Rule 497(b)
Registration No. 33-20190
Note: Part A of this Prospectus May Not Be
Distributed Unless Accompanied by Part B.
MUNICIPAL SECURITIES TRUST
64TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)
- ------------------------------------------------------------------------------
The Trust is a unit investment trust designated 64th Discount
Series ("Municipal Discount Trust") with an underlying portfolio of long-term
tax-exempt bonds and was formed to preserve capital and to provide interest
income (including, where applicable, earned original issue discount) which, in
the opinions of bond counsel to the respective issuers, is, with certain
exceptions, currently exempt from regular federal income tax under existing
law but may be subject to state and local taxes. (See "Tax Status" and "The
Trust--Portfolio" in Part B of this Prospectus.) The Sponsor is Bear, Stearns
& Co. Inc. The value of the Units of the Trust will fluctuate with the value
of the bonds. Minimum purchase: 1 Unit.
- ------------------------------------------------------------------------------
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 1994 (the "Evaluation
Date"), a summary of certain specific information regarding the Trust and
audited financial statements of the Trust, including the related portfolio, as
of the Evaluation Date. Part B of this Prospectus contains a general summary
of the Trust.
Investors should retain both parts of this
Prospectus for future reference.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 28, 1995
111461.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to
preserve capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed,
diversified portfolio of long-term bonds issued by or on behalf of states,
municipalities and public authorities (the "Bonds"). Although the Supreme
Court has determined that Congress has the authority to subject interest on
bonds such as the Bonds in the Trust to regular federal income taxation,
existing law excludes such interest from regular federal income tax. Such
interest income may, however, be subject to the federal corporate alternative
minimum tax and to state and local taxes. (See "Description of Portfolio" in
this Part A for a description of those Bonds which pay interest income subject
to the federal individual alternative minimum tax. See also "Tax Status" in
Part B of this Prospectus.) The Bonds were acquired at prices which resulted
in the portfolio as a whole being purchased at a deep discount from par value.
The portfolio may also include bonds issued at a substantial original issue
discount some of which may be "Zero Coupon Bonds", which are original issue
discount bonds that provide for payment at maturity at par value, but do not
provide for the payment of current interest. Some of the Bonds in the
portfolio may have been purchased at an aggregate premium over par. Some of
the Bonds in the Trust have been issued with optional refunding or refinancing
provisions ("Refunded Bonds") whereby the issuer of the Bond has the right to
call such Bond prior to its stated maturity date (and other than pursuant to
sinking fund provisions) and to issue new bonds ("Refunding Bonds") in order
to finance the redemption. Issuers typically utilize refunding calls in order
to take advantage of lower interest rates in the marketplace. Some of these
Refunded Bonds may be called for redemption pursuant to pre-refunding
provisions ("Pre-Refunded Bonds") whereby the proceeds from the issue of the
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the
call price for such bonds but will cease receiving interest income with
respect to them. For a list of those Bonds which are Pre-Refunded Bonds as of
the Evaluation Date, if any, see "Notes to Financial Statements" in this
Part A. All of the Bonds in the Trust were rated "A" or better by Standard &
Poor's Corporation or Moody's Investors Service, Inc. at the time originally
deposited in the Trust. For a discussion of the significance of such ratings
see "Description of Bond Ratings" in Part B of this Prospectus and for a list
of ratings on the Evaluation Date see the "Portfolio". The payment of
interest and preservation of capital are, of course, dependent upon the
continuing ability of the issuers of the Bonds to meet their obligations.
There can be no assurance that the Trust's objectives will be achieved.
Investment in the Trust should be made with an understanding of the risks
which an investment in long-term fixed rate obligations may entail, including
the risk that the value of the underlying portfolio will decline with
increases in interest rates, and that the value of Zero Coupon Bonds is
subject to greater fluctuations than coupon bonds in response to changes in
interest rates. Each Unit in the Trust represents a 1/9792nd undivided
interest in the principal and net income of the Trust. The principal amount
of Bonds deposited in the Trust per Unit is reflected in the Summary of
Essential Information. (See "The Trust--Organization" in Part B of this
Prospectus.) The Units being offered hereby are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 5.5% of the
Public Offering Price, which is the same as 5.820% of the net amount invested
in Bonds per Unit. In addition, accrued interest to expected date of
A-2
111461.1
<PAGE>
settlement including earned original issue discount is added to the Public
Offering Price. If Units had been purchased on the Evaluation Date, the
Public Offering Price per Unit would have been $476.38 plus accrued interest
of $8.63 under the monthly distribution plan, $11.49 under the semi-annual
distribution plan and $11.46 under the annual distribution plan, for a total
of $485.01, $487.87 and $487.84, respectively. The Public Offering Price per
Unit can vary on a daily basis in accordance with fluctuations in the
aggregate bid price of the Bonds. (See the "Summary of Essential Information"
and "Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or
to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured
in terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing
the average yield for the portfolio of the Trust in order to reflect estimated
fees and expenses of the Trust and the maximum sales charge paid by investors.
The resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated
Long Term Return to Certificateholders under the monthly, semi-annual and
annual distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast
to the Estimated Long Term Return, the Estimated Current Return does not take
into account the amortization of premium or accretion of discount, if any, on
the Bonds in the portfolio of the Trust. Moreover, because interest rates on
Bonds purchased at a premium are generally higher than current interest rates
on newly issued bonds of a similar type with comparable rating, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to the Trust and with the redemption, maturity, sale or
other disposition of the Bonds in the Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future. (For the Estimated Current Return to
Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information". See "Estimated Long Term
Return and Estimated Current Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses,
will be made by the Trust either monthly, semi-annually or annually depending
A-3
111461.1
<PAGE>
upon the plan of distribution applicable to the Unit purchased. A purchaser
of a Unit in the secondary market will initially receive distributions in
accordance with the plan selected by the prior owner of such Unit and may
thereafter change the plan as provided under "Interest and Principal
Distributions" in Part B of the Prospectus. Distributions of principal, if
any, will be made semi-annually on June 15 and December 15 of each year. (See
"Rights of Certificateholders--Interest and Principal Distributions" in Part B
of this Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information.")
MARKET FOR UNITS. The Sponsor, although not obligated to do so,
presently maintains and intends to continue to maintain a market for the Units
at prices based upon the aggregate bid price of the Bonds in the portfolio of
the Trust. The secondary market repurchase price is based on the aggregate
bid price of the Bonds in the Trust portfolio, and the reoffer price is based
on the aggregate bid price of the Bonds plus a sales charge of 5.5% (5.820% of
the net amount invested) plus net accrued interest. If such a market is not
maintained, a Certificateholder will be able to redeem his Units with the
Trustee at a price also based upon the aggregate bid price of the Bonds. (See
"Sponsor Repurchase" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have their interest
distributions and principal distributions, if any, reinvested in available
series of "Municipal Securities Trust." (See "Total Reinvestment Plan" and
for residents of Texas, see "Total Reinvestment Plan for Texas Residents" in
Part B of this Prospectus.) The Plan is not designed to be a complete
investment program.
A-4
111461.1
<PAGE>
MUNICIPAL SECURITIES TRUST
64TH DISCOUNT SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994
Date of Deposit: March 24, 1988 Minimum Principal Distribution:
Principal Amount of Bonds .. $6,260,000 $1.00 per Unit.
Number of Units ............ 9,792 Weighted Average Life to Maturity:
Fractional Undivided Inter- 9.7 Years.
est in Trust per Unit .... 1/9792 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ........... $639.30 value of Trust is less than
Secondary Market Public $4,000,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust.........$4,408,152+++ The earlier of December 31,
Divided by 9,792 Units ... $450.18 2037 or the disposition of
Plus Sales Charge of 5.5% the last Bond in the Trust.
of Public Offering Price $26.20 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ............... $476.38+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $.96 per $1,000; semi-
Repurchase Price annual plan $.50 per $1,000;
per Unit ................. $450.18+ and annual plan is $.32 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $15
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ........... $26.20++++ Bonds in excess of 50 issues
Difference between Public (treating separate
Offering Price per Unit maturities as separate
and Principal Amount per issues).
Unit Premium/(Discount) .. $(162.92) Sponsor: Bear, Stearns & Co. Inc.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in
Part B of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $37.70 $37.70 $37.70
Less estimated annual fees and
expenses ............................ 1.50 1.08 .95
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $36.20 $36.62 $36.75
Estimated interest distribution# ...... 3.01 18.31 36.75
Estimated daily interest accrual# ..... .1005 .1017 .1020
Estimated current return#++ ........... 7.60% 7.69% 7.71%
Estimated long term return++ .......... 4.96% 5.06% 5.09%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-5
111461.1
<PAGE>
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
*** The Trustee maintains its corporate trust office at 770 Broadway, New
York, New York 10003 (tel. no.: 1-800-428-8890). For information
regarding redemption by the Trustee, see "Trustee Redemption" in Part B
of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately five
business days after purchase) of $8.63 monthly, $11.49 semi-annually and
$11.46 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the semi-
annual and annual options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-6
111461.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1994
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 11 issues representing
obligations of issuers located in 7 states. The Sponsor has not participated
as a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the
Bonds were acquired. None of the Bonds are obligations of state and local
housing authorities; approximately 12% are hospital revenue bonds;
approximately 2.4% are issued in connection with the financing of nuclear
generating facilities; and none are "mortgage subsidy" bonds. All of the
Bonds in the Trust are subject to redemption prior to their stated maturity
dates pursuant to sinking fund or optional call provisions. The Bonds may
also be subject to other calls, which may be permitted or required by events
which cannot be predicted (such as destruction, condemnation, termination of a
contract, or receipt of excess or unanticipated revenues). None of the Bonds
are general obligation bonds. Eleven issues representing $6,260,000 of the
principal amount of the Bonds are payable from the income of a specific
project or authority and are not supported by the issuer's power to levy
taxes. The portfolio is divided for purpose of issue as follows: Airport 2,
Coal Power 1, Education 1, Hospital 2, Nuclear Power 1, Parking 1, Solid Waste
1, Toll 1 and Water Development 1. For an explanation of the significance of
these factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1994, $2,400,000 (approximately 38.3% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $2,400,000 (approximately 38.3% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon
bonds in response to changes in interest rates. Approximately 8% of the
aggregate principal amount of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 53.7% were
purchased at a premium and none were purchased at par. For an explanation of
the significance of these factors see "Discount and Zero Coupon Bonds" in
Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
the entire principal amount of the Bond in portfolio no. 1 has been
called for redemption pursuant to pre-refunding provisions and is no
longer contained in the Trust. 8 Units have been redeemed from the
Trust.
A-7
111461.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1992 10,000 $623.64 $48.00 $48.55 $48.70 -0-
December 31, 1993 9,992 563.12 46.80 47.31 47.50 $51.50
December 31, 1994 9,792 462.13 38.36 38.85 38.99 70.24
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-8
111461.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, 64th Discount Series:
We have audited the accompanying statement of net assets, including the
portfolio, of Municipal Securities Trust, 64th Discount Series as of December
31, 1994, and the related statements of operations, and changes in net assets
for each of the years in the three year period then ended. These financial
statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of December 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 Municipal Securities Trust,
64th Discount Series as of December 31, 1994, and the results of its
operations and the changes in its net assets for each of the years in the
three year period then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1995
<PAGE>
Statement of Net Assets
December 31, 1994
Investments in marketable securities,
at market value (cost $4,538,405) $ 4,423,852
Excess of other assets over total liabilities 101,327
-----------
Net assets ( 9,792 units of fractional undivided
interest outstanding, $462.13 per unit) $ 4,525,179
===========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
----------- -- ---------- -- -----------
1994 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Investment income - interest $ 415,195 503,561 519,285
----------- ---------- -----------
Expenses:
Trustee's fees 7,802 9,050 8,727
Evaluator's fees 4,473 4,107 4,111
Sponsor's advisory fee 1,719 1,969 1,969
----------- ---------- -----------
Total expenses 13,994 15,126 14,807
----------- ---------- -----------
Investment income, net 401,201 488,435 504,478
----------- ---------- -----------
Realized and unrealized
loss on investments:
Realized loss on bonds
sold or called (105,424) (36,305) -
Unrealized depreciation
for the year (219,366) (72,391) (26,508)
----------- ---------- -----------
Net loss on investments (324,790) (108,696) (26,508)
----------- ---------- -----------
Net increase in net
assets resulting
from operations $ 76,411 379,739 477,970
=========== ========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ -- ----------- -- ------------
1994 1993 1992
------------ ----------- ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 401,201 488,435 504,478
Realized loss on
bonds sold or called (105,424) (36,305) -
Unrealized depreciation
for the year (219,366) (72,391) (26,508)
------------ ----------- ------------
Net increase in net
assets resulting
from operations 76,411 379,739 477,970
------------ ----------- ------------
Distributions to Certificateholders:
Investment income 382,805 469,270 482,076
Principal 697,387 515,000 -
Redemptions:
Interest 2,350 83 -
Principal 95,343 4,408 -
------------ ----------- ------------
Total distributions
and redemptions 1,177,885 988,761 482,076
------------ ----------- ------------
Total decrease (1,101,474) (609,022) (4,106)
Net assets at beginning of the year 5,626,653 6,235,675 6,239,781
------------ ----------- ------------
Net assets at end of the year (including
undistributed net investment
income of $238,950, $230,722 and
$211,640, respectively) $ 4,525,179 5,626,653 6,235,675
============ =========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, 64TH DISCOUNT SERIES
Notes to Financial Statements
December 31, 1994, 1993, and 1992
(1) Organization
Municipal Securities Trust, 64th Discount Series (Trust) was organized on
March 24, 1988 by Bear, Stearns & Co. Inc. (Sponsor) under the laws of the
State of New York by a Trust Indenture and Agreement, and is registered under
the Investment Company Act of 1940.
(2) Summary of Significant Accounting Policies
United States Trust Company of New York (Trustee) has custody of and
responsibility for the accounting records and financial statements of the
Trust and is responsible for establishing and maintaining a system of
internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method over
the respective lives of the bonds. The accretion of such discount is included
in interest income; however, it is not distributed until realized in cash
upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by either Kenny
S&P Evaluation Services or Moody's Investors Service, Inc. (Evaluator) as
discussed in Footnotes to Portfolio. The market value of the investments is
based upon the bid prices for the bonds at the end of the year, except that
the market value on the date of deposit represents the cost to the Trust
based on the offering prices for investments at that date. The difference
between cost (including accumulated accretion of original issue discount on
zero-coupon bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
The Trust Indenture and Agreement further requires that principal received
from the disposition of bonds, other than those bonds sold in connection with
the redemption of units, be distributed to Certificateholders.
See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended December 31,
1994, 1993, and 1992.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 200 and 8 units were redeemed by the Trust during the years ended
December 31, 1994 and 1993. No units were redeemed by the Trust during the
year ended December 31, 1992.
(5) Net Assets
At December 31, 1994, the net assets of the Trust represented the interests
of Certificateholders as follows:
Original cost to Certificateholders $ 6,232,817
Less initial gross underwriting commission (342,800)
5,890,017
Cost of securities sold or called (1,473,535)
Net unrealized depreciation (114,553)
Undistributed net investment income 238,950
Distributions in excess of proceeds
from bonds sold or called (15,700)
Total $ 4,525,179
The original cost to Certificateholders, less the initial gross underwriting
commission, represents the aggregate initial public offering price net of the
applicable sales charge on 10,000 units of fractional undivided interest of
the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $121,923.
<PAGE>
<TABLE>
MUNICIPAL SECURITIES TRUST, 64TH DISCOUNT SERIES
Portfolio
December 31, 1994
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- ----- --------- --------------------- ----- -------------- ----------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 Chicago Ill. O'Hare A+ 10.375% 1/01/00 @ 100 S.F. $ 515,000
Int'l. Arpt. Gen. 1/01/2009 1/01/95 @ 103 Ref.
Rev. Bonds, 1984
Series A (5)
2 500,000 La. Pub. Facs. Auth. A * 9.750 10/01/06 @ 100 S.F. 528,785
College & University 10/01/2010 10/01/95 @ 102 Ref.
Equip. & Cap. Facs.
Rev. Bonds, (Loyola
Univ. Prjt.) 1985
Series
3 500,000 Tulsa Ok. Muni. Arpt. BAA2* 9.500 No Sinking Fund 526,600
Indus. Dev. Rev. 6/01/2020 12/01/95 @ 102 Ref.
Bonds, Amercian Air
Inc Amr Corp 1985
Series A
4 200,000 Tulsa Ok. Prkg. Auth. A 9.750 10/01/99 @ 100 S.F. 210,746
Rev. Rfdng. Bonds, 10/01/2003 10/01/95 @ 102 Ref.
1985 Series A (5)
5 500,000 Harris Cnty. Tx. A* 9.625 6/01/05 @ 100 S.F. 519,990
Hlth. Facs. Dev. 6/01/2015 6/01/95 @ 102 Ref.
Corp. Hosp. Rev.
Rfndg. Bonds, (Mem.
Hosp. System Project)
1985 Series
6 150,000 Matagorda Cnty. Tx. A 9.750 No Sinking Fund 157,590
Navgtnl. Dist. No. 1 7/01/2015 7/01/95 @ 103 Ref.
(Central Power & Lt.
Co. Prjt.) 1985
Series
7 500,000 Harris Cnty. Tx. Toll AAA 8.125 8/15/08 @ 100 S.F. 549,645
Rd. Multi-mode Rev. 8/15/2017 2/15/98 @ 103 Ref.
Bonds, Senior Lien
1985 Series C (5)
8 260,000 Colo. Rvr. Tx. Muni. A 9.400 No Sinking Fund 305,568
Water Dstrct. Rev. 1/01/2013 1/01/01 @ 100 Ref.
Bonds, 1985 Series A
(5)
9 500,000 Southeastern Publ. AAA 10.500 7/01/03 @ 100 S.F. 524,520
Serv. Auth. of Va. 7/01/2015 7/01/95 @ 102 Ref.
Rev. Bonds, Regional
Solid Waste Sys. 1984
Series A (5)
10 250,000 W.V. Hosp. Finc. AAA 8.500 7/01/03 @ 100 S.F. 268,200
Auth. State of W.V. 7/01/2007 7/01/97 @ 100 Ref.
Hosp. Rev. Bonds,
(Monongalia Gen'l.
Hosp.) 1987 Series
(BIG) (5)
11 2,400,000 Intermountain Utah AAA 0.000 1/01/13 @ 50.753 S.F. 317,208
Power Agency Power 7/01/2020 7/01/02 @ 20.620 Ref.
Supply Revenue Rfndg.
Bonds, 1987 Series C
(5)
--------- ----------
$ 6,260,000 $ 4,423,852
========= ==========
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, 64TH DISCOUNT SERIES
Footnotes to Portfolio
December 31, 1994
(1) All ratings are by Kenny S&P Evaluation Services, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc. A
brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of this
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At December 31, 1994, the net unrealized depreciation of all the bonds
was comprised of the following:
Gross unrealized appreciation $ 130,635
Gross unrealized depreciation (245,188)
Net unrealized depreciation $ (114,553)
(4) The annual interest income, based upon bonds held at December 31, 1994,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $369,190.
(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.
(6) Bonds sold or called after December 31, 1994 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus for Future Reference.
MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: April 28, 1995
THE TRUST
Organization
"Municipal Securities Trust" (the "Trust") consists of the "unit
investment trusts" designated as set forth in Part A.* The Trust was created
under the laws of the State of New York pursuant to the Trust Indenture and
Agreements** (collectively, the "Trust Agreement"), dated the Date of
Deposit, among Bear, Stearns & Co. Inc., as Sponsor, or depending on the
particular Trust, among Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated, as Co-Sponsors (the Sponsors or Co-Sponsors, if applicable, are
referred to herein as the "Sponsor"), Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc., as Evaluator, and, depending on the
particular Trust, either The Bank of New York or United States Trust Company
of New York, as Trustee. The name of the Sponsor and the Trustee for a
particular Trust is contained in the "Summary of Essential Information" in
Part A.
On the Date of Deposit the Sponsor deposited with the Trustee
long-term bonds and/or delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds") and cash or an irrevocable letter
of credit issued by a major commercial bank in the amount required for such
purchases. Thereafter, the Trustee, in exchange for the Bonds so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all
Units of the Trust.
The Trust consists of the bonds described under "The Trust" in
Part A of this Prospectus, the interest (including, where applicable earned
original discount) on which, in the opinions of bond counsel to the respective
issuers given at the time of original delivery of the Bonds, is exempt from
regular federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the
Trust in the per Unit ratio set forth under "Summary of Essential Information"
in Part A. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest or pro rata share in the Trust represented by
- --------
* This Part B relates to the outstanding series of Municipal Securities
Trust or Municipal Securities Trust Discount Series as reflected in
Part A attached hereto.
** References in this Prospectus to the Trust Agreements are qualified in
their entirety by the respective Trust Indentures and Agreements which
are incorporated herein by reference.
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<PAGE>
each unredeemed Unit will increase, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Certificateholders,
which may include the Sponsor or until the termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit investment
trusts formed by the Sponsor, offers investors the opportunity to participate
in a portfolio of long-term tax-exempt bonds with a greater diversification
than they might be able to acquire themselves. The objectives of the Trust
are to preserve capital and to provide interest income (including, where
applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers given at the time of original delivery of
the Bonds, is, with certain exceptions, exempt from regular federal income tax
under existing law. Such interest income may, however, be subject to the
federal corporate alternative minimum tax and to state and local taxes. An
investor will realize taxable income upon maturity or early redemption of the
market discount bonds in a Trust portfolio and will realize, where applicable,
tax-exempt income to the extent of the earned portion of interest, including
original issue discount earned on the bonds in a Trust portfolio. Investors
should be aware that there is no assurance the Trust's objectives will be
achieved as these objectives are dependent on the continuing ability of the
issuers of the Bonds to meet their interest and principal payment
requirements, on the continuing satisfaction of the Bonds of the conditions
required for the exemption of interest thereon from regular federal income
tax, and on the market value of the Bonds, which can be affected by
fluctuations in interest rates and other factors.
Since disposition of Units prior to final liquidation of the Trust
may result in an investor receiving less than the amount paid for such Units
(see "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price"), the purchase of a Unit should be looked upon as a long-
term investment. Neither the Trust nor the Total Reinvestment Plan is
designed to be a complete investment program.
Portfolio
All of the Bonds in the Trust were rated "A" or better by Standard
& Poor's Corporation or Moody's Investors Service, Inc. at the time originally
deposited in the Trust. For a list of the ratings of each Bond on the
Evaluation Date, see "Portfolio" in Part A.
For information regarding (i) the number of issues in the Trust,
(ii) the range of fixed maturities of the Bonds, (iii) the number of issues
payable from the income of a specific project or authority and (iv) the number
of issues constituting general obligations of a government entity, see "The
Trust" and "Portfolio" in Part A.
When selecting Bonds for the Trust, the following factors, among
others, were considered by the Sponsor on the Date of Deposit: (a) the
quality of the Bonds and whether such Bonds were rated "A" or better by either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (b) the
yield and price of the Bonds relative to other tax-exempt securities of
comparable quality and maturity, (c) income to the Certificateholders of the
Trust and (d) the diversification of the Trust portfolio, as to purpose of
issue and location of issuer, taking into account the availability in the
market of issues which meet the Trust's quality, rating, yield and price
criteria. Subsequent to the Evaluation Date, a Bond may cease to be rated or
its rating may be reduced below that specified above. Neither event requires
an elimination of such Bond from a Trust but may be considered in the
Sponsor's determination to direct the Trustee to dispose of the Bond. See
-2-
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<PAGE>
"Portfolio Supervision". For an interpretation of the bond ratings see
"Description of Bond Ratings".
Housing Bonds. Some of the aggregate principal amount of the
Bonds may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to rental housing projects
for low to moderate income families. Since such obligations are usually not
general obligations of a particular state or municipality and are generally
payable primarily or solely from rents and other fees, adverse economic
developments including failure or inability to increase rentals, fluctuations
of interest rates and increasing construction and operating costs may reduce
revenues available to pay existing obligations. See "Description of
Portfolio" in Part A for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount of
the Bonds may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary
considerably from such projections. A hospital's gross receipts and net
income will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to
provide them, physicians' confidence in hospital management capability,
economic developments in the service area, competition, actions by insurers
and governmental agencies and the increased cost and possible unavailability
of malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
The health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could
result in (i) an early redemption of bonds, (ii) alteration of the facilities
financed by the Bonds or which secure the Bonds, (iii) a change in the tax
exempt status of the Bonds or (iv) an inability to produce revenues sufficient
to make timely payment of debt service on the Bonds.
Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in
the areas noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse change in these areas may affect
the ability of such issuers to make payment of principal and interest on such
bonds. See "Description of Portfolio" in Part A for the amount of hospital
revenue bonds contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been issued
in connection with the financing of nuclear generating facilities. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the
development and operation of nuclear generating facilities. The Sponsor is
unable to predict whether any such actions or whether any such proposals or
litigation, if enacted or instituted, will have an adverse impact on the
revenues available to pay the debt service on the Bonds in the portfolio
issued to finance such nuclear projects. See "Description of Portfolio" in
Part A for the amount of bonds issued to finance nuclear generating facilities
contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
-3-
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<PAGE>
provided as a general rule that interest on "mortgage subsidy bonds" will not
be exempt from Federal income tax. An exception is provided for certain
"qualified mortgage bonds." Qualified mortgage bonds are bonds that are used
to finance owner-occupied residences and that meet numerous statutory
requirements. These requirements include certain residency, ownership,
purchase price and target area requirements, ceiling amounts for state and
local issuers, arbitrage restrictions and (for bonds issued after December 31,
1984) certain information reporting, certification, public hearing and policy
statement requirements. In the opinions of bond counsel to the issuing
governmental authorities, interest on all the Bonds in a Trust that might be
deemed "mortgage subsidy bonds" will be exempt from Federal income tax when
issued. See "Description of Portfolio" in Part A for the amount of mortgage
subsidy Bonds contained therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting certification, and public hearing requirements. There
can be no assurance that additional federal legislation will not be introduced
or that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bonds proceeds are not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds").
See "Description of Portfolio" in Part A for the amount of mortgage revenue
bonds contained therein.
Private Activity Bonds. The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial
Revenue Bonds ("IRBs") if issued prior to 1987) which would be primarily of
two types: (1) Bonds for a publicly owned facility which a private entity may
have a right to use or manage to some degree, such as an airport, seaport
facility or water system and (2) facilities deemed owned or beneficially owned
by a private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first
type, receipts or revenues of the Issuer are derived from the project or the
operator or from the unexpended proceeds of the bonds. Such revenues include
user fees, service charges, rental and lease payments, and mortgage and other
loan payments.
The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of
the project or corporate guarantor.
The private activity bonds in the Trust have generally been issued
under bond resolutions, agreements or trust indentures pursuant to which the
revenues and receipts payable under the issuer's arrangements with the users
or the corporate operator of a particular project have been assigned and
pledged to the holders of the private activity bonds. In certain cases a
-4-
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<PAGE>
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition,
private activity bonds are frequently directly guaranteed by the corporate
operator of the project or by another affiliated company. See "Description of
Portfolio" in Part A for the amount of private activity bonds contained
therein.
Litigation. Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In
addition, legislation to effect changes in public school financing has been
introduced in a number of states. The Sponsor is unable to predict the
outcome of the pending litigation and legislation in this area and what
effect, if any, resulting changes in the sources of funds, including proceeds
from property taxes applied to the support of public schools, may have on the
school bonds in a Trust.
Legal Proceedings Involving the Trusts. The Sponsor has not been
notified or made aware of any litigation pending with respect to any Bonds
which might reasonably be expected to have a material adverse effect on a
Trust. Such litigation, as, for example, suits challenging the issuance of
pollution control revenue bonds under recently-enacted environmental
protection statutes, may affect the validity of such Bonds or the tax-free
nature of the interest thereon. At any time after the date of this Prospectus
litigation may be instituted on a variety of grounds with respect to any Bond
in a Trust. The Sponsor is unable to predict whether any such litigation may
be instituted or, if instituted, whether it might have a material adverse
effect on a Trust.
Other Factors. The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 years after
the original issuance dates of such bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period.
In recent periods there have been increased redemptions of bonds, particularly
housing bonds, pursuant to such redemption provisions. In addition, the Bonds
in the Trusts are also subject to mandatory redemption in whole or in part at
par at any time that voluntary or involuntary prepayments of principal on the
underlying collateral are made to the trustee for such bonds or that the
collateral is sold by the bond issuer. Prepayments of principal tend to be
greater in periods of declining interest rates; it is possible that such
prepayments could be sufficient to cause a bond to be redeemed substantially
prior to its stated maturity date, earliest call date or sinking fund
redemption date.
The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as
destruction, condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the Sponsors are
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore,
what effect, if any, the applicable federal bankruptcy law provisions will
have on the Trusts.
The Trust may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
-5-
1173.1
<PAGE>
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question. See "Description
of Portfolio" and "The Trust" in Part A of this Prospectus for the amount of
moral obligations bonds contained in the Trust.
Certain of the Bonds in the Trust are subject to redemption prior
to their stated maturity dates pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund appropriated specifically toward the retirement
of a debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by
which a bond is redeemed at or before maturity from the proceeds of a new
issue of bonds. In general, call provisions are more likely to be exercised
when the offering side evaluation of a bond is at a premium over par than when
it is at a discount from par. A listing of the sinking fund and call
provisions, if any, with respect to each of the Bonds is contained under
"Portfolio" in Part A of this Prospectus. Certificateholders will realize a
gain or loss on the early redemption of such Bonds, depending upon whether the
price of such Bonds is at a discount from or at a premium over par at the time
Certificateholders purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any of the Bonds. Because certain of the
Bonds from time to time may be redeemed or will mature in accordance with
their terms or may be sold under certain circumstances, no assurance can be
given that a Trust will retain its present size and composition for any length
of time. The proceeds from the sale of a Bond or the exercise of any
redemption or call provision will be distributed to Certificateholders on the
next distribution date, except to the extent such proceeds are applied to meet
redemptions of Units. See "Trustee Redemption".
Discount and Zero Coupon Bonds
Some of the Bonds in the Municipal Discount Trust and Municipal
Trust may contain original issue discount bonds (see "Description of
Portfolio" in the Part A). The original issue discount, which is the
difference between the initial purchase price of the Bonds and the face value,
is deemed to accrue on a daily basis and the accrued portion will be treated
as tax-exempt interest income for regular federal income tax purposes. Upon
sale or redemption, any gain realized that is in excess of the earned portion
of original issue discount will be taxable as capital gain. (See "Tax
Status".) The current value of an original issue discount bond reflects the
present value of its face amount at maturity. The market value tends to
increase more slowly in early years and in greater increments as the Bonds
approach maturity. Of these original issue discount bonds, a portion of the
aggregate principal amount of the Bonds in the Trust are Zero Coupon Bonds.
Zero Coupon Bonds do not provide for the payment of any current interest and
provide for payment at maturity at face value unless sooner sold or redeemed.
The market value of Zero Coupon Bonds is subject to greater fluctuation than
coupon bonds in response to changes in interest rates. Zero Coupon Bonds
generally are subject to redemption at compound accreted value based on par
value at maturity. Because the issuer is not obligated to make current
interest payments, Zero Coupon Bonds may be less likely to be redeemed than
coupon bonds issued at a similar interest rate.
Some of the Bonds in the Trust may have been purchased at a
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in the Trust were lower than the current market interest rates for
newly issued bonds of comparable rating and type. At the time of issuance the
discount bonds were for the most part issued at then current coupon interest
rates. The current returns (coupon interest income as a percentage of market
price) of discount bonds will be lower than the current returns of comparably
-6-
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<PAGE>
rated bonds of similar type newly issued at current interest rates because
discount bonds tend to increase in market value as they approach maturity and
the full principal amount becomes payable. A discount bond held to maturity
will have a larger portion of its total return in the form of capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. Gain on the disposition of a Bond purchased
at a market discount generally will be treated as ordinary income, rather than
capital gain, to the extent of accrued market discount. Discount bonds with a
longer term to maturity tend to have a higher current return and a lower
current market value than otherwise comparable bonds with a shorter term of
maturity. If interest rates rise, the value of discount bonds will decrease;
and if interest rates decline, the value of discount bonds will increase. The
discount does not necessarily indicate a lack of market confidence in the
issuer.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is computed by
adding to the aggregate bid price of the Bonds in each Trust divided by the
number of Units outstanding, an amount based on the applicable sales charge
times such aggregate bid price of the Bonds in each Trust (see "Public
Offering Price" in Part A for the applicable sales charge for the Trust). A
proportionate share of accrued interest on the Bonds to the expected date of
settlement for the Units is added to the Public Offering Price. Accrued
interest is the accumulated and unpaid interest on a Bond from the last day on
which interest was paid and is initially accounted for daily by the Trust at
the daily rate set forth under "Summary of Essential Information" in Part A.
The secondary market Public Offering Price can vary on a daily basis from the
amount stated in Part A in accordance with fluctuations in the prices of the
Bonds. The price to be paid by each investor will be computed on the basis of
an evaluation made on the day the Units are purchased. The aggregate bid
price evaluation of the Bonds is determined in the manner set forth under
"Trustee Redemption".
The Evaluator may obtain current prices for the Bonds from
investment dealers or brokers (including the Sponsor) that customarily deal in
tax-exempt obligations or from any other reporting service or source of
information which the Evaluator deems appropriate.
Accrued Interest
An amount of accrued interest which represents accumulated unpaid
or uncollected interest on a Bond from the last day on which interest was paid
thereon will be added to the Public Offering Price and paid by the Certificate-
holder at the time the Units are purchased. Since the Trust normally receives
the interest on Bonds twice a year and the interest on the Bonds in the Trust
is accrued on a daily basis, the Trust will always have an amount of interest
accrued but not actually received and distributed to Certificateholders. A
Certificateholder will not recover his proportionate share of accrued interest
until the Units are sold or redeemed, or the Trust is terminated. At that
time, the Certificateholder will receive his proportionate share of the
accrued interest computed to the settlement date in the case of a sale or
termination and to the date of tender in the case of redemption.
Employee Discounts
Employees (and their immediate families) of Bear, Stearns & Co.
Inc., Gruntal & Co., Incorporated and of any underwriter of a Trust, pursuant
to employee benefit arrangements, may purchase Units of a Trust at a price
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<PAGE>
equal to the bid side evaluation of the underlying securities in the Trust
divided by the number of Units outstanding plus a reduced sales charge of
$10.00 per Unit. Such arrangements result in less selling effort and selling
expenses than sales to employee groups of other companies. Resales or
transfers of Units purchased under the employee benefit arrangements may only
be made through the Sponsor's secondary market, so long as it is being
maintained.
Distribution of Units
Certain banks and thrifts will make Units of the Trust available
to their customers on an agency basis. A portion of the sales charge paid by
their customers is retained by or remitted to the banks. Under the Glass-
Steagall Act, banks are prohibited from underwriting Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
The Sponsor intends to qualify the Units for sale in substantially
all States through dealers who are members of the National Association of
Securities Dealers, Inc. Units may be sold to dealers at prices which
represent a concession of up to (a) 4% of the Public Offering Price for the
Municipal Securities Trust Series or (b) $25.00 per unit for the Municipal
Securities Trust Discount Series, subject to the Sponsor's right to change the
dealers' concession from time to time. Such Units may then be distributed to
the public by the dealers at the Public Offering Price then in effect. In
addition, for transactions of 1,000,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. The Sponsor reserves the right to reject, in whole or in
part, any order for the purchase of Units. The Sponsor reserves the right to
change the discounts from time to time.
Sponsor's Profits
The Sponsor will receive a gross commission on all Units sold in
the secondary market equal to the applicable sales charge on each transaction.
(See "Offering Price".) In addition, in maintaining a market for the Units
(see "Sponsor Repurchase"), the Sponsor will realize profits or sustain losses
in the amount of any difference between the price at which it buys Units and
the price at which it resells such Units.
Participants in the "Total Reinvestment Plan" can designate a
broker as the recipient of a dealer concession. See "Total Reinvestment
Plan".
Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price
The secondary market Public Offering Price of Units will be
determined on the basis of the current bid prices of the Bonds in the Trust,
plus the applicable sales charge. The value at which Units may be resold in
the secondary market or redeemed will be determined on the basis of the
current bid prices of such Bonds without any sales charge. On the Evaluation
Date, the Public Offering Price per Unit (based on the bid prices of the Bonds
in the Trust plus the sales charge) exceeded the Repurchase and Redemption
Price per Unit (based upon the bid prices of the Bonds in the Trust without
the sales charge) by the amount shown under "Summary of Essential Information"
in Part A of this Prospectus. For this reason, among others (including
fluctuations in the market prices of Bonds and the fact that the Public
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<PAGE>
Offering Price includes the applicable sales charge), the amount realized by a
Certificateholder upon any redemption or repurchase of Units may be less than
the price paid for such Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing
the average yield for the portfolio of each Trust in order to reflect
estimated fees and expenses of that Trust and the maximum sales charge paid by
Certificateholders. The resulting Estimated Long Term Return represents a
measure of the return to Certificateholders earned over the estimated life of
each Trust. The Estimated Long Term Return as of the day prior to the
Evaluation Date is stated for each Trust under "Summary of Essential
Information" in Part A.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of each Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current
interest rates on newly issued bonds of a similar type with comparable rating,
the Estimated Current Return per Unit may be affected adversely if such Bonds
are redeemed prior to their maturity. On the day prior to the Evaluation
Date, the Estimated Net Annual Interest Income per Unit divided by the Public
Offering Price resulted in the Estimated Current Return stated for each Trust
under "Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each Trust
will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to each Trust and with the redemption, maturity, sale or
other disposition of the Bonds in each Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future.
A schedule of cash flow projections is available from the Sponsors
upon request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been
selected by the Certificateholder. Certificates are transferable by
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presentation and surrender to the Trustee properly endorsed and/or accompanied
by a written instrument or instruments of transfer. Although no such charge
is presently made or contemplated, the Trustee may require a Certificateholder
to pay $2.00 for each Certificate reissued or transferred and any governmental
charge that may be imposed in connection with each such transfer or
interchange. Mutilated, destroyed, stolen or lost Certificates will be
replaced upon delivery of satisfactory indemnity and payment of expenses
incurred.
Interest and Principal Distributions
Interest received by the Trust is credited by the Trustee to an
Interest Account and a deduction is made to reimburse the Trustee without
interest for any amounts previously advanced. Proceeds representing principal
received from the maturity, redemption, sale or other disposition of the Bonds
are credited to a Principal Account.
Distributions to each Certificateholder from the Interest Account
are computed as of the close of business on each Record Date for the following
Payment Date and consist of an amount substantially equal to one-twelfth, one-
half or all of each Certificateholder's pro rata share of the Estimated Net
Annual Interest Income in the Interest Account, depending upon the applicable
plan of distribution. Distributions from the Principal Account will be
computed as of each semi-annual Record Date, and will be made to the Certifi-
cateholders on or shortly after the next semi-annual Payment Date. Proceeds
representing principal received from the disposition of any of the Bonds
between a Record Date and a Payment Date which are not used for redemptions of
Units will be held in the Principal Account and not distributed until the
second succeeding semi-annual Payment Date. No distributions will be made to
Certificateholders electing to participate in the Total Reinvestment Plan,
except as provided thereunder. Persons who purchase Units between a Record
Date and a Payment Date will receive their first distribution on the second
Payment Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date.
For the purpose of minimizing fluctuations in the distributions from the
Interest Account, the Trustee will advance sufficient funds, without interest,
as may be necessary to provide interest distributions of approximately equal
amounts. All funds in respect of the Bonds received and held by the Trustee
prior to distribution to Certificateholders may be of benefit to the Trustee
and do not bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct from
the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Trust
(as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so
withdrawn shall not be considered a part of the Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover redemptions of
Units by the Trustee.
The estimated monthly, semi-annual or annual interest distribution
per Unit will be in the amount shown under Summary of Essential Information
and will change and may be reduced as bonds mature or are redeemed, exchanged
or sold, or as expenses of the Trust fluctuate. No distribution need be made
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from the Principal Account until the balance therein is an amount sufficient
to distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually,
depending upon the distribution plan applicable to the Unit purchased. Record
Dates are the first day of each month for monthly distributions, the first day
of each June and December for semi-annual distributions and the first day of
each December for annual distributions. Payment Dates will be the fifteenth
day of each month following the respective Record Dates. Certificateholders
purchasing Units in the secondary market will initially receive distributions
in accordance with the election of the prior owner. Every October each
Certificateholder may change his distribution election by notifying the
Trustee in writing of such change between October 1 and November 1 of each
year. (Certificateholders deciding to change their election should contact
the Trustee by calling the number listed on the back cover hereof for
information regarding the procedures that must be followed in connection with
this written notification of the change of election.) Failure to notify the
Trustee on or before November 1 of each year will result in a continuation of
the plan for the following 12 months.
Records
The Trustee shall furnish Certificateholders in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year (normally prior to January 31 of the succeeding year),
the Trustee will furnish to each person who at any time during the calendar
year was a Certificateholder of record, a statement showing (a) as to the
Interest Account: interest received (including any earned original issue
discount and amounts representing interest received upon any disposition of
Bonds), amounts paid for redemptions of Units, if any, deductions for
applicable taxes and fees and expenses of the Trust, and the balance remaining
after such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (b) as to the
Principal Account: the dates of disposition of any Bonds and the net proceeds
received therefrom (including any unearned original issue discount but
excluding any portion representing accrued interest), deductions for payments
of applicable taxes and fees and expenses of the Trust, amounts paid for
redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (c) a list of the Bonds held and the
number of Units outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit based upon the last computation thereof made
during such calendar year; and (e) amounts actually distributed to Certifi-
cateholders during such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total dollar amounts and as
dollar amounts representing the pro rata share of each Unit outstanding on the
last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate-
holders at all reasonable times during usual business hours, books of record
and account of its transactions as Trustee, including records of the names and
addresses of Certificateholders, Certificates issued or held, a current list
of Bonds in the portfolio and a copy of the Trust Agreement.
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TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax, but such interest may be subject to
the federal corporate alternative minimum tax and to state and local taxes.
Neither the Sponsor nor the Trustee nor their respective counsel have made any
review of the proceedings relating to the issuance of the Bonds or the bases
for such opinions, and express no opinion as to these matters, and neither the
Trustee nor the Sponsor nor their respective counsel have made an independent
examination or verification that the federal income tax status of the Bonds
has not been altered since the time of the original delivery of those
opinions.
The Revenue Reconciliation Act of 1993 ("P.L. 103-66") increases
maximum marginal income tax rates for individuals and corporations (generally
effective for taxable years beginning after December 31, 1992), extends the
authority to issue certain categories of tax-exempt bonds (qualified small
issue bonds and qualified mortgage bonds), limits the availability of capital
gain treatment for tax-exempt bonds purchased at a market discount, increases
the amount of Social Security benefits subject to tax (effective for taxable
years beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to the
effect of P.L. 103-66 on an investment in Units.
In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for
federal income tax purposes under the Internal Revenue Code of 1986 (the
"Code"), and income received by the Trust that consists of interest
excludable from federal gross income under the Code will be excludable
from the federal gross income of the Certificateholders of the Trust.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer-
tificateholder will be considered to have received his pro rata share of
Bond interest when it is received by the Trust, and the net income
distributable to Certificateholders that is exempt from federal income
tax when received by the Trust will constitute tax-exempt income when
received by the Certificateholders.
Gain (other than any earned original issue discount) realized on a
sale or redemption of the Bonds or on a sale of a Unit is, however,
includable in gross income for federal income tax purposes, generally as
capital gain, although gain on the disposition of a Bond or a Unit
purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market
discount. (It should be noted in this connection that such gain does
not include any amounts received in respect of accrued interest.) Such
gain may be long or short-term depending on the facts and circumstances.
Capital losses are deductible to the extent of capital gains; in
addition, up to $3,000 of capital losses of non-corporate Certificate-
holders may be deducted against ordinary income. Capital assets
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acquired on or after January 1, 1988 must be held for more than one year
to qualify for long-term capital gain treatment. Individuals who
realize long-term capital gains will be subject to a maximum tax rate of
28% on such gain.
Each Certificateholder will realize taxable gain or loss when the
Trust disposes of a Bond (whether by sale, exchange, redemption or
payment at maturity), as if the Certificateholder had directly disposed
of his pro rata share of such Bond. The gain or loss is measured by the
difference between (i) the tax cost of such pro rata share and (ii) the
amount received therefor. For this purpose, a Certificateholder's tax
cost for each Bond is determined by allocating the total tax cost of
each Unit among all of the Bonds held in the Trust (in accordance with
the portion of the Trust comprised by each Bond). In order to determine
the amount of taxable gain or loss, the Certificateholder's amount
received is similarly allocated at that time. The Certificateholder may
exclude from the amount received any amounts that represent accrued
interest or the earned portion of any original issue discount but may
not exclude amounts attributable to market discount. Thus, when a Bond
is disposed of by the Trust at a gain, taxable gain will equal the
difference between (i) the amount received and (ii) the amount paid plus
any original issue discount (limited, in the case of Bonds issued after
June 8, 1980, to the portion earned from the date of acquisition to the
date of disposition). Gain on the disposition of a Bond purchased at a
market discount generally will be treated as ordinary income, rather
than capital gain, to the extent of accrued market discount. No
deduction is allowed for the amortization of bond premium on tax-exempt
bonds such as the Bonds in computing regular federal income tax.
Discount generally accrues based on the principle of compounding
of accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis
of a discount bond is increased by the amount of accrued, tax-exempt
original issue discount thus determined. This method of calculation
will produce higher capital gains (or lower losses) to a Certificate-
holder, as compared to the results produced by the straight-line method
of accounting for original issue discount, upon an early disposition of
a Bond by the Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable income or loss when a
Unit is sold or redeemed. The amount received is allocated among all
the Bonds in the Trust in the same manner as when the Trust disposes of
Bonds and the Certificateholder may exclude accrued interest and the
earned portion of any original issue discount (but not amounts
attributable to market discount). The return of a Certificateholder's
tax cost is otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross
income for taxpayers whose "modified adjusted gross income" combined
with a portion of their benefits exceeds a base amount. The base amount
is $25,000 for an individual, $32,000 for a married couple filing a
joint return and zero for married persons filing separate returns.
Interest on tax-exempt bonds is to be added to adjusted gross income for
purposes of computing the amount of benefits that are includable in
gross income and determining whether an individual's income exceeds the
base amount above which a portion of the benefits would be subject to
tax. For taxable years beginning after December 31, 1993, the amount of
Social Security benefits subject to tax has been increased.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount by
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which the adjusted current earnings (which will include tax-exempt
interest) of the corporation exceeds alternative minimum taxable income
(determined without this item). Further, interest on the Bonds is
includable in a 0.12% additional corporate minimum tax imposed by the
Superfund Amendments and Reauthorization Act of 1986 for taxable years
beginning before January 1, 1996. In addition, in certain cases, Sub-
chapter S corporations with accumulated earnings and profits from Sub-
chapter C years will be subject to a minimum tax on excess "passive
investment income" which includes tax-exempt interest.
The Trust is not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For
a Certificateholder who is a New York resident, however, a pro rata
portion of all or part of the income of the Trust will be treated as the
income of the Certificateholder under the income tax laws of the State
and City of New York. Similar treatment may apply in other states.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the income
tax laws of any state or political subdivision. In general, municipal bond
interest exempt from federal income tax is taxable income to residents of the
State or City of New York under the tax laws of those jurisdictions unless the
bonds are issued by the State of New York or one of its political subdivisions
or by the Commonwealth of Puerto Rico or one of its political subdivisions.
For corporations doing business in New York State, interest earned on state
and municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and
instrumentalities, must be included in calculating New York State and New York
City entire net income for purposes of computing New York State and New York
City franchise (income) tax. The laws of the several states and local taxing
authorities vary with respect to the taxation of such obligations and each
Certificateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.
In the case of Bonds that are industrial revenue bonds ("IRBs") or
certain types of private activity bonds, the opinions of bond counsel to the
respective issuing authorities indicate that interest on such Bonds is exempt
from regular federal income tax. However, interest on such Bonds will not be
exempt from regular federal income tax for any period during which such Bonds
are held by a "substantial user" of the facilities financed by the proceeds of
such Bonds or by a "related person" thereof within the meaning of the Code.
Therefore, interest on any such Bonds allocable to a Certificateholder who is
such a "substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue"
exemption, the "small issue" exemption will not be available or will be lost
if, at any time during the three-year period beginning on the later of the
date the facilities are placed in service or the date of issue, all
outstanding tax-exempt IRBs, together with a proportionate share of any
present issue, of an owner or principal user (or related person) of the
facilities exceeds $40,000,000. In the case of IRBs issued under the
$10,000,000 "small issue" exemption, interest on such IRBs will become taxable
if the face amount of the IRBs plus certain capital expenditures exceeds
$10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of
other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current
or future owners or users of the facilities financed by the Bonds, the amount
of such persons' outstanding tax-exempt IRBs, or the facilities themselves,
and no assurance can be given that future events will not affect the tax-
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exempt status of the Bonds. Investors should consult their tax advisors for
advice with respect to the effect of these provisions on their particular tax
situation.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for federal income tax purposes. In
addition, under rules used by the Internal Revenue Service for determining
when borrowed funds are considered used for the purpose of purchasing or
carrying particular assets, the purchase of Units may be considered to have
been made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. Also, in the case of certain financial
institutions that acquire Units, in general no deduction is allowed for
interest expense allocable to such Units.
From time to time proposals have been introduced before Congress
to restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trust, and it can be expected that
similar proposals may be introduced in the future.
In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the
federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the federal
government to regulate and control bonds such as the Bonds in the Trust and to
tax interest on such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the Bonds
in the Trust in accordance with Section 103 of the Code.
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt
from regular federal income tax may be limited to law existing at the time the
Bonds were issued, and may not apply to the extent that future changes in law,
regulations or interpretations affect such Bonds. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intends to maintain
a secondary market for the Units. The Sponsor's secondary market repurchase
price will be based on the aggregate bid price of the Bonds in the Trust
portfolio, determined by the Evaluator on a daily basis, and will be the same
as the redemption price. See "Trustee Redemption". Certificateholders who
wish to dispose of their Units should inquire of the Sponsor prior to making a
tender for redemption. The Sponsor may discontinue repurchases of Units if
the supply of Units exceeds demand, or for other business reasons. The date
of repurchase is deemed to be the date on which Certificates representing
Units are physically received in proper form by the Sponsor, Bear, Stearns &
Co. Inc., 245 Park Avenue, New York, N.Y. 10167. Units received after
4:00 P.M., New York Time, will be deemed to have been repurchased on the next
business day. In the event a market is not maintained for the Units, a Cer-
tificateholder may be able to dispose of Units only by tendering them to the
Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsors, subject to change, to repurchase units
on the basis of a price higher than the bid prices of the bonds in the trust.
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Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of this
Trust, although in all bond trusts, the purchase price of a unit depends
primarily on the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate bid price
of the Bonds in the Trust plus the applicable sales charge (see "Public
Offering Price" in Part A) plus net accrued interest. Any Units that are
purchased by the Sponsor in the secondary market also may be redeemed by the
Sponsor if it determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to Cer-
tificateholders, elect to purchase any Units tendered to the Trustee for
redemption. (See "Trustee Redemption".) For example, if in order to meet
redemptions of Units the Trustee must dispose of Bonds, and if such
disposition cannot be made by the redemption date (seven calendar days after
tender), the Sponsor may elect to purchase such Units. Such purchase shall be
made by payment to the Certificateholder not later than the close of business
on the redemption date of an amount equal to the Redemption Price on the date
of tender.
Trustee Redemption
Units also may be tendered to the Trustee for redemption at its
corporate trust office as set forth in Part A of this Prospectus, upon proper
delivery of Certificates representing such Units and payment of any relevant
tax. At the present time there are no specific taxes related to the
redemption of Units. No redemption fee will be charged by the Sponsor or the
Trustee. Units redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be delivered
to the Trustee and must be properly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing
satisfactory indemnity, as in the case of lost, stolen or mutilated
Certificates). Thus, redemptions of Units cannot be effected until
Certificates representing such Units have been delivered by the person seeking
redemption. (See "Certificates".) Certificateholders must sign exactly as
their names appear on the faces of their Certificates. In certain instances
the Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Within seven calendar days following a tender for redemption, or,
if such seventh day is not a business day, on the first business day prior
thereto, the Certificateholder will be entitled to receive in cash an amount
for each Unit tendered equal to the Redemption Price per Unit computed as of
the Evaluation Time on the date of tender. The "date of tender" is deemed to
be the date on which Units are received by the Trustee, except that with
respect to Units received after the close of trading on the New York Stock
Exchange, the date of tender is the next day on which such Exchange is open
for trading, and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the Redemption Price computed on that
day.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell Bonds in order
to make funds available for redemptions. Such sales, if required, could
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result in a sale of Bonds by the Trustee at a loss. To the extent Bonds are
sold, the size and diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each Unit
in the Trust determined by the Trustee on the basis of (i) the cash on hand in
the Trust or moneys in the process of being collected, (ii) the value of the
Bonds in the Trust based on the bid prices of such Bonds and (iii) interest
accrued thereon, less (a) amounts representing taxes or other governmental
charges payable out of the Trust, (b) the accrued expenses of the Trust and
(c) cash allocated for the distribution to Certificateholders of record as of
the business day prior to the evaluation being made. The Evaluator may
determine the value of the Bonds in the Trust for purposes of redemption
(1) on the basis of current bid prices of the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by the Trust,
(2) on the basis of bid prices for bonds comparable to any Bonds for which bid
prices are not available, (3) by determining the value of the Bonds by
appraisal, or (4) by any combination of the above.
The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer-
tificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of redemption
and to postpone the date of payment of the Redemption Price per Unit for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage
which may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual and
annual Certificateholders (except Texas residents*) may elect to have all
regular interest and principal distributions, if any, with respect to their
Units reinvested either in units of various series of "Municipal Securities
Trust" which will have been created shortly before each semi-annual or annual
Payment Date (a "Primary Series") or, if units of a Primary Series are not
available, in units of a previously formed series of the Trust which have been
repurchased by the Sponsor in the secondary market, including the units being
offered hereby (a "Secondary Series") (Primary Series and Secondary Series are
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.
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hereafter collectively referred to as "Available Series"). June 15 and
December 15 of each year, in the case of semi-annual Certificateholders, and
December 15 of each year in the case of annual Certificateholders, are the
"Plan Reinvestment Dates".
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor at a
price equal to the aggregate offering price per Unit of the bonds in the
Available Series portfolio during the initial offering of the Available Series
or at the aggregate bid price per Unit of the Available Series if its initial
offering has been completed, plus a sales charge equal to 3.627% of the net
amount invested in such bonds or 3-1/2% of the Reinvestment Price per Plan
Unit, plus accrued interest, divided by one hundred (the "Reinvestment Price
per Plan Unit"). All Plan Units will be sold at this reduced sales charge of
3-1/2% in comparison to the regular sales charge levied on primary and
secondary market sales of units in any series of "Municipal Securities Trust".
Participants in the Plan will have the opportunity to designate, in the
Authorization Form for the Plan, the name of a broker to whom the Sponsor will
allocate a sales commission of 1-1/2% per Plan Unit, payable out of the 3-1/2%
sales charge. If no such designation is made, the Sponsor will retain the
sales commission.
Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder
who is entitled to receive $130.50 interest income from the Trust would
acquire 13.05 Plan Units assuming that the Reinvestment Price per Plan Unit,
plus accrued interest, was $10.
A semi-annual or annual Certificateholder may join the Plan at the
time he invests in Units of the Trust or any time thereafter by delivering to
the Trustee an Authorization Form which is available from brokers or the
Sponsor. In order that distributions may be reinvested on a particular Plan
Reinvestment Date, the Authorization Form must be received by the Trustee not
later than the 15th day of the month preceding such Date. Authorization Forms
not received in time for a particular Plan Reinvestment Date will be valid
only for the second succeeding Plan Reinvestment Date. Similarly, a
participant may withdraw from the Plan at any time by notifying the Trustee
(see below). However, if written confirmation of withdrawal is not given to
the Trustee prior to a particular distribution, the participant will be deemed
to have elected to participate in the Plan with respect to that particular
distribution and his withdrawal would become effective for the next succeeding
distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to Units
purchased of the Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased of the Trust) for each subsequent
distribution as long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from the Trust
in the opinion of the Sponsor, the authorization will be voided and
participants will be provided with both a notice of the material change and a
new Authorization Form which would have to be returned to the Trustee before
the Certificateholder would again be able to participate in the Plan. The
Sponsor anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from
federal income tax, or the inclusion of bonds which were not rated "A" or
better by either Standard & Poor's Corporation or Moody's Investors Service,
Inc. on the date such bonds were initially deposited in the Available Series
portfolio.
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The Sponsor has the option at any time to use units of a Secondary
Series to fulfill the requirements of the Plan in the event units of a Primary
Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not
declared effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that
the quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered on
or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such Record
Dates are June 1 and December 1 of each year for semi-annual Certificate-
holders, and December 1 of each year for annual Certificateholders. On each
Record Date, the Sponsor will send a current Prospectus relating to the
Available Series being offered for the next Plan Reinvestment Date along with
a letter which reminds each participant that Plan Units are being purchased
for him as part of the Plan unless he notifies the Trustee in writing by that
Plan Reinvestment Date that he no longer wishes to participate in the Plan.
In the event a Primary Series has not been declared effective in sufficient
time to distribute a final Prospectus relating thereto and there is no
Secondary Series as to which a registration statement is currently effective,
it is the Sponsor's intention to suspend the Plan and distribute to each
participant his regular semi-annual or annual distribution. If the Plan is so
suspended, it will resume in effect with the next Plan Reinvestment Date
assuming units of an Available Series are then being offered.
To aid a participant who might desire to withdraw either from the
Plan or from a particular distribution, the Trustee has established a toll
free number (see below) for participants to use for notification of
withdrawal, which must be confirmed in writing prior to the Plan Reinvestment
Date. Should the Trustee be so notified, it will make the appropriate cash
disbursement. Unless the withdrawing participant specifically indicates in
his written confirmation that (a) he wishes to withdraw from the Plan for that
particular distribution only, or (b) he wishes to withdraw from the Plan for
less than all units of each series of "Municipal Securities Trust" which he
might then own (and specifically identifies which series are to continue in
the Plan), he will be deemed to have withdrawn completely from the Plan in all
respects. Once a participant withdraws completely, he will only be allowed to
again participate in the Plan by submitting a new Authorization Form. A sale
or redemption of a portion of a participant's Plan Units will not constitute a
withdrawal from the Plan with respect to the remaining Plan Units owned by
such participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual Cer-
tificateholder fail to have an annual distribution plan, such Certificate-
holder will be deemed to have elected the semi-annual plan of distribution,
and to participate in the Plan with respect to distributions made in
connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash
may withdraw from the Plan with respect to such Plan Units and remain in the
Plan with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from
the Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
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Thus, if a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor has maintained and
intends to continue to maintain a market for the Plan Units and continuously
to offer to purchase Plan Units at prices based upon the aggregate bid price
of the bonds in the Available Series portfolio, during the initial offering of
the Available Series, or at the aggregate bid price of the Bonds in the
Available Series if its initial offering has been completed. The Sponsor may
discontinue such purchases at any time. The aggregate bid price of the under-
lying bonds may be expected to be less than the aggregate offering prices. In
the event that a market is not maintained for Plan Units, a participant
desiring to dispose of his Plan Units may be able to do so only by tendering
such Plan Units to the Trustee for redemption at the Redemption Price of full
units in the Available Series corresponding to such Plan Units, which is based
upon the aggregate bid price of the underlying bonds as described in the
"Municipal Securities Trust" Prospectus for the Available Series in question.
If a participant wishes to dispose of his Plan Units, he should inquire of the
Sponsor as to current market prices prior to making a tender for redemption to
the Trustee.
Any participant may tender his Plan Units for redemption to the
Available Series trustee. Participants may redeem Plan Units by making a
written request to the Trustee, at the address listed in the "Summary of
Essential Information" in Part A on the Redemption Form supplied by the
Trustee. The redemption price per Plan Unit will be determined as set forth
in the "Municipal Securities Trust" Prospectus of the Available Series from
which such Plan Unit was purchased following receipt of the request and
adjusted to reflect the fact that it relates to a Plan Unit. There is no
charge for the redemption of Plan Units.
The Trust Agreement requires that the Trustee notify the Sponsor
of any tender of Plan Units for redemption. So long as the Sponsor is
maintaining a bid in the secondary market, the Sponsor will purchase any Plan
Units tendered to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such
Plan Units on the date of tender not later than the day on which such Plan
Units would otherwise have been redeemed by the Trustee.
Participants in the Plan will not receive individual certificates
for their Plan Units unless the amount of Plan Units accumulated represents
the principal amount of bonds originally underlying each Unit and, in such
case, a written request for certificates is made to the Trustee. All Plan
Units will be accounted for by the Trustee on a book entry system. Each time
Plan Units are purchased under the Plan, a participant will receive a
confirmation stating his cost, number of Units purchased and estimated current
return. Questions regarding a participant's statement should be directed to
the Trustee by calling the Trustee at the number listed in the "Summary of
Essential Information" in Part A.
All expenses relating to the operation of the Plan are borne by
the Sponsor. Both the Sponsor and the Trustee reserve the right to suspend,
modify or terminate the Plan at any time for any reason, including the right
to suspend the Plan if the Sponsor is unable or unwilling to establish a
Primary Series or is unable to provide Secondary Series units. All
participants will receive notice of any such suspension, modification or
termination.
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Total Reinvestment Plan for Texas Residents
Except as specifically provided under this Section, and unless the
context otherwise requires, all provisions and definitions contained under the
heading "Total Reinvestment Plan" shall be applicable to the Total
Reinvestment Plan for Texas Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are
residents of Texas have the option prior to any semi-annual or annual
distribution to elect affirmatively to reinvest that distribution, including
both interest and principal, if any, in an Available Series.
A resident of Texas who is a semi-annual Certificateholder may
join the Texas Plan for any particular semi-annual or annual distribution by
delivering to the Trustee an Authorization Form For Texas Residents ("Texas
Authorization Form") specifically mentioning the date of the particular semi-
annual or annual distribution he wishes to reinvest. On or about each semi-
annual or annual Record Date, Texas Authorization Forms shall be sent by the
Trustee to every Certificateholder who is a resident of Texas. In the event
that the Sponsor suspends the Plan or the Texas Plan, no Texas Authorization
Forms shall be sent. In order that distributions may be reinvested on a
particular Plan Reinvestment Date, the Texas Authorization Form must be
received by the Trustee on or before such Date. Texas Authorization Forms not
received in time for the Plan Reinvestment Date will be deemed void. A
participant who delivers a Texas Authorization Form to the Trustee may
thereafter withdraw said authorization by notifying the Trustee at its toll
free telephone number prior to a Plan Reinvestment Date. Such notification of
a withdrawal must be confirmed in writing prior to the Plan Reinvestment Date.
Under no circumstances shall a Texas Authorization Form be provided or
accepted by the Trustee which provides for the reinvestment of distributions
for more than one Plan Reinvestment Date.
On or about each semi-annual and annual Record Date, the Sponsor
will send a current Prospectus relating to the Available Series being offered
on the next Plan Reinvestment Date along with a letter incorporating a Texas
Authorization Form which specifies the funds available for reinvestment,
reminds each participant that no Plan Units will be purchased for him unless
the Texas Authorization Form is received by the Trustee on or before that
particular Plan Reinvestment Date, and states that the Texas Authorization
Form is valid only for that particular semi-annual or annual distribution. If
the Available Series should materially differ from the Trust, the participant
will be provided with a notice of the material change and a new Texas
Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, with respect to such Units, but such Certificate-
holder will not be deemed to participate in the Plan for any particular
distribution unless and until he delivers to the Trustee a Texas Authorization
Form pertaining to those Plan Units. (Should the Available Series from which
Plan Units are purchased for the account of an annual Certificateholder fail
to have an annual distribution plan, such Certificateholder will be deemed to
have elected the semi-annual plan of distribution, and to participate in the
Plan with respect to distributions made, in connection with such Plan Units.)
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TRUST ADMINISTRATION
Portfolio Supervision
The Sponsor may direct the Trustee to dispose of Bonds upon
(i) default in payment of principal or interest on such Bonds,
(ii) institution of certain legal proceedings with respect to the issuers of
such Bonds, (iii) default under other documents adversely affecting debt
service on such Bonds, (iv) default in payment of principal or interest on
other obligations of the same issuer or guarantor, (v) with respect to
revenue Bonds, decline in revenues and income of any facility or project below
the estimated levels calculated by proper officials charged with the
construction or operation of such facility or project or (vi) decline in price
or the occurrence of other market or credit factors which in the opinion of
the Sponsor would make the retention of such Bonds in the Trust detrimental to
the interests of the Certificateholders. If a default in the payment of
principal or interest on any of the Bonds occurs and if the Sponsor fails to
instruct the Trustee to sell or hold such Bonds, the Trust Agreement provides
that the Trustee may sell such Bonds.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held
by the Trustee subject to the terms and conditions of the Agreement to the
same extent as the Bonds originally deposited. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the bonds substituted therefor.
Except as stated, the acquisition by the Trust of any securities other than
the bonds initially deposited is prohibited.
Trust Agreement, Amendment and Termination
The Trust Agreement may be amended by the Trustee, the Sponsor and
the Evaluator without the consent of any of the Certificateholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the Certifi-
cateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent
of the holders of Certificates evidencing 66-2/3% of the Units then
outstanding, for the purpose of modifying the rights of Certificateholders;
provided that no such amendment or waiver shall reduce any Certificateholder's
interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the
holders of all Certificates. The Trust Agreement may not be amended, without
the consent of the holders of all Certificates then outstanding, to increase
the number of Units issuable or to permit the acquisition of any bonds in
addition to or in substitution for those initially deposited in the Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.
The Trust Agreement provides that the Trust shall terminate upon
the maturity, redemption or other disposition, as the case may be, of the last
of the Bonds held in the Trust but in no event is it to continue beyond the
end of the calendar year preceding the fiftieth anniversary of the execution
of the Trust Agreement. If the value of the Trust shall be less than the
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minimum amount set forth under "Summary of Essential Information" in Part A,
the Trustee may, in its discretion, and shall, when so directed by the
Sponsor, terminate the Trust. The Trust may also be terminated at any time
with the consent of the holders of Certificates representing 100% of the Units
then outstanding. In the event of termination, written notice thereof will be
sent by the Trustee to all Certificateholders. Within a reasonable period
after termination, the Trustee must sell any Bonds remaining in the Trust,
and, after paying all expenses and charges incurred by the Trust, distribute
to each Certificateholder, upon surrender for cancellation of his Certificate
for Units, his pro rata share of the Interest and Principal Accounts.
The Sponsor
For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Sponsor is Bear, Stearns & Co. Inc., a
Delaware corporation, which is engaged in the underwriting, investment banking
and brokerage business and is a member of the National Association of
Securities Dealers, Inc. and all principal securities and commodities
exchanges, including the New York Stock Exchange, the American Stock Exchange,
the Midwest Stock Exchange and the Pacific Stock Exchange. Bear Stearns
maintains its principal business offices at 245 Park Avenue, New York, New
York 10167 and, since its reorganization from a partnership to a corporation
in October, 1985 has been a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Bear Stearns, through its predecessor entities, has been
engaged in the investment banking and brokerage business since 1923. Bear
Stearns is the sponsor for numerous series of unit investment trusts,
including: A Corporate Trust, Series 1; New York Municipal Trust, Series 1
(and Subsequent Series); Municipal Securities Trust, Series 1 (and Subsequent
Series), 1st Discount Series (and Subsequent Series), Multi-State Series 1
(and Subsequent Series), High Income Trust Series 1 (and Subsequent Series),
Insured Municipal Securities Trust, Series 1-4 (Multiplier Portfolio),
Series 1 (and Subsequent Series), 5th Discount Series (and Subsequent Series),
Navigator Series (and Subsequent Series), Mortgage Securities Trust, CMO
Series 1 (and Subsequent Series) and Equity Securities Trust, Series 1,
Signature Series, Gabelli Communications Income Trust (and Subsequent Series).
The information included herein is only for the purpose of informing investors
as to the financial responsibility of the Sponsor and its ability to carry out
its contractual obligations.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Co-Sponsors are Bear, Stearns & Co. Inc. and
Gruntal & Co., Incorporated, both of whom have entered into an Agreement among
Co-Sponsors pursuant to which both parties have agreed to act as Co-Sponsors
for the Trust. Bear, Stearns & Co. Inc. has been appointed by Gruntal & Co.,
Incorporated as agent for purposes of taking any action required or permitted
to be taken by the Sponsors under the Trust Agreement. If the Sponsors are
unable to agree with respect to action to be taken jointly by them under the
Trust Agreement and they cannot agree as to which Sponsor shall act as sole
Sponsor, then Bear, Stearns & Co. Inc. shall act as sole Sponsor. If one of
the Sponsors fails to perform its duties under the Trust Agreement or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, that Sponsors may be discharged under the Trust Agreement
and a new Sponsor(s) may be appointed or the remaining Sponsor(s) may continue
to act as Sponsors.
Gruntal & Co., Incorporated, a Delaware corporation, operates a
regional securities broker/dealer from its main office in New York City and
branch offices in nine states and the District of Columbia. The firm is very
active in the marketing of investment companies and has signed dealer
agreements with every mutual fund group, as well as being the managing
distributor for The Home Group Money Market and Mutual Funds. Further,
through its Syndicate Department, Gruntal & Co. Incorporated has underwritten
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a large number of Closed-End Funds and has been Co-Manager on the following
offerings: Cigna High Income Shares; Dreyfus New York Municipal Income, Inc.;
Franklin Principal Maturity Trust and Van Kampen Merritt Limited Term High
Income Trust.
The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for
errors in judgment except in cases of its own willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any of
its duties under the Trust Agreement or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
The Trustee
For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is United States Trust Company
of New York, with its principal place of business at 770 Broadway, New York,
New York 10003. United States Trust Company of New York has, since its
establishment in 1853, engaged primarily in the management of trust and agency
accounts for individuals and corporations. The Trustee is a member of the New
York Clearing House Association and is subject to supervision and examination
by the Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Trustee is The Bank of New York, a trust company
organized under the laws of New York, having its offices at 101 Barclay
Street, New York, New York 10286 (1-800-431-8002). The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law. The Trustee must be a banking corporation
organized under the laws of the United States or any state which is authorized
under such laws to exercise corporate trust powers and must have at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000. The duties of the Trustee are primarily ministerial in nature.
The Trustee did not participate in the selection of Securities for the
portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for
taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, Bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect
of the Bonds or the Trust which it may be required to pay under current or
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future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Bonds pursuant to
the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, see "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and
appoint a successor as provided in the Trust Agreement. Notice of such
removal and appointment shall be mailed to each Certificateholder by the
Sponsor. If upon resignation of the Trustee no successor has been appointed
and has accepted the appointment within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The resignation or removal of the Trustee becomes
effective only when the successor Trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor Trustee. Upon
execution of a written acceptance of such appointment by such successor
Trustee, all the rights, powers, duties and obligations of the original
Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. with main offices located at 65 Broadway, New York, New York
10006. The Evaluator is a wholly-owned subsidiary of McGraw-Hill, Inc. The
Evaluator is a registered investment advisor and also provides financial
information services.
The Trustee, the Sponsor and Certificateholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available
to it, provided, however, that the Evaluator shall be under no liability to
the Trustee, the Sponsor, or Certificateholders for errors in judgment, except
in cases of its own willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and the
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
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TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933,
preparation and printing of the Certificates, legal and auditing expenses,
advertising and selling expenses, initial fees and expenses of the Trustee and
other out-of-pocket expenses. The fees of the Evaluator, however, incurred
during the initial public offering are paid directly by the Trustee.
The Sponsor will not charge the Trust a fee for its services as
such. See "Sponsor's Profits".
The Trustee will receive for its ordinary recurring services to
the Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust
Agreement, see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the Bonds
in the Trust, a fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of the
Record Date from the Interest Account to the extent funds are available and
then from the Principal Account. Both fees may be increased without approval
of the Certificateholders by amounts not exceeding proportionate increases in
consumer prices for services as measured by the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel and auditing fees) of the Trustee
incurred and advances made in connection with its activities under the Trust
Agreement, including the expenses and costs of any action undertaken by the
Trustee to protect the Trust and the rights and interests of the Certificate-
holders; fees of the Trustee for any extraordinary services performed under
the Trust Agreement; indemnification of the Trustee for any loss or liability
accruing to it without gross negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any loss,
liabilities and expenses incurred in acting as Sponsor of the Trust without
gross negligence, bad faith or willful misconduct on its part; and all taxes
and other governmental charges imposed upon the Bonds or any part of the Trust
(no such taxes or charges are being levied, made or, to the knowledge of the
Sponsor, contemplated). The above expenses, including the Trustee's fees,
when paid by or owing to the Trustee are secured by a first lien on the Trust.
In addition, the Trustee is empowered to sell Bonds in order to make funds
available to pay all expenses.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their Units
of these Trusts for Units of one or more of any available series of Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust, A Corporate Trust or Equity Securities Trust
(the "Exchange Trusts") at a reduced sales charge as set forth below. Under
the Exchange Privilege, the Sponsor's repurchase price of the Units being
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surrendered, and only after the initial offering period is completed, will be
based on the aggregate bid price of the Bonds in the particular Trust
portfolio. Units in an Exchange Trust then will be sold to the
Certificateholder at a price based on the aggregate offer price of the Bonds
in the Exchange Trust portfolio during the initial public offering period of
the Exchange Trust (or for Units of Equity Securities Trust, based on the
market value of the underlying securities in the Equity Trust portfolio); or
based on the aggregate bid price of the Bonds in the Exchange Trust portfolio
if its initial public offering has been completed, plus accrued interest (or
for Units of Equity Securities Trust, based on the market value of the
underlying securities in the Equity Trust portfolio) and a reduced sales
charge as set forth below.
Except for unitholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of Trust, the sales
charge applicable to the purchase of units of an Exchange Trust shall be 1.5%
per unit (or per 1,000 Units for the Mortgage Securities Trust or per
100 Units for the Equity Securities Trust) (approximately 1.5% of the price of
each Exchange Trust unit (or 1,000 Units for the Mortgage Securities Trust or
100 Units for the Equity Securities Trust)). For unitholders who wish to
exercise the Exchange Privilege within the first five months of their purchase
of Units of Trust, the sales charge applicable to the purchase of units of an
Exchange Trust shall be the greater of (i) 1.5% per unit (or per 1,000 Units
for the Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust), or (ii) an amount which when coupled with the sales charge paid by the
unitholder upon his original purchase of Units of the Trust at least equals
the sales charge applicable in the direct purchase of units of an Exchange
Trust. The Exchange Privilege is subject to the following conditions:
(1) The Sponsor must be maintaining a secondary market in both
the Units of the Trust held by the Certificateholder and the Units of
the available Exchange Trust. While the Sponsor has indicated its
intention to maintain a market in the Units of all Trusts sponsored by
it, the Sponsor is under no obligation to continue to maintain a
secondary market and therefore there is no assurance that the Exchange
Privilege will be available to a Certificateholder at any specific time
in the future. At the time of the Certificateholder's election to
participate in the Exchange Privilege, there also must be Units of the
Exchange Trust available for sale, either under the initial primary
distribution or in the Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new
funds in order to complete an exchange. Units of the Mortgage
Securities Trust may only be acquired in blocks of 1,000 Units. Units
of the Equity Securities Trust may only be acquired in blocks of 100
Units.
(3) The Sponsor reserves the right to suspend, modify or
terminate the Exchange Privilege. The Sponsor will provide unitholders
of the Trust with 60 days' prior written notice of any termination or
material amendment to the Exchange Privilege, provided that, no notice
need be given if (i) the only material effect of an amendment is to
reduce or eliminate the sales charge payable at the time of the
exchange, to add one or more series of the Trust eligible for the
Exchange Privilege or to delete a series which has been terminated from
eligibility for the Exchange Privilege, (ii) there is a suspension of
the redemption of units of an Exchange Trust under Section 22(e) of the
Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest
amounts effectively in accordance with its investment objectives,
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<PAGE>
policies and restrictions. During the 60 day notice period prior to the
termination or material amendment of the Exchange Privilege described
above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected
unitholders. Unitholders may, during this 60 day period, exercise the
Exchange Privilege in accordance with its terms then in effect. In the
event the Exchange Privilege is not available to a Certificateholder at
the time he wishes to exercise it, the Certificateholder will
immediately be notified and no action will be taken with respect to his
Units without further instructions from the Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If Units
of a designated, outstanding series of an Exchange Trust are at the time
available for sale and such Units may lawfully be sold in the state in which
the Certificateholder is a resident, the Certificateholder will be provided
with a current prospectus or prospectuses relating to each Exchange Trust in
which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary
market transaction except that units may be purchased at a reduced sales
charge.
Example: Assume that after the initial public offering has been
completed, a Certificateholder has five units of a Trust with a current value
of $700 per unit which he has held for more than 5 months and the Certificate-
holder wishes to exchange the proceeds for units of a secondary market
Exchange Trust with a current price of $725 per unit. The proceeds from the
Certificateholder's original units will aggregate $3,500. Since only whole
units of an Exchange Trust may be purchased under the Exchange Privilege, the
Certificateholder would be able to acquire four units (or 4,000 Units of the
Mortgage Securities Trust or 400 Units of the Equity Securities Trust) for a
total cost of $2,943.50 ($2,900 for unit and $43.50 for the sales charge).
The remaining $556.50 would be remitted to the Certificateholder in cash. If
the Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
The Conversion Offer
Unit owners of any registered unit investment trust for which
there is no active secondary market in the units of such trust (a "Redemption
Trust") may elect to redeem such units and apply the proceeds of the
redemption to the purchase of available Units of one or more series of A
Corporate Trust, Municipal Securities Trust, Insured Municipal Securities
Trust, Mortgage Securities Trust, New York Municipal Trust or Equity
Securities Trust sponsored by Bear, Stearns & Co. Inc. or the Sponsor (the
"Conversion Trusts") at the Public Offering Price for units of the Conversion
Trust based on a reduced sales charge as set forth below. Under the
Conversion Offer, units of the Redemption Trust must be tendered to the
trustee of such trust for redemption at the redemption price, which is based
upon the aggregate bid side evaluation of the underlying bonds in such trust
and is generally about 1-1.2% to 2% lower than the offering price for such
bonds (or for Units of Equity Securities Trust, based on the market value of
the underlying securities in the Equity Trust portfolio). The purchase price
of the units in the Conversion Trust will be based on the aggregate offer
price of the bonds in the Conversion Trust Portfolio during its initial
offering price (or for Units of Equity Securities Trust, based on the market
value of the underlying securities in the Equity Trust portfolio); or, at a
price based on the aggregate bid price of the underlying bonds if the initial
public offering of the Conversion Trust has been completed, plus accrued
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<PAGE>
interest (or for Units of Equity Securities Trust, based on the market value
of the underlying securities in the Equity Trust portfolio) and a sales charge
as set forth below.
Except for unitholders who wish to exercise the Conversion Offer
within the first five months of their purchase of units of a Redemption Trust,
the sales charge applicable to the purchase of Units of the Conversion Trust
shall be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust
or per 100 Units for the Equity Securities Trust). For unitholders who wish
to exercise the Conversion Offer within the first five months of their
purchase of units of a Redemption Trust, the sales charge applicable to the
purchase of Units of a Conversion Trust shall be the greater of (i) 1.5% per
Unit (or per 1,000 Units for the Mortgage Securities Trust or per 100 Units
for the Equity Securities Trust) or (ii) an amount which when coupled with the
sales charge paid by the unitholder upon his original purchase of units of the
Redemption Trust at least equals the sales charge applicable in the direct
purchase of Units of a Conversion Trust. The Conversion Offer is subject to
the following limitations:
(1) The Conversion Offer is limited only to unit owners of any
Redemption Trust, defined as a unit investment trust for which there is
no active secondary market at the time the Certificateholder elects to
participate in the Conversion Offer. At the time of the unit owner's
election to participate in the Conversion Offer, there also must be
available units of a Conversion Trust, either under a primary
distribution or in the Sponsor's secondary market.
(2) Exchanges under the Conversion Offer will be effected in
whole units only. Unit owners will not be permitted to advance any new
funds in order to complete an exchange under the Conversion Offer. Any
excess proceeds from units being redeemed will be returned to the unit
owner. Units of the Mortgage Securities Trust may only be acquired in
blocks of 1,000 units. Units of the Equity Securities Trust may only be
acquired in blocks of 100 Units.
(3) The Sponsor reserves the right to modify, suspend or
terminate the Conversion Offer at any time without notice to unit owners
of Redemption Trusts. In the event the Conversion Offer is not
available to a unit owner at the time he wishes to exercise it, the unit
owner will be notified immediately and no action will be taken with
respect to his units without further instruction from the unit owner.
The Sponsor also reserves the right to raise the sales charge based on
actual increases in the Sponsor's costs and expenses in connection with
administering the program, up to a maximum sales charge of $20 per unit
(or per 1,000 units for the Mortgage Securities Trust or per 100 Units
for the Equity Securities Trust).
To exercise the Conversion Offer, a unit owner of a Redemption
Trust should notify his retail broker of his desire to redeem his Redemption
Trust Units and use the proceeds from the redemption to purchase Units of one
or more of the Conversion Trusts. If Units of a designated, outstanding
series of a Conversion Trust are at that time available for sale and if such
Units may lawfully be sold in the state in which the unit owner is a resident,
the unit owner will be provided with a current prospectus or prospectuses
relating to each Conversion Trust in which he indicates an interest. He then
may select the Trust or Trusts into which he decides to invest the proceeds
from the sale of his Units. The transaction will be handled entirely through
the unit owner's retail broker. The retail broker must tender the units to
the trustee of the Redemption Trust for redemption and then apply the proceeds
to the redemption toward the purchase of units of a Conversion Trust at a
price based on the aggregate offer or bid side evaluation per Unit of the
Conversion Trust, depending on which price is applicable, plus accrued
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<PAGE>
interest and the applicable sales charge. The certificates must be
surrendered to the broker at the time the redemption order is placed and the
broker must specify to the Sponsor that the purchase of Conversion Trust Units
is being made pursuant to the Conversion Offer. The unit owner's broker will
be entitled to retain $5 of the applicable sales charge.
Example: Assume a unit owner has five units of a Redemption Trust
which has held for more than 5 months with a current redemption price of $675
per unit based on the aggregate bid price of the underlying bonds and the unit
owner wishes to participate in the Conversion Offer and exchange the proceeds
for units of a secondary market Conversion Trust with a current price of $750
per Unit. The proceeds from the unit owner's redemption of units will
aggregate $3,375. Since only whole units of a Redemption Trust may be
purchased under the Conversion Offer, the unit owner will be able to acquire
four units of the Conversion Trust (or 4,000 units of the Mortgage Securities
Trust or 400 Units for the Equity Securities Trust) for a total cost of $3,045
($3,000 for units and $45 for the sales charge). The remaining $330 would be
remitted to the unit owner in cash. If the unit owner acquired the same
number of Conversion Trust units at the same time in a regular secondary
market transaction, the price would have been $3,165 ($3,000 for units and
$165 sales charge, assuming a 5 1/2% sales charge times the public offering
price).
Description Of The Exchange Trusts And The Conversion Trusts
A Corporate Trust may be an appropriate investment vehicle for an
investor who is more interested in a higher current return on his investment
(although taxable) than a tax-exempt return (resulting from the fact that the
current return from taxable fixed income securities is normally higher than
that available from tax-exempt fixed income securities). Municipal Securities
Trust and New York Municipal Trust may be appropriate investment vehicles for
an investor who is more interested in tax-exempt income. The interest income
from New York Municipal Trust is, in general, also exempt from New York State
and local New York income taxes, while the interest income from Municipal
Securities Trust is subject to applicable New York State and local New York
taxes, except for that portion of the income which is attributable to New York
obligations in the Trust portfolio, if any. The interest income from each
State Trust of the Municipal Securities Trust, Multi-State Series is, in
general, exempt from state and local taxes when held by residents of the state
where the issuers of bonds in such State Trusts are located. The Insured
Municipal Securities Trust combines the advantages of providing interest
income free from regular federal income tax under existing law with the added
safety of irrevocable insurance. Insured Navigator Series further combines
the advantages of providing interest income free from regular federal income
tax and state and local taxes when held by residents of the state where
issuers of bonds in such state trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high
level of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust
offers investors an opportunity to achieve capital appreciation together with
a high level of current income.
Tax Consequences Of The Exchange Privilege And The Conversion Offer
A surrender of units pursuant to the Exchange Privilege or the
Conversion Offer normally will constitute a "taxable event" to the Certifi-
cateholder under the Code. The Certificateholder will recognize a tax gain or
loss that will be of a long or short-term capital or ordinary income nature
depending on the length of time the units have been held and other factors. A
Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such
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1173.1
<PAGE>
Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions
The legality of the Units originally offered and certain matters
relating to federal tax law have been passed upon by Messrs. Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022, or Berger Steingut
Tarnoff & Stern, 600 Madison Avenue, New York, New York 10022, as counsel for
the Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York,
New York 10005 have acted as counsel for United States Trust Company of New
York. On the initial date of deposit, Messrs. Booth & Baron acted as counsel
for The Bank of New York.
Independent Auditors
The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A have been examined by KPMG Peat
Marwick LLP, independent certified public accountants for the periods
indicated in its reports appearing herein. The financial statements of KPMG
Peat Marwick LLP have been so included in reliance on its report given upon
the authority of said firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Corporation
A brief description of the applicable Standard & Poor's
Corporation rating symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard
& Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
(1) Likelihood of default--capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation.
(2) Nature of and provisions of the obligation.
- --------
* As described by the rating agencies.
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<PAGE>
(3) Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA -- This is the highest rating assigned by Standard & Poor's
to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest for bonds in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "BB" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings -- (Prov.) following a rating indicates the
rating is provisional, which assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to
such likelihood and risk.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's Investors Service,
Inc.'s rating symbols and their meanings is as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat larger
than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate but
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<PAGE>
elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Those bonds in the A and Baa group which Moody's believes possess
the strongest investment attributes are designated by the symbol A 1 and
Baa 1. Other A bonds comprise the balance of the group. These rankings
(1) designate the bonds which offer the maximum in security within their
quality group, (2) designate bonds which can be bought for possible upgrading
in quality and (3) additionally afford the investor an opportunity to gauge
more precisely the relative attractiveness of offerings in the market place.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are debt obligations secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operating experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
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<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 1-25
1st-34th DISCOUNT SERIES
==============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
of Series ___/___ Discount Series.
I hereby authorize The Bank of New York, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Municipal Securities
Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
==============================================================================
Mail to your Broker
or
The Bank of New York
101 Barclay Street
New York, New York 10286
1173.1
<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 26-55
35th-79th DISCOUNT SERIES
=============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
of Series ___/___ Discount Series.
I hereby authorize the United States Trust Company of New York, Trustee, to
pay all semi-annual or annual distributions of interest and principal (if any)
with respect to such units to the United States Trust Company of New York, as
TRP Plan Agent, who shall immediately invest the distributions in units of the
available series of Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
==============================================================================
Mail to your Broker
or
United States Trust Company of New York
Attn: UIT Reinvestment Unit A
770 Broadway
New York, New York 10003
1173.1
<PAGE>
INDEX MUNICIPAL SECURITIES TRUST
(Unit Investment Trust)
Prospectus
Title Page
Dated: April 28, 1995
Summary of Essential Information............A-4
Information Regarding the Trust.............A-6 Sponsor:
Financial and Statistical Information.......A-7
Audit and Financial Information Bear, Stearns & Co. Inc.
245 Park Avenue
Report of Independent Accountants.........F-1 New York, New York 10167
Statements of Net Assets..................F-2 212-272-2500
Statements of Operations..................F-3
Statements of Changes in Net Assets.......F-4 (and for certain Trusts:)
Notes to Financial Statements.............F-5 Gruntal & Co., Incorporated
Portfolio.................................F-7 14 Wall Street
New York, New York 10005
PART B 212-267-8800
The Trust.................................... 1
Public Offering.............................. 7 Trustee:
Estimated Long Term Return and
Estimated Current Return................... 9 United States Trust Company
Rights of Certificateholders.................10 of New York
Tax Status...................................12 770 Broadway
Liquidity....................................15 New York, New York 10003
Total Reinvestment Plan......................18 1-800-428-8890
Trust Administration.........................22
Trust Expenses and Charges...................26 or
Exchange Privilege and Conversion Offer......27
Other Matters................................31 The Bank of New York
Description of Bond Ratings..................31 101 Barclay Street
New York, New York 10286
1-800-431-8002
Parts A and B of this Prospectus do not
contain all of the information set forth in Evaluator:
the registration statement and exhibits
relating thereto, filed with the Securities Kenny S&P Evaluation Services,
and Exchange Commission, Washington, D.C., a division of J.J. Kenny Co.,
under the Securities Act of 1933, and to Inc.
which reference is made. 65 Broadway
New York, New York 10006
* * *
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the
Trust or any of its Units have been guaranteed, sponsored, recommended or
approved by the United States or any state or any agency or officer thereof.
1173.1
