State Trusts' portfolio should be distinguished
from accrued interest on Units of each State Trust. Accrued interest
on a Unit of a State Trust includes both accrued interest on the
Securities in such State Trust and any cash received by the Trustee
with respect to interest on such Securities, less all withdrawals
and deductions from the Interest Account made with respect to
the Unit. Interest on Securities delivered to the State Trust
accrues to the benefit of Certificateholders commencing with the
settlement date of their purchase transaction.
Interest on Securities in each State Trust is actually paid semi-annually
to each State Trust. However, interest on the Securities in a
State Trust is accounted for daily on an accrual basis. Because
of this, each State Trust
Page 22
always has an amount of interest earned but not yet collected
by the Trustee because of non-collected coupons. For this reason,
the Public Offering Price of a Unit of each State Trust will have
added to it the proportionate share of interest accrued on the
Unit of such State Trust (which includes as a part thereof accrued
but unpaid interest on the Securities) to date of settlement.
An amount of accrued interest has been added to the Public Offering
Price of a Unit of a State Trust which represents interest earned
but unpaid upon the underlying Securities. Such interest will
normally be paid to such State Trust during the succeeding six
months and, upon the receipt of such interest payments, the cash
will be distributed as part of the monthly or semi-annual payments.
However, because of the differing periodic interest payment dates
of the Securities comprising the portfolio of such State Trust,
there will always remain an item of accrued interest on the Securities,
and therefore there will always be interest accrued on a Unit
which is added to the value of Units. The interest accrued on
a Unit is accounted for daily and is added to the daily valuation
of each Unit. If a Certificateholder sells or redeems all or a
portion of his Units or if the State Trust in which he is a Certificateholder
is liquidated, he will receive at that time his proportionate
share of the interest accrued on the Units of such State Trust
computed to the settlement date in the case of sale or liquidation
and to the date of tender in the case of redemption.
Method of Evaluation
Aggregate prices of the Securities shall be determined for each
of the State Trusts by the Evaluator, (a) on the basis of current
prices of the Securities, (b) if prices are not available for
any particular Securities, on the basis of current prices for
comparable Securities, (c) by determining the value of the Securities
by appraisal, or (d) by any combination of the above. Unless Securities
are in default in payment of principal or interest or in significant
risk of such default, the Evaluator will not attribute any value
to the insurance obtained by a Guaranteed Trust.
The Evaluator will consider in its evaluation of Defaulted Bonds
held by a Guaranteed Trust and which are covered by insurance
obtained by such Guaranteed Trust the value of the insurance guaranteeing
interest and principal payments as well as the market value of
the Defaulted Bonds and the market value of similar securities
of issuers whose securities, if identifiable, carry identical
interest rates and maturities and are of a creditworthiness comparable
to the issuer prior to the default or risk of default. If such
other securities are not identifiable, the Evaluator will compare
prices of securities with substantially identical interest rates
and maturities and are of a creditworthiness of minimum investment
grade. As to Series 23 and subsequent Series, the value of the
insurance will be equal to the difference between (i) the market
value of Defaulted Bonds assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium attributable
to the purchase of Permanent Insurance and the related custodial
fee) and (ii) the market value of such Defaulted Bonds not covered
by Permanent Insurance. The Evaluator will consider the ability
of the Insurer to meet its commitments under a Guaranteed Trust's
insurance policy and MBIA's commitment, in the case of Series
23 through 36, and the Corporation's commitment, in the case of
Series 37 and subsequent Series, to issue Permanent Insurance.
For example, if a Guaranteed Trust were to hold the defaulted
Securities of a municipality, the Evaluator would first consider
in its evaluation the market price of the defaulted Securities.
The Evaluator would ascribe a value to the insurance feature of
the defaulted Securities that would be equal to the difference
between the market value of the defaulted Securities insured by
such Guaranteed Trust and the market value of similar securities
of minimum investment grade as described herein which were not
in default in payment of principal or interest or in significant
risk of such default. The Evaluator intends to use a similar valuation
method with respect to Securities insured by a Guaranteed Trust
if there is a significant risk of default and a resulting decrease
in the market value. For a description of the circumstances under
which a full or partial suspension of the right of Certificateholders
to redeem their Units may occur, see "Public Offering of Units-Redemption."
Page 23
It is the present intention of the Trustee (and, in the case of
Series 23 and subsequent Series, assuming the Trustee does not
exercise the right to obtain Permanent Insurance on any Defaulted
Bond), so long as a Guaranteed Trust contains either some Bonds
not in default or any Pre-insured Bonds, not to sell Defaulted
Bonds to effect redemptions or for any other reason but rather
to retain them in the portfolio of such Guaranteed Trust BECAUSE
VALUE ATTRIBUTABLE TO THE INSURANCE CANNOT BE REALIZED UPON SALE.
Insurance obtained by the issuer of a Pre-insured Bond, or by
some other party, is effective so long as such Pre-insured Bond
is outstanding and the insurer of such Bond continues to fulfill
its obligations. Therefore, any such insurance may be considered
to represent an element of market value in regard to the Pre-insured
Bond, but the exact effect, if any, of this insurance on such
market value cannot be predicted. Regardless of whether the Insurer
of a Pre-insured Bond continues to fulfill its obligations, however,
such Bond will in any case continue to be insured under the policy
obtained by a Guaranteed Trust from the Insurer as long as the
Bond is held in such Guaranteed Trust.
No value has been ascribed to insurance obtained by a Guaranteed
Trust as of the date of this Prospectus.
Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price
Although the Public Offering Price and the Sponsor's Repurchase
Price of Units of a State Trust will be determined on the basis
of the Sponsor's Bid Price (see "Market for Units" below), the
Unit Value at which Units may be redeemed will be determined on
the basis of the current bid prices of such Securities. On the
Pricing Date, the Public Offering Price and the Sponsor's Repurchase
Price per Unit of each State Trust (based on the Sponsor's Bid
Price of the Securities in such State Trust and including the
sales charge) each exceeded the Unit Value at which Units could
have been redeemed (based upon the current bid prices of the Securities
in such State Trust) by the amount shown under "Summary of Essential
Information" in Part I of the Prospectus. In the past, the bid
prices of bonds similar to those in the State Trusts have been
lower than the offering prices by as much as 3% or more of principal
in the case of inactively traded bonds and as little as 1/2 of 1%
in the case of actively traded bonds, but the difference between
such offering and bid prices has averaged about 1 1/2% to 2% of principal
amount. Further, all of these spreads between bid and offering
prices have increased substantially during periods of extreme
uncertainty. For these reasons, among others (including fluctuations
in the market prices of the Securities and the fact that the Public
Offering Price includes a sales charge), the amount realized by
a Certificateholder upon any redemption of Units may be less than
the price paid by him for such Units.
Page 24
Distribution of Units
Units of the respective State Trusts repurchased by the Sponsor
in the secondary market are offered to the public at the Public
Offering Price of such Units determined in the manner set forth
above, plus accrued interest to the settlement date, on the last
business day of each week effective for all sales made during
the following week. In maintaining a market for the Units, the
Sponsor realizes profits or sustains losses in the amount of any
difference between the price at which it purchased Units and the
price at which it resells or redeems such Units. Cash, if any,
made available to the Sponsor prior to the settlement date for
a purchase of Units may be used in the Sponsor's business, subject
to the limitations of the rules and regulations under the Securities
Exchange Act of 1934, as amended, and may be of benefit to the Sponsor.
The Sponsor qualified and intends to continue to qualify Units
of each of the respective State Trusts for sale in the State for
which such State Trust is named. Sales may be made to or through
dealers at prices which represent concessions or agency commissions
of 70% of the sales charge, subject to the Sponsor's right to
change such concession or agency commission from time to time.
Certain commercial banks are making Units of the respective State
Trusts available to their customers on an agency basis. Under
the Glass-Steagall Act, banks are prohibited from underwriting
State Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not
indicated that these particular agency transactions are not permitted
under such Act. In Texas, any banks making Units available to
potential investors must be registered as broker-dealers in Texas.
The Sponsor may from time to time pay, in addition to the amount
paid to dealers, an additional concession to a dealer which employs
a registered representative who sells during a specific period,
a minimum dollar amount of the respective State Trust's Units.
In no event will such additional concession paid by the Sponsor
to the dealer exceed the difference between the sales charge and
the dealer's allowance in respect of Units sold by the qualifying
registered representative. Such Units then may be distributed
to the public by the dealers at the Public Offering Price then
in effect. The Sponsor reserves the right to reject, in whole
or in part, any order for the purchase of Units.
Market for Units
The Sponsor, although not obligated to do so, intends to maintain
a secondary market for the Units of the respective State Trusts
at its own expense and continuously to offer to purchase such
Units at prices based on the Sponsor's Bid Price, including bid
prices as determined by the Evaluator through the expected date
of settlement. For a description of the Redemption Price, see
"Redemption" below. The repurchase price is subject to change
at any time and may be more or less than the original purchase
price. SINCE THE MARKET PRICE MAY EXCEED THE REDEMPTION PRICE,
A CERTIFICATEHOLDER WHO WISHES TO DISPOSE OF HIS UNITS SHOULD
INQUIRE THROUGH HIS BROKER AS TO THE CURRENT MARKET PRICE OF THE
UNITS BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. Any
Units so acquired by the Sponsor may be reoffered at a price determined
in accordance with the currently effective Prospectus describing
such Units. However, if the Sponsor repurchases Units of a State
Trust in the secondary market at a price below the offering price
of the Securities in such State Trust, it will not resell these
Units in the secondary market.
The Sponsor may discontinue purchases of Units at the Sponsor's
Bid price if the supply of Units of any of the respective State
Trusts exceeds demand or for other business reasons. In that event,
a Certificateholder will be able to dispose of his Units of a
State Trust only by tendering them to the Trustee for redemption
at prices based on the aggregate bid price of the Securities in
such State Trust, which is expected to be less than the aggregate
offering price. The Sponsor, of course, does not in any way guarantee
the enforceability, marketability, or price of any Security in
the portfolio or of the Units of any of the State Trusts. Any
Units that are purchased by the Sponsor in the secondary market
may be tendered for redemption by the Sponsor if it determines
such redemption to be in its best interest.
Page 25
The secondary market Public Offering Price of the Units of the
Trust will be based on the aggregate bid price of the Bonds in
the Trust (as determined by the Evaluator) plus a sales charge
determined in accordance with the schedule set forth below, which
is based upon the maturities of each Bond in the Trust. The use
of a variable sales charge will in no event result in a greater
sales charge than the 5.5% sales charge previously in effect for
purchases of Units in the secondary market. In several instances
it may have the effect of lowering the sales charge and thus increasing
the Estimated Current Return and Estimated Long-Term Return (see
"Summary of Essential Information" in Part I of the Prospectus
for information regarding the Estimated Current Return and Estimated
Long-Term Return of Units of the Trust) to secondary market purchasers.
For the purpose of computing the sales charge, Bonds will be deemed
to mature on their expressed maturity dates unless: (a) the Bonds
have been called for redemption or funds or securities have been
placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Bonds are subject to a "mandatory tender,"
in which case such mandatory tender will be deemed to be the date
upon which they mature.
This method of sales charge computation will apply different sales
charge rates to each Bond in the Trust based upon the maturity
of each such Bond in accordance with the following schedule:
<TABLE>
<CAPTION>
Secondary Market Sales Charge
Years to Maturity Percentage of Percentage of
Per Bond Public Offering Price Net Amount Invested
_________________ _____________________ ___________________
<S> <C> <C>
0.000-3.000 2.00% 2.041%
3.001-4.000 2.50 2.564
4.001-5.000 3.00 3.093
5.001-6.000 3.50 3.627
6.001-7.000 4.00 4.167
7.001-8.000 4.50 4.712
8.001-9.000 5.00 5.263
9.001 or more 5.50 5.820
</TABLE>
A minimum sales charge of 2.0% of the Public Offering Price will
be applied to all secondary market purchases of Units of the Trust.
There will be no reduction of the sales charge for volume purchases
in secondary market transactions.
Redemption
Any Unit may be tendered for redemption by mail to the Trustee,
Bank of New York, Attention: Unit Trust Department, at its office
at 101 Barclay Street, New York, New York 10286, properly endorsed
and accompanied by a written instrument or instruments of transfer,
together with any applicable transfer tax payable, as instructed
by the Trustee. A Certificateholder must sign exactly as his name
appears on the face of the Certificate with the signature guaranteed
by a national bank or trust company or by a member firm of a national
or regional securities exchange and furnish such other documents
as the Trustee may request.
Payment in cash for Units so tendered will be made by the Trustee
no later than the third business day following the day on which
tender for redemption is received (the "Redemption Date"). The
amount to be paid on the Redemption Date to a Certificateholder
is the Unit Value, determined as of the date of tender in accordance
with the procedures set forth under "Unit Evaluation," multiplied
by the number of Units tendered for redemption (the "Redemption
Price"). The "date of tender" is the date Units are received by
the Trustee in proper form, provided that if Units are received
after the Evaluation Time stated under "Summary of Essential Information"
Page 26
in Part I of the Prospectus the date of tender is deemed the next
business day and such Units will be treated as having been tendered
for redemption at the Redemption Price computed on that day.
The Sponsor has the right to purchase any Unit tendered to the
Trustee for redemption no later than the close of business on
the second business day following such tender at a price not less
than the Redemption Price. So long as the Sponsor is maintaining
a bid in the secondary market in excess of the Redemption Price,
the Sponsor will repurchase any Units tendered to the Trustee
for redemption.
Any portion of the Redemption Price representing interest shall
be withdrawn from the Interest Account of the applicable State
Trust to the extent that funds are available for such purpose.
All other amounts paid on redemption shall be withdrawn from the
Principal Account of such State Trust. The Trustee is empowered
to sell Securities in a State Trust in order to make funds available
for the redemption of Units of such State Trust. Any Units redeemed
shall be cancelled and any undivided fractional interest of such
Units in the State Trust extinguished. To the extent Securities
in a State Trust are sold, the size and diversity of such State
Trust will be reduced. Such sale may be required when Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. The Redemption Price may be more
or less than the amount paid by the Certificateholder depending
on the value of the Securities in the portfolio of the applicable
State Trust at the time of redemption.
The right of redemption may be suspended and payment postponed
(1) for any period during which the New York Stock Exchange Inc.
is closed, other than customary weekend or holiday closings; (2)
for any period during which (as determined by the Securities and
Exchange Commission (the "Commission")), (i) trading on the New
York Stock Exchange Inc. is restricted or (ii) an emergency exists
as a result of which disposal or evaluation of the Securities
is not reasonably practicable; or (3) for such other period as
the 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.
As stated above, the Trustee may sell Securities to cover redemptions.
When Securities are sold, the size and diversity of the Trust
will be reduced. Such sale may be required at a time when Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. The Redemption Price may be more
or less than the amount paid by the Certificateholder depending
on the value of the Securities in the portfolio at the time of
redemption. Since the provisions of the insurance obtained by
a Guaranteed Trust cover the Bonds only while the Bonds are held
in and owned by such Guaranteed Trust (and, in the case of Series
23 and subsequent Series, assuming the Trustee does not exercise
the right to obtain Permanent Insurance on a Bond), the Bonds
so insured must be sold on an uninsured basis. To the extent that
(and, in the case of Series 23 and subsequent Series, assuming
the Trustee does not exercise the right to obtain Permanent Insurance
on a Defaulted Bond), Bonds which are current in payment of interest
are sold from a Guaranteed Trust portfolio in order to meet redemption
requests and Defaulted Bonds are retained in the portfolio in
order to preserve the related insurance protection applicable
to said Bonds, the overall quality (and therefore value) of the
Bonds remaining in such Guaranteed Trust will tend to diminish.
See "Investment Supervision" for the effect of selling Defaulted
Bonds to meet redemption requests.
Because insurance obtained by a Guaranteed Trust terminates as
to Bonds which are sold by the Trustee and because the insurance
obtained by such Guaranteed Trust does not have a realizable cash
value which can be used by the Trustee to meet redemption of Units
(and as to Series 23 and subsequent Series, assuming the Trustee
does not exercise the right to obtain Permanent Insurance on Defaulted
Bonds), under certain circumstances the Sponsor may apply to the
Commission for an order permitting a full or partial suspension
of the right of Certificateholders of such Guaranteed Trust to
redeem their Units if a significant portion of the Bonds in the
portfolio are in default in payment of principal or interest or
in significant risk of such default. No assurances
Page 27
can be given that the Commission will permit the Sponsor to suspend
the rights of such Certificateholders to redeem their Units and,
without the suspension of such redemption rights when faced with
excessive redemption, the Sponsor may not be able to preserve
the benefits of such Guaranteed Trust's insurance on Defaulted Bonds.
Unit Evaluation
Unit Value is computed by the Trustee as of the Evaluation Time
stated under "Summary of Essential Information" in Part I of the
Prospectus on each business day by adding: (1) the aggregate value
of each issue of the Securities in such State Trust on the bid
side of the market, as determined by the Evaluator, except for
those cases relating to a Guaranteed Trust in which the value
of insurance has been included; (2) the cash on hand in such State
Trust, other than amounts allocated to semi-annual Certificateholders
under the Agreement; (3) accrued but unpaid interest on the Securities
in such State Trust at the date of the computation; and (4) with
respect to semi-annual Certificateholders only, amounts allocated
to them under the Agreement: and deducting therefrom, (1) amounts
representing any applicable taxes or governmental charges payable
out of such State Trust and for which no deductions have been
previously made; (2) amounts representing estimated accrued expenses
of such State Trust including but not limited to unpaid fees and
expenses of the Trustee (including legal and auditing fees), the
Evaluator, and if any, of counsel; and (3) cash allocated for
distribution (which distribution shall take into account those
Certificateholders who have elected to receive distributions on
a monthly basis) to Certificateholders of record of such State
Trust as of the business day prior to the evaluation being made.
The result of such computation shall be divided by the number
of Units outstanding of such State Trust as of the date thereof
to determine the per Unit evaluation of such State Trust.
In determining the Redemption Price per Unit of a Guaranteed Trust,
no value will be assigned to the portfolio insurance maintained
by such Guaranteed Trust on the Bonds in such Guaranteed Trust
unless such Bonds are in default in payment of principal or interest
or in significant risk of such default. On the other hand, Pre-insured
Bonds are entitled at all times to the benefits of insurance obtained
by their respective issuers and such benefits are reflected and
included in the market value of Pre-insured Bonds. For a description
of the situations in which the Evaluator may value the insurance
obtained by a Guaranteed Trust, see "Public Offering of Units-Method
of Evaluation."
CERTIFICATEHOLDERS
Description of Certificate
Ownership of Units of the respective State Trust will be evidenced
by registered Certificates executed by the Trustee and the Sponsor.
Certificates are transferable by presentation and surrender to
the Trustee properly endorsed and accompanied by a written instrument
or instruments of transfer, together with a payment of $2.00 if
required by the Trustee or such other amounts as may be specified
by the Trustee and approved by the Sponsor for each new Certificate
and any sums payable for taxes or other governmental charges imposed
on such transactions.
Certificates will be issued in denominations of one Unit or any
multiple thereof. The Trustee at the present time does not intend
to charge for services rendered in connection with the normal
transfer or interchange of Certificates. Destroyed, stolen, mutilated
or lost Certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of
expenses incurred.
Trust Distributions
Interest and principal from each State Trust, less applicable
expenses or funds required for the redemption of Units of such
State Trust, will be distributed in monthly or semi-annual installments
on a pro rata basis to Certificateholders
Page 28
of record of such State Trust as of each Record Day on the next
following Distribution Day or shortly thereafter. (See "Distributions"
and "Summary of Essential Information" in Part I of the Prospectus.)
Interest on the Securities received by each State Trust is credited
by the Trustee to an Interest Account of such State Trust. Other
receipts are credited to a Principal Account of such State Trust.
The regular monthly or semi-annual distribution to Certificateholders
in such State Trust shall consist of an amount substantially equal
to one-twelfth or one-half of such holder's pro rata share of
the estimated net annual income in the Interest Account of such
State Trust after deducting estimated expenses (the "Monthly or
Semi-Annual Interest Distribution") plus such holder's pro rata
share of the cash balance of the Principal Account of such State
Trust computed as of the close of business on the preceding Record
Day. The Monthly or Semi-Annual Interest Distribution per Unit
to Certificateholders in a State Trust is expected to be in the
amount shown under "Summary of Essential Information" for such
State Trust in Part I of the Prospectus and will change and may
be reduced as Securities in such State Trust are redeemed, paid
or sold. Proceeds received from the disposition of any of the
underlying Securities in a State Trust subsequent to a Record
Day and prior to the succeeding Distribution Date will be held
in the Principal Account of such State Trust and will not be distributed
until the next successive Distribution Day. Persons who purchase
Units between a Record Day and a Distribution Day will receive
their first distribution on the second Distribution Day following
their purchase of Units. Other than for purposes of redemption,
no distribution need be made from the Principal Account of a State
Trust if the balance therein is less than $1.00 per Unit then
outstanding and in the case of Series 20 and subsequent Series
no monthly distribution need be made from the Principal Account
of a State Trust if the balance therein is less than $10.00 per
Unit then outstanding. A Reserve Account of a State Trust may
be created by the Trustee by withdrawing from the Interest or
Principal Accounts of such State Trust, from time to time, such
amounts as it deems requisite to establish a reserve for any taxes
or other governmental charges that may be payable out of such
State Trust. The Principal, Interest and Reserve Accounts of a
State Trust do not bear interest. (See "Expenses of the Trust.").
Because interest payments are not received by a State Trust at
a constant rate throughout the year, interest distributions may
be more or less than the amount credited to the Interest Account
of such State Trust as of the Record Date. For the purpose of
eliminating fluctuations in the periodic distributions from the
Interest Account of a State Trust, the Trustee is required by
the Agreement to advance such amounts as may be necessary to provide
monthly or semi-annual interest payments of approximately equal
amounts. The Trustee shall be reimbursed, without interest, for
any such advances from funds available from the Interest and Principal
Accounts of such State Trust on or before the ensuing Distribution
Day. (See "Expenses of the Trust.")
Statements to Certificateholders
The Trustee will furnish each Certificateholder with each distribution
a statement of the amount of interest and the amount of other
receipts, if any, which are being distributed, expressed in each
case as a dollar amount per Unit. The accounts of each State Trust
are required to be audited not less frequently than annually by
independent certified public accountants designated from time
to time by the Sponsor. The report of such accountants shall be
furnished by the Trustee to any Certificateholder of such State
Trust upon request. Within a reasonable period of time after the
end of each calendar year (normally within thirty to sixty days),
the Trustee shall furnish to each person who at any time during
the calendar year was a Certificateholder a statement setting
forth: A. As to the Interest Account: (1) The amount of interest
received on the Securities; (2) The amount paid for redemption
of Units; (3) The charges for payment of applicable taxes and
fees and expenses (including auditing fees and insurance costs,
if any) of the Trustee, the Evaluator, and, if any, of counsel;
(4) Any other amount credited to or deducted from the Interest
Account; and (5) The balance remaining expressed both as a total
dollar amount and as a dollar amount per Unit outstanding on the
last business day of such calendar year; B. As to
Page 29
the Principal Account: (1) The dates of the sale, maturity, liquidation
or redemption of any of the Securities and the net proceeds received
therefrom excluding any portion credited to the Interest Account,
and as to Series 23 and subsequent Series, the premium attributable
to the Trustee's exercise of the right to obtain Permanent Insurance
and any related custodial fee; (2) The amount paid for redemption
of Units; (3) The charges for payment of applicable taxes and
fees and expenses (including auditing fees and insurance costs,
if any) of the Trustee, the Evaluator, and, if any, counsel; (4)
Any other amount credited to or deducted from the Principal Account;
and (5) The balance remaining expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the last
business day of the calendar year; C. Other Information: (1) A
list of the Securities as of the last business day of such calendar
year; (2) The number of Units outstanding on the last business
day of such calendar year; (3) The Unit Value based on the last
Trust Evaluation made during such calendar year; and (4) The amounts
actually distributed to Certificateholders during such calendar
year from the Interest and Principal Accounts separately stated,
expressed both as total dollar amounts and as dollar amounts per
Unit outstanding on the Record Days for each such distribution.
Rights of Certificateholders
Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election
of the prior owner. Thereafter, changes in the plan of distribution
may be made, but only as provided in this paragraph. On each Semi-Annual
Distribution Day, or within a reasonable period of time thereafter,
the Trustee shall furnish to each Certificateholder a card which
must be returned to the Trustee on or before the next Monthly
Record Day if the Certificateholder wishes to change his plan
of distribution. Certificateholders wishing to change must so
indicate on the card and return it to the Trustee together with
their Certificate to which it relates. If the card and Certificate
are returned, the change will become effective as of the Monthly
Record Day immediately following such Semi-Annual Distribution
Day and continue in effect until further notice. If the card and
Certificate are not returned to the Trustee, the Certificateholder
will be deemed to have elected to continue with the same plan
for the following six months.
A Certificateholder may tender his Units to the Trustee for redemption
at any time, including the time prior to the receipt of Certificates
representing Units purchased. The death or incapacity of any Certificateholder
in a State Trust will not operate to terminate such State Trust
or entitle his legal representatives or heirs to claim an accounting
or to bring any action or proceeding in any court for partition
or winding up of such State Trust.
No Certificateholder in a State Trust shall have the right to
control the operation and management of such State Trust in any
manner, except to vote with respect to certain amendments of the
Agreement or termination of such State Trust.
AUTOMATIC REINVESTMENT PLAN
The Sponsor has entered into an agreement with First Investors
Insured Tax Exempt Fund, Inc. ("First Investors") which permits
Certificateholders of the State Trust to elect to have each distribution
of interest income, capital gains or principal on his Units automatically
reinvested in shares of First Investors at the price (plus sales
charge) described below. First Investors, whose investment adviser
is First Investors Management Company ("Advisor"), is an open-end,
diversified management investment company with the objective of
providing through investment in a professionally managed insured
portfolio of municipal bonds, a high level of current tax-exempt income.
First Investors has investment objectives which differ in certain
respects from those of the Trust. First Investors is permitted
to own tax-exempt bonds rated less than A by Moody's Investors
Service, Inc., or Standard & Poor's and bonds not rated by Moody's
or Standard & Poor's, if, in the judgment of the Advisor, such
bonds are suitable for achieving First Investors' investment objective,
and if, in the judgment of the independent insurance
Page 30
company (AMBAC Indemnity) which issues insurance covering the
securities in the portfolio of First Investors, such bonds are
acceptable for issuance of municipal bond insurance. Because of
such insurance, Standard & Poor's has rated First Investors "AAA."
First Investors may also own (not to exceed 10% of the portfolio
on average) short-term, fixed income investments, the interest
income from which may be subject to Federal income tax, as described
in a prospectus relating to First Investors.
Each Certificateholder may elect to become a participant in the
automatic reinvestment program by advising his or her account
representative. Thereafter, as directed by such person, each distribution
of interest income, capital gains or principal on the participant's
Units will, on the applicable Distribution Day, automatically
be applied as of that date by the Trustee to purchase shares (or
fractions thereof) of First Investors at a net asset value as
computed as of the close of trading on the New York Stock Exchange
on such date, plus a reduced sales charge of 1% of the offering
price, as described in the First Investors prospectus. The sales
charge would be paid to the Advisor and First Investors Corporation,
as principal underwriters of First Investors. The balance will
be invested in First Investors.
Confirmations of all transactions undertaken for each participant
in the reinvestment plan will be mailed to such participant by
First Investors indicating distributions and shares (or fractions
thereof) of First Investors purchased on his behalf.
A participant may at any time prior to the five days preceding
the next succeeding Distribution Day, by so notifying the Trustee
in writing, elect to terminate his participation in the reinvestment
plan and receive future distributions on his Units in cash. There
will be no charge or other penalty for such termination. The Sponsor,
First Investors and the Advisor each will have the right to terminate
this investment plan.
It should be remembered that the reinvestment of distributions
through the reinvestment plan will not affect the income tax status
of the distributions.
TO RECEIVE MORE INFORMATION REGARDING AN INVESTMENT IN FIRST INVESTORS
THROUGH THE PLAN, INCLUDING CHARGES, EXPENSES AND SALES CHARGES
FOR PARTICIPANTS, FILL OUT AND RETURN THE ENCLOSED CARD FOR A
COPY OF THE FIRST INVESTORS PROSPECTUS. READ IT CAREFULLY BEFORE
YOU DECIDE TO PARTICIPATE.
INVESTMENT SUPERVISION
With certain specified exceptions described below, the Sponsor
may not alter the portfolio of a State Trust by the purchase,
sale or substitution of Securities. Thus, with the exception of
the redemption or maturation of Securities in accordance with
their terms, the assets of a State Trust will remain unchanged
under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities upon
default in the payment of principal or interest, institution of
certain legal proceedings or the existence of certain other impediments
to the payment of Securities, default under other documents which
may adversely affect debt service, default in the payment of principal
or interest on other obligations of the same issuer, decline in
projected revenues pledged for debt service on revenue Securities,
or decline in price or the occurrence of other market factors,
including advance refunding, so that in the opinion of the Sponsor
the retention of such Securities in a State Trust would be detrimental
to the interest of the Certificateholders. The proceeds from any
such sales will be credited to the Principal Account of such State
Trust for distribution to the Certificateholders.
To the extent that Bonds in a Guaranteed Trust are sold which
are current in payment of principal and interest in order to meet
redemption requests and Defaulted Bonds are retained in the portfolio
in order to preserve the related insurance protection applicable
to said Bonds (and as to Series 23 and subsequent Series, assuming
the Trustee does not exercise the right to obtain Permanent Insurance
on a Defaulted Bond or Bonds),
Page 31
the overall quality of the Bonds remaining in such Guaranteed
Trust's portfolio will tend to diminish. Except as described below
and in certain other unusual circumstances for which it is determined
by the Trustee to be in the best interest of the Certificateholders
or if there is no alternative (and as to Series 23 and subsequent
Series, assuming the Trustee does not exercise the right to obtain
Permanent Insurance on a Defaulted Bond or Bonds), the Trustee
is not empowered to sell Defaulted Bonds for which value has been
attributed for the insurance obtained by such Guaranteed Trust.
Because of such restrictions on the Trustee under certain circumstances
the Sponsor may seek a full or partial suspension of the right
of Certificateholders to redeem their Units. See "Public Offering
of Units-Redemption."
The Sponsor is required to instruct the Trustee to reject any
offer made by an issuer of the Securities to issue new obligations
in exchange and substitution for any of the Securities pursuant
to a refunding financing plan, except that the Sponsor may instruct
the Trustee to accept or reject such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if
(a) the issuer is in default with respect to the Securities or
(b) in the written opinion of the Sponsor, there is a reasonable
basis to believe that the issuer will default with respect to
the Securities in the foreseeable future. Any obligations 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 Securities originally deposited. Within five days after
such deposit in a State Trust, notice of such exchange and deposit
shall be given by the Trustee to each Certificateholder in such
State Trust registered on the books of the Trustee, including
an identification of the Securities eliminated and the Securities
substituted therefor.
If a default in the payment of principal or interest on any of
the Securities occurs and no provision for payment is made therefor
either pursuant to any portfolio insurance or otherwise, and if
the Sponsor fails to instruct the Trustee to sell or hold within
thirty days after the notification thereof by the Trustee, the
Agreement provides that the Trustee shall sell the Defaulted Bonds
forthwith and shall not be liable for any depreciation or loss
incurred by reason of such sale. The Trustee may sell Securities
in a State Trust designated by the Sponsor for the purpose of
redeeming Certificates tendered for redemption and the payment
of expenses for such State Trust.
Notwithstanding the foregoing, in connection with the final distributions
to Certificateholders of a Guaranteed Trust (and as to Series
23 and subsequent Series, assuming the Trustee does not exercise
the right to obtain Permanent Insurance on any Defaulted Bond),
because the portfolio insurance obtained by such Guaranteed Trust
is applicable only while bonds so insured are held by such Guaranteed
Trust, the price to be received by such Guaranteed Trust upon
the disposition of any Defaulted Bond will not reflect any value
based on such insurance. Therefore, in connection with any liquidation,
it shall not be necessary for the Trustee to, and the Trustee
does not currently intend to, dispose of any Bond or Bonds if
retention of such Bond or Bonds, until due, shall be deemed to
be in the best interest of Certificateholders, including but not
limited to situations in which a Bond or Bonds so insured have
a deteriorated market price resulting from a significant risk
of default. Since any Pre-insured Bonds will reflect the value
of the insurance obtained by the Bond issuer, it is the present
intention of the Sponsor not to direct the Trustee to hold any
Pre-insured Bonds after the date of termination. All proceeds
received, less applicable expenses, from insurance on defaulted
Bonds not disposed of at the date of termination will ultimately
be distributed to Certificateholders of record as of such date
of termination as soon as practicable after the date such Bond
or Bonds become due and applicable insurance proceeds have been
received by the Trustee. (See "Summary of Essential Information"
in Part I of the Prospectus).
ADMINISTRATION OF THE TRUST
The Trustee
The Successor Trustee as to Series 1 through 23 and Trustee as
to Series 24 and Subsequent Series is The Bank of New York, a
trust company organized under the laws of New York. The Unit Trust
Department of the Trustee
Page 32
has its offices at 101 Barclay Street, New York, New York 10286,
and its telephone number is 1-800-431-8001 or 1-800-431-8002.
The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits
are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The duties of the Trustee are primarily ministerial in nature.
The Trustee did not participate in the selection of Securities
for the portfolios of any of the State Trusts.
The Trustee shall keep proper books of record and account of all
transactions at its office. Such records shall include the name
and address of, and the Certificates issued to, every Certificateholder.
Such books and records shall be open to inspection by any Certificateholder
at all reasonable times during business hours. Although the Trustee
shall remain primarily responsible for the obligations and duties
allocated to it, the Agreement provides that the Trustee may,
subject to the approval of the Sponsor, enter into servicing arrangements
as it deems necessary or appropriate for the performance by a
service organization (which may be a corporation affiliated with
the Trustee) of bookkeeping, accounting, reporting, distribution
and other activities and duties allocated to the Trustee under
the Agreement.
The Trustee or any successor may resign by executing an instrument
in writing and filing the same with the Sponsor and mailing a
copy to each Certificateholder. The Sponsor, upon receiving such
notice, is obligated to use its best efforts to appoint a successor
Trustee promptly. If, upon such resignation, no successor Trustee
has been appointed within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction
for the appointment of a successor. In case the Trustee becomes
incapable of acting or is adjudged bankrupt or is taken over by
public authorities, or, in the case of Series 18 and subsequent
Series, if the Sponsor deems it to be in the best interests of
the Certificateholders, the Sponsor may remove the Trustee and
appoint a successor Trustee as provided in the Agreement. Notice
of such removal and appointment shall be mailed to each Certificateholder
by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor Trustee, all of the rights, powers,
duties and obligations of the original Trustee shall vest in the
successor.
The Trustee shall be a banking corporation organized and doing
business under the laws of the United States or of any state or
territory of the United States which is authorized under such
laws to exercise corporate trust powers and having at all times
an aggregate capital, surplus and undivided profits of not less
than $5,000,000 and shall otherwise qualify to act as Trustee.
The Evaluator
The Evaluator is Securities Evaluation Service, Inc., with its
principal offices at Suite 200, 531 East Roosevelt Road, Wheaton,
Illinois 60187. Securities Evaluation Service, Inc. is a registered
investment advisor.
The Evaluator may resign or be removed by either the Sponsor or
the Trustee which are to use their best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective
upon 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. Notice of such resignation or removal and appointment
shall be mailed by the Trustee to each Certificateholder.
Successor Sponsor
If at any time the Sponsor fails to perform any of its duties
under the Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities,
then the Trustee may (a) appoint a successor
Page 33
Sponsor at rates of compensation deemed by the Trustee to be reasonable
and not exceeding such reasonable amounts as may be prescribed
by the Commission, (b) terminate the Agreement and liquidate the
State Trusts as provided therein, or (c) continue to act as Trustee
without terminating the Agreement and without appointing any successor
Sponsor. In no event may the Trustee act as Sponsor of the Trust.
Amendment and Termination of the Agreement
The Agreement may not be amended, without the consent of the holders
of all Certificates of the Multistate Trust then outstanding,
to increase the number of Units issuable or to permit, except
in accordance with the provisions of the Agreement, the acquisition
of any Securities in addition to or in substitution for those
initially deposited in the State Trusts or to reduce the percentage
interest in the State Trusts of any Certificateholder or reduce
the percentage of Units required to consent to any such amendment
or waiver. The Trustee shall promptly notify Certificateholders
of the substance of any such amendment.
The Agreement may be amended by the Trustee and the Sponsor without
the consent of any of the Certificateholders: (1) to cure any
ambiguity or to correct or supplement any provisions which may
be defective or inconsistent; (2) to change any provisions thereof
as may be required by the Commission or any successor governmental
agency; or (3) to make such provisions as shall not adversely
affect the interests of the Certificateholders (as determined
in good faith by the Sponsor and the Trustee). The Agreement may
also be amended in any respect by the Sponsor and the Trustee,
or performance of any of the provisions thereof may be waived,
with the written consent of the holders of Certificates evidencing
662/3% of the Units then outstanding of each State Trust affected
by such amendment.
The Agreement provides that a State Trust shall terminate upon
the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such State Trust, or,
in the case of certain Trusts, at any time when in the opinion
of the Sponsor and the Trustee, the amount of customary, interest-bearing
Bonds in a State Trust is insufficient to support the expenses
of such State Trust. The Trustee shall notify all Certificateholders
of any State Trust when the value of such State Trust as shown
on the last business day of December or June in any year is less
than the minimum amount set forth in "Summary of Essential Information"
in Part I of the Prospectus, at which time such State Trust may
be terminated by the consent of 662/3% of its Certificateholders
or, in the case of Series 11 and subsequent Series, by the Trustee,
provided however, that at least 331/3% of such Certificateholders
do not instruct the Trustee not to terminate the Trust. In no
event, however, may such State Trust continue beyond the mandatory
termination date set forth in "Summary of Essential Information"
in Part I of the Prospectus; provided, however, that prior to
such mandatory termination date of a Guaranteed Trust, the Trustee
shall not dispose of any Bonds if the retention of such bonds,
until due, shall be deemed to be in the best interest of the Certificateholders.
In the event of termination, written notice thereof will be sent
by the Trustee to all Certificateholders of record on the date
the affected State Trust is terminated. Within a reasonable period
after termination, the Trustee must sell any Securities remaining
in such State Trust, and after paying all expenses and charges
incurred by such State Trust, distribute to each Certificateholder,
upon surrender for cancellation of his Certificate for Units,
his pro rata share of the Interest and Principal Accounts of such
State Trust.
Limitations on Liability
The Sponsor: The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Agreement,
but will be under no liability to the Certificateholders for taking
any action or refraining from any action in good faith or for
errors in judgment, except in cases of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations
and duties. The Sponsor shall not be liable or responsible in
any way for depreciation or loss incurred by reason of the sale
of any Securities.
Page 34
The Trustee: The Agreement provides that, except by reason of
willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations and duties, the Trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies or
Securities, in respect of any evaluation, or otherwise pursuant
to its rights, powers or duties; nor shall the Trustee be liable
or responsible in any way for depreciation or loss incurred by
reason of the sale by the Trustee of any Securities, or for any
evaluation made by the Evaluator or any directions or instructions
given by the Sponsor. In the event that the Sponsor shall fail
to instruct the Trustee as to the disposition of any defaulted
Securities, the Trustee may, but shall be under no obligation
to, act and shall not be liable for any such action taken by it
in good faith. The Trustee shall not be personally liable for
any taxes or other governmental charges imposed upon or in respect
of the Securities or upon the interest thereon. In addition, the
Agreement contains other customary provisions limiting the liability
of the Trustee. The Trustee, whose duties are ministerial, has
not participated in the selection of Securities for the State Trusts.
The Evaluator: The Trustee, Sponsor and Certificateholders may
rely on any evaluation furnished by the Evaluator and shall have
no responsibility for the accuracy thereof. The Agreement provides
that the determinations made by the Evaluator 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, Sponsor or Certificateholders for errors in judgment,
except in cases of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
EXPENSES OF THE TRUST
The cost of the initial fees of the Trustee's counsel, and all
other reasonable expenses in connection therewith, together with
all of the cost of registering the Multistate Trust under the
Investment Company Act of 1940, as amended, and the Units under
the Securities Act of 1933, as amended, shall be borne by the Sponsor.
The Sponsor shall receive no fees from Series 1 through 6 of the
Multistate Trust for services performed. The Sponsor will receive,
in connection with Series 7 and subsequent Series, a Sponsor's
Annual Fee as set forth in Part I of the Prospectus. The Sponsor's
Annual Fee, which is earned for portfolio supervisory services,
is based on the number of Units outstanding (or, in the case of
Series 7 through 13, on the face amount of underlying Securities)
in each State Trust at December 15 of each year. The Sponsor's
Annual Fee, which is not to exceed the maximum amount set forth
under "Summary of Essential Information" in Part I of the Prospectus,
may exceed the actual costs of providing portfolio supervisory
services for this Trust, but at no time will the total amount
it receives for portfolio supervisory services rendered to all
series of the Trust in any calendar year exceed the aggregate
cost to it of supplying such services in such year. See "Investment
Supervision." Also, the Sponsor may derive profits from maintaining
a secondary market in Units of the State Trusts.
For ordinary services performed under the Agreement, the Trustee
will be paid monthly at the rates set forth under "Summary of
Essential Information" in Part I of the Prospectus. The Trustee
will also benefit to the extent that its return on funds it holds
on deposit in the non-interest bearing Interest, Principal and
Reserve Accounts of each of the State Trusts created under the
Agreement is greater than its cost of advancing, without interest,
such amounts as may be necessary to provide distributions to Certificateholders
as required by the Agreement. (See "The Trust-Interest and Estimated
Current Return" and "Certificateholders-Trust Distributions.")
The Evaluator shall receive a fee for each evaluation as is set
forth under "Summary of Essential Information" in Part I of the
Prospectus.
The fees of the Trustee and the Evaluator are payable monthly
on or before each Distribution Day for a State Trust, and any
Sponsor's Annual Fee is paid annually on December 15, all by deductions
from the Interest Account of such State Trust to the extent funds
are available, then from the Principal Account of such State Trust. The
Page 35
Trustee's fee may not be increased for the purpose of compensating
the Trustee for any reduction in its fee during the first year
of the Multistate Trust. These fees may be increased without approval
of the Certificateholders by amounts not exceeding a proportionate
increase in the Consumer Price Index entitled "All Services Less
Rent," published by the United States Department of Labor, or
any equivalent index substituted therefor.
The cost of insurance obtained by a Guaranteed Trust is in the
amount set forth under "Summary of Essential Information" in Part
I of the Prospectus so long as such Guaranteed Trust retains the
Securities. Premiums, which are Guaranteed Trust obligations,
are payable monthly by the Trustee on behalf of such Guaranteed
Trust. As Securities in the portfolio are redeemed by their respective
issuers or are sold by the Trustee, the amount of the premium
will be reduced in respect of those Securities no longer owned
by and held in such Guaranteed Trust. A Guaranteed Trust does
not incur any expense for insurance which has been obtained by
an issuer of a Pre-insured Bond, since the premium or premiums
for such insurance have been paid by such issuer or other party;
any Pre-insured Bonds, however, are additionally insured by such
Guaranteed Trust. In the case of Series 23 and subsequent Series,
the premium payable for Permanent Insurance and the related custodial
fee will be paid solely from the proceeds of the sale of a Bond
from a Guaranteed Trust in the event the Trustee exercises the
right to obtain Permanent Insurance on such Bond. No premium need
be paid by any Guaranteed Trust on Bonds that are Pre-insured
by either MBIA or the Corporation.
In addition to the above, the following charges may be incurred
by the Multistate Trust: (a) fees for the Trustee's extraordinary
services; (b) expenses of the Trustee (including legal and auditing
expenses) and of counsel; (c) various governmental charges; (d)
expenses and costs of any action taken by the Trustee to protect
the Multistate Trust or any of the State Trusts and the rights
and interests of the Certificateholders; (e) indemnification of
the Trustee for any loss, liabilities and expenses incurred by
it in the administration of the Multistate Trust or any of the
State Trusts without gross negligence, bad faith or willful misconduct
on its part; (f) indemnification of the Sponsor for any loss,
liability and expenses incurred by it in acting as depositors
of the State Trust without gross negligence, bad faith or willful
misconduct; and (g) expenditures incurred in contacting Certificateholders
upon termination of any of the State Trusts. The fees and the
expenses set forth herein, and advances made by the Trustee in
order to eliminate certain fluctuations in periodic distributions
(see "Certificateholders-Trust Distributions"), are payable out
of the State Trusts and, when so paid by or owing to the Trustee,
secured by a prior lien on such State Trusts.
Fees and expenses of a State Trust shall be deducted from the
Interest Account of such State Trust, or to the extent funds are
not available in such Account, from the Principal Account of such
State Trust. The Trustee may withdraw from such Principal Account
or such Interest Account such amounts, if any, as it deems necessary
to establish a reserve for any taxes or other governmental charges
payable out of such State Trust. Amounts so withdrawn shall be
credited to the Reserve Account of such State Trust and shall
not be considered a part of such State Trust when determining
the value of the Units of such State Trust until such time as
the Trustee shall return all or any part of such amounts to the
appropriate account. If the balances in the Principal and Interest
Accounts are insufficient to provide for amounts payable by the
Multistate Trust, or amounts payable to the Trustee which are
secured by its prior lien on the Multistate Trust, the Trustee
is permitted to sell Securities to pay such amounts.
THE SPONSOR
The Sponsor is a Delaware corporation incorporated in 1977 to
succeed to the business of a partnership which resulted from mergers
of five New York Stock Exchange member firms. The Sponsor is a
wholly-owned subsidiary of The Advest Group, Inc., a financial
services holding company. The Sponsor is a registered broker-dealer
Page 36
and provides securities, brokerage, trading, investment banking
and other financial services for its clients. The Sponsor is a
member of the National Association of Securities Dealers, Inc.
and of the New York Stock Exchange, the American Stock Exchange
and other principal exchanges. The principal offices of the Sponsor
are located at One Commercial Plaza, 280 Trumbull Street, Hartford,
Connecticut 06103. The Sponsor maintains approximately 83 branch
offices in 18 states and the District of Columbia. As of March
31, 1995, the total stockholder's equity of the Sponsor was $74,841,000.
The Sponsor is entirely owned by The Advest Group, Inc. and is
affiliated with Boston Security Counsellors, Inc.
On February 9, 1987, without admitting or denying the findings
of fact or conclusions of law contained therein, the Sponsor consented
to the entry of an Order (In the Matter of Advest, Inc., Admin.
Proceeding File No. 3-6783) by the Commission which imposed a
censure of the Sponsor for failure to supervise its registered
representatives so as to prevent the overcharging of sales commissions
to certain mutual fund customers entitled to volume discounts
through rights of accumulation. The Sponsor has refunded such
excess commissions together with appreciation thereon to such
customers and revised its supervising procedures to address this
problem. In connection with this matter, the then Vice President
in charge of the Unit Trust and Mutual Fund Departments of the
Sponsor has been suspended for 30 days from association with any
broker or dealer, subject to his right to petition for review
of the initial decision. None of the activities which were the
basis for the administrative actions discussed above involved
the Sponsor's activities as a Sponsor of the State Trusts.
The foregoing information with respect to the stockholders' equity
of the Sponsor relates to the Sponsor only and not to the Multistate
Trust. Such information is included in this Prospectus only for
the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out contractual obligations
with respect to the Multistate Trust. More comprehensive financial
information can be obtained upon request from the Sponsor.
The contract of insurance relating to a Guaranteed Trust and the
negotiations in respect thereof represent the only significant
relationship between the Insurer (and, in the case of Series 23
and subsequent Series, certain agreements relating to Permanent
Insurance) and such Guaranteed Trust. Otherwise, neither the Insurer
nor any associate thereof has any material business relationship,
direct or indirect, with any Guaranteed Trust or the Sponsor,
except that the Sponsor may from time to time in the normal course
of its business, participate as underwriter or as manager or as
a member of underwriting syndicates in the distribution of new
issues of municipal bonds for which a policy of insurance guaranteeing
the payment of interest and principal has been obtained from the
Insurer. Although all issues contained in the portfolio are individually
insured, neither a Guaranteed Trust, the Units nor the portfolio
of such Guaranteed Trust is insured directly or indirectly by the Insurer.
LEGAL OPINIONS
The legality of the Units originally offered hereby and certain
matters relating to Federal tax law have been passed upon by Choate,
Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts
02109, as counsel for Moseley and the Sponsor for Series 1 through
19 of Multistate Trust. Special Counsel for each State Trust for
tax matters relating to the state for which such Trust is named
are referred to under "Portfolios - Risk Factors and Tax Status"
in Part I of the Prospectus. Booth & Baron, 122 East 42nd Street,
New York, New York 10168 has acted as counsel for the Trustee
and as special counsel for the Multistate Trust for New York tax
matters for Series 1 through 19 of Multistate Trust. Tanner Propp
& Farber, 99 Park Avenue, New York, New York 10016, has acted
as counsel for the Trustee and as special counsel for the Multistate
Trust for New York tax matters
Page 37
for Series 20 and subsequent Series. Brown & Wood, One World Trade
Center, New York, New York 10048 have acted as special counsel
for Moseley and the Sponsor with respect to Multistate Trust Series
20 and subsequent Series.
AUDITORS
The financial statements of the Multistate Trust included in Part
I of the Prospectus have been examined by BDO Seidman, LLP, independent
certified public accountants, as stated in their opinion appearing
herein, and are included herein in reliance upon such opinion
given upon the authority of that firm as experts in accounting
and auditing.
DESCRIPTION OF BOND RATINGS
Standard & Poor's: A Standard & Poor's corporate or municipal
bond rating is a current assessment of the creditworthiness of
an obligor with respect to a specific debt obligation. This assessment
of creditworthiness may take into consideration obligors such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold
a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit
in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
II. Nature of provisions of the obligation; and
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
BB, B, CCC, CC-Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Page 38
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful completion
of the project being financed by 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 of the project, 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.
NR-Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that S&P
does not rate a particular type of obligation as a matter of policy.
Moody's Investors Service, Inc.: A brief description of the applicable
Moody's Investor Service rating symbols and their meanings follow:
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 few speculative characteristics
as well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well as assured. Often the
protection of interest and principal payment may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or maintenance of other terms of the contract over any long period
of time may be small.
Con. (. . .)-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by: (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction
or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating
system. Although Industrial Revenue Bonds and Environmental Control
Revenue Bonds are tax-exempt issues, they are included in the
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.
Moody's does not apply numerical modifiers other than Aa1, A1, and Baa1,
which are described above, in its municipal bond rating system.
Page 39
<TABLE>
<CAPTION>
TABLE OF CONTENTS
for Prospectus, Part II
Page
______
<S> <C>
The Trust 1
Objectives 1
Organization 3
Portfolio 3
General Considerations 4
Guaranteed Trust Insurance 13
Interest, Estimated Current Return and
Estimated Long-Term Return 18
Tax Status of the Trust 19
Public Offering of Units 22
Public Offering Price 22
Accrued Interest 22
Method of Evaluation 23
Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price 24
Distribution of Units 25
Market for Units 25
Redemption 26
Unit Evaluation 28
Certificateholders 28
Description of Certificate 28
Trust Distributions 28
Statements to Certificateholders 29
Rights of Certificateholders 30
Automatic Reinvestment Plan 30
Investment Supervision 31
Administration of the Trust 32
The Trustee 32
The Evaluator 33
Successor Sponsor 33
Amendment and Termination of the Agreement 34
Limitations on Liability 34
Expenses of the Trust 35
The Sponsor 36
Legal Opinions 37
Auditors 38
Description of Bond Ratings 38
</TABLE>
_____________________________________
This Prospectus does not contain all of the information set forth
in the registration statement and exhibits relating thereto, filed
with the Securities and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, and to which reference is made.
_____________________________________
No person is authorized to give any information or to make any
representations not contained in 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.
_____________________________________
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 an offer in such state.
_____________________________________
MULTISTATE TAX
EXEMPT UNIT
TRUST PROSPECTUS
Series 1-7
and
MULTISTATE TRUST
Series 8
and Subsequent Series
_____________________________________
Sponsor:
ADVEST, INC.
One Commercial Plaza
280 Trumbull Street Hartford,
Connecticut 06103
(203) 525-1421
MULTISTATE TRUST, SERIES 43
SUMMARY OF ESSENTIAL INFORMATION
AT JUNE 30, 1995
================================
<TABLE>
<CAPTION>
Maryland Massachusetts Massachusetts Virginia
Trust Trust Discount Trust Trust
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Face Amount of Securities in Trust $ 2,840,000 $ 3,250,000 $ 2,310,000 $ 1,240,000
Number of Units 3,591 3,670 3,881 1,795
Fractional Undivided Interest in
Trust represented by each Unit 1/3,591 1/3,670 1/3,881 1/1,795
Public Offering Price:
Aggregate Bid Price of Underlying
Securities $2,982,386.78 $3,371,452.39 $2,222,293.29 $1,306,770.54
============= ============= ============= =============
Divided units in trust $ 830.51 $ 918.65 $ 572.60 $ 728.00
Plus Sales Charge 29.23 35.39 31.61 25.66
------------- ------------- ------------- -------------
Plus Offering Price per Unit $ 859.74* $ 954.04* $ 604.21* $ 753.66*
============= ============= ============= =============
Unit Value for Purposes of
Redemption $ 830.51 $ 918.65 $ 572.60 $ 728.00
Excess of Public Offering Price
per Unit over Redemption
Value per Unit $ 29.23 $ 35.39 $ 31.61 $ 25.66
Calculation of Estimated
Net Annual Interest Income
per Unit
- --------------------------------
</TABLE>
<TABLE>
<CAPTION>
MONTHLY:
- --------
<S> <C> <C> <C> <C>
Annual interest income per Unit $ 57.99 $ 67.10 $ 40.05 $ 50.25
Less estimated annual expenses
per Unit 2.27 2.27 1.89 2.45
------------- ------------- ------------- -------------
Estimated net annual interest
income per Unit $ 55.72 $ 64.83 $ 38.16 $ 47.80
============= ============= ============= =============
</TABLE>
Page 1
MULTISTATE TRUST, SERIES 43
SUMMARY OF ESSENTIAL INFORMATION
AT JUNE 30, 1995
(Continued)
================================
<TABLE>
<CAPTION>
Maryland Massachusetts Massachusetts Virginia
Trust Trust Discount Trust Trust
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SEMI-ANNUAL:
- ------------
Annual interest income per Unit $ 57.99 $ 67.10 $ 40.05 $ 50.25
Less estimated annual expenses
per Unit 1.69 1.69 1.46 1.94
------------- ------------- ------------- -------------
Estimated net annual interest
income per Unit $ 56.30 $ 65.41 $ 38.59 $ 48.31
============= ============= ============= =============
- --------------------------
* Plus accrued interest to expected
date of settlement (three
business days after
purchase) of
Monthly $ 10.31 $ 13.07 $ 8.36 $ 9.80
Semi-annual $ 14.58 $ 18.59 $ 11.42 $ 13.65
</TABLE>
Page 2
MULTISTATE TRUST, SERIES 43
SUMMARY OF ESSENTIAL INFORMATION
AT JUNE 30, 1995
(Continued)
================================
Per Unit Information
<TABLE>
<CAPTION>
Maryland Massachusetts Massachusetts Virginia
Trust Trust Discount Trust Trust
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Calculation of Estimated Monthly
or Semi-Annual Interest per
Unit:
Monthly
-------
Estimated net annual
interest income per Unit $ 55.72 $ 64.83 $ 38.16 $ 47.80
Divided by 12 $ 4.64 $ 5.40 $ 3.18 $ 3.98
Semi-annual
-----------
Estimated net annual
interest income
per Unit $ 56.30 $ 65.41 $ 38.59 $ 48.31
Divided by 2 $ 28.15 $ 32.70 $ 19.29 $ 24.15
Estimated Current Return based
on Public Offering Price:**
Monthly 6.48% 6.80% 6.32% 6.34%
Semi-annual 6.55% 6.86% 6.39% 6.41%
Estimated Long-Term Return:***
Monthly 5.31% 4.77% 5.47% 4.17%
Semi-annual 5.38% 4.83% 5.54% 4.24%
Daily rate at which interest
(net of estimated expenses)
accrues per Unit:
Monthly $.15477 $.18010 $.10600 $.13277
Semi-annual $.15638 $.18170 $.10719 $.13419
</TABLE>
Page 3
MULTISTATE TRUST, SERIES 43
SUMMARY OF ESSENTIAL INFORMATION
AT JUNE 30, 1995
(Continued)
================================
Per Unit Information (Continued)
Record Days:
Monthly: The first day of each month
Semi-Annual: June 1 and December 1 of each year
Distribution Days:
Monthly: The fifteenth day of each month
Semi-Annual: June 15 and December 15 of each year
Trustee's Annual Fee:
For each $1,000 principal amount of Bonds in the Trust, $1.24 under
the monthly and $.69 under the semi-annual distribution plan.
Minimum Value of State Trust:
Trust Agreement may be terminated if value of trust is less than:
Maryland Trust $800,000
Virginia Trust $400,000
Massachusetts Trust $800,000
Massachusetts Discount Trust $800,000
Evaluators' Fees: $12 for each daily valuation
Evaluation Time:
2:00 P.M., New York Time, on the day next following receipt by the
Sponsor of an order for a Unit sale or purchase or by the
Trustee of a Unit tendered for redemption.
Sponsor's Advisory Fee:
Maximum of $.25 per Unit outstanding in each State Trust increased
by the cumulative Consumer Price Index change since inception
of the Trust.
Mandatory Termination Date: December 31, 2036
[FN]
- -------------------------
**Semi-annual distributions yield a slightly higher return due
to lower Trustee's fees and expenses.
***Estimated Long-Term Return is calculated by using a formula
that takes into account the yields (including accretion of discounts
and amortization of premiums) of the individual Bonds in the Trust's
portfolio, weighted to reflect the market value and time to maturity
(or, in certain cases, to earlier call date) of such Bonds, adjusted
to reflect the Public Offering Price (including sales charge and
expenses) per Unit. This calculation does not take into account
delays in payment to Unit holders for the first few months of
Trust operations, which reduces the Long-Term Return number. See
"The Trust - Interest, Estimated Current Return and Estimated
Long-Term Return" in Part II of the Prospectus.
Page 4
Maryland Trust
The portfolio consists of 10 issues of Bonds representing obligations
of issuers located in Maryland with stated maturity dates ranging
from June 1, 1995 to July 1, 2018. $1,395,000 of the Bonds in
the Trust are General Obligations of the Governmental entities
issuing them. $1,780,000 of the Bonds in the Trust are payable
from the income of specific projects. The portfolio is divided
for purposes of issues as follows: General Obligations, 4 (45.1%);
Revenue Bonds: Housing, 2 (22.5%); Health Care, 1 (16.2%); and
Other, 3 (16.2%). The Trust is deemed "concentrated" in a particular
category when the Bonds in that category constitute 25% or more
of the aggregate principal amount of the Bonds in the Trust. For
further discussion relating to the special characteristics of
certain of such Bond issues, see "Portfolio" in Part II of the
Prospectus. 39.2% of the Bonds in the Portfolio are subject to
redemption prior to their stated maturity dates pursuant to sinking
fund or call provisions. For an explanation of the significance
of the factors see "Portfolio" in Part II of the Prospectus. On
May 31, 1995, the bid side valuation of 100% of the aggregate
principal amount of Bonds in the portfolio for this Trust was
at a premium over par. See "Portfolio" in Part II of this Prospectus.
Massachusetts Trust
The portfolio consists of 9 issues of Bonds representing obligations
of issuers located in Massachusetts and Puerto Rico, with stated
maturity dates ranging from May 1, 1996 to December 1, 2020. $1,075,000
of the Bonds in the Trust are General Obligations of the Governmental
entities issuing them. $2,390,000 of the Bonds in the Trust are
payable from the income of specific projects. The portfolio is
divided for purposes of issues as follows: General Obligations,
2 (31.0%); Revenue Bonds: Single-Family Housing, 1 (4.2%); Higher
Education, 1 (10.8%); Transportation, 2 (17.5%); Multi-Family
Housing, 1 (14.1%); and Other, 2 (22.4%). The Trust is deemed
"concentrated" in a particular category when the Bonds in that
category constitute 25% or more of the aggregate principal amount
of the Bonds in the Trust. For further discussion relating to
the special characteristics of certain of such Bond issues, see
"Portfolio" in Part II of the Prospectus. 69.0% of the Bonds in
the Portfolio are subject to redemption prior to their stated
maturity dates pursuant to sinking fund or call provisions. For
an explanation of the significance of the factors see "Portfolio"
in Part II of the Prospectus. On May 31, 1995, the bid side valuation
of 3.0% of the aggregate principal amount of Bonds in the portfolio
for this Trust was at a discount from par and 97.0% was at a premium
over par. See "Portfolio" in Part II of this Prospectus.
Page 5
Massachusetts Discount Trust
The portfolio consists of 6 issues of Bonds representing obligations
of issuers located in Massachusetts and Puerto Rico, with stated
maturity dates ranging from July 1, 2012 to December 1, 2020.
$750,000 of the Bonds in the Trust are General Obligations of
the Governmental entities issuing them. $1,560,000 of the Bonds
in the Trust are payable from the income of specific projects.
The portfolio is divided for purposes of issues as follows: General
Obligations, 1 (32.5%); Revenue Bonds: Housing, 1 (21.0%); Higher
Education, 1 (13.0%); Transportation, 2 (27.1%); and Other, 1
(6.4%). The Trust is deemed "concentrated" in a particular category
when the Bonds in that category constitute 25% or more of the
aggregate principal amount of the Bonds in the Trust. For further
discussion relating to the special characteristics of certain
of such Bond issues, see "Portfolio" in Part II of the Prospectus.
100% of the Bonds in the Portfolio are subject to redemption prior
to their stated maturity dates pursuant to sinking fund or call
provisions. For an explanation of the significance of the factors
see "Portfolio" in Part II of the Prospectus. On May 31, 1995,
the bid side valuation of 37.9% of the aggregate principal amount
of Bonds in the portfolio for this Trust was at a discount from
par and 62.1% was at a premium over par. See "Portfolio" in Part
II of this Prospectus.
Virginia Trust
The portfolio consists of 6 issues of Bonds representing obligations
of issuers located in Virginia, with stated maturity dates ranging
from May 15, 1997 to September 1, 2014. $280,000 of the Bonds
in the Trust are General Obligations of the Governmental entities
issuing them. $985,000 of the Bonds in the Trust are payable from
the income of specific projects. The portfolio is divided for
purposes of issues as follows: General Obligations, 1 (22.1%);
Revenue Bonds: Health Care, 2 (40.7%); Resource Recovery and Solid
Waste, 1 (23.7%); Single-Family Housing, 1 (.9%); and Other, 1
(12.6%). The Trust is deemed "concentrated" in a particular category
when the Bonds in that category constitute 25% or more of the
aggregate principal amount of the Bonds in the Trust. For further
discussion relating to the special characteristics of certain
of such Bond issues, see "Portfolio" in Part II of the Prospectus.
35.2% of the Bonds in the Portfolio are subject to redemption
prior to their stated maturity dates pursuant to sinking fund
or call provisions. For an explanation of the significance of
the factors see "Portfolio" in Part II of the Prospectus. On May
31, 1995, the bid side valuation of .8% of the aggregate principal
amount of Bonds in the portfolio for this Trust was at a discount
from par and 99.2% was at a premium over par. See "Portfolio"
in Part II of this Prospectus.
Page 6
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Sponsor, Trustee and Unit Holders of Multistate Trust, Series 43:
We have audited the accompanying statement of net assets of Multistate
Trust, Series 43 (Maryland Trust, Massachusetts Trust, Massachusetts
Discount Trust and Virginia Trust), including the schedule of
investments, as of May 31, 1995, and the related statements of
operations and changes in net assets for the years ended May 31,
1995 and 1994. These financial statements are the responsibility
of the Sponsor. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of May 31, 1995, by correspondence
with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor,
as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Multistate
Trust, Series 43 as of May 31, 1995, and the results of its operations
and changes in net assets for the years ended May 31, 1995 and
1994, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
June 30, 1995
Page 7
MULTISTATE TRUST, SERIES 43
STATEMENT OF NET ASSETS
MAY 31, 1995
============================
<TABLE>
<CAPTION>
Massachusetts
Maryland Massachusetts Discount Virginia
Trust Trust Trust Trust
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
CASH $ 8,326 $ 30,440 $ 9,234 $ 13,709
INVESTMENTS IN SECURITIES, at
market value (cost $3,008,476,
$3,360,732, $2,007,839 and
$1,214,937) 3,265,319 3,602,941 2,259,019 1,332,002
ACCRUED INTEREST RECEIVABLE 79,103 67,871 47,429 12,699
PREPAID EXPENSES 3,375 7,604 7,507 3,296
---------- ---------- ---------- ----------
Total trust property 3,356,123 3,708,856 2,323,189 1,361,706
LESS - ACCRUED EXPENSES
650 670 660 335
---------- ---------- ---------- ----------
NET ASSETS $3,355,473 $3,708,186 $2,322,529 $1,361,371
========== ========== ========== ==========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 8
MULTISTATE TRUST, SERIES 43
STATEMENT OF NET ASSETS
MAY 31, 1995
(Continued)
===========================
NET ASSETS REPRESENTED BY:
<TABLE>
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
------------ ------------ -----------
<S> <C> <C> <C>
Maryland Trust
- ---------------
VALUE OF FRACTIONAL
UNDIVIDED INTERESTS $1,684,560 $1,569,684 $3,254,244
UNDISTRIBUTED NET
INVESTMENT INCOME 29,265 71,964 101,229
---------- ---------- ----------
Total value $1,713,825 $1,641,648 $3,355,473
========== ========== ==========
UNITS OUTSTANDING 1,965 1,831 3,796
========== ========== ==========
VALUE PER UNIT $ 872.18 $ 896.59
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Trust
- --------------------
<S> <C> <C> <C>
VALUE OF FRACTIONAL
UNDIVIDED INTERESTS $2,289,145 $1,312,150 $3,601,295
UNDISTRIBUTED NET
INVESTMENT INCOME 42,134 64,757 106,891
---------- ---------- ----------
Total value $2,331,279 $1,376,907 $3,708,186
========== ========== ==========
UNITS OUTSTANDING 2,493 1,429 3,922
========== ========== ==========
VALUE PER UNIT $ 935.13 $ 963.54
========== ==========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 9
MULTISTATE TRUST, SERIES 43
STATEMENT OF NET ASSETS
MAY 31, 1995
(Continued)
===========================
NET ASSETS REPRESENTED BY:
<TABLE>
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
------------ ------------ -----------
<S> <C> <C> <C>
Massachusetts
Discount Trust
- --------------
VALUE OF FRACTIONAL
UNDIVIDED INTERESTS $1,287,226 $ 963,829 $2,251,055
UNDISTRIBUTED NET
INVESTMENT INCOME 24,471 47,003 71,474
---------- ---------- ----------
Total value $1,311,697 $1,010,832 $2,322,529
========== ========== ==========
UNITS OUTSTANDING 2,225 1,666 3,891
========== ========== ==========
VALUE PER UNIT $ 589.52 $ 606.74
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Virginia Trust
- --------------
<S> <C> <C> <C>
VALUE OF FRACTIONAL
UNDIVIDED INTERESTS $ 844,973 $ 480,973 $1,325,946
UNDISTRIBUTED NET
INVESTMENT INCOME 14,045 21,380 35,425
---------- ---------- ----------
Total value $ 859,018 $ 502,353 $1,361,371
========== ========== ==========
UNITS OUTSTANDING 1,163 662 1,825
========== ========== ==========
VALUE PER UNIT $ 738.62 $ 758.84
========== ==========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 10
MULTISTATE TRUST, SERIES 43
MARYLAND TRUST
STATEMENTS OF OPERATIONS
===========================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENT INCOME - INTEREST $231,667 $237,052
-------- --------
EXPENSES:
Trustee fees 4,141 4,146
Evaluation fees 759 759
Sponsors' advisory fees 1,441 959
Auditors' fees 979 980
-------- --------
Total expenses 7,320 6,844
-------- --------
NET INVESTMENT INCOME 224,347 230,208
REALIZED GAIN ON SECURITIES
SOLD OR REDEEMED (Note 3) 597 1,446
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION (29,764) (59,679)
-------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $195,180 $171,975
======== ========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 11
MULTISTATE TRUST, SERIES 43
MARYLAND TRUST
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 224,347 $ 230,208
Realized gain on securities
sold or redeemed 597 1,446
Net change in unrealized market
depreciation (29,764) (59,679)
---------- ----------
Net increase in net assets
resulting from operations 195,180 171,975
DISTRIBUTIONS TO UNIT HOLDERS OF
NET INVESTMENT INCOME (227,262) (230,162)
CAPITAL SHARE TRANSACTIONS:
Redemption of 116 and 48 units (98,761) (41,709)
---------- ----------
NET DECREASE IN NET ASSETS (130,843) (99,896)
NET ASSETS:
Beginning of year 3,486,316 3,586,212
---------- ----------
End of year $3,355,473 $3,486,316
========== ==========
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan $57.87 $57.70
Semi-annual plan $58.46 $58.39
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 12
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS TRUST
STATEMENTS OF OPERATIONS
===========================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENT INCOME - INTEREST $274,356 $283,063
-------- --------
EXPENSES:
Trustee fees 4,699 4,759
Evaluation fees 759 759
Sponsors' advisory fees 1,487 904
Auditors' fees 1,015 980
-------- --------
Total expenses 7,960 7,402
-------- --------
NET INVESTMENT INCOME 266,396 275,661
REALIZED GAIN ON
SECURITIES SOLD OR
REDEEMED (Note 3) 3,934 -
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION (53,593) (64,280)
-------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $216,737 $211,381
======== ========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 13
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 266,396 $ 275,661
Realized gain on securities
sold or redeemed 3,934 -
Net change in unrealized market
depreciation (53,593) (64,280)
---------- ----------
Net increase in net assets
resulting from operations 216,737 211,381
---------- ----------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income (274,703) (276,548)
Principal (215,661) (10,020)
---------- ----------
Total distributions (490,364) (286,568)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Redemption of 65 and 5 units (61,806) (4,936)
---------- ----------
NET DECREASE IN NET ASSETS (335,433) (80,123)
NET ASSETS:
Beginning of year 4,043,619 4,123,742
---------- ----------
End of year $3,708,186 $4,043,619
========== ==========
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan $68.29 $68.76
Semi-annual plan $70.29 $69.81
Principal:
Monthly plan $54.57 $ 2.51
Semi-annual plan $54.57 $ 2.51
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 14
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS DISCOUNT TRUST
STATEMENTS OF OPERATIONS
============================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENT INCOME - INTEREST $165,235 $172,678
-------- --------
EXPENSES:
Trustee fees 2,861 4,282
Evaluation fees 759 759
Sponsors' advisory fees 967 959
Auditors' fees 999 980
-------- --------
Total expenses 5,586 6,980
-------- --------
NET INVESTMENT INCOME 159,649 165,698
REALIZED GAIN ON
SECURITIES SOLD OR
REDEEMED (Note 3) 21,783 3,897
NET CHANGE IN UNREALIZED MARKET
APPRECIATION (DEPRECIATION) 2,695 (74,099)
-------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $184,127 $ 95,496
======== ========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 15
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS DISCOUNT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 159,649 $ 165,698
Realized gain on
securities sold or redeemed 21,783 3,897
Net change in unrealized market
appreciation (depreciation) 2,695 (74,099)
---------- ----------
Net increase in net assets
resulting from operations 184,127 95,496
---------- ----------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income (166,187) (167,462)
Principal (261,509) (24,329)
---------- ----------
Total distributions (427,696) (191,791)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Redemption of 65 and -0- units (39,384) -
---------- ----------
NET DECREASE IN NET ASSETS (282,953) (96,295)
NET ASSETS:
Beginning of year 2,605,482 2,701,777
---------- ----------
End of year $2,322,529 $2,605,482
========== ==========
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan $41.41 $41.63
Semi-annual plan $43.03 $43.16
Principal:
Monthly plan $66.84 $ 6.15
Semi-annual plan $66.84 $ 6.15
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 16
MULTISTATE TRUST, SERIES 43
VIRGINIA TRUST
STATEMENTS OF OPERATIONS
===========================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENT INCOME - INTEREST $95,155 $120,806
------- --------
EXPENSES:
Trustee fees 1,975 2,369
Evaluation fees 759 759
Sponsors' advisory fees 675 486
Auditors' fees 490 560
------- --------
Total expenses 3,899 4,174
------- --------
NET INVESTMENT INCOME 91,256 116,632
REALIZED GAIN ON
SECURITIES SOLD OR
REDEEMED (Note 3) 1,562 7,921
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION (11,956) (46,919)
------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $80,862 $ 77,634
======= ========
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 17
MULTISTATE TRUST, SERIES 43
VIRGINIA TRUST
STATEMENTS OF CHANGES IN NET ASSETS
===================================
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 91,256 $ 116,632
Realized gain on
securities sold or redeemed 1,562 7,921
Net change in unrealized market
depreciation (11,956) (46,919)
---------- ----------
Net increase in net assets
resulting from operations 80,862 77,634
---------- ----------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income (102,863) (119,290)
Principal (264,230) (10,220)
---------- ----------
Total distributions (367,093) (129,510)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Redemption of 134 and 41 units (97,339) (35,765)
---------- ----------
NET DECREASE IN NET ASSETS (383,570) (87,641)
NET ASSETS:
Beginning of year 1,744,941 1,832,582
---------- ----------
End of year $1,361,371 $1,744,941
========== ==========
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan $ 50.58 $ 58.92
Semi-annual plan $ 55.74 $ 59.48
Principal:
Monthly plan $134.88 $ 5.11
Semi-annual plan $134.88 $ 5.11
</TABLE>
[FN]
See accompanying notes to financial statements.
Page 18
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
General
-------
The Trust is registered under the Investment Company Act of 1940.
Securities
----------
Securities transactions are recorded on a settlement date
basis which does not differ materially from trade date. Investments
in securities are stated at bid side market value as determined
by an independent outside evaluator.
Taxes on income
---------------
The Trust is not subject to taxes on income and, accordingly,
no provision has been made.
NOTE 2 - DISTRIBUTIONS
- ----------------------
Interest received by the Trust is distributed to Unit Holders
either semi-annually on the fifteenth day of June and December
or, if elected by the Unit Holder, on the fifteenth day of each
month, after deducting applicable expenses. Principal distributions,
resulting from the sale or redemption of securities, were made
from the Massachusetts Trust in February 1995, from the Massachusetts
Discount Trust in July 1994 and February 1995 and from the Virginia
Trust in June 1994.
Page 19
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 3 - BONDS SOLD OR REDEEMED
- -------------------------------
<TABLE>
<CAPTION>
Port-
folio Principal Date Net Realized
No. Amount Redeemed Description Proceeds Cost Gain
- ----- --------- -------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maryland Trust
Year ended May 31, 1995:
1 $10,000 7/19/94 Montgomery $10,210 $10,116 $ 94
County,
Maryland,
Parking
Revenue
Bonds
(Bethesda
Parking Lot
District),
1987
Series A
1 20,000 10/14/94 Montgomery 20,418 20,231 187
County,
Maryland,
Parking
Revenue
Bonds
(Bethesda
Parking Lot
District),
1987
Series A
1 30,000 2/23/95 Montgomery 30,548 30,347 201
County,
Maryland,
Parking
Revenue
Bonds
(Bethesda
Parking Lot
District),
1987
Series A
</TABLE>
Page 20
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
- -------------------------------------------
<TABLE>
<CAPTION>
Port-
folio Principal Date Net Realized
No. Amount Redeemed Description Proceeds Cost Gain
- ----- --------- -------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maryland Trust (continued)
Year ended May 31, 1995 (continued):
1 $25,000 3/16/95 Montgomery $25,404 $25,289 $115
County,
Maryland,
Parking
Revenue
Bonds
(Bethesda
Parking Lot
District),
1987
Series A
------- ------- ------- ----
$85,000 $86,580 $85,983 $597
======= ======= ======= ====
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Trust
Year ended May 31, 1995:
<S> <C> <C> <C> <C> <C> <C>
* $ 20,000 8/31/94 M assachusetts $ 20,259 $ 20,238 $ 21
Health and
Educational
Facilities
Authority,
Revenue Bonds,
Massachusetts,
General
Hospital Issue,
Series D
(MBIA Insured)
</TABLE>
Page 21
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
- -------------------------------------------
<TABLE>
<CAPTION>
Port-
folio Principal Date Net Realized
No. Amount Redeemed Description Proceeds Cost Gain
- ----- --------- -------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Trust (continued)
Year ended May 31, 1995 (continued):
* $230,000 1/1/95 Massachusetts $234,600 $232,742 $1,858
Health and
Educational
Facilities
Authority,
Revenue Bonds,
Massachusetts
General
Hospital
Issue, Series D
(MBIA Insured)
1 25,000 4/26/95 Massachusetts 25,894 23,839 2,055
State College
Building
Authority,
Project and
Refunding
Revenue Bonds,
Series 1986-A
Guaranteed
By the
-------- Commonwealth -------- -------- ------
$275,000 $280,753 $276,819 $3,934
======== ======== ======== ======
</TABLE>
Page 22
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
- -------------------------------------------
<TABLE>
<CAPTION>
Port-
folio Principal Date Net Realized
No. Amount Redeemed Description Proceeds Cost Gain
- ----- --------- -------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Discount Trust
Year ended May 31, 1995:
* $ 900,000 6/1/94 Massachusetts $ 73,595 $ 53,550 $20,045
Housing
Finance
Agency,
Single-Family
Housing
Mortgage
Purchase
Bonds, 1984
Series A
* 215,000 1/1/95 Massachusetts 219,300 217,562 1,738
Health and
Educational
Facilities
Authority,
Revenue Bonds,
Massachusetts
General
Hospital
Issue, Series D
---------- (MBIA Insured) -------- -------- -------
$1,115,000 $292,895 $271,112 $21,783
========== ======== ======== =======
</TABLE>
Page 23
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
- -------------------------------------------
<TABLE>
<CAPTION>
Port-
folio Principal Date Net Realized
No. Amount Redeemed Description Proceeds Cost Gain
- ----- --------- -------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Virginia Trust
Year ended May 31, 1995:
2 $15,000 9/21/94 Eastern Virginia $16,157 $15,830 $ 327
Medical
Authority,
General
Revenue Bonds
(Medical
Education
Facilities
Projects),
Series 1987
2 70,000 11/22/94 Eastern Virginia 75,107 73,872 1,235
Medical
Authority,
General
Revenue Bonds
(Medical
Education
Facilities
Projects),
------- Series 1987 ------- ------- ------
$85,000 $91,264 $89,702 $1,562
======= ======= ======= ======
</TABLE>
[FN]
- ------------
* Portfolio redeemed in its entirety.
Page 24
MULTISTATE TRUST, SERIES 43
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 4 - NET ASSETS
- -------------------
<TABLE>
<CAPTION>
Massachusetts
Maryland Massachusetts Discount Virginia
Trust Trust Trust Trust
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Cost of 4,000, 4,000,
4,000 and 2,000 units at
Date of Deposit $4,032,710 $4,097,922 $3,049,685 $2,040,183
Less gross underwriting
commission 197,560 200,760 167,720 99,960
---------- ---------- ---------- ----------
Net cost - initial
offering price 3,835,150 3,897,162 2,881,965 1,940,223
Realized net gain (loss)
on securities sold or
redeemed (60,299) 9,323 5,455 (63,788)
Principal distributions (604,118) (472,906) (816,986) (534,450)
Redemption of units (173,332) (74,493) (70,559) (133,104)
Unrealized market
appreciation of
securities 256,843 242,209 251,180 117,065
Undistributed net
investment income 101,229 106,891 71,474 35,425
---------- ---------- ---------- ----------
Net assets $3,355,473 $3,708,186 $2,322,529 $1,361,371
========== ========== ========== ==========
</TABLE>
Page 25
MULTISTATE TRUST, SERIES 4
MARYLAND TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 25,000 Montgomery County, Aaa(2) 7.600% 06/01/95 No Optional Call $ 25,289 $ 25,500 $ 1,900
Maryland,
Parking
Revenue Bonds
(Bethesda Parking
Lot District),
1987 Series A
(Prerefunded
@ 102 originally
due 06/01/02)
2 195,000 Community Development Aa(2) 7.250 04/01/16 04/01/07 @ 100 S.F. 181,695 198,530 14,138
Administration, 04/01/96 @ 103 Opt.
Department of
Economic and
Community
Development, State
of Maryland,
Single-Family
Program Bonds,
1986 Third Series
3 500,000 Community Aa(2) 8.200 04/01/18 04/01/15 @ 100 S.F. 510,000 515,000 41,000
Development 04/01/97 @ 103 Opt.
Administration,
Department of
Economic and
Community
Development,
State of
Maryland,
Single-Family
Program Bonds,
1987 Second Series
</TABLE>
Page 26
MULTISTATE TRUST, SERIES 43
MARYLAND TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 $ 500,000 Montgomery County, AAA 7.200% 07/01/97 No Optional Call $ 494,765 $ 539,030 $ 36,000
Maryland, General
Obligation Bonds,
Consolidated
Public Improvement
Bonds of 1987,
Series A
(Prerefunded @
102 originally
due 07/01/07)
5 500,000 Maryland Health AAA 7.100 07/01/96 No Optional Call 470,600 525,125 35,500
and Higher
Educational
Facilities
Authority,
Project and
Refunding
Revenue Bonds,
Greater
Baltimore
Medical Center,
Series 1986
(Prerefunded @
102 originally
due 07/01/17)
6 100,000 St. Mary's County A+ 6.900 07/01/11 No Sinking Fund 93,892 103,668 6,900
(Maryland) 07/01/96 @ 102 Opt.
Metropolitan
Commission
Refunding Bonds
of 1986
7 165,000 St. Mary's County A+ 6.900 07/01/12 No Sinking Fund 154,773 170,443 11,385
(Maryland) 07/01/96 @ 102 Opt.
Metropolitan
Commission
Refunding Bonds
of 1986
</TABLE>
Page 27
MULTISTATE TRUST, SERIES 43
MARYLAND TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8 $ 250,000 Mayor and City AAA 6.750% 07/01/18 07/01/09 @ 100 S.F. $ 227,545 $ 260,775 $ 16,875
Council of 07/01/97 @ 102 Opt.
Baltimore,
Maryland
Refunding
Revenue Bonds
(Baltimore City
Parking System
Facilities),
Series 1987 B
(FGIC Insured)
9 225,000 Montgomery Aaa(2) 7.850 06/01/95 No Optional Call 228,441 255,000 17,662
County,
Maryland,
Parking
Revenue Bonds
(Bethesda
Parking Lot
District),
1987 Series A
(Prerefunded
@ 102 originally
due 06/01/07)
10 630,000 Washington AAA 7.375 01/01/97 No Optional Call 621,476 672,248 46,463
Suburban
Sanitary
District,
Maryland
(Montgomery
and Prince
George's
Counties)
General
Construction
Refunding Bonds
of 1986
(Prerefunded
@ 102 originally
---------- due 01/01/10) ---------- ---------- --------
$3,090,000 $3,008,476 $3,265,319 $227,823
========== ========== ========== ========
</TABLE>
Page 28
MULTISTATE TRUST, SERIES 43
MARYLAND TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
NOTES TO SCHEDULE OF INVESTMENTS
(A) A description of the rating symbols and their meanings appears
under "Description of Bond Ratings" in Part II of this Prospectus.
Ratings are by Standard & Poor's Corporation, except for those
indicated by (2), which are by Moody's Investors Service. Certain
bond ratings have changed since the Date of Deposit, at which
time all such bonds were rated A or better by either Standard
& Poor's Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking
fund (mandatory partial redemption) (S.F.) or at the stated optional
call (at the option of the issuer) (Opt.) or by refunding. Certain
bonds in the portfolio may be redeemed earlier than dates shown
in whole or in part under certain unusual or extraordinary circumstances
as specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely
to be called subject to such provisions, but other bonds may have
similar call features.
Page 29
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 475,000 Massachusetts State A+ 7.250% 05/01/96 No Optional Call $ 452,941 $ 496,190 $ 34,437
College Building
Authority,
Project and
Refunding Revenue
Bonds, Series
1986-A Guaranteed
By the Commonwealth
(Prerefunded @ 102
originally due
05/01/16)
2 600,000 Southeastern A+ 7.800 05/01/16 05/01/12 @ 100 S.F. 604,236 626,262 46,800
Massachusetts 05/01/96 @ 102 Opt.
University
Building Authority,
Project and Revenue
Refunding Bonds,
1986 Series A
3 375,000 Massachusetts AA+ 6.400 11/01/14 11/01/03 @ 100 S.F. 319,680 375,889 24,000
Health and 11/01/95 @ 100 Opt.
Educational
Facilities
Authority,
Revenue Bonds,
Amherst College
Issue, Series D
4 500,000 Massachusetts Port AA 7.125 07/01/12 07/01/98 @ 100 S.F. 468,300 505,810 35,625
Authority, 07/01/95 @ 101 Opt.
Revenue Refunding
Bonds, Series 1978
5 105,000 Massachusetts Bay A+ 5.750 03/01/17 03/01/16 @ 100 S.F. 81,729(C) 103,579(C) 6,038(C)
Transportation 03/01/97 @ 100 Opt.
Authority,
General
Transportation
System Bonds,
1987 Series A
</TABLE>
Page 30
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 $ 490,000 Massachusetts AAA 9.125% 12/01/20 06/01/10 @ 100 S.F. $ 539,274 $ 507,125 $ 44,713
Housing Finance 12/01/95 @ 102 Opt.
Agency, Multi-
Family Housing
Mortgage Revenue
Bonds, 1985
Series (GNMA
Mortgage-Backed
Securities)
7 145,000 Massachusetts Aa(2) 7.875 06/01/14 12/01/05 @ 100 S.F 144,275 149,887 11,419
Housing Finance 12/01/96 @ 102 Opt.
Agency, Single-
Family Housing
Revenue Bonds,
Series 3
8 175,000 Massachusetts AAA 6.625 01/01/07 01/01/01 @ 100 S.F. 157,797 183,431 11,593
Industrial Finance 01/01/97 @ 102 Opt.
Agency, Museum
Revenue Bonds
(Museum of
Fine Arts,
Boston - 1987
Issue) (MBIA
Insured)
9 600,000 Puerto Rico Public AAA 7.875 07/01/97 No Optional Call 592,500 654,768 47,250
Building Authority,
Public Educational
and Health Facilities
Bonds, Series H,
Guaranteed By The
Commonwealth of
Puerto Rico (Prerefunded
@ 102 originally due
07/01/16)
---------- ---------- ---------- --------
$3,465,000 $3,360,732 $3,602,941 $261,875
========== ========== ========== ========
</TABLE>
Page 31
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
NOTES TO SCHEDULE OF INVESTMENTS
(A) A description of the rating symbols and their meanings appears
under "Description of Bond Ratings" in Part II of this Prospectus.
Ratings are by Standard & Poor's Corporation, except for those
indicated by (2), which are by Moody's Investors Service. Certain
bond ratings have changed since the Date of Deposit, at which
time all such bonds were rated A or better by either Standard
& Poor's Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking
fund (mandatory partial redemption) (S.F.) or at the stated optional
call (at the option of the issuer) (Opt.) or by refunding. Certain
bonds in the portfolio may be redeemed earlier than dates shown
in whole or in part under certain unusual or extraordinary circumstances
as specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely
to be called subject to such provisions, but other bonds may have
similar call features.
(C) The cost to the Trust of the "original issue discount" bonds
(Portfolio Number 5) includes accreted interest income of $40
from the date of issuance of the bond to the Date of Deposit.
The accreted interest income from the Date of Deposit to May
31, 1995 from the bond has been $1,134. Accreted interest income
has been calculated on a compounded semi-annual basis from the
initial offering date of the bonds, at an annual rate of 6.45%
based upon an original issuance discount at 9.25% of par. There
will be periodic payments of interest at annual interest rates
of 5.75% of the aggregate principal amount of the bonds.
Page 32
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS DISCOUNT TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 150,000 Southeastern A+ 7.800% 05/01/16 05/01/12 @ 100 S.F. $ 151,059 $ 156,566 $ 11,700
Massachusetts 05/01/96 @ 102 Opt.
University
Building Authority,
Project and
Refunding Revenue
Bonds, 1986
Series A
2 300,000 Massachusetts AA+ 6.400 11/01/14 11/01/03 @ 100 S.F. 255,744 300,711 19,200
Health and 11/01/95 @ 100 Opt.
Educational
Facilities
Authority,
Revenue Bonds,
Amherst College
Issue, Series D
3 500,000 Massachusetts Port AA 7.125 07/01/12 07/01/98 @ 100 S.F. 468,300 505,810 35,625
Authority, 07/01/95 @ 101 Opt.
Revenue Refunding
Bonds, Series 1978
4 125,000 Massachusetts Bay A+ 5.750 03/01/17 03/01/16 @ 100 S.F. 97,296(C) 123,309(C) 7,187(C)
Transportation 03/01/97 @ 100 Opt.
Authority,
General
Transportation
System Bonds,
1987 Series A
</TABLE>
Page 33
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS DISCOUNT TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 $ 485,000 Massachusetts AAA 9.125% 12/01/20 06/01/10 @ 100 S.F. $ 533,772 $ 501,951 $ 44,256
Housing Finance 12/01/95 @ 102 Opt.
Agency, Multi-
Family Mortgage
Revenue Bonds, 1985
Series A (GNMA
Mortgage-Backed
Securities)
6 750,000 Puerto Rico Public A 5.000 07/01/17 No Sinking Fund 501,668(C) 670,672(C) 37,500(C)
Buildings Authority, 07/01/97 @ 102 Opt.
Public Education
and Health Facilities
Bonds, Series H,
Guaranteed By The
Commonwealth of
Puerto Rico
---------- ---------- ---------- --------
$2,310,000 $2,007,839 $2,259,019 $155,468
========== ========== ========== ========
</TABLE>
Page 34
MULTISTATE TRUST, SERIES 43
MASSACHUSETTS DISCOUNT TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
NOTES TO SCHEDULE OF INVESTMENTS
(A) A description of the rating symbols and their meanings appears
under "Description of Bond Ratings" in Part II of this Prospectus.
Ratings are by Standard & Poor's Corporation, except for those
indicated by (2), which are by Moody's Investors Service. Certain
bond ratings have changed since the Date of Deposit, at which
time all such bonds were rated A or better by either Standard
& Poor's Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking
fund (mandatory partial redemption) (S.F.) or at the stated optional
call (at the option of the issuer) (Opt.) or by refunding. Certain
bonds in the portfolio may be redeemed earlier than dates shown
in whole or in part under certain unusual or extraordinary circumstances
as specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely
to be called subject to such provisions, but other bonds may have
similar call features.
(C) With the exception of the "original issue discount" bonds
referred to above, the cost to the Trust of the "original issue
discount" bonds (Portfolio Numbers 4 and 6) includes accreted
interest income of $48 and $170, from the date of issuance of
the Bonds to the Date of Deposit. The accreted interest income
from the Date of Deposit to May 31, 1995 from these Bonds has
been $1,344 and $22,492. Accreted interest income has been calculated
on a compounded semi-annual basis from the initial offering date
of the Bonds, at an annual interest rate of 6.45% and 7.8%, respectively,
based upon an original issuance discount of 9.25% and 32.3%, respectively,
of par. There will be periodic payments of interest rates of 5.75%
and 5.00% of the aggregate principal amount of the Bonds.
Page 35
MULTISTATE TRUST, SERIES 43
VIRGINIA TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 280,000 City of Portsmouth, NR 7.500% 11/01/97 No Optional Call $ 277,900 $ 304,489 $ 21,000
Virginia,
Various General
Obligation Bonds,
Series 1987
(Prerefunded
@ 102.5
originally
due 11/01/12)
2 215,000 Eastern Virginia NR 8.375 05/15/97 No Optional Call 226,891 233,798 18,006
Medical
Authority,
General Revenue
Bonds (Medical
Education
Facilities
Projects),
Series 1987
(Prerefunded
@ 102 originally
due 05/15/17)
3 10,000 Virginia Housing AAA 0.000 09/01/14 09/01/04 @ 35.513 S.F. 709(C) 1,490(C) -(C)
Development No Optional Call
Authority,
Residential
Mortgage Bonds,
1983 Series B
4 160,000 Virginia Public AAA 6.100 03/01/02 No Sinking Fund 141,579 172,304 9,760
Building No Optional Call
Authority
State Building
Revenue Refunding
Bonds, 1987 Series
(Escrowed to
maturity)
</TABLE>
Page 36
MULTISTATE TRUST, SERIES 43
VIRGINIA TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 $ 300,000 Industrial A+ 7.400% 01/01/08 01/01/99 @ 100 S.F. $ 289,296 $ 305,079 $ 22,200
Development 07/01/95 @ 101.5 Opt.
Authority of
The City of
Alexandria,
Virginia,
Resource
Recovery
Revenue Bonds,
Series 1984
(Alexandria/
Arlington
Waste-To-Energy
Facility)
6a 135,000 Industrial Aa(2) 7.000 11/01/07 11/01/03 @ 100 S.F. 125,353 140,000 9,450
Development 11/01/97 @ 100 Opt.
Authority of
The City
of Norfolk,
Virginia,
Hospital
Revenue Bonds,
Series 1987
A (Medical
Center Hospitals
Project)
</TABLE>
Page 37
MULTISTATE TRUST, SERIES 43
VIRGINIA TRUST
SCHEDULE OF INVESTMENTS
MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Market
Redemption Features Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Principal Name of Issuer and Ratings Coupon Maturity Opt. - Optional Call Bonds May 31, Income to
No. Amount Title of Bond (Note A) Rate (Note B) (Note B) to Trust 1995 Trust
- ----- ---------- -------------------- -------- ------- -------- -------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6b $ 165,000 Industrial Aa(2) 7.000% 11/01/97 No Optional Call $ 153,209 $ 174,842 $ 11,550
Development
Authority of
The City of
Norfolk,
Virginia,
Hospital
Revenue Bonds,
Series 1987
A (Medical
Center
Hospitals
Project)
(Prerefunded
@ 100 originally
due 11/01/07)
---------- ---------- ---------- --------
$1,265,000 $1,214,937 $1,332,002 $ 91,966
========== ========== ========== ========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(A) A description of the rating symbols and their meanings appears
under "Description of Bond Ratings" in Part II of this Prospectus.
Ratings are by Standard & Poor's Corporation, except for those
indicated by (2), which are by Moody's Investors Service. Certain
bond ratings have changed since the Date of Deposit, at which
time all such bonds were rated A or better by either Standard
& Poor's Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking
fund (mandatory partial redemption) (S.F.) or at the stated optional
call (at the option of the issuer) (Opt.) or by refunding. Certain
bonds in the portfolio may be redeemed earlier than dates shown
in whole or in part under certain unusual or extraordinary circumstances
as specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely
to be called subject to such provisions, but other bonds may have
similar call features.
(C) The cost to the Trust of the "zero coupon" bonds (Portfolio
Number 3) includes accreted interest income of $191 from the
date of issuance of the Bonds to the Date of Deposit. The accreted
interest income from the Date of Deposit to May 31, 1995 from
these bonds has been $760. Accreted interest income has been calculated
on a compounded semi-annual basis from the initial offering date
of the bonds, at an annual rate of 10.6% based upon an original
issuance discount at 95.9% of par. There are no periodic payments
of interest.
Page 38
MULTISTATE TRUST, SERIES 43
FINANCIAL DATA SCHEDULE
AT MAY 31, 1995
===========================
<TABLE>
<CAPTION>
Item number Item description Amount
- ----------- ----------------------------------------- ----------------------------------------------------------
Massa-
Massa- chusetts
Maryland chusetts Discount Virginia
Trust Trust Trust Trust
----------- ----------- ----------- -----------
<C> <S> <C> <C> <C> <C>
6-03- Investments - cost $3,008,476 $3,360,732 $2,007,839 $1,214,937
6-04-4 Investments 3,265,319 3,602,941 2,259,019 1,332,002
6-04-6 Receivables 79,103 67,871 47,429 12,699
6-04-8 Other assets 11,701 38,044 16,741 17,005
- - Balancing amount to total assets n/a n/a n/a n/a
6-04-9 Total assets 3,356,123 3,708,856 2,323,189 1,361,706
6-04 Accounts payable for securities n/a n/a n/a n/a
6-04-13 Senior long-term debt n/a n/a n/a n/a
- - Balancing amount to total liabilities 650 670 660 335
6-04-14 Total liabilities 650 670 660 335
6-04-16 Senior equity securities n/a n/a n/a n/a
6-04-16 Paid-in capital - common shareholders n/a n/a n/a n/a
6-04-16 Number of shares or units -
current period 3,796 3,922 3,891 1,825
</TABLE>
Page 39
MULTISTATE TRUST, SERIES 43
FINANCIAL DATA SCHEDULE
AT MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Item number Item description Amount
- ----------- ----------------------------------------- ----------------------------------------------------------
Massa-
Massa- chusetts
Maryland chusetts Discount Virginia
Trust Trust Trust Trust
----------- ----------- ----------- -----------
<C> <S> <C> <C> <C> <C>
6-04-16 Number of shares or units - prior period 3,912 3,987 3,956 1,959
6-04-17(a) Accumulated undistributed net investment
income (current year) $ 101,229 $ 106,891 $ 71,474 $ 35,425
- - Overdistribution of net investment income n/a n/a n/a n/a
6-04-17(b) Accumulated undistributed net realized
gains (losses) n/a n/a n/a n/a
- - Overdistribution of realized gains n/a n/a n/a n/a
6-04-17(c) Accumulated net unrealized appreciation
(depreciation) 256,843 242,209 251,180 117,065
6-04-19 Net assets 3,355,473 3,708,186 2,322,529 1,361,371
6-07-1(a) Dividend income n/a n/a n/a n/a
6-07-1(b) Interest income 231,667 274,356 165,235 95,155
6-07-1(c) Other income n/a n/a n/a n/a
6-07-2 Expenses - net 7,320 7,960 5,586 3,899
6-07-6 Net investment income (loss) 224,347 266,396 159,649 91,256
</TABLE>
Page 40
MULTISTATE TRUST, SERIES 43
FINANCIAL DATA SCHEDULE
AT MAY 31, 1995
(Continued)
===========================
<TABLE>
<CAPTION>
Item number Item description Amount
- ----------- ----------------------------------------- ----------------------------------------------------------
Massa-
Massa- chusetts
Maryland chusetts Discount Virginia
Trust Trust Trust Trust
----------- ----------- ----------- -----------
<C> <S> <C> <C> <C> <C>
6-07-7(a) Realized gains (losses) on investments $ 597 $ 3,934 $ 21,783 $ 1,562
6-07-7(d) Net increase (decrease) in appreciation
(depreciation) (29,764) (53,593) 2,695 (11,956)
6-07-9 Net increase (decrease) in net assets
resulting from operations 195,180 216,737 184,127 80,862
C-09-2 Net equalization charges and credit n/a n/a n/a n/a
6-09-3(a) Distributions from net investment income (227,262) (274,703) (166,187) (102,863)
6-09-3(b) Distributions from realized gains n/a n/a n/a n/a
6-09-3(c) Distributions from other sources (98,761) (277,467) (300,893) (361,569)
6-09-4(b) Number of shares sold n/a n/a n/a n/a
6-09-4(b) Number of shares redeemed 116 65 65 134
6-09-4(b) Number of shares issued - reinvestment n/a n/a n/a n/a
6-09-5 Total increase (decrease) [in assets] (130,843) (335,433) (282,953) (383,570)
6-09-7 Accumulated undistributed net investment
income (prior year) n/a n/a n/a n/a
6-04-17(b) Accumulated undistributed net realized
gains (prior year) n/a n/a n/a n/a
Overdistribution of net investment income
(prior year) n/a n/a n/a n/a
Overdistribution of net realized gains
(prior year) n/a n/a n/a n/a
</TABLE>
Page 41
Multistate Tax Exempt Unit Trust, Series 1-7
and
Multistate Trust, Series 8
and Subsequent Series
PROSPECTUS, Part II
Note: Part II of this Prospectus may not be distributed unless
accompanied by Part I.
THE TRUST
The Units being offered by this Prospectus are issued and outstanding
Units which have been purchased by Advest, Inc. (the "Sponsor")
in the secondary market or from the Trustee, after having been
tendered for redemption. The Units are being offered by the Sponsor
at the Public Offering Price plus accrued interest to the expected
date of settlement. The profit or loss resulting from the sale
of Units will accrue to the Sponsor. No proceeds from the sale
will be received by the Trust. The minimum investment which may
be made is one Unit.
Objectives
The Trust (herein referred to as the "Trust" or the "Multistate
Trust") is one of a series of separate unit trusts formed by Moseley
Securities Corporation ("Moseley"), formerly a sponsor of the
Trust, and the Sponsor under the name Multistate Tax Exempt Unit
Trust, in the case of Series 1 through 7, and under the name Multistate
Trust, in the case of Series 8 and subsequent Series. Effective
December 29, 1987 Moseley resigned as a sponsor and the agent
of the various series of the Trust. The objectives of the Trust,
consisting of the underlying State Trusts, are to provide investors
with preservation of capital and interest income free from Federal
income tax and to the extent indicated from state and local taxes
in the State for which the State Trust is named through investment
in a portfolio of tax exempt securities. Each State Trust shall
consist of interest bearing debt obligations or contracts to purchase
such obligations of the State for which the Trust is named, its
political subdivisions, municipalities, and public authorities,
or of certain United States territories or possessions and their
public authorities and may include Trust Units, all described
under "Schedule of Investments" (the "Bonds" or "Securities"),
dated as of the Date of Determination for the applicable State
Trust in Part I of the Prospectus. In the opinion of bond counsel
to the respective issuers of the Bonds (and the bonds underlying
any Trust Units), under existing law interest on the Bonds is
exempt from Federal income tax. In addition, the interest income
of each State Trust is, in the opinion of counsel, exempt to the
extent indicated from state and local taxes when held by residents
of the state the name of which appears in the name of such State
Trust. With certain exceptions, capital gains realized upon a
sale of Units by an investor or upon disposition of Securities
by the Trust will be subject to tax. (See "The Trust-Tax Status
of the Trust.") Certain of the Bonds in a State Trust may have
been purchased at prices which resulted in the portfolio as a
whole being purchased at a market discount. See "Portfolios-State
Risk Factors and Tax Status" in Part I of the Prospectus for a
description of market discount which may result in taxable income
and capital gain to investors.
Page 1
The Multistate Trust offers investors an opportunity to participate
in a portfolio of tax exempt securities with greater diversification
than they might be able to acquire individually. The rate of current
interest income, in part, reflects the various factors described
in Part I of the Prospectus for each State Trust. Investors should
be aware that there is no guarantee that the Multistate Trust's
objectives will be achieved because they are subject to the continuing
ability of the respective issuers of the Bonds (and the Bonds
underlying any Trust Units) to meet the interest and principal
payment obligations of such Bonds and of the insurer for that
series of the Guaranteed Trust (the "Insurer")* to meet their
obligations under the insurance policies guaranteeing the payment,
when due, of all principal of and interest on each of the Bonds
held in any Guaranteed Trust, and because the market value of
such Bonds can be affected by fluctuations in interest rates.
______________
* Municipal Bond Insurance Association is the Insurer of any Guaranteed
Trust for Series 1 through Series 36. MBIA Insurance Corporation
is the Insurer of any Guaranteed Trust for Series 37 and Subsequent Series.
Guaranteed Trust Insurance
Insurance guaranteeing the payment of all principal (either at
the stated maturity or by any advancement of maturity pursuant
to a mandatory sinking fund payment) and interest on each of the
Securities in a Guaranteed Trust as such payment shall become
due but shall not be paid has been obtained by such Guaranteed
Trust from the Insurer. Certain issues of Securities in a Guaranteed
Trust may be Pre-insured Bonds, which are also insured under insurance
obtained by its issuer or other parties. Insurance obtained by
a Guaranteed Trust is effective only while the Bonds thus insured
are held in such Guaranteed Trust; however, any insurance previously
obtained by the issuer or any other party, for which a single
premium has been paid, is effective so long as the Pre-insured
bonds are outstanding. Regardless of whether the insurer of a
Pre-insured Bond fulfills its obligations, such Bond will, in
any case, continue to be insured under the policy obtained by
a Guaranteed Trust from the Insurer, as long as the Bond is held
in such Guaranteed Trust and, such Bond will continue to be insured
by the Insurer after such Bond is sold from a Guaranteed Trust
assuming the Trustee exercises its right to obtain permanent insurance
on such Bond, as discussed below. No representation is made as
to any Insurer's ability to meet its commitments.
Neither the Public Offering Price nor any evaluation of Units
for purposes of repurchases or redemptions reflects any element
of value for the insurance obtained by a Guaranteed Trust unless
Securities are in default in payment of principal or interest
or in significant risk of such default. (See "Public Offering
of Units-Public Offering Price.") On the other hand, the value,
if any, of insurance obtained by the issuer of the Securities
is reflected and included in the market value of such Securities.
Insurance is not a substitute for the basic credit of an issuer
but supplements the existing credit and provides additional security
therefor. If an issue is accepted for insurance, a non-cancellable
policy for the payment of interest and principal on the bonds
is issued by the Insurer. A single premium is paid by the issuer
or any other party for its insurance on Pre-insured Bonds, and
a monthly premium is paid by a Guaranteed Trust for the insurance
it obtains from the Insurer on all of the Bonds in such Guaranteed
Trust that are not pre-insured by either Municipal Bond Insurance
Association ("MBIA") or MBIA Insurance Corporation (the "Corporation").
No premium will be paid by a Guaranteed Trust on Bonds pre-insured
by either MBIA or the Corporation. Pursuant to an irrevocable
commitment of the Insurer, upon the sale of a Bond from a Guaranteed
Trust, the Trustee has the right to obtain permanent insurance
with respect to such Bond upon the payment of a single predetermined
insurance premium from the proceeds of the sale of such Bond.
It is expected that the Trustee will exercise the right to obtain
permanent insurance for a Bond in a Guaranteed Trust upon instruction
from the Sponsor whenever the value of that Bond insured to its
maturity less the applicable permanent insurance
Page 2
premium and the related custodial fee exceeds the value of the
Bond without such insurance. (See "The Trust-General Considerations-
Guaranteed Trust Insurance.")
Organization
The Multistate Trust is one of a series of unit investment trusts
created by Moseley and the Sponsor under the name Multistate Tax
Exempt Unit Trust, in the case of Series 1 through 7, and the
name Multistate Trust, in the case of Series 8 and subsequent
Series. The Multistate Trust was created under the laws of New
York pursuant to a Trust Agreement** (the "Agreement"), dated
as of the Date of Deposit as set forth under the "Summary of Essential
Information" in Part I of the Prospectus, among Moseley and the
Sponsor, the trustee and the evaluator. The Bank of New York (the
"Trustee") acts as successor trustee for Series 1 through 23 and
as trustee for Series 24 and subsequent Series. Securities Evaluation
Service, Inc. (the "Evaluator") acts as successor evaluator for
each Series of the Multistate Trust.
______________
**References in this Prospectus to the Agreement are qualified
in their entirety by the Agreement which is incorporated herein
by reference.
On the Pricing Date as defined in Part I of the Prospectus, each
Unit of each State Trust represented the fractional undivided
interest in the principal and net income of such State Trust set
forth under "Summary of Essential Information" in Part I of the
Prospectus. If any Units of a State Trust are redeemed by the
Trustee, the principal amount of Securities in such State Trust
will be reduced by the amount allocable to such redeemed Units
and the fractional undivided interest represented by each Unit
will be increased. The number of Units comprising each State Trust
will not be increased.
Portfolio
All of the issues of Bonds in each State Trust were rated by Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's") or Moody's Investors Service, Inc.
on the date such State Trust was originally established (the "Date
of Deposit"). (See "Description of Bond Ratings.") A further explanation
of the significance of such ratings may be obtained from the rating
agencies furnishing them. There can be no assurance that the economic
and political conditions on which these ratings are based will
continue or that particular Bond issues may not be adversely affected
by changes in economic, political or other conditions that do
not affect the above ratings. Subsequent to the Date of Deposit,
a Bond may cease to be rated or its rating may be reduced. (See
"The Trust" in Part I of the Prospectus for a statement regarding
ratings of the Bonds on the Date of Determination.) Neither event
requires an elimination of such Bond from the portfolio of a State
Trust, but may be considered in the Sponsor's determination to
direct the Trustee to dispose of the Bonds. (See "Investment Supervision.")
Moseley and the Sponsor selected the Bonds for the portfolio of
each State Trust based upon, among other things, the following
primary criteria: (a) a minimum rating of "A" either by Standard
& Poor's or Moody's Investors Service, Inc., or, in the case of
Series 25 and subsequent Series, in the opinion of Moseley and
the Sponsor, possess similar credit characteristics, except any
Guaranteed Trust (see "Description of Bond Ratings"); (b) price
of the Bonds relative to other issues of similar quality and maturity;
(c) income to the Certificateholders of each State Trust; (d)
all the Bonds in each State Trust are obligations of the State
for which such State Trust is named and counties, municipalities,
authorities or public authorities thereof or issued by certain
United States territories or possessions and their public authorities;
and (e) in the case of a Guaranteed Trust, the availability of
insurance from the Insurer for the payment of principal and interest
on the Securities held in the portfolio of such Guaranteed Trust.
A purpose of the insurance on the Bonds in the portfolio obtained
by a Guaranteed Trust is to obtain a higher yield on such Guaranteed
Trust portfolio than would be available if all the Securities
in such portfolio had Standard
Page 3
& Poor's "AAA" rating but were uninsured and yet at the same time
to have the protection of insurance of payment of interest and
principal on the Securities. There is, of course, no certainty
that this result will be achieved. Any Pre-insured Bonds in a
Guaranteed Trust (all of which are rated "AAA" by Standard & Poor's)
may or may not have a higher yield than uninsured bonds rated
"AAA" by Standard & Poor's. In considering Pre-insured Bonds for
the portfolio, the Sponsor has applied the criteria hereinbefore
described.
Because the Securities in a Guaranteed Trust are insured by the
Insurer as to the payment of principal and interest, Standard
& Poor's has assigned to the Units of a Guaranteed Trust and in
the case of Series 21 and subsequent Series to all the Bonds while
in such Guaranteed Trust its "AAA" investment rating and Moody's
Investors Service, Inc. has assigned a rating of "Aaa" to all
of the Bonds in such Guaranteed Trust. (See "Description of Bond
Ratings"). The obtaining of this rating by a Guaranteed Trust
should not be construed as an approval of the offering of the
Units by Standard & Poor's or as a guarantee of the market value
of such Guaranteed Trust or of the Units.
Certain of the Securities in a State Trust may consist of Trust
Units. ANY SUCH TRUST UNITS DEPOSITED WITH THE TRUSTEE REPRESENT
DIFFERENT PREVIOUSLY-ISSUED SERIES OF THE MULTISTATE TRUST (no
one of which represented at the Date of Deposit more than 5%,
and all of which represented at the Date of Deposit no more than
10%, of the value of the portfolio of a State Trust) the portfolios
of which contain long-term obligations of the State for which
the Trust is named, its political subdivisions, municipalities
and public authorities and of certain United States territories
or possessions and their public authorities. On the respective
Dates of Deposit of said series, the underlying bonds were rated
"A" or better by either Standard & Poor's or Moody's Investors
Service, Inc. or, in the case of Series 25 and subsequent Series,
in the Sponsor's opinion, possess similar credit characteristics.
While certain of such bonds included in the portfolios of said
series may not presently meet such criteria, they will in no event
represent more than 0.5% of the face amount of the portfolio of
a State Trust. The investment objectives of the various series
are similar to the investment objective of the Trust.
An investment in Units of a State Trust should be made with an
understanding of the risks entailed in investments in fixed-rate
bonds, including the risk that the value of such bonds (and, therefore,
of the Units) will decline with increases in interest rates. Inflation
and recession, as well as measures implemented to address these
and other economic problems contribute to the fluctuations in
the interest rates and the values of fixed-rate bonds generally.
The Sponsor cannot predict future economic policies or their consequences;
nor, therefore, can it predict the course or extent of such fluctuations
in the future.
For a summary of the types of Securities held in a State Trust,
see Part I of the Prospectus, and for a discussion of any risk
factors relating to the state for which such State Trust is named,
see "Information Regarding the Trust--Portfolios-State Risk Factors
and Tax Status" in Part I of the Prospectus.
General Considerations
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance
with their terms and the proceeds from such events will be distributed
to certificate holders and will not be reinvested, no assurance
can be given that the Trust will retain for any length of time
its present size and composition. The inclusion of unrated Bonds
in certain Series of the Trust may result in less flexibility
in their disposal and a loss to the Trust upon their disposition.
Except as described in footnotes to "Summary of Essential Information"
in Part I of this Prospectus, interest accrues to the benefit
of certificate holders commencing with the expected date of settlement
for purchase of the Units. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect
in any Security.
The following paragraphs discuss the characteristics of the Bonds
in the State Trusts and of certain types of issuers of the Bonds
in the State Trusts. These paragraphs discuss, among other things,
certain circumstances which
Page 4
may adversely affect the ability of such issuers to make payment
of principal and interest on Bonds held in any of the State Trusts
or which may adversely affect the ratings of such Bonds. Because
of the insurance obtained by the Sponsor or by the issuers, however,
such changes should not adversely affect the Guaranteed Trusts'
receipt of principal and interest, the Standard & Poor's AAA rating
in the case of Series 21 and subsequent Series or Moody's Investors
Service, Inc.'s Aaa rating of the Bonds in the Guaranteed Trusts
or the Standard & Poor's rating of the Units of the Guaranteed
Trusts. An investment in Units of the Multistate Trust should
be made with an understanding of the risks that such an investment
may entail, certain of which are described below. Certificateholders
may obtain additional information concerning a particular Bond
by requesting an official statement from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal
and interest. The taxing power of any governmental entity may
be limited, however, by provisions of state constitutions or laws,
and an entity's credit will depend on many factors, including
potential erosion of the tax base due to population declines,
natural disasters, declines in the state's industrial base or
inability to attract new industries, economic limits on the ability
to tax without eroding the tax base, state legislative proposals
or voter initiatives to limit ad valorem real property taxes and
the extent to which the entity relies on Federal or state aid,
access to capital markets or other factors beyond the state's
or entity's control.
Appropriations Bonds
Many state and local governmental entities enter into lease purchase
obligations as a means for financing the acquisition of capital
projects (e.g., buildings or equipment, among other things). Such
obligations are often made subject to annual appropriations. Certain
Bonds in the State Trusts may be Bonds that are, in whole or in
part, subject to and dependent upon (i) the governmental entity
making appropriations from time to time or (ii) the continued
existence of special temporary taxes which require legislative
action for their reimposition. The availability of any appropriation
generally is subject to the willingness of the governmental entity
to continue to make such special appropriations or to reimpose
such special taxes. The obligation to make lease payments generally
exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental
entity beyond the monies so appropriated. Subject to the foregoing,
once an annual appropriation is made, the governmental entity's
obligation to make lease rental payments generally is absolute
and unconditional without setoff or counterclaim, regardless of
contingencies, whether a given project is completed or used by
the governmental entity and notwithstanding any circumstances
or occurrences which might arise. In the event of nonappropriation,
bondowners' sole remedy (absent credit enhancement) generally
is limited to repossession of the collateral for resale or releasing,
and the obligation of the governmental lessee is not backed by
a pledge of the general credit of the governmental lessee. In
the event of nonappropriation, the Sponsor may instruct the Trustee
to sell such Bonds.
Moral Obligation Bonds. Certain of the Securities in a State Trust
may be secured by pledged revenues and additionally by the so-called
"moral obligation" of the related state or local governmental
body. Should the pledged revenues prove insufficient, the payment
of such Bonds is not a legal obligation of the related state or
local government, and is subject to its willingness to appropriate
funds therefor.
Revenue Bonds
Single Family Housing Bonds and Multifamily Housing Bonds. Single
family housing bonds and multifamily housing bonds are obligations
of state and local housing authorities that have been issued in
connection with a variety of single and multifamily housing projects.
Economic developments, including fluctuations in interest rates,
increasing construction and operating costs, increasing real estate
taxes and declining occupancy rates, and
Page 5
investment risks may have an adverse effect upon the revenues
of such projects and such housing authorities. Multifamily housing
bonds may be subject to mandatory redemption prior to maturity,
including redemption from noncompletion of the project or upon
receipt of Federal Housing Authority or certain other insurance
proceeds. Certain housing bonds used in a State Trust may also
be secured by Government National Mortgage Association certificates
or be guaranteed by the U.S. Government. Bonds issued by state
or local units or authorities and payable from revenues from single
family residential mortgages may be subject to mandatory redemption
prior to maturity, including redemption from mortgage loan prepayments
and undisbursed bond proceeds reserved for the purpose of purchasing
mortgage loans. Housing bonds may also be subject to changes in
creditworthiness due to potential weaknesses of mortgage insurance
companies providing various policies; fluctuations in the valuation
of invested funds and in the strengths of banks and other entities
which may provide investment agreements; and smaller than expected
mortgage portfolios due to partial non-origination.
Single family housing bonds and multifamily housing bonds must
meet certain requirements in order to maintain their exemption
from Federal income taxation after the date of their issuance.
The Internal Revenue Code of 1954, as amended (the "1954 Code"),
provided, in general, that interest on "mortgage subsidy bonds"
(generally those obligations all or a significant portion of the
proceeds of which are to be used directly or indirectly for mortgages
on owner-occupied residences) issued after April 24, 1979* is
not exempt from Federal income taxation unless the bonds are "qualified
mortgage bonds" issued on or before December 31, 1987, as part
of a "qualified mortgage issue" wherein certain requirements are
and will continue to be met with respect to the terms, amount
and purpose of the bonds, the use of the funds generated by the
issue, the nature of the residences and the mortgages, and the
eligibility of the borrower executing the mortgage. The Internal
Revenue Code of 1986 (the "Code"), as amended by the Tax Reform
Act of 1986 and the Tax Extension Act of 1991, now provides that
a "qualified mortgage bond" must be part of a "qualified mortgage
issue" issued on or before June 30, 1992. A "qualified mortgage
issue" is an issue all of the proceeds of which (exclusive of
issuance costs and a reasonably required reserve) are to be used
to finance owner-occupied residences, no bond of which meets the
private business use and private security or payment tests of
the Code, and which meets certain requirements regarding the timely
use of mortgage payments to redeem the bonds, the nature of the
residences financed, the nature of the mortgages, the eligibility
of the borrowers executing the mortgages and certain arbitrage
and targeting requirements. The Code provides that, if an issue
fails to meet one or more of the qualified mortgage bond eligibility
requirements but the issuer makes certain good faith efforts to
comply with such requirements, then the issue will be treated
as a qualified mortgage issue. In addition, interest on obligations
issued to finance residential rental property will be exempt from
Federal income taxes when the proceeds are used to finance multifamily
rental property and specified percentages of the units are occupied
by low income tenants as defined by the Code. The regulations
under the Code provide relief from noncompliance with the qualified
residential rental project bond requirements if the issuer corrects
any noncompliance occurring after the issuance of the bonds within
a reasonable period after such noncompliance is first discovered
______________
*Such provisions and regulations of the 1954 Code did not apply
to obligations if official action taken before April 25, 1979
by the governing body of the unit having authority to issue such
obligations indicated an intent to issue such obligations. Such
provisions and regulations do not apply to obligations issued
before January 1, 1981 if such obligations are part of an issue
substantially all the proceeds of which are committed by firm
commitment letters or, in the case of rental housing, committed
by the commencement of the construction or acquisition of the
project. The Sponsor is unable to determine the effect of these
requirements on any Bonds in any State Trust issued prior to January
1, 1981. Qualified mortgage bonds issued after December 31, 1980,
in the opinion of bond counsel, are or will be tax-exempt for
Federal income tax purposes at the time of issuance. There can
be no assurance, however, that the interest on such Bonds will
continue to be exempt from Federal income taxation in the event
that the requirements of the Code are not met subsequently.
Page 6
or would have been discovered by the exercise of reasonable diligence.
If the interest on any single family housing bonds or multifamily
housing bonds in a State Trust should ultimately be deemed to
be taxable, the Sponsor may instruct the Trustee to sell such
Bonds and, since they would be sold as taxable securities, it
is expected that such Bonds would have to be sold at a substantial
discount from current market prices.
Public Power Revenue Bonds. General problems of the electric utility
industry include difficulty in financing large construction programs
during an inflationary period; restrictions on operations and
increased costs and delays attributable to environmental considerations;
the difficulty of the capital markets in absorbing utility debt
and equity securities; the availability of fuel for electric generation
at reasonable prices, including among other considerations the
potential rise in fuel costs and the costs associated with conversion
to alternate fuel sources such as coal; technical cost factors
and other problems associated with construction, licensing, regulation
and operation of nuclear facilities for electric generation, including
among other considerations the problems associated with the use
of radioactive materials and the disposal of radioactive waste;
and the effects of energy conservation. Certain of the issuers
of the Bonds may own or operate nuclear generating facilities.
Federal, state and municipal governmental authorities may, from
time to time, review and revise existing requirements, and impose
additional requirements governing the licensing, construction
and operation of nuclear power plants. The Sponsor is unable to
predict whether any such actions 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. Each of
the problems referred to above could adversely affect the ability
of the issuers of public power revenue bonds to make payments
of principal and/or interest on such bonds. Certain municipal
utilities or agencies may have entered into contractual arrangements
with investor-owned utilities and large industrial users and consequently
may be dependent in varying degrees on the performance of such
contracts for repayment of bond debt service.
Health Care Revenue Bonds. Some of the bonds may be obligations
of issuers whose revenues are derived from services provided by
hospitals or other health care facilities, including nursing homes.
Ratings of bonds issued for health care facilities are sometimes
based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and
net income available for debt service may be affected by future
events and conditions including, among other things, demand for
services, the ability of the facility to provide the services
required, an increasing shortage of qualified nurses or a dramatic
rise in nursing salaries, physicians' confidence in the facility,
management capabilities, economic developments in the service
area, competition from other similar providers, efforts by insurers
and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, government regulation,
the cost and possible unavailability of malpractice insurance,
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar
third party payor programs. Medicare reimbursements are currently
calculated on a prospective basis and are not based on a provider's
actual costs. Such method of reimbursement may adversely affect
reimbursements to hospitals and other facilities for services
provided under the Medicare program and thereby may have an adverse
effect on the ability of such institutions to satisfy debt service
requirements. In the event of a default upon a bond secured by
hospital or other health care facilities, the limited alternative
uses for such facilities may result in the recovery upon such
collateral not providing sufficient funds to fully repay the bonds.
A number of legislative proposals concerning health care have
been introduced in Congress or have been reported to be under
consideration by the Clinton Administration. These proposals span
a wide range of topics, including cost controls, national health
insurance, incentives for competition in the provision of health
care services, tax incentives and penalties related to health
care insurance premiums, and promotion of prepaid health
Page 7
care plans. The Sponsor is unable to predict the effect of any
of these proposals, if enacted, on any of the Securities.
Higher Education Revenue Bonds. Higher education revenue bonds
include debt of state and private colleges, universities and systems,
and parental and student loan obligations. The ability of universities
and colleges to meet their obligations is dependent upon various
factors, including the revenues, costs and enrollment levels of
the institutions. In addition, their ability may be affected by
declines in Federal, state and alumni financial support, fluctuations
in interest rates and construction costs, increased maintenance
and energy costs, failure or inability to raise tuition or room
charges and adverse results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution
control facilities category include securities issued on behalf
of a private corporation,** including utilities, to provide facilities
for the treatment of air, water and solid waste pollution. Repayment
of these bonds is dependent upon income from the specific pollution
control facility and/or the financial condition of the corporation.
(See also "Industrial Development Bonds.")
______________
**For purposes of the description of users of facilities, all
references to "corporations" shall be deemed to include any other
nongovernmental person or entity.
Other Utility Revenue Bonds. Bonds in this category include securities
issued to finance natural gas supply, distribution and transmission
facilities, public water supply, treatment and distribution facilities,
as well as sewage collection, treatment and disposal facilities.
Repayment of these bonds is dependent primarily on revenues derived
from the billing of residential, commercial and industrial customers
for utility services, as well as, in some instances, connection
fees and hook-up charges. Such utility revenue bonds may be adversely
affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this
category include securities issued to finance facilities for removal
and disposal of solid municipal waste. Repayment of these bonds
is dependent on factors which may include revenues from appropriations
from a governmental entity, the financial condition of the private
corporation and revenues derived from the collection of charges
for disposal of solid waste. Repayment of resource recovery bonds
may also be dependent to various degrees on revenues from the
sale of electric energy or steam. Bonds in this category may be
subject to mandatory redemption in the event of project noncompletion,
if the project is rendered uneconomical or if it is considered
an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds
issued for airport facilities, bridges, turnpikes, port authorities,
railroad systems or mass transit systems. Generally, airport facility
revenue bonds are payable from and secured by the revenues derived
from the ownership and operation of a particular airport. Airport
operating income may therefore be affected by the ability of the
airlines to meet their obligations under the use agreements. The
air transport industry is experiencing significant variations
in earnings and traffic, due to increased competition, excess
capacity, increased costs, deregulation, traffic constraints and
other factors, and several airlines are experiencing severe financial
difficulties. In particular, facilities with use agreements involving
airlines experiencing financial difficulty may experience a reduction
in revenue due to the possible inability of these airlines to
meet their use agreement obligations because of such financial
difficulties and possible bankruptcy. The Sponsor cannot predict
what effect these industry conditions may have on airport revenues
which are dependent for payment on the financial condition of
the airlines and their usage of the particular airport facility.
Payment on other transportation bonds is often dependent primarily
or solely on revenues from financed facilities, including user
fees, charges, tolls and rents. Such revenues may be adversely
affected by increased construction and maintenance costs or taxes,
decreased use, competition from alternative facilities, scarcity
of fuel, reduction or loss of rents or the impact of environmental
considerations. Other
Page 8
transportation bonds may be dependent primarily or solely on Federal,
state or local assistance including motor fuel and motor vehicle
taxes, fees and licenses and, therefore, may be subject to fluctuations
in such assistance.
Industrial Development Bonds ("IDBs"). IDBs are tax-exempt securities
issued by states, municipalities or public authorities and are
issued to provide funds, usually through a loan or lease arrangement,
to a private corporation, partnership or individual ("beneficiary")
for the purpose of financing construction or improvement of a
facility to be used by the beneficiary. The issuer of an IDB is
not obligated to pay the principal of or premium, if any, or interest
on such bonds or other costs incident thereto, except from the
revenues assigned and pledged by the beneficiary therefor. Such
bonds are secured primarily by revenues derived from loan repayments
or installment sale or lease payments due from a beneficiary which
may or may not be guaranteed by a parent company or otherwise
secured. In view of this, an investor should be aware that repayment
of such bonds depends on the revenues of a private beneficiary
and be aware of the risks that such an investment may entail.
Continued ability of a beneficiary to generate sufficient revenues
for the payment of principal and interest on such bonds will be
affected by many factors including the size of the beneficiary,
its capital structure, demand for its products or services, competition,
general economic conditions, government regulation and the beneficiary's
dependence for revenues on the operation of the particular facility
being financed. In addition, interest on the IDBs is excludible
from gross income for Federal income tax purposes provided the
issuer and beneficiary continue to meet certain Code requirements.
If the interest on these debt obligations should ultimately be
deemed to be taxable, the Sponsor may instruct the Trustee to
sell them, and, since they would be sold as taxable securities,
it is expected that they would have to be sold at a substantial
discount from current market prices. Debt of private beneficiaries
may be subject to deterioration in creditworthiness or redemption
in events of mergers, acquisitions or reorganizations or as a
result of adverse court decisions. Such bonds may also be subject
to mandatory redemption upon the determination that the project
has become uneconomical or in the event that the bonds are rendered
taxable.
Special Tax Revenue Bonds. Bonds in this category are bonds secured
primarily or solely by receipts of certain state or local taxes,
including sales and use taxes or excise taxes. Consequently, such
bonds may be subject to fluctuations in the collection of such
taxes. Such bonds do not include tax increment bonds or special
assessment bonds.
Other Revenue Bonds. Certain of the Bonds in the State Trusts
may be revenue bonds which are payable from and secured primarily
or solely by revenues from the ownership and operation of particular
facilities, such as correctional facilities, parking facilities,
convention centers, arenas, museums and other facilities owned
or used by a charitable entity. Payment on bonds related to such
facilities is, therefore, primarily or solely dependent on revenues
from such projects, including user fees, charges and rents. Such
revenues may be affected adversely by increased construction and
maintenance costs or taxes, decreased use, competition from alternative
facilities, reduction or loss of rents or the impact of environmental
considerations.
Certain of the Bonds in the State Trusts are secured by direct
obligations of the U.S. Government, or in some cases, obligations
guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. In a few isolated instances to date, bonds which
were thought to be escrowed to maturity have been called for redemption
prior to maturity.
Puerto Rico Bonds
Certain State Trusts may contain Bonds of issuers located in the
Commonwealth of Puerto Rico or issuers which will be affected
by general economic conditions of Puerto Rico. Puerto Rico's unemployment
rate remains significantly higher than the U.S. unemployment rate.
Furthermore, the economy is largely dependent for its development
upon U.S. policies and programs that are being reviewed and may
be eliminated.
Page 9
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism.
Most of the island's manufacturing output is shipped to the mainland
United States, which is also the chief source of semi-finished
manufactured articles on which further manufacturing operations
are performed in Puerto Rico. Since World War II the economic
importance of agriculture for Puerto Rico, particularly in the
dominance of sugar production, has declined. Nevertheless, the
Commonwealth-controlled sugar monopoly remains an important economic
factor and is largely dependent upon Federal maintenance of sugar
prices, the discontinuation of which could severely affect Puerto
Rico sugar production. The level of tourism is affected by various
factors including the strength of the U.S. dollar. During periods
when the dollar is strong, tourism in foreign countries becomes
relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the Federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of the Bonds are
subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not
within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of Puerto Rico
and various agencies and political subdivisions located in Puerto
Rico. The Sponsor is unable to predict whether or to what extent
such factors or other factors may affect the issuers of Bonds,
the market value or marketability of the Bonds
Page 10
or the ability of the respective issuers of the Bonds acquired
by the State Trusts to pay interest on or principal of the Bonds.
Original Issue Discount Bonds and Zero Coupon Bonds
Certain of the Securities in a State Trust may have been acquired
at a market discount from par value at maturity. The coupon interest
rates on the discount bonds at the time they were purchased and
deposited in the State Trust were lower than the current market
interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued comparable bonds
increase, the market discount of previously issued bonds will
become greater, and if such interest rates for newly issued comparable
bonds decline, the market discount of previously issued bonds
will be reduced, other things being equal. Investors should also
note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase,
the value of bonds purchased at a market discount will decrease
faster than bonds purchased at a market premium. In addition,
if interest rates rise, the prepayment risk of higher yielding,
premium bonds and the prepayment benefit for lower yielding, discount
bonds will be reduced. A discount bond held to maturity will have
a larger portion of its total return in the form of taxable income
and capital gain and less in the form of tax-exempt interest income
than a comparable bond newly issued at current market rates. See
"Portfolios-State Risk Factors and Tax Status" in Part I of the
Prospectus for each Trust. Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds.
Certain of the Securities in a State Trust may be original issue
discount bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at
maturity and the issue price of the Bonds, is deemed to accrue
on a daily basis and the accrued portion is treated as tax-exempt
interest income for Federal income tax purposes. On sale or redemption,
any gain realized that is in excess of the earned portion of original
issue discount will be taxable as capital gain unless the gain
is attributable to market discount in which case the accretion
of market discount is taxable as ordinary income. See "Portfolios-State
Risk Factors and Tax Status" in Part I of the Prospectus for each
Trust. The current value of an original issue discount bond reflects
the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the
Securities approach maturity.
Certain of the original issue discount bonds may be Zero Coupon
Bonds (including bonds known as multiplier bonds, money multiplier
bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds).
Zero Coupon Bonds do not provide for the payment of any current
interest and generally provide for payment at maturity at face
value unless sooner sold or redeemed. Zero Coupon Bonds may be
subject to more price volatility than conventional bonds. While
some types of Zero Coupon Bonds, such as multipliers and capital
appreciation bonds, define par as the initial offering price rather
than the maturity value, they share the basic Zero Coupon Bond
features of (1) not paying interest on a semi-annual basis and
(2) providing for the reinvestment of the bond's semi-annual earnings
at the bond's stated yield to maturity. While Zero Coupon Bonds
are frequently marketed on the basis that their fixed rate of
return minimizes reinvestment risk, this benefit can be negated
in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value
of the bond.
There can be no assurance that additional Federal legislation
will not be enacted or that existing legislation will not be amended
hereafter with the effect that interest on the Bonds becomes subject
to Federal income taxation. If the interest on the Bonds should
ultimately be deemed to be taxable, the Sponsor may instruct the
Trustee to sell them, and, since they would be sold as taxable
securities, it is expected that they would have to be sold at
a substantial discount from current market prices.
Page 11
Most of the Bonds in the Trust are subject to redemption prior
to their stated maturity date pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund accumulated over
a period of time for retirement of debt. Sinking fund provisions
are designed to redeem a significant portion of an issue gradually
over the life of the issue. Obligations to be redeemed are generally
chosen by lot. The portfolio in Part I of this Prospectus contain
a listing of the sinking fund and call provisions, if any, with
respect to each of the Bonds therein.
To the Sponsor's knowledge, there is no litigation pending as
of the Date of Deposit in respect to any Securities which might
reasonably be expected to have a material adverse effect on any
of the respective State Trusts. At any time after the date of
this Prospectus, litigation may be instituted on a variety of
grounds with respect to Securities in any State 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 Securities or the tax-free
nature of the interest thereon. 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 the Multistate
Trust. In addition, other litigation may arise from time to time
which might impair the ability of issuers to make payments due
on the Securities.
The Federal Bankruptcy Act contains provisions relating to the
adjustment of indebtedness owed by any political subdivision or
public agency or instrumentality of any state, including municipalities.
Among other things, these provisions facilitate the use of the
bankruptcy laws by such entities to restructure or otherwise alter
the terms of their obligations, including long-term debt obligations
of the type comprising each of the State Trust's portfolio. The
Sponsor is unable to predict at this time what effect, if any,
this legislation will have on the Multistate Trust.
The percentage of Bonds in a State Trust which are subject to
redemption prior to their maturity dates pursuant to sinking fund
or call provisions is stated in Part I of the Prospectus. A sinking
fund is a reserve fund accumulated over a period of time for retirement
of 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 issue is redeemed at or
before maturity from the proceeds of a new bond issue. In general,
a call or redemption provision is more likely to be exercised
when the offering price evaluation of a Bond is higher than its
call or redemption price. The "Schedule of Investments" relating
to each State Trust in Part I of the Prospectus contains a listing
of the maturity date and sinking fund and call provisions for each Bond.
In the case of a Guaranteed Trust, the insurance guarantees payment
of principal of and interest on the Bonds held in such Guaranteed
Trust as such payments shall become due but not be paid, except
that in the event of any acceleration of the due date of principal
by reason of mandatory or optional redemption (other than a mandatory
sinking fund redemption), default or otherwise, the payments guaranteed
will be made in such amounts and at such times as would have been
due had there not been an acceleration. With respect to small
issue industrial development bonds and pollution control revenue
bonds held in such Guaranteed Trust, the Insurer guarantees the
full and complete payments required to be made by or on behalf
of an issuer of such bonds if there occurs pursuant to the terms
of the Bonds an event which results in the loss of the tax-exempt
status of interest on such bonds, including principal, interest
or premium payments payable thereon, if any, as and when thereby required.
Certain of the Bonds may from time to time be sold under certain
extraordinary circumstances (see "Investment Supervision") or
may be redeemed or mature in accordance with their terms, and
the proceeds from such sales, redemptions and maturities will
be distributed to Certificateholders and will not be reinvested.
Therefore, no assurance can be given that any of the State Trusts
will retain its present size and composition for any length of
time and such sales, redemptions or maturities may result in a
corresponding reduction of interest income distributions. Each
of the State Trusts may be terminated if the value of such State
Trust becomes less than
Page 12
the amount shown under "Summary of Essential Information." (See
also "The Trust-Interest and Estimated Current Return" and "The
Trust-Tax Status of the Trust" for additional information on the
effects of redemptions.)
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Bond or in any Bond
underlying any Trust Units.
The Sponsor believes the information summarized above describes
some of the more significant events relating to the Multistate
Trust. The sources of such information, particularly as they relate
to the respective State Trusts, are the official statements of
issuers located in the states for which such Trusts are named
as well as other publicly available documents. The Sponsor has
not independently verified any of the information contained in
such official statements and other publicly available documents
and is not aware of any facts which would render such information
inaccurate.
Guaranteed Trust Insurance
For Series 10 through 36 of any Guaranteed State Trust
Insurance guaranteeing the timely payment, when due, of all principal
and interest on the bonds in any Guaranteed Trust(s) has been
obtained from MBIA by such Guaranteed Trust. Such insurance has
not been obtained by any State Trust in this Series other than
such Guaranteed Trust(s). MBIA has issued a policy or insurance
covering each of the Bonds in a Guaranteed Trust, including bonds
which may previously have been insured. The MBIA policy shall
continue in force only with respect to Bonds held in and owned
by a Guaranteed Trust, and MBIA shall not have any liability under
the policy with respect to any Bonds which do not constitute part
of such Guaranteed Trust. In determining to insure the Bonds held
in a Guaranteed Trust, MBIA has applied its own standards which
correspond generally to the standards it has established for determining
the insurability of new issues of municipal bonds.
By the terms of its policy, MBIA will unconditionally guarantee
to a Guaranteed Trust the payment, when due, required of the issuer
of the Bonds held in such Guaranteed Trust of any amount equal
to the principal of (either at the stated maturity or by any advancement
of maturity pursuant to a mandatory sinking fund payment) and
interest on such Bonds as such payments shall become due but not
paid, except that in the event of any acceleration of the due
date of principal by reason of mandatory or optional redemption
(other than a mandatory sinking fund redemption), default or otherwise,
the payments guaranteed will be made in such amounts and at such
times as would have been due had there not been an acceleration
by reason of mandatory or optional redemption (other than mandatory
sinking fund redemption). MBIA will be responsible for such payments
less any amounts received by a Guaranteed Trust from any trustee
for the Bond issuers or from any other source. The MBIA policy
does not guarantee payment on an accelerated basis, the payment
of any redemption premium or the value of the Units of a Guaranteed
Trust. The MBIA policy also does not insure against nonpayment
of principal of or interest on the Bonds resulting from the insolvency,
negligence or any other act or omission of the Trustee or other
paying agent for the Bonds. However, with respect to small issue
industrial development bonds and pollution control revenue bonds
covered by the policy which are held in a Guaranteed Trust, MBIA
guarantees the full and complete payments required to be made
by or on behalf of an issuer of such Bonds if there occurs pursuant
to the terms of the Bonds an event which results in the loss of
the tax-exempt status of interest on such Bonds, including principal,
interest or premium payments payable thereon, if any, as and when
thereby required to be made by or on behalf of the issuer pursuant
to the terms of such Bonds. The MBIA policy does not insure the
payment of principal or interest on Bonds which is not required
to be paid by the issuer thereof because the Bonds were not validly
issued. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof was rendered by bond counsel
to the respective authorities.
Page 13
The MBIA policy is non-cancellable and will continue in force
so long as a Guaranteed Trust is in existence and the Bonds described
in the policy continue to be held in and owned by such Guaranteed
Trust. (See "The Trust-Portfolio"). Failure to pay premiums on
the MBIA policy will not result in the cancellation of insurance
but will force MBIA to take action against the Trustee to recover
premium payments due it. The Trustee in turn will be entitled
to recover such payments from a Guaranteed Trust.
The MBIA policy shall terminate as to any Bond which has been
redeemed from or sold by the Trustee or Guaranteed Trust on the
date of such redemption or on the settlement date of such sale,
and MBIA shall not have any liability under the policy as to any
such Bond thereafter. If the date of such redemption or the settlement
date of such sale occurs between a record date and a date of payment
of any such Bonds, the MBIA policy will terminate as to such Bond
on the business day next succeeding such date of payment. The
termination of the MBIA policy as to any Bond shall not affect
MBIA's obligations regarding any other Bond in a Guaranteed Trust.
The MBIA policy will terminate as to all Bonds on the date on
which the last of the Bonds mature, are redeemed or are sold by
a Guaranteed Trust.
In the case of Series 23 through Series 36, pursuant to an irrevocable
commitment of MBIA, the Trustee upon sale of a Bond in a Guaranteed
Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds) (the "Permanent
Insurance") upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly,
any Bond in a Guaranteed Trust is eligible to be sold on an insured
basis. It is expected that the Trustee will exercise the right
to obtain Permanent Insurance for a Bond in a Guaranteed Trust
upon instruction from the Sponsor only if upon such exercise such
Guaranteed Trust would receive net proceeds (sale of Bond proceeds
less the insurance premium attributable to the Permanent Insurance
and the related custodial fee) from such sale in excess of the
sale proceeds if such Bond was sold on an uninsured basis. The
Permanent Insurance premium with respect to each Bond is determined
based upon the insurability of each Bond as of the Date of Deposit
and will not be increased or decreased for any change in creditworthiness
of such Bond unless such Bond is in default as to payment of principal
and/or interest. In such event, the Permanent Insurance premium
shall be subject to an increase predetermined at the Date of Deposit
and payable from the proceeds of the sale of such Bond.
Except as indicated below, insurance obtained by a Guaranteed
Trust has no effect on the price or redemption value of Units
thereof. It is the present intention of the Evaluator to attribute
a value to the insurance obtained by a Guaranteed Trust (including,
as to Series 23 through 36, the right to obtain Permanent Insurance)
for the purpose of computing the price or redemption value of
Units thereof only if the Bonds covered by such insurance are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default ("Defaulted Bonds").
The value of the insurance obtained by a Guaranteed Trust will
be equal to the difference between (i) the market value of a Defaulted
Bond insured by a Guaranteed Trust (as to Series 23 through Series
36, the market value of a Defaulted Bond assuming the exercise
of the right to obtain Permanent Insurance less the insurance
premium attributable to the purchase of Permanent Insurance and
the related custodial fee) and (ii) the market value of similar
securities not in default or significant risk thereof (as to Series
23 through Series 36 the market value of such Defaulted Bonds
not covered by Permanent Insurance). See "Public Offering of Units-Public
Offering Price" for a more complete description of the Evaluator's
method of valuing Defaulted Bonds. Insurance obtained by the issuer
of a Bond or by other parties is effective so long as such Pre-insured
Bond is outstanding and the insurer of such Pre-insured Bond continues
to fulfill its obligations. Regardless of whether the Insurer
of a Pre-insured Bond continues to fulfill its obligations, however,
such Bond will continue to be insured under the policy obtained
by a Guaranteed Trust from MBIA as long as the bond is held in
such Guaranteed Trust. Insurance obtained by the issuer of a Bond
or by other parties may be considered
Page 14
to represent an element of market value in regard to the Bonds
thus insured but the exact effect, if any, of this insurance on
such market value cannot be predicted.
Upon notification from a Guaranteed Trust or the paying agent
for a Bond held in such Guaranteed Trust that the payment of principal
or interest which is then due the paying agent for such Bonds
has not been made to such paying agent, MBIA will be obliged to
deposit funds promptly with Citibank, N.A., New York, New York
as fiscal agent for MBIA, sufficient to cover the deficit. If
notice of nonpayment is received on or after the due date, MBIA
will provide for payment within one business day following receipt
of the notice. Upon payment by MBIA of any principal or interest
payments with respect to any Bonds, MBIA shall succeed to the
rights of the owner of such Bonds with respect to such payment.
Each insurance company comprising MBIA will be severally and not
jointly obligated under the MBIA policy in the following respective
percentages: the AEtna Casualty and Surety Company, 33%; Fireman's
Fund Insurance Company, 30%; The Travelers Indemnity Company,
15%; CIGNA Property and Casualty Company (formerly AEtna Insurance
Company), 12%; and The Continental Insurance Company, 10%. As
a several obligor, each such insurance company will be obligated
only to the extent of its percentage of any claim under the MBIA
policy and will not be obligated to pay any unpaid obligations
of any other member of MBIA. Each insurance company's participation
is backed by all its assets. However, each insurance company is
a multiline insurer involved in several lines of insurance other
than municipal bond insurance, and the assets of each insurance
company also secure all of its other insurance policy and surety
bond obligations.
The following table sets forth unaudited financial information
with respect to the five insurance companies comprising MBIA.
The statistics, which have been furnished by MBIA, are as reported
by the insurance companies to the New York State Insurance Department
and are determined in accordance with statutory accounting principles.
No representation is made herein as to the accuracy or adequacy
of such information or as to the absence of material adverse changes
in such information subsequent to the date thereof. In addition,
these numbers are subject to revision by the New York State Insurance
Department which, if revised, could either increase or decrease
the amounts. The Sponsor is not aware that the information herein
is inaccurate or incomplete as of the date hereof.
<TABLE>
<CAPTION>
MUNICIPAL BOND INSURANCE ASSOCIATION, INC.
STATUTORY ASSETS, LIABILITIES AND POLICYHOLDERS' SURPLUS
OF MEMBER COMPANIES - SEPTEMBER 30, 1994
(000's omitted)
New York New York New York
Statutory Statutory Policyholders'
Assets Liabilities Surplus
__________ ____________ ______________
<S> <C> <C> <C>
The AEtna Casualty & Surety Company $10,030,200 $ 8,275,300 $ 1,754,900
Fireman's Fund Insurance Company 6,815,775 4,904,534 1,911,241
The Travelers Indemnity Company 10,295,359 8,515,392 1,779,967
CIGNA Property and Casualty Company
(formerly AEtna Insurance Company) 5,112,251 4,842,235 270,016
The Continental Insurance Company 2,794,536 2,449,805 344,731
___________ ___________ ___________
Total $35,048,121 $28,987,266 $ 6,060,855
</TABLE>
Some of the members of MBIA are among the shareholders of MBIA
Inc. MBIA Inc. is the parent of the Corporation. The Corporation
commenced municipal bond insurance operations on January 5, 1987.
The Corporation is a separate and distinct entity from MBIA. THE
CORPORATION HAS NO LIABILITY TO THE BONDHOLDERS FOR THE OBLIGATIONS
OF MBIA UNDER ANY OF MBIA'S POLICIES.
Page 15
MBIA's principal offices are located at 113 King Street, Armonk,
New York 10504.
For Series 37 and subsequent Series of any Guaranteed State Trust
Insurance guaranteeing the timely payment, when due, of all principal
and interest on the bonds in any Guaranteed Trust(s) has been
obtained from the Corporation by such Guaranteed Trust. SUCH INSURANCE
HAS NOT BEEN OBTAINED BY ANY STATE TRUST IN THIS SERIES OTHER
THAN SUCH GUARANTEED TRUST(S). The Corporation has issued a policy
of insurance covering each of the Bonds in a Guaranteed Trust,
including Bonds which may previously have been insured. The Corporation
policy shall continue in force only with respect to Bonds held
in and owned by a Guaranteed Trust, and the Corporation shall
not have any liability under the policy with respect to any Bonds
which do not constitute part of such Guaranteed Trust. In determining
to insure the Bonds held in a Guaranteed Trust, the Corporation
has applied its own standards which correspond generally to the
standards it has established for determining the insurability
of new issues of municipal bonds.
By the terms of its policy, the Corporation will unconditionally
guarantee to a Guaranteed Trust the payment, when due, required
of the issuer of the Bonds held in such Guaranteed Trust of any
amount equal to the principal of (either at the stated maturity
or by any advancement of maturity pursuant to a mandatory sinking
fund payment) and interest on such Bonds as such payments shall
become due but not paid, except that in the event of any acceleration
of the due date of principal by reason of mandatory or optional
redemption (other than a mandatory sinking fund redemption), default
or otherwise, the payments guaranteed will be made in such amounts
and at such times as would have been due had there not been an
acceleration by reason of mandatory or optional redemption (other
than mandatory sinking fund redemption). The Corporation will
be responsible for such payments less any amounts received by
a Guaranteed Trust from any trustee for the Bond issuers or from
any other source. The Corporation policy does not guarantee payment
on an accelerated basis, the payment of any redemption premium
or the value of the Units of a Guaranteed Trust. The Corporation
policy also does not insure against nonpayment of principal of
or interest on the Bonds resulting from the insolvency, negligence
or any other act or omission of the Trustee or other paying agent
for the Bonds. However, with respect to small issue industrial
development bonds and pollution control revenue bonds covered
by the policy which are held in a Guaranteed Trust, the Corporation
guarantees the full and complete payments required to be made
by or on behalf of an issuer of such Bonds if there occurs pursuant
to the terms of the Bonds an event which results in the loss of
the tax-exempt status of interest on such Bonds, including principal,
interest or premium payments payable thereon, if any, as and when
thereby required to be made by or on behalf of the issuer pursuant
to the terms of such Bonds. The Corporation policy does not insure
the payment of principal or interest on Bonds which is not required
to be paid by the issuer thereof because the Bonds were not validly
issued. At the respective times of issuance of the Bonds, opinions
relating to the validity thereof were rendered by bond counsel
to the respective authorities.
The Corporation policy is non-cancellable and will continue in
force so long as a Guaranteed Trust is in existence and the Bonds
described in the policy continue to be held in and owned by such
Guaranteed Trust. (See "The Trust-Portfolio"). Failure to pay
premiums on the Corporation policy will not result in the cancellation
of insurance but will force the Corporation to take action against
the Trustee to recover premium payments due it. The Trustee in
turn will be entitled to recover such payments from a Guaranteed Trust.
The Corporation policy shall terminate as to any Bond which has
been redeemed from or sold by the Trustee or Guaranteed Trust
on the date of such redemption or on the settlement date of such
sale, and the Corporation shall not have any liability under the
policy as to any such Bond thereafter. If the date of such redemption
or the settlement date of such sale occurs between a record date
and a date of payment of any such Bonds, the Corporation policy
will terminate as to such Bond on the business day next succeeding
such date of payment. The termination of the Corporation policy
as to any Bond shall not affect the Corporation's obligations
regarding any
Page 16
other Bond in a Guaranteed Trust. The Corporation policy will
terminate as to all Bonds on the date on which the last of the
Bonds mature, are redeemed or are sold by a Guaranteed Trust.
Pursuant to an irrevocable commitment of the Corporation, the
Trustee upon sale of a Bond in a Guaranteed Trust has the right
to obtain permanent insurance with respect to such Bond (i.e.,
insurance to maturity of the Bonds) (the "Permanent Insurance")
upon the payment of a single predetermined insurance premium from
the proceeds of the sale of such Bond. Accordingly, any Bond in
a Guaranteed Trust is eligible to be sold on an insured basis.
It is expected that the Trustee will exercise the right to obtain
Permanent Insurance for a Bond in a Guaranteed Trust upon instruction
from the Sponsor only if upon such exercise such Guaranteed Trust
would receive net proceeds (sale of Bond proceeds less the insurance
premium attributable to the Permanent Insurance and the related
custodial fee) from such sale in excess of the sale proceeds if
such Bond was sold on an uninsured basis. The Permanent Insurance
premium with respect to each Bond is determined based upon the
insurability of each Bond as of the Date of Deposit and will not
be increased or decreased for any change in the creditworthiness
of such Bond unless such Bond is in default as to payment of principal
and/or interest. In such event, the Permanent Insurance premium
shall be subject to an increase predetermined at the Date of Deposit
and payable from the proceeds of the sale of such Bond.
Except as indicated below, insurance obtained by a Guaranteed
Trust has no effect on the price or redemption value of Units
thereof. It is the present intention of the Evaluator to attribute
a value to the insurance obtained by a Guaranteed Trust (including
the right to obtain Permanent Insurance) for the purpose of computing
the price or redemption value of Units thereof only if the Bonds
covered by such insurance are in default in payment of principal
or interest or, in the Sponsor's opinion, in significant risk
of such default ("Defaulted Bonds"). The value of the insurance
obtained by a Guaranteed Trust will be equal to the difference
between (i) assuming no exercise of the right to obtain Permanent
Insurance, the market value of a Defaulted Bond insured by a Guaranteed
Trust and the market value of similar securities not in default
or significant risk thereof or (ii) assuming the exercise of the
right to obtain Permanent Insurance, the market value of a Defaulted
Bond less the insurance premium attributable to the purchase of
Permanent Insurance and the related custodial fee and the market
value of such Defaulted Bond not covered by Permanent Insurance.
See "Public Offering of Units-Public Offering Price" for a more
complete description of the Evaluator's method of valuing Defaulted
Bonds. Insurance obtained by the issuer of a Bond or by other
parties is effective so long as such Pre-insured Bond is outstanding
and the Insurer of such Pre-insured Bond continues to fulfill
its obligations. Regardless of whether the Insurer of a Pre-insured
Bond continues to fulfill its obligations, however, such Bond
will continue to be insured under the policy obtained by a Guaranteed
Trust from the Corporation as long as the bond is held in such
Guaranteed Trust. Insurance obtained by the issuer of a Bond or
by other parties may be considered to represent an element of
market value in regard to the Bonds thus insured but the exact
effect, if any, of this insurance on such market value cannot be predicted.
Upon notification from a Guaranteed Trust or the paying agent
for a Bond held in such Guaranteed Trust that the payment of principal
or interest which is then due the paying agent for such Bonds
has not been made to such paying agent, the Corporation will be
obliged to deposit funds promptly with Citibank, N.A., New York,
New York as fiscal agent for the Corporation, sufficient to cover
the deficit. If notice of nonpayment is received on or after the
due date, the Corporation will provide for payment within one
business day following receipt of the notice. Upon payment by
the Corporation of any principal or interest payments with respect
to any Bonds, the Corporation shall succeed to the rights of the
owner of such Bonds with respect to such payment.
The Corporation is the principal operating subsidiary of MBIA
Inc. The principal shareholders of MBIA Inc. are AEtna Casualty
and Surety Company, The Fund American Companies, Inc., Insurance
Company of North America, CIGNA Property and Casualty Insurance
Company and Credit Local de France, and they own approximately
Page 17
13.4% of the outstanding common stock of MBIA Inc. Neither MBIA
Inc. nor its shareholders are obligated to pay the debts of or
claims against the Corporation. The Corporation, which commenced
municipal bond insurance operations on January 5, 1987, is a limited
liability corporation rather than a several liability association.
The Corporation is domiciled in the State of New York and licensed
to do business in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. The Corporation has one European branch in
the Republic of France. As of December 31, 1993, the Corporation
had admitted assets of $3.1 billion (audited), total liabilities
of $2.1 billion (audited), and total capital and surplus of $978
million (audited), according to financial statement prepared in
accordance with statutory accounting practices prescribed or permitted
by insurance regulatory authorities. As of December 31, 1994,
the Corporation had admitted assets of $3.4 billion (audited),
total liabilities of $2.3 billion (audited), and total capital
and surplus of $1.1 billion (audited), according to financial
statement prepared in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Copies
of the Corporation's financial statements prepared in accordance
with statutory accounting practices are available from the Corporation.
The address of the Corporation is 113 King Street, Armonk, New York 10504.
Some of the shareholders of MBIA Inc. are among the members of
MBIA; however, the Corporation is a separate and distinct entity
from MBIA. MBIA HAS NO LIABILITY FOR THE OBLIGATIONS OF THE CORPORATION
UNDER ANY OF THE CORPORATION'S POLICIES.
No representation is made herein as to the accuracy or adequacy
of the foregoing information regarding the Corporation and MBIA
or as to the absence of material adverse changes in such information
subsequent to the date thereof. The Sponsor is not aware that
the information herein is inaccurate or incomplete as of the date hereof.
Standard & Poor's has assigned to the Units of a Guaranteed Trust
and in the case of Series 21 and subsequent Series to all Bonds
a rating of "AAA" and Moody's Investors Service, Inc. has assigned
a rating of "Aaa" to all of the Bonds in such Guaranteed Trust,
as insured. These ratings apply only to such Bonds while they
are held in such Guaranteed Trust. Also, these ratings reflect
Standard & Poor's and Moody's current assessment of the creditworthiness
of the Corporation and MBIA and their ability to pay claims on
their respective policies of insurance.
Interest, Estimated Current Return and Estimated Long-Term Return
The estimated net annual interest income per Unit of each State
Trust is computed by dividing the estimated annual interest income
to each State Trust from all of the Securities in such State Trust
by the number of Units of the State Trust, less estimated annual
fees and expenses per Unit of such State Trust, as set forth under
"Expenses of the Trust."
Units of the Trust are offered on a "dollar price" basis. In contrast,
tax-exempt bonds customarily are offered on a "yield price" basis.
Therefore, the rate of return on each Unit is measured in terms
of both Estimated Current Return and Estimated Long-Term Return.
Estimated Current Return based on the Public Offering Price per
Unit and Estimated Long-Term Return per Unit is set forth under
"Summary of Essential Information" in Part I of the Prospectus.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price.
Estimated Net Annual Interest Income per Unit will vary with changes
in fees and expenses of the Trustee and the Evaluator and with
principal prepayment, redemption, maturity, exchange or sale of
Bonds. The Public Offering Price per Unit will vary with changes
in the offering price of the Bonds. Estimated Current Return takes
into account only the interest payable on the Bonds and does not
involve a computation of yield
Page 18
to maturity or to an earlier redemption date nor does it reflect
any amortization of premium or discount from par value in the
Bond's purchase price. 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
ratings, the Estimated Current Return per Unit may be affected
adversely if such Bonds are redeemed prior to their maturity.
Therefore, there is no assurance that the Estimated Current Return
as set forth under "Summary of Essential Information" will be
realized in the future.
Estimated Long-Term Return is calculated using a formula that
(i) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (taking into
account the amortization of premiums and the accretion of discounts)
and estimated retirements of all the Bonds in the portfolio and
(ii) takes into account the expenses and sales charge associated
with each Unit. The Estimated Long-Term Return assumes that each
Bond is retired on its pricing life date (i.e., that date which
produces the lowest dollar price when yield price calculations
are done for each optional call date and the maturity date of
a callable security). If the Bond is retired on any optional call
or maturity date other than the pricing life date, the yield to
the holder of that Bond will be different from the initial quoted
yield. Since the market values and estimated retirements of the
Bonds, the expenses of the Trust and the Net Annual Interest Income
and Public Offering Price per Unit may change, there is no assurance
that the Estimated Long-Term Return as set forth under "Summary
of Essential Information" will be realized in the future.
Tax Status of the Trust
Interest income on the Bonds contained in the Trust portfolio
is, in the opinion of bond counsel to the issuing governmental
authorities, which opinion was rendered at the time of original
issuance of the Bonds, excludible from Federal gross income under
the Internal Revenue Code of 1986, as amended (the "Code"). See
"The Trust Portfolio."
Gain (or loss) realized on sale, maturity, or redemption of the
Bonds or on sale or redemption of a Unit is, however, includible
in gross income for Federal, state and local income tax purposes.
Such gain (or loss) does not include any amount received in respect
of accrued interest. Bonds selling at a market discount tend to
increase in market value as they approach maturity when the principal
amount is payable, thus increasing the potential for taxable gain
(or reducing the potential for loss) on their redemption, maturity
or sale. It should be noted that under provisions of the Revenue
Reconciliation Act of 1993 (the "1993 Tax Act") that subject accretion
of market discount on tax-exempt bonds to taxation as ordinary
income, gain realized on the sale or redemption of Bonds by the
Trustee or of Units by a Certificateholder that would have been
be treated as capital gain under prior law is treated as ordinary
income to the extent it is attributable to accretion of market
discount. Market discount can arise based on the price the Trust
pays for the Bonds or the price a Certificateholder pays for his Units.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compound interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which accrued to prior owners. The application of these rules
will also vary depending on the value of the Bond on the date
a Certificateholder acquires his Units, and the price the Certificateholder
pays for his Units. Because of the complexity of these rules relating
to the accrual of original issue discount, Certificateholders
should consult their tax advisors as to how these rules apply.
Certificateholders should also consult their own tax advisors
with respect to the state and local tax consequences of owning
original issue discount Bonds. It is possible that under applicable
provisions governing determination of such state and local taxes
Page 19
interest on tax-exempt Bonds such as any Bonds issued with original
issue discount may be deemed to be received in the year of accrual
even though there are no corresponding cash payments until a later year.
If a Certificateholder's cost for his pro rata interest in a Bond
exceeds his pro rata interest in the Bond's face amount, such
Certificateholder will be considered to have purchased his pro
rata interest in the Bond at a "premium." The Certificateholder
will be required to amortize any premium relating to his pro rata
interest in a Bond prior to the maturity of the Bond. Amortization
of premium on a Bond will reduce a Certificateholder's tax basis
for his pro rata interest in the Bond, but will not result in
any deduction from the Certificateholder's income. Thus, for example,
a Certificateholder who purchases a pro rata interest in a Bond
at a premium and resells it at the same price will recognize taxable
gain equal to the portion of the premium that was amortized during
the period the Certificateholder is considered to have held such
interest. A Certificateholder should consult his own tax advisor
regarding the proper method of amortizing bond premium.
The 1993 Tax Act subjects tax-exempt bonds to the market discount
rules of the Code effective for bonds purchased after April 30,
1993. In general, market discount is the amount (if any) by which
the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued),
subject to a statutory de minimis rule. Under the 1993 Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law, the accretion had been treated as capital gain. Market
discount that accretes while the Trust holds a Bond would be recognized
as ordinary income by the Certificateholders when principal payments
are received on the Bond, upon sale or at redemption (including
early redemption), or upon the sale or redemption of his Units
unless a Certificateholder elects to include market discount in
taxable income as it accrues. The market discount rules are complex
and Certificateholders should consult their tax advisors regarding
these rules and their application.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing bonds) issued on or after August 8, 1986 is included
as a preference item. The Trust does not include any such bonds.
Present Federal income tax law also provides for an alternative
minimum tax for corporations levied at a rate of 20% of alternative
minimum taxable income. The alternative minimum tax and the Superfund
Tax depend upon the corporation's alternative minimum taxable
income, which is the corporation's taxable income with certain
adjustments. One of the adjustment items used in computing the
alternative minimum taxable income and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment
Company, Real Estate Investment Trust, or REMIC) is an amount
equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its alternative minimum taxable
income (determined before such adjustment item and the alternative
tax net operating loss deduction). Although tax-exempt interest
received by the Trust on Bonds deposited therein will not be included
in the gross income of corporations for Federal income tax purposes,
"adjusted current earnings" include all tax-exempt interest, including
interest on all of the Bonds in the Trust. Corporate Certificateholders
are urged to consult their tax advisors with respect to the particular
tax consequences to them resulting from purchasing Units, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code. In addition,
certain "S Corporations" may have a tax imposed on passive income
including tax-exempt interest, such as interest on the Bonds.
Under Section 265 of the Code, interest on indebtedness incurred
or continued to purchase or carry Units of the Trust is not deductible
for Federal income tax purposes. The Internal Revenue Service
has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units. However, these
rules do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature (such as a mortgage
Page 20
incurred to purchase or improve a personal residence). Also, under
Section 265 of the Code certain financial institutions that acquire
Units would generally not be able to deduct any of the interest
expense attributable to ownership of such Units. Investors with
questions regarding this issue should consult with their tax advisors.
In the case of certain of the Bonds in the State Trusts, the opinions
of bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be exempt from Federal income taxes, although
interest on such securities received by others would be exempt
from Federal income taxes. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his or her tax advisor.
All statements in Part I of the Prospectus concerning exclusion
from gross income for Federal, state or other taxes are the opinions
of counsel and are to be so construed.
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income are rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor nor its special
counsel made any special review of the proceedings relating to
the issuance of the Bonds held by the State Trusts or of the basis
of such opinions. One or more issues of Bonds in the State Trusts
may have been issued after the effective date of the Tax Reform
Act of 1986 (the "1986 Tax Act") but before the release of the
Conference Committee Report relating to the 1986 Tax Act. As a
result, bond counsel's opinion may not have addressed the tax-exempt
status of such Bonds under the 1986 Tax Act as signed into law.
Any such Bonds are designated under the applicable State Trust
under "Information Regarding the Trust-Portfolios-State Risk Factors
and Tax Status" in Part I of this Prospectus. The continued tax-exempt
status of such Bonds may depend upon the issuer's ability to comply
with the provisions of the 1986 Tax Act. It should be noted that
the tax-exempt status of certain Bonds may be based upon compliance
with certain requirements after the Bonds were issued.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning
after December 31, 1993, up to 85% of Social Security benefits
are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of Social Security benefits received
exceeds an "adjusted base amount." The adjusted base amount is
$34,000 for unmarried taxpayers, $44,000 for married taxpayers
filing a joint return, and zero for married taxpayers who do not
live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from the
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified
Page 21
adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security
benefits in gross income.
The Tax Act raised tax rates on ordinary income while capital
gains remain subject to a 28% maximum stated rate for taxpayers
other than corporations. Because some or all capital gains are
taxed at a comparatively lower rate under the Tax Act, the Tax
Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Certificateholders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
For taxpayers other than corporations, net capital gains are subject
to a maximum marginal tax rate of 28 percent. However, it should
be noted that legislative proposals are introduced from time to
time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
All taxpayers are presently required to disclose to the Internal
Revenue Service the amount of tax-exempt interest earned during the year.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL
INCOME TAX PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER
THE INCOME OR OTHER TAX LAWS OF ANY STATE OR POLITICAL SUBDIVISION.
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 STATUS OF
HIS CERTIFICATES UNDER STATE AND LOCAL TAX LAWS. (SEE "CERTIFICATEHOLDERS-
STATEMENTS TO CERTIFICATEHOLDERS.")
Each Certificateholder is also advised to consult his own tax
advisor regarding the recently enacted legislation discussed above
concerning market discount, inclusion in taxable income of Social
Security benefits, and changes in tax rates.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price per Unit of a State Trust is computed
by adding, to the Sponsor's Bid Price of the Securities in such
State Trust divided by the number of Units of such State Trust
outstanding, a sales charge calculated as set forth under the
caption "Market for Units."
In addition, a proportionate share of interest accrued (see "Accrued
Interest" below) on a Unit of such State Trust to the date of
delivery of the Units to the purchaser (settlement date) is added
to the Public Offering Price. The Public Offering Price of such
Units will vary on a daily basis from the amount stated on the
cover page of Part I of the Prospectus in accordance with fluctuations
in the prices of the underlying Securities and the price to be
paid by each investor will be computed as of the date Units are purchased.
Accrued Interest
Accrued interest is the accumulation of unpaid interest on an
obligation from the last day on which interest thereon was paid.
In the case of the Multistate Trust, interest accrued on the Securities
held in each of the State Trusts' portfolio should be distinguished
from accrued interest on Units of each State Trust. Accrued interest
on a Unit of a State Trust includes both accrued interest on the
Securities in such State Trust and any cash received by the Trustee
with respect to interest on such Securities, less all withdrawals
and deductions from the Interest Account made with respect to
the Unit. Interest on Securities delivered to the State Trust
accrues to the benefit of Certificateholders commencing with the
settlement date of their purchase transaction.
Interest on Securities in each State Trust is actually paid semi-annually
to each State Trust. However, interest on the Securities in a
State Trust is accounted for daily on an accrual basis. Because
of this, each State Trust
Page 22
always has an amount of interest earned but not yet collected
by the Trustee because of non-collected coupons. For this reason,
the Public Offering Price of a Unit of each State Trust will have
added to it the proportionate share of interest accrued on the
Unit of such State Trust (which includes as a part thereof accrued
but unpaid interest on the Securities) to date of settlement.
An amount of accrued interest has been added to the Public Offering
Price of a Unit of a State Trust which represents interest earned
but unpaid upon the underlying Securities. Such interest will
normally be paid to such State Trust during the succeeding six
months and, upon the receipt of such interest payments, the cash
will be distributed as part of the monthly or semi-annual payments.
However, because of the differing periodic interest payment dates
of the Securities comprising the portfolio of such State Trust,
there will always remain an item of accrued interest on the Securities,
and therefore there will always be interest accrued on a Unit
which is added to the value of Units. The interest accrued on
a Unit is accounted for daily and is added to the daily valuation
of each Unit. If a Certificateholder sells or redeems all or a
portion of his Units or if the State Trust in which he is a Certificateholder
is liquidated, he will receive at that time his proportionate
share of the interest accrued on the Units of such State Trust
computed to the settlement date in the case of sale or liquidation
and to the date of tender in the case of redemption.
Method of Evaluation
Aggregate prices of the Securities shall be determined for each
of the State Trusts by the Evaluator, (a) on the basis of current
prices of the Securities, (b) if prices are not available for
any particular Securities, on the basis of current prices for
comparable Securities, (c) by determining the value of the Securities
by appraisal, or (d) by any combination of the above. Unless Securities
are in default in payment of principal or interest or in significant
risk of such default, the Evaluator will not attribute any value
to the insurance obtained by a Guaranteed Trust.
The Evaluator will consider in its evaluation of Defaulted Bonds
held by a Guaranteed Trust and which are covered by insurance
obtained by such Guaranteed Trust the value of the insurance guaranteeing
interest and principal payments as well as the market value of
the Defaulted Bonds and the market value of similar securities
of issuers whose securities, if identifiable, carry identical
interest rates and maturities and are of a creditworthiness comparable
to the issuer prior to the default or risk of default. If such
other securities are not identifiable, the Evaluator will compare
prices of securities with substantially identical interest rates
and maturities and are of a creditworthiness of minimum investment
grade. As to Series 23 and subsequent Series, the value of the
insurance will be equal to the difference between (i) the market
value of Defaulted Bonds assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium attributable
to the purchase of Permanent Insurance and the related custodial
fee) and (ii) the market value of such Defaulted Bonds not covered
by Permanent Insurance. The Evaluator will consider the ability
of the Insurer to meet its commitments under a Guaranteed Trust's
insurance policy and MBIA's commitment, in the case of Series
23 through 36, and the Corporation's commitment, in the case of
Series 37 and subsequent Series, to issue Permanent Insurance.
For example, if a Guaranteed Trust were to hold the defaulted
Securities of a municipality, the Evaluator would first consider
in its evaluation the market price of the defaulted Securities.
The Evaluator would ascribe a value to the insurance feature of
the defaulted Securities that would be equal to the difference
between the market value of the defaulted Securities insured by
such Guaranteed Trust and the market value of similar securities
of minimum investment grade as described herein which were not
in default in payment of principal or interest or in significant
risk of such default. The Evaluator intends to use a similar valuation
method with respect to Securities insured by a Guaranteed Trust
if there is a significant risk of default and a resulting decrease
in the market value. For a description of the circumstances under
which a full or partial suspension of the right of Certificateholders
to redeem their Units may occur, see "Public Offering of Units-Redemption."
Page 23
It is the present intention of the Trustee (and, in the case of
Series 23 and subsequent Series, assuming the Trustee does not
exercise the right to obtain Permanent Insurance on any Defaulted
Bond), so long as a Guaranteed Trust contains either some Bonds
not in default or any Pre-insured Bonds, not to sell Defaulted
Bonds to effect redemptions or for any other reason but rather
to retain them in the portfolio of such Guaranteed Trust BECAUSE
VALUE ATTRIBUTABLE TO THE INSURANCE CANNOT BE REALIZED UPON SALE.
Insurance obtained by the issuer of a Pre-insured Bond, or by
some other party, is effective so long as such Pre-insured Bond
is outstanding and the insurer of such Bond continues to fulfill
its obligations. Therefore, any such insurance may be considered
to represent an element of market value in regard to the Pre-insured
Bond, but the exact effect, if any, of this insurance on such
market value cannot be predicted. Regardless of whether the Insurer
of a Pre-insured Bond continues to fulfill its obligations, however,
such Bond will in any case continue to be insured under the policy
obtained by a Guaranteed Trust from the Insurer as long as the
Bond is held in such Guaranteed Trust.
No value has been ascribed to insurance obtained by a Guaranteed
Trust as of the date of this Prospectus.
Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price
Although the Public Offering Price and the Sponsor's Repurchase
Price of Units of a State Trust will be determined on the basis
of the Sponsor's Bid Price (see "Market for Units" below), the
Unit Value at which Units may be redeemed will be determined on
the basis of the current bid prices of such Securities. On the
Pricing Date, the Public Offering Price and the Sponsor's Repurchase
Price per Unit of each State Trust (based on the Sponsor's Bid
Price of the Securities in such State Trust and including the
sales charge) each exceeded the Unit Value at which Units could
have been redeemed (based upon the current bid prices of the Securities
in such State Trust) by the amount shown under "Summary of Essential
Information" in Part I of the Prospectus. In the past, the bid
prices of bonds similar to those in the State Trusts have been
lower than the offering prices by as much as 3% or more of principal
in the case of inactively traded bonds and as little as 1/2 of 1%
in the case of actively traded bonds, but the difference between
such offering and bid prices has averaged about 1 1/2% to 2% of principal
amount. Further, all of these spreads between bid and offering
prices have increased substantially during periods of extreme
uncertainty. For these reasons, among others (including fluctuations
in the market prices of the Securities and the fact that the Public
Offering Price includes a sales charge), the amount realized by
a Certificateholder upon any redemption of Units may be less than
the price paid by him for such Units.
Page 24
Distribution of Units
Units of the respective State Trusts repurchased by the Sponsor
in the secondary market are offered to the public at the Public
Offering Price of such Units determined in the manner set forth
above, plus accrued interest to the settlement date, on the last
business day of each week effective for all sales made during
the following week. In maintaining a market for the Units, the
Sponsor realizes profits or sustains losses in the amount of any
difference between the price at which it purchased Units and the
price at which it resells or redeems such Units. Cash, if any,
made available to the Sponsor prior to the settlement date for
a purchase of Units may be used in the Sponsor's business, subject
to the limitations of the rules and regulations under the Securities
Exchange Act of 1934, as amended, and may be of benefit to the Sponsor.
The Sponsor qualified and intends to continue to qualify Units
of each of the respective State Trusts for sale in the State for
which such State Trust is named. Sales may be made to or through
dealers at prices which represent concessions or agency commissions
of 70% of the sales charge, subject to the Sponsor's right to
change such concession or agency commission from time to time.
Certain commercial banks are making Units of the respective State
Trusts available to their customers on an agency basis. Under
the Glass-Steagall Act, banks are prohibited from underwriting
State Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not
indicated that these particular agency transactions are not permitted
under such Act. In Texas, any banks making Units available to
potential investors must be registered as broker-dealers in Texas.
The Sponsor may from time to time pay, in addition to the amount
paid to dealers, an additional concession to a dealer which employs
a registered representative who sells during a specific period,
a minimum dollar amount of the respective State Trust's Units.
In no event will such additional concession paid by the Sponsor
to the dealer exceed the difference between the sales charge and
the dealer's allowance in respect of Units sold by the qualifying
registered representative. Such Units then may be distributed
to the public by the dealers at the Public Offering Price then
in effect. The Sponsor reserves the right to reject, in whole
or in part, any order for the purchase of Units.
Market for Units
The Sponsor, although not obligated to do so, intends to maintain
a secondary market for the Units of the respective State Trusts
at its own expense and continuously to offer to purchase such
Units at prices based on the Sponsor's Bid Price, including bid
prices as determined by the Evaluator through the expected date
of settlement. For a description of the Redemption Price, see
"Redemption" below. The repurchase price is subject to change
at any time and may be more or less than the original purchase
price. SINCE THE MARKET PRICE MAY EXCEED THE REDEMPTION PRICE,
A CERTIFICATEHOLDER WHO WISHES TO DISPOSE OF HIS UNITS SHOULD
INQUIRE THROUGH HIS BROKER AS TO THE CURRENT MARKET PRICE OF THE
UNITS BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. Any
Units so acquired by the Sponsor may be reoffered at a price determined
in accordance with the currently effective Prospectus describing
such Units. However, if the Sponsor repurchases Units of a State
Trust in the secondary market at a price below the offering price
of the Securities in such State Trust, it will not resell these
Units in the secondary market.
The Sponsor may discontinue purchases of Units at the Sponsor's
Bid price if the supply of Units of any of the respective State
Trusts exceeds demand or for other business reasons. In that event,
a Certificateholder will be able to dispose of his Units of a
State Trust only by tendering them to the Trustee for redemption
at prices based on the aggregate bid price of the Securities in
such State Trust, which is expected to be less than the aggregate
offering price. The Sponsor, of course, does not in any way guarantee
the enforceability, marketability, or price of any Security in
the portfolio or of the Units of any of the State Trusts. Any
Units that are purchased by the Sponsor in the secondary market
may be tendered for redemption by the Sponsor if it determines
such redemption to be in its best interest.
Page 25
The secondary market Public Offering Price of the Units of the
Trust will be based on the aggregate bid price of the Bonds in
the Trust (as determined by the Evaluator) plus a sales charge
determined in accordance with the schedule set forth below, which
is based upon the maturities of each Bond in the Trust. The use
of a variable sales charge will in no event result in a greater
sales charge than the 5.5% sales charge previously in effect for
purchases of Units in the secondary market. In several instances
it may have the effect of lowering the sales charge and thus increasing
the Estimated Current Return and Estimated Long-Term Return (see
"Summary of Essential Information" in Part I of the Prospectus
for information regarding the Estimated Current Return and Estimated
Long-Term Return of Units of the Trust) to secondary market purchasers.
For the purpose of computing the sales charge, Bonds will be deemed
to mature on their expressed maturity dates unless: (a) the Bonds
have been called for redemption or funds or securities have been
placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Bonds are subject to a "mandatory tender,"
in which case such mandatory tender will be deemed to be the date
upon which they mature.
This method of sales charge computation will apply different sales
charge rates to each Bond in the Trust based upon the maturity
of each such Bond in accordance with the following schedule:
<TABLE>
<CAPTION>
Secondary Market Sales Charge
Years to Maturity Percentage of Percentage of
Per Bond Public Offering Price Net Amount Invested
_________________ _____________________ ___________________
<S> <C> <C>
0.000-3.000 2.00% 2.041%
3.001-4.000 2.50 2.564
4.001-5.000 3.00 3.093
5.001-6.000 3.50 3.627
6.001-7.000 4.00 4.167
7.001-8.000 4.50 4.712
8.001-9.000 5.00 5.263
9.001 or more 5.50 5.820
</TABLE>
A minimum sales charge of 2.0% of the Public Offering Price will
be applied to all secondary market purchases of Units of the Trust.
There will be no reduction of the sales charge for volume purchases
in secondary market transactions.
Redemption
Any Unit may be tendered for redemption by mail to the Trustee,
Bank of New York, Attention: Unit Trust Department, at its office
at 101 Barclay Street, New York, New York 10286, properly endorsed
and accompanied by a written instrument or instruments of transfer,
together with any applicable transfer tax payable, as instructed
by the Trustee. A Certificateholder must sign exactly as his name
appears on the face of the Certificate with the signature guaranteed
by a national bank or trust company or by a member firm of a national
or regional securities exchange and furnish such other documents
as the Trustee may request.
Payment in cash for Units so tendered will be made by the Trustee
no later than the third business day following the day on which
tender for redemption is received (the "Redemption Date"). The
amount to be paid on the Redemption Date to a Certificateholder
is the Unit Value, determined as of the date of tender in accordance
with the procedures set forth under "Unit Evaluation," multiplied
by the number of Units tendered for redemption (the "Redemption
Price"). The "date of tender" is the date Units are received by
the Trustee in proper form, provided that if Units are received
after the Evaluation Time stated under "Summary of Essential Information"
Page 26
in Part I of the Prospectus the date of tender is deemed the next
business day and such Units will be treated as having been tendered
for redemption at the Redemption Price computed on that day.
The Sponsor has the right to purchase any Unit tendered to the
Trustee for redemption no later than the close of business on
the second business day following such tender at a price not less
than the Redemption Price. So long as the Sponsor is maintaining
a bid in the secondary market in excess of the Redemption Price,
the Sponsor will repurchase any Units tendered to the Trustee
for redemption.
Any portion of the Redemption Price representing interest shall
be withdrawn from the Interest Account of the applicable State
Trust to the extent that funds are available for such purpose.
All other amounts paid on redemption shall be withdrawn from the
Principal Account of such State Trust. The Trustee is empowered
to sell Securities in a State Trust in order to make funds available
for the redemption of Units of such State Trust. Any Units redeemed
shall be cancelled and any undivided fractional interest of such
Units in the State Trust extinguished. To the extent Securities
in a State Trust are sold, the size and diversity of such State
Trust will be reduced. Such sale may be required when Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. The Redemption Price may be more
or less than the amount paid by the Certificateholder depending
on the value of the Securities in the portfolio of the applicable
State Trust at the time of redemption.
The right of redemption may be suspended and payment postponed
(1) for any period during which the New York Stock Exchange Inc.
is closed, other than customary weekend or holiday closings; (2)
for any period during which (as determined by the Securities and
Exchange Commission (the "Commission")), (i) trading on the New
York Stock Exchange Inc. is restricted or (ii) an emergency exists
as a result of which disposal or evaluation of the Securities
is not reasonably practicable; or (3) for such other period as
the 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.
As stated above, the Trustee may sell Securities to cover redemptions.
When Securities are sold, the size and diversity of the Trust
will be reduced. Such sale may be required at a time when Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. The Redemption Price may be more
or less than the amount paid by the Certificateholder depending
on the value of the Securities in the portfolio at the time of
redemption. Since the provisions of the insurance obtained by
a Guaranteed Trust cover the Bonds only while the Bonds are held
in and owned by such Guaranteed Trust (and, in the case of Series
23 and subsequent Series, assuming the Trustee does not exercise
the right to obtain Permanent Insurance on a Bond), the Bonds
so insured must be sold on an uninsured basis. To the extent that
(and, in the case of Series 23 and subsequent Series, assuming
the Trustee does not exercise the right to obtain Permanent Insurance
on a Defaulted Bond), Bonds which are current in payment of interest
are sold from a Guaranteed Trust portfolio in order to meet redemption
requests and Defaulted Bonds are retained in the portfolio in
order to preserve the related insurance protection applicable
to said Bonds, the overall quality (and therefore value) of the
Bonds remaining in such Guaranteed Trust will tend to diminish.
See "Investment Supervision" for the effect of selling Defaulted
Bonds to meet redemption requests.
Because insurance obtained by a Guaranteed Trust terminates as
to Bonds which are sold by the Trustee and because the insurance
obtained by such Guaranteed Trust does not have a realizable cash
value which can be used by the Trustee to meet redemption of Units
(and as to Series 23 and subsequent Series, assuming the Trustee
does not exercise the right to obtain Permanent Insurance on Defaulted
Bonds), under certain circumstances the Sponsor may apply to the
Commission for an order permitting a full or partial suspension
of the right of Certificateholders of such Guaranteed Trust to
redeem their Units if a significant portion of the Bonds in the
portfolio are in default in payment of principal or interest or
in significant risk of such default. No assurances
Page 27
can be given that the Commission will permit the Sponsor to suspend
the rights of such Certificateholders to redeem their Units and,
without the suspension of such redemption rights when faced with
excessive redemption, the Sponsor may not be able to preserve
the benefits of such Guaranteed Trust's insurance on Defaulted Bonds.
Unit Evaluation
Unit Value is computed by the Trustee as of the Evaluation Time
stated under "Summary of Essential Information" in Part I of the
Prospectus on each business day by adding: (1) the aggregate value
of each issue of the Securities in such State Trust on the bid
side of the market, as determined by the Evaluator, except for
those cases relating to a Guaranteed Trust in which the value
of insurance has been included; (2) the cash on hand in such State
Trust, other than amounts allocated to semi-annual Certificateholders
under the Agreement; (3) accrued but unpaid interest on the Securities
in such State Trust at the date of the computation; and (4) with
respect to semi-annual Certificateholders only, amounts allocated
to them under the Agreement: and deducting therefrom, (1) amounts
representing any applicable taxes or governmental charges payable
out of such State Trust and for which no deductions have been
previously made; (2) amounts representing estimated accrued expenses
of such State Trust including but not limited to unpaid fees and
expenses of the Trustee (including legal and auditing fees), the
Evaluator, and if any, of counsel; and (3) cash allocated for
distribution (which distribution shall take into account those
Certificateholders who have elected to receive distributions on
a monthly basis) to Certificateholders of record of such State
Trust as of the business day prior to the evaluation being made.
The result of such computation shall be divided by the number
of Units outstanding of such State Trust as of the date thereof
to determine the per Unit evaluation of such State Trust.
In determining the Redemption Price per Unit of a Guaranteed Trust,
no value will be assigned to the portfolio insurance maintained
by such Guaranteed Trust on the Bonds in such Guaranteed Trust
unless such Bonds are in default in payment of principal or interest
or in significant risk of such default. On the other hand, Pre-insured
Bonds are entitled at all times to the benefits of insurance obtained
by their respective issuers and such benefits are reflected and
included in the market value of Pre-insured Bonds. For a description
of the situations in which the Evaluator may value the insurance
obtained by a Guaranteed Trust, see "Public Offering of Units-Method
of Evaluation."
CERTIFICATEHOLDERS
Description of Certificate
Ownership of Units of the respective State Trust will be evidenced
by registered Certificates executed by the Trustee and the Sponsor.
Certificates are transferable by presentation and surrender to
the Trustee properly endorsed and accompanied by a written instrument
or instruments of transfer, together with a payment of $2.00 if
required by the Trustee or such other amounts as may be specified
by the Trustee and approved by the Sponsor for each new Certificate
and any sums payable for taxes or other governmental charges imposed
on such transactions.
Certificates will be issued in denominations of one Unit or any
multiple thereof. The Trustee at the present time does not intend
to charge for services rendered in connection with the normal
transfer or interchange of Certificates. Destroyed, stolen, mutilated
or lost Certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of
expenses incurred.
Trust Distributions
Interest and principal from each State Trust, less applicable
expenses or funds required for the redemption of Units of such
State Trust, will be distributed in monthly or semi-annual installments
on a pro rata basis to Certificateholders
Page 28
of record of such State Trust as of each Record Day on the next
following Distribution Day or shortly thereafter. (See "Distributions"
and "Summary of Essential Information" in Part I of the Prospectus.)
Interest on the Securities received by each State Trust is credited
by the Trustee to an Interest Account of such State Trust. Other
receipts are credited to a Principal Account of such State Trust.
The regular monthly or semi-annual distribution to Certificateholders
in such State Trust shall consist of an amount substantially equal
to one-twelfth or one-half of such holder's pro rata share of
the estimated net annual income in the Interest Account of such
State Trust after deducting estimated expenses (the "Monthly or
Semi-Annual Interest Distribution") plus such holder's pro rata
share of the cash balance of the Principal Account of such State
Trust computed as of the close of business on the preceding Record
Day. The Monthly or Semi-Annual Interest Distribution per Unit
to Certificateholders in a State Trust is expected to be in the
amount shown under "Summary of Essential Information" for such
State Trust in Part I of the Prospectus and will change and may
be reduced as Securities in such State Trust are redeemed, paid
or sold. Proceeds received from the disposition of any of the
underlying Securities in a State Trust subsequent to a Record
Day and prior to the succeeding Distribution Date will be held
in the Principal Account of such State Trust and will not be distributed
until the next successive Distribution Day. Persons who purchase
Units between a Record Day and a Distribution Day will receive
their first distribution on the second Distribution Day following
their purchase of Units. Other than for purposes of redemption,
no distribution need be made from the Principal Account of a State
Trust if the balance therein is less than $1.00 per Unit then
outstanding and in the case of Series 20 and subsequent Series
no monthly distribution need be made from the Principal Account
of a State Trust if the balance therein is less than $10.00 per
Unit then outstanding. A Reserve Account of a State Trust may
be created by the Trustee by withdrawing from the Interest or
Principal Accounts of such State Trust, from time to time, such
amounts as it deems requisite to establish a reserve for any taxes
or other governmental charges that may be payable out of such
State Trust. The Principal, Interest and Reserve Accounts of a
State Trust do not bear interest. (See "Expenses of the Trust.").
Because interest payments are not received by a State Trust at
a constant rate throughout the year, interest distributions may
be more or less than the amount credited to the Interest Account
of such State Trust as of the Record Date. For the purpose of
eliminating fluctuations in the periodic distributions from the
Interest Account of a State Trust, the Trustee is required by
the Agreement to advance such amounts as may be necessary to provide
monthly or semi-annual interest payments of approximately equal
amounts. The Trustee shall be reimbursed, without interest, for
any such advances from funds available from the Interest and Principal
Accounts of such State Trust on or before the ensuing Distribution
Day. (See "Expenses of the Trust.")
Statements to Certificateholders
The Trustee will furnish each Certificateholder with each distribution
a statement of the amount of interest and the amount of other
receipts, if any, which are being distributed, expressed in each
case as a dollar amount per Unit. The accounts of each State Trust
are required to be audited not less frequently than annually by
independent certified public accountants designated from time
to time by the Sponsor. The report of such accountants shall be
furnished by the Trustee to any Certificateholder of such State
Trust upon request. Within a reasonable period of time after the
end of each calendar year (normally within thirty to sixty days),
the Trustee shall furnish to each person who at any time during
the calendar year was a Certificateholder a statement setting
forth: A. As to the Interest Account: (1) The amount of interest
received on the Securities; (2) The amount paid for redemption
of Units; (3) The charges for payment of applicable taxes and
fees and expenses (including auditing fees and insurance costs,
if any) of the Trustee, the Evaluator, and, if any, of counsel;
(4) Any other amount credited to or deducted from the Interest
Account; and (5) The balance remaining expressed both as a total
dollar amount and as a dollar amount per Unit outstanding on the
last business day of such calendar year; B. As to
Page 29
the Principal Account: (1) The dates of the sale, maturity, liquidation
or redemption of any of the Securities and the net proceeds received
therefrom excluding any portion credited to the Interest Account,
and as to Series 23 and subsequent Series, the premium attributable
to the Trustee's exercise of the right to obtain Permanent Insurance
and any related custodial fee; (2) The amount paid for redemption
of Units; (3) The charges for payment of applicable taxes and
fees and expenses (including auditing fees and insurance costs,
if any) of the Trustee, the Evaluator, and, if any, counsel; (4)
Any other amount credited to or deducted from the Principal Account;
and (5) The balance remaining expressed both as a total dollar
amount and as a dollar amount per Unit outstanding on the last
business day of the calendar year; C. Other Information: (1) A
list of the Securities as of the last business day of such calendar
year; (2) The number of Units outstanding on the last business
day of such calendar year; (3) The Unit Value based on the last
Trust Evaluation made during such calendar year; and (4) The amounts
actually distributed to Certificateholders during such calendar
year from the Interest and Principal Accounts separately stated,
expressed both as total dollar amounts and as dollar amounts per
Unit outstanding on the Record Days for each such distribution.
Rights of Certificateholders
Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election
of the prior owner. Thereafter, changes in the plan of distribution
may be made, but only as provided in this paragraph. On each Semi-Annual
Distribution Day, or within a reasonable period of time thereafter,
the Trustee shall furnish to each Certificateholder a card which
must be returned to the Trustee on or before the next Monthly
Record Day if the Certificateholder wishes to change his plan
of distribution. Certificateholders wishing to change must so
indicate on the card and return it to the Trustee together with
their Certificate to which it relates. If the card and Certificate
are returned, the change will become effective as of the Monthly
Record Day immediately following such Semi-Annual Distribution
Day and continue in effect until further notice. If the card and
Certificate are not returned to the Trustee, the Certificateholder
will be deemed to have elected to continue with the same plan
for the following six months.
A Certificateholder may tender his Units to the Trustee for redemption
at any time, including the time prior to the receipt of Certificates
representing Units purchased. The death or incapacity of any Certificateholder
in a State Trust will not operate to terminate such State Trust
or entitle his legal representatives or heirs to claim an accounting
or to bring any action or proceeding in any court for partition
or winding up of such State Trust.
No Certificateholder in a State Trust shall have the right to
control the operation and management of such State Trust in any
manner, except to vote with respect to certain amendments of the
Agreement or termination of such State Trust.
AUTOMATIC REINVESTMENT PLAN
The Sponsor has entered into an agreement with First Investors
Insured Tax Exempt Fund, Inc. ("First Investors") which permits
Certificateholders of the State Trust to elect to have each distribution
of interest income, capital gains or principal on his Units automatically
reinvested in shares of First Investors at the price (plus sales
charge) described below. First Investors, whose investment adviser
is First Investors Management Company ("Advisor"), is an open-end,
diversified management investment company with the objective of
providing through investment in a professionally managed insured
portfolio of municipal bonds, a high level of current tax-exempt income.
First Investors has investment objectives which differ in certain
respects from those of the Trust. First Investors is permitted
to own tax-exempt bonds rated less than A by Moody's Investors
Service, Inc., or Standard & Poor's and bonds not rated by Moody's
or Standard & Poor's, if, in the judgment of the Advisor, such
bonds are suitable for achieving First Investors' investment objective,
and if, in the judgment of the independent insurance
Page 30
company (AMBAC Indemnity) which issues insurance covering the
securities in the portfolio of First Investors, such bonds are
acceptable for issuance of municipal bond insurance. Because of
such insurance, Standard & Poor's has rated First Investors "AAA."
First Investors may also own (not to exceed 10% of the portfolio
on average) short-term, fixed income investments, the interest
income from which may be subject to Federal income tax, as described
in a prospectus relating to First Investors.
Each Certificateholder may elect to become a participant in the
automatic reinvestment program by advising his or her account
representative. Thereafter, as directed by such person, each distribution
of interest income, capital gains or principal on the participant's
Units will, on the applicable Distribution Day, automatically
be applied as of that date by the Trustee to purchase shares (or
fractions thereof) of First Investors at a net asset value as
computed as of the close of trading on the New York Stock Exchange
on such date, plus a reduced sales charge of 1% of the offering
price, as described in the First Investors prospectus. The sales
charge would be paid to the Advisor and First Investors Corporation,
as principal underwriters of First Investors. The balance will
be invested in First Investors.
Confirmations of all transactions undertaken for each participant
in the reinvestment plan will be mailed to such participant by
First Investors indicating distributions and shares (or fractions
thereof) of First Investors purchased on his behalf.
A participant may at any time prior to the five days preceding
the next succeeding Distribution Day, by so notifying the Trustee
in writing, elect to terminate his participation in the reinvestment
plan and receive future distributions on his Units in cash. There
will be no charge or other penalty for such termination. The Sponsor,
First Investors and the Advisor each will have the right to terminate
this investment plan.
It should be remembered that the reinvestment of distributions
through the reinvestment plan will not affect the income tax status
of the distributions.
TO RECEIVE MORE INFORMATION REGARDING AN INVESTMENT IN FIRST INVESTORS
THROUGH THE PLAN, INCLUDING CHARGES, EXPENSES AND SALES CHARGES
FOR PARTICIPANTS, FILL OUT AND RETURN THE ENCLOSED CARD FOR A
COPY OF THE FIRST INVESTORS PROSPECTUS. READ IT CAREFULLY BEFORE
YOU DECIDE TO PARTICIPATE.
INVESTMENT SUPERVISION
With certain specified exceptions described below, the Sponsor
may not alter the portfolio of a State Trust by the purchase,
sale or substitution of Securities. Thus, with the exception of
the redemption or maturation of Securities in accordance with
their terms, the assets of a State Trust will remain unchanged
under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities upon
default in the payment of principal or interest, institution of
certain legal proceedings or the existence of certain other impediments
to the payment of Securities, default under other documents which
may adversely affect debt service, default in the payment of principal
or interest on other obligations of the same issuer, decline in
projected revenues pledged for debt service on revenue Securities,
or decline in price or the occurrence of other market factors,
including advance refunding, so that in the opinion of the Sponsor
the retention of such Securities in a State Trust would be detrimental
to the interest of the Certificateholders. The proceeds from any
such sales will be credited to the Principal Account of such State
Trust for distribution to the Certificateholders.
To the extent that Bonds in a Guaranteed Trust are sold which
are current in payment of principal and interest in order to meet
redemption requests and Defaulted Bonds are retained in the portfolio
in order to preserve the related insurance protection applicable
to said Bonds (and as to Series 23 and subsequent Series, assuming
the Trustee does not exercise the right to obtain Permanent Insurance
on a Defaulted Bond or Bonds),
Page 31
the overall quality of the Bonds remaining in such Guaranteed
Trust's portfolio will tend to diminish. Except as described below
and in certain other unusual circumstances for which it is determined
by the Trustee to be in the best interest of the Certificateholders
or if there is no alternative (and as to Series 23 and subsequent
Series, assuming the Trustee does not exercise the right to obtain
Permanent Insurance on a Defaulted Bond or Bonds), the Trustee
is not empowered to sell Defaulted Bonds for which value has been
attributed for the insurance obtained by such Guaranteed Trust.
Because of such restrictions on the Trustee under certain circumstances
the Sponsor may seek a full or partial suspension of the right
of Certificateholders to redeem their Units. See "Public Offering
of Units-Redemption."
The Sponsor is required to instruct the Trustee to reject any
offer made by an issuer of the Securities to issue new obligations
in exchange and substitution for any of the Securities pursuant
to a refunding financing plan, except that the Sponsor may instruct
the Trustee to accept or reject such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if
(a) the issuer is in default with respect to the Securities or
(b) in the written opinion of the Sponsor, there is a reasonable
basis to believe that the issuer will default with respect to
the Securities in the foreseeable future. Any obligations 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 Securities originally deposited. Within five days after
such deposit in a State Trust, notice of such exchange and deposit
shall be given by the Trustee to each Certificateholder in such
State Trust registered on the books of the Trustee, including
an identification of the Securities eliminated and the Securities
substituted therefor.
If a default in the payment of principal or interest on any of
the Securities occurs and no provision for payment is made therefor
either pursuant to any portfolio insurance or otherwise, and if
the Sponsor fails to instruct the Trustee to sell or hold within
thirty days after the notification thereof by the Trustee, the
Agreement provides that the Trustee shall sell the Defaulted Bonds
forthwith and shall not be liable for any depreciation or loss
incurred by reason of such sale. The Trustee may sell Securities
in a State Trust designated by the Sponsor for the purpose of
redeeming Certificates tendered for redemption and the payment
of expenses for such State Trust.
Notwithstanding the foregoing, in connection with the final distributions
to Certificateholders of a Guaranteed Trust (and as to Series
23 and subsequent Series, assuming the Trustee does not exercise
the right to obtain Permanent Insurance on any Defaulted Bond),
because the portfolio insurance obtained by such Guaranteed Trust
is applicable only while bonds so insured are held by such Guaranteed
Trust, the price to be received by such Guaranteed Trust upon
the disposition of any Defaulted Bond will not reflect any value
based on such insurance. Therefore, in connection with any liquidation,
it shall not be necessary for the Trustee to, and the Trustee
does not currently intend to, dispose of any Bond or Bonds if
retention of such Bond or Bonds, until due, shall be deemed to
be in the best interest of Certificateholders, including but not
limited to situations in which a Bond or Bonds so insured have
a deteriorated market price resulting from a significant risk
of default. Since any Pre-insured Bonds will reflect the value
of the insurance obtained by the Bond issuer, it is the present
intention of the Sponsor not to direct the Trustee to hold any
Pre-insured Bonds after the date of termination. All proceeds
received, less applicable expenses, from insurance on defaulted
Bonds not disposed of at the date of termination will ultimately
be distributed to Certificateholders of record as of such date
of termination as soon as practicable after the date such Bond
or Bonds become due and applicable insurance proceeds have been
received by the Trustee. (See "Summary of Essential Information"
in Part I of the Prospectus).
ADMINISTRATION OF THE TRUST
The Trustee
The Successor Trustee as to Series 1 through 23 and Trustee as
to Series 24 and Subsequent Series is The Bank of New York, a
trust company organized under the laws of New York. The Unit Trust
Department of the Trustee
Page 32
has its offices at 101 Barclay Street, New York, New York 10286,
and its telephone number is 1-800-431-8001 or 1-800-431-8002.
The Bank of New York is subject to supervision and examination
by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits
are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The duties of the Trustee are primarily ministerial in nature.
The Trustee did not participate in the selection of Securities
for the portfolios of any of the State Trusts.
The Trustee shall keep proper books of record and account of all
transactions at its office. Such records shall include the name
and address of, and the Certificates issued to, every Certificateholder.
Such books and records shall be open to inspection by any Certificateholder
at all reasonable times during business hours. Although the Trustee
shall remain primarily responsible for the obligations and duties
allocated to it, the Agreement provides that the Trustee may,
subject to the approval of the Sponsor, enter into servicing arrangements
as it deems necessary or appropriate for the performance by a
service organization (which may be a corporation affiliated with
the Trustee) of bookkeeping, accounting, reporting, distribution
and other activities and duties allocated to the Trustee under
the Agreement.
The Trustee or any successor may resign by executing an instrument
in writing and filing the same with the Sponsor and mailing a
copy to each Certificateholder. The Sponsor, upon receiving such
notice, is obligated to use its best efforts to appoint a successor
Trustee promptly. If, upon such resignation, no successor Trustee
has been appointed within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction
for the appointment of a successor. In case the Trustee becomes
incapable of acting or is adjudged bankrupt or is taken over by
public authorities, or, in the case of Series 18 and subsequent
Series, if the Sponsor deems it to be in the best interests of
the Certificateholders, the Sponsor may remove the Trustee and
appoint a successor Trustee as provided in the Agreement. Notice
of such removal and appointment shall be mailed to each Certificateholder
by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor Trustee, all of the rights, powers,
duties and obligations of the original Trustee shall vest in the
successor.
The Trustee shall be a banking corporation organized and doing
business under the laws of the United States or of any state or
territory of the United States which is authorized under such
laws to exercise corporate trust powers and having at all times
an aggregate capital, surplus and undivided profits of not less
than $5,000,000 and shall otherwise qualify to act as Trustee.
The Evaluator
The Evaluator is Securities Evaluation Service, Inc., with its
principal offices at Suite 200, 531 East Roosevelt Road, Wheaton,
Illinois 60187. Securities Evaluation Service, Inc. is a registered
investment advisor.
The Evaluator may resign or be removed by either the Sponsor or
the Trustee which are to use their best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective
upon 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. Notice of such resignation or removal and appointment
shall be mailed by the Trustee to each Certificateholder.
Successor Sponsor
If at any time the Sponsor fails to perform any of its duties
under the Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities,
then the Trustee may (a) appoint a successor
Page 33
Sponsor at rates of compensation deemed by the Trustee to be reasonable
and not exceeding such reasonable amounts as may be prescribed
by the Commission, (b) terminate the Agreement and liquidate the
State Trusts as provided therein, or (c) continue to act as Trustee
without terminating the Agreement and without appointing any successor
Sponsor. In no event may the Trustee act as Sponsor of the Trust.
Amendment and Termination of the Agreement
The Agreement may not be amended, without the consent of the holders
of all Certificates of the Multistate Trust then outstanding,
to increase the number of Units issuable or to permit, except
in accordance with the provisions of the Agreement, the acquisition
of any Securities in addition to or in substitution for those
initially deposited in the State Trusts or to reduce the percentage
interest in the State Trusts of any Certificateholder or reduce
the percentage of Units required to consent to any such amendment
or waiver. The Trustee shall promptly notify Certificateholders
of the substance of any such amendment.
The Agreement may be amended by the Trustee and the Sponsor without
the consent of any of the Certificateholders: (1) to cure any
ambiguity or to correct or supplement any provisions which may
be defective or inconsistent; (2) to change any provisions thereof
as may be required by the Commission or any successor governmental
agency; or (3) to make such provisions as shall not adversely
affect the interests of the Certificateholders (as determined
in good faith by the Sponsor and the Trustee). The Agreement may
also be amended in any respect by the Sponsor and the Trustee,
or performance of any of the provisions thereof may be waived,
with the written consent of the holders of Certificates evidencing
662/3% of the Units then outstanding of each State Trust affected
by such amendment.
The Agreement provides that a State Trust shall terminate upon
the maturity, redemption or other disposition, as the case may
be, of the last of the Securities held in such State Trust, or,
in the case of certain Trusts, at any time when in the opinion
of the Sponsor and the Trustee, the amount of customary, interest-bearing
Bonds in a State Trust is insufficient to support the expenses
of such State Trust. The Trustee shall notify all Certificateholders
of any State Trust when the value of such State Trust as shown
on the last business day of December or June in any year is less
than the minimum amount set forth in "Summary of Essential Information"
in Part I of the Prospectus, at which time such State Trust may
be terminated by the consent of 662/3% of its Certificateholders
or, in the case of Series 11 and subsequent Series, by the Trustee,
provided however, that at least 331/3% of such Certificateholders
do not instruct the Trustee not to terminate the Trust. In no
event, however, may such State Trust continue beyond the mandatory
termination date set forth in "Summary of Essential Information"
in Part I of the Prospectus; provided, however, that prior to
such mandatory termination date of a Guaranteed Trust, the Trustee
shall not dispose of any Bonds if the retention of such bonds,
until due, shall be deemed to be in the best interest of the Certificateholders.
In the event of termination, written notice thereof will be sent
by the Trustee to all Certificateholders of record on the date
the affected State Trust is terminated. Within a reasonable period
after termination, the Trustee must sell any Securities remaining
in such State Trust, and after paying all expenses and charges
incurred by such State Trust, distribute to each Certificateholder,
upon surrender for cancellation of his Certificate for Units,
his pro rata share of the Interest and Principal Accounts of such
State Trust.
Limitations on Liability
The Sponsor: The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Agreement,
but will be under no liability to the Certificateholders for taking
any action or refraining from any action in good faith or for
errors in judgment, except in cases of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations
and duties. The Sponsor shall not be liable or responsible in
any way for depreciation or loss incurred by reason of the sale
of any Securities.
Page 34
The Trustee: The Agreement provides that, except by reason of
willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations and duties, the Trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies or
Securities, in respect of any evaluation, or otherwise pursuant
to its rights, powers or duties; nor shall the Trustee be liable
or responsible in any way for depreciation or loss incurred by
reason of the sale by the Trustee of any Securities, or for any
evaluation made by the Evaluator or any directions or instructions
given by the Sponsor. In the event that the Sponsor shall fail
to instruct the Trustee as to the disposition of any defaulted
Securities, the Trustee may, but shall be under no obligation
to, act and shall not be liable for any such action taken by it
in good faith. The Trustee shall not be personally liable for
any taxes or other governmental charges imposed upon or in respect
of the Securities or upon the interest thereon. In addition, the
Agreement contains other customary provisions limiting the liability
of the Trustee. The Trustee, whose duties are ministerial, has
not participated in the selection of Securities for the State Trusts.
The Evaluator: The Trustee, Sponsor and Certificateholders may
rely on any evaluation furnished by the Evaluator and shall have
no responsibility for the accuracy thereof. The Agreement provides
that the determinations made by the Evaluator 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, Sponsor or Certificateholders for errors in judgment,
except in cases of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
EXPENSES OF THE TRUST
The cost of the initial fees of the Trustee's counsel, and all
other reasonable expenses in connection therewith, together with
all of the cost of registering the Multistate Trust under the
Investment Company Act of 1940, as amended, and the Units under
the Securities Act of 1933, as amended, shall be borne by the Sponsor.
The Sponsor shall receive no fees from Series 1 through 6 of the
Multistate Trust for services performed. The Sponsor will receive,
in connection with Series 7 and subsequent Series, a Sponsor's
Annual Fee as set forth in Part I of the Prospectus. The Sponsor's
Annual Fee, which is earned for portfolio supervisory services,
is based on the number of Units outstanding (or, in the case of
Series 7 through 13, on the face amount of underlying Securities)
in each State Trust at December 15 of each year. The Sponsor's
Annual Fee, which is not to exceed the maximum amount set forth
under "Summary of Essential Information" in Part I of the Prospectus,
may exceed the actual costs of providing portfolio supervisory
services for this Trust, but at no time will the total amount
it receives for portfolio supervisory services rendered to all
series of the Trust in any calendar year exceed the aggregate
cost to it of supplying such services in such year. See "Investment
Supervision." Also, the Sponsor may derive profits from maintaining
a secondary market in Units of the State Trusts.
For ordinary services performed under the Agreement, the Trustee
will be paid monthly at the rates set forth under "Summary of
Essential Information" in Part I of the Prospectus. The Trustee
will also benefit to the extent that its return on funds it holds
on deposit in the non-interest bearing Interest, Principal and
Reserve Accounts of each of the State Trusts created under the
Agreement is greater than its cost of advancing, without interest,
such amounts as may be necessary to provide distributions to Certificateholders
as required by the Agreement. (See "The Trust-Interest and Estimated
Current Return" and "Certificateholders-Trust Distributions.")
The Evaluator shall receive a fee for each evaluation as is set
forth under "Summary of Essential Information" in Part I of the
Prospectus.
The fees of the Trustee and the Evaluator are payable monthly
on or before each Distribution Day for a State Trust, and any
Sponsor's Annual Fee is paid annually on December 15, all by deductions
from the Interest Account of such State Trust to the extent funds
are available, then from the Principal Account of such State Trust. The
Page 35
Trustee's fee may not be increased for the purpose of compensating
the Trustee for any reduction in its fee during the first year
of the Multistate Trust. These fees may be increased without approval
of the Certificateholders by amounts not exceeding a proportionate
increase in the Consumer Price Index entitled "All Services Less
Rent," published by the United States Department of Labor, or
any equivalent index substituted therefor.
The cost of insurance obtained by a Guaranteed Trust is in the
amount set forth under "Summary of Essential Information" in Part
I of the Prospectus so long as such Guaranteed Trust retains the
Securities. Premiums, which are Guaranteed Trust obligations,
are payable monthly by the Trustee on behalf of such Guaranteed
Trust. As Securities in the portfolio are redeemed by their respective
issuers or are sold by the Trustee, the amount of the premium
will be reduced in respect of those Securities no longer owned
by and held in such Guaranteed Trust. A Guaranteed Trust does
not incur any expense for insurance which has been obtained by
an issuer of a Pre-insured Bond, since the premium or premiums
for such insurance have been paid by such issuer or other party;
any Pre-insured Bonds, however, are additionally insured by such
Guaranteed Trust. In the case of Series 23 and subsequent Series,
the premium payable for Permanent Insurance and the related custodial
fee will be paid solely from the proceeds of the sale of a Bond
from a Guaranteed Trust in the event the Trustee exercises the
right to obtain Permanent Insurance on such Bond. No premium need
be paid by any Guaranteed Trust on Bonds that are Pre-insured
by either MBIA or the Corporation.
In addition to the above, the following charges may be incurred
by the Multistate Trust: (a) fees for the Trustee's extraordinary
services; (b) expenses of the Trustee (including legal and auditing
expenses) and of counsel; (c) various governmental charges; (d)
expenses and costs of any action taken by the Trustee to protect
the Multistate Trust or any of the State Trusts and the rights
and interests of the Certificateholders; (e) indemnification of
the Trustee for any loss, liabilities and expenses incurred by
it in the administration of the Multistate Trust or any of the
State Trusts without gross negligence, bad faith or willful misconduct
on its part; (f) indemnification of the Sponsor for any loss,
liability and expenses incurred by it in acting as depositors
of the State Trust without gross negligence, bad faith or willful
misconduct; and (g) expenditures incurred in contacting Certificateholders
upon termination of any of the State Trusts. The fees and the
expenses set forth herein, and advances made by the Trustee in
order to eliminate certain fluctuations in periodic distributions
(see "Certificateholders-Trust Distributions"), are payable out
of the State Trusts and, when so paid by or owing to the Trustee,
secured by a prior lien on such State Trusts.
Fees and expenses of a State Trust shall be deducted from the
Interest Account of such State Trust, or to the extent funds are
not available in such Account, from the Principal Account of such
State Trust. The Trustee may withdraw from such Principal Account
or such Interest Account such amounts, if any, as it deems necessary
to establish a reserve for any taxes or other governmental charges
payable out of such State Trust. Amounts so withdrawn shall be
credited to the Reserve Account of such State Trust and shall
not be considered a part of such State Trust when determining
the value of the Units of such State Trust until such time as
the Trustee shall return all or any part of such amounts to the
appropriate account. If the balances in the Principal and Interest
Accounts are insufficient to provide for amounts payable by the
Multistate Trust, or amounts payable to the Trustee which are
secured by its prior lien on the Multistate Trust, the Trustee
is permitted to sell Securities to pay such amounts.
THE SPONSOR
The Sponsor is a Delaware corporation incorporated in 1977 to
succeed to the business of a partnership which resulted from mergers
of five New York Stock Exchange member firms. The Sponsor is a
wholly-owned subsidiary of The Advest Group, Inc., a financial
services holding company. The Sponsor is a registered broker-dealer
Page 36
and provides securities, brokerage, trading, investment banking
and other financial services for its clients. The Sponsor is a
member of the National Association of Securities Dealers, Inc.
and of the New York Stock Exchange, the American Stock Exchange
and other principal exchanges. The principal offices of the Sponsor
are located at One Commercial Plaza, 280 Trumbull Street, Hartford,
Connecticut 06103. The Sponsor maintains approximately 83 branch
offices in 18 states and the District of Columbia. As of March
31, 1995, the total stockholder's equity of the Sponsor was $74,841,000.
The Sponsor is entirely owned by The Advest Group, Inc. and is
affiliated with Boston Security Counsellors, Inc.
On February 9, 1987, without admitting or denying the findings
of fact or conclusions of law contained therein, the Sponsor consented
to the entry of an Order (In the Matter of Advest, Inc., Admin.
Proceeding File No. 3-6783) by the Commission which imposed a
censure of the Sponsor for failure to supervise its registered
representatives so as to prevent the overcharging of sales commissions
to certain mutual fund customers entitled to volume discounts
through rights of accumulation. The Sponsor has refunded such
excess commissions together with appreciation thereon to such
customers and revised its supervising procedures to address this
problem. In connection with this matter, the then Vice President
in charge of the Unit Trust and Mutual Fund Departments of the
Sponsor has been suspended for 30 days from association with any
broker or dealer, subject to his right to petition for review
of the initial decision. None of the activities which were the
basis for the administrative actions discussed above involved
the Sponsor's activities as a Sponsor of the State Trusts.
The foregoing information with respect to the stockholders' equity
of the Sponsor relates to the Sponsor only and not to the Multistate
Trust. Such information is included in this Prospectus only for
the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out contractual obligations
with respect to the Multistate Trust. More comprehensive financial
information can be obtained upon request from the Sponsor.
The contract of insurance relating to a Guaranteed Trust and the
negotiations in respect thereof represent the only significant
relationship between the Insurer (and, in the case of Series 23
and subsequent Series, certain agreements relating to Permanent
Insurance) and such Guaranteed Trust. Otherwise, neither the Insurer
nor any associate thereof has any material business relationship,
direct or indirect, with any Guaranteed Trust or the Sponsor,
except that the Sponsor may from time to time in the normal course
of its business, participate as underwriter or as manager or as
a member of underwriting syndicates in the distribution of new
issues of municipal bonds for which a policy of insurance guaranteeing
the payment of interest and principal has been obtained from the
Insurer. Although all issues contained in the portfolio are individually
insured, neither a Guaranteed Trust, the Units nor the portfolio
of such Guaranteed Trust is insured directly or indirectly by the Insurer.
LEGAL OPINIONS
The legality of the Units originally offered hereby and certain
matters relating to Federal tax law have been passed upon by Choate,
Hall & Stewart, Exchange Place, 53 State Street, Boston, Massachusetts
02109, as counsel for Moseley and the Sponsor for Series 1 through
19 of Multistate Trust. Special Counsel for each State Trust for
tax matters relating to the state for which such Trust is named
are referred to under "Portfolios - Risk Factors and Tax Status"
in Part I of the Prospectus. Booth & Baron, 122 East 42nd Street,
New York, New York 10168 has acted as counsel for the Trustee
and as special counsel for the Multistate Trust for New York tax
matters for Series 1 through 19 of Multistate Trust. Tanner Propp
& Farber, 99 Park Avenue, New York, New York 10016, has acted
as counsel for the Trustee and as special counsel for the Multistate
Trust for New York tax matters
Page 37
for Series 20 and subsequent Series. Brown & Wood, One World Trade
Center, New York, New York 10048 have acted as special counsel
for Moseley and the Sponsor with respect to Multistate Trust Series
20 and subsequent Series.
AUDITORS
The financial statements of the Multistate Trust included in Part
I of the Prospectus have been examined by BDO Seidman, LLP, independent
certified public accountants, as stated in their opinion appearing
herein, and are included herein in reliance upon such opinion
given upon the authority of that firm as experts in accounting
and auditing.
DESCRIPTION OF BOND RATINGS
Standard & Poor's: A Standard & Poor's corporate or municipal
bond rating is a current assessment of the creditworthiness of
an obligor with respect to a specific debt obligation. This assessment
of creditworthiness may take into consideration obligors such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold
a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit
in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
II. Nature of provisions of the obligation; and
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
BB, B, CCC, CC-Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Page 38
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful completion
of the project being financed by 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 of the project, 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.
NR-Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that S&P
does not rate a particular type of obligation as a matter of policy.
Moody's Investors Service, Inc.: A brief description of the applicable
Moody's Investor Service rating symbols and their meanings follow:
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 few speculative characteristics
as well.
Ba-Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well as assured. Often the
protection of interest and principal payment may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or maintenance of other terms of the contract over any long period
of time may be small.
Con. (. . .)-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by: (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals
which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction
or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating
system. Although Industrial Revenue Bonds and Environmental Control
Revenue Bonds are tax-exempt issues, they are included in the
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.
Moody's does not apply numerical modifiers other than Aa1, A1, and Baa1,
which are described above, in its municipal bond rating system.
Page 39
<TABLE>
<CAPTION>
TABLE OF CONTENTS
for Prospectus, Part II
Page
______
<S> <C>
The Trust 1
Objectives 1
Organization 3
Portfolio 3
General Considerations 4
Guaranteed Trust Insurance 13
Interest, Estimated Current Return and
Estimated Long-Term Return 18
Tax Status of the Trust 19
Public Offering of Units 22
Public Offering Price 22
Accrued Interest 22
Method of Evaluation 23
Comparison of Public Offering Price, Sponsor's
Repurchase Price and Redemption Price 24
Distribution of Units 25
Market for Units 25
Redemption 26
Unit Evaluation 28
Certificateholders 28
Description of Certificate 28
Trust Distributions 28
Statements to Certificateholders 29
Rights of Certificateholders 30
Automatic Reinvestment Plan 30
Investment Supervision 31
Administration of the Trust 32
The Trustee 32
The Evaluator 33
Successor Sponsor 33
Amendment and Termination of the Agreement 34
Limitations on Liability 34
Expenses of the Trust 35
The Sponsor 36
Legal Opinions 37
Auditors 38
Description of Bond Ratings 38
</TABLE>
_____________________________________
This Prospectus does not contain all of the information set forth
in the registration statement and exhibits relating thereto, filed
with the Securities and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, and to which reference is made.
_____________________________________
No person is authorized to give any information or to make any
representations not contained in 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.
_____________________________________
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 an offer in such state.
_____________________________________
MULTISTATE TAX
EXEMPT UNIT
TRUST PROSPECTUS
Series 1-7
and
MULTISTATE TRUST
Series 8
and Subsequent Series
_____________________________________
Sponsor:
ADVEST, INC.
One Commercial Plaza
280 Trumbull Street Hartford,
Connecticut 06103
(203) 525-1421
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
Item A - Bonding Arrangements
The employees of Advest, Inc. are covered under a Brokers Blanket
Policy, Standard Form 14, in the amount of $20,000,000.
Item B - Contents of Registration Statement
This Post-Effective Amendment to the Registration Statement on
Form S-6 comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (previously filed).
The Prospectus.
Signatures.
Written Consent of the following persons:
Brown & Wood (previously filed).
Various state tax counsel (previously filed). BDO Seidman, LLP.
The following exhibits:
*4.1 - Consent of Securities Evaluation Service, Inc., as Evaluator.
____________
*Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Multistate Trust, Series 43, certifies that it meets
all of the requirements for effectiveness of this Post-Effective
Amendment to the Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the City of Hartford
and State of Connecticut on the 29th day of September, 1995.
Signatures appear on page II-3
A majority of the Board of Directors of Advest, Inc. have signed
this Post-Effective Amendment to the Registration Statement pursuant
to powers of attorney on file with the Commission authorizing
the person signing this Post-Effective Amendment to the Registration
Statement.
Page II-1
CONSENT OF COUNSEL
The consent of Brown & Wood to the use of their name in the Prospectus
included in the Registration Statement is contained in their opinion
previously filed as Exhibit 3.1.1.
The consent of the various state tax counsel to the use of their
names in the Prospectus included in the Registration Statement
is contained in their opinions previously filed as Exhibit 3.2 et seq.
__________________________________________________
CONSENT OF INDEPENDENT AUDITORS
The Sponsor and Trustee of
Multistate Trust Series 43:
We hereby consent to the use in Post-Effective Amendment No. 8
to Registration Statement No. 33-12257 of our opinion dated June
30, 1995, relating to the Financial Statements of Multistate Trust,
Series 43 and to the references to us in the prospectus which
is part of such Registration Statement.
BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 29, 1995
Page II-2
Multistate Trust
Series 43
By: ADVEST, INC.
(Sponsor)
By: ______________________________________________
(Lee G. Kuckro, Vice President)
By the following persons, who constitute a majority of the Board
of Directors of Advest, Inc.
Allen G. Botwinick
George A. Boujoukos
Donald J. Cristo
Edward Fernberger
Gerald A. Guild
Lee G. Kuckro
Grant W. Kurtz
Martin Lilienthal
Howard R. Merriman, Jr.
Paul Nussbaum
Jay H. Salkin
Philip M. Skidmore
Raymond T. Waller
Allen Weintraub
By: ______________________________________________
(Lee G. Kuckro, as
Attorney-in-Fact
for the persons listed above)
Page II-3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to Form S-6 and is qualified in its entirety by
reference to such Post Effective Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> MARYLAND TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 3,008,476
<INVESTMENTS-AT-VALUE> 3,265,319
<RECEIVABLES> 79,103
<ASSETS-OTHER> 11,701
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,356,123
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 650
<TOTAL-LIABILITIES> 650
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,796
<SHARES-COMMON-PRIOR> 3,912
<ACCUMULATED-NII-CURRENT> 101,229
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 256,843
<NET-ASSETS> 3,355,473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 231,667
<OTHER-INCOME> 0
<EXPENSES-NET> 7,320
<NET-INVESTMENT-INCOME> 224,347
<REALIZED-GAINS-CURRENT> 597
<APPREC-INCREASE-CURRENT> (29,764)
<NET-CHANGE-FROM-OPS> 195,180
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (227,262)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (98,761)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 116
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (130,843)
<ACCUMULATED-NII-PRIOR> 0
<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> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to Form S-6 and is qualified in its entirety by
reference to such Post Effective Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> MASSACHUSETTS TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 3,360,732
<INVESTMENTS-AT-VALUE> 3,602,941
<RECEIVABLES> 67,871
<ASSETS-OTHER> 38,044
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,708,856
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 670
<TOTAL-LIABILITIES> 670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,922
<SHARES-COMMON-PRIOR> 3,987
<ACCUMULATED-NII-CURRENT> 106,891
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 242,209
<NET-ASSETS> 3,708,186
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 274,356
<OTHER-INCOME> 0
<EXPENSES-NET> 7,960
<NET-INVESTMENT-INCOME> 266,396
<REALIZED-GAINS-CURRENT> 3,934
<APPREC-INCREASE-CURRENT> (53,593)
<NET-CHANGE-FROM-OPS> 216,737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (274,703)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (277,467)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 65
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (335,433)
<ACCUMULATED-NII-PRIOR> 0
<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> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to Form S-6 and is qualified in its entirety by
reference to such Post Effective Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> MASSACHUSETTS DISCOUNT TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 2,007,839
<INVESTMENTS-AT-VALUE> 2,259,019
<RECEIVABLES> 47,429
<ASSETS-OTHER> 16,741
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,323,189
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 660
<TOTAL-LIABILITIES> 660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,891
<SHARES-COMMON-PRIOR> 3,956
<ACCUMULATED-NII-CURRENT> 71,474
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 251,180
<NET-ASSETS> 2,322,529
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 165,235
<OTHER-INCOME> 0
<EXPENSES-NET> 5,586
<NET-INVESTMENT-INCOME> 159,649
<REALIZED-GAINS-CURRENT> 21,783
<APPREC-INCREASE-CURRENT> 2,695
<NET-CHANGE-FROM-OPS> 184,127
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (166,187)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (300,893)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 65
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (282,953)
<ACCUMULATED-NII-PRIOR> 0
<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> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to Form S-6 and is qualified in its entirety by
reference to such Post Effective Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> VIRGINIA TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 1,214,937
<INVESTMENTS-AT-VALUE> 1,332,002
<RECEIVABLES> 12,699
<ASSETS-OTHER> 17,005
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,361,706
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 335
<TOTAL-LIABILITIES> 335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,825
<SHARES-COMMON-PRIOR> 1,959
<ACCUMULATED-NII-CURRENT> 35,425
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 117,065
<NET-ASSETS> 1,361,371
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 95,155
<OTHER-INCOME> 0
<EXPENSES-NET> 3,899
<NET-INVESTMENT-INCOME> 91,256
<REALIZED-GAINS-CURRENT> 1,562
<APPREC-INCREASE-CURRENT> (11,956)
<NET-CHANGE-FROM-OPS> 80,862
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (102,863)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (361,569)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 134
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (383,570)
<ACCUMULATED-NII-PRIOR> 0
<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> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Securities Evaluation Service, Inc.
Suite 200
531 E. Roosevelt Road
Wheaton, IL 60187
September 29, 1995
Advest, Inc.
One Commercial Plaza
280 Trumbull Street
Hartford, CT 06103
Re: Multistate Trust, Series 43
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-12257 for the above captioned
trust. We hereby acknowledge that Securities Evaluation Service,
Inc. is currently acting as the evaluator for the trust. We
hereby consent to the use in the Amendment of the reference to
Securities Evaluation Service, Inc. as evaluator.
In addition, we hereby confirm that we have researched the
ratings indicated in the above-referenced Amendment, with
standard industries sources which we believe to be reliable, for
the respective bonds comprising the trust portfolio and the
ratings indicated are current.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Securities Evaluation Service, Inc.
James R. Couture
President
JRC/jml
