<PAGE>
Registration No. 33-19518
S E C U R I T I E S A N D E X C H A N G E C O M M I S
S I O
N
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
to
F O R M 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:
TAX EXEMPT SECURITIES TRUST,
SERIES 273
B.
Name of Depositor:
SMITH BARNEY INC.
<TABLE>
<S> <C>
C. Complete address of depositor's principal executive
office:
SMITH BARNEY
INCORPORATED
1345 Avenue of the Americas
New York, New York 10105
D. Name and complete address of agent for service:
STEPHEN J. TREADWAY
Smith Barney
Incorporated
1345 Avenue of the Americas
New York, New York 10105
</TABLE>
It is proposed that this filing will become effective February 20,
1995
pursuant to paragraph (b) of Rule 485.
<PAGE>
TAX EXEMPT SECURITIES TRUST
CROSS-REFERENCE SHEET
Pursuant to Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction
as to the Prospectus in Form S-6)
<TABLE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
<C> <S> <C>
1. . . . . . . . . (a) Name of trust Prospectus front cover
(b) Title of securities issued . .
2.Name and address of each depositor Sponsors: Prospectus back
cover
3. . . . Name and address of trustee Trustee
4.Name and address of each principal underwriterSponsors:
Prospectus back cover
5. . .State of organization of trust Tax Exempt Securities
Trust
6.Execution and termination of trust agreementTax Exempt
Securities Trust - The
Trust:
Amendment and Termination
of the Trust Agreement 7. .
. . . . . . . . Changes of name *
8. . . . . . . . . . . . Fiscal year *
9. . . . . . . . . . . . .Litigation *
II. General Description of the Trust and
Securities of the Trust
10.(a) Registered or bearer securities Rights of Unit Holders
(b) Cumulative or distributive securities
(c) Redemption . . . . . . . . . .
(d) Conversion, transfer, etc. . .
(e) Periodic payment plan. . . . . *
(f) Voting rights. . . . . . . . .
(g) Notice to certificate holders Rights of Unit Holders -
Reports and Records:
Sponsors -
Responsibility: Trustee -
Resignation: Amendment
and Termination of the
Trust Agreement -
Amendment
(h) Consents required. . . . . . . Sponsors - Responsibility:
Amendment and Termination
of the Trust Agreement (i) Other
provisions . . . . . . . Tax Exempt Securities Trust - Tax Status
11.Type of securities comprising units Prospectus front cover:
Tax Exempt Securities
Trust - Portfolio
12.Certain information regarding periodic
payment certificates. . . . . . . *
13.. .(a) Load, fees, expenses, etc. Prospectus front cover:
Summary of Essential
Information; Public
Offering - Offering
Price; Public Offering -
Sponsors' and
Underwriters' Profits:
Tax Exempt Securities
Trust - Expenses and
Charges
<PAGE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
II. General Description of the Trust and
Securities of the Trust
<C> <S> <C>
(b) Certain information regarding periodic
payment certificates . . . . *
(c) Certain percentages. . . . . . Public Offering - Offering
Price
(d) Certain other fees, etc, payable by holders
Rights of Unit Holders - Certificates
(e) Certain profits receivable by depositors,
principal underwriters, trustee or
affiliated persons . . . . . . Public Offering - Sponsors'
and Underwriters' Profits:
Rights of Unit Holders -
Redemption of Units -
Purchase by the Sponsors of
Units Tendered for
Redemption
(f) Ratio of annual charges to income*
14.. .Issuance of trust's securities Tax Exempt Securities
Trust - The Trust: Rights
of Unit Holders -
Certificates
15.Receipt and handling of payments from purchasers*
16.Acquisition and disposition of underlying
securities . . . . . . . . . . . . Tax Exempt Securities Trust
- Portfolio: Sponsors -
Responsibility
17.. . . . .Withdrawal or redemption Rights of Unit Holders -
Redemption of Units
18.(a) Receipt, custody and disposition of incomeRights of Units
Holders - Distribution of
Interest and Principal:
Rights of Unit Holders -
Reports and Records
(b) Reinvestment of distributions *
(c) Reserves or special funds. . . Rights of Unit Holders -
Distribution of Interest
and Principal: Tax Exempt
Securities Trust - Expenses
and Charges - Other Charges (d) Schedule of
distributions. . . *
19.. . Records, accounts and reports Rights of Unit Holders -
Reports and Records:
Rights of Unit Holders -
Distribution of Interest
and Principal
20.Certain miscellaneous provisions of trust agreementAmendment
and Termination of the Trust
(a) Amendment. . . . . . . . . . . Agreement: Trustee -
Resignation: Trustee -
(b) Termination . . . . . . . . . Resignation: Trustee -
Limitations on Liability:
(c) and (d) Trustee, removal and successorSponsors -
Responsibility: Sponsors - Resignation
(e) and (f) Depositors, removal and successor
21.. . . . Loans to security holders *
22.. . . . .Limitations on liability Sponsors - Limitations on
Liability: Trustee -
Limitations on Liability:
Tax Exempt Securities
Trust - Portfolio
23.. . . . . . .Bonding arrangements *
24.Other material provisions of trust agreement*
______
* Inapplicable, answer negative or not required.
<PAGE>
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
III. Organization, Personnel and
Affiliated Persons of Depositor
<C> <S> <C>
25.. . . .Organization of depositors Sponsors
26.. . . Fees received by depositors *
27.. . . . . .Business of depositors Sponsors
28.Certain information as to officials and
affiliated persons of depositors [Contents of Registration
Statement]
29.. Voting securities of depositors *
30.. .Persons controlling depositors *
31.Payments by depositor for certain services
rendered to trust . . . . . . . . *
32.Payments by depositors for certain other services
rendered to trust . . . . . . . . *
33.Remuneration of employees of depositors for
certain services rendered to trust *
34.Remuneration of other persons for certain services
rendered to trust . . . . . . . . *
IV. General Description of the Trust and
Securities of the Trust
35.Distribution of trust's securities by statesPublic Offering -
Distribution of Units
36.Suspension of sales of trust's securities*
37.Revocation of authority to distribute*
38.. . . .(a) Method of distribution Public Offering -
Distribution of Units
(b) Underwriting agreements. . . .
(c) Selling agreements . . . . . .
39.(a) Organization of principal underwritersSponsors
(b) N.A.S.D. membership of principal underwriters
40.Certain fees received by principal underwriters*
41.(a) Business of principal underwritersSponsors
(b) Branch offices of principal underwriters*
(c) Salesmen of principal underwriters*
42.Ownership of trust's securities by certain persons*
43.Certain brokerage commissions received by principal
underwriters. . . . . . . . . . . *
44.. . . . . (a) Method of valuation Prospectus front cover:
Public Offering -
Offering Price: Public
Offering - Distribution
of Units
(b) Schedule as to offering price *
(c) Variation in offering price to certain personsPublic
Offering - Distribution of Units
45.. Suspension of redemption rights *
46.. . . . .(a) Redemption Valuation Rights of Unit Holders -
Redemption of Units -
Computation of Redemption
Price per Unit
(b) Schedule as to redemption price *
47.Maintenance of position in underlying securities
Public Offering - Market for Units: Rights of Unit Holders -
Redemption of Units - Purchase by the Sponsors of Units
tendered for Redemption; Rights of Unit Holders - Redemption
of Units - Computation of Redemption Price per Unit
______
* Inapplicable, answer negative or not required.<PAGE>
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
V. Information Concerning the Trustee
or Custodian
<C> <S> <C>
48.Organization and regulation of trusteeTrustee
49.. . .Fees and expenses of trustee Tax Exempt Securities
Trust - Expenses and
Charges
50.. . . . . . . . . .Trustee's lien Tax Exempt Securities
Trust - Expenses and
Charges - Other Charges
VI. Information Concerning Insurance of
Holders of Securities
51.Insurance of holders of trust's securities*
VI. Policy of Registrant
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying securitiesProspectus
front cover: Sponsors-Responsibility
(b)Transactions involving elimination of
underlying securities . . . . . *
(c)Policy regarding substitution or elimination
of underlying securities. . . . Sponsors - Responsibility
(d)Fundamental policy not otherwise covered*
53. Tax status of trust . . . . . . Prospectus front cover: Tax
Exempt Securities Trust -
Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during last ten years*
55. . . . . . . . . . . . . . . . . *
56. Certain information regarding periodic payment
securities . . . . . . . . . . . . *
57. . . . . . . . . . . . . . . . . *
58. . . . . . . . . . . . . . . . . *
59. Financial statements (Instruction 1(c) to form S-6)
Statement of Financial Condition of The Tax Exempt Securities
Trust
______
* Inapplicable, answer negative or not required.
<PAGE>
</TABLE>
National Trust 137
[S] [C]
In the opinion of counsel, under existing law interest income to the
Trusts and, with certain exceptions, to Unit holders is exempt from
all Federal income tax. In addition, in the opinion of counsel, the
interest income of each State Trust is similarly exempt from state
income taxes in the state for which such Trust is named. Capital
gains, if any, are subject to tax. Investors should retain both parts
of this Prospectus for future reference.
THE INITIAL PUBLIC OFFERING OF UNITS IN THE TRUSTS
HAS BEEN COMPLETED. THE UNITS OFFERED HEREBY
ARE ISSUED AND OUTSTANDING UNITS WHICH HAVE BEEN
ACQUIRED BY THE SPONSORS EITHER BY PURCHASE
FROM THE TRUSTEE OF UNITS TENDERED FOR
REDEMPTION OR IN THE SECONDARY MARKET. SEE PART
B, "RIGHTS OF UNIT HOLDERS--REDEMPTION OF UNITS--
PURCHASE BY THE SPONSORS OF UNITS TENDERED FOR
REDEMPTION" AND "MARKET FOR UNITS". THE PRICE AT
WHICH THE UNITS OFFERED HEREBY WERE ACQUIRED
WAS NOT LESS THAN THE REDEMPTION PRICE
DETERMINED AS PROVIDED HEREIN. SEE PART B,
"RIGHTS OF UNIT HOLDERS--REDEMPTION OF UNITS--
COMPUTATION OF REDEMPTION PRICE PER UNIT".
THE TAX EXEMPT SECURITIES TRUST, SERIES 273 is a unit
investment trust formed for the purpose of obtaining for its Unit
holders tax-exempt interest income through investment in a fixed
portfolio consisting primarily of long term municipal bonds rated
at the time of deposit A or better by Standard & Poor's
Corporation or Moody's Investors Service, with certain ratings
being provisional or conditional. (See "Portfolio of Securities".)
The bonds are issued on behalf of states, counties, territories,
possessions and municipalities of the United States and authorities
or political subdivisions thereof. The interest on such bonds is
exempt from all Federal income tax (except in certain instances
depending upon the Unit holder) under existing law in the opinion
of recognized bond counsel to the issuing governmental authorities.
See "Tax Status" for further information regarding the Federal
income tax treatment of interest on municipal bonds.
THE OBJECTIVES of the Trust are tax-exempt income and
conservation of capital through an investment in a diversified
portfolio consisting primarily of municipal bonds. There is, of
course, no guarantee that the Trust's objectives will be achieved
since the payment of interest and preservation of principal are
dependent upon the continued ability of the issuers of the bonds
to meet such obligations.
THE PUBLIC OFFERING PRICE of the Units is equal to the
aggregate bid price of the underlying Securities in the Trust's
portfolio divided by the number of Units outstanding, plus a sales
charge equal to 3.25% of the Public Offering Price (3.359% of the
aggregate bid price of the Securities per Unit). A proportional
share of accrued and undistributed interest on the Securities at the
date of delivery of the Units to the purchaser is also added to the
Public Offering Price.
THE SPONSORS, although not obligated to do so, intend to
maintain a market for the Units at prices based upon the aggregate
bid price of the underlying Securities, as more fully described in
Part B, "Market for Units". If such a market is not maintained, a
Unit holder may be able to dispose of his Units only through
redemption at prices based upon the aggregate bid price of the
underlying Securities.
MONTHLY DISTRIBUTIONS of principal and interest received by
the Trust will be made on or shortly after the fifteenth day of each
month to holders of record on the first day of that month. For
further information regarding the distributions by the Trust, see the
"Summary of Essential Information".
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Prospectus Part A dated February 20, 1995
Note: Part A of this Prospectus may not be distributed unless
accompanied by Part B.
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER
28, 1994+
Sponsor:SMITH BARNEY INC.
Trustee:UNITED STATES TRUST COMPANY OF NEW YORK
Evaluator:KENNY S&P EVALUATION SERVICES
<S><C>
Principal Amount of Securities in Trust$10,310,000
Number of Units 13,701
Fractional Undivided Interest in Trust per Unit 1/13,701
Principal Amount of Securities in Trust per Unit$752.49
Public Offering Price per Unit #*$ 764.75
Sales Charge (3.25% of Public Offering Price)# 24.85
Approximate Redemption and Sponsor's Repurchase
Price per Unit
(per Unit Bid Price of Securities)#**$739.90
Calculation of Estimated Net Annual Income per Unit:
Estimated Annual Income per Unit$58.95
Less Estimated Annual Expenses per Unit 1.19
Estimated Net Annual Income per Unit$57.76
Monthly Income Distribution per Unit$4.81
Daily Rate (360-day basis) of Income Accrual per Unit$
.1604
Estimated Current Return Based on Public Offering
Price# 7.55%
Estimate Long-Term Return# 6.42%
<FN>
#Subject to changes in the prices of the underlying securities.
The aggregate bid price of the securities is determined on each
business day as of the Evaluation Time.
*Plus $13.11 per Unit representing accrued interest and the net
of cash on hand, accrued expenses and amounts distributable to
Unit holders through the expected date of settlement (five
business days after November 28, 1994). (See "Public Offering--
Offering Price".)
The sales charge was previously reduced because prerefundings
of Portfolio securities have shortened the average life of the
Trust.
**Plus $17.92 per Unit representing accrued interest and the net
of cash on hand, accrued expenses and amounts distributable to
Unit holders of record as of November 28, 1994 on a pro rata
basis. (See "Redemption of Units--Computation of Redemption
Price per Unit".)
</TABLE>
Record Dates: The first day of each month
Distribution Dates: The fifteenth day of each month
Evaluation Time: Close of trading on the New York Stock
Exchange (currently 4:00 P.M. New York time)
Date of Deposit and Trust Agreement: February 3, 1988
Mandatory Termination Date: January 1, 2038
Minimum Value of Trust: Trust may be terminated if the value
of the Trust is less than $7,500,000 and must be terminated if the
value of the Trust is less than $3,750,000
Trustee's Annual Fee: $1.05 per $1,000 principal amount of bonds
($10,826 per year on the basis of bonds in the principal amount
of $10,310,000) plus expenses.
Evaluator's Fee: $.30 per bond per evaluation Number of
issues: 26 Number of States: 11
As of November 28, 1994, 12 (48%) of the Bonds were rated by
Standard & Poor's Corporation (15% being rated AAA, 29%
being rated AA and 4% being rated BBB), 10 (46%) were rated
by Moody's Investors Service (5% being rated Aaa, 5% being
rated Aa, 26% being rated A and 10% being rated Baa) and 4
(6%) were not rated by either service. Ratings assigned by the
bond rating services are subject to change from time to time.<PAGE>
<PAGE>
Additional Considerations - Investment in the Trust should be made
with an understanding that the value of the underlying Portfolio may
decline with increases in interest rates. Approximately 31% of the
Bonds in the Trust consist of hospital revenue bonds (including
obligations of health care facilities). Approximately 40% of the Bonds
in the Trust consist of bonds in the power facilities category.
Approximately 9% of the Bonds in the Trust consist of bonds issued
for the financing of nuclear power plants. (See Part B, "Tax Exempt
Securities Trust-Portfolio" for a brief summary of additional
considerations relating to certain of these issues.)
+The percentages referred to in this summary are each computed on
the basis of the aggregate bid price of the Bonds as of November 28,
1994.
<TABLE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding
IncomePrincipal
UnitsNet AssetDistributionsDistributions
Period EndedOutstandingValue Per UnitPer UnitPer Unit
<S><C><C><C><C>
October 31, 199214,513$988.68$79.40$18.25
October 31, 199313,997961.7674.7461.66
October 31, 199413,771816.4065.8981.44
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Unit Holders, Sponsor and Trustee of
Tax Exempt Securities Trust, Series 273 National Trust 137:
We have audited the accompanying balance sheet of Tax Exempt
Securities Trust, Series 273 National Trust 137, including the portfolio
of securities, as of October 31, 1994, and the related statement of
operations and changes in net assets for each of the years in the three-
year period ended October 31, 1994. These financial statements are
the responsibility of the Trustee (see Note 6). 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 October 31, 1994 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the
Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tax Exempt
Securities Trust, Series 273 National Trust 137 as of October 31, 1994,
and the results of its operations and changes in its net assets for each
of the years in the three-year period ended October 31, 1994, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
February 3, 1995<PAGE>
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137
BALANCE SHEET
October 31, 1994
ASSETS
<S><C>
Investments in tax exempt bonds, at market value
(Cost $10,704,889) (Note 3 to Portfolio of
Securities)$11,021,979
Accrued interest 279,169
Total Assets$11,301,148
LIABILITIES AND NET ASSETS
Overdraft payable$ 56,988
Accrued expenses 1,487
Total Liabilities 58,475
Net Assets (13,771 units of fractional
undivided interest outstanding):
Original cost to investors (Note 1)$15,551,144
Less initial underwriting commission (sales charge)
(Note 1) 731,000
14,820,144
Cost of securities sold or redeemed since date of
deposit (February 3, 1988) (4,115,255)
Net unrealized market appreciation 317,090
11,021,979
Undistributed net investment income 245,593
Undistributed proceeds from secuirities sold or
redeemed (24,899)
Net Assets 11,242,673
Total Liabilities and Net Assets$11,301,148
Net asset value per unit$816.40
STATEMENTS OF OPERATIONS
For the years ended October 31, 1994, 1993 and 1992
1994 1993 1992
<S><C><C><C>
Investment Income-interest (Note 2)$ 926,500$ 1,074,132$
1,196,618
Less expenses:
Trustee's fees and expenses 15,40915,77915,150
Evaluator's fees 2,413 2,780 2,741
Total expenses 17,822 18,559 17,891
Net investment income 908,678 1,055,573 1,178,727
Realized and unrealized gain (loss) on investments:
Net realized loss on securities transactions (Note 5) (99,164)(189,3
58)(168,133)
Net increase (decrease) in unrealized market appreciation (782,688)
684,600 66,644
Net gain (loss) on investments (881,852) 495,242 (101,489)
Net increase in net assets resulting from
operations$26,826$1,550,815$1,077,238
The accompanying Notes to Financial Statements are an integral part
of these statements.<PAGE>
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1994, 1993 and 1992
1994 1993 1992
Operations:
Net investment income$908,678$1,055,573$1,178,727
Net realized loss on securities transactions (Note 5) (99,164)(189,3
58)(168,133)
Net increase (decrease) in unrealized market appreciation
(782,688) 684,600 66,644
Net increase in net assets resulting from operations 26,826
1,550,815 1,077,238
Distributions to Unit Holders:
Net investment income (Note 4) (917,208)(1,056,997)(1,182,164)
Proceeds from securities sold or redeemed (1,136,522) (865,139)
(268,001)
Total Distributions (2,053,730) (1,922,136) (1,450,165)
Unit Redemptions by Unit Holders (Note 3):
Accrued interest at date of redemption (3,145)(7,058)(7,413)
Value of Units at date of redemption (189,077) (508,656)
(470,853)
Total Redemptions (192,222) (515,714) (478,266)
Decrease in net assets (2,219,126)(887,035)(851,193)
Net Assets:
Beginning of year 13,461,799 14,348,834 15,200,027
End of year (including undistributed net
investment income of $245,593, $257,268 and
$265,750, respectively)$11,242,673$13,461,799$14,348,834
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(1) The original cost to the investors represents the aggregate initial
public offering price as of the date of deposit (February 3,
1988), exclusive of accrued interest, computed on the basis of
the aggregate offering price of the securities. The initial
underwriting commission (sales charge) was 4.70% of the
aggregate public offering price (4.932% of the aggregate
offering price of the securities).
(2) Interest income represents interest earned on the Trust's
portfolio and has been recorded on the accrual basis.
(3) 1,209 Units were redeemed by the Trustee during the three
years ended October 31, 1994 (226 Units, 516 Units and 467
Units being redeemed in 1994, 1993 and 1992, respectively).
(4) Interest received by the Trust is distributed to Unit holders on
the fifteenth day of each month, after deducting applicable
expenses.
(5) The loss from the sale or redemption of securities is computed
on the basis of average cost of the issue sold or redeemed.
(6) The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of each Trust and is responsible for establishing and
maintaining a system of internal control directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of each Trust. The Trustee is
also responsible for all estimates of expenses and accruals
reflected in each Trust's financial statements. The Evaluator
determines the price for each underlying Bond included in each
Trust's Portfolio of Securities on the basis set forth in Part B,
"Public Offering - Offering Price". Under the Securities Act of
1933, as amended (the "Act"), the Sponsor is deemed to be
issuer of each Trust's Units. As such, the Sponsor has the
responsibility of issuer under the Act with respect to financial
statements of each Trust included in the Registration Statement.
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137 - PORTFOLIO OF SECURITIES - October
31, 1994
RatingsRedemptionPrincipalMarket
Security Description (1) Provisions (2) Amount Value (3)
<S><C><C><C><C>
The Industrial Development Board
of The Town of Columbia, Alabama,
Pollution Control Revenue Bonds,
Alabama Power Company Farley Plant A2*11/1/94 @
102$150,000$153,000
Project, 10.875% due 11/1/2014 (p)
City of Tallassee, Alabama,
Industrial Development Bonds, United
Technologies Corporation,A+11/30/94 @ 103340,000351,951
10.50% due 8/1/2014
Metropolitan Atlanta Rapid Transit
Authority, Georgia, Tax RevenueAAA(c)7/1/95 @ 102 50,00052,275
Bonds, 8.625% due 7/1/2010 (p)
Development Authority of Monroe
County, Georgia, Pollution Control
Revenue Bonds, Gulf Power Company,
10.50% due 12/1/2014A2*12/1/94 @ 102115,000117,896
Municipal Electric Authority of
Georgia Power Revenue, A+1/1/97 @ 100400,000305,788
5.00% due 1/1/2020
Illinois Health Facilities Authority
Revenue Refunding Bonds, West
Suburban Hospital Medical Center, OakA*8/1/97 @
102750,000809,760
Park, Illinois, 8.25% due 8/1/2013S.F. 8/1/06 @ 100
Indiana Municipal Power Agency, Power
Supply System Revenue Refunding Bonds,A1*1/1/96 @
100250,000215,600
5.75% due 1/1/2018S.F. 1/1/16 @ 100
Terrebonne Parish, Louisiana,
Waterworks District No. 1, WaterA-5/1/96 @ 102300,000319,809
Revenue Bonds, 8.25% due 11/1/2010 (p)
North Carolina Eastern Municipal
Power Agency, Power System Revenue Aaa*1/1/22 @
100750,000552,900
Refunding Bonds, 4.50% due 1/1/2024 (p)
City of Warren, Ohio, Hospital
Facilities Revenue Bonds, Warren
General Hospital Association, Inc.,BBB6/1/95 @ 102350,000368,694
Project, 10.80% due 6/1/2014 (p)
Trustees of the Tulsa Municipal Airport
Trust Revenue Bonds, Oklahoma, American Baa2*12/1/95 @
102500,000527,365
Airlines, 9.50% due 6/1/2020
Woodward Municipal Authority, Oklahoma,
Sales Tax and Utility System Revenue A-11/1/97 @
101200,000218,248
Bonds, 8.00% due 11/1/2012 (p)
A-6
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137 - PORTFOLIO OF SECURITIES - October
31, 1994
(Continued)
RatingsRedemptionPrincipalMarket
Security Description (1) Provisions (2) Amount Value (3)
Oklahoma Municipal Power Authority,
Power Supply System Revenue Bonds, A1/1/96 @
100$500,000$506,915
6.00% due 1/1/2023 (p)
Grand River Dam Authority, Oklahoma,A*6/1/97 @
100550,000449,119
Revenue Bonds, 5.00% due 6/1/2012
The Hospitals and Higher Education
Facilities Authority of Philadelphia,
Pennsylvania, Hospital Revenue Bonds,
Albert Einstein Medical Center,AAA4/1/95 @ 102750,000784,125
10.00% due 4/1/2011 (p)
Texas Municipal Power Agency Refunding A+9/1/97 @
102335,000360,751
Revenue Bonds, 7.25% due 9/1/2011 (p)
Grapevine Industrial Development
Corporation, Texas, Airport Facilities
Revenue Bonds, American Airlines, Baa1*12/1/95 @
102500,000524,000
Inc. Project, 9.25% due 12/1/2012
The Woodlands Municipal Utility District
No. 2, of Montgomery County, Texas,
Waterworks and Sewer System Unlimited
Tax Bonds, 9.00% due 11/1/2009 (p)NR11/1/98 @ 100 45,00051,087
9.00% due 11/1/2010 (p)NR11/1/98 @ 100160,000181,642
9.00% due 11/1/2011 (p)NR11/1/98 @ 100175,000198,670
9.00% due 11/1/2012 (p)NR11/1/98 @ 100190,000215,699
Brazos River Authority, Texas, Pollution
Control Revenue Bonds, Houston Lighting & A-8/1/95 @
102250,000265,347
Power Company Project, 9.875% due 8/1/2015
Cass County, Texas, Pollution Control
Revenue Bonds, International Paper A-11/30/94 @ 100750,000671,220
Company, 5.70% due 5/1/2012S.F. Currently @ 100
Abilene Higher Education Facilities
Corporation, Texas, Higher Education
Revenue Refunding Bonds, AbileneA*10/1/96 @ 102
1/2500,000531,470
Christian University, 7.875% due 10/1/2011
Harris County Health Facilities Development
Corporation, Texas, Hospital Revenue
Refunding, Memorial Hospital System A*6/1/95 @ 102500,000526,240
Project, 9.625% due 6/1/2015
Texas Health Facilities Development
Corporation, Hospital System Revenue
Bonds, All Saints Southwest Hospital,AAA2/15/97 @
102600,000655,530
Inc. Project, 8.50% due 2/15/2011 (p)
Intermountain Power Agency, Utah, Aa*7/1/96 @ 102500,000527,555
Power Supply Bonds, 7.875% due 7/1/2014S.F. 7/1/07 @ 100
A-7
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 273
NATIONAL TRUST 137 - PORTFOLIO OF SECURITIES - October
31, 1994
(Continued)
RatingsRedemptionPrincipalMarket
Security Description (1) Provisions (2) Amount Value (3)
Emery County, Utah, Pollution Control
Revenue Bonds, Utah Power & Light A11/30/94 @ 102 565,000
579,323
Company Project, 10.70% due 9/1/2014
$11,025,000$11,021,979
The accompanying Notes are an integral part of this Portfolio.
At October 31, 1994 the net unrealized market appreciation of all tax
exempt bonds was comprised of the following:
<S><C>
Gross unrealized market appreciation$720,697
Gross unrealized market depreciation (403,607)
Net unrealized market appreciation $317,090
</TABLE>
NOTES TO PORTFOLIO OF SECURITIES:
(1) All Ratings are by Standard & Poor's Corporation, except those
identified by an asterisk (*) which are by Moody's Investors
Service. The meaning of the applicable rating symbols is set
forth in Part B, "Ratings".
(2) There is shown under this heading the year in which each issue
of bonds initially or currently is redeemable and the redemption
price for that year; unless otherwise indicated, each issue
continues to be redeemable at declining prices thereafter, but
not below par. "S.F." indicates a sinking fund has been or will
be established with respect to an issue of bonds. The prices at
which bonds may be redeemed or called prior to maturity may
or may not include a premium and, in certain cases, may be less
than the cost of the bonds to the Trust. Certain bonds in the
portfolio, including bonds not listed as being subject to
redemption provisions, may be redeemed in whole or in part
other than by operation of the stated redemption or sinking
fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the
terms and provisions of such bonds. For example, see discussion
of obligations of municipal housing authorities under "Tax
Exempt Securities Trust-Portfolio" in Part B.
(3) The market value of securities as of October 31, 1994 was
determined by the Evaluator on the basis of bid prices for the
securities at such date.
(p)
It is anticipated that these bonds will be redeemed prior to
their scheduled maturity, pursuant to a pre-refunding, as
reflected under the column "Redemption Provisions".
(c) Continuance of the rating is contingent upon Standard &
Poor's Corporation's receipt of an executed copy of the
escrow agreement or closing documentation confirming
investments and cash flows.
A-8
<PAGE>
PROSPECTUS -- PART B
Note that Part B of the Prospectus may not be distributed
unless accompanied by Part A.
TAX EXEMPT SECURITIES TRUST
The Trusts
Each Trust is one of a series of similar but separate unit
investment trusts created under the laws of the State of New York
by a Trust Indenture and Agreement and related Reference Trust
Agreement dated the Date of Deposit (collectively, the "Trust
Agreement"), among the sponsors, United
States Trust Company of New York, as trustee (the "Trustee"), and
J.J. Kenny Co., Inc., as evaluator (the "Evaluator"). The sponsor
is Smith Barney Inc. (the
"Sponsor"). Each Trust containing Bonds of a state for which such
Trust is named (a "State Trust") and each Long Term Trust, National
Trust, Long-Intermediate Term Trust, Intermediate Term Trust,
Selected Term Trust, Short-Intermediate Term Trust and Short Term
Trust are referred to herein as
the "Trust" or "Trusts," unless the context requires otherwise. On
the Date of Deposit, the deposited contracts and funds
(represented by a certified check or
checks and/or an irrevocable letter or letters of credit, issued by
a major commercial bank) for the purchase of certain
interest-bearing obligations (the
"Bonds") and/or Units of preceding Series of Tax Exempt Securities
Trust (such Bonds, if any, being referred to herein collectively as
the "Securities"). The Trustee thereafter delivered to the Sponsor
<PAGE>
registered certificates of beneficial
interest (the "Certificates") representing the units (the "Units")
comprising the entire ownership of each Trust. The initial public
offering of Units in each Trust has been completed. The Units
offered hereby are issued and outstanding
Units which have been acquired by the Sponsor either by purchase
from the Trustee of Units tendered for redemption or in the
secondary market. See "Rights or Unit Holders -- Redemption of
Units -- Purchase by the Sponsor of
Units Tendered for Redemption" and "Market for Units". References
to multiple Trusts in Part B herein should be read as references to
a single Trust if Part A indicates the creation of only one Trust.
Objectives
The objectives of a Trust are tax-exempt income and
conservation of capital through an investment in a diversified
portfolio of municipal bonds.
There is, of course, no guarantee that a Trust's objectives will be
achieved since the payment of interest and the preservation of
principal are dependent upon the
continued ability of the issuers of the bonds to meet such
obligations. Subsequent to the Date of Deposit, the ratings of the
Bonds set forth in Part A -
"Portfolio of Securities" may have declined due to, among other
factors, a decline in creditworthiness of the issuer of said Bonds.
Portfolio
The following factors, among others, were considered in
selecting the Bonds for each Trust: (1) the Bonds are obligations
of the states, counties,
municipalities, territories or possessions of the United States and
authorities or political subdivisions thereof, so that the interest
on them will, in the opinion of
recognized bond counsel to the issuing governmental authorities,
given on the date of the original delivery of the Bonds, be exempt
from Federal income tax
under existing law to the extent described in "Tax Status" herein,
(2) all the Bonds deposited in a State Trust are obligations of the
state for which such Trust
is named or of the counties, territories or municipalities of such
state, and authorities or political subdivisions thereof, or of the
Territory of Guam or the Commonwealth of Puerto Rico, so that the
interest on them will, in the opinion of recognized bond counsel to
the issuing governmental authorities, be exempt
from Federal income tax under existing law to the extent described
in "Tax Status" herein and from state income taxes in the state for
which such Trust is named in each case to the extent described in
"Tax Exempt Securities Trust --
Tax Status", (3) the Bonds were chosen in part on the basis of
their respective maturity dates, (4) the Bonds are diversified as
<PAGE>
to purpose of issue and location
of issuer, except in the case of a State Trust where the Bonds are
diversified only as to purpose of issue, and (5) in the opinion of
the the Bonds are fairly
valued relative to other bonds of comparable quality and maturity.
The rating of each issue as of a recent date is set forth in Part
A, "Portfolio of Securities" (the "Portfolio"). For a description
of the meaning of the applicable rating
symbols as published by Standard & Poor's and Moody's, see "Bond
Ratings". It should be emphasized, however, that the ratings of
Standard & Poor's and Moody's represent their opinions as to the
quality of the bonds which they undertake to rate, and that these
ratings are general and not absolute standards
of quality.
The Bonds in the Portfolio of a Trust were chosen in part
on the basis of their respective maturity dates. An Intermediate
Term Trust and a Selected Term Trust will have a dollar-weighted
average portfolio maturity of
more than three years but not more than ten years from the Date of
Deposit. A Long-Intermediate Term Trust will have a
dollar-weighted average portfolio
maturity of more than ten years but less than fifteen years from
the Date of Deposit. A Long Term Trust, National Trust or a State
Trust not specified as to term will have a dollar-weighted average
portfolio maturity of more than ten
years from the Date of Deposit. For the actual maturity dates of
each of the Bonds contained in a Trust, see Part A, "Portfolio of
Securities". A sale or other disposition of a Bond by the Trust
prior to the maturity of such Bond may
be at a price which results in a loss to the Trust. The inability
of an issuer to pay the principal amount due upon maturity of a
Bond would result in a loss to the Trust.
The Trusts may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt
fixed income securities with greater diversification than they
might be able to acquire individually. In
addition, bonds of the type deposited in the Trusts are often not
available in small amounts. Investors should be aware that
ordinarily the market value of
bonds will decrease as prevailing interest rates increase, and will
increase as interest rates decrease. In general, bonds with long
term maturities (such as those held in a Long Term Trust) usually
yield more than bonds with shorter term maturities (such as those
held in a Short Term Trust), assuming all bonds
share similar credit characteristics. Long term bonds, however,
are often more vulnerable to a decline in market value than are
short term bonds, in the event
interest rates and yields rise. If long term bonds are held for a
period approaching their maturity dates, such impact on the value
of the long term
bonds will be lessened.
<PAGE>
Risk Factors
Most of the Bonds in the Portfolio of a Trust are subject to
redemption prior to their stated maturity date pursuant to sinking
fund or call provisions. (See
Part A-"Portfolio Summary as of Date of Deposit" for information
relating to the particular Trust described therein.) In general, a
call or redemption provision
is more likely to be exercised when the offering price valuation of
a bond is higher than its call or redemption price, as it might be
in periods of declining interest rates, than when such price
valuation is less than the bond's call or
redemption price. To the extent that a Bond was deposited in a
Trust at a price higher than the price at which it is redeemable,
redemption will result in a loss
of capital when compared with the original public offering price of
the Units. Conversely, to the extent that a Bond was acquired at a
price lower than the
redemption price, redemption will result in an increase in capital
when compared with the original public offering price of the Units.
Monthly distributions will
generally be reduced by the amount of the income which would
otherwise have been paid with respect to redeemed bonds. The
Estimated Current Return and
Estimated Long-Term Return of the Units may be affected by such
redemptions. Each Portfolio of Securities in Part A contains a
listing of the sinking fund and
call provisions, if any, with respect to each of the Bonds in a
Trust. 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 Unit holders and
will not be reinvested, no assurance can be given that a Trust will
retain for any length of time its
present size and composition. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in
any Bond.
The Portfolio of the Trust may consist of some Bonds whose
current market values were below face value on the Date of Deposit.
A primary reason for the
market value of such Bonds being less than face value at maturity
is that the interest coupons of such Bonds are at lower rates than
the current market interest rate for comparably rated Bonds, even
though at the time of the issuance
of such Bonds the interest coupons thereon represented then
prevailing interest rates on comparably rated Bonds then newly
issued. Bonds selling at market
discounts tend to increase in market value as they approach
maturity when the principal amount is payable. A market discount
tax-exempt Bond held to maturity will have a larger portion of its
total return in the form of taxable
ordinary income and less in the form of tax-exempt income than a
<PAGE>
comparable Bond bearing interest at current market rates. Under the
provisions of the
Internal Revenue Code in effect on the date of this Prospectus any
ordinary income attributable to market discount will be taxable but
will not be realized until maturity, redemption or sale of the
Bonds or Units.
As set forth under "Portfolio Summary as of Date of Deposit", the
Trust may contain or be concentrated in one or more of the
classifications of Bonds
referred to below. A Trust is considered to be "concentrated" in a
particular category when the Bonds in that category constitute 25%
or more of the aggregate value of the Portfolio. (See Part
A-"Portfolio Summary as of Date of
Deposit" for information relating to the particular Trust described
therein.) An investment in Units of the Trust should be made with
an understanding of the risks that these investments may entail,
certain of which are described below.
General Obligation Bonds. Certain of the Bonds in the Portfolio
may be general obligations of a governmental entity that are
secured by the taxing power of the entity. General obligation bonds
are backed by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal
and interest. However, the taxing power of any governmental entity
may be limited by provisions of state constitutions or laws and an
entity's credit will depend on
many factors, including an 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 and the extent to which the entity relies on Federal
or state aid, access to capital
markets or other factors beyond the entity's control.
As a result of the recent recession's adverse impact upon both
their revenues and expenditures, as well as other factors, many
state and local governments are
confronting deficits and potential deficits which are the most
severe in recent years. Many issuers are facing highly difficult
choices about significant tax
increases and/or spending reductions in order to restore budgetary
balance. Failure to implement these actions on a timely basis could
force the issuers to depend upon market access to finance deficits
or cash flow needs.
In addition, certain of the Bonds in the Trust may be obligations
of issuers (including California issuers) who rely in whole or in
part on ad valorem real property taxes as a source of revenue.
Certain proposals, in the form of state
legislative proposals or voter initiatives, to limit ad valorem
real property taxes have been introduced in various states, and an
amendment to the constitution of
<PAGE>
the State of California, providing for strict limitations on ad
valorem real
property taxes, has had a significant impact on the taxing powers
of local
governments and on the financial conditions of school districts and
local
governments in California. It is not possible at this time to
predict the final
impact of such measures, or of similar future legislative or
constitutional
measures, on school districts and local governments or on their
abilities to make
future payments on their outstanding debt obligations.
Industrial Development Revenue Bonds ("IDRs"). IDRs, including
pollution
control revenue bonds, are tax-exempt securities issued by states,
municipalities,
public authorities or similar entities ("issuers") to finance the
cost of acquiring,
constructing or improving various projects, including pollution
control facilities
and certain industrial development facilities. These projects are
usually operated
by corporate entities. IDRs are not general obligations of
governmental entities
backed by their taxing power. Issuers are only obligated to pay
amounts due on
the IDRs to the extent that funds are available from the unexpended
proceeds of
the IDRs or receipts or revenues of the issuer under arrangements
between the
issuer and the corporate operator of a project. These arrangements
may be in the
form of a lease, installment sale agreement, conditional sale
agreement or loan
agreement, but in each case the payments to the issuer are designed
to be
sufficient to meet the payments of amounts due on the IDRs.
IDRs are generally issued under bond resolutions, agreements or
trust
indentures pursuant to which the revenues and receipts payable
under the
issuer's arrangements with the corporate operator of a particular
project have
been assigned and pledged to the holders of the IDRs or a trustee
for the benefit
of the holders of the IDRs. In certain cases, a mortgage on the
underlying
project has been assigned to the holders of the IDRs or a trustee
as additional
security for the IDRs. In addition, IDRs are frequently directly
<PAGE>
guaranteed by
the corporate operator of the project or by another affiliated
company.
Regardless of the structure, payment of IDRs is solely dependent
upon the
creditworthiness of the corporate operator of the project or
corporate guarantor.
Corporate operators or guarantors that are industrial companies may
be affected
by many factors which may have an adverse impact on the credit
quality of the
particular company or industry. These include cyclicality of
revenues and
earnings, regulatory and environmental restrictions, litigation
resulting from
accidents or environmentally-caused illnesses, extensive
competition (including
that of low-cost foreign companies), unfunded pension fund
liabilities or
off-balance sheet items, and financial deterioration resulting from
leveraged
buy-outs or takeovers. However, certain of the IDRs in the
Portfolio may be
additionally insured or secured by letters of credit issued by
banks or otherwise
guaranteed or secured to cover amounts due on the IDRs in the event
of default
in payment by an issuer.
Hospital and Health Care Facility Bonds. The ability of hospitals
and other
health care facilities to meet their obligations with respect to
revenue bonds
issued on their behalf is dependent on various factors, including
the level of
payments received from private third-party payors and government
programs and
the cost of providing health care services.
A significant portion of the revenues of hospitals and other
health care
facilities is derived from private third-party payors and
government programs,
including the Medicare and Medicaid programs. Both private
third-party payors
and government programs have undertaken cost containment measures
designed
to limit payments made to health care facilities. Furthermore,
government
programs are subject to statutory and regulatory changes,
retroactive rate
adjustments, administrative rulings and government funding
restrictions, all of
<PAGE>
which may materially decrease the rate of program payments for
health care
facilities. There can be no assurance that payments under
governmental
programs will remain at levels comparable to present levels or
will, in the
future, be sufficient to cover the costs allocable to patients
participating in such
programs. In addition, there can be no assurance that a particular
hospital or
other health care facility will continue to meet the requirements
for participation
in such programs.
The costs of providing health care services are subject to
increase as a result
of, among other factors, changes in medical technology and
increased labor
costs. In addition, health care facility construction and operation
is subject to
federal, state and local regulation relating to the adequacy of
medical care,
equipment, personnel, operating policies and procedures,
rate-setting, and
compliance with building codes and environmental laws. Facilities
are subject
to periodic inspection by governmental and other authorities to
assure continued
compliance with the various standards necessary for licensing and
accreditation.
These regulatory requirements are subject to change and, to comply,
it may be
necessary for a hospital or other health care facility to incur
substantial capital
expenditures or increased operating expenses to effect changes in
its facilities,
equipment, personnel and services.
Hospitals and other health care facilities are subject to claims
and legal actions
by patients and others in the ordinary course of business. Although
these claims
are generally covered by insurance, there can be no assurance that
a claim will
not exceed the insurance coverage of a health care facility or that
insurance
coverage will be available to a facility. In addition, a
substantial increase in the
cost of insurance could adversely affect the results of operations
of a hospital or
other health care facility. The Clinton Administration may impose
regulations
<PAGE>
which could limit price increases for hospitals or the level of
reimbursements for
third-party payors or other measures to reduce health care costs
and make health
care available to more individuals, which would reduce profits for
hospitals.
Some states, such as New Jersey, have significantly changed their
reimbursement systems. If a hospital cannot adjust to the new
system by
reducing expenses or raising rates, financial difficulties may
arise. Also, Blue
Cross has denied reimbursement for some hospitals for services
other than
emergency room services. The lost volume would reduce revenues
unless
replacement patients were found.
Certain hospital bonds may provide for redemption at par at any
time upon the
sale by the issuer of the hospital facilities to a non-affiliated
entity, if the
hospital becomes subject to ad valorem taxation, or in various
other
circumstances. For example, certain hospitals may have the right to
call bonds
at par if the hospital may be legally required because of the bonds
to perform
procedures against specified religious principles or to disclose
information that
is considered confidential or privileged. Certain FHA-insured bonds
may provide
that all or a portion of these bonds, otherwise callable at a
premium, can be
called at par in certain circumstances. If a hospital defaults upon
a bond
obligation, the realization of Medicare and Medicaid receivables
may be
uncertain and, if the bond obligation is secured by the hospital
facilities, legal
restrictions on the ability to foreclose upon the facilities and
the limited
alternative uses to which a hospital can be put may severely reduce
its collateral
value.
The Internal Revenue Service is currently engaged in a program of
intensive
audits of certain large tax-exempt hospital and health care
facility organizations.
Although these audits have not yet been completed, it has been
reported that the
tax-exempt status of some of these organizations may be revoked. At
this time,
<PAGE>
it is uncertain whether any of the hospital and health care
facility bonds held by
the Trust will be affected by such audit proceedings.
Single Family and Multi-Family Housing Bonds. Multi-family
housing revenue
bonds and single family mortgage revenue bonds are state and local
housing
issues that have been issued to provide financing for various
housing projects.
Multi-family housing revenue bonds are payable primarily from the
revenues
derived from mortgage loans to housing projects for low to moderate
income
families. Single-family mortgage revenue bonds are issued for the
purpose of
acquiring from originating financial institutions notes secured by
mortgages on
residences.
Housing obligations are not general obligations of the issuer
although certain
obligations may be supported to some degree by Federal, state or
local housing
subsidy programs. Budgetary constraints experienced by these
programs as well
as the failure by a state or local housing issuer to satisfy the
qualifications
required for coverage under these programs or any legal or
administrative
determinations that the coverage of these programs is not available
to a housing
issuer, probably will result in a decrease or elimination of
subsidies available for
payment of amounts due on the issuer's obligations. The ability of
housing
issuers to make debt service payments on their obligations will
also be affected
by various economic and non-economic developments including, among
other
things, the achievement and maintenance of sufficient occupancy
levels and
adequate rental income in multi-family projects, the rate of
default on mortgage
loans underlying single family issues and the ability of mortgage
insurers to pay
claims, employment and income conditions prevailing in local
markets, increases
in construction costs, taxes, utility costs and other operating
expenses, the
managerial ability of project managers, changes in laws and
governmental
regulations and economic trends generally in the localities in
<PAGE>
which the projects
are situated. Occupancy of multi-family housing projects may also
be adversely
affected by high rent levels and income limitations imposed under
Federal, state
or local programs.
All single family mortgage revenue bonds and certain multi-family
housing
revenue bonds are prepayable over the life of the underlying
mortgage or
mortgage pool, and therefore the average life of housing
obligations cannot be
determined. However, the average life of these obligations will
ordinarily be less
than their stated maturities. Single-family issues are subject to
mandatory
redemption in whole or in part from prepayments on underlying
mortgage loans;
mortgage loans are frequently partially or completely prepaid prior
to their final
stated maturities as a result of events such as declining interest
rates, sale of the
mortgaged premises, default, condemnation or casualty loss.
Multi-family issues
are characterized by mandatory redemption at par upon the
occurrence of
monetary defaults or breaches of covenants by the project operator.
Additionally, housing obligations are generally subject to
mandatory partial
redemption at par to the extent that proceeds from the sale of the
obligations are
not allocated within a stated period (which may be within a year of
the date of
issue). To the extent that these obligations were valued at a
premium when a
Holder purchased Units, any prepayment at par would result in a
loss of capital
to the Holder and, in any event, reduce the amount of income that
would
otherwise have been paid to Holders.
The tax exemption for certain housing revenue bonds depends on
qualification
under Section 143 of the Internal Revenue Code of 1986, as amended
(the
"Code"), in the case of single family mortgage revenue bonds or
Section
142(a)(7) of the Code or other provisions of Federal law in the
case of certain
multi-family housing revenue bonds (including Section 8 assisted
bonds). These
sections of the Code or other provisions of Federal law contain
<PAGE>
certain ongoing
requirements, including requirements relating to the cost and
location of the
residences financed with the proceeds of the single family mortgage
revenue
bonds and the income levels of tenants of the rental projects
financed with the
proceeds of the multi-family housing revenue bonds. While the
issuers of the
bonds and other parties, including the originators and servicers of
the
single-family mortgages and the owners of the rental projects
financed with the
multi-family housing revenue bonds, generally covenant to meet
these ongoing
requirements and generally agree to institute procedures designed
to ensure that
these requirements are met, there can be no assurance that these
ongoing
requirements will be consistently met. The failure to meet these
requirements
could cause the interest on the bonds to become taxable, possibly
retroactively
to the date of issuance, thereby reducing the value of the bonds,
subjecting the
Holders to unanticipated tax liabilities and possibly requiring the
Trustee to sell
the bonds at reduced values. Furthermore, any failure to meet these
ongoing
requirements might not constitute an event of default under the
applicable
mortgage or permit the holder to accelerate payment of the bond or
require the
issuer to redeem the bond. In any event, where the mortgage is
insured by the
Federal Housing Administration, its consent may be required before
insurance
proceeds would become payable to redeem the mortgage bonds.
Power Facility Bonds. The ability of utilities to meet their
obligations with
respect to revenue bonds issued on their behalf is dependent on
various factors,
including the rates they may charge their customers, the demand for
a utility's
services and the cost of providing those services. Utilities, in
particular
investor-owned utilities, are subject to extensive regulations
relating to the rates
which they may charge customers. Utilities can experience
regulatory, political
and consumer resistance to rate increases. Utilities engaged in
long-term capital
<PAGE>
projects are especially sensitive to regulatory lags in granting
rate increases. Any
difficulty in obtaining timely and adequate rate increases could
adversely affect
a utility's results of operations.
The demand for a utility's services is influenced by, amoung
other factors,
competition, weather conditions and economic conditions. Electric
utilities, for
example, have experienced increased competition as a result of the
availability
of other energy sources, the effects of conservation on the use of
electricity,
self-generation by industrial customers and the generation of
electricity by
co-generators and other independent power producers. Also,
increased
competition will result if federal regulators determine that
utilities must open
their transmission lines to competitors. Utilities which distribute
natural gas also
are subject to competition from alternative fuels, including fuel
oil, propane and
coal.
The utility industry is an increasing cost business making the
cost of generating
electricity more expensive and heightening its sensitivity to
regulation. A
utility's costs are influenced by the utility's cost of capital,
the availability and
cost of fuel and other factors. In addition, natural gas pipeline
and distribution
companies have incurred increased costs as a result of long-term
natural gas
purchase contracts containing "take or pay" provisions which
require that they
pay for natural gas even if natural gas is not taken by them. There
can be no
assurance that a utility will be able to pass on these increased
costs to customers
through increased rates. Utilities incur substantial capital
expenditures for plant
and equipment. In the future they will also incur increasing
capital and operating
expenses to comply with environmental legislation such as the Clean
Air Act of
1990, and other energy, licensing and other laws and regulations
relating to,
among other things, air emissions, the quality of drinking water,
waste water
discharge, solid and hazardous substance handling and disposal, and
<PAGE>
siting and
licensing of facilities. Environmental legislation and regulations
are changing
rapidly and are the subject of current public policy debate and
legislative
proposals. It is increasingly likely that some or many utilities
will be subject to
more stringent environmental standards in the future that could
result in
significant capital expenditures. Future legislation and regulation
could include,
among other things, regulation of so-called electromagnetic fields
associated with
electric transmission and distribution lines as well as emissions
of carbon dioxide
and other so-called greenhouse gases associated with the burning of
fossil fuels.
Compliance with these requirements may limit a utility's operations
or require
substantial investments in new equipment and, as a result, may
adversely affect
a utility's results of operations.
The electric utility industry in general is subject to various
external factors
including (a) the effects of inflation upon the costs of operation
and construction,
(b) substantially increased capital outlays and longer construction
periods for
larger and more complex new generating units, (c) uncertainties in
predicting
future load requirements, (d) increased financing requirements
coupled with
limited availability of capital, (e) exposure to cancellation and
penalty charges
on new generating units under construction, (f) problems of cost
and availability
of fuel, (g) compliance with rapidly changing and complex
environmental, safety
and licensing requirements, (h) litigation and proposed legislation
designed to
delay or prevent construction of generating and other facilities,
(i) the uncertain
effects of conservation on the use of electric energy, (j)
uncertainties associated
with the development of a national energy policy, (k) regulatory,
political and
consumer resistance to rate increases and (l) increased competition
as a result
of the availability of other energy sources. These factors may
delay the
construction and increase the cost of new facilities, limit the use
of, or
<PAGE>
necessitate costly modifications to, existing facilities, impair
the access of
electric utilities to credit markets, or substantially increase the
cost of credit for
electric generating facilities. The Sponsor cannot predict at this
time the ultimate
effect of such factors on the ability of any issuers to meet their
obligations with
respect to Bonds.
The National Energy Policy Act ("NEPA"), which became law in
October,
1992, makes it mandatory for a utility to permit non-utility
generators of
electricity access to its transmission system for wholesale
customers, thereby
increasing competition for electric utilities. NEPA also mandated
demand-side
management policies to be considered by utilities. NEPA prohibits
the Federal
Energy Regulatory Commission from mandating electric utilities to
engage in
retail wheeling, which is competition among suppliers of electric
generation to
provide electricity to retail customers (particularly industrial
retail customers)
of a utility. However, under NEPA, a state can mandate retail
wheeling under
certain conditions.
There is concern by the public, the scientific community, and the
U.S.
Congress regarding environmental damage resulting from the use of
fossil fuels.
Congressional support for the increased regulation of air, water,
and soil
contaminants is building and there are a number of pending or
recently enacted
legislative proposals which may affect the electric utility
industry. In particular,
on November 15, 1990, legislation was signed into law that
substantially revises
the Clean Air Act (the "1990 Amendments"). The 1990 Amendments seek
to
improve the ambient air quality throughout the United States by the
year 2000.
A main feature of the 1990 Amendments is the reduction of sulphur
dioxide and
nitrogen oxide emissions caused by electric utility power plants,
particularly
those fueled by coal. Under the 1990 Amendments the U.S.
Environmental
Protection Agency ("EPA") must develop limits for nitrogen oxide
<PAGE>
emissions by
1993. The sulphur dioxide reduction will be achieved in two phases.
Phase I
addresses specific generating units named in the 1990 Amendments.
In Phase II
the total U.S. emissions will be capped at 8.9 million tons by the
year 2000.
The 1990 Amendments contain provisions for allocating allowances to
power
plants based on historical or calculated levels. An allowance is
defined as the
authorization to emit one ton of sulphur dioxide.
The 1990 Amendments also provide for possible further regulation
of toxic air
emissions from electric generating units pending the results of
several federal
government studies to be conducted over the next three to four
years with
respect to anticipated hazards to public health, available
corrective technologies,
and mercury toxicity.
Electric utilities which own or operate nuclear power plants are
exposed to
risks inherent in the nuclear industry. These risks include
exposure to new
requirements resulting from extensive federal and state regulatory
oversight,
public controversy, decomissioning costs, and spent fuel and
radioactive waste
disposal issues. While nuclear power construction risks are no
longer of
paramount concern, the emerging issue is radioactive waste
disposal. In
addition, nuclear plants typically require substantial capital
additions and
modifications throughout their operating lives to meet safety,
environmental,operational and regulatory requirements and to
replace and
upgrade various plant systems. The high degree of regulatory
monitoring and
controls imposed on nuclear plants could cause a plant to be out of
service or
on limited service for long periods. When a nuclear facility owned
by an
investor-owned utility or a state or local municipality is out of
service or
operating on a limited service basis, the utility operator or its
owners may be
liable for the recovery of replacement power costs. Risks of
substantial liability
<PAGE>
also arise from the operation of nuclear facilities and from the
use, handling,
and possible radioactive emissions associated with nuclear fuel.
Insurance may
not cover all types or amounts of loss which may be experienced in
connection
with the ownership and operation of a nuclear plant and severe
financial
consequences could result from a significant accident or
occurrence. The
Nuclear Regulatory Commission has promulgated regulations mandating
the
establishment of funded reserves to assure financial capability for
the eventual
decommissioning of licensed nuclear facilities. These funds are to
be accrued
from revenues in amounts currently estimated to be sufficient to
pay for
decommissioning costs.
The ability of state and local joint action power agencies to
make payments on
bonds they have issued is dependent in large part on payments made
to them
pursuant to power supply or similar agreements. Courts in
Washington, Oregon
and Idaho have held that certain agreements between the Washington
Public
Power Supply System ("WPPSS") and the WPPSS participants are
unenforceable
because the participants did not have the authority to enter into
the agreements.
While these decisions are not specifically applicable to agreements
entered into
by public entities in other states, they may cause a reexamination
of the legal
structure and economic viability of certain projects financed by
joint power
agencies, which might exacerbate some of the problems referred to
above and
possibly lead to legal proceedings questioning the enforceability
of agreements
upon which payment of these bonds may depend.
Water and Sewer Revenue Bonds. Water and sewer bonds are
generally
payable from user fees. The ability of state and local water and
sewer authorities
to meet their obligations may be affected by failure of
municipalities to utilize
fully the facilities constructed by these authorities, economic or
population
decline and resulting decline in revenue from user charges, rising
<PAGE>
construction
and maintenance costs and delays in construction of facilities,
impact of
environmental requirements, failure or inability to raise user
charges in response
to increased costs, the difficulty of obtaining or discovering new
supplies of
fresh water, the effect of conservation programs and the impact of
"no growth"
zoning ordinances. In some cases this ability may be affected by
the continued
availability of Federal and state financial assistance and of
municipal bond
insurance for future bond issues.
University and College Bonds. The ability of universities and
colleges to meet
their obligations is dependent upon various factors, including the
size and
diversity of their sources of revenues, enrollment, reputation,
management
expertise, the availability and restrictions on the use of
endowments and other
funds, the quality and maintenance costs of campus facilities, and,
in the case
of public institutions, the financial condition of the relevant
state or other
governmental entity and its policies with respect to education. The
institution's
ability to maintain enrollment levels will depend on such factors
as tuition costs,
demographic trends, geographic location, geographic diversity and
quality of the
student body, quality of the faculty and the diversity of program
offerings.
Legislative or regulatory action in the future at the Federal,
state or local level
may directly or indirectly affect eligibility standards or reduce
or eliminate the
availability of funds for certain types of student loans or grant
programs,
including student aid, research grants and work-study programs, and
may affect
indirect assistance for education.
Lease Rental Bonds. Lease rental bonds are issued for the most
part by
governmental authorities that have no taxing power or other means
of directly
raising revenues. Rather, the authorities are financing vehicles
created solely for
the construction of buildings (administrative offices, convention
<PAGE>
centers and
prisons, for example) or the purchase of equipment (police cars and
computer
systems, for example) that will be used by a state or local
government (the
"lessee"). Thus, the bonds are subject to the ability and
willingness of the lessee
government to meet its lease rental payments which include debt
service on the
bonds. Willingness to pay may be subject to changes in the views of
citizens and
government officials as to the essential nature of the finance
project. Lease
rental bonds are subject, in almost all cases, to the annual
appropriation risk,
i.e., the lessee government is not legally obligated to budget and
appropriate for
the rental payments beyond the current fiscal year. These bonds are
also subject
to the risk of abatement in many states - rental bonds cease in the
event that
damage, destruction or condemnation of the project prevents its use
by the
lessee. (In these cases, insurance provisions and reserve funds
designed to
alleviate this risk become important credit factors). In the event
of default by the
lessee government, there may be significant legal and/or practical
difficulties
involved in the reletting or sale of the project. Some of these
issues, particularly
those for equipment purchase, contain the so-called "substitution
safeguard",
which bars the lessee government, in the event it defaults on its
rental payments,
from the purchase or use of similar equipment for a certain period
of time. This
safeguard is designed to insure that the lessee government will
appropriate the
necessary funds even though it is not legally obligated to do so,
but its legality
remains untested in most, if not all, states.
Capital Improvement Facility Bonds. The Portfolio of a Trust may
contain
Bonds which are in the capital improvement facilities category.
Capital
improvement bonds are bonds issued to provide funds to assist
political
subdivisions or agencies of a state through acquisition of the
underlying debt of
a state or local political subdivision or agency which bonds are
secured by the
<PAGE>
proceeds of the sale of the bonds, proceeds from investments and
the
indebtedness of a local political subdivision or agency. The risks
of an
investment in such bonds include the risk of possible prepayment or
failure of
payment of proceeds on and default of the underlying debt.
Solid Waste Disposal Bonds. Bonds issued for solid waste
disposal facilities
are generally payable from tipping fees and from revenues that may
be earned
by the facility on the sale of electrical energy generated in the
combustion of
waste products. The ability of solid waste disposal facilities to
meet their
obligations depends upon the continued use of the facility, the
successful and
efficient operation of the facility and, in the case of
waste-to-energy facilities,
the continued ability of the facility to generate electricity on a
commercial basis.
All of these factors may be affected by a failure of municipalities
to fully utilize
the facilities, an insufficient supply of waste for disposal due to
economic or
population decline, rising construction and maintenance costs, any
delays in
construction of facilities, lower-cost alternative modes of waste
processing and
changes in environmental regulations. Because of the relatively
short history of
this type of financing, there may be technological risks involved
in the
satisfactory construction or operation of the projects exceeding
those associated
with most municipal enterprise projects. Increasing environmental
regulation on
the federal, state and local level has a significant impact on
waste disposal
facilities. While regulation requires more waste producers to use
waste disposal
facilities, it also imposes significant costs on the facilities.
These costs include
compliance with frequently changing and complex regulatory
requirements, the
cost of obtaining construction and operating permits, the cost of
conforming to
prescribed and changing equipment standards and required methods of
operation
and, for incinerators or waste-to-energy facilities, the cost of
disposing of the
waste residue that remains after the disposal process in an
<PAGE>
environmentally safe
manner. In addition, waste disposal facilities frequently face
substantial
opposition by environmental groups and officials to their location
and operation,
to the possible adverse effects upon the public health and the
environment that
may be caused by wastes disposed of at the facilities and to
alleged improper
operating procedures. Waste disposal facilities benefit from laws
which require
waste to be disposed of in a certain manner but any relaxation of
these laws
could cause a decline in demand for the facilities' services.
Finally,
waste-to-energy facilities are concerned with many of the same
issues facing
utilities insofar as they derive revenues from the sale of energy
to local power
utilities (see Power Facility Bonds above).
Moral Obligation Bonds. The Trust may also include "moral
obligation"
bonds. If an issuer of moral obligation bonds is unable to meet its
obligations,
the repayment of the bonds becomes a moral commitment but not a
legal
obligation of the state or municipality in question. Even though
the state may be
called on to restore any deficits in capital reserve funds of the
agencies or
authorities which issued the bonds, any restoration generally
requires
appropriation by the state legislature and accordingly does not
constitute a
legally enforceable obligation or debt of the state. The agencies
or authorities
generally have no taxing power.
Refunded Bonds. Refunded Bonds are typically 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. These
obligations are
generally noncallable prior to maturity or the predetermined
redemption date.
In a few isolated instances to date, however, bonds which were
thought to be
escrowed to maturity have been called for redemption prior to
maturity.
<PAGE>
Airport, Port and Highway Revenue Bonds. Certain facility revenue
bonds are
payable from and secured by the revenues from the ownership and
operation of
particular facilities, such as airports (including airport
terminals and maintenance
facilities), bridges, marine terminals, turnpikes and port
authorities. For
example, the major portion of gross airport operating income is
generally
derived from fees received from signatory airlines pursuant to use
agreements
which consist of annual payments for airport use, occupancy of
certain terminal
space, facilities, service fees, concessions and leases. 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 aviation fuel costs, deregulation, traffic constraints,
the recent
recession and other factors. As a result, several airlines are
experiencing severe
financial difficulties. Several airlines including America West
Airlines have
sought protection from their creditors under Chapter 11 of the
Bankruptcy Code.
In addition, other airlines such as Midway Airlines, Inc., Eastern
Airlines, Inc.
and Pan American Corporation have been liquidated. However, within
the past
few months Northwest Airlines, Continental Airlines and Trans World
Airlines
have emerged from 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.
Similarly, payment on bonds related to other facilities is
dependent on revenues
from the projects, such as use fees from ports, tolls on turnpikes
and bridges
and rents from buildings. Therefore, payment may be adversely
affected by
reduction in revenues due to such factors and increased cost of
maintenance or
decreased use of a facility, lower cost of alternative modes of
<PAGE>
transportation or
scarcity of fuel and reduction or loss of rents.
Special Tax Bonds. Special tax bonds are payable from and secured
by the
revenues derived by a municipality from a particular tax such as a
tax on the
rental of a hotel room, on the purchase of food and beverages, on
the rental of
automobiles or on the consumption of liquor. Special tax bonds are
not secured
by the general tax revenues of the municipality, and they do not
represent
general obligations of the municipality. Therefore, payment on
special tax bonds
may be adversely affected by a reduction in revenues realized from
the
underlying special tax due to a general decline in the local
economy or
population or due to a decline in the consumption, use or cost of
the goods and
services that are subject to taxation. Also, should spending on the
particular
goods or services that are subject to the special tax decline, the
municipality may
be under no obligation to increase the rate of the special tax to
ensure that
sufficient revenues are raised from the shrinking taxable base.
Tax Allocation Bonds. Tax allocation bonds are typically secured
by
incremental tax revenues collected on property within the areas
where
redevelopment projects financed by bond proceeds are located
("project areas").
Such payments are expected to be made from projected increases in
tax revenues
derived from higher assessed values of property resulting from
development in
the particular project area and not from an increase in tax rates.
Special risk
considerations include: reduction of, or a less than anticipated
increase in,
taxable values of property in the project area, caused either by
economic factors
beyond the Issuer's control (such as a relocation out of the
project area by one
or more major property owners) or by destruction of property due to
natural or
other disasters; successful appeals by property owners of assessed
valuations; substantial delinquencies in the payment of property
taxes; or imposition of any constitutional or legislative property
tax rate decrease.
<PAGE>
Transit Authority Bonds. Mass transit is generally not
self-supporting from
fare revenues. Therefore, additional financial resources must be
made available
to ensure operation of mass transit systems as well as the timely
payment of debt
service. Often such financial resources include Federal and state
subsidies, lease
rentals paid by funds of the state or local government or a pledge
of a special
tax such as a sales tax or a property tax. If fare revenues or the
additional
financial resources do not increase appropriately to pay for rising
operating
expenses, the ability of the issuer to adequately service the debt
may be
adversely affected.
Convention Facility Bonds. The Portfolio of a Trust may contain
Bonds of
issuers in the convention facilities category. Bonds in the
convention facilities
category include special limited obligation securities issued to
finance convention
and sports facilities payable from rental payments and annual
governmental
appropriations. The governmental agency is not obligated to make
payments in
any year in which the monies have not been appropriated to make
such
payments. In addition, these facilities are limited use facilities
that may not be
used for purposes other than as convention centers or sports
facilities.
Puerto Rico . The Portfolio may contain bonds of issuers which
will be
affected by general economic conditions in 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.
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 (the "Code") provides for a credit against Federal
income taxes
for U.S. companies operating on the island if certain requirements
<PAGE>
are met. The Omnibus Budget Reconciliation Act of 1993 imposed
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 states
are so treated and subject to the provisions of the Code currently
in effect.
There can be no assurance that any pending or future legislation
finally enacted
will include the same or 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
<PAGE>
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.
Litigation and Legislation. To the best knowledge of the Sponsor,
there was
no litigation pending as of the Date of Deposit in respect of any
Bonds which
might reasonably be expected to have a material adverse effect upon
the Trust.
At any time after the Initial Date of Deposit, litigation may be
initiated on a
variety of grounds, or legislation may be enacted, with respect to
Bonds in the
Trust. Litigation, for example, challenging the issuance of
pollution control
revenue bonds under environmental protection statutes may affect
the validity of
Bonds or the tax-free nature of their interest. While the outcome
of litigation of
this nature can never be entirely predicted, opinions of bond
counsel are
delivered on the date of issuance of each Bond to the effect that
the Bond has
been validly issued and that the interest thereon is exempt from
Federal income
tax. In addition, other factors may arise from time to time which
potentially may
impair the ability of issuers to make payments due on the Bonds.
Under the Federal Bankruptcy Act, a political subdivision or
public agency or
instrumentality of any state, including municipalities, may proceed
to restructure
or otherwise alter the terms of its obligations, including those of
the type
comprising the Trust's Portfolio. The Sponsor is unable to predict
what effect,
if any, this legislation might have on the Trust.
From time to time Congress considers proposals to tax the
interest on state and
local obligations, such as the Bonds. The Supreme Court clarified
in South
Carolina v. Baker (decided April 20, 1988) that the U.S.
Constitution does not
prohibit Congress from passing a nondiscriminatory tax on interest
on state and
<PAGE>
local obligations. This type of legislation, if enacted into law,
could adversely
affect an investment in Units. Holders are urged to consult their
own tax
advisers.
Tax Exemption. In the opinion of bond counsel rendered on the
date of
issuance of each Bond, the interest on each Bond is excludable from
gross
income under existing law for regular Federal income tax purposes
(except in
certain circumstances depending on the Holder) but may be subject
to state and
local taxes. As discussed under Taxes below, interest on some or
all of the
Bonds may become subject to regular Federal income tax, perhaps
retroactively
to their date of issuance, as a result of changes in Federal law or
as a result of
the failure of issuers (or other users of the proceeds of the
Bonds) to comply
with certain ongoing requirements.
Moreover, the Internal Revenue Service announced on June 14, 1993
that it
will be expanding its examination program with respect to
tax-exempt bonds.
The expanded examination program will consist of, among other
measures,
increased enforcement against abusive transactions, broader audit
coverage
(including the expected issuance of audit guidelines) and expanded
compliance
achieved by means of expected revisions to the tax-exempt bond
information
return forms. At this time, it is uncertain whether the tax exempt
status of any
of the Bonds would be affected by such proceedings, or whether such
effect, if
any, would be retroactive.
In certain cases, a Bond may provide that if the interest on the
Bond should
ultimately be determined to be taxable, the Bond would become due
and payable
by its issuer, and, in addition, may provide that any related
letter of credit or
other security could be called upon if the issuer failed to satisfy
all or part of its
obligation. In other cases, however, a Bond may not provide for the
acceleration
or redemption of the Bond or a call upon the related letter of
<PAGE>
credit or other security upon a determination of taxability. In
those cases in which a Bond does
not provide for acceleration or redemption or in which both the
issuer and the
bank or other entity issuing the letter of credit or other security
are unable to
meet their obligations to pay the amounts due on the Bond as a
result of a
determination of taxability, the Trustee would be obligated to sell
the Bond and,
since it would be sold as a taxable security, it is expected that
it would have to
be sold at a substantial discount from current market price. In
addition, as
mentioned above, under certain circumstances Holders could be
required to pay
income tax on interest received prior to the date on which the
interest is
determined to be taxable.
The Units
On the date of this Prospectus each Unit in a Trust
represented
a fractional undivided interest in the principal and net income of
such Trust as
is set forth in Part A, "Summary of Essential Information". If any
Units are
redeemed after the date of this Prospectus by the Trustee, the
principal amount
of Bonds in the affected Trust will be reduced by an amount
allocable to
redeemed Units and the fractional undivided interest in the
affected Trust
represented by each unredeemed Unit will be increased. Units will
remain
outstanding until redeemed upon tender to the Trustee by any Unit
holder, which
may include the Sponsor, or until the termination of the Trust
Agreement. (See
"Amendment and Termination of the Trust Agreement-Termination.")
References in this Prospectus to "Units" are to Units which
represented the
fractional undivided interest indicated in the "Summary of
Essential Information"
in Part A.
Estimated Current Return And Estimated Long-Term Return
Under accepted bond practice, tax-exempt bonds are
<PAGE>
customarily offered to investors on a "yield price" basis (as
contrasted to a "dollar price"
basis) at the lesser of the yield as computed to maturity of the
bonds or to an
earlier redemption date and which takes into account not only the
interest
payable on the bonds but also the amortization or accretion to a
specified date
of any premium over or discount from the par (maturity) value in
the bond's
purchase price. Since Units of a Trust are offered on a dollar
price basis, the
rate of return on an investment in Units of a Trust is stated in
terms of
"Estimated Current Return," computed by dividing the Net Annual
Income per
Unit by the Public Offering Price per Unit. Any change in either
the Net
Annual Income per Unit or the Public Offering Price per Unit will
result in a
change in the Estimated Current Return. The Net Annual Income per
Unit of
a Trust is determined by dividing the total annual interest income
to such Trust,
less estimated annual fees and expenses of the Trustee, the Sponsor
and the
Evaluator, by the number of Units of such Trust outstanding. The
Net Annual
Income per Unit of a Trust will change as the income or expenses of
such Trust
changes and as Bonds are redeemed, paid, sold or exchanged. For a
statement
of the Net Annual Income per Unit and the Estimated Current Return
based on
the Public Offering Price, see Part A, "Summary of Essential
Information".
The Estimated Long-Term Return for each Trust is a measure
of
the return to the investor over the estimated life of the Trust.
The Estimated
Long-Term Return represents an average of the yields to maturity
(or call) of
the Bonds in the Trust's portfolio calculated in accordance with
accepted bond
practice and adjusted to reflect expenses and sales charges. In
calculating
Estimated Long-Term Return, the average yield for the Trust's
portfolio is
derived by weighting each Bond's yield by the market value of the
Bond and by
the amount of time remaining to the date to which the Bond is
priced. Once the
<PAGE>
average portfolio yield is computed, this figure is then reduced to
reflect
estimated expenses and the effect of the maximum sales charge paid
by
investors.
A Trust may experience expenses and portfolio changes
different
from those assumed in the calculation of Estimated Long-Term
Return. There
thus can be no assurance that the Estimated Current Returns or the
Estimated
Long-Term Returns quoted for a Trust will be realized in the
future. Since both
Estimated Current Return and Estimated Long-Term Return quoted on
a given
business day are based on the market value of the underlying Bonds
on that day,
subsequent calculations of these performance measures will reflect
the then-
current market value of the underlying bonds and may be higher or
lower.
Taxes
In the opinion of bond counsel to the issuing governmental
authorities given at the time of the original delivery of the
Bonds, interest
income on the Bonds comprising the Portfolio of each Trust is
(except in certain
instances, depending upon the Unit holder, as described below)
exempt from
Federal income tax under the provisions of the Internal Revenue
Code in effect
as of the date of issuance. In the case of Bonds issued when the
Internal Revenue Code of 1954 was in effect, redesignation of the
Code as the Internal Revenue Code of 1986 (the "Code" or the "1986
Code") has not adversely affected such exemption. (See "Tax Exempt
Securities Trust - Portfolio.")
Messrs. Davis Polk & Wardwell, special counsel for the
Sponsor, rendered an opinion under existing provisions of the Code,
the regulations then promulgated thereunder and current rulings of
the Internal Revenue Service substantially to the effect that:
The Trust is not an association taxable as a corporation for
Federal income tax purposes, and income received by the Trust will
be treated as the income of the
Unit holders ("Holders") in the manner set forth below.
Each Holder will be considered the owner of a pro rata portion of
each Bond in the Trust under the grantor trust rules of Sections
<PAGE>
671-679 of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to determine the face
amount of a Holder's pro rata portion of each Bond on the Date of
Deposit, see "Aggregate Principal" under "Portfolio of Securities".
The total cost to a Holder
of his Units, including sales charges, is allocated to his pro rata
portion of each
Bond, in proportion to the fair market values thereof on the date
the Holder purchases his Units, in order to determine his tax basis
for his pro rata portion of each Bond.
Each Holder will be considered to have received the interest on
his pro rata portion of each Bond when interest on the Bond is
received by the Trust. In the
opinion of bond counsel (delivered on the date of issuance of each
Bond), such interest will be excludable from gross income for
regular Federal income tax
purposes (except in certain limited circumstances referred to
below). Amounts
received by the Trust pursuant to a bank letter of credit,
guarantee or insurance
policy with respect to payments of principal, premium or interest
on a Bond in
the Trust will be treated for Federal income tax purposes in the
same manner
as if such amounts were paid by the issuer of the Bond.
The Trust may contain Bonds which were originally issued at a
discount ("original issue discount"). The following principles will
apply to each Holder's
pro rata portion of any Bond originally issued at a discount. In
general, original issue discount is defined as the difference
between the price at which a debt
obligation was issued and its stated redemption price at maturity.
Original issue discount on a tax-exempt obligation issued after
September 3, 1982, is deemed
to accrue as tax-exempt interest over the life of the obligation
under a formula based on the compounding of interest. Original
issue discount on a tax-exempt
obligation issued before July 2, 1982 is deemed to accrue as
tax-exempt interest
ratably over the life of the obligation. Original issue discount on
any tax-exempt obligation issued during the period beginning July
2, 1982 and ending September
3, 1982 is also deemed to accrue as tax-exempt interest over the
life of the obligation, although it is not clear whether such
accrual is ratable or is determined under a formula based on the
compounding of interest. If a Holder's
tax basis for his pro rata portion of a Bond issued with original
issue discount is greater than its "adjusted issue price" but less
than its stated redemption price
at maturity (as may be adjusted for certain payments), the Holder
will be considered to have purchased his pro rata portion of the
<PAGE>
Bond at an "acquisition
premium." A Holder's adjusted tax basis for his pro rata portion of
a Bond issued with original issue discount will include original
issue discount accrued during the period such Holder held his
Units. Such increases to the Holder's tax
basis in his pro rata portion of the Bond resulting from the
accrual of original issue discount, however, will be reduced by the
amount of any such acquisition premium.
If a Holder's tax basis for his pro rata portion of a Bond
exceeds the
redemption price at maturity thereof (subject to certain
adjustments), the Holder
will be considered to have purchased his pro rata portion of the
Bond with "amortizable bond premium". The Holder is required to
amortize such bond
premium over the term of the Bond. Such amortization is only a
reduction of basis for his pro rata portion of the Bond and does
not result in any deduction
against the Holder's income. Therefore, under some circumstances,
a Holder may recognize taxable gain when his pro rata portion of a
Bond is disposed of for an amount equal to or less than his
original tax basis therefor.
A Holder will recognize taxable gain or loss when all or part of
his pro rata portion of a Bond is disposed of by the Trust for an
amount greater or less than
his adjusted tax basis. Any such taxable gain or loss will be
capital gain or loss,
except that any gain from the disposition of a Holder's pro rata
portion of a Bond acquired by the Holder at a "market discount"
(i.e., where the Holder's
original tax basis for his pro rata portion of the Bond (plus any
original issue discount which will accrue thereon until its
maturity) is less than its stated
redemption price at maturity) would be treated as ordinary income
to the extent the gain does not exceed the accrued market discount.
Capital gains are
generally taxed at the same rate as ordinary income. However, the
excess of net long-term capital gains over net short-term capital
losses may be taxed at a
lower rate than ordinary income for certain noncorporate taxpayers.
A capital gain or loss is long-term if the asset is held for more
than one year and short-term if held for one year or less. The
deduction of capital losses is subject
to limitations. A Holder will also be considered to have disposed
of all or part of his pro rata portion of each Bond when he sells
or redeems all or some of his Units.
Under Section 265 of the Code, a Holder (except a corporate
Holder) is not
entitled to a deduction for his pro rata share of fees and expenses
of the Trust
<PAGE>
because the fees and expenses are incurred in connection with the
production of
tax-exempt income. Further, if borrowed funds are used by a Holder
to purchase
or carry Units of the Trust, interest on such indebtedness will not
be deductible
for Federal income tax purposes. In addition, under rules used by
the Internal
Revenue Service, the purchase of Units may be considered to have
been made
with borrowed funds even though the borrowed funds are not directly
traceable
to the purchase of Units. Similar rules may be applicable for state
tax purposes.
From time to time proposals are introduced in Congress and state
legislatures
which, if enacted into law, could have an adverse impact on the
tax-exempt
status of the Bonds. It is impossible to predict whether any
legislation in respect
of the tax status of interest on such obligations may be proposed
and eventually
enacted at the Federal or state level.
The foregoing discussion relates only to Federal and certain
aspects of New
York State and City income taxes. Depending on their state of
residence,
Holders may be subject to state and local taxation and should
consult their own
tax advisers in this regard.
* * * * *
Interest on certain tax-exempt bonds issued after August 7, 1986
will be a
preference item for purposes of the alternative minimum tax
("AMT"). The
Sponsor believes that interest (including any original issue
discount) on the
Bonds should not be subject to the AMT for individuals or
corporations under
this rule. A corporate Holder should be aware, however, that the
accrual or
receipt of tax-exempt interest not subject to the AMT may give rise
to an
alternative minimum tax liability (or increase an existing
liability) because the
interest income will be included in the corporation's "adjusted
current earnings"
for purposes of the adjustment to alternative minimum taxable
income required
<PAGE>
by Section 56(g) of the Code and will be taken into account for
purposes of the
environmental tax on corporations under Section 59A of the Code,
which is
based on an alternative minimum taxable income.
In addition, interest on the Bonds must be taken into
consideration in
computing the portion, if any, of social security benefits that
will be included
in an individual's gross income and subject to Federal income tax.
Holders are
urged to consult their own tax advisers concerning an investment in
Units.
At the time of issuance of each Bond, an opinion relating to the
validity of the
Bond and to the exemption of interest thereon from regular Federal
income taxes
was or will be rendered by bond counsel. Neither the Sponsor nor
Davis Polk
& Wardwell nor any of the special counsel for state tax matters
have made or
will make any review of the proceedings relating to the issuance of
the Bonds
or the basis for these opinions. The tax exemption is dependent
upon the issuer's
(and other users') compliance with certain ongoing requirements,
and the
opinion of bond counsel assumes that these requirements will be
complied
with. However, there can be no assurance that the issuer (and other
users) will
comply with these requirements, in which event the interest on the
Bond could
be determined to be taxable retroactively to the date of issuance.
In the case of certain of the Bonds, the opinions of bond counsel
indicate that
interest on such Bonds received by a "substantial user" of the
facilities being
financed with the proceeds of such Bonds, or persons related
thereto, for periods
while such Bonds are held by such a user or related person, will
not be exempt
from regular Federal income taxes, although interest on such Bonds
received by
others would be exempt from regular Federal income taxes.
"Substantial user"
is defined under U.S. Treasury Regulations to include only a person
whose
gross revenue derived with respect to the facilities financed by
the issuance of
<PAGE>
bonds is more than 5% of the total revenue derived by all users of
such facilities, or who occupies more than 5% of the usable area of
such facilities or
for whom such facilities or a part thereof were specifically
constructed,
reconstructed or acquired. "Related persons" are defined to include
certain
related natural persons, affiliated corporations, partners and
partnerships.
Similar rules may be applicable for state tax purposes.
After the end of each calendar year, the Trustee will furnish to
each Holder an annual statement containing information relating to
the interest received by
the Trust on the Bonds, the gross proceeds received by the Trust
from the disposition of any Bond (resulting from redemption or
payment at maturity of
any Bond or the sale by the Trust of any Bond), and the fees and
expenses paid
by the Trust. The Trustee will also furnish annual information
returns to each
Holder and to the Internal Revenue Service. Holders are required to
report to the Internal Revenue Service the amount of tax-exempt
interest received during
the year.
Expenses and Charges
Initial Expenses
At no cost to a Trust the Sponsor has borne all the
expenses of creating and establishing the Trust, including the cost
of the initial preparation
and execution of the Trust Agreement, initial preparation and
printing of the certificates for Units, the fees of the Evaluator
during the initial public offering,
legal expenses, advertising and selling expenses and other
out-of-pocket expenses. The costs of maintaining the secondary
market, such as printing,
legal and accounting, will be borne by the Sponsor except as
otherwise provided in the Trust Agreement.
Trustee's, Sponsor's and Evaluator's Fees
The Trustee will receive for its ordinary recurring
services to a Trust an annual fee in the amount set forth under
Part A, "Summary of Essential
Information." For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see
"Rights of Unit Holders." The Trustee will receive the benefit of
any reasonable cash balances
in the Interest and Principal accounts.
<PAGE>
The Portfolio supervision fee (the "Supervision Fee"),
which is
earned for Portfolio supervisory services, is based upon the
greatest face amount
of Bonds in the Trust at any time during the calendar year with
respect to which
the fee is being computed. The Supervision Fee has been incurred
by Portfolios
which have come into existence after August 14, 1991, beginning
with Series
345 initially, and each Series, in existence, thereafter.
The Supervision Fee, which is not to exceed the amount set
forth in Part A--"Summary of Essential Information", may exceed the
actual costs of providing Portfolio supervisory services for such
Trust, but at no time will the
total amount the Sponsor receives for Portfolio supervisory
services rendered to
all series of Tax Exempt Securities Trust in any calendar year
exceed the aggregate cost to them of supplying such services in
such year. In addition, the
Sponsor may also be reimbursed for bookkeeping and other
administrative services provided to the Trust in amounts not
exceeding their costs of providing these services.
The Evaluator determines the aggregate bid price of the
underlying securities on a daily basis at a fee in the amount set
forth under Part A, "Summary of Essential Information," for each
evaluation of the Bonds in a Trust. For a discussion of the
services performed by the Evaluator pursuant to
its obligations under the Trust Agreement, see
"Evaluator-Responsibility" and "Public Offering-Offering Price".
Any of such fees may be increased without approval of the
Unit holders by amounts not exceeding proportionate increases in
consumer prices for services as measured by the United States
Department of Labor's Consumer
Price Index entitled "All Services Less Rent" or, if such Index is
no longer published, in a similar index to be determined by the
Trustee and the Sponsor.
In addition, at the time of any such increase, the Trustee shall
also be entitled to charge thereafter an additional fee at a rate
or amount to be determined by the
Trustee and the Sponsor based upon the face amount of Deposited
Units in a Trust, for the Trustee's services in maintaining such
Deposited Units. The approval of Unit holders shall not be
required for charging of such additional
fee.
Other Charges
The following additional charges are or may be incurred by
a Trust: all expenses of the Trustee (including fees and expenses
<PAGE>
of counsel and auditors) incurred in connection with its activities
under the Trust Agreement,
including reports and communications to Unit holders; expenses and
costs of any
action undertaken by the Trustee to protect a Trust and the rights
and interests
of the Unit holders; fees of the Trustee for any extraordinary
services performed
under the Trust Agreement; indemnification of the Trustee for any
loss or
liability accruing to it without gross negligence, bad faith or
willful misconduct
on its part, arising out of or in connection with its acceptance or
administration
of a Trust; in the case of certain trusts to the extent lawful,
expenses (including
legal, accounting and printing expenses) of maintaining
registration or
qualification of the Units and/or a Trust under Federal or state
securities laws
subsequent to initial registration so long as the Sponsor is
maintaining a market
for the Units and all taxes and other governmental charges imposed
upon the
Bonds or any part of a Trust (no such taxes or charges are being
levied or made
or, to the knowledge of the Sponsor, contemplated). The above
expenses,
including the Trustee's fee, when paid by or owing to the Trustee,
are secured
by a lien on the Trust. In addition, the Trustee is empowered to
sell Bonds in
order to make funds available to pay all expenses.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units of a Trust is
determined
by adding to the Evaluator's determination of the aggregate bid
price of the
Bonds per Unit a sales charge equal to the percentage of the Public
Offering
Price indicated for each Trust in Part A, "Summary of Essential
Information".
The aggregate bid price of the underlying Bonds may be expected to
be less than
the aggregate offering price (see "Public Offering - Method of
Evaluation"). A
proportionate share of accrued and undistributed interest on the
Bonds in a Trust
at the date of delivery of the Units of such Trust to the purchaser
<PAGE>
is also added to the Public Offering Price.
Pursuant to employee benefit plans, Units of a Trust are
available to employees of certain of the Sponsor at a Public
Offering Price equal to the
Evaluator's determination of the aggregate bid price of Bonds of a
Trust per Unit plus a sales charge of 1.25% of the Public Offering
Price. Sales through such plans to employees of the Sponsor
requires less selling effort and selling expenses than sales to the
general public.
Method of Evaluation
The aggregate bid price of the Bonds (which is used to
calculate the price at which the Sponsor repurchases and sells
Units in the secondary market and the Redemption Price at which
Units may be redeemed) will be determined by the Evaluator (1) on
the basis of the current bid prices for the
Bonds, (2) if bid prices are not available for any Bonds, on the
basis of current bid prices of comparable securities, (3) by
appraisal, or (4) by any combination of
the above. Such determinations will be made each business day as
of the Evaluation Time set forth in the "Summary of Essential
Information," in Part A, effective for all sales made subsequent to
the last preceding determination.
The term "business day", as used herein shall exclude Saturdays,
Sundays and any day on which the New York Stock Exchange is closed.
The difference between the bid and offering prices of the Bonds may
be expected to average approximately 1.5% of principal amount. In
the case of actively traded securities, the difference may be as
little as 0.5 of 1%, and in the case of
inactively traded securities such difference will usually not
exceed 3%. The price at which Units may be repurchased by the
Sponsor in the secondary
market could be less than the price paid by the Unit holder. For
information relating to the calculation of the Redemption Price per
Unit, which is also based upon the aggregate bid price of the
underlying Bonds and which may be
expected to be less than the Public Offering Price per Unit, see
"Rights of Unit Holders - Redemption of Units".
Distribution of Units
Units acquired in the secondary market (see "Public
Offering -Market for Units") may be offered by this Prospectus at
the Public Offering Price determined in the manner provided above
(see "Public Offering - Offering Price").
The Sponsor will allow a discount on Units sold to members
of the National Association of Securities Dealers, Inc. Such
discount is subject to change from time to time.
<PAGE>
Sales will be made only with respect to whole Units, and
the Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units. A purchaser does not become a
Unit holder (Certificate
holder) or become entitled to exercise the rights of a Unit holder
(including the right to redeem his Units) until he has paid for his
Units. Generally, such payment must be made within five business
days after an order for the purchase
of Units has been placed. The price paid by a Unit holder is the
Public Offering Price in effect at the time his order is received,
plus accrued interest (see "Public Offering - Method of
Evaluation"). This price may be different from
the Public Offering Price in effect on any other day, including the
day on which the Unit holder made payment for the Units.
Market for Units
Although not obligated to do so, the Sponsor presently
intends to maintain a market for the Units of a Trust and to
continuously offer to purchase
such Units at prices based upon the aggregate bid price of the
underlying Bonds which may be less than the price paid by the Unit
holder. For information relating to the method and frequency of
the Evaluator's determination of the
aggregate bid price of the underlying Bonds, see "Public Offering
- -- Method of Evaluation". The costs of maintaining the secondary
market, such as printing, legal and accounting, will be borne by
the Sponsor except as otherwise provided
in the Trust Agreement. The Sponsor may cease to maintain such a
market at any time and from time to time without notice if the
supply of Units of a Trust of this Series exceeds demand or for any
other reason. In this event the Sponsor
may nonetheless purchase Units, as a service to Unit holders, at
prices based on the current Redemption Price of those Units. In
the event that a market is not maintained for the Units of a Trust,
a Unit holder of such Trust desiring to
dispose of his Units may be able to do so only by tendering such
Units to the Trustee for redemption at the Redemption Price, which
is based upon the aggregate bid price of the underlying Bonds.
(See "Rights of Unit Holders -Redemption of Units").
Exchange Option
Unit holders may elect to exchange any or all of their
Units of this series for units of one or more of any series of Tax
Exempt Securities Trust
(the "Exchange Trust") available for sale in the state in which the
Unit holder resides at a Public Offering Price for the units of the
Exchange Trust to be acquired based on a fixed sales charge of $25
per unit. The Sponsor reserves
the right to modify, suspend or terminate this plan at any time
<PAGE>
without further notice to Unit holders. Therefore, there is no
assurance that a market for units
will in fact exist on any given date on which a Unit holder wishes
to sell his Units of this series and thus there is no assurance
that the Exchange Option will
be available to a Unit holder. Exchanges will be effected in whole
units only. Any excess proceeds from Unit holders' Units being
surrendered will be
returned and Unit holders will not be permitted to advance any new
money in order to complete an exchange.
An exchange of Units pursuant to the Exchange Option for
units of an Exchange Trust will generally constitute a "taxable
event" under the Code,
i.e., a Holder will recognize a gain or loss at the time of
exchange. However, an exchange of Units of this Trust for units of
any other similar series of the
Tax Exempt Securities Trust which are grantor trusts for U.S.
federal income tax purposes will not constitute a taxable event to
the extent that the underlying securities in each trust do not
differ materially either in kind or in extent. Unit
holders are urged to consult their own tax advisors as to the tax
consequences to them of exchanging Units in particular cases.
Units of the Exchange Trust will be sold under the
Exchange Option at the bid prices of the underlying securities in
the particular portfolio involved per unit plus a fixed charge of
$25 per unit. As an example, assume
that a Unit holder, who has three units of a trust with a current
price of $1,020 per unit based on the bid prices of the underlying
securities, desires to exchange
his Units for units of a series of an Exchange Trust with a current
price of $880 per unit based on the bid prices of the underlying
securities. In this example,
the proceeds from the Unit holder's units will aggregate $3,060.
Since only whole units of an Exchange Trust may be purchased under
the Exchange Option, the Unit holder would be able to acquire three
units in the Exchange Trust for
a total cost of $2,715 ($2,640 for the units and $75 for the sales
charge). The remaining $345 would be returned to the Unit holder
in cash.
Reinvestment Programs
Distributions of interest and principal, if any, are made
to Unit holders monthly. The Unit holder will have the option of
either receiving his
monthly income check from the Trustee or participating in one of
the reinvestment programs offered by the Sponsor provided such Unit
holder meets the minimum qualifications of the reinvestment program
and such program lawfully qualifies for sale in the jurisdiction in
which the Unit holder resides.
<PAGE>
Upon enrollment in a reinvestment program, the Trustee will direct
monthly interest distributions and principal distributions, if any,
to the reinvestment
program selected by the Unit holder. Since the Sponsor has
arranged for
different reinvestment alternatives, Unit holders should contact
the Sponsor for
more complete information, including charges and expenses. The
appropriate
prospectus will be sent to the Unit holder. The Unit holder should
read the
prospectus for a reinvestment program carefully before deciding to
participate.
Participation in the reinvestment program will apply to all Units
of a Trust
owned by a Unit holder and may be terminated at any time by the
Unit holder,
or the program may be modified or terminated by the Trustee or the
program's
Sponsor.
Sponsor's Profits
For their services the Sponsor receives a gross commission
equal to a percentage of the Public Offering Price of the Units.
In maintaining a market for the Units of a Trust (see "Public
Offering - Market for Units"), the
Sponsor also realizes profits or sustain losses in the amount of
any difference between the price at which they buy such Units and
the price at which they resell or redeem such Units (see "Public
Offering - Offering Price").
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units of a Trust is evidenced by registered
certificates executed by the Trustee and the Sponsor. A
Certificate is
transferable by presentation and surrender of the Certificate to
the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or
any multiple thereof. A Unit holder may be required to pay $2.00
per certificate reissued or transferred, and to pay any
governmental charge that may be imposed in connection with each
such transfer or interchange. For new
certificates issued to replace destroyed, stolen or lost
certificates, the Unit holder
must furnish indemnity satisfactory to the Trustee and must pay
<PAGE>
such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
Distribution of Interest and Principal
Interest and principal received by a Trust will be
distributed on each Monthly Distribution Date on a pro rata basis
to Unit holders in such Trust
of record as of the preceding Record Date. All distributions will
be net of applicable expenses and funds required for the redemption
of Units and, if applicable, reimbursements to the Trustee for
interest payments advanced to Unit
holders on previous Monthly Distribution Dates. (See Part A,
"Summary of Essential Information," and "Tax Exempt Securities
Trust -Expenses and Charges" and "Rights of Unit Holders -
Redemption of Units" in this Section.)
The Trustee will credit to the Interest Account of a Trust
all interest received by such Trust, including that part of the
proceeds of any disposition of Bonds of such Trust which represents
accrued interest. Other receipts will be credited to the Principal
Account of the affected Trust. The pro
rata share of the Interest Account and the pro rata share of cash
in the Principal Account represented by each Unit of a Trust will
be computed by the Trustee
each month as of the Record Date. (See Part A, "Summary of
Essential Information"). Proceeds received from the disposition of
any of the Bonds subsequent to a Record Date and prior to the next
succeeding Distribution Date
will be held in the Principal Account and will not be distributed
until the following Distribution Date. The distribution to the
Unit holders as of each Record Date will be made on the following
Distribution Date or shortly thereafter and shall consist of an
amount substantially equal to one-twelfth of
such holders' pro rata share of the estimated annual income to the
Interest Account after deducting estimated expenses (the "Monthly
Interest Distribution") plus such holders' pro rata share of the
cash balance in the Principal Account
computed as of the close of business on the preceding Record Date.
Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distribution on the second
Distribution Date following their purchase
of Units. No distribution need be made from the Principal Account
if the balance therein is less than an amount sufficient to
distribute $1.00 per Unit. The Monthly Interest Distribution per
Unit as of the date shown under Part A,
"Summary of Essential Information" for a Trust will change as the
income and expenses of such Trust change and as Bonds are
exchanged, redeemed, paid or sold.
Normally, interest on the Bonds in the Portfolio of a
Trust is paid on a semi-annual basis. Because Bond interest is not
<PAGE>
received by a Trust at a constant rate throughout the year, any
Monthly Interest Distribution may be
more or less than the amount credited to the Interest Account as of
the Record Date. In order to eliminate fluctuations in Monthly
Interest Distributions
resulting from such variances, the Trustee is required by the Trust
Agreement to advance such amounts as may be necessary to provide
Monthly Interest Distributions of approximately equal amounts. The
Trustee will be reimbursed,
without interest, for any such advances from funds available from
the Interest Account on the next ensuing Record Date or Record
Dates, as the case may be.
If all or a portion of the Bonds for which advances have been made
subsequently fail to pay interest when due, the Trustee may recoup
advances made by it in
anticipation of receipt of interest payments on such Bonds by
reducing the amount distributed per Unit in one or more Monthly
Interest Distributions. If
units are redeemed subsequent to such advances by the Trustee, but
prior to receipt by the Trustee of actual notice of such failure to
pay interest, the amount
of which was so advanced by the Trustee, each remaining Unit holder
will be subject to a greater pro rata reduction in his Monthly
Interest Distribution than
would have occurred absent such redemptions. Funds which are
available for future distributions, payments of expenses and
redemptions are in accounts
which are non-interest bearing to Unit holders and are available
for use by United States Trust Company of New York, pursuant to
normal banking procedures. The Trustee is entitled to the benefit
of holding any reasonable cash
balances in the Interest and Principal Accounts. The Trustee
anticipates that the average cash balance in the Interest Account
will be approximately 2% in excess
of the amounts anticipated to be required for Monthly Distributions
to Unit holders. In addition, because of the varying interest
payment dates of the Bonds
comprising a Trust Portfolio, accrued interest at any point in time
will be greater than the amount of interest actually received by a
Trust and distributed to Unit holders. Therefore, there will
always remain an item of accrued interest
that is added to the value of the Units. This accrued but
undistributed interest is known as the accrued interest carryover.
If a Unit holder sells or redeems all
or a portion of his Units, a portion of his sale proceeds will be
allocable to his proportionate share of the accrued interest
carryover. Similarly, if a Unit holder
redeems all or a portion of his Units, the Redemption Price per
Unit which he is entitled to receive from the Trustee will include
his accrued interest carryover
on the Bonds. It should be noted that any Series formed after
Series 384 (including Series 384) that accrued interest carryover
no longer is implemented.
<PAGE>
(See "Rights of Unit Holders - Redemption of Units - Computation of
Redemption Price per Unit.")
As of the first day of each month the Trustee will deduct
from the Interest Account of a Trust and, to the extent funds are
not sufficient therein,
from the Principal Account of such Trust, amounts necessary to pay
the expenses of such Trust. (See "Tax Exempt Securities Trust -
Expenses and Charges".) The Trustee also may withdraw from said
accounts such amounts,
if any, as it deems necessary to establish a reserve for any
governmental charges payable out of a Trust. Amounts so withdrawn
shall not be considered a part
of a Trust's assets until such time as the Trustee shall return all
or any part of such amounts to the appropriate account. In
addition, the Trustee may withdraw
from the Interest Account and the Principal Account such amounts as
may be necessary to cover redemption of Units by the Trustee. (See
"Rights of Unit Holders - Redemption of Units".) The Trustee is
also entitled to withdraw from
the Interest Account, and, to the extent funds are not sufficient
therein, from the Principal Account, on one or more Record Dates as
may be appropriate, amounts sufficient to recoup advances which the
Trustee has made in anticipation of the receipt by a Trust of
interest in respect of Bonds which
subsequently fail to pay interest when due.
Reports and Records
The Trustee shall furnish Unit holders in connection with
each distribution a statement of the amount of interest, if any,
and the amount of other receipts, if any, which are being
distributed, expressed in each case as a
dollar amount per Unit. In the event that the issuer of any of the
Bonds fails to make payment when due of any interest or principal
and such failure results in a change in the amount which would
otherwise be distributed as a monthly
distribution, the Trustee will, with the first such distribution
following such failure, set forth in an accompanying statement, the
issuer and the Bond, the amount of the reduction in the
distribution per Unit resulting from such failure,
the percentage of the aggregate principal amount of Bonds which
such Bond represents and, to the extent then determined,
information regarding any disposition or legal action with respect
to such Bond. Within a reasonable time
after the end of each calendar year, the Trustee will furnish to
each person who at any time during the calendar year was a Unit
holder of record, a statement (1) as to the Interest Account:
interest received (including amounts representing
interest received upon any disposition of Bonds), if the issuers of
the Bonds are located in different states or territories, then the
percentage of such interest by
<PAGE>
such states or territories, deductions for payment of applicable
taxes and for fees and expenses of a Trust, redemptions of Units
and the balance remaining after
such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar
year; (2) as to the Principal Account: the
dates of disposition of any Bonds and the net proceeds received
therefrom (excluding any portion representing interest), deductions
for payments of applicable taxes and for fees and expenses of a
Trust, redemptions of Units, and
the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of
each Unit outstanding on the last business day of such calendar
year; (3) a list of the Bonds held and the number of Units
outstanding on the last business day
of such calendar year; (4) the Redemption Price per Unit based upon
the last computation thereof made during such calendar year; and
(5) amounts actually distributed during such calendar year from the
Interest Account and from the Principal Account, separately stated,
expressed both as total dollar amounts and
as dollar amounts representing the pro rata share of each Unit
outstanding. The accounts of a Trust will be audited not less
frequently than annually by independent auditors designated by the
Sponsor, and the report of such auditors
shall be furnished by the Trustee to Unit holders upon request.
The Trustee shall keep available for inspection by Unit
holders at all reasonable times during the usual business hours,
books of record and account of its transactions as Trustee
including records of the names and
addresses of Unit holders, certificates issued or held, a current
list of Bonds in the Portfolio of a Trust and a copy of the Trust
Agreement.
Redemption of Units
Units may be tendered to the Trustee for redemption at its
unit investment trust office at 770 Broadway, New York, New York
10003, upon payment of any relevant tax. At the present time there
are no specific taxes
related to the redemption of the Units. No redemption fee will be
charged by the Sponsor or the Trustee. Units redeemed by the
Trustee will be canceled.
Certificates for Units to be redeemed must be properly
endorsed or accompanied by a written instrument of transfer. Unit
holders must sign exactly as their name appears on the face of the
certificate with the signature
guaranteed by an officer of a national bank or trust company or by
a member of either the New York, Midwest or Pacific Stock Exchange.
<PAGE>
In certain instances the Trustee may require additional documents
such as, but not limited
to, trust instruments, certificates of death, appointments as
executor or administrator or certificates of corporate authority.
Within seven calendar days following such tender, the Unit
holder will be entitled to receive in cash an amount for each Unit
tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth in the
"Summary of Essential Information" in Part A on the date of tender.
(See "Redemption of Units - Computation of Redemption Price per
Unit".) The "date of tender" is deemed to be the date on which
Units are received by the Trustee, except as regards Units received
after the close of trading on the New
York Stock Exchange, the date of tender is the next day on which
such Exchange is open for trading, and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day. For information relating to
the purchase by the Sponsor
of Units tendered to the Trustee for redemption at prices which may
be, in certain circumstances, in excess of the Redemption Price,
see "Redemption of Units - Purchase by the Sponsor of Units
Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn
from the Interest Account, or, if the balance therein is
insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell Bonds
in order to make funds available for redemption. Such sales, if
required, could result in a sale
of Bonds by the Trustee at a loss. To the extent Bonds are sold,
the size and diversity of a Trust will be reduced.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption
Price per Unit for any
period during which the New York Stock Exchange is closed, other
than weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and
Exchange Commission) an
emergency exists as a result of which disposal or evaluation of the
underlying Bonds is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission has by order
permitted.
Computation of Redemption Price per Unit - The Redemption
Price per Unit of a Trust is determined by the Trustee on the basis
of the bid prices of the Bonds in such Trust as of the Evaluation
Time on the date any such determination is made. The Redemption
Price per Unit of a Trust is each Unit's
pro rata share, determined by the Trustee, of: (1) the aggregate
value of the Bonds in such Trust on the bid side of the market
<PAGE>
(determined by the Evaluator
as set forth under "Public Offering - Method of Evaluation") (2)
cash on hand in such Trust and accrued and unpaid interest on the
Bonds as of the date of computation, less (a) amounts representing
taxes or governmental charges payable out of such Trust, (b) the
accrued expenses of such Trust, and (c) cash held for distribution
to Unit holders of such Trust of record as of a date prior
to the evaluation.
Purchase by the Sponsor of Units Tendered for Redemption
- - The Trust Agreement requires that the Trustee notify the Sponsor
of any tender of Units for redemption. So long as the Sponsor is
maintaining a bid in the
secondary market, the Sponsor, prior to the close of business on
the second succeeding business day, will purchase any Units
tendered to the Trustee for
redemption at the price so bid by making payment therefor to the
Unit holder in an amount not less than the Redemption Price not
later than the day on which
the Units would otherwise have been redeemed by the Trustee.
(See"Public Offering - Market for Units".) Units held by the
Sponsor may be tendered to
the Trustee for redemption as any other Units, provided that the
Sponsor shall not receive for Units purchased as set forth above a
higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsor will
be the Public Offering Price determined in the manner provided in
this Prospectus. (See "Public Offering - Offering Price".) Any
profit resulting from the resale
of such Units will belong to the Sponsor which likewise will bear
any loss resulting from a lower offering or redemption price
subsequent to their acquisition of such Units. (See "Public
Offering - Sponsor's Profits".)
Sponsor
Smith Barney Inc., 1345 Avenue of the Americas, New York,
New York 10105 ("Smith Barney"), was incorporated in Delaware in
1960 and traces its history through predecessor partnerships to
1873. Smith Barney, an investment banking and securities
broker-dealer firm, is a member of the New
York Stock Exchange, Inc. and other major securities and
commodities exchanges, the National Association of Securities
Dealers, Inc. and the Securities Industry Association. Smith
Barney is an indirect wholly-owned subsidiary of The Travelers Inc.
(formerly, Primerica Corporation).
Smith Barney sponsors numerous open-end investment
companies and closed-end investment companies. Smith Barney also
sponsors all Series of
Corporate Securities Trust, Government Securities Trust and Harris,
<PAGE>
Upham Tax-Exempt Fund and acts as co-sponsor of certain trusts of
The Equity Income
Fund, Concept series. The Sponsor has acted previously as managing
underwriter of other investment companies. In addition to
participating as a
member of various underwriting and selling groups or as agent of
other investment companies, the Sponsor also executes orders for
the purchase and sale of securities of investment companies and
sell securities to such companies in its capacity as broker or
dealer in securities.
Limitations on Liability
The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Trust
Agreement, but will be under no
liability to Unit holders for taking any action or refraining from
any action in good faith or for errors in judgment or responsible
in any way for depreciation or loss incurred by reason of the sale
of any Bonds, except in cases of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties. (See "Tax Exempt Securities Trust -
Portfolio" and "Sponsor -Responsibility.")
Responsibility
The Sponsor is empowered to direct the Trustee to dispose
of Bonds or deposited Units of other trusts when certain events
occur that adversely affect the value of the Bonds, including
default in payment of interest or
principal, default in payment of interest or principal on other
obligations of the same issuer, institution of legal proceedings,
default under other documents
adversely affecting debt service, decline in price or the
occurrence of other market or credit factors, or decline in
projected income pledged for debt service
on revenue bonds and advanced refunding that, in the opinion of the
Sponsor, may be detrimental to the interests of the Unit holders.
The Sponsor intends to provide portfolio services for each
Trust in order to determine whether the Trustee should be directed
to dispose of any such Bonds.
It is the responsibility of the Sponsor to instruct the
Trustee to reject any offer made by an issuer of any of the Bonds
to issue new obligations
in exchange and substitution for any Bonds pursuant to a refunding
or refinancing plan, except that the Sponsor may instruct the
Trustee to accept such an offer or to take any other action with
respect thereto as the Sponsor may
deem proper if the issuer is in default with respect to such Bonds
or in the judgment of the Sponsor the issuer will probably default
<PAGE>
in respect to such Bonds in the foreseeable future. Any
obligations so received in exchange or
substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds
originally deposited thereunder.
Within five days after the deposit of obligations in exchange or
substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unit
holder, identifying the Bonds eliminated and the Bonds substituted
therefor. Except as stated in this paragraph, the acquisition by
a Trust of any securities other than the Bonds initially deposited
in the Trust is prohibited.
Resignation
If the Sponsor resigns or otherwise fails or becomes
unable to perform its duties under the Trust Agreement, and no
express provision is made for action by the Trustee in such event,
the Trustee may appoint a successor sponsor or terminate the Trust
Agreement and liquidate the affected Trusts.
TRUSTEE
The Trustee is United States Trust Company of New York,
with its principal place of business at 114 West 47th Street, New
York, New York 10036. United States Trust Company of New York has,
since its establishment in 1853, engaged primarily in the
management of trust and agency accounts for
individuals and corporations. The Trustee is a member of the New
York Clearing House Association and is subject to supervision and
examination by the
Superintendent of Banks of the State of New York, the Federal
Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System. In connection with the storage and
handling of certain Bonds deposited
in the Trust, the Trustee may use the services of The Depository
Trust Company. These services may include safekeeping of the Bonds
and coupon-clipping, computer book-entry transfer and institutional
delivery services. The
Depository Trust Company is a limited purpose trust company
organized under the Banking Law of the State of New York, a member
of the Federal Reserve System and a clearing agency registered
under the Securities Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way
for depreciation or loss incurred by reason of the disposition of
any monies, securities or certificates or in respect of any
evaluation or for any action taken
in good faith reliance on prima facie properly executed documents
except in cases of willful misfeasance, bad faith, gross negligence
or reckless disregard for its obligations and duties. In addition,
the Trustee shall not be personally
liable for any taxes or other governmental charges imposed upon or
in respect of a Trust which the Trustee may be required to pay
under current or future law of the United States or any other
taxing authority having jurisdiction. (See"Tax
Exempt Securities Trust - Portfolio".) For information relating to
the responsibilities and indemnification of the Trustee under the
Trust Agreement, reference is made to the material set forth under
"Rights of Unit Holders," "Sponsor - Resignation" and "Other
Charges".
Resignation
By executing an instrument in writing and filing the same
with the Sponsor, the Trustee and any successor may resign. In
such an event, the Sponsor is obligated to appoint a successor
trustee as soon as possible. If the
Trustee becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a
successor as provided in the Trust Agreement. Such resignation or
removal shall become effective upon the acceptance of appointment
by the successor trustee. If no successor has accepted the
appointment within thirty days after
notice of resignation, the retiring trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The
resignation or removal of
a trustee becomes effective only when the successor trustee accepts
its appointment as such or when a court of competent jurisdiction
appoints a successor trustee.
EVALUATOR
The Evaluator is Kenny Information Systems, Inc., a
division of J.J. Kenny Co., Inc., with main offices located at 65
Broadway, New York, New York 10006.
Limitations on Liability
The Trustee, Sponsor and Unit holders may rely on any
evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. Determinations by the
Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information
available to it; provided, however, that the Evaluator shall be
under no liability to the Trustee, the Sponsor or Unit holders for
errors in judgment. But this provision shall not protect the
Evaluator in cases of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
<PAGE>
Responsibility
The Trust Agreement requires the Evaluator to evaluate the
Bonds of a Trust on the basis of their bid prices on the last
business day of June and
December in each year, on the day on which any Unit of such Trust
is tendered for redemption and on any other day such evaluation is
desired by the Trustee
or is requested by the Sponsor. For information relating to the
responsibility of the Evaluator to evaluate the Bonds on the basis
of their bid prices, see "Public Offering - Offering Price".
Resignation
The Evaluator may resign or may be removed by the joint
action of the Sponsor and the Trustee, and in such event, the
Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of
appointment by a successor evaluator. If upon resignation of the
Evaluator no successor has accepted appointment within thirty days
after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
Amendment
The Sponsor and the Trustee have the power to amend the
Trust Agreement without the consent of any of the Unit holders when
such an amendment is (1) to cure any ambiguity or to correct or
supplement any provision of the Trust Agreement which may be
defective or inconsistent with
any other provision contained therein, or (2) to make such other
provisions as shall not adversely affect the interests of the Unit
holders; provided, that the Trust Agreement is not amended to
increase the number of Units issuable thereunder or to permit the
deposit or acquisition of securities either in addition to or in
substitution for any of the Bonds initially deposited in a Trust,
except for the substitution of certain refunding securities for
such Bonds or to permit the Trustee to engage in business or
investment activities not specifically authorized in the Trust
Agreement as originally adopted. In the event of any amendment,
the Trustee is obligated to notify promptly all Unit holders of
the substance of such amendment.
Termination
The Trust Agreement provides that if the principal amount
of Bonds is less than 50% of the principal amount of the Bonds
<PAGE>
originally deposited in such Trust, the Trustee may in its
discretion and will, when directed by the
Sponsor, terminate such Trust. A Trust may be terminated at any
time by 100% of the Unit holders. See Part A for additional
optional and mandatory termination provisions. However, in no
event may a Trust continue beyond the
Mandatory Termination Date set forth under Part A, "Summary of
Essential Information". In the event of termination, written
notice thereof will be sent by
the Trustee to all Unit holders. Within a reasonable period after
termination, the Trustee will sell any Bonds remaining in the
affected Trust, and, after paying all expenses and charges incurred
by such Trust, will distribute to each
Unit holder, upon surrender for cancellation of his certificate for
Units, his pro rata share of the balances remaining in the Interest
and Principal Account of such Trust.
LEGAL OPINIONS
Certain legal matters in connection with the Trusts have
been passed upon by Messrs. Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York 10017, as special counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, 2 Wall Street, New
York, New York 10005, act as counsel for the Trustee.
AUDITORS
The Statements of Financial Condition and Portfolio of
Securities of a trust included in this Prospectus have been audited
by KPMG Peat Marwick LLP, independent auditors, as indicated in
their report with respect thereto, and
are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
BOND RATINGS
All ratings except those identified otherwise are by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("Standard & Poor's").
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 or
<PAGE>
sell a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's
from other sources it considers reliable. The ratings may be
changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information.
The ratings are based, in varying degrees, on the
following considerations:
I. Likelihood of default - capacity and willingness of
the
obligor as to the timely payment of interest and
repayment
of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation; and
III.Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization
or
other arrangement under the laws of bankruptcy and
other
laws affecting creditors' rights.
A summary of the meaning of the applicable rating symbols
as
published by Standard & Poor's follows:
AAA - This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal, and in the majority of instances
differ from AAA issues only in small degrees.
A - Bonds rated A have a strong capacity to pay interest
and repay principal, although they are somewhat more susceptible to
the adverse 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
weakened capacity to pay interest and repay principal for bonds in
this category than for bonds in the higher-rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is
regarded, on balance, as predominantly speculative with respect to
<PAGE>
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Plus(+) or Minus(-): To provide more detailed indications
of credit quality, the ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" following a rating
indicates the rating is provisional. A provisional rating assumes
the successful completion of the project being financed by the
issuance of the bonds being rated and
indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality
subsequent to completion, makes no
comment on the likelihood of, or the risk of default upon failure
of, such completion. Accordingly, the investor should exercise his
own judgment with respect to such likelihood and risk.
Conditional Ratings: Indicated by "Con" are given to bonds
for which the continuance of the security rating is contingent upon
Standard & Poor's receipt of an executed copy of the escrow
agreement or closing issuance of insurance by the respective
insurance company.
Moody's Investors Service
A brief description of the applicable Moody's Investors
Service's rating symbols and their meanings is as follows:
Aaa - Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge". Interest payments
are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they
comprise what are generally known as high grade bonds. Aa bonds
are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
<PAGE>
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly protected nor
poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over
any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger
with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: Those municipal bonds in the Aa, A, Baa, Ba and B
groups which Moody's believes possess the strongest investment
attributes are designated by the symbols Aa1, A1, Baa1, Ba1 and B1,
respectively. In addition, Moody's applies numerical modifiers, 1,
2, and 3 in each generic rating classification from Aa through B in
its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Although Industrial Revenue Bonds and Environmental Control Revenue
Bonds are tax-exempt issues, they are included in the corporate
<PAGE>
bond rating system.
Conditional ratings, indicated by "Con" are given to bonds
for which the security depends upon the completion of some act or
the fulfillment of some condition. These are bonds secured by (a)
earnings of projects under
construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which begin when facilities are completed,
or (d) payments to which
some other limiting condition attaches. A parenthetical rating
denotes probable credit stature upon completion of construction or
elimination of basis of condition.
Note: NR indicates, among other things, that no rating has
been requested, that there is insufficient information on which to
base a rating, or that Standard & Poor's Corporation and Moody's
Investors Service do not rate a particular type of obligation as a
matter of policy. Subsequent to the Date of
Deposit the credit characteristics of the Issuers of Securities may
have changed. Currently, certain of the Securities in the Portfolio
of a Trust may be unrated
and have credit characteristics comparable to securities rated
below the minimum requirements of such Trust for acquisition of a
Security. See Part A - "Portfolio
of Securities" herein to ascertain the ratings on the Securities,
if any, on the date of the Portfolios of Securities.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors
Service, Inc. rating symbols and their meanings is as follow:
AAA - Bonds which are considered to be investment grade
and of the highest credit quality. The obligor has an
exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA - Bonds which are considered to be investment grade and
of very high credit quality. The obligor's ability to pay interest
and repay principal is very strong although not quite as strong as
bonds rated AAA.
A - Bonds which are considered to be investment grade and
of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher
ratings.
BBB - Bonds which are considered to be investment grade
and of satisfactory credit quality. The obligor's ability to pay
<PAGE>
interest and repay principal is considered to be adequate. Adverse
changes in economic conditions
and circumstances, however, are more likely to have adverse impact
on these bonds, and therefore impair timely payment. The
likelihood that these bonds will fall below investment grade is
higher than for bonds with higher ratings.
Plus (+) Minus (-) - Plus and minus signs are used with a
rating symbol to indicate the relative position of a credit within
the rating category. Plus and minus signs, however, are not used in
the `AAA', `DDD', `DD' or `D' categories.
Conditional - A conditional rating is promised on the
successful completion of a project of the occurrence of a specific
event.
Duff & Phelps Credit Rating Co.
A brief description of the applicable Duff & Phelps Credit Rating
Co. rating symbols and their meanings is as follows:
AAA-Highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA-High credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of
economic conditions.
A-Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.
BBB-Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk
during economic cycles.
NR- Not rated (credit characteristics comparable to A or
better on the Date of Deposit).
<PAGE>
<TABLE>
Prospectus
This Prospectus contains information concerning the Trust and
the Sponsors, but does not contain all the information set forth
in the registration statements and exhibits relating thereto, which
the Trust has filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is
hereby made.
<S>
<C>
Index:
Page
Summary of Essential Information . . . . . . . . . . . . . . . . . . . . . A-
2
Series 273
Financial and Statistical Information. . . . . . . . . . . . . . . . . . . A-3
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . A-3
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Statements of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . A-5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . A-
5
13,701 Units
Portfolio of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Tax Exempt Securities Trust. . . . . . . . . . . . . . . . . . . . . . . . 1
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROSPECTUS
The Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dated February 20, 1995
Estimated Current Return and Estimated Long-Term Return. . . . . . . . . 13
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Expenses and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Public Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Sponsors
Method of Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Distribution of Units. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Market for Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SMITH BARNEY INC.
Exchange Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reinvestment Program . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1345 Avenue of the Americas
Sponsor's Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
New York, New York 10105
Rights of Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(800) 298-UNIT
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Distribution of Interest and Principal . . . . . . . . . . . . . . . . . 20
Reports and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Redemption of Units. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Sponsor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 24
Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 25
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Evaluator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 25
Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Amendment and Termination of the Trust Agreement . . . . . . . . . . . . . 26
Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Standard & Poor's Corporation. . . . . . . . . . . . . . . . . . . . . . 27
Moody's Investors Service. . . . . . . . . . . . . . . . . . . . . . . . 29
Fitch Investors Service, Inc . . . . . . . . . . . . . . . . . . . . . . 30
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, securities in any state to any person to whom it is
not lawful to make such offer in such state.
</TABLE>
<PAGE> PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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.
The Prospectus consisting of pages A-1 - A- , and 1- , back cover.
Signatures.
Written consents of the following persons:
KPMG Peat Marwick
Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc.
(included in Exhibit 4.6A)
The following exhibits:
*4.6A - Consent of Kenny S&P Evaluation Services, a division
of Kenny Information Systems, Inc. as Evaluator.
* Filed herewith.
II-1
<PAGE>
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 Broadway
New York, New York, 10006-2511
Telephone 212/770-4000
Smith Barney Incorporated
388 Greenwich Street
New York, NY 10013
RE:Tax Exempt Securities Trust
Series 273
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-19518 for the above-captioned
trust. We hereby acknowledge that Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust portfolio
are the ratings currently indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter
with the Securities and Exchange Commission.
Sincerely,
John R. Fitzgerald
Vice President
tru:l-31
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to
the use of their name in the Prospectus included in this Post-
Effective Amendment to the Registration Statement ("Post-
Effective Amendment") is contained in their opinion filed as
Exhibit 3.1 to the Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of
our report dated February 3, 1995 included herein and to the
reference to our firm under the heading "AUDITORS" in the
prospectus.
KPMG PEAT MARWICK
New York, New York
February 15, 1995
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, Tax Exempt Securities Trust, Series 273,
certifies that it meets all the requirements for
effectiveness of this Post-Effective Amendment pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of New York,
and State of New York on the 15th day of February, 1995.
Signatures appear on pages II-3.
A majority of the members of the Board of Directors of Smith
Barney Inc. have signed this Post-Effective Amendment
pursuant to Powers of Attorney authorizing the person signing
this Post-Effective Amendment to do so on behalf of such members.
These Powers of Attorney were filed with the Securities
and Exchange Commission under the Securities Act of 1933 with the
Registration Statement of Tax Exempt Securities Trust,
Appreciation Series 7, Registration No. 2-78499 and with the
Registration Statement of Tax Exempt Securities Trust, Series
110, Intermediate Term Series 15 and Short-Intermediate Term
Series 13, Registration Nos. 2-97179, 2-95591 and 2-96184,
respectively, with the Registration Statement of Tax Exempt
Securities Trust, Series 284, Amendment No. 2, Registration No.
33-22777, with the Registration Statement of Tax Exempt
Securities Trust, Series 295, Amendment No. 1, Registration No.
33-26376, and with the Registration Statement of Tax Exempt
Securities Trust, Series 335, Amendment No. 1, Registration No.
33-37952.
<PAGE>
TAX EXEMPT SECURITIES TRUST
BY SMITH BARNEY INC.
By
(George S. Michinard, Jr.)
By the following persons,* who constitute a majority of
the directors of Smith Barney Inc. :
Steven D. Black
James S. Boshart III
Robert A. Case
James Dimon
Robert Druskin
Robert F. Greenhill
Jeffrey B. Lane
Robert H. Lessin
John F. Lyness
Jack L. Rivkin
By
(George S. Michinard, Jr.
Attorney-in-Fact)
* Pursuant to Powers of Attorney previously filed.
II-3
