MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 34, 485BPOS, 1994-04-19

MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 34
485BPOS, 1994-04-19

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As filed with the Securities and Exchange Commission on April 19, 1994

Registration No. 33-26550*

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT No. 5

To
FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2

A. Exact name of trust:

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34, MULTI-STATE
SERIES 35 and MULTI-STATE SERIES 36

B. Name of depositor: BEAR, STEARNS & CO. INC.

C. Complete address of depositor's principal executive office:

245 Park Avenue
New York, NY 10167

D. Name and complete address of agent for service:

PETER J. DeMARCO Copy of comments to:
Managing Director MICHAEL R. ROSELLA, ESQ.
Bear, Stearns & Co. Inc. Battle Fowler
245 Park Avenue 280 Park Avenue
New York, NY 10167 New York, NY 10017
(212) 856-6858

It is proposed that this filing become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ x / on April 29, 1994 pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485

* The Prospectus included in this Registration Statement constitutes a
combined Prospectus as permitted by the provisions of Rule 429 of
the General Rules and Regulations under the Securities Act of 1933
(the "Act"). Said Prospectus covers units of undivided interest in
Municipal Securities Trust, Multi-State Series 34, Multi-State
Series 35 and Multi-State Series 36 covered by prospectuses
heretofore filed as part of separate registration statements on
Form S-6 (Registration Nos. 33-26550, 33-27109 and 33-28234,
respectively) under the Act.
<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34,
MULTI-STATE SERIES 35, MULTI-STATE SERIES 36

CROSS-REFERENCE SHEET

Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933

(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)

Form N-8B-2 Form S-6
Item Number Heading in Prospectus

I. Organization and General Information

1. (a) Name of trust................... Front Cover of Prospectus
(b) Title of securities issued...... "
2. Name and address of each depositor.. The Sponsor
3. Name and address of trustee......... The Trustee
4. Name and address of principal
underwriters...................... The Sponsor
5. State of organization of trust...... Organization
6. Execution and termination of
trust agreement................... Trust Agreement, Amendment and
Termination
7. Changes of name..................... Not Applicable
8. Fiscal year......................... "
9. Litigation.......................... None

II. General Description of the Trust and Securities of the Trust

10. (a) Registered or bearer
securities...................... Certificates
(b) Cumulative or distributive
securities...................... Interest and Principal
Distributions
(c) Redemption...................... Trustee Redemption
(d) Conversion, transfer, etc....... Certificates, Sponsor
Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan........... Not Applicable
(f) Voting rights................... Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders.... Records, Portfolio, Trust
Agreement,
Amendment and Termination, The
Sponsor, The Trustee
(h) Consents required............... Trust Agreement, Amendment and
Termination
(i) Other provisions................ Tax Status
11. Type of securities
comprising units.................. Objectives, Portfolio,
Description
of Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
13. (a) Load, fees, expenses, etc....... Summary of Essential
Information,
Offering Price, Volume and
Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust
Expenses
and Charges
(b) Certain information regarding
periodic payment certificates... Not Applicable
(c) Certain percentages............. Summary of Essential
Information,
Offering Price, Total
Reinvestment
Plan
(d) Price differences............... Volume and Other Discounts
(e) Other loads, fees, expenses..... Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons.............. Sponsor's and Underwriters'
Profits
(g) Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities...... Organization, Certificates
15. Receipt and handling of payments
from purchasers................... Organization
16. Acquisition and disposition of
underlying securities............. Organization, Objectives,
Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............ Comparison of Public Offering
Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income........... Distribution Elections, Interest
and
Principal Distributions,
Records,
Total Reinvestment Plan
(b) Reinvestment of distributions... Total Reinvestment Plan
(c) Reserves or special funds....... Interest and Principal
Distributions
(d) Schedule of distributions....... Not Applicable
19. Records, accounts and reports....... Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................ Trust Agreement, Amendment and
Termination
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... The Trustee
(e) and (f) Depositor, removal
and successor................... The Sponsor
21. Loans to security holders........... Not Applicable
22. Limitations on liability............ The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements................ Part II--Item A
24. Other material provisions
of trust agreement................ Not Applicable

III. Organization, Personnel and Affiliated Persons of Depositor

25. Organization of depositor........... The Sponsor
26. Fees received by depositor.......... Not Applicable
27. Business of depositor............... The Sponsor
28. Certain information as to
officials and affiliated
persons of depositor.............. Part II--Item C
29. Voting securities of depositor...... Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "
32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "

IV. Distribution and Redemption of Securities

35. Distribution of trust's
securities by states.............. Distribution of Units
36. Suspension of sales of
trust's securities................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution.......... Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters.................... The Sponsor
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a) Business of principal
underwriters.................... The Sponsor
(b) Branch offices of principal
underwriters.................... Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation............. Summary of Essential
Information,
Offering Price, Accrued
Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price... Not Applicable
(c) Variation in offering price
to certain persons.............. Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights..... Trustee Redemption

46. (a) Redemption valuation............ Comparison of Public Offering
Price,
Sponsor's Repurchase Price and
Redemption Price, Trustee
Redemption
(b) Schedule as to
redemption price................ Not Applicable
47. Maintenance of position in
underlying securities............. Comparison of Public Offering
Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption

V. Information Concerning the Trustee or Custodian

48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........ Trust Expenses and Charges
50. Trustee's lien...................... "

VI. Information Concerning Insurance of Holders of Securities

51. Insurance of holders of
trust's securities................ Not Applicable

VII. Policy of Registrant

52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision, Substitution of
Bonds
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Tax Status

VIII. Financial and Statistical Information

54. Trust's securities during
last ten years.................... Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6)...... Statement of Financial Condition
<PAGE>

Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

MUNICIPAL SECURITIES TRUST

MULTI-STATE SERIES 34
(MULTIPLIER PORTFOLIO)

The Trust consists of 3 separate unit investment trusts
designated California Trust, New York Trust and Pennsylvania Trust (the
"State Trusts"). Each State Trust contains an underlying portfolio of
long-term tax-exempt bonds issued by or on behalf of states,
municipalities and public authorities and was formed to preserve capital
and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from
regular Federal income tax (including where applicable earned original
discount) under existing law. In addition, in the opinion of counsel to
the Sponsor, the interest income of each State Trust is exempt, to the
extent indicated, from state and local taxes when held by residents of the
state where the issuers of bonds in such State Trust are located. Such
interest income may, however, be a specific preference item for purposes
of Federal individual and/or corporate alternative minimum tax. Investors
may recognize taxable capital gain or ordinary income, to the extent of
accrued market discount, upon maturity or earlier redemption of the bonds.
(See "Tax Status" and "The Portfolios--General.") The Sponsor is Bear,
Stearns & Co. Inc. The value of the Units of the Trust will fluctuate
with the value of the underlying bonds. Minimum purchase: 1 Unit.

This Prospectus consists of two parts. Part A contains the
Summary of Essential Information including descriptive material relating
to each State Trust as of December 31, 1993 (the "Evaluation Date"), a
summary of certain specific information regarding each State trust and
audited financial statements of each State Trust, including the related
portfolio, as of the Evaluation Date. Part B of this Prospectus contains
a general summary of the State Trusts.

Investors Should Read and Retain Both Parts
of This Prospectus for Future Reference.

Principal Secondary Market
Number of Amount of Offering Price
Units Bonds per Unit
(12/31/93)

California Trust 2,445 $1,685,000 $546.37
New York Trust 10,000 $5,155,000 $613.79
Pennsylvania Trust 4,000 $2,080,000 $623.99

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 29, 1994

<PAGE>

THE TRUST. The Trust consists of three separate unit
investment trusts designated California Trust, New York Trust and
Pennsylvania Trust (the "State Trusts"). Each State Trust has been formed
to preserve capital and to provide interest income (including, where
applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently
exempt from regular federal income tax under existing law through
investment in a fixed, diversified portfolio of long-term bonds (the
"Bonds") issued by or on behalf of the State for which such Trust is named
and political subdivisions, municipalities and public authorities thereof
and of Puerto Rico and its public authorities. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average
portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have
a dollar-weighted average portfolio maturity of more than ten years.
Although the Supreme Court has determined that Congress has the authority
to subject interest on bonds such as the Bonds in the Trust to regular
federal income taxation, existing law excludes such interest from federal
income tax. In addition, in the opinion of counsel to the Sponsor, the
interest income of each State Trust is exempt, to the extent indicated,
from state and local taxes when held by residents of the state where the
issuers of the Bonds in such State Trust are located. Such interest
income may, however, be subject to the federal corporate alternative
minimum tax and to state and local taxes in other jurisdictions. (See
"Description of Portfolios" 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 State Trusts contain bonds that were acquired at prices
which resulted in the portfolios 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 that provide for payment at maturity at par value, but do not
provide for the payment of current interest. 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. Some of the Bonds in the portfolio may have been purchased at
an aggregate premium over par. (See "Tax Status" in Part B of this
Prospectus.) Some of the Bonds in the Trust have been issued with
optional refunding or refinancing provisions ("Refunded Bonds") whereby
the issuer of the Bond has the right to call such Bond prior to its stated
maturity date (and other than pursuant to sinking fund provisions) and to
issue new bonds ("Refunding Bonds") in order to finance the redemption.
Issuers typically utilize refunding calls in order to take advantage of
lower interest rates in the marketplace. Some of these Refunded Bonds may
be called for redemption pursuant to pre-refunding provisions ("Pre-
Refunded Bonds") whereby the proceeds from the issue of the Refunding
Bonds are typically invested in government securities in escrow for the
benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of
this escrow. The issuers of Pre-Refunded Bonds must call such Bonds on
their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest
income with respect to them. For a list of those Bonds which are Pre-
Refunded Bonds, if any, as of the Evaluation Date, see "Notes to Financial
Statements" in this Part A. All of the Bonds in each State Trust were
rated "A" or better by Standard & Poor's Corporation or Moody's Investors
Service, Inc. at the time originally deposited in the State Trusts. 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 Trusts' investment 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 debt 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 fluctuation than coupon bonds in response to such
changes in interest rates. Each Unit represents a fractional undivided
interest in the principal and net income of each State Trust. The
principal amount of Bonds deposited in such State Trust per Unit is
reflected in the Summary of Essential Information. Each State Trust will
be administered as a distinct entity with separate certificates, expenses,
books and records. (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, or 5.820% of the net amount invested in
Bonds per Unit. In addition, accrued interest to the expected date of
settlement is added to the Public Offering Price. If Units of the
California Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $546.37 plus accrued interest of
$8.04 under the monthly distribution plan, $11.27 under the semi-annual
distribution plan and $11.27 under the annual distribution plan, for a
total of $554.41, $557.64 and $557.64, respectively. If Units of the New
York Trust had been purchased on the Evaluation Date, the Public Offering
Price per Unit would have been $613.79 plus accrued interest of $8.43
under the monthly distribution plan, $11.98 under the semi-annual
distribution plan and $11.94 under the annual distribution plan, for a
total of $622.22, $625.77 and $625.73, respectively. If Units of the
Pennsylvania Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $623.99 plus accrued interest of
$8.25 under the monthly distribution plan, $12.11 under the semi-annual
distribution plan and $12.11 under the annual distribution plan, for a
total of $632.24, $636.10 and $636.10, 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 "Summary of Essential
Information" and "Public Offering--Offering Price" in Part B of this
Prospectus.)

ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. The
rate of return on an investment in Units of the 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 upon the plan of distribution applicable to the Unit
purchased. A purchaser of a Unit in the secondary market will actually
receive distributions in accordance with the distribution plan chosen by
the prior owner of such Unit and may thereafter change the plan as
provided under "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-
annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of
this Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information.")

MARKET FOR UNITS. The Sponsor, although not obligated to do
so, presently maintains and intends to continue to maintain a secondary
market for the Units at prices based on the aggregate bid price of the
Bonds in the Trust portfolio. 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% of the Public Offering Price (5.820% of the net
amount invested) plus net accrued interest. If a market is not
maintained, a Certificateholder will be able to redeem his Units with the
Trustee at a price also based on 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 all
their regular interest distributions, and principal distributions, if any,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of
this Prospectus. 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.

For additional information regarding the Public Offering Price
and Estimated Current Return and Estimated Long Term Return for Units of
each State Trust, descriptions of interest and principal distributions,
repurchase and redemption of Units and other essential information
regarding the Trusts, please refer to the Summary of Essential Information
for the particular State Trust on one of the immediately succeeding pages.

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$1,685,000 $1.00 per Unit.
Number of Units .............2,445 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/2445 19.6 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$689.16 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $1,000,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$1,262,403+++ Mandatory Termination Date:
Divided by 2,445 Units ....$516.32 The earlier of December 31,
Plus Sales Charge of 5.5% 2037 or the disposition of the
of Public Offering Price $30.05 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$546.37+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $1.05 per $1,000; semi-
per Unit ..................$516.32+ annual plan $.60 per $1,000;
+++ and annual plan is $.35 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $15
Price per Unit ............$30.05++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$(142.79) Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# .........$40.45 $40.45 $40.45
Less estimated annual fees and
expenses ............................ 2.08 1.62 1.42
Estimated net annual interest ______ ______ ______
income (cash)# ......................$38.37 $38.83 $39.03
Estimated interest distribution# ...... 3.19 19.41 39.03
Estimated daily interest accrual# ..... .1065 .1078 .1084
Estimated current return#++ ........... 7.02% 7.11% 7.14%
Estimated long term return++ .......... 4.18% 4.27% 4.30%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$5,155,000 $1.00 per Unit.
Number of Units .............10,000 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/10000 8.7 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$515.50 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $4,000,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$5,800,286+++ Mandatory Termination Date:
Divided by 10,000 Units ...$580.03 The earlier of December 31,
Plus Sales Charge of 5.5% 2037 or the disposition of the
of Public Offering Price $33.76 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$613.79+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $.96 per $1,000; semi-
per Unit ..................$580.03+ annual plan $.50 per $1,000;
+++ and annual plan is $.32 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $15
Price per Unit ............$33.76++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$98.29 Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# ......... $45.58 $45.58 $45.58
Less estimated annual fees and
expenses ............................ 1.22 .83 .72
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $44.36 $44.75 $44.86
Estimated interest distribution# ...... 3.69 22.37 44.86
Estimated daily interest accrual# ..... .1232 .1243 .1246
Estimated current return#++ ........... 7.23% 7.29% 7.31%
Estimated long term return ++ ......... 3.33% 3.39% 3.41%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$2,080,000 $1.00 per Unit.
Number of Units .............4,000 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/4000 11.5 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$520.00 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $1,600,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$2,358,666+++ Mandatory Termination Date:
Divided by 4,000 Units ....$589.67 The earlier of December 31,
Plus Sales Charge of 5.5% 2037 or the disposition of the
of Public Offering Price $34.32 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$623.99+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $1.05 per $1,000; semi-
per Unit ..................$589.67+ annual plan $.60 per $1,000;
+++ and annual plan is $.35 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $15
Price per Unit ............$34.32++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$103.99 Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time.
Sponsor's Annual Fee: Maximum of
$.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# ......... $47.68 $47.68 $47.68
Less estimated annual fees and
expenses ............................ 1.57 1.19 1.04
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $46.11 $46.49 $46.64
Estimated interest distribution# ...... 3.84 23.24 46.64
Estimated daily interest accrual# ..... .1280 .1291 .1295
Estimated current return#++ ........... 7.39% 7.45% 7.47%
Estimated long term return ++ ......... 3.35% 3.41% 3.44%
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

<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 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 $8.04 monthly, $11.27 semi-
annually and $11.27 annually for the California Trust, $8.43
monthly, $11.98 semi-annually and $11.94 annually for the New York
Trust, and $8.25 monthly, $12.11 semi-annually and $12.11 annually
for the Pennsylvania Trust.

++ 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 from 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 accrual from original issue discount bonds, if any.

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1993

DESCRIPTION OF PORTFOLIOS

California Trust*

Each Unit in the California Trust consists of a 1/2495th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $689.16 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the California Trust consists of 8 issues of 7 issuers
located in California and 1 in Puerto Rico. Approximately 33.2% of the
Bonds are obligations of state and local housing authorities;
approximately 14.8% are hospital revenue bonds; and none were issued in
connection with the financing of nuclear generating facilities. None of
the Bonds are mortgage subsidy bonds. All of the Bonds 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. Eight issues representing $1,685,000 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:
Electric 1, Electric and Gas 1, Federally Insured Mortgage 3, Hospital 1,
Rail Transportation 1 and Water Development 1. For an explanation of the
significance of these factors see "The State Trusts--Portfolios" in Part B
of this Prospectus.

* Changes in the Trust Portfolio: From January 1, 1994 to March 24,
1994, the entire principal amount of the Bonds in portfolio no. 8
has been called and is no longer contained in the Trust.

<PAGE>

As of December 31, 1993, $560,000 (approximately 33.2% of the
aggregate principal amount of the Bonds) were original issue discount
bonds. Of these original issue discount bonds, $560,000 (approximately
33.2% 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. None of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 66.8% were purchased at
a premium and none were purchased at par. For an explanation of the
significance of these factors see "The Portfolios--Discount and Zero
Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the California 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.

<PAGE>

New York Trust*

Each Unit in the New York Trust consists of a 1/10000th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $515.50 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the New York Trust consists of 14 issues of 13 issuers
located in New York and 1 in Puerto Rico. None of the Bonds are
obligations of state and local housing authorities; approximately 38.4%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds are
mortgage subsidy bonds. All of the Bonds 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). One issue representing $500,000 of the
principal amount of the Bonds is a general obligation bond. All 13 of the
remaining issues representing $4,655,000 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: Bridge and Tunnel 1, Development
Corp. 1, Electric 1, Hospital 4, Public Building 1, Transit Facility 1,
University 3 and Urban Development Corp. 1. For an explanation of the
significance of these factors see "The State Trusts--Portfolios" in Part B
of this Prospectus.

* Changes in the Trust Portfolio: From January 1, 1994 to March 24,
1994, the entire principal amount of the Bonds in portfolio no. 7
has been called for redemption pursuant to pre-refunding provisions
and is no longer contained in the Trust.
<PAGE>

As of December 31, 1993, none of the aggregate principal amount of
the Bonds were original issue discount bonds. None of the Bonds in the
Trust were purchased at a "market" discount from par value at maturity,
100% were purchased at a premium and none were purchased at par. For an
explanation of the significance of these factors see "The Portfolios--
Discount and Zero Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the New York 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.

<PAGE>

Pennsylvania Trust

Each Unit in the Pennsylvania Trust consists of a 1/4000th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $520.00 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the Pennsylvania Trust consists of 8 issues of 7 issuers
located in Pennsylvania and 1 in Puerto Rico. None of the Bonds are
obligations of state and local housing authorities; approximately 51.9%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds in the
trust are mortgage subsidy bonds. All of the Bonds 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). One issue representing
$100,000 of the principal amount of the Bonds is a general obligation
bond. All 7 of the remaining issues representing $1,980,000 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:
Electric 1, Hospital 4, Pollution Control 1, and Water and Sewer 1. For
an explanation of the significance of these factors see "The State
Trusts--Portfolios" in Part B of this Prospectus.

None of the Bonds in the Pennsylvania 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.

<PAGE>
FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

California Trust

December 31, 1991 2,500 $623.22 $44.25 $44.84 $45.10 -0-
December 31, 1992 2,495 618.84 44.21 44.81 45.09 -0-
December 31, 1993 2,445 526.93 39.46 40.06 40.34 $80.16

New York Trust

December 31, 1991 10,000 $622.97 $45.72 $46.28 $46.51 -0-
December 31, 1992 10,000 629.51 45.60 46.27 46.47 -0-
December 31, 1993 10,000 591.77 44.59 45.07 45.21 $29.93

Pennsylvania Trust

December 31, 1991 4,000 $616.66 $45.72 $46.28 $46.54 -0-
December 31, 1992 4,000 585.49 45.66 46.23 46.49 $1.51
December 31, 1993 4,000 600.91 45.84 46.34 46.54 8.37

* 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.

<PAGE>
Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, Multi-State Series 34:

We have audited the accompanying statements of net assets, including the
portfolios, of Municipal Securities Trust, Multi-State Series 34
(comprising, respectively, the California Trust, New York Trust and
Pennsylvania Trust) as of December 31, 1993, 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, 1993, by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by management, 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 each of the respective
trusts constituting the Municipal Securities Trust, Multi-State Series 34
as of December 31, 1993, and the results of their operations and the
changes in their net assets for each of the years in the three year period
then ended in conformity with generally accepted accounting principles.

KPMG Peat Marwick

New York, New York
March 31, 1994
<PAGE>
<TABLE>

Statements of Net Assets

December 31, 1993
<CAPTION>
California New York Pennsylvania
Trust Trust Trust
<S> <C> <C> <C>
Investments in marketable
securities, at market value (cost
$1,259,461, $5,646,752 and
$2,342,275 respectively) $ 1,262,395 5,800,221 2,358,662

Excess of other assets over
total liabilities 25,942 117,447 44,961
----------- ----------- ----------

Net assets (2,445, 10,000 and
4,000 units of fractional
undivided interest outstanding,
$526.93, $591.77 and $600.91
per unit, respectively) $ 1,288,337 5,917,668 2,403,623
=========== =========== ==========

See accompanying notes to financial statements.
</TABLE>
<PAGE>

CALIFORNIA TRUST

Statements of Operations

Years ended December 31,
------- ---- --------------- --------
1993 1992 1991
-------- --------- ---------

Investment income - interest $ 105,725 120,646 119,965
--------- --------- ---------

Expenses:
Trustee's fees 3,457 3,566 2,145
Evaluator's fees 1,483 1,370 1,155
Sponsor's advisory fee 768 624 1,375
--------- --------- --------

Total expenses 5,708 5,560 4,675
--------- --------- --------

Investment income, net 100,017 115,086 115,290
--------- --------- --------

Realized and unrealized gain (loss)
on investments:
Net realized loss on
bonds sold or called (10,144) - (9)
Unrealized appreciation
(depreciation) for the year (11,154) (25,291) 50,864
--------- --------- --------

Net gain (loss)
on investments (21,298) (25,291) 50,855
--------- --------- ---------

Net increase in net
assets resulting
from operations $ 78,719 89,795 166,145
========= ========= =========

See accompanying notes to financial statements.
<PAGE>

NEW YORK TRUST

Statements of Operations

Years ended December 31,
--------- --- --------- ---------
1993 1992 1991
--------- --------- ---------

Investment income - interest $ 460,438 489,712 487,146
--------- --------- ---------

Expenses:
Trustee's fees 7,345 9,425 8,210
Evaluator's fees 1,483 1,370 1,155
Sponsor's advisory fee 2,343 2,500 1,375
--------- --------- ---------

Total expenses 11,171 13,295 10,740
--------- --------- ---------

Investment income, net 449,267 476,417 476,406
--------- --------- ---------

Realized and unrealized gain (loss)
on investments:
Realized loss on bonds (70,923) - -
sold or called
Unrealized appreciation
(depreciation) for the year (8,306) 48,170 249,141
--------- --------- ---------

Net gain (loss)
on investments (79,229) 48,170 249,141
--------- --------- ---------

Net increase in net
assets resulting
from operations $ 370,038 524,587 725,547
========= ========= =========

See accompanying notes to financial statements.
<PAGE>
<TABLE>
PENNSYLVANIA TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
--------- ----- --------------- ---------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Investment income - interest $ 192,794 195,735 195,602
--------- --------- ---------

Expenses:
Trustee's fees 4,089 4,614 3,443
Evaluator's fees 1,483 1,370 1,155
Sponsor's advisory fee 929 1,000 1,375
--------- --------- ---------

Total expenses 6,501 6,984 5,973
--------- --------- ---------

Investment income, net 186,293 188,751 189,629
--------- --------- ---------

Realized and unrealized gain (loss)
on investments:
Realized loss on bonds
sold or called (14,544) (2,748) -
Unrealized appreciation
(depreciation) for the year (3,327) (9,548) 89,659
--------- --------- ---------

Net gain (loss)
on investments (17,871) (12,296) 89,659
--------- --------- ---------

Net increase in net
assets resulting
from operations $ 168,422 176,455 279,288
========= ========= =========

See accompanying notes to financial statements.
</TABLE>
<PAGE>

<TABLE>
CALIFORNIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
---------------------------- ------------------
1993 1992 1991
---------- ----------- -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 100,017 115,086 115,290
Net realized loss on
bonds sold or called (10,144) - (9)
Unrealized appreciation
(depreciation) for the year (11,154) (25,291) 50,864
---------- ----------- -----------

Net increase in net
assets resulting
from operations 78,719 89,795 166,145
---------- ----------- -----------

Distributions to Certificateholders:
Investment income 97,415 110,712 111,086
Principal 196,577 - -

Redemptions:
Interest 699 82 -
Principal 29,707 3,039 -
---------- ----------- -----------

Total distributions
and redemptions 324,398 113,833 111,086
---------- ----------- -----------

Total increase (decrease) (245,679) (24,038) 55,059

Net assets at beginning of year 1,534,016 1,558,054 1,502,995
---------- ----------- -----------

Net assets at end of year (including
undistributed net investment
income of$34,830, $41,303, and
$37,011 respectively) $ 1,288,337 1,534,016 1,558,054
========== =========== ===========

See accompanying notes to financial statements.
</TABLE>
<PAGE>

<TABLE>
NEW YORK TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
----------- -- ----------- --- ----------
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 449,267 476,417 476,406
Realized loss on bonds
sold or called (70,923) - -
Unrealized appreciation
(depreciation) for the year (8,306) 48,170 249,141
----------- ----------- ----------

Net increase in net
assets resulting
from operations 370,038 524,587 725,547

Distributions to Certificateholders:
Investment income 448,185 - -
Principal 299,300 459,201 459,890
----------- ----------- ----------

Total distributions 747,485 459,201 459,890
----------- ----------- ----------

Total increase (decrease) (377,447) 65,386 265,657

Net assets at beginning of year 6,295,115 6,229,729 5,964,072
----------- ----------- ----------

Net assets at end of year (including
undistributed net investment
income of $117,382, $169,478,
and $152,262, respectively) $ 5,917,668 6,295,115 6,229,729
=========== =========== ==========

See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PENNSYLVANIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
--------------- ---------------------------
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 186,293 188,751 189,629
Realized loss on bonds
sold or called (14,544) (2,748) -
Unrealized appreciation
(depreciation) for the year (3,327) (9,548) 89,659
----------- ----------- ------------

Net increase in net
assets resulting
from operations 168,422 176,455 279,288
----------- ----------- ------------

Distributions to Certificateholders:
Investment income 184,468 183,899 184,110
Principal 33,480 6,040 -
----------- ----------- ------------

Total distributions 217,948 189,939 184,110
----------- ----------- ------------

Total increase (decrease) (49,526) (13,484) 95,178

Net assets at beginning of year 2,453,149 2,466,633 2,371,455
----------- ----------- ------------

Net assets at end of year (including
undistributed net investment
income of $44,957, $60,238, and
$57,656, respectively) $ 2,403,623 2,453,149 2,466,633
=========== =========== ============

See accompanying notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Notes to Financial Statements

December 31, 1993, 1992 and 1991

(1) Organization

Municipal Securities Trust, Multi-State Series 34 (Trust) was
organized on February 2, 1989 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 Standard & Poor's Corporation 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 period, 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 each state 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, 1993, 1992, and 1991.

The Trust Indenture and Agreement also requires each state Trust to
redeem units tendered. 50, 5 and 0 units were redeemed by the
California Trust during the years ended December 31, 1993, 1992, and
1991, respectively . No units have been redeemed since the inception of
the Trust for the New York or Pennsylvania Trusts.

(5) Net Assets

At December 31, 1993, the net assets of the Trust represented the
interests of Certificateholders as follows:

California New York Pennsylvania
Trust Trust Trust

Original cost to
Certificateholders $ 1,567,875 6,310,965 2,518,217
Less initial gross
underwriting commission (86,233) (347,103) (138,502)

1,481,642 5,963,862 2,379,715

Cost of securities sold or called(231,077) (317,110) (37,440)
Net unrealized appreciation 2,934 153,469 16,387
Undistributed net
investment income 34,830 117,382 44,957
Undistributed proceeds from
bonds sold or called 8 65 4

Total $ 1,288,337 5,917,668 2,403,623

The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 2,500, 10,000 and
4,000 units of fractional undivided interest of the California Trust,
New York Trust and Pennsylvania Trust, respectively, as of the date of
deposit.

Undistributed net investment income includes accumulated accretion of
original issue discount of $8,896 for the California Trust.
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

CALIFORNIA TRUST
Portfolio
December 31, 1993
<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 $ 250,000 Fresno Calif. Hlth. AAA 8.750% 2/01/01 @ 100 S.F. $ 269,898
Facs. Rev. Bonds 2/01/2015 2/01/95 @ 102 Ref.
(Fresno Cmmnty. Hosp.
& Med. Cntr.) 1985
Series A (AMBAC) (5)

2 250,000 Irvine Ranch Calif. BBB 8.250 8/15/09 @ 100 S.F. 279,860
Wtr. Dstrct. Joint 8/15/2023 8/15/98 @ 100 Ref.
Pwrs. Agncy. (Local
Agncy. Pool) Rev.
Bonds Issue II 1988

3 250,000 Sacramento Calif. AAA 8.875 12/01/03 @ 100 S.F. 277,215
Certs. of Part. 12/01/2012 6/01/95 @ 103 Ref.
(Sacramento Lt. Rail
Trans. Prjt.) 1985
Series (5)

4 250,000 San Diego Calif. AA3* 9.250 No Sinking Fund 277,340
Indus. Dev. Rev. 9/01/2020 9/01/95 @ 102 Ref.
Bonds 1985 Series A
(San Diego Gas &
Elec. Co.)

5 125,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 138,064
Auth. Pub. Ed. & 7/01/2012 7/01/95 @ 102 Ref.
Hlth. Facs. Rfndg.
Bonds 1985 Series E
(Guaranteed by the
Commonwlth. of P.R.)
(5)

6 160,000 Fresno Calif. AA* 0.000 6/01/98 @ 4.856 S.F. 5,142
Multi-Fam. Hsg. Rev. 12/01/2026 None
Bonds (FHA Insrd.
Mtg. Loan-Pleasant
Valley Pines Aprtmts.
Prjt.) 1985 Series

7 200,000 Modesto Calif. Mtg. BBB 0.000 6/01/96 @ 5.314 S.F. 8,516
Rev. Bonds (FHA 12/01/2025 6/01/00 @ 7.911 Ref.
Insrd. Mtg.
Loan-Stonebridge
Aprtmts. Prjt.) 1984
Series

8 200,000 Cnty. of Santa Clara AAA 0.000 1/01/13 @ 23.559 S.F. 6,360
(Calif.) Mtg. Rev. 7/01/2026 1/01/01 @ 6.518 Ref.
Bonds Series 1985B
(FHA Insrd. Mtg.
Loan-Macara Gardens
Prjt.)

--------- ---------
$ 1,685,000 $ 1,262,395
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

NEW YORK TRUST
Portfolio
December 31, 1993
<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 $ 105,000 Dorm. Auth. of the AAA 8.125% 7/01/08 @ 100 S.F. $ 122,191
State of N.Y. (City 7/01/2017 7/01/97 @ 102 Ref.
Univ.) Sys. Consol.
Rev. Bonds Series
1987A (5)

2 500,000 N.Y. Energy Rsrch. & AA2* 9.000 No Sinking Fund 551,155
Dev. Auth. Elec. Fac. 8/15/2020 8/15/95 @ 102 Ref.
Rev. Bonds 1985A (Con
Edison Co. of N.Y.
Inc. Prjt.)

3 145,000 N.Y. State Hsg. Finc. AAA 8.000 5/01/97 @ 100 S.F. 162,561
Agncy. State Univ. 11/01/2016 5/01/96 @ 102 Ref.
Constrctn. Rev. Bonds
Series 1986A (5)

4 500,000 N.Y. State Med. Care AAA 8.875 1/15/07 @ 100 S.F. 564,080
Facs. (Mt. Sinai 1/15/2026 1/15/96 @ 102 Ref.
Hosp.) 1985 Series C
FHA Insrd. Bonds (5)

5 500,000 N.Y. State Med. Care BBB+ 8.875 2/15/00 @ 100 S.F. 577,190
Facs. Finc. Agncy. 8/15/2007 8/15/97 @ 102 Ref.
Mental Hlth. Svs.
Facs. Imprvmt. Rev.
Refndg. Bonds 1987
Series A

6 500,000 N.Y. State Med. Care AA* 9.000 No Sinking Fund 536,930
Facs. Finc. Agncy. 2/15/2026 2/15/95 @ 102 Ref.
(Insrd. Hosp. & Nrsg.
Home) Insrd. Rev.
Bonds 1985 Series C

7 480,000 N.Y. State Med. Care AAA 9.875 2/15/94 @ 100 S.F. 496,416
Facs. Finc. Agncy. 2/15/2004 2/15/94 @ 102.5 Ref.
Insrd. Hosp. Mtg.
Rev. Bonds 1984
Series A (Montefiore
Med. Cntr.) (FHA
Insrd.) (5)

8 125,000 N.Y. State Urban Dev. BAA1* 8.125 1/01/09 @ 100 S.F. 146,818
Corp. Correctnl. 1/01/2014 1/01/98 @ 102 Ref.
Facs. Rev. Bonds 1988
Series E (5)

9 500,000 N.Y. City Gen. Oblig. A- 8.750 No Sinking Fund 597,120
Rev. Bonds 1988 11/01/2014 11/01/97 @ 101.5 Ref.
Series A (5)

10 250,000 Nassau Cnty. N.Y. A 8.250 7/01/01 @ 100 S.F. 294,560
Ind. Dev. Agncy. 7/01/2003 7/01/98 100 Ref.
Civic Fac. Rev. Bonds
(Hofstra Univ. Prjt.)
Series 1987 (5)

11 500,000 Metro. Trans. Auth. AAA 8.500 7/01/07 @ 100 S.F. 587,980
N.Y. Transit Facs. 7/01/2017 7/01/97 @ 102 Ref.
Rev. Bonds 1987
Series 1 (5)

12 500,000 Triborough Bridge & AAA 9.000% 1/01/03 @ 100 S.F. 553,165
Tunnel Auth. Cnvntn. (Cond.) 1/01/2011 7/01/95 @ 102 Ref.
Cntr. Prjt. Bonds
1985 Series D (5)

13 125,000 United Nations Dev. AAA* 7.875 1/01/07 @ 100 S.F. 140,638
Corp. of N.Y. Phase 2 7/01/2026 7/01/96 @ 102 Ref.
& 3 Sr. Lien 1986
Series A (5)

14 425,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 469,417
Auth. Pub. Ed. & 7/01/2012 7/01/95 @ 102 Ref.
Hlth. Facs. Rfndg.
Bonds 1985 Series E
(Guaranteed by the
Commonwlth. of P.R.)

--------- ---------
$ 5,155,000 $ 5,800,221
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

PENNSYLVANIA TRUST
Portfolio
December 31, 1993
<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 $ 230,000 Penn. Hghr. Ed. Facs. AA* 9.250% 7/01/02 @ 100 S.F. $ 255,916
Auth. Hosp. Rev. 7/01/2008 11/01/95 @ 102 Ref.
Rfndg. Bonds 1985B
Thomas Jefferson
Univ. Hosp.

2 250,000 Bucks Cnty. Penn. AAA 9.400 7/01/06 @ 100 S.F. 275,820
Hosp. Rev. Rfndg. 7/01/2014 7/01/95 @ 102 Ref.
Bonds (Franciscan
Hlth. Sys./St. Mary
Hosp. of Langhorne)
1985 Series
(BIGI/CX)

3 250,000 Lehigh Cnty. Penn. A1* 9.000 7/01/96 @ 100 S.F. 288,660
Genl. Purp. Auth. 7/01/2015 7/01/97 @ 102 Ref.
Hosp. Rev. Bonds
(Healtheast Inc.)
Series A 1987

4 350,000 Lehigh Cnty. Indus. A 9.375 No Sinking Fund 383,719
Dev. Auth. Poll. 7/01/2015 7/01/95 @ 102 Ref.
Cntrl. Rev. Bonds
(Penn. Pwr. & Lt. Co.
Prjt.) Series 1985A

5 350,000 Montgomery Cnty. AAA 9.375 12/01/03 @ 100 S.F. 427,704
Penn. Hghr. Ed. & 12/01/2019 12/01/97 @ 102 Ref.
Hlth. Auth. Hosp.
Rev. Bonds (The Bryn
Mawr Hosp. Prjt.)
Series 1987 (5)

6 100,000 Phil. Penn. Gen. AAA 8.250 2/15/02 @ 100 S.F. 111,771
Oblig. Rfndg. Bonds 2/15/2009 2/15/96 @ 102 Ref.
Series 1986
(Financial Guaranty)
(5)

7 350,000 Phil. Penn. Wtr. & AAA 9.100 No Sinking Fund 394,170
Swr. Rev. Bonds 1985 12/01/2003 12/01/95 @ 102 Ref.
Eleventh Series
Subseries A (5)

8 200,000 P.R. Pub. Bldgs. Auth AAA 8.875 No Sinking Fund 220,902
Pub. Ed. & Hlth. 7/01/2012 7/01/95 @ 102 Ref.
Facs. Rfndg. Bonds
1985 Series E
(Guaranteed by the
Commonwlth. of P.R.)
(5)

--------- ---------
$ 2,080,000 $ 2,358,662
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Footnotes to Portfolios

December 31, 1993

(1) All ratings are by Standard & Poor's Corporation, 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, 1993, the net unrealized appreciation of all the bonds
was comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 17,073 223,109 41,865
Gross unrealized depreciation (14,139) (69,640) (25,478)

Net unrealized appreciation $ 2,934 153,469 16,387

(4) The annual interest income, based upon bonds held at December 31, 1993,
(excluding accretion of original issue discount on zero-coupon bonds)
to the Municipal Securities Trust, Multi-State Series 34 is $98,906,
$455,875 and $190,750 for the California Trust, New York Trust and
Pennsylvania Trust, respectively.

(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.

(6) Bonds sold or called after December 31, 1993 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).

<PAGE>

Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

MUNICIPAL SECURITIES TRUST

MULTI-STATE SERIES 35
(MULTIPLIER PORTFOLIO)

Investors Should Read and Retain Both Parts
of This Prospectus for Future Reference.

Principal Secondary Market
Number of Amount of Offering Price
Units Bonds per Unit (12/31/93)

California Trust 2,500 $1,075,000 $508.73
New York Trust 7,740 $4,215,000 $651.49
Pennsylvania Trust 3,500 $1,885,000 $640.14

Prospectus Part A Dated April 29, 1994

<PAGE>

PUBLIC OFFERING PRICE. The secondary market Public Offering
Price of each Unit is equal to the aggregate bid price of the Bonds in the
Trust divided by the number of Units outstanding, plus a sales charge of
5.5% of the Public Offering Price, or 5.820% of the net amount invested in
Bonds per Unit. In addition, accrued interest to the expected date of
settlement is added to the Public Offering Price. If Units of the
California Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $508.73 plus accrued interest of
$8.26 under the monthly distribution plan, $11.29 under the semi-annual
distribution plan and $11.28 under the annual distribution plan, for a
total of $516.99, $520.02 and $520.01, respectively. If Units of the New
York Trust had been purchased on the Evaluation Date, the Public Offering
Price per Unit would have been $651.49 plus accrued interest of $8.36
under the monthly distribution plan, $11.97 under the semi-annual
distribution plan and $11.98 under the annual distribution plan, for a
total of $659.85, $663.46 and $663.47, respectively. If Units of the
Pennsylvania Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $640.14 plus accrued interest of
$8.92 under the monthly distribution plan, $12.46 under the semi-annual
distribution plan and $12.45 under the annual distribution plan, for a
total of $649.06, $652.60 and $652.59, 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 "Summary of Essential
Information" and "Public Offering--Offering Price" in Part B of this
Prospectus.)

ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. The
rate of return on an investment in Units of the Trust is measured in terms
of "Estimated Current Return" and "Estimated Long Term Return".

A schedule of cash flow projections is available from the
Sponsor upon request.

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: March 9, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$1,075,000 $1.00 per Unit.
Number of Units .............2,500 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/2500 6.6 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$430.00 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $1,000,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$1,201,883+++ Mandatory Termination Date:
Divided by 2,500 Units ....$480.75 The earlier of December 31,
Plus Sales Charge of 5.5% 2037 or the disposition of the
of Public Offering Price $27.98 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$508.73+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $1.05 per $1,000; semi-
per Unit ..................$480.75+ annual plan $.60 per $1,000;
+++ and annual plan is $.35 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $15
Price per Unit ............$27.98++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$78.73 Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# ......... $39.56 $39.56 $39.56
Less estimated annual fees and
expenses ............................ 1.80 1.45 1.32
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $37.76 $38.11 $38.24
Estimated interest distribution# ...... 3.14 19.05 38.24
Estimated daily interest accrual# ..... .1048 .1058 .1062
Estimated current return#++ ........... 7.42% 7.49% 7.52%
Estimated long term return++ .......... 3.14% 3.21% 3.22%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: March 9, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$4,215,000 $1.00 per Unit.
Number of Units .............7,740 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/7740 14.1 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$544.57 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $3,200,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$4,765,182+++ Mandatory Termination Date:
Divided by 7,740 Units ....$615.66 The earlier of December 31,
Plus Sales Charge of 5.5% 2037 or the disposition of the
of Public Offering Price $35.83 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$651.49+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $.96 per $1,000; semi-
per Unit ..................$615.66+ annual plan $.50 per $1,000;
+++ and annual plan is $.32 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $15
Price per Unit ............$35.83++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$106.92 Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# .........$47.85 $47.85 $47.85
Less estimated annual fees and
expenses ............................ 1.30 .90 .79
Estimated net annual interest ______ ______ ______
income (cash)# ......................$46.55 $46.95 $47.06
Estimated interest distribution# ...... 3.87 23.47 47.06
Estimated daily interest accrual# ..... .1293 .1304 .1307
Estimated current return#++ ........... 7.15% 7.21% 7.22%
Estimated long term return ++ ......... 3.60% 3.66% 3.68%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: March 9, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$1,885,000 $1.00 per Unit.
Number of Units .............3,500 Weighted Average Life to
Fractional Undivided Inter- Maturity: 12.4 Years.
est in Trust per Unit .....1/3500 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............$538.57 value of Trust is less than
Secondary Market Public $1,400,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust .......$2,117,262+++ The earlier of December 31,
Divided by 3,500 Units ....$604.93 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $35.21 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................$640.14+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.05 per $1,000; semi-
Repurchase Price annual plan $.60 per $1,000;
per Unit ..................$604.93+ and annual plan is $.35 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $15
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............$35.21++++ Bonds in excess of 50 issues
Difference between Public
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$101.57 Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# .........$48.24 $48.24 $48.24
Less estimated annual fees and
expenses ............................ 1.67 1.28 1.11
Estimated net annual interest ______ ______ ______
income (cash)# ......................$46.57 $46.96 $47.13
Estimated interest distribution# ...... 3.88 23.48 47.13
Estimated daily interest accrual# ..... .1293 .1304 .1309
Estimated current return#++ ........... 7.27% 7.34% 7.36%
Estimated long term return ++ ......... 3.59% 3.65% 3.68%
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

<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.

+ Plus accrued interest to expected date of settlement (approximately
five business days after purchase) of $8.26 monthly, $11.29 semi-
annually and $11.28 annually for the California Trust, $8.36
monthly, $11.97 semi-annually and $11.98 annually for the New York
Trust, and $8.92 monthly, $12.46 semi-annually and $12.45 annually
for the Pennsylvania Trust.

++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.

# Does not include accrual from original issue discount bonds, if any.

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1993

DESCRIPTION OF PORTFOLIOS

California Trust

Each Unit in the California Trust consists of a 1/2500th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $430 of principal amount of the Bonds currently held in the
Trust. 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. The
portfolio of the California Trust consists of 5 issues of 4 issuers
located in California and 1 in Puerto Rico. None of the Bonds are
obligations of state and local housing authorities; approximately 65.1%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds are
mortgage subsidy bonds. All of the Bonds 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. Five issues representing $1,075,000 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: Education 1, Hospital 3 and
Public Building 1. For an explanation of the significance of these
factors see "The State Trusts--Portfolios" in Part B of this Prospectus.

None of the Bonds in the California 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.

<PAGE>

New York Trust*

Each Unit in the New York Trust consists of a 1/7740th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $544.57 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the New York Trust consists of 10 issues of 9 issuers located
in New York and 1 in Puerto Rico. Approximately 9.5% of the Bonds are
obligations of state and local housing authorities; approximately 21.4%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds are
mortgage subsidy bonds. All of the Bonds 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). One issue representing $515,000 of the
principal amount of the Bonds is a general obligation bond. All 9 of the
remaining issues representing $3,700,000 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: Bridge and Tunnel Authority 1,
Dormitory Authority 2, Electric 1, Federally Insured Mortgage 1,
Hospital 2, Public Buildings 1 and Transit Authority 1. For an
explanation of the significance of these factors see "The State Trusts--
Portfolios" in Part B of this Prospectus.

* Changes in the Trust Portfolio: From January 1, 1993 to April 2,
1993, the entire principal amount of the Bonds in portfolio no. 11
has been called and is no longer contained in the Trust.

<PAGE>

As of December 31, 1993, none of the aggregate principal amount of
the Bonds were original issue discount bonds. None of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, 100% were purchased at a premium and
none were purchased at par. For an explanation of the significance of
these factors see "The Portfolios--Discount and Zero Coupon Bonds" in
Part B of this Prospectus.

None of the Bonds in the New York 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.

<PAGE>

Pennsylvania Trust

Each Unit in the Pennsylvania Trust consists of a 1/3500th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $538.57 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the Pennsylvania Trust consists of 7 issues of 6 issuers
located in Pennsylvania and 1 in Puerto Rico. None of the Bonds are
obligations of state and local housing authorities; approximately 47.7%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds in the
trust are mortgage subsidy bonds. All of the Bonds 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. Seven issues representing $1,885,000 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:
Hospital 3, Pollution Control Revenue 1, Pooled Loans 1, Public
Buildings 1 and Resource Recovery 1. For an explanation of the
significance of these factors see "The State Trusts--Portfolios" in Part B
of this Prospectus.

None of the Bonds in the Pennsylvania 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.

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

California Trust

December 31, 1991 2,500 $629.64 $45.96 $46.62 -0- -0-
December 31, 1992 2,500 618.00 45.84 46.49 -0- -0-
December 31, 1993 2,500 491.46 39.40 39.98 -0- $120.28

New York Trust

December 31, 1991 8,000 $640.69 $46.20 $46.80 $47.01 -0-
December 31, 1992 8,000 646.18 46.08 46.76 46.96 -0-
December 31, 1993 7,740 627.40 46.39 46.90 47.03 $12.75

Pennsylvania Trust

December 31, 1991 3,500 $621.44 $46.08 $46.76 $47.01 -0-
December 31, 1992 3,500 627.24 46.08 46.70 46.97 $1.44
December 31, 1993 3,500 615.93 46.26 46.81 47.05 8.06

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, Multi-State Series 35:

We have audited the accompanying statements of net assets, including the
portfolios, of Municipal Securities Trust, Multi-State Series 35
(comprising, respectively, the California Trust, New York Trust and
Pennsylvania Trust) as of December 31, 1993, 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, 1993, by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by management, 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 each of
the respective trusts constituting the Municipal Securities Trust,
Multi-State Series 35 as of December 31, 1993, and the results of
their operations and the changes in their net assets for each of the
years in the three year period then ended in conformity with generally
accepted accounting principles.

KPMG Peat Marwick

New York, New York
March 31, 1994
<PAGE>
<TABLE>

Statements of Net Assets

December 31, 1993
<CAPTION>
California New York Pennsylvania
Trust Trust Trust
------------- ------------ ------------
<S> <C> <C> <C>
Investments in marketable
securities, at market value (cost
$1,198,190, $4,523,624 and
$2,041,170, respectively) $ 1,201,869 4,767,444 2,117,261

Excess of other assets over
total liabilities 26,896 88,710 38,624
------------- ------------ ------------

Net assets (2,500, 7,740 and
3,500 units of fractional
undivided interest outstanding,
$491.51, $627.41 and $615.97
per unit, respectively) $ 1,228,765 4,856,154 2,155,885
============= ============ ============

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
CALIFORNIA TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
---------- --- ---------- -------------
1993 1992 1991
---------- ---------- ---------
<S> <C> <C> <C>
Investment income - interest $ 106,230 125,287 124,607
---------- ---------- ---------

Expenses:
Trustee's fees 3,433 3,723 2,329
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 514 621 1,167
---------- ---------- ---------

Total expenses 5,316 5,714 4,651
---------- ---------- ---------

Investment income, net 100,914 119,573 119,956
---------- ---------- ---------

Realized and unrealized gain (loss)
on investments:
Realized loss on
bonds sold or called (19,618) - (113)
Unrealized appreciation
(depreciation) for the year 1,900 (33,580) 33,320
---------- ---------- ---------

Net gain (loss)
on investments (17,718) (33,580) 33,207
---------- ---------- ---------

Net increase in net
assets resulting
from operations $ 83,196 85,993 153,163
========== ========== =========

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>

NEW YORK TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
-----------------------------------------
1993 1992 1991
-----------------------------------------
<S> <C> <C> <C>

Investment income - interest $ 378,299 395,905 393,862
---------- -------- ----------

Expenses:
Trustee's fees 6,614 8,398 7,108
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 2,021 2,000 1,167
---------- -------- -----------

Total expenses 10,004 11,768 9,430
---------- -------- -----------

Investment income, net 368,295 384,137 384,432
---------- -------- -----------

Realized and unrealized gain (loss)
on investments
Realized loss on bonds
sold or called (32,754) - -
Unrealized appreciation
(depreciation) for the year (16,311) 30,467 191,751
---------- -------- -----------

Net gain (loss) on investments (49,065) 30,467 191,751
---------- -------- -----------

Net increase in net
assets resulting
from operations $ 319,230 414,604 576,183
========== ======== ===========

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
PENNSYLVANIA TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
------------- --- ------------ --- ------------
1993 1992 1991
------------- ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 170,576 173,823 170,561
------------- ------------ ------------

Expenses:
Trustee's fees 4,052 4,263 3,084
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 891 875 1,167
------------- ------------ ------------

Total expenses 6,312 6,508 5,406
------------- ------------ ------------

Investment income, net 164,264 167,315 165,155
------------- ------------ ------------

Realized and unrealized gain (loss)
on investments:
Realized loss on
bonds sold or called (12,651) (2,228) -
Unrealized appreciation
for the year 16 22,678 50,337
------------- ------------ ------------

Net gain (loss) on investments (12,635) 20,450 50,337
------------- ------------ ------------

Net increase in net
assets resulting
from operations $ 151,629 187,765 215,492
============= ============ ============

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>

CALIFORNIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
-------------- -- ------------- ---------------
1993 1992 1991
-------------- ------------- ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 100,914 119,573 119,956
Net realized loss on
bonds sold or called (19,618) - (113)
Unrealized appreciation
(depreciation) for the year 1,900 (33,580) 33,320
-------------- ------------- ------------

Net increase in net
assets resulting
from operations 83,196 85,993 153,163

Distributions to Certificateholders:
Investment income 98,868 114,959 115,261
Principal 300,701 - -
-------------- ------------- ------------

Total increase (decrease) (316,373) (28,966) 37,902

Net assets at beginning of year 1,545,138 1,574,104 1,536,202
-------------- ------------- ------------

Net assets at end of year (including
undistributed net investment
income of$26,882, $42,542, and
$37,928, respectively) $ 1,228,765 1,545,138 1,574,104
============== ============= ============

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
NEW YORK TRUST

Statements of Changes in Net Assets

Years ended December 31,
------------ ------------ ---------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 368,295 384,137 384,432
Realized loss on bonds
sold or called (32,754) - -
Unrealized appreciation
(depreciation) for the year (16,311) 30,467 191,751
------------ ------------ ------------

Net increase in net
assets resulting
from operations 319,230 414,604 576,183

Distributions to Certificateholders:
Investment income 363,315 370,669 371,449
Principal 102,000 - -
Redemptions:
Interest 6,003 - -
Principal 161,196 - -
------------ ------------ ------------

Total distributions
and redemptions 632,514 370,669 371,449
------------ ------------ ------------

Total increase (decrease) (313,284) 43,935 204,734

Net assets at beginning of year 5,169,438 5,125,503 4,920,769
------------ ------------ ------------

Net assets at end of year (including
undistributed net investment
income o$90,972, $132,576, and
$119,108, respectively) $ 4,856,154 5,169,438 5,125,503
============ ============ ============

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
PENNSYLVANIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
------------ -- ------------- ---------------
1993 1992 1991
------------ ------------- ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 164,264 167,315 165,155
Net realized loss on
bonds sold or called (12,651) (2,228) -
Unrealized appreciation
for the year 16 22,678 50,337
------------ ------------- ------------

Net increase in net
assets resulting
from operations 151,629 187,765 215,492
------------ ------------- ------------

Distributions to Certificateholders:
Investment income 162,884 162,411 162,520
Principal 28,210 5,040 -
------------ ------------- ------------

Total distributions 191,094 167,451 162,520
------------ ------------- ------------

Total increase (decrease) (39,465) 20,314 52,972

Net assets at beginning of year 2,195,350 2,175,036 2,122,064
------------ ------------- ------------

Net assets at end of year (including
undistributed net investment
income of$38,622, $52,052, and
$48,977, respectively) $ 2,155,885 2,195,350 2,175,036
============ ============= ============

See accompanying notes to financial statements.
</TABLE>

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Notes to Financial Statements

December 31, 1993, 1992 and 1991

(1) Organization

Municipal Securities Trust, Multi-State Series 35 (Trust) was
organized on March 9, 1989 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

Investments are carried at market value which is determined by
either Standard & Poor's Corporation 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 period, 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 by the
Internal Revenue Code.

(4) Trust Administration

The fees and expenses of each state 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).

See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the periods
ended December 31, 1993, 1992, and 1991.

The Trust Indenture and Agreement also requires each state Trust to
redeem units tendered. No units have been redeemed during the years
ended 1993, 1992, and 1991 by the California Trust and the Pennsylvania
Trust. 260 units were redeemed by the New York Trust, during the year
ended December 31, 1993. No units were redeemed by the New York Trust
during 1992 and 1991.

(5) Net Assets

At December 31, 1993, the net assets of the Trust represented the
interests of Certificateholders as follows:

California New York Pennsylvania
Trust Trust Trust

Original cost to
Certificateholders $ 1,588,177 5,054,742 2,193,293
Less initial gross
underwriting commission (87,350) (278,011) (120,631)

1,500,827 4,776,731 2,072,662

Cost of securities sold or called (302,637) (253,107) (31,492)
Net unrealized appreciation 3,679 243,820 76,091
Undistributed net
investment income 26,882 90,972 38,623
Undistributed proceeds (Distributions
in excess of proceeds) from bonds
sold or called 14 (2,262) 1

Total $ 1,228,765 4,856,154 2,155,885

The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 2,500, 8,000 and
3,500 units of fractional undivided interest of the California Trust,
New York Trust and Pennsylvania Trust, respectively, as of the date of
deposit.
<PAGE>

<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

CALIFORNIA TRUST
Portfolio
December 31, 1993

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 $ 250,000 Calif. Ed. Facs. AAA 9.200% 10/01/01 @ 100 S.F. $ 280,728
Auth. Rev. Bonds 10/01/2015 10/01/95 @ 102 Ref.
(Univ. of So. Calif.
Prjt.) 1985 First
Series (5)

2 200,000 Glendale Calif. Hosp. AAA 10.375 3/01/05 @ 100 S.F. 220,510
Rev. Bonds (Adventist 3/01/2014 3/01/95 @ 102 Ref.
Hlth. Sys. West)
Series 1984A (MBIA)
(5)

3 250,000 Santa Rosa Calif. AA 9.000 12/01/06 @ 100 S.F. 277,508
Kaiser Permanente 12/01/2015 12/01/95 @ 102 Ref.
Rev. Bonds Series
1985 A

4 250,000 Tracy Cnty. Calif. A+ 8.625 1/01/03 @ 100 S.F. 285,059
Hosp. Dstrct. Hosp. 1/01/2018 1/01/97 @ 102 Ref.
Rev. Bonds, Certs. of
Part. 1987 Series A
(Tracy Cmmnty. Mem.
Hosp.) (5)

5 125,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 138,064
Auth. Pub. Ed. & 7/01/2012 7/01/95 @ 102 Ref.
Hlth. Facs. Rfndg.
Bonds 1985 Series E
(Guaranteed by the
Commonwlth. of P.R.)
(5)

--------- ---------
$ 1,075,000 $ 1,201,869
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

NEW YORK TRUST

Portfolio
December 31, 1993

2 100,000 Dorm. Auth. of the AAA 8.125 7/01/08 @ 100 S.F. 116,372
State of N.Y. (City 7/01/2017 7/01/97 @ 102 Ref.
Univ.) Sys. Consol.
Rev. Bonds Series
1987A (5)

3 500,000 N.Y. Energy Rsrch. & AA2 9.000 No Sinking Fund 551,155
Dev. Auth. Elec. Fac. 8/15/2020 8/15/95 @ 102 Ref.
Rev. Bonds 1985A (Con
Edison Co. of N.Y.
Inc. Prjt.)

4 500,000 N.Y. State Med. Care AAA 8.875 7/15/02 @ 100 S.F. 564,080
Facs. (Mt. Sinai 1/15/2026 1/15/96 @ 102 Ref.
Hosp.) 1985 Series C
FHA Insrd. Bonds (5)

5 400,000 N.Y. State Med. Care AA 9.000 No Sinking Fund 429,544
Facs. Inc. Agncy. 2/15/2026 2/15/95 @ 102 Ref.
(Insrd. Hosp. & Nrsg.
Home) Insrd. Rev.
Bonds 1985 Series C

6 515,000 N.Y. City Gen. Oblig. AAA 8.750 No Sinking Fund 615,034
Bonds 1987 Series A 11/01/2017 11/01/97 @ 101.5 Ref.
(5)

7 400,000 N.Y. City Hsg. Dev. A+ 9.625 7/01/97 @ 100 S.F 463,640
Corp. Multi-Fam. Hsg. 1/01/2019 7/01/97 @ 102 Ref.
(FHA Insrd. Prjt.
Loans) 1987 Series A

8 500,000 Metro. Trans. Auth. AAA 8.500 7/01/06 @ 100 S.F. 569,660
N.Y. Transit Facs. 7/01/2011 7/01/96 @ 102 Ref.
Svc. Cntrct. Bonds
1986 Series G (5)

9 495,000 Triborough Bridge & AAA* 9.000 1/01/03 @ 100 S.F. 547,633
Tunnel Auth. Cnvntn. (Cond.) 1/01/2011 7/01/95 @ 102 Ref.
Cntr. Prjt. Bonds
1985 Series D (5)

10 305,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 336,876
Auth. Pub. Ed. & 7/01/2012 7/01/95 @ 102 Ref.
Hlth. Facs. Rfndg.
Bonds 1985 Series E
(Guaranteed by the
Commonwlth. of P.R.)
(5)
--------- ---------

$ 4,215,000 $ 4,767,444
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

PENNSYLVANIA TRUST

Portfolio
December 31, 1993

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 $ 210,000 Delaware Cnty. Indus. AA3* 8.100% 12/01/06 @ 100 S.F. $ 233,255
Dev. Auth.
(Penn.) Rfndg. Rev. 12/01/2013 12/01/95 @ 104 Ref.
Bonds (Resource
Recovry. Prjt.)
Series 1988A
(Security
Pacific Letter of
Credit)
2 250,000 Emmaus Penn. Gen. AAA 7.900 No Sinking Fund 288,930
Auth. Local Gvnmt. 5/15/2018 3/15/99 @ 100 Ref.
Rev. Bonds (Bond Pool
Prgm.) Series 1988F
(BIG)

3 350,000 Lehigh Cnty. Indus. A 9.375 No Sinking Fund 383,719
Dev. Auth. Poll. 7/01/2015 7/01/95 @ 102 Ref.
Cntrl. Rev. Bonds
(Penn. Pwr. & Lt. Co.
Prjt.) Series 1985A

4 350,000 Monroeville Hosp. AAA 9.700 10/01/01 @ 100 S.F. 394,555
Auth. Allegheny Cnty. 10/01/2013 10/01/95 @ 102 Ref.
Penn. Hosp. Rev.
Bonds (Forbes Hlth.
Sys.) 1985 Series A
(5)

5 350,000 Northeastern Penn. A1* 8.375 7/01/00 @ 100 S.F. 399,977
Hosp. Auth. (Luzerne 7/01/2006 7/01/97 @ 102 Ref.
Cnty. Penn.) Hosp.
Rev. Bonds
(Wilkes-Barre Gen.
Hosp.) 1987, Series B

6 200,000 Scranton-Lakawanna A- 10.250 10/01/97 @ 100 S.F. 223,536
Penn. Hlth. & Welfare 10/01/2003 10/01/95 @ 100 Ref.
Auth. Univ. Rev.
Rfndg. Bonds (Univ.
of Scranton Prjt.)
Series 1985 (5)

7 175,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 193,289
Auth. Pub. Ed. & 7/01/2012 7/01/95 @ 102 Ref.
Hlth. Facs. Rfndg.
Bonds Series E
(Guaranteed by the
Commonwlth. of P.R.)
(5)
--------- ---------
$ 1,885,000 $ 2,117,261
========= =========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Footnotes to Portfolios

December 31, 1993

(3) At December 31, 1993, the net unrealized appreciation of all the bonds
was comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 18,341 247,732 93,020
Gross unrealized depreciation (14,662) (3,912) (16,929)

Net unrealized appreciation $ 3,679 243,820 76,091

(4) The annual interest income, based upon bonds held at December 31,
1993, (excluding accretion of original issue discount on zero-coupon bonds)
to the Municipal Securities Trust, Multi-State Series 35 is $98,907,
$370,432 and $168,865 for the California Trust, New York Trust and
Pennsylvania Trust, respectively.

(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.

(6) Bonds sold or called after December 31, 1993 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.

Note: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

MUNICIPAL SECURITIES TRUST

MULTI-STATE SERIES 36
(MULTIPLIER PORTFOLIO)

Investors Should Read and Retain Both Parts
of This Prospectus for Future Reference.

Principal Secondary Market
Number of Amount of Offering Price
Units Bonds per Unit (12/31/93)

California Trust 2,500 $2,500,000 $635.25
New York Trust 7,897 $4,250,000 $635.52
Pennsylvania Trust 3,500 $1,880,000 $625.59

Prospectus Part A Dated April 29, 1994

<PAGE>

PUBLIC OFFERING PRICE. The secondary market Public Offering
Price of each Unit is equal to the aggregate bid price of the Bonds in the
Trust divided by the number of Units outstanding, plus a sales charge of
5.5% of the Public Offering Price, or 5.820% of the net amount invested in
Bonds per Unit. In addition, accrued interest to the expected date of
settlement is added to the Public Offering Price. If Units of the
California Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $635.25 plus accrued interest of
$8.49 under the monthly distribution plan, $12.21 under the semi-annual
distribution plan and $12.21 under the annual distribution plan, for a
total of $643.74, $647.46 and $647.46, respectively. If Units of the New
York Trust had been purchased on the Evaluation Date, the Public Offering
Price per Unit would have been $635.52 plus accrued interest of $8.56
under the monthly distribution plan, $12.22 under the semi-annual
distribution plan and $12.23 under the annual distribution plan, for a
total of $644.08, $647.74 and $647.75, respectively. If Units of the
Pennsylvania Trust had been purchased on the Evaluation Date, the Public
Offering Price per Unit would have been $625.59 plus accrued interest of
$8.56 under the monthly distribution plan, $12.20 under the semi-annual
distribution plan and $12.20 under the annual distribution plan, for a
total of $634.15, $637.79 and $637.79, 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 "Summary of Essential
Information" and "Public Offering--Offering Price" in Part B of this
Prospectus.)

ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. The
rate of return on an investment in Units of the Trust is measured in terms
of "Estimated Current Return" and "Estimated Long Term Return".

A schedule of cash flow projections is available from the
Sponsor upon request.

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: May 11, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$2,500,000 $1.00 per Unit.
Number of Units .............2,500 Weighted Average Life
Fractional Undivided Inter- to Maturity: 20.4 Years.
est in Trust per Unit .....1/2500 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............$1,000.00 value of Trust is less than
Secondary Market Public $1,000,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust .......$1,500,778+++ The earlier of December 31,
Divided by 2,500 Units ....$600.31 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $34.94 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................$635.25+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.05 per $1,000; semi-
Repurchase Price annual plan $.60 per $1,000;
per Unit ..................$600.31+ and annual plan is $.35 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $15
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............$34.94++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Bear, Stearns & Co.
Unit Premium/(Discount) ...$(364.75) Inc.
Evaluation Time: 4:00 p.m.
New York Time. Sponsor's Annual Fee: Maximum of
$.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# .........$47.22 $47.22 $47.22
Less estimated annual fees and
expenses ............................ 2.43 1.82 1.53
Estimated net annual interest ______ ______ ______
income (cash)# ......................$44.79 $45.40 $45.69
Estimated interest distribution# ...... 3.73 22.70 45.69
Estimated daily interest accrual# ..... .1244 .1261 .1269
Estimated current return#++ ........... 7.05% 7.15% 7.19%
Estimated long term return++ .......... 4.13% 4.22% 4.27%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: May 11, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$4,250,000 $1.00 per Unit.
Number of Units .............7,897 Weighted Average Life
Fractional Undivided Inter- to Maturity: 9.1 Years.
est in Trust per Unit .....1/7897 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............$538.18 value of Trust is less than
Secondary Market Public $3,200,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust .......$4,742,704 The earlier of December 31,
Divided by 7,897 Units ....$600.57 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $34.95 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................$635.52+ 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 ..................$600.57+ 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 ............$34.95++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Bear, Stearns & Co.
Unit Premium/(Discount) ...$97.34 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# .........$47.89 $47.89 $47.89
Less estimated annual fees and
expenses ............................ 1.30 .90 .79
Estimated net annual interest ______ ______ ______
income (cash)# ......................$46.59 $46.99 $47.10
Estimated interest distribution# ...... 3.88 23.49 47.10
Estimated daily interest accrual# ..... .1294 .1305 .1308
Estimated current return#++ ........... 7.33% 7.39% 7.41%
Estimated long term return ++ ......... 3.09% 3.16% 3.18%
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

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993

Date of Deposit: May 11, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ...$1,880,000 $1.00 per Unit.
Number of Units .............3,500 Weighted Average Life
Fractional Undivided Inter- to Maturity: 11.9 Years.
est in Trust per Unit .....1/3500 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............$537.14 value of Trust is less than
Secondary Market Public $1,400,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust .......$2,069,139+++ The earlier of December 31,
Divided by 3,500 Units ....$591.18 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $34.41 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................$625.59+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.05 per $1,000; semi-
Repurchase Price annual plan $.60 per $1,000;
per Unit ..................$591.18+ and annual plan is $.35 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $15
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............$34.41++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Bear, Stearns & Co.
Unit Premium/(Discount) ...$88.45 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# .........$48.21 $48.21 $48.21
Less estimated annual fees and
expenses ............................ 1.67 1.28 1.11
Estimated net annual interest ______ ______ ______
income (cash)# ......................$46.54 $46.93 $47.10
Estimated interest distribution# ...... 3.87 23.46 47.10
Estimated daily interest accrual# ..... .1292 .1303 .1308
Estimated current return#++ ........... 7.44% 7.50% 7.53%
Estimated long term return ++ ......... 3.67% 3.73% 3.76%
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

<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.

+ Plus accrued interest to expected date of settlement (approximately
five business days after purchase) of $8.49 monthly, $12.21 semi-
annually and $12.21 annually for the California Trust, $8.56
monthly, $12.22 semi-annually and $12.23 annually for the New York
Trust, and $8.56 monthly, $12.20 semi-annually and $12.20 annually
for the Pennsylvania Trust.

++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.

# Does not include accrual from original issue discount bonds, if any.

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1993

DESCRIPTION OF PORTFOLIOS

California Trust

Each Unit in the California Trust consists of a 1/2500th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $1,000 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the California Trust consists of 7 issues of 6 issuers
located in California and 1 in Puerto Rico. Approximately 47.6% of the
Bonds are obligations of state and local housing authorities;
approximately 22.2% are hospital revenue bonds; and none were issued in
connection with the financing of nuclear generating facilities. None of
the Bonds are mortgage subsidy bonds. All of the Bonds 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. All seven issues representing $2,500,000 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:
Federally Insured Mortgage 1, Hospital 2, Power 1, Public Buildings 1,
University 1 and Water 1. For an explanation of the significance of these
factors see "The State Trusts--Portfolios" in Part B of this Prospectus.

As of December 31, 1993, $1,190,000 (approximately 47.6% of the
aggregate principal amount of the Bonds) were original issue discount
bonds. Of these original issue discount bonds, $1,190,000 (approximately
47.6% 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. None of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 52.4% were purchased at
a premium and none were purchased at par. For an explanation of the
significance of these factors see "The Portfolios--Discount and Zero
Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the California 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.

<PAGE>

New York Trust*

Each Unit in the New York Trust consists of a 1/7897th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $538.18 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the New York Trust consists of 9 issues of 8 issuers located
in New York and 1 in Puerto Rico. None of the Bonds are obligations of
state and local housing authorities; approximately 34% are hospital
revenue bonds; and none were issued in connection with the financing of
nuclear generating facilities. None of the Bonds are mortgage subsidy
bonds. All of the Bonds 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). One issue representing $500,000 of the principal
amount of the Bonds is a general obligation bond. All 8 of the remaining
issues representing $3,750,000 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: Bridge and Tunnel Authority 1, Commuter
Facilities 1, Dormitory Authority 1, Electric 1, Hospital 3 and Public
Buildings 1. For an explanation of the significance of these factors see
"The State Trusts--Portfolios" in Part B of this Prospectus.

* Changes in the Trust Portfolio: From January 1, 1994 to March 24,
1994, $15,000 of the principal amount of the Bonds in portfolio no.
3 has been called and is no longer contained in the Trust. 20 Units
have been redeemed from the Trust.

<PAGE>

As of December 31, 1993, none of the Bonds were original issue
discount bonds. None of the aggregate principal amount of the Bonds in
the Trust were purchased at a "market" discount from par value at
maturity, 100% were purchased at a premium and none were purchased at par.
For an explanation of the significance of these factors see "The
Portfolios--Discount and Zero Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the New York 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.

<PAGE>

Pennsylvania Trust

Each Unit in the Pennsylvania Trust consists of a 1/3500th undivided
interest in the principal and net income of the Trust in the ratio of one
Unit for each $537.14 of principal amount of the Bonds currently held in
the Trust. 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. The
portfolio of the Pennsylvania Trust consists of 6 issues of 5 issuers
located in Pennsylvania and 1 in Puerto Rico. None of the Bonds are
obligations of state and local housing authorities; approximately 32.2%
are hospital revenue bonds; and none were issued in connection with the
financing of nuclear generating facilities. None of the Bonds are
mortgage subsidy bonds. All of the Bonds 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. Six issues representing $1,880,000 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: Hospital 1, Life Care 1,
Pollution Control Revenue 1, Pooled Loan 1, Public Buildings 1, and Water
and Sewer 1. For an explanation of the significance of these factors see
"The State Trusts--Portfolios" in Part B of this Prospectus.

As of December 31, 1993, none of the Bonds were original issue
discount bonds. The market value of Zero Coupon Bonds is subject to
greater fluctuations than coupon bonds in response to changes in interest
rates. None of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, 100% were purchased at a premium and
none were purchased at par. For an explanation of the significance of
these factors see "The Portfolios--Discount and Zero Coupon Bonds" in
Part B of this Prospectus.

None of the Bonds in the Pennsylvania 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.

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

California Trust

December 31, 1991 2,500 $620.63 $44.88 $45.54 $45.79 -0-
December 31, 1992 2,500 612.22 44.76 45.41 45.68 -0-
December 31, 1993 2,500 611.73 44.76 45.38 45.68 -0-

New York Trust

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, 1991 8,000 $635.27 $46.20 $46.80 $47.01 -0-
December 31, 1992 8,000 636.95 46.08 46.78 46.98 -0-
December 31, 1993 7,897 612.53 46.48 70.43 47.10 -0-

Pennsylvania Trust

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, 1991 3,500 $614.29 $46.08 $46.72 $47.01 -0-
December 31, 1992 3,500 612.78 46.08 46.68 46.94 $1.47
December 31, 1993 3,500 602.85 46.26 46.79 47.01 -0-

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Municipal Securities Trust, Multi-State Series 36:

We have audited the accompanying statements of net assets, including the
portfolios, of Municipal Securities Trust, Multi-State Series 36
(comprising, respectively, the California Trust, New York Trust and
Pennsylvania Trust) as of December 31, 1993, 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, 1993, by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant
estimates made by management, 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 each of the respective
trusts constituting the Municipal Securities Trust, Multi-State Series 36
as of December 31, 1993, and the results of their operations and the
changes in their net assets for each of the years in the three year
period then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick

New York, New York
March 31, 1994
<PAGE>
<TABLE>

Statements of Net Assets

December 31, 1993
<CAPTION>
California New York Pennsylvania
Trust Trust Trust
<S> <C> <C> <C>
Investments in marketable
securities, at market value (cost
$1,496,823, $4,610,914 and
$2,055,150, respectively) $ 1,500,778 4,746,018 2,069,117

Excess of other assets over
total liabilities 28,556 91,149 40,853
----------- ------------ ------------

Net assets (2,500, 7,897 and
3,500 units of fractional
undivided interest outstanding,
$611.73, $612.53 and $602.85
per unit, respectively) $ 1,529,334 4,837,167 2,109,970
=========== ============ ============
</TABLE>

<PAGE>

<TABLE>
CALIFORNIA TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
--------- --- ------------ -----------
1993 1992 1991
--------- ------------ -----------
<S> <C> <C> <C>
Investment income - interest $ 122,854 122,738 122,006
--------- ------------ -----------

Expenses:
Trustee's fees 3,715 3,608 2,077
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 994 625 1,167
--------- ------------ -----------

Total expenses 6,078 5,603 4,399
--------- ------------ -----------

Investment income, net 116,776 117,135 117,607

Unrealized appreciation
(depreciation) for the year (5,732) (25,847) 42,413
--------- ------------ -----------

Net increase in net
assets resulting
from operations $ 111,044 91,288 160,020
========= ============ ===========

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
NEW YORK TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
-------------------------------------------
1993 1992 1991
--------- ------------ -----------
<S> <C> <C> <C>

Investment income - interest $ 382,475 396,734 394,648

Expenses:
Trustee's fees 6,382 8,095 6,575
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 1,680 2,000 1,167

Total expenses 9,431 11,465 8,897

Investment income, net 373,044 385,269 385,751

Realized and unrealized gain (loss)
on investments:
Unrealized appreciation
(depreciation) for the year (49,541) (715) 178,609
Net realized loss on
bonds sold or called (54,512) - -

Net gain (loss)
on investments (104,053) (715) 178,609

Net increase in net
assets resulting
from operations $ 268,991 384,554 564,360

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
PENNSYLVANIA TRUST

Statements of Operations
<CAPTION>
Years ended December 31,
----------- --- ---------- ----------
1993 1992 1991
----------- ---------- ----------
<S> <C> <C> <C>

Investment income - interest $ 170,776 172,850 172,704
----------- ---------- ----------

Expenses:
Trustee's fees 3,400 4,006 2,921
Evaluator's fees 1,369 1,370 1,155
Sponsor's advisory fee 754 875 1,167
----------- ---------- ----------

Total expenses 5,523 6,251 5,243
----------- ---------- ----------

Investment income, net 165,253 166,599 167,461
----------- ---------- ----------

Realized and unrealized gain (loss)
on investments:
Realized loss on bonds
sold or called (10,736) (1,976) -
Unrealized appreciation
(depreciation) for the year 1,777 (2,353) 70,792
----------- ---------- ----------

Net gain (loss)
on investments (8,959) (4,329) 70,792
----------- ---------- ----------

Net increase in net
assets resulting
from operations $ 156,294 162,270 238,253
=========== ========== ==========

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
CALIFORNIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
----------- --- ---------- ----------
1993 1992 1991
----------- ---------- ----------
<S> <C> <C> <C>

Operations:
Investment income, net $ 116,776 117,135 117,607
Unrealized appreciation
(depreciation) for the year (5,732) (25,847) 42,413

Net increase in net
assets resulting
from operations 111,044 91,288 160,020

Distributions to Certificateholders
of Investment income 112,266 112,299 112,641

Total increase (decrease) (1,222) (21,011) 47,379

Net assets at beginning of year 1,530,556 1,551,567 1,504,188

Net assets at end of year (including
undistributed net investment
income of $47,383, $42,873, and
$38,037, respectively) $ 1,529,334 1,530,556 1,551,567

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>

NEW YORK TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
----------- --- ---------- ----------
1993 1992 1991
----------- ---------- ----------
<S> <C> <C> <C>

Operations:
Investment income, net $ 373,044 385,269 385,751
Realized loss on
bonds sold or called (54,512) - -
Unrealized appreciation
(depreciation) for the year (49,541) (715) 178,609

Net increase in net
assets resulting
from operations 268,991 384,554 564,360

Distributions to Certificateholders:
Investment income 370,741 371,110 372,453
Principal 92,432 - -

Redemptions:
Interest 1,192 - -
Principal 63,034 - -

Total distributions
and redemptions 527,399 371,110 372,453

Total increase (decrease) (258,408) 13,444 191,907

Net assets at beginning of year 5,095,575 5,082,131 4,890,224

Net assets at end of year (including
undistributed net investment
income of $94,462, $135,191, and
$121,032,respectively) $ 4,837,167 5,095,575 5,082,131

See accompanying notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
PENNSYLVANIA TRUST

Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------- -- ------------ -----------
1993 1992 1991
------------- ------------ -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 165,253 166,599 167,461
Realized loss on bonds
sold or called (10,736) (1,976) -
Unrealized appreciation
(depreciation) for the year 1,777 (2,353) 70,792
------------- ------------ -----------

Net increase in net
assets resulting
from operations 156,294 162,270 238,253
------------- ------------ -----------

Distributions to Certificateholders:
Investment income 162,889 162,394 162,472
Principal 28,175 5,145 -
------------- ------------ -----------

Total distributions 191,064 167,539 162,472
------------- ------------ -----------

Total increase (decrease) (34,770) (5,269) 75,781

Net assets at beginning of year 2,144,740 2,150,009 2,074,228
------------- ------------ -----------

Net assets at end of year (including
undistributed net investment
income of $40,831, $52,028, and
$49,536, respectively) $ 2,109,970 2,144,740 2,150,009
============= ============ ===========

See accompanying notes to financial statements.
</TABLE>

<PAGE>

Notes to Financial Statements

December 31, 1993, 1992 and 1991

(1) Organization

Municipal Securities Trust, Multi-State Series 36 (Trust) was
organized on May 11, 1989 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

Investments are carried at market value which is determined by
either Standard and Poor's Corporation 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 each state 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 each state 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).

See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the years
ended December 31, 1993, 1992 and 1991.

The Trust Indenture and Agreement also requires each state Trust to
redeem units tendered. 103 units were redeemed by the New York Trust
during the year ended December 31, 1993. No units were redeemed by the
California and Pennsylvania Trusts during the year ended December 31,
1993. No units were redeemed by any of the trusts during the years
ended December 31, 1992 and 1991.

(5) Net Assets

At December 31, 1993, the net assets of the Trust represented the
interests of Certificateholders as follows:

California New York Pennsylvania
Trust Trust Trust

Original cost to
Certificateholders $ 1,564,017 5,053,692 2,207,333
Less initial gross
underwriting commission (86,021) (277,953) (21,403)

1,477,996 4,775,739 2,085,930

Cost of bonds sold or called - (164,825) (30,780)
Net unrealized appreciation 3,955 135,104 13,967
Undistributed net
investment income 47,383 94,462 40,831
Undistributed (distributions
(in excess of) proceeds
from bonds sold or called - (3,313) 22

Total $ 1,529,334 4,837,167 2,109,970

The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 2,500, 8,000 and
3,500 units of fractional undivided interest of the California Trust,
New York Trust and Pennsylvania Trust, respectively, as of the date of
deposit.

Undistributed net investment income includes accumulated accretion of
original issue discount of $18,827 for the California Trust.
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

CALIFORNIA TRUST
Portfolio
December 31, 1993
<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 $ 230,000 Calif. Ed. Facs. AAA* 9.125% 2/01/06 @ 100 S.F. $ 261,062
Auth. (Santa Clara 2/01/2016 2/01/96 @ 102 Ref.
Univ. Prjt.) Rev.
Bonds Series 1985 (5)
2 280,000 Calif. Hlth. Facs. A+ 9.125 1/01/01 @ 100 S.F. 301,725
Auth. Hosp. Rev. 1/01/2007 1/01/95 @ 102 Ref.
Rfndg. Bonds (Sutter
Cmmnty. Hosps. of
Sacramento) Series
1985A

3 275,000 Calif. Hlth. Facs. AAA 10.000 3/01/05 @ 100 S.F. 302,027
Auth. Insrd. Hosp. 3/01/2014 3/01/95 @ 102 Ref.
Rev. Bonds (Adventist
Hlth. Sys. West)
Series 1984 A (MBIA)
(5)

4 150,000 Local Gov. Finc. Jt. A* 8.200 9/01/10 @ 100 S.F. 179,414
Pwrs. Auth. Rev. 9/01/2015 9/01/98 @ 102 Ref.
Bonds (Calif. Local
Agncy.-Anaheim Redev.
Agncy.) 1988 Issue A

5 250,000 Irvine Rach Calif. BBB 8.250 8/15/09 @ 100 S.F. 279,860
Wtr. Dstrct. Joint 8/15/2023 8/15/98 @ 100 Ref.
Pwrs. Agncy. (Local
Agncy. Pool) Rev.
Bonds Issue II 1988

6 125,000 Puerto Rico Pub. AAA 8.875 No Sinking Fund 138,063
Bldgs. Auth. Pub. Ed. 7/01/2012 7/01/95 @ 102 Ref.
& Hlth. Facs. Rfndg.
Bonds 1985 Series F
(Guaranteed by the
Commonwlth. of P.R.)
(5)

7 1,190,000 Santa Clara Calif. AAA 0.000 4/01/07 @ 13.074 S.F. 38,627
Hsg. Auth. Multi-Fam. 4/01/2026 10/01/03 @ 8.987 Ref.
Hsg. Rev. Bonds
Series 1984 (FHA
Insrd. Mtg.
Loan-Cedar Glen
Aprtmts. Prjt.)
(MBIA)

--------- -----------
$ 2,500,000 $ 1,500,778
========= ===========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

NEW YORK TRUST
Portfolio
December 31, 1993

2 455,000 N.Y. Energy Rsrch. & AA2* 9.000 No Sinking Fund 501,551
Dev. Auth. Elec. Fac. 8/15/2020 8/15/95 @ 102 Ref.
Rev. Bonds 1985A (Con
Edison Co. of N.Y.
Inc. Prjt.)

3 495,000 N.Y. State Med. Care A 8.625 8/15/94 @ 100 S.F. 529,704
Facs. Finc. Agncy. 2/15/2006 2/15/95 @ 102 Ref.
Insrd. Hosp. & Nrsg.
Home Mtg. Rev. Bonds
1985 Series C

4 500,000 N.Y. State Med. Care AAA 8.875 7/15/02 @ 100 S.F. 564,080
Facs. (Mt. Sinai 1/15/2026 1/15/96 @ 102 Ref.
Hosp.) 1985 Series C
FHA Insrd. Bonds (5)
5 450,000 N.Y. State Med. Care A- 10.500 1/15/03 @ 100 S.F. 462,299
Facs. Finc. Agncy. 1/15/2024 2/1/94 @ 102 Ref.
Nrsg. Home Insrd.
Mtg. Rev. Bonds 1984
Series B

6 500,000 N.Y. City Gen. Oblig. AAA 8.750 No Sinking Fund 597,120
Bonds 1987 Series A 11/01/2017 11/01/97 @ 101.5 Ref.
(5)

7 500,000 Metro Trans. Auth. AAA 8.500 7/01/06 @ 100 S.F. 569,660
N.Y. Commuter Facs. 7/01/2011 7/01/96 @ 102 Ref.
Serv. Cntrct. Bonds
1986 Series H (5)
8 500,000 Triborough Bridge & AAA 9.000 1/01/03 @ 100 S.F. 553,165
Tunnel Auth. Cnvntn. (Cond.) 1/01/2011 7/01/95 @ 102 Ref.

Cntr. Prjt. Bonds
1985 Series D (5)

9 350,000 Puerto Rico Pub. AAA 8.875 No Sinking Fund 386,579
Bldgs. Auth. Pub. Ed. 7/01/2012 7/01/95 @ 102 Ref.
& Hlth. Facs. Rfndg.
Bonds 1985 Series F
(Guaranteed by the
Commonwealth of P.R.)
(5)

--------- -----------
$ 4,250,000 $ 4,746,018
========= ===========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

<TABLE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

PENNSYLVANIA TRUST
Portfolio
December 31,1993

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 $ 350,000 Penn. State Pooled AAA 8.000% No Sinking Fund $ 364,000
Finc. Auth. Beaver 11/01/2009 5/01/96 @ 100 Ref.
Cnty. (Muni. Cap.
Imprvmt. Prgm.)
Series 1986B (MBIA)

2 350,000 Butler Cnty. Penn. A- 8.750 6/01/01 @ 100 S.F. 393,330
Indus. Dev. Auth. 6/01/2016 6/01/96 @ 102 Ref.
First Mtg. Rev.
Rfndg. Bonds
Pittsburgh Lifetime
Care Cmmnty.
(Sherwood Oaks Prjt.)
Series 1986A

3 255,000 Chester Cnty. Penn. AAA 10.000 7/01/97 @ 100 S.F. 285,383
Hosp. Auth. Hosp. 7/01/2014 7/01/95 @ 102 Ref.
Rev. Bonds Series
1985 (Bryn Mawr
Rehab. Hosp.) (5)

4 350,000 Lehigh Cnty. Indus. A 9.375 No Sinking Fund 383,719
Dev. Auth. Poll. 7/01/2015 7/01/95 @ 102 Ref.
Cntrl. Rev. Bonds
(Penn. Pwr. & Lt. Co.
Prjt.) Series 1985A

5 350,000 Phil. Penn. Wtr. & AAA 9.100 No Sinking Fund 394,170
Swr. Rev. Bonds 1985 12/01/2002 12/01/95 @ 102 Ref.
Eleventh Series
Subseries A (5)

6 225,000 Puerto Rico Pub. AAA 8.875 No Sinking Fund 248,515
Bldgs. Auth. Pub. Ed. 7/01/2012 7/01/95 @ 102 Ref.
& Hlth. Facs. Rfndg.
Bonds 1985 Series F
(Guaranteed by the
Commnwlth. of P.R.)
(5)

--------- -----------
$ 1,880,000 $ 2,069,117
========= ===========

See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>

<PAGE>

Footnotes to Portfolios

December 31, 1993

(3) At December 31, 1993, the net unrealized appreciation of all the bonds
was comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 40,539 187,300 32,096
Gross unrealized depreciation (36,584) (52,196) (18,129)

Net unrealized appreciation $ 3,955 135,104 13,697

(4) The annual interest income, based upon bonds held at December 31, 1993,
(excluding accretion of original issue discount on zero-coupon bonds)
to the Municipal Securities Trust, Multi-State Series 36 is $118,057,
$378,207 and $168,757 for the California Trust, New York Trust and
Pennsylvania Trust, respectively.

(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.

(6) Bonds sold or called after December 31, 1993 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.

Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.

Please Read and Retain Both Parts
of the Prospectus for Future Reference.

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES
(Multiplier Portfolio)

Prospectus Part B

Dated: April 29, 1994

THE TRUST

Organization

"Municipal Securities Trust," Multi-State Series (the "Trust")
consists of several separate "unit investment trusts," which may include
California Trust, Massachusetts Trust, Michigan Trust, New York Trust
and/or Pennsylvania Trust (collectively, the "State Trusts") designated as
set forth in Part A. The State Trusts were created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement*
(collectively, the "Trust Agreement"), dated the Date of Deposit, among
Bear, Stearns & Co. Inc., as Sponsor, Kenny S&P Evaluation Services, as
Evaluator, and, depending on the particular State Trust, either The Bank
of New York or United States Trust Company of New York, as Trustee. The
name of the Trustee for a particular State Trust is contained in the
"Summary of Essential Information" in Part A. For a description of the
Trustee for a particular State Trust, see "Trust Administration--The
Trustee." Each State Trust will be administered as a distinct entity with
separate certificates, expenses, books and records.

* References in this Prospectus to the Trust Agreement are qualified
in their entirety by the respective Trust Indentures and Agreements
which are incorporated herein by reference.

<PAGE>

On the Date of Deposit the Sponsor deposited with the Trustee long-
term bonds, including delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds"), and cash or irrevocable
letters 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 State Trusts. The Trust consists of the
interest-bearing bonds described under "Information Regarding the Trust"
in Part A of this Prospectus, the interest on which is, in the opinions of
bond counsel to the respective issuers given at the time of original
delivery of the Bonds, 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 each
State Trust in the ratio of one Unit to the principal amount of Bonds in
such State Trust on such date as specified in Part A of this Prospectus.
To the extent that any Units of a State Trust are redeemed by the Trustee,
the fractional undivided interest or pro rata share in such State Trust
represented by each unredeemed Unit of such State Trust will increase,
although the actual interest in such State 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

Each State Trust, each 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 deep "market" discount and
original issue discount tax-exempt bonds with a greater diversification
than they might be able to acquire themselves. The objectives of each
State Trust are to preserve capital and to provide interest income 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 and from present income taxes of
the State for which such Trust is named for residents thereof. Such
interest income may, however, be subject to the federal corporate
alternative minimum tax and to state and local taxes in other
jurisdictions. As a result of the Tax Reform Act of 1986, capital gains
based upon the difference, if any, between the value of the Bonds at
maturity, redemption or sale and their original purchase price at discount
(plus the earned portion of original issue discount) are generally taxed
at the same rates applicable to ordinary income, although in certain
circumstances preferential treatment may be applicable. (See "Tax
Status".) Investors should be aware that there is no assurance the State
Trusts' objectives will be achieved because 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 exemptions 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 a State
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. The State Trusts are not designed to be
complete investment programs.

The Portfolios--General

All of the Bonds in the State Trusts were rated "A" or better by
Standard & Poor's Corporation or Moody's Investors Service, Inc. at the
time originally deposited in the State Trust. For a list of the ratings
of each Bond on the Evaluation Date, see each "Portfolio" in Part A of
this Prospectus.

For information regarding (i) the number of issues in each State
Trust, (ii) the range of fixed maturity 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 "Information Regarding the State Trust" and "Portfolio" for
each State Trust in Part A of this Prospectus.

When selecting Bonds for the State Trusts, 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 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 State Trusts, (d) the diversification of each
State Trust's portfolio, as to purpose of issue and location of issuer,
taking into account the availability in the market of issues which meet
such State Trust's quality, rating, yield and price criteria and (e) the
existence of "market" discount and original issue discount. 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 State Trust but may be considered in the Sponsor's
determination to direct the Trustee to dispose of the Bond. See
"Portfolio Supervision." For an interpretation of the bond ratings, see
"Description of Bond Ratings."

Housing Bonds. Some of the aggregate principal amount of the Bonds
may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to rental housing
projects for low to moderate income families. Since such obligations are
usually not general obligations of a particular state or municipality and
are generally payable primarily or solely from rents and other fees,
adverse economic developments including failure or inability to increase
rentals, fluctuations of interest rates and increasing construction and
operating costs may reduce revenues available to pay existing obligations.
See "Description of Portfolio" in Part A for the amount of 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.

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, 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, a
ceiling amount 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. It is unclear
whether legislation extending the authority to issue mortgage revenue
bonds will continue to be enacted. 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.

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 the State Trusts will retain their present size and
composition for any length of time. The proceeds from the sale of a Bond
in a State Trust or from the exercise of any redemption or call provision
will be distributed to Certificateholders of such State Trust, except to
the extent such proceeds are applied to meet redemptions of Units. See
"Trustee Redemption."

Private Activity Bonds. The portfolio of the Trust may contain
other Bonds which are "private activity bonds" 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 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 change in the sources of funds, including
proceeds from property taxes applied to the support of public schools, may
have on the school bonds in the State Trusts.

To the Sponsor's knowledge, there is no litigation pending as of the
date of this Prospectus with respect to any Bonds which might reasonably
be expected to have a material effect on the State Trusts other than that
which is discussed under "The State Trusts." 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 the Bonds in the State Trusts.
The Sponsor is unable to predict whether any such litigation may be
instituted or, if instituted, whether it will have a material adverse
effect on a State 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 of declining interest rates 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
state Trusts.

The State Trusts may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but
not a legal obligation of the state or municipality in question. See
"Portfolio" and "Information Regarding the State Trust" for each State
Trust in Part A of this Prospectus for the amount of moral obligation
bonds contained in each State Trust's portfolio.

Certain of the Bonds in the State Trusts 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 in each State Trust is contained under the "Portfolio"
for such State Trust 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 the Certificateholders Purchase their
Units.

Puerto Rico Bonds. Certain of the Bonds in the portfolio may be
general obligations and/or revenue bonds of issuers located in Puerto Rico
which will be affected by general economic conditions in Puerto Rico. The
economy of Puerto Rico is closely integrated with that of the mainland
United States. During fiscal year 1991, approximately 87% of Puerto
Rico's exports were to the United States mainland, which was also the
source of 67% of Puerto Rico's imports. In fiscal 1991, Puerto Rico
experienced a $2,325.5 million positive adjusted trade balance. The
economy of Puerto Rico is dominated by the manufacturing and service
sectors. The manufacturing sector has experienced a basic change over the
years as a result of increased emphasis on higher wage, high technology
industries such as pharmaceuticals, electronics, computers,
microprocessors, professional and scientific instruments, and certain high
technology machinery and equipment. The service sector, including
finance, insurance and real estate, also plays a major role in the
economy. It ranks second only to manufacturing in contribution to the
gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in
response to and paralleling the expansion of the manufacturing sector.
Since fiscal 1987, personal income has increased consistently in each
fiscal year. In fiscal 1991, aggregate personal income was $21.4 billion
($18.7 billion in 1987 prices) and personal income per capital was $6,038
($5,287 in 1987 prices). Real personal income showed a small decrease in
fiscal 1991 principally as a result of a decline in real transfer
payments. Real transfer payments grew at an above normal rate in fiscal
1990 due to the receipt of non-recurrent relief of federal funds for
hurricane Hugo victims. Personal income includes transfer payments to
individuals in Puerto Rico under various social programs. Total federal
payments to Puerto Rico, which include many types in addition to federal
transfer payments, are lower on a per capita basis in Puerto Rico than in
any state. Transfer payments to individuals in fiscal 1991 were $4.6
billion, of which $3.0 billion, or 65.4%, represent entitlement to
individuals who had previously performed services or made contributions
under programs such as social security, veterans benefits and medicare.
The number of persons employed in Puerto Rico rose to a record level
during fiscal 1991. Unemployment, although at the lowest level since the
late 1970s, remains above the average for the United States. In fiscal
1991, the unemployment rate in Puerto Rico was 15.2%. From fiscal 1987
through fiscal 1990, Puerto Rico experienced an economic expansion that
affected almost every sector of its economy and resulted in record levels
of employment. Factors behind this expansion include Commonwealth
sponsored economic development programs, the relatively stable prices of
oil imports, the continued growth of the United States economy, periodic
declines in exchange value of the United States dollar and the relatively
low cost borrowing during the period. Real gross product amounted to
approximately $19.2 billion in fiscal 1991, or .9% above the fiscal 1990
level. The economy continued its growth during fiscal 1990 but at a
slower rate. The Puerto Rico Planning Board's economic activity index, a
composite index for thirteen economic indicators, increased .4% for the
first eleven months of fiscal 1992 compared to the same period in fiscal
1991, which period showed a decrease of.5% over the same period in fiscal
1990. Growth in the Puerto Rico economy in fiscal 1993 depends on several
factors, including the state of the United States economy and the relative
stability in the price of oil imports, the exchange value of the U.S.
dollar and the cost of borrowing.

Discount and Zero Coupon Bonds

The State Trust portfolios may contain original issue discount
bonds. 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 each State Trust
may be 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 fluctuations than coupon bonds in
response to changes in interest rates. Zero Coupon Bonds generally are
subject to redemption at compound accredited 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. See "Description of Portfolios"
in Part A for the aggregate principal amount of original issue discount
bonds in each State Trust's portfolio.

The State Trust portfolios may also contain Bonds that were
purchased at deep "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 State Trusts were lower than the
current market interest rates for newly issued bonds of comparable rating
and type. At the time of issuance the discount Bonds were for the most
part issued at then current coupon interest rates. The current returns
(coupon interest income as a percentage of market price) of discount bonds
will be lower than the current returns of comparably rated bonds of
similar type newly issued at current interest rates because discount bonds
tend to increase in market value as they approach maturity and the full
principal amount becomes payable. A discount bond held to maturity will
have a larger portion of its total return in the form of capital gain and
less in the form of tax-exempt interest income than a comparable bond
newly issued at current market rates. Discount bonds with a longer term
to maturity tend to have a higher current yield and a lower current market
value than otherwise comparable bonds with a shorter term to maturity. If
interest rates rise, the value of the bonds will decrease; and if interest
rates decline, the value of the bonds will increase. The discount does
not necessarily indicate a lack of market confidence in the issuer.

THE STATE TRUSTS

California Trust

Because the Trust invests in California issues, it is susceptible to
political, economic, regulatory or other factors affecting issuers of
California municipal securities. The following information constitutes
only a brief summary of a number of the complex factors which may have an
impact on issuers of California municipal securities and does not purport
to be a complete or exhaustive description of all adverse conditions to
which issuers of California municipal securities may be subject.
Additionally, many factors, including national, economic, social and
environmental policies and conditions, which are not within the control of
such issuers, could have an adverse impact on the financial condition of
such issuers. The Trust cannot predict whether or to what extent such
factors or other factors may affect the issuers of California municipal
securities, the market value or marketability of such securities or the
ability of the respective issuers of such securities acquired by the Trust
to pay interest on or principal of such securities. Further, the
creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California. Such information is derived from sources that are generally
available to investors (such as official statements relating to the
offerings of California issuers) and is believed to be accurate.

Bonds in the California Trust include primarily debt obligations of
the State of California and its subdivisions issued to obtain funds for
various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. Other
purposes for which said Bonds may be issued include the refunding of
outstanding obligations, the obtaining of funds for general operating
expenses, or the obtaining of funds to lend to public or private
institutions for the construction of facilities such as educational,
hospital and housing facilities. In addition, certain types of bonds may
be issued by California public authorities to finance privately operated
housing facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal.

California's economy is the largest among the 50 states and one of
the largest in the world. The State's July 1, 1992 population of over 31
million represents more than 12.0 percent of the total United States
population. Total employment is about 14.0 million, the majority of which
is in the service, trade and manufacturing sectors.

Recent California Economic Trends

Since the start of the 1990-91 Fiscal Year, California has faced the
worst economic, fiscal and budget conditions since the 1930s.
Construction, manufacturing (especially aerospace), exports and financial
services, among others, have all been severely affected. Since 1990 the
State has lost over 800,000 jobs. Although the national economic recovery
continued at a moderate pace in 1993, California has yet to share in the
economic upturn. However, the Commission on State Finance predicts that
the California economy will stabilize in 1994.

National Economic Trends

Economic data in late 1992 presented conflicting signals in the
United States economy. Indicators of recovery were offset by signs of
weakness. Reported growth in gross domestic product for the third quarter
of 1992 was not consistent with a decline in industrial production,
unchanged average weekly hours and a fractional gain in jobs. Looking
behind other indicators reveals as many areas of weakness as of strength.

While some regions reported modest gains in the economy, other areas
remain exceptionally weak, with no signs that the recession is over. The
reported improvement in consumer confidence late in 1992 was still too
tentative to conclude that consumers are ready to lead the economy out of
recession. Similar signals in the past have proved temporary.

There are continuing problems which suggest recovery will be slow at
best. Key measures such as new car sales and housing activity remain
depressed. The government sector also is likely to be a negative factor
in coming quarters.

Slow growth is forecast for the United States through the end of
1994, with real gross domestic product up 1.8% on average in 1993, with a
further gain of 2.6% in 1994. Personal income is expected to be up 4% in
1993, reflecting a marginal gain in jobs. Corporate profits are expected
to rise by 11%, however, reflecting the efforts of many businesses to
restructure their operations for greater efficiency and improved profits.

California Economy

After three years of recession, California's economy seems to be
stabilizing. However, economic signals remain mixed. The State's economy
faces several formidable barriers which likely will prolong the recession
and will inhibit the pace of recovery:

-- Defense budget cuts will continue to reduce employment in the
aerospace industry, while the major impact of military base closings
will be felt through 1995.

-- The construction and real estate sectors face a variety of
obstacles, including huge oversupplies of commercial office, retail
and hotel space, constraints on traditional financial institutions
relative to real estate lending and a severe price adjustment in the
upper half of the housing market.

-- California-based industries, such as high technology manufacturing,
are looking increasingly to lower cost areas of the nation and the
world when considering expansion sites.

-- Export markets are unlikely to provide much support to the State's
economy. Japan, Western Europe, Canada and Mexico are all affected
by the global slowdown, and California has a disproportionate share
of export oriented jobs in manufacturing and other industries as
well.

-- Cost containment efforts and "downsizing" are continuing in a
variety of service producing industries, including finance,
transportation, utilities and wholesale and retail trade.

The construction industry is projected to see only modest
improvement in homebuilding, to perhaps 115,000 units from last year's
estimated 95,000 unit volume. Even 1994's projected 144,000 figure is
significantly less than the quarter million unit years of the late 1980s.
Part of this sluggishness reflects demographic trends affecting the
apartment sector. But the improvement in single family housing is likely
to be dampened by the scarcity of construction finance and the relatively
sluggish job market. Given the supply imbalance in the commercial sector,
this year probably will see further declines in nonresidential
construction, with only the faint beginnings of recovery visible in 1994.

Manufacturing will continue to be held back by declines in defense
related aerospace as well as weakness in the market for commercial
aircraft. Electronics employment is expected to stabilize at 1992 year
end levels (implying further declines on an annual average basis) before
modest growth resumes in 1994. Construction related industries such as
lumber, furniture, fabricated metals and stone-clay-glass will reflect
weakness in the building industry this year, with modest improvement
likely in 1994. Nondurable goods, including apparel, chemicals, food
processing and plastics, should all benefit this year from the national
upturn.

Wholesale and retail trade experienced a modest pick up for the
second half of 1993 as sales begin to recover. Transportation and
utilities will continue to emphasize cost cutting, and at best will be
stable this year and next. The financial sector will continue to grapple
with declines in banking, partially offset by gains in nonbank financial
services. Real estate and insurance are expected to show little short-
term growth. By the end of 1994, most financial segments are expected to
be on the rise. Gains in service industries (mainly healthcare),
temporary agencies, motion picture production and amusements are expected
to continue.

With continued weakness in aerospace, construction and exports,
California's recovery will depend on national economic growth and the
gradual completion of the restructuring of the State's services economy.
Eventually underlying national growth trends may be sufficient to offset
the diminishing negative effects of defense cuts, real estate imbalances
and sluggish export markets.

The State's unemployment rate, which first broke into double digits
in November, 1992, remained near 10% throughout 1993, reflecting contained
labor force growth against stagnant employment. In 1994, the rate is
expected to fall slowly to 9.5% on an annual average basis.

In this job environment, income growth remained sluggish in 1993.
Once again, government transfer payments will be the leading source of
growth. In 1994, incomes are expected to rise by nearly 6%. Inflation in
the State, as measured by the California Consumer Price Index, has
remained under control.

The Department of Finance Bulletins for July, August and September,
1993 reported that California entered the fourth year of recession in
June, 1993 with few signs of any sustained turnaround in the economy,
which remains sluggish. In the year from August, 1992 to August, 1993 an
estimated 173,000 more jobs had been lost, principally in manufacturing.
A small gain in nonfarm employment in July, 1993 was offset by a larger
loss of 22,000 jobs in August, 1993. Unemployment has risen in the last
few months to 9.4% in September. Changes in the rate have been primarily
due to changes in the labor force; actual jobs and job-seekers have
declined in August, 1993. This was consistent with a report issued by the
Department of Finance indicating that California suffered a net loss of
150,000 residents to other states in the last fiscal year; overall
population still grew due to births and foreign immigration. Both
residential and nonresidential real estate construction remained in a
sustained slump, and were, in May, 1993 both at or close to the lowest
levels since the start of the recession.

Finally, the Department of Finance noted that California would be
hit hard by the latest round of Federal military base closings and force
realignments, which will be implemented over the remaining years of the
decade. California was estimated to have 22% of the nation's defense
spending, but might suffer 25-30% of the defense spending cuts over the
next five years. The Department also estimates that the recent Federal
Budget Reconciliation Act will have a disproportionate and negative impact
on California. California would suffer 19.5% of the outlay reductions,
which rely heavily on defense budget cuts, and the State, with many high
income taxpayers, will pay nearly 14.5% of the tax increases, compared to
12% of the nation's population.

State Finance

Since the start of the 1990-91 fiscal year, the State has faced the
worst economic, fiscal, and budget conditions since the 1930s. The
recession has seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also is facing a structural
imbalance in its budget with the largest programs supported by the General
Fund -- K-14 education, health, welfare and corrections -- growing at
rates significantly higher than the growth rates for the principal revenue
sources of the General Fund. As a result, the State entered a period of
chronic budget imbalance, with expenditures exceeding revenues for four of
the last five fiscal years. Revenues declined in 1990-91 over 1989-90,
for the first time since the 1930s. By June 30, 1992, the State's General
Fund had an accumulated deficit, on a budget basis, of approximately $2.2
billion.

A further consequence of the large imbalances over two consecutive
years was that the State used up all of its available cash resources. In
late June, 1992, the State was required to issue $475 million of short-
term revenue anticipation warrants to cover obligations coming due on
June 30. With the failure of the Governor and the Legislature to adopt a
budget for the 1992-93 fiscal year on time (to allow the State to carry
out its usual cash flow borrowing for the fiscal year), the shortfall of
cash forced the State Controller to issue interest-bearing "registered
warrants" in lieu of regular warrants redeemable for cash after July 1,
1992 to many State vendors, suppliers, and employees and to local
government agencies. Until the State Budget was adopted on September 2,
1992, the Controller issued more than one million registered warrants
totaling approximately $3.8 billion to pay valid obligations from the
prior fiscal year, and to pay continuing obligations after July 1 based on
special appropriations or court orders. Certain constitutionally mandated
obligations, such as debt service on bonds and revenue anticipation
warrants, were paid with available cash. Registered warrants had not been
issued by the State since the 1930s.

The 1992-93 Budget Act closed a "gap" of about $7.9 billion, but
budgeted a reserve at June 30, 1993 of only $28 million. However, the
Budget was based on economic forecasts and projections of major tax
sources. Shortly after the 1992-93 Budget Act was enacted, it became
evident that economic conditions in the State were not beginning to
improve in the second half of 1992, as assumed by the Department of
Finance's May, 1992 Revision economic estimates, which underlay the
Budget. This was exacerbated by enactment of an initiative measure in
November, 1992 which repealed a sales tax for certain candy, snack foods
and bottled water, reducing revenues by about $300 million for a full
fiscal year ($200 million in 1992-93). The Commission on State Finance
reported, in Fall 1992, that the 1992-93 Budget would be about $2.7
billion out of balance, with about $2.1 billion attributed to reduced
revenues. This was a "primary" forecast, which could be worse if the
economy fell into a deeper recession rather than continuing in a stagnant
mode. The Legislative Analyst issued a report consistent with the
Commission's predictions. In addition, certain lawsuits were filed
concerning implementation of the K-14 school financing portion of the
Budget Act.

The Governor's budget proposal for 1993-94, released on January 8,
1993 (the "1993-94 Governor's Budget"), confirmed the earlier forecasts
about the State's economy and the 1992-93 Budget. The Administration now
foresees recovery from the recession beginning only in 1993 or 1994.
Because of the weaker-than-forecast economy, the Administration predicts
that General Fund revenues in 1992-93 will fall $2.5 billion below
original estimates, to about $40.9 billion, over $1 billion below actual
revenues in 1992-92. The Administration predicts expenditures in 1992-93
will have been only about $30 million higher than original projections,
primarily because increased health and welfare costs will have been offset
by cost savings due to smaller than predicted school enrollments and
smaller tax relief costs. As of May, 1993, the Administration predicts
the General Fund will end fiscal year 1992-93 with a deficit of $2.7
billion, compared to a $2.2 billion deficit at June 30, 1992. The
Administration's deficit estimate assumes favorable resolution of a
dispute about school funding for 1992-93, favorable action on other school
financing adjustments proposed in the 1993-94 Governor's Budget and a $1.6
billion shift in property tax revenues.

On June 30, 1993, the Governor signed into law the 1993-94 state
budget. The adopted budget included the $2.6 billion shift of local
property taxes from cities, counties and special districts to school
districts.

Certain issuers of California Municipal Bonds receive subventions
from the State which are eligible to be used to make payments on said
Bonds. No prediction can be made as to what effect continued decreases in
subventions may have on the ability of some issuers to make such payments.

Subsequent Developments

By June 30, 1993, the General Fund had an accumulated deficit, on a
budgeted basis, of approximately $2.8 billion. In addition, the large
deficit over the previous three years had exhausted the State's available
cash reserves and resources. The Commission Staff estimated in its
December 1993 Update that revenues will fall short of budget projections
by $1.0 billion in fiscal year 1993-94, and that expenditures will exceed
budget projections by $700 million. The State is expected to end the year
with a deficit of $1.7 billion. Looking ahead to 1994-95, the Commission
Staff forecasts an operating deficit of $2.1 billion which, when added to
the 1993-94 operating deficit, will lead to a cumulative funding gap of
$3.8 billion by the end of that fiscal year. In an alternative forecast,
the Commission Staff predicts that this cumulative funding gap could
exceed $6.3 billion.

Because of California's continuing budget problems, the State's
General Obligation bonds were downgraded in 1992 by Moody's from Aa1 to Aa
and by Standard & Poor's from AA to A+. In February 1994, both ratings
companies stated that they were concerned about the deficit. While
neither company lowered the State's credit rating, Standard & Poor's
changed its credit outlook for California from "stable" to "negative" and
Moody's stated that it is unlikely that California will balance its budget
by 1995.

On January 17, 1994, Northridge, California experienced an
earthquake that registered 6.7 on the Richter Scale resulting in
significant property damage to private and public facilities throughout
Los Angeles and Ventura Counties, and to parts of Orange and San
Bernardino Counties. The affected portions of the counties were declared
to be federal and state disaster areas. The total damage is estimated to
be between $13 billion and $20 billion. The cost to federal, state and
local government is estimated to be $11.6 billion with the State's and
local governments' share estimated to be $1.9 billion and $135 million,
respectively. The Governor has proposed to pay for the State's share of
the cost with federal loans, bond issues, and unspecified spending cuts.
In addition, members of the State legislature have proposed raising taxes
to help cover a portion of the cost. The impact of the earthquake on
California's economy is uncertain.

The Governor's Budget for fiscal year 1994-95 proposed General Fund
expenditures of $38.8 billion for fiscal 1994-95, with projected revenues
of $41.1 billion. As proposed, the Governor's Budget would provide a
small reserve at the end of the 1994-95 fiscal year, and the retirement of
the budget deficit incurred at the end of the 1992-93 fiscal year.

The Governor's proposed 1994-95 Budget contains the largest
restructuring of the State-county relationship since Proposition 13,
comprising $5.4 billion involving the restructuring of existing revenue
sources and the responsibility for AFDC, Medi-Cal, foster care, in-home
supportive services, and alcohol and drug programs. The 1994-95 Proposed
Budget is balanced assuming $1.1 billion in additional federal funds for
health and welfare costs such as additional aid for undocumented
immigrants.

Constitutional and Statutory Limits on Spending and Taxes; Pending
Litigation

Article XIIIA of the California Constitution (which resulted from
the voter approved Proposition 13 in 1978) limits the taxing powers of
California public agencies. Article XIIIA provides that the maximum ad
valorem tax on real property cannot exceed 1 percent of the "full cash
value" of the property, and effectively prohibits the levying of any other
ad valorem property tax for general purposes. However, on May 3, 1986,
Proposition 46, an amendment to Article XIIIA, was approved by the voters
of the State of California creating a new exemption under Article XIIIA
permitting an increase in ad valorem taxes on real property in excess of 1
percent for bonded indebtedness approved by two-thirds of the voters
voting on the proposed indebtedness. "Full cash value" is defined as "the
County Assessor's valuation of real property as shown on the 1975-76 tax
bill under "full cash value" or, thereafter, the appraised value of real
property when purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment." The "full cash value" is subject to
annual adjustment to reflect increases (not to exceed 2 percent) or
decreases in the consumer price index or comparable local data, or to
reflect reductions in property value caused by damage, destruction or
other factors.

The State is subject to an annual appropriations limit imposed by
Article XIIIB of the State Constitution (the "Appropriations Limit").
Article XIIIB prohibits the State from spending "appropriations subject to
limitation" in excess of the Appropriations Limit. Article XIIIB,
originally adopted in 1979, was modified substantially by Propositions 98
and 111 in 1988 and 1990, respectively. "Appropriations subject to
limitation," with respect to the State, are authorizations to spend
"proceeds of taxes," which consist of tax revenues, and certain other
funds, including proceeds from regulatory licenses, user charges or other
fees to the extent that such proceeds exceed "the cost reasonably borne by
that entity in providing the regulation, product or service," but
"proceeds of taxes" exclude most state subventions to local governments,
tax refunds and some benefit payments such as unemployment insurance. No
limit is imposed on appropriations of funds which are not "proceeds of
taxes," such as reasonable user charges or fees, and certain other non-tax
funds.

Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply
with mandates of courts or the federal government and, pursuant to
Proposition 111, appropriations for qualified capital outlay projects and
appropriations of revenues derived from any increase in gasoline taxes and
motor vehicle weight fees above January 1, 1990 levels. In addition, a
number of recent initiatives were structured or proposed to create new tax
revenues dedicated to certain specific uses, with such new taxes expressly
exempted from the Article XIIIB limits (e.g., increased cigarette and
tobacco taxes enacted by Proposition 99 in 1988). The Appropriations
Limit may also be exceeded in cases of emergency. However, unless the
emergency arises from civil disturbance or natural disaster declared by
the Governor, and the appropriations are approved by two-thirds of the
Legislature, the Appropriations Limit for the next three years must be
reduced by the amount of the excess.

The State's Appropriations Limit in each year is based on the limit
for the prior year, adjusted annually for chances in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the Appropriations Limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year period above the combined
Appropriations Limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.

As originally enacted in 1979, the State's Appropriations Limit was
based on 1978-79 Fiscal Year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by
Proposition 111). Starting in the 1990-91 Fiscal Year, the State's
Appropriations Limit will be recalculated by taking the actual 1986-87
limit, and applying the annual adjustments as if Proposition 111 had been
in effect. This recalculation has resulted in an increase of $1 billion
to the State's Appropriations Limit in 1990-91. The Legislature has
enacted legislation to implement Article XIIIB which defines certain terms
used in Article XIIIB and sets forth the methods for determining the
Appropriations Limit. Government Code Section 7912 requires an estimate
of the Appropriations Limit to be included in the annual budget proposed
by the Governor in January of each year for the next fiscal year (the
"Governor's Budget"), and thereafter to be subject to the budget process
and established in the Budget Act.

The following table shows the State's Appropriations Limit for the
past four fiscal years, and the current fiscal year.

State Appropriations Limit
(Millions)

Fiscal Years
1989-90 1990-91 1991-92 1992-93 1993-94*

State Appropriations
Limit . . . . . . . . $ 29,318 $ 32,703 $ 34,233 $ 35,010 $ 36,599
Appropriations Subject
to Limit . . . . . . -27,700 -25,191 -29,078 -30,739 -33,164
Amount (Over)/Under
Limit . . . . . . . . $ 1,618 $ 7,512 $ 5,155 $ 4,271 $ 3,435

* Estimate
SOURCE: State of California, Department of Finance

<PAGE>

Proposition 98

On November 8, 1988, voters of the State approved Proposition
98, a combined initiative constitutional amendment and statute called the
"Classroom Instructional Improvement and Accountability Act". Proposition
98 changed State funding of public education below the university level,
and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (as modified by Proposition III, discussed below, which was
enacted on June 5, 1990), K-14 schools are guaranteed the greater of
(a) 40.3 percent of General Fund revenues (the "first test"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for
changes in the cost of living (measured as in Article XIIIB by reference
to California per capita personal income) and enrollment (the "second
test"), or (c) a third test, which would replace the second test in any
year when the percentage growth in per capita General Fund revenues from
the prior year plus one half of one percent is less than the percentage
growth in California per capita personal income. Under the third test,
schools would receive the amount appropriated in the prior year adjusted
for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If the third test is used in any
year, the difference between the third test and the second test would
become a "credit" to schools which would be the basis of payments in
future years when per capita General Fund revenue growth exceeds per
capita personal income growth.

Proposition 98 permits the Legislature by two-thirds vote of
both houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3
percent of revenues generated by a special supplemental sales tax enacted
for earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the
Article XIIIB limit to K-14 schools.

In 1992-93 and 1993-94, the State met part of its Proposition 98
commitment to education through $1.8 billion in off-balance sheet loans.
These loans were held illegal by a lower court decision in California
Teachers' Association v. Gould. If this decision is upheld on appeal,
schools would not be required to repay these loans and the 1993-94 year-
end deficit would increase by $1.8 billion.

Article XIIIA, Article XIIIB and Proposition 98 were each
adopted as measures that qualified for the ballot pursuant to California's
initiative process. Other initiative measures could be adopted in the
future, affecting the availability of revenues to pay certain of the
Bonds.

Recent Initiatives. In July 1991, California increased taxes by
adding two new marginal tax rates, at 10% and 11%, effective for tax years
1991 through 1995. After 1995, the maximum personal income tax rate is
scheduled to return to 9.3%, and the alternative minimum tax rate is
scheduled to drop from 8.5% to 7%. In addition, legislation in July 1991
raised the sales tax by 1.25%, of which 0.5% was a permanent addition.
This tax increase will be cancelled if a court rules that such tax
increase violates any constitutional requirements. Although 0.5% of the
State tax rate was scheduled to expire on June 30, 1993, such amount was
extended for six months for the benefit of counties and cities. On
November 2, 1993, voters approved extension of this 0.5% levy as a
permanent source of funding for local government.

The November 2, 1993 special election ballot also contained an
initiative constitutional amendment providing parental choice regarding
education. This initiative would have required the State to allocate
every school-age child a scholarship in an amount equal to at least 50% of
the prior year's per-pupil State and local government expenditure for
kindergarten through twelfth grade education. Such scholarships would
have been redeemable by public or private schools. If passed, the
parental choice initiative could have threatened the fiscal stability of
any school district in which a significant number of students withdraw and
enroll elsewhere. Although the initiative failed, other parental choice
initiatives have already been filed in an attempt to qualify them for
future voter consideration.

Pending Litigation. Three court cases may further upset
California's budgetary balance; one concerning the medically indigent and
Medi-Cal funding, a second concerning employee pensions, and a third on
California's unitary method of taxing multinational companies. In Kinlaw
v. State of California, the State faced possible retroactive reimbursement
to counties of $2-$3 billion for Medi-Cal costs for medically indigent
adults. The ruling could have added annual operating costs of $500-$700
million and would have precluded the State-county realignment of
responsibilities. On August 30, 1991, the California Supreme Court
overturned the case on procedural grounds; however, a case of similar
scope and substance regarding employee pensions, San Bernardino County v.
State of California, is pending in the Court of Appeals. On November 1,
1993, the United States Supreme Court granted certiorari to hear two
consolidated cases dealing with the validity of California's prior method
of taxing multinational corporations under a "unitary" method of
accounting for their worldwide earnings. Barclays Bank PLC v. Franchise
Tax Board concerns foreign corporations, and Colgate-Palmolive v.
Franchise Tax Board concerns domestic corporations. California courts
have upheld the State's unitary method of taxation, which has since been
modified by the Legislature. If the Court does not uphold the State's
prior method of taxation, the State could be liable for tax refunds and
will be unable to collect taxes previously assessed, with an aggregate
impact of $3.5-$4 billion.

Additionally, in a case called ABC Unified School District, et
al. v. State of California, some 130 public school districts and various
taxpayers filed an action in 1991 seeking a declaration that the State'
system of financing K-12 public education is unconstitutional. The suit
claims that alleged inequalities in per-pupil expenditures among school
districts throughout the State are violative of equal protection
guarantees and the public education guarantee of the State Constitution.
The case is pending in the trial court. It is impossible to predict when
or how this case will be resolved, or how a decision in favor of the
plaintiff's claims may affect the State's financial obligations.

In the spring of 1991, the Richmond Unified School District
("RUSD") Board of Directors attempted to end classes six weeks early
because of a fiscal crisis. In response to lawsuits, a lower court judge,
in a case called Butt v. State of California, ordered the State, over
objections from the Governor, to provide funding to allow the school year
to be completed, and an emergency loan was arranged by the State
Controller. On appeal, the California Supreme Court in late December,
1992 upheld the lower court's action, ruling that the State Constitution's
guarantee of public education required the State to ensure a full year's
education in all school districts. The Court, however, overturned a
portion of the original order relating to the source of funds for RUSD's
emergency loan; the decision leaves unclear just where the State must find
funds to make any future loans of this kind.

City of Alhambra, et al. v. Los Angeles County
Auditor/Controller, et al. involves the constitutionality of the 1992-93
Budget Act-related legislation which redirects approximately $1.3 billion
in local tax revenues from localities to schools. The case was originally
filed with the California Supreme Court. The Court denied the petition
and the case was refiled in the Los Angeles Superior Court, where it is
now pending. Various constitutional arguments concerning equal
protection, two-thirds voter approval for tax increases, interference with
local government fiscal powers and violation of school funding
restriction, are raised.

Finally, in Parr v. State of California, a complaint was filed
in federal court claiming that payment of wages in registered warrants
violated the Fair Labor Standards Act ("FLSA"). The federal court held
that the issuance of registered warrants does violate the FLSA. The next
phase of the trial will focus on the issue of damages. The maximum amount
of damages is the amount of the salary originally owed or approximately
$350 million.

Massachusetts Trust

Between 1982 and 1988 the Commonwealth's economy generally
performed better than the national economy. At the present time, however,
although the Massachusetts economy has experienced a significant economic
slowdown, it appears recently to have stabilized. Massachusetts had
benefitted from an annual job growth rate of approximately 2% since the
early 1980's but in recent years has had one of the highest unemployment
rates in the country. After declining since 1989, Massachusetts'
employment in 1993 has shown positive annual growth. Per capita personal
income growth has slowed as well, after several years in which the per
capita personal income growth rate in Massachusetts was among the highest
in the nation.

The economy is expected to grow slowly over the next two years,
with employment growth projected at 1.3% in 1994 and 2.1% in 1995.
Massachusetts' economic performance is expected to lag the nation through
1995 because of restructuring in the computer and defense industries.
Strong employment gains are expected in construction, recovering from
depressed levels, and services--such as computer software, engineering,
biomedical research,and health care.

Manufacturing employment should decline over the next several
years, as the restructuring in defense spending leads to spin-off job
losses in missiles, aircraft engines, instruments, and electronics
manufacturing. The computer industry's retrenchment continued through
1993. Computer manufacturing employment was 27,400 in August 1993, two-
thirds the peak level of 1984, and now represents less than 1% of
employment. Computer software, rather than hardware, represents the area
of growth for the Massachusetts computer industry.

Because of the large number of hospitals, medical research
facilities, bio-tech firms, and insurance companies, the state will be
significantly impacted by health-care reform. Health-care services have
been the primary source of new jobs in Massachusetts over the past several
years. However, new cost-containment initiatives should dampen health-
care service growth over the next several years despite the expected
increase in demand for medical care.

Employment and investment income gains are expected to result in
real personal income growth of 2.5% in 1994. Home construction activity
is increasing in response to low mortgage rates. A glut of office space
will dampen commercial building activity. However, construction
employment should benefit from public infrastructure projects including
the Boston Central Artery/Third Harbor Tunnel project, the clean-up of
Boston Harbor, Logan International Airport improvements, and commuter rail
service expansion.

The Commonwealth's unemployment rate was among the nation's
lowest from 1985 through 1989. The average unemployment rate in 1989 was
4.0% which was among the lowest of the nation's large industrial states.
In 1990, however, the Massachusetts unemployment rate increased from 4.5%
in January to 7.4% in December. During the first portion of calendar year
1991, the unemployment rate continued this upward trend and increased from
8.6% in January to 9.1% in July. However, the December 1991 unemployment
rate showed a drop to 8.4% and the February 1992 rate of 7.5% was the
state's lowest unemployment level since December of 1990. The February
1993 rate of 7.7% was a decrease from the 8.2% rate of January 1993. The
Commonwealth's unemployment rate in December, 1993 was 6.3%, as compared
to 6.6% for November, 1993 and 8.6% for December, 1992.

Efforts to limit and to reduce the levels of state spending and
state and local taxation have been underway in Massachusetts for several
years and are continuing. Legislation enacted in October 1986, and an
initiative petition approved by the voters in November 1986, established
limitations on state tax revenues. Additionally, legislation enacted in
July 1989 restricts growth in state spending in each fiscal year to a five
percent increase over the amount of state revenue collected in the
previous fiscal year. The 1986 legislation and the initiative petition
are inconsistent in several respects, including the methods of calculating
the revenue growth limits and the exclusions from those limits. The
initiative petition, for example, contains no exclusion from the scope of
its tax limit for debt service on the Commonwealth's bonds and notes.

In July 1990 the Legislature enacted tax legislation which
increased personal income tax rates on most income items retroactively to
January 1, 1990. The new rates on income were 5.95% for calendar year
1990, 6.25% for 1991 and returning back to 5.95% for 1992 and subsequent
years. The tax is applicable to all personal income except income derived
from dividends, capital gains, unemployment compensation, alimony, rent,
interest, pensions, annuities and IRA/Keogh distributions. The income tax
rate on other interest (excluding interest on obligations of the United
States and of the Commonwealth and its subdivisions), dividends and net
capital gains (after a 50% reduction) was increased from 10% to 12% for
tax year 1990 and subsequent years. These tax increases were expected to
yield, according to preliminary estimates, additional revenues of
approximately $700 million in fiscal 1991, $894 million in fiscal 1992 and
$865 million in fiscal 1993.

On November 3, 1992, more tax legislation was enacted by voter
initiative petition which imposed, as of January 1, 1993, a new excise tax
of 1.25 cents per cigarette and 25% of the wholesale price of smokeless
tobacco. Under the legislation, the revenues raised by this excise tax
shall be credited to a new Health Protection Fund and expended, subject to
appropriation by the Legislature, to pay for health programs and education
relating to tobacco use. Total revenues expected to be deposited in the
Health Protection Fund are estimated to be $55.5 million and
$116.7 million in fiscal 1993 and fiscal 1994, respectively.

In November 1990, an initiative petition was approved which
mandates (subject to appropriation) that no less than 40% of receipts from
certain taxes be distributed to cities and towns as local aid. However,
local aid payments remain subject to annual appropriations and fiscal 1992
and fiscal 1993 appropriations did not meet, and it is anticipated that
fiscal 1994 appropriations for local aid will not meet the levels set
forth in the initiative law.

Proposition 2-1/2, a local property tax reduction measure passed
by the voters in 1980, led to large reductions in such taxes, the major
source of income for cities and towns. Large increases in state aid to
offset such revenue losses occurred in subsequent years. Local aid more
than doubled from the fiscal 1981 level of $1.6 billion to the fiscal 1989
level of approximately $4.1 billion. Direct local aid increased from
$2.769 billion to $2.961 billion from fiscal 1988 to 1989, decreased to
$2.328 billion in fiscal 1992 and increased to $2.457 billion in fiscal
1993. It is estimated that fiscal 1994 expenditures for direct local aid
will be $2.737 billion, which is an increase of approximately 7.5% above
the fiscal 1993 level. The additional amount of indirect local aid
provided over and above direct local aid was approximately $1.717 billion
in fiscal 1993. It is estimated that in fiscal 1994 approximately
$1.717 billion of indirect local aid will be paid. The Governor's
proposed fiscal 1994 budget includes approximately $2.389 billion and
$1.628 billion of direct local aid and indirect local aid, respectively.

Fiscal 1984 was the final year of reductions for all cities and
towns under Proposition 2-1/2. All of the 351 cities and towns have now
achieved a property tax level of no more than 2.5% of full property value.
Although actual revenue losses were largely offset by the increases in
local aid provided by the state government, normal budgetary growth could
not occur and cuts in programs and personnel were required. Many
Massachusetts communities have overridden, or are presently attempting to
override, Proposition 2-1/2 at the local level in order to allow an
increase in taxes to avoid cuts in programs and personnel.
Proposition 2-1/2, as amended to date, limits the property taxes that may
be levied by any city or town in any fiscal year to the lesser of (i) 2.5%
of the full and fair cash valuation of the real estate and personal
property therein and (ii) 2.5% over the previous year's levy limit plus
any growth in the tax base from certain new construction and parcel
subdivisions. Proposition 2-1/2 also limits any increase in the charges
and fees assessed by certain governmental entities, including county
governments, on cities and town to the sum of (i) 2.5% of the total
charges and fees imposed in the preceding fiscal year, and (ii) any
increase in charges for services customarily provided locally or services
obtained by the city or town at its option.

One of the Commonwealth's principal budgetary problems in past
years has been its failure to establish and maintain currently adequate
reserves to fund past and current service liabilities for the retirement
system benefits which the Commonwealth is statutorily obligated to pay
certain retired state and local government employees. These problems
have, in recent years, been addressed and substantial reserves are now
being created.

The Commonwealth is responsible for the payment of pension
benefits to members of two retirement systems: (1) the state employees'
retirement system, which also covers Boston teachers, and (2) the
teachers' retirement system (which covers teachers employed by the
cities, towns and regional school districts throughout Massachusetts,
except for Boston). Separate retirement systems cover the employees of
certain independent authorities and agencies and of counties, cities and
towns other than teachers. Beginning in fiscal 1982, the Commonwealth
assumed responsibility for payment of cost-of-living adjustments for these
other local retirement systems.

The retirement systems were originally established as "pay-as-
you-go" systems. As such, amounts were appropriated each year to pay
current benefits. However, no current provision was made to fund future
liabilities for past service costs already accrued. In fiscal 1978, the
Commonwealth began to set aside funds to pay the unfunded liabilities of
the two state systems by making appropriations to a pension reserve. As a
result of comprehensive legislation approved in 1988, the Commonwealth is
required, beginning in fiscal 1989, to fund future pension liabilities
currently and to amortize the Commonwealth's accrued, unfunded liabilities
over 40 years (beginning in 1989).

The current funding schedule, filed March 1, 1991, in effect
requires total payments over 36 years. It is based on actuarial
valuations of the benefits to be provided under the state retirement
systems and the cost of living adjustments for the local systems. As of
January 1, 1990, the funding schedule estimated that the unfunded
actuarial accrued pension liability of the two state retirement systems
was approximately $8.865 billion for state employees and teachers, and
$2.004 billion for cost-of-living increases for the local retirement
systems. Such liability is the estimated present value of all benefits to
be paid to existing pensioners and current employees less the present
value of the future normal cost of the systems. The unfunded liability is
the amount by which the actuarial accrued pension liability exceeds the
accumulated assets of the retirement system, and represents the present
value of the amount that would have to be contributed in the future, in
addition to normal costs, in order for the systems to be fully funded.

An actuarial valuation as of January 1, 1992 has been completed,
which shows that as of such date, the total unfunded actuarial liability
of the Commonwealth's state employees' and teachers' retirement systems
and the Boston teachers' retirement system and of cost-of-living
allowances for local systems was approximately $8.485 billion, which
represents a reduction of approximately $2.383 billion from the January 1,
1990 total unfunded actuarial liability. This reduction is attributable
to asset growth, work force reduction and improved data. The January 1,
1992 actuarial valuation will be the basis for the funding schedule to be
filed in March, 1994.

The comprehensive 1988 legislation also authorizes local systems
to establish funding schedules for their past service costs. In addition,
it provides, beginning in fiscal 1990, for a 15-year program of state
grants to those local systems which establish such schedules. The
legislature included $5.5 million in its fiscal 1990 budget for such
grants; the Governor vetoed all grants to municipalities for which the
appropriation required by the funding schedule would have been less than
the appropriation required to pay current benefits, reducing the total
grants statewide to approximately $129,000.

Taken together, the changes in the law and direct appropriations
made since fiscal 1978 have resulted in a substantial increase in the
pension reserves. Increased investment flexibility has also enabled the
two state retirement systems to improve their investment performance such
that substantial excess earnings have been transferred to the pension
reserves. Total pension costs for fiscal 1987, 1988 and 1989, including
both current benefit payments and amounts set aside in the pension
reserves, were $622.4 million, $600.2 million and $659.7 million,
respectively. Total pension costs for fiscal 1990, 1991 and 1992 were
$671.9 million, approximately $705 million and approximately $724 million,
respectively and the estimated costs for fiscal 1993 and fiscal 1994 are
$728 million and $884 million, respectively. As of June 30, 1993, the
Commonwealth's pension reserves amounted to approximately $3.877 billion.

In recent years, health care related costs have risen
dramatically nationwide. Massachusetts' experience with Medicaid and
group health insurance costs reflect this trend. The Commonwealth had
instituted various Medicaid and group insurance reforms in order to slow
the rapid growth in these expenditure items. The Medicaid program
provides health care to low-income children and families, the disabled and
the elderly.

In fiscal 1992, Medicaid accounted for more than half of the
Commonwealth's appropriations for health care. It was the largest item in
the Commonwealth's budget and has been one of the fastest growing budget
items. During fiscal years 1989, 1990, 1991 and 1992, Medicaid
expenditures were $1.834 billion, $2.121 billion, $2.765 billion
(including $194 million paid in respect of retroactive provider
settlements) and $2.818 billion, respectively, representing an average
annual increase of 15.4%. Expenditures for fiscal 1993 were
$3.151 billion, an increase of 11.8% over fiscal 1992 expenditures. The
increase from fiscal 1992 to fiscal 1993 resulted mainly from the one-time
start-up costs of a new managed care program for Medicaid recipients. The
Executive Office for Administration and Finance estimates that fiscal 1994
Medicaid expenditures will be approximately $3.252 billion, an increase of
3.9% over fiscal 1993 expenditures. Substantial Medicaid expenditures in
recent years have been provided through supplemental appropriations
because program requirements have consistently exceeded initial
appropriations. For fiscal 1994, however, no supplemental Medicaid
appropriations are expected to be necessary.

The large Medicaid expenditure increases experienced in recent
years have been driven by several forces, including rising health care
costs in general, increased caseloads, and, in particular, forces
affecting the aggregate cost of long-term care for the elderly. The
elderly population in the Commonwealth and the elderly Medicaid caseload
both continue to grow. The future burdens of long-term care on Medicaid
expenditures are expected to continue to be high.

The Group Insurance Commission provides individual and family
health insurance coverage for Commonwealth employees and retirees. For
several years group health insurance expenditures were the fastest growing
expense item in the Commonwealth's budget. These costs rose at an average
annual rate of 11.5% from $341.4 million in fiscal 1989 to $446.1 million
in fiscal 1992. Group health insurance expenditures in fiscal 1993 were
$491.2 million and are estimated to be $506.1 million in fiscal 1994,
representing an increase of 3.0%.

In 1988, the Health Security Act was enacted to ensure that all
Massachusetts residents are covered by health insurance. Also in 1988 a
newly created Department of Medical Security assumed management of an
uncompensated care fund to reimburse hospitals that provide free care to
uninsured individuals and for bad debts written off by those hospitals.
The costs of the fund are to be paid by private sector hospital charges.
For fiscal 1989, a total of $15 million was appropriated in the final
supplemental budget and continued for use in fiscal 1990. The 1991 Budget
appropriated $3.84 million for state funding of the uncompensated care
pool and continues $14.2 million of fiscal 1990 appropriations for
expenditure in fiscal 1991. The Governor withheld all fiscal 1991 state
funding for the pool, but litigation was initiated challenging this
action.

Certain voluntary incentives and tax credits have also been made
available to businesses and the self-employed to encourage them to
purchase health insurance. Some recipients of unemployment insurance are
eligible for health insurance coverage, paid for by an unemployment
insurance surcharge on employers.

Beginning January 1, 1992, a surcharge will be imposed on all
employers who do not provide employee health insurance to help finance the
cost of health insurance for the uninsured. The law contains various
exceptions to, and exemptions from payment of, the surcharge. The
employer payments will be used by the Department of Medical Security,
together with other available funds, to purchase health insurance coverage
for the otherwise uninsured. Each of the Department's obligations to
purchase insurance or make programs available is described by the law as
subject to appropriation or subject to the availability of unappropriated
funds.

The Health Security Act also established a Medicare Shortfall
Assistance Fund to compensate hospitals for shortfalls resulting from
insufficient reimbursements under the federal Medicare program. Funding
from state appropriations is capped at $50 million per year. Allotment of
$37 million in fiscal 1989 appropriations was delayed by the Governor in
July 1988, an action which was judicially challenged by the hospital
industry. Such litigation was settled in June 1989, and the $37 million
was released and paid to the hospitals. An additional $50 million in
fiscal 1989 appropriations were continued into fiscal 1990 and paid to
hospitals.

In fiscal 1988, the Commonwealth experienced a significant
revenue shortfall. Fiscal 1988 revenues were approximately $391 million
lower than the total expenditures. This shortfall has been attributed, in
large part, to three sources: (1) the reduction in state income tax
revenues resulting from individual decisions flowing from the 1986 Federal
tax reforms, (2) the unexpectedly large revenue loss resulting from making
S-corporation status available to large Massachusetts corporations, and
(3) a Massachusetts Supreme Judicial Court decision requiring that more
than $100 million in tax refunds be paid to certain multi-national
corporations. To alleviate the effect of the revenue shortfall, several
legislative and administrative actions were taken to balance the fiscal
1988 budget, including the implementation of spending reductions, the
raising of additional non-tax revenues, and the bonding of certain
appropriations previously earmarked for highway and building construction
(largely, part of prior year surpluses set aside to fund projects
ordinarily financed through bond issues).

As a result of these and other steps, the Commonwealth ended its
1988 fiscal year, on June 30, 1988, with an aggregate surplus of
approximately $78.3 million in its three principal operating funds.
Approximately $41.3 million of this amount was carried forward into fiscal
1989 (approximately 0.5% of total fiscal 1988 tax revenues).
Approximately $37 million was transferred to the Stabilization Fund which
increased the fund to $122.3 million.

Total appropriations for 1989 were approximately $12.255
billion. Certain fiscal 1989 expenditures were made from sources other
than fiscal 1989 appropriations. Total spending for fiscal 1989 was
approximately $12.861 billion. These expenditures were financed by tax
revenues and other sources, such as Federal reimbursements and Lottery
profits.

The Commonwealth had an operating loss for fiscal 1989 of
approximately $672.5 million. This was the result of a general slowdown
in the Massachusetts economy due to a deep regional recession. The first
real signs of an economic slowdown appeared in the second half of fiscal
1989 with a precipitous decline in sales tax revenues. By the end of
fiscal 1989, overall sales tax collections had grown by only 3.1%. Sales
tax collections would have declined except for the enforcement initiatives
and the inclusion of cigarettes under the sales tax. The Department of
Revenue has concluded that weakness in the real estate market was a
leading factor in the sales tax decline. Growth in the sales tax is
highly reliant on purchases of construction materials used for new homes
and sales of consumer durable items purchased by new homeowners.

The Commonwealth ended its 1989 fiscal year with an aggregate
deficit of approximately $319.3 million in its three principal operating
funds. The Commonwealth issued notes in a principal amount of $466.4
million and $244 million of Medicaid related notes for the purpose of
financing certain fiscal 1989 expenditures. These notes were to be repaid
with the proceeds of an additional tax on certain types of personal income
of 0.375% for 1989 and 0.75% for 1990. This additional tax was dedicated
to the debt service on these notes and the Medicaid borrowing, and may not
be used for general purposes.

In addition, by the end of fiscal 1989, the Commonwealth owed
$488 million for services rendered to Medicaid recipients in prior years.
In fiscal year 1990, the Commonwealth paid off the $488 million liability
to hospitals and nursing homes for rate settlements dating back to 1980.

Total revenues for fiscal 1990 were approximately $12.223
billion. Expenditures for fiscal 1990 were higher than appropriations,
however. The total expenditures were approximately $13.474 billion. The
Commonwealth suffered an operating loss of approximately $1.252 billion in
fiscal 1990. The Commonwealth had a cash surplus on June 30, 1990, as a
result of deferring until fiscal 1991 the payment of approximately $1.26
billion of local aid due June 30, 1990.

In July 1990, the legislature authorized the Commonwealth to
issue bonds in an aggregate amount up to $1.42 billion for purposes of
funding the fiscal 1990 deficit and certain prior year Medicaid
reimbursement payments. The Commonwealth has established the Commonwealth
Fiscal Recovery Fund which provides for the dedication and application of
certain state personal income tax receipts by payment into the fund for
purposes of securing payment of debt service on the new bonds.

As a result of the Governor's veto of a portion of the 1990
appropriations budget, the Commonwealth defaulted on a $2.5 million
obligation to the Massachusetts Community Development Finance Corporation.
The full faith and credit of the Commonwealth had been pledged on this
obligation. The legislature approved a supplemental appropriation of $2.5
million to meet the payment which was made on September 17, 1990.

The Commonwealth ended fiscal 1991 with an operating loss of
approximately $21.2 million. After drawing on the fiscal 1990's fund
balance of $258.3 million, a final surplus of $237.1 million resulted at
the close of the fiscal years. Actual tax revenue collections for fiscal
year 1991 totaled $8.995 billion, up $477 million from fiscal 1990.

Upon taking office in January 1991, the new Governor of
Massachusetts proposed legislative and administrative actions in order to
eliminate the projected deficits for fiscal 1991. Among the proposals was
the withholding of allotments (under Section 9C of Chapter 29 of the
Massachusetts General Laws) in order to reduce appropriated spending. The
legislature adopted a number of the Governor's recommendations and the
Governor took certain other administrative actions not requiring
legislative approval, including the adoption of a state employee furlough
program. It is estimated that spending reductions achieved through
savings initiatives and withholding of allotments totalled $484.3 million
in the aggregate for fiscal 1991.

In May 1991, the new administration filed an amendment to its
Medicaid state plan that will enable it to claim 50% federal reimbursement
on uncompensated care payments provided to certain hospitals in the
Commonwealth. The Commonwealth obtained federal reimbursement of
approximately $513 million. The reimbursement was based upon recent
amendments of federal law contained in the Omnibus Budget Reconciliation
Act of 1990 and the federal government is auditing the reimbursement
claim. Although the administration feels that the Commonwealth is
entitled to reimbursement and will prevail in the audit, if the
Commonwealth does not prevail, it would have the right to contest and
appeal. However, the Commonwealth could be required to repay all or part
of Medicaid reimbursements with interest or have such amounts deducted
from future reimbursement payments.

At the end of fiscal 1991, after payment in full of the Local
Aid distribution of $1.018 billion due on June 28, 1991, retirement of all
the Commonwealth's outstanding commercial paper and repayment of certain
other short-term borrowings, the Commonwealth had a cash balance of $182.3
million. The fiscal 1991 year-end cash position compared favorably to the
Commonwealth's cash position at the end of the prior fiscal year, June 30,
1990, when the Commonwealth's cash shortfall would have exceeded $1.1
billion had payment of Local Aid not been postponed.

Budgeted revenues and other sources for fiscal 1992 were
$13.728 billion, including tax revenues of $9.484 billion. Budgeted
revenues and other sources increased by approximately 0.7% from fiscal
1991 to fiscal 1992, while tax revenues increased by 5.4% for the same
period. Overall, the budgeted operating funds ended fiscal 1992 with an
excess of revenues and other sources over expenditures and other uses of
$312.3 million and with positive fund balances of $549.4 million, when
such excess is added to the fund balances of $237.1 million carried
forward from fiscal 1991. Total fiscal 1992 spending authority continued
into fiscal 1993 was $231.0 million.

After payment in full of the quarterly local aid distribution of
$514.0 million due on June 30, 1992, retirement of the Commonwealth's
outstanding commercial paper (except for approximately $50 million of bond
anticipation notes) and certain other short-term borrowings, as of
June 30, 1992, the Commonwealth showed a year-end cash position of
approximately $731.0 million. The fiscal 1992 ending balance compares
favorably with the cash balance of $182.3 million at the end of fiscal
1991.

One June 23, 1993, the Office of the Comptroller concluded an
analytical review for fiscal 1992 pertaining to the Commonwealth's
Unemployment Compensation Trust Fund. Certain amounts totalling $416.2
million, previously accounted for and reported in the audited financial
statements as loans from the federal government, were determined to have
been revenues, primarily federal grants under the Emergency Unemployment
Compensation program enacted by the United States Congress during fiscal
1992. The Commonwealth's Comprehensive Annual Financial Report, and other
schedules related to the audit of federal financial assistance programs
for fiscal 1992, were restated accordingly. The effect of this
restatement was to decrease liabilities and the fund deficit in the
Unemployment Compensation Trust Fund as originally reported at June 30,
1992. This restatement was restricted to the Unemployment Compensation
Trust Fund and did not affect the budgeted funds of the Commonwealth.

At the end of fiscal 1993, the budgeted operating funds of the
Commonwealth had a surplus of revenues and other sources over expenditures
and other uses of $13.1 million. The aggregate ending fund balances in
the budgeted operating funds totalled approximately $562.5 million.
Budgeted revenues and other sources for fiscal 1993 totalled approximately
$14.710 billion, including tax revenues of $9.930 billion. Total revenues
and other sources increased by approximately 6.9% from fiscal 1992 to
fiscal 1993, while tax revenues increased by 4.7% for the same period. In
July, 1992, tax revenues had been estimated to be approximately $9.685
billion for fiscal 1993. This amount was subsequently revised during
fiscal 1993 to $9.940 billion.

In fiscal 1993, Commonwealth budgeted expenditures and other
uses totalled approximately $14.696 billion, $1.280 billion or
approximately 9.6% higher than fiscal 1992 levels. Fiscal 1993 budgeted
expenditures were $23 million lower than the initial July 1992 estimates
of fiscal 1993 budgeted expenditures.

As of June 30, 1993, after payment of all local aid and
retirement of short-term debt, the Commonwealth showed a year-end cash
position of approximately $622.2 million, as compared to a projected
position of $485.1 million.

On January 27, 1993, the Governor submitted his fiscal 1994
budget recommendation which called for budgeted expenditures of
approximately $15.208 billion. This recommended spending level was
approximately $232.2 million, or 1.6%, over then estimated budgeted
expenditures for fiscal 1993 of $14.976 billion. Proposed budgeted
revenues for fiscal 1994 would exceed proposed budgeted expenditures by
approximately $20.5 million. The Governor's recommendation projected a
fiscal 1994 ending fund balance of $250.7 million, of which $198.8 million
is anticipated to be in the Stabilization Fund. The Governor's budget
recommendation was based on a tax revenue estimate of $10.460 billion, an
increase of approximately $520 million, or approximately 5.2%, as compared
to the then estimated fiscal 1993 tax revenues of $9.940 billion. The
Governor's fiscal 1994 budget submission also proposed tax reductions
aggregating $30 million, including a tax credit for certain college
tuition payments and a tax credit for health insurance premiums paid by
the elderly.

On July 19, 1993, the Governor signed into law the fiscal 1994
budget. As signed by the Governor, the budget authorizes approximately
$15.463 billion in fiscal 1994 expenditures. The Legislature had
originally approved a fiscal 1994 budget with appropriations totalling
$15.545 billion. The Governor exercised his authority to veto and reduce
individual line-items and reduced total expenditures by approximately
$82.4 million in order to bring the fiscal 1994 budget into balance and to
fund fiscal 1993 appropriations continued into fiscal 1994 and certain
other fiscal 1994 expenditures which the Governor believes will be
necessary. Total budgeted expenditures and other uses for fiscal 1994
(excluding any supplemental appropriations) are currently estimated to be
approximately $15.500 billion. On September 24, 1993, the Governor filed
a supplemental appropriations bill recommending $75.4 million in fiscal
1994 appropriations. The Governor had previously filed on June 28 and
August 25 two other supplemental appropriation bills totalling $34.0
million to fund certain collective bargaining agreements. On January 4,
1994, the Legislature approved a supplemental appropriation bill totalling
approximately $158.1 million. The Governor is currently reviewing the
bill to determine what vetoes, if any, may be necessary.

In June, 1993, the Legislature adopted and the Governor signed
into law comprehensive education reform legislation. The Executive Office
for Administration and Finance expects this legislation will require
annual increases in expenditures for education purposes above fiscal 1993
base spending of $1.289 billion of approximately $175 million in fiscal
1994, $414 million in fiscal 1995 and $662 million in fiscal 1996.
Additional annual increases are also expected in later fiscal years. The
fiscal 1994 budget as signed by the Governor includes $175 million in
appropriations to satisfy this legislation. On July 1, 1993, the Governor
proposed certain amendments to the education reform legislation, which,
among other things, would modify the sending requirements imposed on
cities and towns under the legislation. The amendments are not expected
to have any material fiscal impact on the Commonwealth.

On January 14, 1994, the Governor signed into law supplemental
appropriations totalling approximately $157.9 million. Including an
additional $8.1 million in fiscal 1994 supplemental appropriation
recommendations that the Governor plans to file, and an approximately $100
million contingency reserve in fiscal 1994 for possible additional
spending, fiscal 1994 budgeted expenditures are currently estimated to be
approximately $15.716 billion.

Fiscal 1994 budgeted revenues and other sources are currently
estimated by the Executive Office for Administration and Finance to be
approximately $15.535 billion. This amount includes estimated fiscal 1994
tax revenues of $10.694 billion, which is $764 million, or 7.7% higher
than fiscal 1993 tax revenues of $9.930 billion. The fiscal 1994 tax
revenue amount represents an increase of approximately $134 million from
the previous fiscal 1994 tax revenue estimate of $10.560 billion. The
revised tax revenue estimate is based on tax revenue collections through
December 1993, which as of that time were approximately $134.3 million
above the benchmark established by the Department of Revenue at the start
of fiscal 1994. Fiscal 1994 non-tax revenues are currently estimated by
the Executive Office for Administration and Finance to be approximately
$4.841 billion, an increase of approximately $61.2 million or 1.3%, over
fiscal 1993 non-tax revenues of approximately $4.780 billion.

Based on currently estimated revenues and expenditures, the
Executive Office for Administration and Finance projects a fiscal 1994
ending balance of approximately $382.0 million, of which approximately
$315.5 million is anticipated to be in the Stabilization Fund.

On January 21, 1994, the Governor submitted his fiscal 1995
budget recommendation to the Legislature. The proposal will call for
budgeted expenditures of approximately $16.139 billion. This recommended
spending level is approximately $423.8 million, or 2.7%, above currently
estimated fiscal 1994 expenditures of $15.716 billion. Proposed budgeted
revenues for fiscal 1994 will be approximately $16.141 billion, and exceed
proposed budgeted expenditures by approximately $1.5 million. The
Governor's recommendation projects a fiscal 1995 ending balance of
approximately $383.4 million, of which approximately $325.0 million is
projected to be in the Stabilization Fund. The Governor's budget
recommendation is based on a tax revenue estimate of $11.226 billion, an
increase of approximately $532 million, or approximately 5.0%, as compared
to currently estimated fiscal 1994 tax revenues of $10.694 billion. The
Governor's fiscal 1995 budget submission also proposes tax reductions
aggregating $105 million in fiscal 1995, which include a reduction in the
income tax rate from 5.95% to 5.85%, an increase in certain income tax
exemptions and an increase in the no-tax status threshold for low-income
taxpayers. The fiscal 1995 tax revenue estimate of $11.226 billion is net
of the $105 million tax reduction proposal. The annualized impact of
these reductions is estimated to be approximately $270 million.

Since October 13, 1993 Standard & Poor's Corporation ("S+P") has
rated the Commonwealth's uninsured general obligation bonds at A+. This
rating reflects an upgrade by S+P's from an A due to continued improvement
in the financial management of the Commonwealth; including significant
programmatic changes and their positive effect on the financial position
of the Commonwealth, and stabilization of the Massachusetts economy.
Since September, 1992 the S+P rating on state and agency notes has been at
SP1, which reflects an improvement from a previous downgrade to SP2 on
December 13, 1989.

Since September, 1992 Moody's Investors Service ("Moody's") has
rated the Commonwealth's uninsured general obligation bonds at A. This
rating was confirmed as recently as February 4, 1994 by Moody's on the
basis of the Commonwealth's continued progress in restoring fiscal
control, as well as the recent improvement in the local economy; notably a
reduction in the rate of continuing job losses and encouraging revenue
performance. On November 15, 1993 Moody's rated the Commonwealth's short
term notes at MIG2. This rating also reflects an improvement in the
restoration of fiscal control; including a reduction in reliance upon
temporary borrowings to finance operations, but acknowledges the potential
market risk in the continuation of refinancings to retire outstanding
notes. The Commonwealth's commercial paper is rated at P-1.

In recent years, the Commonwealth of Massachusetts and certain
of its public bodies and municipalities have faced serious financial
difficulties which have affected the credit standing and borrowing
abilities of Massachusetts and the respective entities and may have
contributed to higher interest rates on debt obligations. The
continuation of, or an increase in such financial difficulties, could
result in declines in the market values of, or default on, existing
obligations including Bonds deposited in the Massachusetts Trust. Should
there be during the term of the Massachusetts Trust a financial crisis
relating to Massachusetts, its public bodies or municipalities, the market
value and marketability of all outstanding bonds issued by the
Commonwealth and its public authorities or municipalities including the
Bonds in the Massachusetts Trust and interest income to the Massachusetts
Trust could be adversely affected.

As of January 1, 1994, the total general obligation bond and
note indebtedness of the Commonwealth was approximately $8.430 billion.
Dedicated income tax indebtedness totalled approximately $1.037 billion
and the Special Obligation Indebtedness was approximately $104 million.
The total Bond and note liability as of January 1, 1994 was approximately
$12.555 billion.

As of January 1, 1994, there were various suits pending in which
the Commonwealth is a defendant. In the opinion of the Attorney General,
no litigation that was pending or threatened at that time was likely to
result in final judgments against the Commonwealth that would materially
affect its financial condition. However, certain actions should be noted
(in addition to the ones noted previously).

The Commonwealth is engaged in various lawsuits involving
environmental and related laws, including an action brought on behalf of
the U.S. Environmental Protection Agency alleging violations of the Clean
Water Act and seeking to enforce the clean-up of Boston Harbor. The
Massachusetts Water Resource Authority ("MWRA"), successor in liability to
the Metropolitan District Commission, has assumed primary responsibility
for developing and implementing a court-approved plan for the construction
of the treatment facilities necessary to achieve compliance with federal
requirements. Under the Clean Water Act, the Commonwealth may be liable
for costs of compliance in these or any other Clean Water cases if the
MWRA or a municipality is prevented from raising revenues necessary to
comply with a judgment. The MWRA currently projects that the total cost
of construction of the treatment facilities required under the court's
order is approximately $3.5 billion in current dollars.

The Commonwealth defends actions challenging the establishment
of fees, taxes and other revenue-raising measures. One case challenged
the constitutionality of amendments to the "bottle law" which provide that
unclaimed bottle deposits (estimated at $22 million or more annually)
escheat to the Commonwealth. In March of 1993, the Supreme Judicial Court
upheld the amendments except for the initial funding requirement, which
the Court held severable. The parties are now trying to determine the
practical effect of the ruling. Another case challenged the
constitutionality of certain fees imposed on trucks. In May, 1993, the
Supreme Judicial Court struck down, on Commerce Clause grounds, several
fees imposed on interstate motor carriers operating in the Commonwealth.
The Court remanded the case to the Superior Court to determine the
appropriate remedy. Refunds will be limited to fees paid on or after
November 14, 1988 and may be limited to the discriminatory portion (rather
than the entirety) of the fees in question.

There are also actions pending in which recipients of human
services benefits, such as welfare recipients, the mentally retarded, the
elderly, the handicapped, children, residents of state hospitals and
inmates of corrections institutions, seek expanded levels of services and
benefits and in which providers of services to such recipients challenge
the rates at which they are reimbursed by the Commonwealth. To the extent
that such actions result in judgments requiring the Commonwealth to
provide expanded services or benefits or pay increased rates, additional
operating and capital expenditures might be needed to implement such
judgments.

In addition, there are several tax matters in litigation which
could result in significant refunds to taxpayers if decisions unfavorable
to the Commonwealth are rendered. The amount of taxes and interest at
issue in those cases is approximately $596 million.

Many factors affect the financial condition of the Commonwealth,
including social, environmental and economic conditions which are beyond
its control. As with most urban states, the continuation of many of the
Commonwealth's programs, particularly human services programs, is, in
significant part, dependent upon continuing Federal reimbursements. These
reimbursements have been, in general, declining in amount. Recent Federal
legislation has effected substantial reductions in direct Federal payments
and grants to states and municipalities for programs in social services,
water pollution control and other areas. These Federal actions and the
smaller Commonwealth tax revenues may well require reducing the level of
existing Massachusetts programs unless other funding sources are found.
Similarly, the more limited availability of grants to the state and local
governments could slow economic development.

The Sponsor believes the information summarized above describes
some of the more significant events relating to the Massachusetts Trust.
Sources of such information are the official statements of issuers located
in the Commonwealth of Massachusetts, as well as other publicly available
documents and information. While the Sponsor has not independently
verified such information, the Sponsor has no reason to believe it is not
correct.

Michigan Trust

Due primarily to the fact that the leading sector of the State's
economy is the manufacturing of durable goods, economic activity tends to
be more cyclical than in the nation as a whole. While the State's efforts
to diversify its economy have proven successful as reflected by the fact
that the share of employment in the State in the durable goods sector fell
from 33.1 percent in 1960 to 15.1 percent in 1993, durable goods
manufacturing still represents a sizeable proportion of the State's
economy. As a result, any substantial economic downturn is likely to have
an adverse effect on the State's economy and its municipalities and school
districts. These conditions and other factors described below could
adversely affect the Michigan debt obligations that the Michigan trust
acquires and the value of the Units of the Trust.

Recently, as well as historically, the average monthly
unemployment rate in the State has been higher than the average figures
for the United States. For example, for 1993 the average monthly
unemployment rate in the State was 7.0% as compared to a national average
of 6.8% in the United States.

The State's economy could continue to be affected by changes in
the auto industry, notably consolidation, reduction in administrative
staff and plant closings resulting from competitive pressures and
overcapacity. General Motors Corporation has scheduled the closing of
several of its plants in Michigan beginning in 1993 and continuing in
1994. The impact these closures will have on the State's revenues and
expenditures is not currently known. The financial impact on the local
units of government in the areas in which plants are closed could be more
severe than on the State as a whole and could adversely affect State
revenues.

The State Constitution limits the amount of total revenues of
the State raised from taxes and certain other sources to a level for each
fiscal year equal to a percentage of State personal income in the prior
calendar year. In the event the State's total revenues exceed the limit
by 1% or more, the Constitution requires that the excess be refunded to
taxpayers. The State Constitution does not prohibit the increasing of
taxes so long as revenues are expected to amount to less than the revenue
limit, and authorizes exceeding the limit for emergencies. The State
Constitution further provides that the proportion of State spending paid
to all units of local government to total State spending may not be
reduced below the proportion in effect in the 1978-79 fiscal year. The
State Constitution requires that if the spending does not meet the
required level in a given year, an additional appropriation for local
units is required by the following fiscal year. The State Constitution
also requires the State to finance any new or expanded activity of local
units mandated by State law. Any expenditures required by this provision
would be counted as State spending for local units for purposes of
determining compliance with the provisions cited above.

The State Constitution limits the purposes for which State
general obligation debt may be issued. Such debt is limited to short-term
debt for State operating purposes, short and long term debt for the
purposes of making loans to school districts and long term debt for voter
approved purposes. In addition to the foregoing, the State authorizes
special purpose agencies and authorities to issue revenue bonds payable
from designated revenues and fees. Revenue bonds are not obligations of
the State and in the event of shortfalls in self-supporting revenues, the
State has no legal obligation to appropriate money to these service
payments. The State's Constitution also directs or restricts the use of
certain revenues.

The state finances its operations through the State's General
Fund and Special Revenue Funds. The General Fund receives revenues of the
State that are not specifically required to be included in the Special
Revenue Fund. General Fund revenues are obtained approximately 59% from
the payment of State taxes and 41% from federal and non-tax revenue
sources. The majority of the revenues from State taxes are from the
State's personal income tax, single business tax, use tax, sales tax and
various other taxes. Approximately 60% of total General Fund expenditures
have been for State support of public education and for social services
programs. Other significant expenditures from the General Fund provide
funds for law enforcement, general State government, debt service and
capital outlay. The State Constitution requires that any prior year's
surplus or deficit in any fund must be included in the next succeeding
year's budget for that fund.

In recent years, the State of Michigan has reported its
financial results in accordance with generally accepted accounting
principles. For each of the five fiscal years ending with the fiscal year
ended September 30, 1989, the State reported positive year-end balances
and positive cash balances in the combined General Fund/School Aid Fund.
For the fiscal years ended September 30, 1990 and 1991, the State reported
negative year-end General Fund balances of $310.3 million and $169.4
million, respectively, but ended the 1992 fiscal year with its General
Fund in balance. A positive cash balance in the combined General
Fund/School Aid Fund was recorded at September 30, 1990. In each of the
last three fiscal years, the State has undertaken mid-year actions to
address projected year-end budget deficits, including expenditure cuts and
deferrals and one-time expenditures or revenue recognition adjustments.
In the fiscal year ended September 30, 1993, the State took mid-year
action to eliminate a projected year-end General Fund deficit of $370
million and expects to show a balance as of September 30, 1993 of $26.0
million after a projected transfer of $286.2 million to the Budget
Stabilization Fund described below. From 1991 through 1993, the State
experienced deteriorating cash balances which have necessitated short-term
borrowings and the deferral of certain scheduled cash payments to local
units of government. The State borrowed $700 million for cash flow
purposes in the 1992 fiscal year and $900 million in the 1993 fiscal year.
The State has a Budget Stabilization Fund which, after a transfer of $230
million to the General Fund for the 1991 fiscal year, had an accrued
balance of $182 million as of September 30, 1991, an accrued balance of
$20.1 million as of September 30, 1992 and, after an expected transfer of
$286 million on an accrual basis in connection with the completion of the
State's financial reports, a preliminary ending accrued balance of $307.1
million as of September 30, 1993.

Amendments to the Michigan Constitution which place limitations
on increases in State taxes and local ad valorem taxes (including taxes
used to meet debt service commitments on obligations of the taxing unit)
were approved by the voters of the State of Michigan in November 1978 and
became effective on December 23, 1978. To the extent that obligations in
the Trust are for local units and have been issued on or subsequent to
December 23, 1978, the ability of such local units to levy debt service
taxes might be affected.

State law provides for distributions of certain State collected
taxes or portions thereof to local units based in part on population as
shown by census figures and authorizes levy of certain local taxes by
local units having a certain level of population as determined by census
figures. Reductions in population in local units resulting from periodic
census could result in a reduction in the amount of State collected taxes
returned to those local units and in reductions in levels of local tax
collections for such local units unless the impact of the census is
changed by State law. No assurance can be given that any such State law
will be enacted. In the 1991 fiscal year, the state deferred certain
scheduled payments to municipalities, school districts, universities and
community colleges. While such deferrals were made up at later dates,
similar future deferrals could have an adverse impact on the cash position
of some local units. Additionally, the State reduced revenue sharing
payments to municipalities below the level provided under formulas by $0.9
million in the 1991 fiscal year and $34.4 million in the 1992 fiscal year
and froze the 1993 revenue sharing payments at the 1992 level.

On March 15, 1994, the electors of the State voted to amend the
State's Constitution to increase the State sales tax rate from 4% to 6%
and to place an annual cap on property assessment increases for all
property taxes. Companion legislation further provides for a cut in
State's income tax rate from 4.6% to 4.4%. In addition, property taxes
for school operating purposes will be reduced and school funding will be
provided from a combination of property taxes and state revenues, some of
which will be provided for new or increased State taxes. The legislation
also contains other provisions that may reduce or alter the revenues of
local units of government and tax increment bonds could be particularly
affected. While the ultimate impact of the constitutional amendment and
related legislation cannot yet be accurately predicted, investors should
be alert to the potential effect of such measures upon the operations and
revenues of Michigan local units of government.

Currently, this State's general obligation bonds ar rated "A1"
by Moody's Investors Service, Inc. and "AA" by Fitch Investor's Services,
Inc. In October, 1989, Standard & Poor's Corporation raised its rating on
the State's general obligation bonds to "AA". In January, 1991,
Standard & Poor's placed the State's general obligation debt on
CreditWatch with negative implication from Standard & Poor's AA rating on
such debt. In July, 1991, Standard & Poor's removed the State general
obligation debt from CreditWatch and in 1992 reconfirmed the "AA" rating.

The information above constitutes a brief summary only and does
not purport to be a complete description of potential adverse effects and
is based on material presented in various official statements, offering
circulars and prospectuses. While the Sponsor has not independently
verified such information, the Sponsor has no reason to believe that such
information is not correct in all respects.

NEW YORK RISK FACTORS DISCLOSURE

New York Trust

New York City. New York City (the "City"), with a population of
approximately 7.3 million, is an international center of business and
culture. Its non-manufacturing economy is broadly based, with the banking
and securities, life insurance, communications, publishing, fashion
design, retailing and construction industries accounting for a significant
portion of the City's total employment earnings. Additionally, the City
is the nation's leading tourist destination. The City's manufacturing
activity is conducted primarily in apparel and publishing.

The national economic recession which began in July 1990 has
adversely impacted the City harder than almost any other political
jurisdiction in the nation. As a result, the City, with approximately 3
percent of national employment, has lost approximately 20 percent of all
U.S. jobs during the recent economic downturn and, consequently, has
suffered erosion of its local tax base. In total, the City private sector
employment has plummeted by approximately 360,000 jobs since 1987. But,
after nearly five years of decline, the City appears to be on the verge of
a broad-based recovery which will lift many sectors of the local economy.
Most of the nascent local recovery can be attributed to the continued
improvement in the U.S. economy, but a great deal of the strength expected
in the City economy will be due to local factors, such as the heavy
concentration of the securities and banking industries in the City. The
current forecast calls for modest employment growth of about 20,000 a year
(0.6 percent) on average through 1998 with some slowing but still positive
growth in employment in 1995-96 as U.S. growth slows (local job gains slow
from 25,000 to around 10,000 per year).

During the most recent economic downturn, the City has faced
recurring extraordinary budget gaps that have been addressed by
undertaking one-time, one-shot budgetary initiatives to close then
projected budget gaps in order to achieve a balanced budget as required by
the laws of the State of New York (the "State"). For example, in order to
achieve a balanced budget for the 1992 fiscal year, the City increased
taxes and reduced services during the 1991 fiscal year to close a then
projected gap of $3.3 billion in the 1992 fiscal year which resulted from,
among other things, lower than expected tax revenue of approximately $1.4
billion, reduced State aid for the City of approximately $564 million and
greater than projected increases in legally mandated expenditures of
approximately $400 million, including public assistance and Medicare
expenditures. The gap closing measures for fiscal year 1992 included
receipt of $605 million from tax increases, approximately $1.5 billion of
proposed service reductions and proposed productivity savings of $545
million.

Notwithstanding its recurring projected budgets gaps, for fiscal
years 1981 through 1993 the City achieved balanced operating results (the
City's General Fund revenues and transfers reduced by expenditures and
transfers), as reported in accordance with Generally Accepted Accounting
Principles ("GAAP"), and the City's 1994 fiscal year results are projected
to be balanced in accordance with GAAP.

The City's ability to maintain balanced budgets in the future is
subject to numerous contingencies; therefore, even though the City has
managed to close substantial budget gaps in recent years in order to
maintain balanced operating results, there can be no assurance that the
City will continue to maintain a balanced budget as required by State law
without additional tax or other revenue increases or reduction in City
services, which could adversely affect the City's economic base.

Pursuant to the laws of the State, the City prepares an annual
four-year financial plan, which is reviewed and revised on a quarterly
basis and which includes the City's capital, revenue and expense
projections. The City is required to submit its financial plans to review
bodies, including the New York State Financial Control Board ("Control
Board"). If the City were to experience certain adverse financial
circumstances, including the occurrence or the substantial likelihood and
imminence of the occurrence of an annual operating deficit of more than
$100 million or the loss of access to the public credit markets to satisfy
the City's capital and seasonal financing requirements, the Control Board
would be required by State law to exercise powers, among others, of prior
approval of City financial plans, proposed borrowings and certain
contracts.

On November 23, 1993, the City submitted to the Control Board
the Financial Plan for the 1994 through 1997 fiscal years, which is a
modification to a financial plan submitted to the Control Board on
August 30, 1993 and which relates to the City, the Board of Education
("BOE") and the City University of New York ("CUNY"). The 1994-1997
Financial Plan projects revenues and expenditures for the 1994 fiscal year
balanced in accordance with GAAP. The 1994-1997 Financial Plan sets forth
actions to close a previously projected gap of approximately $2.0 billion
in the 1994 fiscal year. The gap-closing actions for the 1994 fiscal year
included agency actions aggregating $666 million, including productivity
savings and savings from restructuring the delivery of City services;
service reductions aggregating $274 million; the sale of delinquent real
property tax receivables for $215 million; discretionary transfers from
the 1993 fiscal year of $110 million; reduced debt service costs
aggregating $187 million, resulting from refinancings and other actions;
$150 million in proposed increased Federal assistance; a continuation of
the personal income tax surcharge, resulting in revenues of $143 million;
$80 million in proposed increased State aid, which is subject to approval
by the Governor; and revenue actions aggregating $173 million.

The Financial Plan also sets forth projections for the 1995
through 1997 fiscal years and outlines a proposed gap-closing program to
close projected budget gaps of $1.7 billion, $2.5 billion and $2.7 billion
for the 1995 through 1997 fiscal years, respectively. City gap-closing
actions total $640 million in the 1995 fiscal year, $814 million in the
1996 fiscal year and $870 million in the 1997 fiscal year. These actions
include increased revenues and reduced expenditures from agency actions
aggregating $165 million, $439 million and $470 million in the 1995
through 1997 fiscal years, respectively, including productivity savings
and savings from restructuring the delivery of City services and service
reductions; possible BOE expenditure reductions aggregating $125 million
in each of the 1995 through 1997 fiscal years; and reduced other than
personal service costs aggregating $50 million in each of the 1995 through
1997 fiscal years.

State actions proposed in the gap-program total $306 million,
$616 million and $766 million in each of the 1995, 1996 and 1997 fiscal
years, respectively. These actions include savings from various proposed
mandate relief measures and the proposed reallocation of State education
aid among various localities totaling $175 million, $325 million and $475
million in each of the 1995, 1996 and 1997 fiscal years, respectively.
These actions also include $131 million in 1995 and $291 million in each
of 1996 and 1997 in anticipated State actions which could include savings
from the proposed State assumption of certain Medicaid costs or various
proposed mandate relief measures.

The Federal actions proposed in the gap-closing program are $100
million and $200 million in increased Federal assistance in fiscal years
1996 and 1997, respectively.

Other Actions proposed in the gap-closing program represent
Federal, State or City actions to be specified in the future.

Various actions proposed in the Financial Plan, including the
proposed continuation of the personal income tax surcharge beyond December
31, 1995 and the proposed increase in State aid, are subject to approval
by the Governor and the State Legislature, and the proposed increase in
Federal aid is subject to approval by Congress and the President. The
State Legislature has in previous legislative sessions failed to approve
proposals for the State assumption of certain Medicaid costs, mandate
relief and reallocation of State education aid, thereby increasing the
uncertainty as to the receipt of the State assistance included in the
Financial Plan. If these actions cannot be implemented, the City will be
required to take other actions to decrease expenditures or increase
revenues to maintain a balanced financial plan. The state Legislature has
approved the continuation of the personal income tax surcharge through
December 31, 1995, and the Governor is expected to approve this
continuation. The Financial Plan has been the subject of extensive public
comment and criticism particularly regarding the sale of delinquent
property tax receivables, the sale of the New York City Off-Track Betting
Corporation ("OTB"), the amount of State and Federal aid included in the
Financial Plan and the inclusion of non-recurring actions.

Notwithstanding the proposed city, federal and state actions in
the gap-closing programs, the City Comptroller has warned in past
published reports that State and local tax increases in an economic
downturn or period of slow economic growth can have adverse effects on the
local economy and can slow down an economic recovery. The City
Comptroller has also previously expressed concerns about the effects on
the City's economy and budgets of rapidly increasing water and sewer
rates, decreasing rental payments in future years from the Port Authority
under leases for LaGuardia and Kennedy airports, the dependence on
increased aid from the State and Federal Governments for gap-closing
programs, the escalation cost of judgements and claims, federal deficit
reduction measures and the increasing percentage of future years' revenues
projected to be consumed by debt service, even after reductions in the
capital program.

Although the City has maintained balanced budgets in each of its
last thirteen fiscal years, and is projected to achieve balanced operating
results for the 1993 fiscal year, there can be no assurance that the gap-
closing actions proposed in the Financial Plan can be successfully
implemented or that the City will maintain a balanced budget in future
years without additional State aid, revenue increases or expenditure
reductions. Additional tax increases and reductions in essential City
services could adversely affect the City's economic base.

In November 1993, Rudolph W. Giuliani was elected mayor of the
City, replacing the previous administration on January 1, 1994. Mayor
Giuliani's Modification No. 94-2 to the Financial Plan for the City and
Covered Organizations for fiscal years 1994-1998 (the "Modification"),
issued February 10, 1994, reports that for 1995 fiscal year, the budget
gap is estimated at $2.26 billion, or nearly a 12 percent shortfall of
existing tax revenues over baseline expenditures. Absent gap closing
initiatives, the Modification reports that the projected budget gap will
grow to nearly $3.4 billion by 1998 fiscal year. According to the
Modification, the 1995 fiscal year budget gap is the largest that the City
has faced since 1981, when the City converted to GAAP. The Modification
attributes the projected budget gaps to the lingering national recession,
to a sharp growth in expenditures during the boom years of the 1980s and
the failure of the City to reduce the City's municipal workforce. The
Modification reports that at the same time that City employment has
declined as a percentage of U.S. employment, local government employment
in the City, which exceeds the state government employment of the five
largest states, is on the verge of an historic high. According to the
Modification, at the end of December 1993, the City's full-time municipal
workforce stood at more than 362,000 employees, and absent reductions,
will reach an all-time high at the end of fiscal year 1994.

The Modification states that in order to strengthen the City's
long-term fiscal position the City's gap closing initiatives must be
accomplished without resorting to one-shot gap-closing measures, such as
tax increases; instead, it must balance its budgets by reducing City
spending, reducing the size of the City's municipal workforce and reducing
certain City taxes to encourage economic growth. Under the Modification,
fiscal year 1995 spending declines by $516 million over the current fiscal
year, the lowest projected spending rate since 1975. The Modification
plans to reduce the City's municipal workforce by 15,000 positions, as
compared to the current actual headcount, by the end of fiscal year 1995.
The workforce reduction will be achieved through an aggressive severance
package, and, if necessary, layoffs. It is anticipated that these
workforce reduction initiatives will save $117 million, $144 million, $311
million, $415 million and $539 million in fiscal years 1994 through 1998,
respectively, after taking into account an estimated $200 million in costs
related to instituting the proposed severance programs which are
anticipated to be financed with surplus Municipal Assistance Corporation
funds (see below for a discussion of the Municipal Assistance
Corporation). The Modification also contemplates the loss of $35 million,
$186 million, $534 million and $783 million in tax revenues in 1995
through 1998, respectively, as a result of the reduction in certain City
taxes, such as the reduction of the hotel tax from 6 percent to 5 percent,
commercial rent tax reductions and the elimination of the 12.5 percent
personal income tax surcharge.

The 1994-97 Financial Plan is based on numerous assumptions,
including the recovery of the City's and the region's economy early in the
calendar year 1993 and the concomitant receipt of economically sensitive
tax revenues in the amounts projected. The 1994-97 Financial Plan is
subject to various other uncertainties and contingencies relating to,
among other factors, the extent, if any, to which wage increases for City
employees exceed the annual increases assumed for the 1994 through 1997
fiscal years; continuation of the 9% interest earnings assumptions for
pension fund assets affecting the City's required pension fund
contributions; the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions to
assist the City, including the proposed State takeover of certain Medicaid
costs and State mandate relief, the ability of the New York City Health
and Hospitals Corporation ("HHC"), BOE and other agencies to maintain
budget balance; the willingness of the Federal government to provide
Federal aid; approval of the proposed continuation of the personal income
tax surcharge and the State budgets; adoption of the City's budgets by the
City Council; the ability of the City to implement contemplated
productivity and service and personnel reduction programs and the success
with which the City controls expenditures; additional expenditures that
may be incurred due to the requirements of certain legislation requiring
minimum levels of funding for education; the City's ability to market its
securities successfully in the public credit markets; the level of funding
required to comply with the Americans with Disabilities Act of 1990; and
additional expenditures that may be incurred as a result of deterioration
in the condition of the City's infrastructure. Certain of these
assumptions have been questioned by the City Comptroller and other public
officials.

Estimates of the City's revenues and expenditures are based on
numerous assumptions and subject to various uncertainties. If expected
Federal or State aid is not forthcoming, if unforeseen developments in the
economy significantly reduce revenues derived from economically sensitive
taxes or necessitate increased expenditures for public assistance, if the
City should negotiate wage increases for its employees greater than the
amounts provided for in the City's Financial Plan or if other
uncertainties materialize that reduce expected revenues or increase
projected expenditures, then, to avoid operating deficits, the City may be
required to implement additional actions, including increases in taxes and
reductions in essential City services. The City might also seek
additional assistance from the State.

The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements. For its
1993 fiscal year, the State, before taking any remedial action, reported a
potential budget deficit of $4.8 billion (before providing for repayment
of the deficit notes as described below). If the State experiences
revenue shortfalls or spending increases beyond its projections during its
1993 fiscal year or subsequent years, such developments could result in
reductions in projected State aid to the City. In addition, there can be
no assurance that State budgets in future fiscal years will be adopted by
the April 1 statutory deadline and that there will not be adverse effects
on the City's cash flow and additional City expenditures as a result of
such delays.

Implementation of the Financial Plan is also dependent upon the
City's ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1994-1997
contemplates issuance of $11.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. A significant portion of
such bond financing is used to reimburse the City's general fund for
capital expenditures already incurred. In addition, the City issues
revenue and tax anticipation notes to finance its seasonal working capital
requirements. The success of projected public sales of City bonds and
notes will be subject to prevailing market conditions at the time of the
sale, and no assurance can be given that such sales will be completed. If
the City were unable to sell its general obligation bonds and notes, it
would be prevented from meeting its planned operating and capital
expenditures.

Substantially all of the City's full-time employees are members
of labor unions. The Financial Emergency Act requires that all collective
bargaining agreements entered into by the City and the Covered
Organizations be consistent with the City's current financial plan, except
under certain circumstances, such as awards arrived at through impasse
procedures.

On January 11, 1993, the City announced a settlement with a
coalition of municipal unions, including Local 237 of the International
Brotherhood of Teamsters ("Local 237"), District Council 37 of the
American Federation of State, County and Municipal Employees ("District
Council 37") and other unions covering approximately 44% of the City's
work force. The settlement, which has been ratified by the unions,
includes a total net expenditure increase of 8.25% over a 39-month period,
ending March 31, 1995 for most of these employees. On April 9, 1993 the
City announced an agreement with the Uniformed Fire Officers Association
(the "UFOA") which is consistent with the coalition agreement. The
agreement has been ratified. The Financial Plan reflects the costs
associated with these settlements and provides for similar increases for
all other City-funded employees.

The Financial Plan provides no additional wage increases for
City employees after their contracts expire in the 1995 fiscal year. Each
1% wage increase for all employees commencing in the 1995 fiscal year
would cost the City an additional $30 million for the 1995 fiscal year and
$135 million for the 1996 fiscal year and $150 million for each year
thereafter above the amounts provided for in the Financial Plan.

A substantial portion of the capital improvements in the City
are financed by indebtedness issued by the Municipal Assistance
Corporation for the City of New York ("MAC"). MAC was organized in 1975
to provide financing assistance for the City and also to exercise certain
review functions with respect to the City's finances. MAC bonds are
payable out of certain State sales and compensating use taxes imposed
within the City, State stock transfer taxes and per capita State aid to
the City. Any balance from these sources after meeting MAC debt service
and reserve fund requirements and paying MAC's operating expenses is
remitted to the City or, in the case of the stock transfer taxes, rebated
to the taxpayers. The State is not, however, obligated to continue the
imposition of such taxes or to continue appropriation of the revenues
therefrom to MAC, nor is the State obligated to continue to appropriate
the State per capita aid to the City which would be required to pay the
debt service on certain MAC obligations. MAC has no taxing power and MAC
bonds do not create an enforceable obligation of either the State or the
City. As of September 30, 1993, MAC had outstanding an aggregate of
approximately $5.304 billion of its bonds.

Standard & Poor's has rated City Bonds A-. Moody's Investors
Service, Inc. ("Moody's") has rated City Bonds Baal. Such ratings reflect
only the views of Standard & Poor's and Moody's from which an explanation
of the significance of such ratings may be obtained. There is no
assurance that either or both of such ratings will continue for any given
period of time or that either or both will not be revised downward or
withdrawn entirely. Any such downward revision or withdrawal could have
an adverse effect on the market prices of the Bonds.

In 1975, Standard & Poor's suspended its A rating of City Bonds.
This suspension remained in effect until March 1981, at which time the
City received an investment grade rating of BBB from Standard & Poor's.
On July 2, 1985, Standard & Poor's revised its rating of City Bonds upward
to BBB+ and on November 19, 1987, to A-. On July 2, 1993, Standard &
Poor's reconfirmed its A- rating of City Bonds, continued its negative
rating outlook assessment and stated that maintenance of such ratings
depended upon the City's making further progress towards reducing budget
gaps in the outlying years. Moody's ratings of City bonds were revised in
November 1981 from B (in effect since 1977) to Ba1, in November 1983 to
Baa, in December 1985 to Baal, in May 1988 to A and again in February 1991
to Baal.

New York State and Its Authorities. The national recession
which commenced in mid-1990 has had a more adverse impact on the State's
economy than on other parts of the nation, owing to a significant
retrenchment in the financial services industry, cutbacks in defense
spending, and an overbuilt real estate market in the State and City. As a
result of the national and regional economic recession, the State's tax
revenues for its 1991 and 1992 fiscal years were substantially lower than
projected. Consequently, the State took various actions for its 1992
fiscal year, which included increases in certain State taxes and fees,
substantial decreases in certain expenditures from previously projected
levels, including cuts in State operations and reductions in State aid to
localities, and the sale of $531 million of short-term deficit notes prior
to the end of the State's 1992 fiscal year. The State's 1992-93 budget
was passed on time, closing an estimated $4.8 billion imbalance resulting
primarily from the national and regional economic recession. Major
budgetary actions included a freeze in the scheduled reduction in the
personal income tax and business tax surcharge, adoption of significant
Medicaid cost containment or revenue initiatives, and reductions in both
agency operations and grants to local governments from previously
anticipated levels. The State completed its 1993 fiscal year with a
positive margin of $671 million in the General Fund which was deposited
into a tax refund reserve account.

The Governor released the recommended Governor's Executive
Budget for the 1993-1994 fiscal year on January 19, 1993. The recommended
1993-1994 State Financial Plan projected a balanced General Fund. General
Fund receipts and transfers from other funds were projected at $31.6
billion, including $184 million carried over from the State's 1993 fiscal
year. Disbursements and transfers from other funds were projected at
$31.5 billion, not including a $67 million repayment to the State's Tax
Stabilization Reserve Fund. To achieve General Fund budgetary balance in
the 1994 State fiscal year, the Governor recommended various actions.These
included proposed spending reductions and other actions that would reduce
General Fund spending ($1.6 billion); continuing the freeze on personal
income and corporate tax reductions and on hospital assessments ($1.3
billion); retaining moneys in the General Fund that would otherwise have
been deposited in dedicated highway and transportation funds ($516
million); a 21-cent increase in the cigarette tax ($180 million); and new
revenues from miscellaneous sources ($91 million). The recommended
Governor's 1993-94 Executive Budget included reductions in anticipated aid
to all levels of local government.

In comparison to the recommended 1993-94 Executive Budget, the
1993-94 State budget, as enacted, reflects increases in both receipts and
disbursements in the general Fund of $811 million.

The $811 million increase in projected receipts reflects (i) an
increase of $487 million, from $184 million to $671 million, in the
positive year-end margin at March 31, 1993, which resulted primarily from
improving economic conditions and higher-than-expected tax collections,
(ii) an increase of $269 million in projected receipts, $211 million
resulting from the improved 1992-93 results and the expectation of an
improving economy and the balance from improved auditing and enforcement
measures and other miscellaneous items, (iii) additional payments of $200
million from the Federal government to reimburse the State for the cost of
providing indigent medical care, and (iv) the payment of an additional $50
million of personal income tax refunds in the 1992-93 fiscal year which
would otherwise have been paid in fiscal year 1993-94; offset by (v) $195
million of revenue raising recommendations in the Executive Budget that
were not enacted in the budget and thus are not included in the 1993-94
State Financial Plan.

The $811 million increase in projected disbursements reflects
(i) an increase of $252 million in projected school-aid payments, after
applying estimated receipts from the State Lottery allocated to school
aid, (ii) a increase of $194 million in projected payments for Medicaid
assistance and other social service programs, (iii) additional spending on
the judiciary ($56 million) and criminal justice ($48 million), (iv) a net
capital projects, of $162 million, after reflecting certain re-estimates
in spending, and (v) the transfer of $100 million to a newly-established
contingency reserve.

The 1993-94 State budget, as enacted, included $400 million less
in State actions that the City had anticipated. Reform of education aid
formulas was achieved which brought an additional $145 million education
dollars to New York City. However, the State Legislature failed to enact
a takeover of local Medicaid costs, other significant mandate relief items
and certain Medicaid cost containment items proposed by the Governor,
which would have provided the City with savings. The adopted State budget
cut aid for probation services, increased sanctions on social service
programs, eliminated the pass-through of a State surcharge on parking
tickets, cut reimbursement for CHIPS transportation operating dollars, and
required a large contribution in City funds to hold the MTA fare at the
current level. In the event of any significant reduction in projected
State revenues or increases in projected State expenditures from the
amounts currently projected by the State, there could be an adverse impact
on the timing and amounts of State aid payments to the City in the future.

On October 29, 1993, the State released a revised financial plan
for the State's 1993-94 fiscal year (the "Revised State Financial Plan")
which includes increased taxes and other revenues, deferral of scheduled
personal income and corporation tax reductions, reductions from previously
projected levels in aid to localities and State operations and other
budgetary actions that further limit the growth of General Fund
disbursements as compared to the initial financial plan for the State's
1993-94 fiscal year. The Revised State Financial Plan is based on
economic projections that the State will perform more poorly than the
nation as a whole. The State's economy, as measured by employment, was
expected to commence growth late in the 1993 calendar year. Many
uncertainties exist in forecasts of both the national and State economies,
including consumer attitudes toward spending. There can be no assurance
that the State economy will not experience worse-than-predicted results in
the 1993-94 fiscal year, with corresponding material and adverse effects
on the State's projections of receipts and disbursements.

In certain prior fiscal years, the State has failed to enact a
budget prior to the beginning of the State's fiscal year. A delay in the
adoption of the State's budget beyond the statutory April 1 deadline and
the resultant delay in the State's Spring borrowing has in certain prior
years delayed the projected receipt by the City of State aid, and there
can be no assurance that State budgets in future fiscal years will be
adopted by the April 1 statutory deadline.

The State has noted that its forecasts of tax receipts have been
subject to variance in recent fiscal years. As a result of these
uncertainties and other factors, actual results could differ materially
and adversely from the State's current projections and the State's
projections could be materially and adversely changed from time to time.

On January 14, 1992, Standard & Poor's downgraded the State's
general obligation bonds from A to A-. Also downgraded was certain of the
State's variously rated moral obligation, lease purchase, guaranteed and
contractual obligation debt, including debt issued by certain State
agencies. On June 6, 1990, Moody's changed its rating of the State's
outstanding general obligation bonds from AA- to A. The State's tax and
revenue anticipation notes issued in February 1991 were rated MIG-2 by
Moody's and SP-1 by Standard & Poor's. On January 6, 1992, Moody's
changed its rating of certain appropriations-backed debt of the State from
A to Baal. Moody's also placed the State's general obligation, State
guaranteed and New York State Local Government Assistance Corporation
bonds under review for possible downgrading in coming months. Any action
taken by Standard & Poor's or Moody's to lower the credit rating on
outstanding indebtedness and obligations of the State may have an adverse
impact on the marketability of the State's notes and bonds.

As of March 31, 1993, the State had approximately $5.132 billion
in general obligation bonds excluding refunding bonds and $293 million in
bond anticipation notes outstanding. On May 24, 1993 the State issued
$850 million in tax and revenue anticipation notes all of which will
mature on December 31, 1993. Principal and interest due on general
obligation bonds and interest due on bond anticipation notes and on tax
and revenue anticipation notes were $890 million and $818.8 million for
the 1991-92 and 1992-93 fiscal years, respectively, and are estimated to
be $789 million for the State's 1993-94 fiscal year, not including
interest on refunding bonds, issued in July 1992, to the extent that such
interest is to be paid from escrowed funds.

The fiscal stability of the State is related to the fiscal
stability of its authorities, which generally have responsibility for
financing, constructing and operating revenue-producing public benefit
facilities. The authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself and
may issue bonds and notes within the amounts of, and as otherwise
restricted by, their legislative authorization. As of September 30, 1992
there were 18 authorities that had outstanding debt of $100 million or
more. The aggregate outstanding debt, including refunding bonds, of these
18 authorities was $62.2 billion as of September 30, 1992, of which
approximately $8.2 billion was moral obligation debt and approximately
$17.1 billion was financed under lease-purchase or contractual-obligation
financing arrangements.

The authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent
years, however, the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise for debt
service. This assistance is expected to continue to be required in future
years.

The Metropolitan Transit Authority ("MTA"), a State agency,
oversees the operation of the City's subway and bus system (the "Transit
Authority" or "TA") and commuter rail lines serving the New York
metropolitan area. Fare revenues from such operations have been
insufficient to meet expenditures, and the MTA depends heavily upon a
system of State, local, Triborough Bridge and Tunnel Authority ("TBTA")
and, to the extent available, Federal support. Over the past several
years, the State has enacted several taxes, including a surcharge on the
profits of banks, insurance corporations and general business corporations
doing business in the 12-county region served by the MTA (the
"Metropolitan Transportation Region") and a special one-quarter of 1%
regional sales and use tax, that provide additional revenues for mass
transit purposes including assistance to the MTA. The surcharge, which
expires in November 1995, yielded $507 million in calendar year 1992, of
which the MTA was entitled to receive approximately 90 percent, or
approximately $456 million.

For 1993, TA has projected a budget gap of about $266 million.
The MTA Board approved an increase in TBTA tools which took effect January
31, 1993. Since the TBTA operating surplus helps subsidize TA operations,
the January toll increase on TBTA facilities, and other developments,
reduced the projected gap to approximately $241 million. Legislation
passed in April 1993 relating to the MTA's 1992-1996 Capital Program
reflected a plan for closing this gap without raising fares. A major
element of the plan provides that the TA receive a significant share of
the petroleum business tax which will be paid directly to MTA for its
agencies. The plan also relies on certain City actions that have not yet
been taken. The plan also relies on MTA and TA resources projected to be
available to help close the gap. If any of the assumptions used in making
these projections prove incorrect, the TA's gap could grow, and the TA
would be required to seek additional State assistance, raise fares or take
other actions.

Two serious accidents in December 1990 and August 1992, which
caused fatalities and many injuries, have given rise to substantial claims
for damages against both the TA and the City.

The State's experience has been that if an Authority suffers
serious financial difficulties, both the ability of the State and the
Authorities to obtain financing in the public credit markets and the
market price of the State's outstanding bonds and notes may be adversely
affected. The Housing Finance Agency ("HFA") and the Urban Development
Corporation ("UDC") have in the past required substantial amounts of
assistance from the State to meet debt service costs or to pay operating
expenses. Further assistance, possibly in increasing amounts, may be
required for these, or other, Authorities in the future. In addition,
certain statutory arrangements provide for State local assistance payments
otherwise payable to localities to be made under certain circumstances to
certain Authorities. The State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could
seek additional State funds.

Litigation. A number of court actions have been brought
involving State finances. The court actions in which the State is a
defendant generally involve state programs and miscellaneous tort, real
property, employment discrimination and contract claims and the monetary
damages sought are substantial. The outcome of these proceedings could
affect the ability of the State to maintain a balanced State Financial
Plan in the 1994-97 fiscal year or thereafter.

In particular, for the State's 1993-1994 fiscal year, the State
may be required to make payments as a result of the United States Supreme
Court decision in the case of State of Delaware v. State of New York,
which involved a challenge to the State's possession of certain funds
taken pursuant to the State's Abandoned Property Law. Although it is not
possible to predict the amounts of the payments that may be required to be
made in the State's 1993-94 fiscal year, the amount may be significant.
The Division of the Budget expects, however, that the State will have the
resources to meet reasonably anticipated payment requirements for the
1993-94 fiscal year resulting from the litigation.

In addition, on November 23, 1993, the New York Court of
Appeals, the State's highest court, affirmed the decisions of the State's
Supreme Court in several actions challenging the constitutionality of
legislation enacted in 1990 which changed the actuarial funding methods
for determining contributions by the State and local governments to the
State and local retirement systems. As a result of this decision, the
State Comptroller has developed a plan to return to the previous actuarial
funding method and to restore previous funding levels of the retirement
system. The Comptroller expects to achieve this objective in a manner
that, consistent with its fiduciary duties, will neither require the State
to make additional contributions in its 1993-1994 fiscal year nor
materially and adversely affect the financial condition of the State
thereafter.

Among the more significant of these claims still pending against
the State at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes
transferred title to the State of certain land in central New York; (2)
certain aspects of the State's Medicaid rates and regulations, including
reimbursements to providers of mandatory and optional Medicaid services;
(3) contamination in the Love Canal area of Niagara Falls; (4) an action
against State and New York City officials alleging that the present level
of shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (5) challenges to the
practice of reimbursing certain Office of Mental Health patient care
expenses from the client's Social Security benefits; (6) a challenge to
the methods by which the State reimburses localities for the
administrative costs of food stamp programs; (7) alleged responsibility of
State officials to assist in remedying racial segregation in the City of
Yonkers; (8) an action in which the State is a third party defendant, for
injunctive or other appropriate relief, concerning liability for the
maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) an action challenging legislation enacted in 1990
which had the effect of deferring certain employer contributions to the
State Teachers' Retirement System and reducing State aid to school
districts by a like amount; (10) a challenge to the constitutionality of
financing programs of the Thruway Authority authorized by Chapters 166 and
410 of the Laws of 19; (11) a challenge to the constitutionality of
financing programs of the Metropolitan Transportation Authority and the
Thruway Authority authorized by Chapter 56 of the Law of 1993; (12)
challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on impatient hospital bills paid by commercial
insurers and employee welfare benefit plans and portions of Chapter 55 of
The Laws of 1992 which require hospitals to impose and remit to the state
an 11% surcharge on hospital bills paid by commercial insurers; (14)
challenges to the promulgation of the State's proposed procedure to
determine the eligibility for and nature of home care services for
Medicaid recipients; (15) a challenge to State implementation of a program
which reduces Medicaid benefits to certain home-relief recipients; and
(16) challenges to the rationality and retroactive application of State
regulations recalibrating nursing home Medicaid rates.

State Economic Trends. Over the long term, the State and the
City also face serious potential economic problems. The City accounts for
approximately 41% of the State's population and personal income, and the
City's financial health affects the State in numerous ways. The State
historically has been one of the wealthiest states in the nation. For
decades, however, the State has grown more slowly than the nation as a
whole, gradually eroding its relative economic affluence. Statewide,
urban centers have experienced significant changes involving migration of
the more affluent to the suburbs and an influx of generally less affluent
residents. Regionally, the older Northeast cities have suffered because
of the relative success that the South and the West have had in attracting
people and business. The City has also had to face greater competition as
other major cities have developed financial and business capabilities
which make them less dependent on the specialized services traditionally
available almost exclusively in the City. In recent years the State's
economic position has improved in a manner consistent with that for the
Northeast as a whole.

The State has for many years had a very high State and local tax
burden relative to other states. The State and its localities have used
these taxes to develop and maintain their transportation networks, public
schools and colleges, public health systems, other social services and
recreational facilities. Despite these benefits, the burden of State and
local taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some businesses
and individuals to relocate outside, or not locate within, the State.

Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced
budgets, reductions in Federal spending could materially and adversely
affect the financial condition and budget projections of the State and its
localities.

Pennsylvania Trust

The following information constitutes only a brief summary of a
number of the complex factors which may impact issuers of Pennsylvania
municipal securities and does not purport to be a complete or exhaustive
description of all conditions to which issuers of Pennsylvania municipal
securities may be subject. Such information is derived from official
statements utilized in connection with the issuance of Pennsylvania
municipal securities, as well as from other publicly available documents.
Such information has not been independently verified by the Trust and the
Trust assumes no responsibility for the completeness or accuracy of such
information. Additionally, many factors, including national, economic,
social and environmental policies and conditions, which are not within the
control of such issuers, could have an adverse impact on the financial
condition of such issuers. The Trust cannot predict whether or to what
extent such factors or other factors may affect the issuers of
Pennsylvania municipal securities, the market value or marketability of
such securities or the ability of the respective issuers of such
securities held by the Trust to pay interest on or principal of such
securities. The creditworthiness of obligations issued by local
Pennsylvania issuers may be unrelated to the creditworthiness of
obligations issued by the Commonwealth of Pennsylvania, and there is no
obligation on the part of the Commonwealth of Pennsylvania to make
payments on such local obligations. There may be specific factors that
are applicable in connection with investment in the obligations of
particular issuers located within Pennsylvania, and it is possible the
Trust has invested in obligations of particular issuers as to which such
specific factors are applicable. However, the information set forth below
is intended only as a general summary and not as a discussion of any
specific factors that may affect any particular issuer of Pennsylvania
municipal securities.

State Economy. The Commonwealth of Pennsylvania is one of the
most populous states, ranking fifth behind California, New York, Texas and
Florida. Pennsylvania is an established yet growing state with a
diversified economy. It is the headquarters for 64 major corporations and
the home for more than 268,600 businesses. Pennsylvania historically has
been identified as a heavy industry state although that reputation has
changed recently as the industrial composition of the Commonwealth
diversified when the coal, steel and railroad industries began to decline.
The major new sources of growth in Pennsylvania are in the service sector,
including trade, medical and the health services, education and financial
institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, accounting
for more than $3.5 billion in crop and livestock products annually, while
agribusiness and food related industries support $38 billion in economic
activity annually.

Non-agricultural employment in the Commonwealth declined by 5.1
percent during the recessionary period from 1980 to 1983. In 1984, the
declining trend was reversed as employment grew by 2.9 percent over 1983
levels. From 1984 to 1990, non-agricultural employment continued to grow
each year, increasing an additional 14.3 percent during such period. For
the last two years, employment in the Commonwealth has declined 1.9
percent. The growth in employment experienced in Pennsylvania is
comparable to the growth in employment in the Middle Atlantic region which
has occurred during this period. As a percentage of total non--
agricultural employment within the Commonwealth, non-manufacturing
employment has increased steadily since 1980 to its 1992 level of 81.3
percent of total employment. Consequently, manufacturing employment
constitutes a diminished share of total employment within the
Commonwealth. Manufacturing, contributing 18.7 percent of 1992
non-agricultural employment, has fallen behind both the services sector
and the trade sector as the largest single source of employment within the
Commonwealth. In 1992, the services sector accounted for 29.3 percent of
all non-agricultural employment while the trade sector accounted for 22.7
percent.

From 1983 to 1989, Pennsylvania's annual average unemployment
rate dropped from 11.8 percent to 4.5 percent, falling below the national
rate in 1986 for the first time in over a decade. Slower economic growth
caused the unemployment rate in the Commonwealth to rise to 6.9 percent in
1991 and 7.5 percent in 1992. As of February 1994, the seasonally
adjusted unemployment rate for the Commonwealth was 5.1 percent compared
to 6.5 percent for the United States as a whole.

The Commonwealth operates under an annual budget which is
formulated and submitted for legislative approval by the Governor each
February. The Pennsylvania Constitution requires that the Governor's
budget proposal consist of three parts: (i) a balanced operating budget
setting forth proposed expenditures and estimated revenues from all
sources and, if estimated revenues and available surplus are less than
proposed expenditures, recommending specific additional sources of revenue
sufficient to pay the deficiency; (ii) a capital budget setting forth
proposed expenditures to be financed from the proceeds of obligations of
the Commonwealth or its agencies or from operating funds; and (iii) a
financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated
revenues and projected expenditures for capital projects. The General
Assembly may add, change or delete any items in the budget prepared by the
Governor, but the Governor retains veto power over the individual
appropriations passed by the legislature. The Commonwealth's fiscal year
begins on July 1 and ends on June 30.

The Constitution and the laws of the Commonwealth require all
payments from the treasury, with the exception of refunds of taxes,
licenses, fees and other charges, to be made only by duly enacted
appropriations. Amounts appropriated from a fund may not exceed its
actual and estimated revenues for the fiscal year plus any surplus
available. Appropriations from the principal operating funds of the
Commonwealth (the General Fund, the Motor License Fund and the State
Lottery Fund) are generally made for one fiscal year and are returned to
the unappropriated surplus of the fund (a lapse) if not spent or
encumbered by the end of the fiscal year.

Pennsylvania uses the "fund" method of accounting for receipts
and disbursements. For purposes of government accounting, a "fund" is an
independent fiscal and accounting entity with a self-balancing set of
accounts, recording cash and/or other resources together with all related
liabilities and equities which are segregated for the purpose of carrying
on specific activities or attaining certain objectives in accordance with
the fund's special regulations, restrictions or limitations. In the
Commonwealth, funds are established by legislative enactment or in certain
cases by administrative action. Over 140 funds have been established for
the purpose of recording the receipts and disbursements of monies received
by the Commonwealth. Annual budgets are adopted each fiscal year for the
principal operating funds of the Commonwealth and several other special
revenue funds. Expenditures and encumbrances against these funds may only
be made pursuant to appropriation measures enacted by the General Assembly
and approved by the Governor. The General Fund, the Commonwealth's
largest fund, receives all tax revenues, non-tax revenues and federal
grants and entitlements that are not specified by law to be deposited
elsewhere. The majority of the Commonwealth's operating and
administrative expenses are payable from the General Fund. Debt service
on all bond indebtedness of the Commonwealth, except that issued for
highway purposes or for the benefit of other special revenue funds, is
payable from the General Fund.

Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting. Since
1984, the Commonwealth has also prepared annual financial statements in
accordance with generally accepted accounting principles ("GAAP").
Financial statements prepared in accordance with GAAP have been audited
jointly by the Auditor General of the Commonwealth and an independent
public accounting firm each year since 1984. Budgetary basis financial
reports are based on a modified cash basis of accounting as opposed to a
modified accrual basis of accounting prescribed by GAAP. The budgetary
basis financial information maintained by the Commonwealth to monitor and
enforce budgetary control is adjusted at fiscal year-end to reflect
appropriate accruals for financial reporting in conformity with GAAP.

Financial Results for Recent Fiscal Years (GAAP Basis). The
five year period from fiscal 1989 through fiscal 1993 was marked by public
health and welfare costs growing at a rate double the growth for all the
state expenditures. Rising caseloads, increased utilization of services
and rising prices joined to produce the rapid rise of public health and
welfare costs at a time when a national recession caused tax revenues to
stagnate and even decline. During the period from fiscal 1989 through
fiscal 1993, public health and welfare costs rose by an average annual
rate of 10.9 percent while tax revenues were growing at an average annual
rate of 5.5 percent. Consequently, spending on other budget programs was
restrained to a growth rate below 5.0 percent and sources of revenues
other than taxes became larger components of fund revenues. Among those
sources are transfers from other funds and hospital and nursing home
pooling of contributions to use as federal matching funds.

Tax revenues declined in fiscal 1991 as a result of the
recession in the economy. A $2.7 billion tax increase enacted for fiscal
1992 brought financial stability to the General Fund. That tax increase
included several taxes with retroactive effective dates which generated
some one-time revenues during fiscal 1992. The absence of those revenues
in fiscal 1993 contributed to the decline in tax revenues shown for fiscal
1993.

During fiscal 1992 enactment of over $2.7 billion in General
Fund tax increases and implementation of expenditure control initiatives
have helped the General Fund balance return to a surplus at June 30, 1992
of $87.5 million. The actions taken to increase revenues and restrain
expenditure growth were necessary to offset the effects on General Fund
finances of period of slow economic growth including a national economic
recession. The recession caused tax revenues during fiscal 1991 to be
below the amount received during fiscal 1990 while spending, particularly
for public health and welfare programs to support needy individuals,
increased by over 21 percent. Public health and welfare expenditures
continued their rapid increase with a 23.9 percent increase during fiscal
1992 as caseloads and costs continued upward. Some of these increased
costs were met through the use of pooled financing techniques that use
private contributions and intergovernmental transfers to substitute for
state funds matched for federal governmental grants-in-aid. The higher
level of intergovernmental and other revenue for fiscal 1991 and 1992
reflect the use of these techniques. Debt service expenditures have
escalated as the amount of tax anticipation note borrowing increased in
response to the fiscal pressures brought about by slow economic growth and
the recession.

Fiscal 1991 Financial Results -- GAAP Basis. The General Fund
experienced an $861.2 million operating deficit resulting in a fund
balance deficit of $980.9 million at June 30, 1991. The operating deficit
was a consequence of the effect of a national recession that restrained
budget revenues and pushed expenditures above budgeted levels. At
June 30, 1991, a negative unreserved-undesignated balance of $1,146.2
million was reported. During fiscal 1991, the balance in the Tax
Stabilization Reserve Fund was used to maintain vital state spending.

Budgetary Basis. A deficit of $453.6 million was recorded by
the General Fund at June 30, 1991. The deficit was a consequence of
higher than budgeted expenditures and lower than estimated revenues during
the fiscal year brought about by the national economic recession that
began during the fiscal year. The budgetary basis deficit at June 30,
1991 was carried into the 1992 fiscal year and funded in the fiscal 1992
budget.

A number of actions were taken throughout the fiscal year by the
Commonwealth to mitigate the effects of the recession on budget revenues
and expenditures. Actions taken, together with normal appropriation
lapses, produced $871 million in expenditure reductions and revenue
increases for the fiscal year. The most significant of these actions were
a $214 million transfer from the Pennsylvania Industrial Development
Authority ("PIDA"), a $134 million transfer from the Tax Stabilization
Reserve Fund, and a pooled financing program to match federal Medicaid
funds replacing $145 million of state funds.

Restrained by the recession, economic activity within the state
declined and caused corporation tax receipts and sales and use tax
receipts to be below year-earlier receipts. Sales and use tax collections
for the fiscal year totaled $4,200.3 million, a 0.9 percent decrease from
fiscal 1990 collections and $276.4 million below the budget estimate.
Corporation, public utility, financial and insurance taxes in aggregate
totaled $2,648.0 million, 7.3 percent below fiscal 1990 collections and
$199.0 million below the budget estimate. Personal income tax receipts
totaled $3,375.5 million, an increase of 2.0 percent over fiscal 1990
collections, but $136.6 million below the budget estimate.

Non-tax revenues were above the budget estimate largely as a
result of the $214 million transfer of funds from the PIDA
recapitalization. In addition to the transfer from PIDA, $230.1 million
of other non-recurring revenues were received during the fiscal year to
help reduce the budget deficit.

Rising program demands caused by the economic recession,
particularly for the medical assistance and cash assistance programs,
produced rapidly increasing costs during the fiscal year, causing
expenditures to exceed their respective budget estimates. Costs of
special education programs and for corrections facilities and programs
also exceeded their budgeted amounts due to underestimates of their fiscal
year costs. Meeting these higher budget needs required supplemental
appropriation authority of $374 million to be enacted during the fiscal
year.

One consequence of the lower revenues and higher expenditures
than budgeted for fiscal 1991 was the need to delay making certain
disbursements against state appropriations. Throughout the fiscal year
the Commonwealth elected to defer certain disbursements of appropriated
amounts in order to assure that sufficient cash was available to meet the
highest priority payments such as debt service, cash assistance and
payrolls. The deferred payments were accounted for as fiscal 1991
expenditures but were disbursed during fiscal 1992 from current cash flow
or from the proceeds of the fiscal 1992 tax anticipation notes.

Fiscal 1992 Financial Results -- GAAP Basis. During fiscal 1992
the General Fund recorded a $1.1 billion operating surplus. This
operating surplus was achieved through legislated tax rate increases and
tax base broadening measures enacted in August 1991 and by controlling
expenditures through numerous cost reduction measures implemented
throughout the fiscal year. These actions are described more fully below
under the heading "Budgetary Basis". As a result of the fiscal 1992
operating surplus, the fund balance has increased to $87.5 million and the
unreserved/undesignated deficit has dropped to $138.6 million from its
fiscal 1991 level of $1,146.2 million.

Budgetary Basis. Eliminating the budget deficit carried into
fiscal 1992 from fiscal 1991 and providing revenues for fiscal 1992
budgeted expenditures required tax revisions that are estimated to have
increased receipts for the 1992 fiscal year by over $2.7 billion. Total
revenues for the fiscal year were $14,516.8 million, a $2,654.5 million
increase over cash revenues during fiscal 1991. Originally based on
forecasts for an economic recovery, the budget revenue estimates were
revised downward during the fiscal year to reflect continued recessionary
economic activity. Largely due to the tax revisions enacted for the
budget, corporate tax receipts totaled $3,761.2 million, up from $2,656.3
million in fiscal 1991, sales tax receipts increased by $302.0 million to
$4,499.7 million, and personal income tax receipts totaled $4,807.4
million, an increase of $1,443.8 million over receipts in fiscal 1991.

As a result of the lowered revenue estimate during the fiscal
year, increased emphasis was placed on restraining expenditure growth and
reducing expenditure levels. A number of cost reductions were implemented
during the fiscal year that contributed to $296.8 million of appropriation
lapses. These appropriation lapses were responsible for the $8.8 million
surplus at fiscal year-end, after accounting for the required 10 percent
transfer of the surplus to the Tax Stabilization Reserve Fund.

Spending increases in the fiscal 1992 budget were largely
accounted for by increases for education, social services and corrections
programs. Commonwealth funds for the support of public schools were
increased by 9.8 percent to provide a $438.0 million increase to $4.9
billion for fiscal 1992. The fiscal 1992 budget provided additional funds
for basic and special education and included provisions designed to help
restrain the annual increase of special education costs, an area of recent
rapid cost increases. Child welfare appropriations supporting county-
operated child welfare programs were increased $67.0 million, more than
31.5 percent over fiscal 1991. Other social service areas such as medical
and cash assistance also received significant funding increases as costs
have risen quickly as a result of the economic recession and high
inflation rates of medical care costs. The costs of corrections programs,
reflecting the marked increase in prisoner population, increased by 12.0
percent. Economic development efforts, largely funded from bond proceeds
in fiscal 1991, were continued with General Fund appropriations for fiscal
1992.

The budget included the use of several Medicaid pooled financing
transactions. These pooling transactions replaced $135.0 million of
Commonwealth funds, allowing total spending under the budget to increase
by an equal amount.

Fiscal 1993 Financial Results -- GAAP Basis. The fund balance
of the General Fund increased by $611.4 million during the fiscal year,
led by an increase in the unreserved balance of $576.8 million over the
prior fiscal year balance. At June 30, 1993, the fund balance totaled
$698.9 and the unreserved/undesignated balance totaled $64.4 million. A
continuing recovery of the Commonwealth's financial condition from the
effects of the national economic recession of 1990 and 1991 is
demonstrated by this increase in the balance and a return to a positive
unreserved/undesignated balance. The previous positive
unreserved/undesignated balance was recorded in fiscal 1987. For the
second consecutive fiscal year the increase in the unreserved/undesignated
balance exceeded the increase recorded in the budgetary basis
unappropriated surplus during the fiscal year.

Budgetary Basis. The 1993 fiscal year closed with revenues
higher than anticipated and expenditures about as projected, resulting in
an ending unappropriated balance surplus (prior to the ten percent
transfer to the Tax Stabilization Reserve Fund) of $242.3 million,
slightly higher than estimated in May 1993. Cash revenues were $41.5
million above the budget estimate and totaled $14.633 billion representing
less than a one percent increase over revenues for the 1992 fiscal year.
A reduction in the personal income tax rate in July 1992 and revenues from
retroactive corporate tax increases received in fiscal 1992 were
responsible, in part, for the low revenue growth in fiscal 1993.

Appropriations less lapses totaled an estimated $13.870 billion
representing a 1.1 percent increase over those during fiscal 1992. The
low growth in spending is a consequence of a low rate of revenue growth,
significant one-time expenses during fiscal 1992, increased tax refund
reserves to cushion against adverse decisions on pending litigations, and
the receipt of federal funds for expenditures previously paid out of
Commonwealth funds.

By state statute, ten percent of the budgetary basis
unappropriated surplus at the end of a fiscal year is to be transferred to
the Tax Stabilization Reserve Fund. The transfer for the fiscal 1993
balance is $24.2 million. The remaining unappropriated surplus of $218.0
million was carried forward into the 1994 fiscal year.

Fiscal 1994 Budget (Budgetary Basis). The enacted 1994 fiscal
year budget provides for $14.995 billion of appropriations of Commonwealth
funds. The largest increase in appropriations is for the Department of
Public Welfare --$235 million-- to meet the increasing costs of medical
care and rising caseloads. Other large increases are education --$196
million-- including $129 million to increase state educational subsidies
for the most needy school districts and $104 million for correctional
institutions to pay operating costs and lease payments for five new
prisons and to expand the capacity of two existing facilities.

The continuing rise in medical assistance costs cannot be met
from the resources provided by a much slower growing tax revenue base.
Consequently, program and financial changes must be implemented to keep
costs within budget limits. For fiscal 1994, the Commonwealth plans to
save $247 million by receiving federal reimbursement for hospital services
provided to state general assistance recipients. Prior to this time,
those costs were fully paid by the Commonwealth. In addition, the
Commonwealth will continue to use pooled financing for medical assistance
costs using intergovernmental transfers in place of voluntary
contributions as was done in earlier fiscal years. Through the pooled
financing, additional federal reimbursements may be drawn to support the
medical assistance program. The pooled financing is anticipated to
replace $99 million of Commonwealth funds in the 1994 fiscal year budget.

The budget estimates revenue growth of 3.7 percent over fiscal
1993 actual revenues. The revenue estimate is based on an expectation of
continued economic recovery, but at a slow rate. Sales tax receipts are
projected to rise 4.4 percent over 1993 receipts while personal income tax
receipts are projected to increase by 3.3 percent, a rate that is low
because of the tax rate reduction in July 1992.

In February 1994, the Governor recommended $46.4 million of
additional appropriations be enacted for fiscal 1994, raising total
appropriations to $15,041.7 million. The largest increase in additional
appropriations is $27.3 million to make audit payments to the federal
Department of Health and Human Services. No change to the aggregate
commonwealth revenue estimate was made although individual tax estimates
have been revised to reflect actual receipts to date and the tax refund
estimate was reduced to reflect a favorable ruling in Philadelphia
Suburban Corp. vs. Commonwealth. Through February 1994, revenues are
slightly ($1.1 million or 0.01 percent) above estimate as below estimate
corporate tax receipts are being offset by above estimate sales tax,
personal income tax and non-tax revenue receipts.

Upon completion of a review of actual expenditures and revised
estimates for the remainder of fiscal 1994, lapses of current and prior
years' appropriations are projected to be $163.0 million. The projected
lapses and the beginning unappropriated surplus contribute to a projected
ending unappropriated surplus of $296.8 million before the required ten
percent transfer to the Tax Stabilization Reserve Fund.

Proposed Fiscal 1995 Budget. For the fiscal year beginning July
1, 1994, the Governor has proposed a budget containing a 4.1 percent
increase in appropriations over the actual and proposed supplemental
appropriations for fiscal 1994. Total appropriations recommended amount
to $15,665 million. The budget is balanced by drawing down of a projected
$267 million unappropriated surplus for fiscal 1994. The fastest growing
portion of the budget continues to be medical assistance which is proposed
to receive the largest increase, $264 million or 42.4 percent of the
proposed net increase in spending. Other program areas budgeted to
receive major increases are education -- $165 million -- and corrections
-- $126 million. The proposed budget recommends a tightening of
eligibility criteria for state-financed welfare benefits as a cost
reduction measure. Those individuals not meeting the revised criteria
would only qualify for 60 days of cash grants in a two-year period.

The Governor's proposal also includes a recommended reduction in
the corporate net income tax rate from 12.25 percent to 9.99 percent over
a three year period. The corporate tax cut and a proposed increase in
poverty exemption for the personal income tax are estimated to cost $124.7
million in fiscal 1995.

The recommended budget includes Commonwealth revenue growth of
4.7 percent without the effect of the proposed tax reduction. The revenue
estimate is based on the expectation of a continued slow national economic
recovery and continued economic growth of the Pennsylvania economy at a
rate slightly below the national rate. Total estimated Commonwealth
revenue, adjusted for refunds and the proposed tax reduction, is $15,400
million.

The General Assembly is conducting hearings to review the
Governor's proposed budget.

Tax Structure. The Commonwealth, through its principal
operating funds -- the General Fund, the Motor License Fund and the State
Lottery Fund -- receives over 57 percent of its revenues from taxes levied
by the Commonwealth. Interest earnings, licenses and fees, lottery ticket
sales, liquor store profits, miscellaneous revenues, augmentations and
federal government grants supply the balance of receipts to these funds.

Tax and fee proceeds relating to motor fuels and vehicles are
constitutionally dedicated for highway purposes and are deposited into the
Motor License Fund. Lottery ticket sale revenues are deposited into the
State Lottery Fund and are reserved by statute for programs to benefit
senior citizens. Revenues, other than those specified to be deposited in
a particular fund, are deposited into the General Fund.

The major tax sources for the General Fund of the Commonwealth
are the sales tax enacted in 1953, the personal income tax enacted in
1971, and the corporate net income tax which in its present form dates
back to 1935. The last restructuring of the Commonwealth's tax system
occurred with the enactment of the Tax Reform Code of 1971 that codified
many of the taxes levied by the Commonwealth.

The major tax sources for the Motor License Fund are the liquid
fuels taxes and the oil company franchise tax. The Motor License Fund
also receives revenues from fees levied on heavy trucks and from taxes on
fuels used for aviation purposes. Use of these revenues is restricted to
the repair and construction of highway bridges and aviation programs
respectively.

The Tax Stabilization Reserve Fund was established in 1986 to
provide a source of funds that can be used to alleviate emergencies
threatening the health, safety or welfare of the Commonwealth's citizens
or to offset unanticipated revenue shortfalls due to economic downturns.
Income to the fund is provided by specific appropriation from available
balances by the General Assembly, from investment income and, after fiscal
1991, by the transfer to the Tax Stabilization Reserve Fund of 10 percent
of the budgetary basis operating surplus in the General Fund at the close
of any fiscal year. In addition, the proceeds received from the
disposition of assets of the Commonwealth are also to be deposited into
the Tax Stabilization Reserve Fund. The Commonwealth has not prepared
estimates of such sales.

Assets of the Tax Stabilization Reserve Fund may be used only
upon the recommendation by the Governor and approval by the vote of
two-thirds of the members of each house of the General Assembly. In
February 1991, in response to a projected fiscal 1991 General Fund
budgetary deficit caused by lower revenues and higher expenditures than
budgeted, the Governor recommended, and the General Assembly authorized,
the available balance of $133.8 million in the Tax Stabilization Reserve
Fund be used to pay medical assistance and special education costs not
covered by budgeted funds. On December 31, 1993, the balance in the Tax
Stabilization Fund was $29.3 million.

Debt Limits and Outstanding Debt. The Pennsylvania Constitution
permits the Commonwealth to issue the following types of debt: (i) debt to
suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years, and (iv) tax anticipation notes payable in
the fiscal year of issuance. All debt except tax anticipation notes must
be amortized in substantial and regular amounts.

Outstanding general obligation debt totalled $5,038.8 million on
June 30, 1993, an increase of $163.7 million from June 30, 1992. Over the
10-year period ending June 30, 1993, total outstanding general obligation
debt increased at an annual rate of 1.2 percent. Within the most recent
5-year period, outstanding general obligation debt has grown at an annual
rate of 1.4 percent.

General obligation debt for non-highway purposes of $3,643.6
million was outstanding on June 30, 1993. Outstanding debt for these
purposes increased $253.2 million since June 30, 1992, in large part due
to the recent emphasis the Commonwealth has placed on infrastructure
investment as a means to spur economic growth and to provide a higher
quality of life for Commonwealth residents. For the period ending June
30, 1993, the 10-year and 5-year average annual compounded growth rate for
total outstanding debt for non-highway purposes has been 3.5 percent and
4.4 percent, respectively. In its current debt financing plan,
Commonwealth infrastructure investment projects include improvement and
rehabilitation of existing capital facilities, such as water supply
systems and construction of new facilities, such as roads, prisons and
public buildings.

Outstanding general obligation debt for highway purposes was
$1,395.2 million on June 30, 1993, a decrease of $89.5 million from June
30, 1992. Highway outstanding debt has declined over the most recent
10-year and 5-year periods ending June 30, 1993 by an annual average rates
of 3.1 percent and 4.4 percent, respectively.

During the period from 1980 through 1986, all of the
Commonwealth's highway investment was funded from current year revenues.
Beginning in 1987, a limited return to the issuance of long-term bonds was
required to finance immediately needed repairs to highway bridges. The
highway bridge bonding program is funded from the Highway Bridge
Improvement Restricted Account within the Motor License Fund. Revenues in
this restricted account are derived from six cent per gallon surtax on
motor fuel used on Commonwealth highways by motor carriers and increased
registration fees for trucks and truck tractors weighing above 26,000
pounds. The two funding sources for the Highway Bridge Improvement
Restricted Account were enacted on July 13, 1987 to replace revenues from
an axle tax on heavy trucks which was declared unconstitutional by the
United States Supreme Court.

The Commonwealth has also issued obligations for its advance
construction interstate program (the "ACI Program") to fund the completion
of the interstate highway network in anticipation of the receipt of
reimbursements for the federally financed portion of these projects. As
of June 30, 1993, $85.5 million of ACI Program debt was outstanding.

The Commonwealth may incur debt to fund capital projects for
community colleges, highways, public improvements, transportation
assistance, flood control, redevelopment assistance, site development and
the Pennsylvania Industrial Development Authority. Before a project may
be funded, it must be itemized in a capital budget bill adopted by the
General Assembly. An annual capital budget bill states the maximum amount
of debt for capital projects that may be incurred during the current
fiscal year for projects authorized in the current or previous years'
capital budget bills. Capital projects debt is subject to a
constitutional limit on debt. As of December 31, 1993, $3,903.0 million
of capital projects debt was outstanding.

The issuance of electorate approved debt is subject to the
enactment of legislation which places on the ballot the question of
whether debt shall be incurred. Such legislation must state the purposes
for which the debt is to be authorized and, as a matter of practice,
includes a maximum amount of funds to be borrowed. Upon electorate
approval and enactment of legislation implementing the proposed
debt-funded program, bonds may be issued. As of December 31, 1993, the
Commonwealth had $893.1 million of electorate approved debt outstanding.

Debt issued to rehabilitate areas affected by disasters is
authorized by specific legislation. The Commonwealth had $79.3 million of
disaster relief debt outstanding as of December 31, 1993.

Due to the timing of major tax payment dates, the Commonwealth's
cash receipts are generally concentrated in the last four months of the
fiscal year, from March through June. Disbursements are distributed more
evenly throughout the fiscal year. As a result, operating cash shortages
can occur during certain months of the fiscal year. The Commonwealth
engages in short-term borrowing to fund expenses within the fiscal year
through the sale of tax anticipation notes. The Commonwealth may issue
tax anticipation notes only for the account of the General Fund or the
Motor License Fund or both such funds. The principal amount issued, when
added to that outstanding, may not exceed in the aggregate 20 percent of
the revenues estimated to accrue to the appropriate fund or both funds in
the fiscal year. Tax anticipation notes must mature within the fiscal
year in which they are issued. The Commonwealth is not permitted to fund
deficits between fiscal years with any form of debt. All year-end deficit
balances must be funded within the succeeding fiscal year's budget. The
Commonwealth has issued $400.0 million of tax anticipation notes for the
account of the General Fund for fiscal 1994, all of which are currently
outstanding. All such notes will mature on June 30, 1994 and will be paid
from fiscal 1994 General Fund receipts.

Pending the issuance of bonds, the Commonwealth may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may
not exceed three years. Currently, there are no bond anticipation notes
outstanding.

Certain state-created agencies have statutory authority to incur
debt for which state appropriations to pay debt service thereon is not
required. The debt of these agencies is supported by assets of, or
revenues derived from, the various projects financed and is not an
obligation of the Commonwealth. Some of these agencies, however, are
indirectly dependent on Commonwealth appropriations. These entities
include: Delaware River Joint Toll Bridge Commission, Delaware River Port
Authority, Pennsylvania Energy Development Authority, Pennsylvania Higher
Education Assistance Agency, Pennsylvania Higher Educational Facilities
Authority, Pennsylvania Industrial Development Authority, Pennsylvania
Infrastructure Investment Authority, Pennsylvania State Public School
Building Authority, Pennsylvania Turnpike Commission, the Philadelphia
Regional Port Authority and the Pennsylvania Economic Development
Financing Authority. As of December 31, 1993, the aggregate outstanding
indebtedness of these entities was $5,767.7 million.

The Pennsylvania Housing Finance Agency ("PHFA"), as of
December 31, 1993, had $2,052.5 million of revenue bonds and $13.0 million
of notes outstanding. The statute creating PHFA provides that if there is
a potential deficiency in the capital reserve fund or if funds are
necessary to avoid default on interest, principal or sinking fund payments
on bonds or notes of PHFA, the Governor, upon notification from the PHFA,
shall place in the budget of the Commonwealth for the next succeeding year
an amount sufficient to make up any such deficiency or to avoid any such
default. The budget as finally adopted by the General Assembly may or may
not include the amount so placed therein by the Governor. PHFA is not
permitted to borrow additional funds so long as any deficiency exists in
the capital reserve fund.

The Hospitals and Higher Education Facilities Authority of
Philadelphia, as of June 30, 1993, had $21.1 million of bonds outstanding
which benefit from a moral obligation of the Commonwealth's Department of
Public Welfare to request a budget appropriation to make up any deficiency
in the debt service reserve fund for said bonds. The budget as finally
adopted may or may not include the amount requested.

The Commonwealth, through several of its departments and
agencies, has entered into various agreements to lease, as lessee, certain
real property and equipment and to make lease rental payments. Some of
those lease payments are pledged as security for various outstanding debt
obligations issued by certain public authorities or other entities within
the state. All lease payments due from Commonwealth departments and
agencies are subject to and dependent upon an annual spending
authorization approved through the Commonwealth's annual budget process.
The Commonwealth is not required by law to appropriate or otherwise
provide moneys from which the lease payments are to be paid. The
obligations to be paid from such lease payments are not bonded debt of the
Commonwealth.

The Commonwealth maintains contributory benefit pension plans
covering all state employees, public school employees and employees of
certain other state-related organizations. Unfunded actuarial accrued
liabilities for the Public School Employees' Retirement Fund as of June
30, 1993 were $4,359 million, and for the State Employees' Retirement Fund
were $281 million as of December 31, 1992.

Local Finance. The Local Government Unit Debt Act (Act 52 of
1978) (the "Debt Act") establishes debt limits for local government units.
Local government units include municipalities (except a first class city
or county), school districts and intermediate units. The Act establishes
three classes of debt for a local government unit: (i) electoral debt
(debt incurred with the approval of the electors of the municipality for
which there is no limitation on the amount that may be incurred); (ii)
nonelectoral debt (debt of a local government unit not being electoral or
lease rental debt); (iii) lease rental debt (the principal amount of debt
of an authority organized by a municipality or debt of another local
government unit, which debt is to be repaid by the local government unit
through a lease, subsidy contract, guarantee or other form of agreement
evidencing acquisition of a capital asset, payable or which may be payable
out of tax revenues and other general revenues. Each local government
unit is subject to a limitation as to the amount of class "ii" and class
"iii" debt which may be issued which is based upon such local government
unit's Borrowing Base.

Borrowing Base is defined in the Debt Act as the annual
arithmetic average of the total revenues for the three full fiscal years
ended next preceding the date of the incurring of nonelectoral debt or
lease rental debt. Total revenues for the purposes of the Debt Act
excludes, inter alia, certain state and federal subsidies and
reimbursements, certain pledged revenues, interest on pledged funds and
nonrecurring items.

The debt limitations applicable to the various local government
units are set forth below:

Nonelectoral Nonelectoral plus
Lease Rental
First Class
School District 100% of Borrowing Base 200% of Borrowing Base

County 300% of Borrowing Base 400% of Borrowing Base

Other 250% of Borrowing Base 350% of Borrowing Base

A county may utilize an additional debt limit of 100% of its
Borrowing Base for additional nonelectoral or additional lease rental
debt, or both, if such county has assumed countywide responsibility for
hospitals and other public health services, air and water pollution
control, flood control, environmental protection, water distribution and
supply systems, sewage and refuse collection and disposal systems,
education at any level, highways, public transportation, or port
operations, but such additional debt limit may be so utilized only to
provide funds for and towards the costs of capital facilities for any or
any combination of the foregoing purposes.

City of Philadelphia. The City of Philadelphia ("Philadelphia")
is the largest city in the Commonwealth, with an estimated population of
1,585,577 according to the 1990 Census. Philadelphia functions both as a
city of the first class and a county for the purpose of administering
various governmental programs.

For the fiscal year ending June 30, 1991, Philadelphia
experienced a cumulative General Fund balance deficit of $153.5 million.
The audit findings for the fiscal year ending June 30, 1992, place the
Cumulative General Fund balance deficit at $224.9.

Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class
cities in remedying fiscal emergencies was enacted by the General Assembly
and approved by the Governor in June 1991. PICA is designed to provide
assistance through the issuance of funding debt to liquidate budget
deficits and to make factual findings and recommendations to the assisted
city concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City
Council on January 3, 1992, and approved by the PICA Board and signed by
the Mayor on January 8, 1992. At this time, Philadelphia is operating
under a five year fiscal plan approved by PICA on April 6, 1992. Full
implementation of the five year plan was delayed due to labor negotiations
that were not completed until October 1992, three months after the
expiration of the old labor contracts. The terms of the new labor
contracts are estimated to cost approximately $144.0 million more than
what was budgeted in the original five year plan. An amended five year
plan was approved by PICA in May 1993. The audit findings show a surplus
of approximately $3 million for the fiscal year ending June 30, 1993. The
fiscal 1994 budget projects no deficit and a balanced budget for the year
ending June 30, 1994. The Mayor presented the latest update of the five
year financial plan on January 13, 1994; it will be considered by PICA in
the spring of 1994.

In June 1992, PICA issued $474,555,000 of its Special Tax
Revenue Bonds to provide financial assistance to Philadelphia and to
liquidate the cumulative General Fund balance deficit. In July 1993, PICA
issued $643,430,000 of Special Tax Revenue Bonds to refund certain general
obligation bonds of the city and to fund additional capital projects.

Litigation. According to the Preliminary Official Statement
dated March 9, 1994 describing General Obligation Bonds, First Series of
1994 of the Commonwealth of Pennsylvania, the Office of Attorney General
and the Office of General Counsel have reviewed the status of pending
litigation against the Commonwealth, its officers and employees, and have
identified the following cases as ones where an adverse decision could
materially affect the Commonwealth's governmental operations. Listed
below are all litigation items so identified that may have a material
effect on government operations of the Commonwealth and consequently, the
Commonwealth's ability to pay debt service on its obligations.

Under Act No. 1978-152 approved September 28, 1978, as amended,
the General Assembly approved a limited waiver of sovereign immunity.
Damages for any loss are limited to $250,000 for each person and
$1,000,000 for each accident. The Supreme Court of Pennsylvania has held
that this limitation is constitutional. Approximately 3,500 suits against
the Commonwealth remain open. Tort claim payments for the departments and
agencies, other than the Department of Transportation, are paid from
departmental and agency operating and program appropriations. Tort claim
payments for the Department of Transportation are paid from an
appropriation of $17.5 million from the Motor License Fund for fiscal
1993. The Motor License Fund tort claim appropriation for fiscal 1994 has
been increased by 83 percent to $32.0 million to fund possibly higher and
more numerous payments resulting from recent decisions by the Pennsylvania
Supreme Court, including Woods v. PaDOT, that will affect the Department
of Transportation's liability. The Woods v. PaDOT ruling changes the
computation for delay damages by using the jury award as the base rather
than the damage limits specified in Act No. 1978-152.

Baby Neal v. Commonwealth

In April of 1990, the American Civil Liberties Union ("ACLU")
and various named plaintiffs filed a lawsuit against the Commonwealth in
federal court seeking an order requiring the Commonwealth to provide
additional funding for child welfare services. No figures for the amount
of funding sought are available. A similar lawsuit filed in the
Commonwealth Court, captioned as The City of Philadelphia, Hon. Wilson
Goode v. Commonwealth of Pennsylvania, Hon. Robert P. Casey, was resolved
through a court approved settlement providing, inter alia, for more
Commonwealth funding for these services for fiscal year 1991 as well as a
commitment to pay to counties $30.0 million over five years. The
Commonwealth is now seeking dismissal of the federal action based on,
among other things, the settlement of the Commonwealth Court case.

In January of 1992, the U.S. District Court, per Judge Kelly,
denied the ACLU's motion for class certification and held that the "next
friends" seeking to represent the interests of the 16 minor plaintiffs in
the case were inadequate representatives. The Commonwealth filed a motion
for summary judgment on most of the counts in the ACLU's complaint on the
basis of, among other things, Suter v. Artist M.. After the motion for
summary judgment was filed, the ACLU filed a renewed motion to certify
sub-classes. The court stayed decision on that motion pending decision on
the motion for summary judgment.

On April 12, 1993, the court issued an order granting and
denying in part the motion for summary judgment. The court dismissed all
claims except for the constitutional claims of some of the plaintiffs to
adequate care while in foster care and to procedural due process. In
addition, the court did not dismiss the claims of two plaintiffs under the
Americans with Disabilities Act.

The case will now be scheduled for trial.

County of Allegheny v. Commonwealth of Pennsylvania

On December 7, 1987, the Supreme Court of Pennsylvania held in
County of Allegheny v. Commonwealth of Pennsylvania, that the statutory
scheme for county funding of the judicial system is in conflict with the
Pennsylvania Constitution. However, the Supreme Court of Pennsylvania
stayed its judgment to afford the General Assembly an opportunity to enact
appropriate funding legislation consistent with its opinion and ordered
that the prior system of county funding shall remain in place until this
is done. Allegheny County, on February 12, 1991, filed a motion in the
Supreme Court of Pennsylvania to lift the stay and enforce the judgment.
The Supreme Court subsequently denied the motion.

On March 3, 1989, the City of Philadelphia, Allegheny County,
and the state County Commissioner's Association filed suit in the Supreme
Court of Pennsylvania to require the General Assembly to appropriate the
funds required by the Supreme Court of Pennsylvania. That suit was
summarily dismissed on March 31, 1989. On February 14, 1991, the
Pennsylvania State Association of County Commissioners and the Counties of
Blair, Bucks, Erie, Huntington and Perry filed in the Commonwealth Court
of Pennsylvania an action for declaratory judgment requesting an order
that the Commonwealth be required to provide funds for the operation of
the courts of common pleas in accordance with the County of Allegheny
decision. These parties also requested the Supreme Court of Pennsylvania
to assume plenary jurisdiction over their case. The Supreme Court of
Pennsylvania refused to do so, and these parties have withdrawn the
Commonwealth Court action.

On October 5, 1992, the Pennsylvania State Association of County
Commissioners, along with Allegheny, Beaver, Clarion, Forest, Tioga and
Washington counties, filed in the Supreme Court of Pennsylvania a motion
to enforce judgment seeking an order that would direct the Commonwealth to
restore funding for local courts and district justices to levels existing
in 1987. The Commonwealth has filed a response opposing the motion. By
order dated May 28, 1993, the motion to enforce judgment was denied.

On December 7, 1992, the State Association of County
Commissioners filed a new action in mandamus seeking to compel the
Commonwealth to comply with the decision in County of Allegheny. The
Commonwealth has filed a response in opposition to the new action.

The General Assembly has yet to consider legislation
implementing the Supreme Court of Pennsylvania's judgment.

First National Bank of Fredericksburg, Fidelity Bank, and Equibank v.
Commonwealth

First National Bank of Fredericksburg challenged the con-
stitutionality of the single excise tax which was levied on banking firms
in 1983 by the Commonwealth to recover from each bank the amounts paid in
refunds to each bank for the bank shares tax previously ruled
unconstitutional in Dale National Bank v. Commonwealth. Dale held that
federal obligations may not be considered in determining the base of the
bank shares tax. On February 3, 1989, the Supreme Court of Pennsylvania
affirmed the order of the Commonwealth Court, which held that the single
excise tax, as applied to the First National Bank of Fredericksburg,
violated the bank's due process rights and the doctrine of separation of
powers.

On July 1, 1989, the Governor signed into law Act 1989-21. This
law, which revised the bank shares tax by adjusting the tax base and
increasing the tax rate, provided additional revenues to the Commonwealth
during fiscal year 1990 sufficient to permit the payment of refund
liabilities from the single excise tax and maintain a projected positive
budget balance for the General Fund.

After the first installment of the revised bank shares tax for
1989, due October 30, 1989, First National Bank of Fredericksburg,
Fidelity Bank, and Equibank filed actions against the Commonwealth
contesting the constitutionality of Act 1989-21. First National Bank of
Fredricksburg has since withdrawn its case and the Equibank case is also
expected to be withdrawn. Argument was held in the Fidelity case on
March 16, 1993. The Fidelity litigation potentially exposes the
Commonwealth to an estimated $1.024 billion through December 1993, plus
appropriate statutory interest.

On December 6, 1993, a single judge of the Commonwealth Court
issued a decree nisi in Fidelity wherein he concluded that the
Commonwealth had an obligation to actually pay Fidelity its single excise
tax refunds (approximately $13 million), rather than merely apply the
refunds as credits against Fidelity's 1989 Amended Bank Shares Tax
liability. The judge specifically declined to address the issue of
whether the 1989 Amended Bank Shares Tax was constitutional. The
Commonwealth is seeking further review of this decision in the
Commonwealth Court.

Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey

This action was filed in January, 1991 by an association of
rural and small schools, several individual school districts, and a group
of parents and students, against Governor Robert P. Casey and Secretary of
Education Donald M. Carroll, Jr. The action challenges the
constitutionality of the Commonwealth's system for funding local school
districts. The action consists of two parallel cases, one in the
Commonwealth Court of Pennsylvania, and one in the United States District
Court for the Middle District of Pennsylvania. The federal court case has
been indefinitely stayed, pending resolution of the state court case. The
state court case is in the pretrial discovery stage. The trial has not
yet been scheduled.

Temple University Hospital v. White

Temple is one of nine federal lawsuits in which approximately
150 hospitals have challenged Pennsylvania's fiscal 1989 and fiscal 1990
reimbursement rates for inpatient hospital services provided to needy
citizens under the Medical Assistance program. In January 1990, the
United States District Court of the Eastern District of Pennsylvania
declared in the Temple case that Pennsylvania's formula for reimbursing
acute care hospitals did not comply with federal law and ordered the
Commonwealth to (1) design a new state plan and (2) pay Temple enhanced
rates. In a set of subsequent "interim relief" orders, the court ordered
the Commonwealth to pay all litigating hospitals enhanced payment rates as
well.

To comply with the district court's orders, Pennsylvania (1)
submitted a new state plan to the Health Care Financing Administration,
U.S. Department of Health and Human Services ("HCFA") on September 30,
1990 and (2) began paying Medicaid reimbursement rates increased by
approximately 13 percent to acute care hospitals.

The Third Circuit affirmed the district court's holding in
Temple. In January 1992, the United States Supreme Court denied
certiorari. There is no immediate adverse impact because the
Commonwealth, as described below, has settled the case. Should a
component of the settlement agreement unravel, the Commonwealth will have
to continue to pay enhanced payment rates and to implement a new state
plan.

In May of 1991, the hospitals and the Commonwealth settled the
lawsuits by agreeing to, among other things, engage in a pooling
transaction which will permit the Commonwealth to secure additional
federal funds to pay for enhanced rates of reimbursement. The Stipulation
of Settlement entered into in this case and related cases expired on June
30, 1993. Under the terms of the Agreement, the litigation is subject to
dismissal unless there are outstanding matters regarding the litigation
before the Court. There is currently pending before the U.S. Court of
Appeals for the Third Circuit, an appeal from a decision by the District
Court denying a Motion to Compel filed by certain hospitals in related
litigation. Once that appeal is disposed of, the parties can move to
dismiss the action before the District Court.

Philadelphia Suburban Corp. v. Commonwealth

On December 10, 1993, the Pennsylvania Supreme Court overturned
a decision of the Commonwealth Court ruling that dividends received by a
corporate taxpayer which are accounted for under the equity method of
accounting are not includible in average net income for purposes of
determining capital stock value under the fixed formula. The Commonwealth
Court held that the Revenue Department regulation which requires that book
income be adjusted to include dividends accounted for under the equity
method is contrary to the capital stock tax law which requires that net
income be computed on an unconsolidated basis exclusive of the net income
or loss of corporations in which the taxpayer has an investment. The
Pennsylvania Supreme Court's decision permits the Commonwealth to release
$147 million held in reserve for potential tax refund.

Austin v. Department of Corrections, et al.

In November 1990, the American Civil Liberties Union ("ACLU")
brought a class action lawsuit on behalf of the inmate populations in
thirteen Commonwealth correctional institutions.

The lawsuit challenges the conditions of confinement at each
institution and includes specified allegations of overcrowding,
deficiencies in medical and mental health services, inadequate
environmental conditions, disparate treatment of HIV positive prisoners
and other assorted claims.

No damages are sought. The ACLU is seeking injunctive relief
which would modify conditions, change practices and procedures and
increase the number of staff deployment. The Department of Corrections
has been ordered to implement a new policy regarding detection and
prevention of tuberculosis. If injunctive relief is granted, the cost to
the Commonwealth may be substantial. The Commonwealth may incur
significant capital and personnel costs after this fiscal year ranging in
the millions of dollars.

Trial of this matter will take place in four distinct phases:
Corrections, Environmental, Medical and Mental Health. Trial of the first
phase (Corrections) began on December 6, 1993. The court recessed on
January 3, 1994, prompted by settlement negotiations between the parties,
and trial will resume if a settlement is not reached.

Scott v. Snider

In 1991, a consortium of public interest law firms filed a class
action suit, Scott v. Snider, against various Commonwealth officers,
alleging that the Commonwealth of Pennsylvania had failed to comply with a
1989 federal mandate to provide and pay for early and periodic screening,
diagnostic, and treatment services for all Medicaid-eligible children
under the age of 21. If the federal court were to grant all of the relief
that plaintiffs are seeking, the Commonwealth would be obligated, among
other things, (1) to substantially revise the methods by which it
presently identifies children in need of treatment and (2) to expand the
scope of services and treatment presently provided to such children. It
is estimated that such relief, if granted in toto, would cost the
Commonwealth approximately $98 million. On July 7, 1993, an Intervening
Complaint was filed by the City and County of Philadelphia, Allegheny
County, Pennsylvania State Association of County Commissioners, et al.

The Sponsor believes the information summarized above describes
some of the more significant events relating to the Pennsylvania Trust.
The sources of such information are the official statements of issuers
located in Pennsylvania as well as other publicly available documents.

PUBLIC OFFERING

Offering Price

The secondary market Public Offering Price per Unit of each
Trust is computed by adding to the aggregate bid price of the Bonds in
such Trust divided by the number of Units thereof outstanding, an amount
equal to 5.820% of such aggregate offering price of the Bonds per Unit.
This amount is equal to a sales charge of 5-1/2% of the Public Offering
Price. 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 Bonds
from the last day on which interest was paid and is initially accounted
for daily by each Trust at the daily rate set forth under "Summary of
Essential Information" for each Trust in Part A of this Prospectus. This
daily rate is net of estimated fees and expenses. The secondary market
Public Offering Price can vary on a daily basis from the amount stated on
the cover of Part A of this Prospectus 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 as of 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 Sponsors) 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 Certificateholder at the time Units are purchased. Since each
Trust normally receives the interest on the Bonds twice a year and the
interest on the Bonds is accrued on a daily basis (this daily rate is net
of estimated fees and expenses), each Trust will always have an amount of
interest earned but uncollected by, or unpaid to, the Trustee. A Certifi-
cateholder will not recover his proportionate share of accrued interest
until the Units of a Trust are sold or redeemed, or such 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 sale or termination and to the date of tender in the
case of redemption.

Employee Discounts

Employees (and their families) of Bear, Stearns & Co. Inc. and
of any underwriter of any Trust, pursuant to employee benefit
arrangements, may purchase Units of a State Trust at a price equal to the
bid side evaluation of the underlying securities in such State 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 of each State Trust for
sale in only the State for which such Trust is named and certain other
states and in the case of the Municipal Securities Trust and the Municipal
Securities Discount Trust 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 $33.00 per Unit, subject to the Sponsor's
right to change the dealers' concession from time to time. 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. Such Units may then be distributed to the public by
the dealers at the Public Offering Price then in effect. The Sponsor
reserves the right to reject, in whole or in part, any order for the
purchase of Units.

Sponsor's Profits

The Sponsor will receive a gross commission on all Units sold in
the secondary market equal to the applicable sales charge in 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 of each
State Trust will be determined on the basis of the current bid prices of
the Bonds in such State Trust plus the applicable sales charge. 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 of each State Trust (based on the bid price of the Bonds in such
State Trust plus the sales charge) each exceeded the Repurchase and
Redemption Price per Unit (based upon the bid price of the Bonds in each
State Trust without the sales charge) by the amounts shown under "Summary
of Essential Information" for each State Trust in Part A of this
Prospectus. For this reason, among others (including fluctuations in the
market prices of such Bonds and the fact that the Public Offering Price
includes the 5-1/2% sales charge), the amount realized by a Certificate-
holder upon any redemption 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 Unitholders. The resulting Estimated
Long Term Return represents a measure of the return to Unitholders 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 offering prices (bid prices in the
case of the secondary market) 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
Sponsor upon request.

RIGHTS OF CERTIFICATEHOLDERS

Certificates

Ownership of Units of each State Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor.
Certificates may be issued in denominations of one or more Units and will
bear appropriate notations on their faces indicating which plan of
distribution has been selected by the Certificateholder. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed and/or accompanied by a written instrument or instrument 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 each State Trust is credited by the Trustee
to the Interest Account of such Trust and a deduction is made to reimburse
the Trustee without interest for any amounts previously advanced.
Proceeds representing principal received by each State Trust from the
maturity, redemption, sale or other disposition of Bonds are credited to
the Principal Account of such State Trust.

Distributions to each Certificateholder of each State Trust from
the Interest Account of such State Trust 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 such
Certificateholder's pro rata share of the Estimated Net Annual Interest
Income in such Interest Account, depending upon the applicable plan of
distribution. Distributions from the Principal Account of each State
Trust will be computed as of each semi-annual Record Date, and will be
made to the Certificateholders of such State Trust 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 appropriate 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 State 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 as
may be necessary to provide interest distributions of approximately equal
amounts. The Trustee shall be reimbursed, without interest, for these
advances to the Interest Account. Funds which are available for future
distributions, investment in the Total Reinvestment Plan, payments of
expenses and redemptions are in accounts which are non-interest bearing to
Certificateholders and are available for use by the Trustee pursuant to
normal banking procedures.

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 of each State Trust initially will be in the amounts
shown under "Summary of Essential Information" in Part A and will change
and be reduced as Bonds mature or are redeemed, exchanged or sold, or as
expenses of each State Trust fluctuate. No distribution need be made from
a 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 applicable to the Unit Purchased. Record
Dates for interest distributions will be 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, the Trustee will furnish to each person who
at any time during the calendar year was a Certificateholder of record of
a State Trust, a statement showing (a) as to the Interest Account of such
State Trust: interest received (including any earned original issue
discount and amounts representing interest received upon any disposition
of Bonds and earned original discount, if any), amounts paid for
redemption of Units, if any, deductions for applicable taxes and fees and
expenses of such State 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 such
State Trust's 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 such
State Trust, amounts paid for redemption 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 in such State Trust and the number of Units
thereof outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit of such State Trust based upon the last
computation thereof made during such calendar year; and (e) amounts
actually distributed to Certificateholders of such State Trust during such
calendar year from the Interest and Principal Accounts, separately stated,
expressed both as total dollar amounts and as dollar amounts representing
the pro rata share of each Unit outstanding on the last business day of
such calendar year.

The Trustee shall keep available for inspection by Certificate-
holders, at all reasonable times during usual business hours, books of
record and account of its transactions as Trustee, including records of
the names and addresses of Certificateholders, Certificates issued or
held, a current list of Bonds in the portfolio and a copy of the Trust
Agreement.

TAX STATUS

All Bonds acquired by the State Trusts 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 and from the
respective State income taxes. Such interest may, however, be subject to
the federal corporate alternative minimum tax and to state and local taxes
in other jurisdictions. 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") was
recently enacted. 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, counsel for the Sponsor, under
existing law:

The State Trusts are not associations taxable as corporations
for federal income tax purposes under the Internal Revenue Code of
1986 (the "Code"), and income received by each State Trust that
consists of interest excludible from federal gross income under the
Code will be excludable from the federal gross income of the
Certificateholders of such State Trust.

Each Certificateholder of a State Trust will be considered the
owner of a pro rata portion of that State Trust under Section 676(a)
of the Code. Thus, each Certificateholder of a State Trust will be
considered to have received his pro rata share of Bond interest when
it is received by the State Trust, and the entire amount of net
income distributable to Certificateholders of a State Trust that is
exempt from federal income tax when received by that State Trust will
constitute tax-exempt income when received by the Certificateholders.

Gain (other than any earned original issue discount) realized on
sale or redemption of the Bonds or on sale of a Unit is, however,
includible in gross income for federal income tax purposes, generally
as capital gain, 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 gain depending on the facts and
circumstances. Capital losses are deductible to the extent of
capital gains; in addition, up to $3,000 of capital losses of non-
corporate Certificateholders may be deducted against ordinary income.
Capital assets 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 of a State Trust will realize taxable
income or loss when that State 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. The Certificateholder's tax cost for each Bond is
determined by allocating the total tax cost of each Unit among all
the Bonds held in the State Trust (in accordance with the portion of
the State 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 State 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
Certificateholder, as compared to the results produced by the
straight-line method of accounting for original issue discount, upon
an early disposition of a Bond by a State Trust or of a Unit by a
Certificateholder.

A Certificateholder may also realize taxable gain or loss when a
Unit of a State Trust is sold or redeemed. The amount received is
allocated among all the Bonds in that State Trust in the same manner
as when the State 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 includible 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 Social Security
benefits that are includible in gross income and determining whether
an individual's income exceeds the base amount above which a portion
of the benefits would be subject to tax. For taxable years beginning
after December 31, 1993, the amount of Social Security benefits
subject to tax will be increased.

Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount
by which the adjusted current earnings (which will include tax-exempt
interest) of the corporation exceeds alternative minimum taxable
income (determined without regard to this item). Further, interest
on the Bonds is includible in a 0.12% additional corporate minimum
tax imposed by the Superfund Amendments and Reauthorization Act of
1986 for taxable years beginning before January 1, 1996. In
addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be
subject to a minimum tax on excess "passive investment income" which
includes tax-exempt interest.

Under federal law, interest on Bonds in each State Trust issued
by authority of the Government of Puerto Rico is exempt from regular
federal income tax and state and local income taxes in the United
States and Puerto Rico.

The State Trusts are not subject to the New York State Franchise
Tax on Business Corporations or the New York City General Corporation
Tax.

Messrs. Battle Fowler are also of the opinion that under the
personal income tax laws of the State and City of New York, the income of
each State Trust will be treated as the income of the Certificateholders.
Interest on the Bonds that is exempt from tax under the laws of the State
and City of New York when received by the New York Trust will retain its
status as tax-exempt interest of the Certificateholders. In addition,
non-residents of New York City will not be subject to the City personal
income tax on gains derived with respect to their Units. Non-residents of
New York State will not be subject to New York State personal income tax
on such gains unless the Units are employed in a business, trade or
occupation carried on in New York State. A New York State or New York
City resident should determine his basis and holding period for his Units
in the same manner for New York State and New York City tax purposes as
for federal tax purposes. 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 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 local government. The laws of such states
and local governments vary with respect to the taxation of such
obligations. See "Rights of Certificateholders" in this Part B.

In the opinion of Brown & Wood, special counsel to the Sponsor
for California tax matters, under existing California law applicable to
individuals who are California residents:

The California Trust will not be an association taxable as a
corporation. Accordingly, interest on Bonds received by the
California Trust that is exempt from personal income taxes imposed by
or under the authority of the State of California will be treated for
California income tax purposes in the same manner as if directly
received by the Certificateholders.

Each Certificateholder of the California Trust will recognize
gain or loss when the California Trust disposes of a Bond (whether by
sale, exchange, redemption or payment at maturity) or upon the
Certificateholder's sale or other disposition of a Unit. The amount
of gain or loss for California income tax purposes will generally be
calculated pursuant to the Internal Revenue Code of 1986, as amended,
certain provisions of which are incorporated by reference under
California law.

In the opinion of Messrs. Miller, Canfield, Paddock and Stone,
special counsel to the Sponsor on Michigan tax matters, under existing
law:

Under the income tax laws of the State of Michigan, the Michigan
Trust is not an association taxable as a corporation; the income of
the Michigan Trust will be treated as the income of the Certificate-
holders of the Michigan Trust and be deemed to have been received by
them when received by the Michigan Trust. Interest on the Bonds in
the Michigan Trust which is exempt from tax under the Michigan income
tax laws when received by the Michigan Trust will retain its status
as tax-exempt interest to the Certificateholders of the Michigan
Trust.

For purposes of the Michigan income tax laws, each Certificate-
holder of the Michigan Trust will be considered to have received his
pro rata share of interest on each Bond in the Michigan Trust when it
is received by the Michigan Trust, and each Certificateholder will
have a taxable event when the Michigan Trust disposes of a Bond
(whether by sale, exchange, redemption or payment at maturity) or
when the Certificateholder redeems or sells his Certificate, to the
extent the transaction constitutes a taxable event for Federal income
tax purposes. The tax cost of each Unit to a Certificateholder will
be established and allocated for purposes of the Michigan income tax
laws in the same manner as such cost is established and allocated for
Federal income tax purposes.

Under the Michigan intangibles tax, the Michigan Trust is not
taxable and the pro rata ownership of the underlying Bonds, as well
as the interest thereon, will be exempt to the Certificateholders to
the extent the Michigan Trust consists of obligations of the State of
Michigan or its political subdivisions or municipalities, or
obligations of the Government of Puerto Rico, or any other possession
of the United States.

The Michigan Single Business Tax replaced the tax on corporate
and financial institution income under the Michigan Income Tax, and
the intangible tax with respect to those intangibles of persons
subject to the Single Business Tax, the income from which would be
considered in computing the Single Business Tax. Persons are subject
to the Single Business Tax only if they are engaged in "business
activity," as defined in the Act. Under the Single Business Tax,
both interest received by the Michigan Trust on the underlying Bonds
and any amount distributed from the Michigan Trust to a Certificate-
holder, if not included in determining taxable income for Federal
income tax purposes, is also not included in the adjusted tax base
upon which the Single Business Tax is computed, of either the
Michigan Trust or the Certificateholders. If the Michigan Trust or
the Certificateholders have a taxable event for Federal income tax
purposes when the Michigan Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity) or the Certificateholder
redeems or sells his Certificate, an amount equal to any gain
realized from such taxable event which was included in the
computation of taxable income for Federal income tax purposes (plus
an amount equal to any capital gain of an individual realized in
connection with such event but excluded in computing that
individual's Federal taxable income) will be included in the tax base
against which, after allocation, apportionment and other adjustments,
the Single Business Tax is computed. The tax base will be reduced by
an amount equal to any capital loss realized from such a taxable
event, whether or not the capital loss was deducted in computing
Federal taxable income in the year the loss occurred. Certificate-
holders should consult their tax advisors as to their "business
activity" status under Michigan law.

In the opinion of Saul, Ewing, Remick & Saul, special counsel to
the Sponsor on Pennsylvania tax matters, under existing law:

(1) Units evidencing fractional undivided interests in the
Trust, to the extent represented by obligations issued by the
Commonwealth of Pennsylvania, any public authority, commission, board
or other agency created by the Commonwealth of Pennsylvania, any
political subdivision of the Commonwealth of Pennsylvania or any
public authority created by any such political subdivision, or by the
Government of Puerto Rico or its public authorities, are not taxable
under any of the personal property taxes presently in effect in
Pennsylvania;

(2) Distributions of interest income to Unitholders that would
not be taxable if received directly by a Pennsylvania resident are
not subject to personal income tax under the Pennsylvania Tax Reform
Code of 1971; nor will such interest be taxable under Philadelphia
School District Investment Income Tax imposed on Philadelphia
resident individuals;

(3) A Certificateholder which is an individual, estate or trust
will have a taxable event under the Pennsylvania state and local
income tax referred to in the preceding paragraph upon the redemption
or sale of Units;

(4) A Certificateholder which is a corporation will have a
taxable event under the Pennsylvania Corporate Net Income Tax or, if
applicable, the Mutual Thrift Institutions Tax, upon the redemption
or sale of its Units. Interest income distributed to
Certificateholders which are corporations is not subject to
Pennsylvania Corporate Net Income Tax or Mutual Thrift Institutions
Tax. However, banks, title insurance companies and trust companies
may be required to take the value of Units into account in
determining the taxable value of their shares subject to Shares Tax;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania
Bonds may be subject to Pennsylvania personal or corporate income
taxes. Those gains which are distributed by the Trust to
Certificateholders who are individuals will be subject to
Pennsylvania Personal Income Tax and, for residents of Philadelphia,
to Philadelphia School District Investment Income Tax. For
Certificateholders which are corporations, the distributed gains will
be subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax.

(6) For Pennsylvania Bonds, gains which are not distributed by
the Trust will nevertheless be taxable to Certificateholders if
derived by the Trust from the sale, exchange or other disposition of
these Bonds issued on or after February 1, 1994. Such gains which
are not distributed by the Trust will remain nontaxable to
Certificateholders if derived by the Trust from the sale, exchange or
other disposition of Bonds issued prior to February 1, 1994.
However, for gains from the sale, exchange or other disposition of
these Bonds to be taxable under the Philadelphia School District
Investment Income Tax, the Bonds must be held for six months or less;

(7) Gains from the sale, exchange or other disposition of
Puerto Rico Bonds will be taxable to Certificateholders if
distributed or retained by the Trust. However, for gains from the
sale, exchange or other disposition of these Bonds to be taxable
under the Philadelphia School District Investment Income Tax, the
Bonds must be held for six months or less;

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations
held by the Trustee will be excludable from Pennsylvania gross income
if, and to the same extent as, such interest would have been so
excludable if paid in the normal course by the issuer of the
defaulted obligations; and

(10) The Trust is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.

In the opinion of Shapiro, Israel & Weiner, special counsel to
the Sponsor on Massachusetts tax matters, under existing law:

Interest on the Bonds earned by the Trust (including (if any)
amounts representing original issue discount) will not be includible
in the Massachusetts gross income of the Trust or the
Certificateholders who are subject to Massachusetts income taxation
under Chapter 62 of the Massachusetts General Laws, to the extent
such interest is tax-exempt for Federal income purposes.

Gains or loss from the sale, exchange, redemption, payment at
maturity or other disposition of the Bonds will be includible in the
Massachusetts gross income of the Certificateholders who are subject
to Massachusetts income taxation under Chapter 62 of the
Massachusetts General Laws, except to the extent specifically
exempted from income taxation under the Massachusetts statute
authorizing issuance of the Bonds, and will not be includible in the
Massachusetts gross income of the Massachusetts Trust.

Gains and losses realized upon the sale or redemption of Units
in the Trust by Certificateholders who are subject to Massachusetts
income taxation under Chapter 62 of the Massachusetts General Laws
will be includible in their Massachusetts gross income.

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 IRBs 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 such IRBs
plus certain capital expenditures exceeds $10,000,000.

In addition, a Bond can lose its tax-exempt status as a result
of other subsequent but unforeseeable events such as prohibited
"arbitrage" activities by the issuer of the Bond or the failure of the
Bond to continue to satisfy the conditions required for the exemption of
interest thereon from regular federal income tax. No investigation has
been made as to the current or future owners or users of the facilities
financed by the Bonds, the amount of such persons' outstanding tax-exempt
IRBs, or the facilities themselves, and no assurance can be given that
future events will not affect the tax-exempt status of the Bonds.
Investors should consult their tax advisors for advice with respect to the
effect of these provisions on their particular tax situation.

Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for regular federal income tax purposes.
In addition, under rules used by the Internal Revenue Service for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of Units may be
considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. Also, in the
case of certain financial institutions that acquire Units, in general no
deduction is allowed for interest expense allocable to the Units.

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 State Trusts, and it can be
expected that similar proposals may be introduced in the future.

In a 1988 decision (South Carolina v. Baker), the U.S. Supreme
Court held that the federal government may constitutionally require states
to register bonds they issue and subject the interest on such bonds to
federal income tax if not registered, and that there is no constitutional
prohibition against the federal government's taxing the interest earned on
state or other municipal bonds. The Supreme Court decision affirms the
authority of the federal government to regulate and control bonds such as
the Bonds in the Trust and to tax interest on such bonds in the future.
The decision does not, however, affect the current exemption from taxation
of the interest earned on the Bonds in the Trust in accordance with Sec-
tion 103 of the Code.

The opinions of bond 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, has maintained and
intends to continue to maintain a secondary market for the Units of each
State Trust and continuously to offer to repurchase the Units of the
Trusts. The Sponsor's secondary market repurchase price will be based on
the aggregate bid price of the Bonds in each State 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 as to current
market prices prior to making a tender for redemption. The Sponsor may
discontinue repurchases of Units of a State Trust 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 of a State
Trust 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
of a State Trust, a Certificateholder may be able to dispose of Units only
by tendering them to the Trustee for redemption.

Prospectuses relating to certain other bond trusts indicate an
intention by the Sponsor, subject to change, to repurchase units of those
funds on the basis of a price higher than the bid prices of the Bonds in
the Trusts. Consequently, depending upon 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 these State Trusts, although in all bond trusts, the
purchase price per unit depends primarily on the value of the bonds in the
trust portfolio.

Units purchased by the Sponsor in the secondary market may be
re-offered for sale by the Sponsor at a price based on the aggregate bid
price of the Bonds in a State Trust plus a 5-1/2% sales charge (5.820% of
the net amount invested) plus net accrued interest. Any Units that are
purchased by the Sponsor in the secondary market also may be redeemed by
the Sponsor if it determines such redemption to be in its best interest.

The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee
for redemption (see "Trustee Redemption"). For example, if in order to
meet redemptions of Units the Trustee must dispose of Bonds, and if such
disposition cannot be made by the redemption date (seven calendar days
after tender), the Sponsor may elect to purchase such Units. Such
purchase shall be made by payment to the Certificateholder not later than
the close of business on the redemption date of an amount equal to the
Redemption Price on the date of tender.

Trustee Redemption

Units may also 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
appropriate Interest Account, or, if the balance therein is insufficient,
from the appropriate Principal Account. All other amounts paid on
redemption shall be withdrawn from the appropriate Principal Account. The
Trustee is empowered to sell Bonds in order to make funds available for
redemptions. Such sales, if required, could result in a sale of Bonds by
the Trustee at a loss. To the extent Bonds in a State Trust are sold, the
size and diversity of such Trust will be reduced.

The Redemption Price per Unit of a State Trust is the pro rata
share of each Unit in such State Trust determined by the Trustee on the
basis of (i) the cash on hand in such Trust or monies in the process of
being collected, (ii) the value of the Bonds in such State 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 such State Trust, (b) the accrued expenses of such State Trust and
(c) cash allocated for distribution to Certificateholders of record of
such State Trust as of the business day prior to the evaluation being
made. The Evaluator may determine the value of the Bonds in such State
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 such State Trust, (2) on the basis of bid
prices for bonds comparable to any Bonds for which bid prices are not
available, (3) by determining the value of the Bonds by appraisal, or
(4) by any combination of the above.

The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if
the Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit,
to sell such Unit in the over-the-counter market for the account of the
tendering Certificateholder at prices which will return to the
Certificateholder an amount in cash, net after deducting brokerage
commissions, transfer taxes and other charges, equal to or in excess of
the Redemption Price for such Unit. The Trustee will pay the net proceeds
of any such sale to the Certificateholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.

The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per
Unit for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or trading on that
Exchange is restricted or during which (as determined by the Securities
and Exchange Commission) an emergency exists as a result of which disposal
or evaluation of the Bonds is not reasonably practicable, or for such
other periods as the Securities and Exchange Commission may by order
permit. The Trustee and the Sponsor are not liable to any person or in
any way for any loss or damage which may result from any such suspension
or postponement.

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 may elect to have all interest and principal
distributions, if any, with respect to their Units reinvested either in
units of various series of "Municipal Securities Trust"* which will have
been created shortly before each semi-annual or annual Payment Date (a
"Primary Series") or, if units of a Primary Series are not available, in
units of a previously formed series of the Trust which have been
repurchased by the Sponsor in the secondary market, including the Units
being offered hereby (a "Secondary Series") (Primary Series and Secondary
Series are hereafter collectively referred to as "Available Series").
June 15 and December 15 of each year in the case of semi-annual
Certificateholders and December 15 of each year in the case of annual
Certificateholders are "Plan Reinvestment Dates."

* Certificateholders of a particular State Trust of the Multi-State
Trust who participate in the Plan will have reinvestments made in
Units from the same State Trust of a similar Multi-State Trust if
such Units are available. If no such Units are available for
reinvestment, distributions to Certificateholders will be reinvested
in Units of regular series of Municipal Securities Trust, the income
earned on which may not be exempt from state and local income taxes.

<PAGE>

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% of the Reinvestment Price 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 Certificate-
holder 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, approximated $10 (Ten Dollars).

A semi-annual or annual Certificateholder may join the Plan at
the time he invests in Units of the State 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 program
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 in the Trust (and with respect to Plan Units purchased
with the distributions from the Units purchased in the State 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 all Federal
income tax, or the inclusion of bonds which were not rated "A" or better
by either Standard & Poor's Corporation or Moody's Investors Service, Inc.
on the date such bonds were initially deposited in the Available Series
portfolio.

The Sponsor has the option at any time to use units of a
Secondary Series to fulfill the requirements of the Plan in the event
units of a Primary Series are not available either because a Primary
Series is not then in existence or because the registration statement
relating thereto is not declared effective in sufficient time to
distribute final prospectuses to Plan participants (see below). It should
be noted that there is no assurance that the quality and diversification
of the Bonds in any Available Series or the estimated current return
thereon will be similar to that of this Trust.

It is the Sponsor's intention that Plan Units will be offered on
or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such
Record Dates are June 1 and December 1 of each year for semi-annual
Certificateholders, and December 1 of each year for annual Certificate-
holders. 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 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.) A participant
who subsequently desires to have distributions made with respect to Plan
Units delivered to him in cash may withdraw from the Plan with respect to
such Plan Units and remain in the Plan with respect to units acquired
other than through the Plan. Assuming a participant has his distributions
made with respect to Plan Units reinvested, all such distributions will be
accumulated with distributions generated from the Units of the Trust used
to purchase such additional Plan Units. However, distributions related to
units in other series of "Municipal Securities Trust" will not be
accumulated with the foregoing distributions for Plan purchases. Thus, if
a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan),
distributions with respect thereto will not be aggregated for purchases
under the Plan.

Although not obligated to do so, the Sponsor has maintained and
intends to continue to maintain a market for the Plan Units and
continuously to offer to purchase Plan Units at prices based upon the
aggregate offering 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 of the Available Series of its initial offering has
been completed. The Sponsor may discontinue such purchases at any time.
The aggregate bid price of the underlying bonds may be expected to be less
than the aggregate offering price. 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 the 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 Trust. Participants may redeem Plan Units by making a
written request to the Trustee at the address set forth 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 otherwise would 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 per Unit for the
Available Series 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 statements should be directed to the Trustee by calling the
Trustee at the number set forth under "Summary of Essential Information"
in Part A of this Prospectus.

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.

TRUST ADMINISTRATION

Portfolio Supervision

The Sponsor may direct the Trustee to dispose of Bonds in a
State Trust 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
that in the opinion of the Sponsor would make the retention of such Bonds
in such State Trust detrimental to the interests of the Certificate-
holders. 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 Trust
Agreement to the same extent as the Bonds originally deposited. Within
five days after such deposit in a State Trust, notice of such exchange and
deposit shall be given by the Trustee to each Certificateholder of such
Trust registered on the books of the Trustee, including an identification
of the Bonds eliminated and the Bonds substituted therefor. Except as
previously stated in the discussion regarding Failed Bonds, the
acquisition by a State Trust of any securities other than the Bonds
initially deposited is prohibited.

Trust Agreement, Amendment and Termination

The Trust Agreement may be amended by the Trustee, the Sponsor
and the Evaluator without the consent of any of the Certificateholders:
(1) to cure any ambiguity or to correct or supplement any provision which
may be defective or inconsistent; (2) to change any provision thereof as
may be required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to
matters arising thereunder as shall not adversely affect the interests of
the Certificateholders.

The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the
consent of the holders of Certificates evidencing 66-2/3% of the Units
then outstanding of each State Trust affected by such amendment for the
purpose of modifying the rights of Certificateholders; provided that no
such amendment or waiver shall reduce any Certificateholder's interest in
a State 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 in a State Trust
then outstanding, to increase the number of Units issuable by such State
Trust or to permit the acquisition of any bonds in addition to or in
substitution for those initially deposited in such State 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 each State Trust shall
terminate upon the maturity, redemption or other disposition, as the case
may be, of the last of the Bonds held in such State 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 a State Trust shall be less than the minimum amount set forth
under "Summary of Essential Information in Part A" for such State Trust,
the Trustee may, in its discretion, and shall when so directed by the
Sponsor, terminate such State Trust. Each State Trust may also be
terminated at any time with the consent of the holders of Certificates
representing 100% of the Units of such State Trust then outstanding. In
the event of termination of a State Trust, written notice thereof will be
sent by the Trustee to all Certificateholders of such State Trust. Within
a reasonable period after termination, the Trustee must sell any Bonds
remaining in the terminated State Trust, and, after paying all expenses
and charges incurred by such State Trust, distribute to each Certificate-
holder thereof, upon surrender for cancellation of his Certificate for
Units, his pro rata share of the Interest and Principal Accounts of such
State Trust.

The Sponsor

The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation,
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), Discount & Zero Coupon Fund, 1st Series
(and Subsequent Series); Municipal Series Trust, Series 1 (and Subsequent
Series), 1st Discount Series (and Subsequent Series), High Income Series 1
(and Subsequent Series), Multi-State Series 1 (and Subsequent Series);
Insured Municipal Securities Trust, Series 1 (and Subsequent Series),
Series 1-4 (Multiplier Portfolio), 5th Discount 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. The information contained in the Prospectus
concerning governmental entities and authorities, including the various
issuers of the Bonds in the Trust, was gathered from sources deemed to be
reliable by the Sponsor. The Sponsor has not independently verified the
information contained in such sources.

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
any 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 State Trusts; 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 State 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 45 Wall
Street, New York, New York 10005 and a corporate trust office at
770 Broadway, New York, New York 10003. United States Trust Company of
New York has, since its establishment in 1853, engaged primarily in the
management of trust and agency accounts for individuals and corporations.
The Trustee is a member of the New York Clearing House Association and is
subject to supervision and examination by the Superintendent of Banks of
the State of New York, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System.

For certain other State 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 Trusts
which it may be required to pay under current or future law of the United
States or any other taxing authority having jurisdiction. The Trustee
shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Bonds pursuant to the Trust Agreement.

For further information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set
forth under "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
Kenny Information Systems, 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
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 retiring
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.

TRUST EXPENSES AND CHARGES

At no cost to the State Trusts, the Sponsor has borne all the
expenses of creating and establishing the State Trusts, including the cost
of initial preparation and execution of the Trust Agreement, registration
of the State Trusts and the Units under the Investment Company Act of 1940
and the Securities Act of 1933, preparation and printing of the
Certificates, the fees of the Evaluator during the initial public
offering, legal and auditing expenses, advertising and selling expenses,
initial fees and expenses of the Trustee and other out-of-pocket expenses.

The Sponsor will not charge the State Trust a fee for its
services as such. See "Sponsor's Profits."

The Trustee will receive for its ordinary recurring services to
each State Trust an annual fee in the amount set forth under "Summary of
Essential Information" in Part A. 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, which fee shall be allocated pro rata
among each State Trust.

The Trustee's and Evaluator's fees applicable to a State Trust
are payable monthly as of the Record Date from such State Trust's Interest
Account to the extent funds are available and then from such Trust's
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 any
or all of the State Trusts: all expenses (including counsel and auditing
fees) of the Trustee incurred in connection with its activities under the
Trust Agreement, including the expenses and costs of any action undertaken
by the Trustee to protect a State Trust and the rights and interests of
the Certificateholders; fees of the Trustee for any extraordinary services
performed under the Trust Agreement; indemnification of the Trustee for
any loss or liability accruing to it without gross negligence, bad faith
or willful misconduct on its part, arising out of or in connection with
its acceptance or administration of a State Trust; indemnification of the
Sponsor for any loss, liabilities and expenses incurred in acting as
Sponsor of a State 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 a State 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 State
Trust to which such expenses are allocable. In addition, the Trustee is
empowered to sell Bonds of a State Trust in order to make funds available
to pay all expenses of such State Trust.

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 (upon receipt by Equity Securities Trust of an
appropriate exemption order from the Securities and Exchange Commission)
(the "Exchange Trusts") at a reduced sales charge as set forth below.
Under the Exchange Privilege, the Sponsor's repurchase price of the Units
being surrendered, and only after the initial offering period has been
completed, will be based on the aggregate bid price of the Bonds in the
particular Trust Portfolio. Units in an Exchange Trust then will be sold
to the Certificateholder at a price based on the aggregate offer price of
the Bonds in the Exchange Trust portfolio during the initial public
offering period of the Exchange Trust (or for units of the 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 the 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 $15 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 per 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) $15 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, 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
Certificateholder 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 $2,960 ($2,900 for unit and $60 for
the sales charge). The remaining $540 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 $3,068.80 ($2,900 for units and
$168.80 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 (upon receipt by Equity Securities Trust of an
appropriate exemption order from the Securities and Exchange Commission)
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 will be based on the aggregate offer price of the Bonds in
the Conversion Trust portfolio (or for units of the Equity Securities
Trust, based on the market value of the underlying Securities in the
Equity Trust portfolio) during the public offering of the Conversion
Trust; or based on the aggregate bid price of the underlying bonds if the
initial public offering of the Conversion Trust has been completed, plus
accrued interest (or for units of the 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 $15 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) $15 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
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 of the Equity
Securities Trust) for a total cost of $2,860 ($2,800 for units and $60 for
the sales charge). The remaining $515 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 $2,962.96 ($2,800 for units and $162.96 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 and Puerto
Rico obligations in the Trust portfolio, if any. The interest income from
each State Trust of the Multi-State Series is, in general, exempt from
state and local taxes when held by residents of the state where issuers of
bonds in such State Trusts are located. The Insured Municipal Securities
Trust combines the advantages of income free from regular federal income
tax with the added safety of irrevocable insurance on the underlying
obligations. Insured Navigator Series further combines the advantages of
providing interest income free from regular federal income tax and sate
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 on the underlying obligations. 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 will constitute a "taxable event" to the Certificate-
holder 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. Under present law, capital gains are generally taxed at the same
rates applicable to ordinary income, although in certain circumstances a
preferential tax rate may apply. (See "Tax Status.") A Certificate-
holder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such
Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in
the Exchange Privilege or Conversion Offer.

OTHER MATTERS

Legal Opinions

The legality of the Units originally offered and certain matters
relating to federal and New York tax law have been passed upon by Battle
Fowler, 280 Park Avenue, New York, New York 10017, or Berger Steingut
Tarnoff & Stern, 600 Madison Avenue, New York, New York 10022, as counsel
for the Sponsor. Certain matters relating to California tax law have been
passed upon by Brown & Wood, as special California counsel to the Sponsor.
Certain matters relating to Massachusetts tax law have been passed upon by
Shapiro, Israel & Weiner, as special Massachusetts counsel to the Sponsor.
Certain matters relating to Michigan tax law have been passed upon by
Miller, Canfield, Paddock and Stone, as special Michigan counsel to the
Sponsor. Certain matters relating to Pennsylvania tax law have been
passed upon by Saul, Ewing Remick & Saul, as special Pennsylvania counsel
to the Sponsor. 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, 122 East
42nd Street, New York, New York 10168, acted as counsel for The Bank of
New York.

Independent Auditors

The financial statements of the State Trusts included in Part A
of this Prospectus as of the dates set forth in Part A have been examined
by KPMG Peat Marwick, independent certified public accountants for the
periods indicated in its reports appearing herein. The financial
statements of KPMG Peat Marwick have been so included in reliance on its
reports given upon the authority of said firm as expert in accounting
and auditing.

DESCRIPTION OF BOND RATINGS*

Standard & Poor's Corporation

A brief description of the applicable Standard & Poor's Corpora-
tion rating symbols and their meanings is as follows:
* As described by the rating agencies.

<PAGE>

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:

(i) Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms
of the obligation.
(ii) Nature of and provisions of the obligation.

(iii) Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

AAA -- This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to
pay 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.

Moody's Investors Service

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 which make the long term risks
appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Those bonds in the A and Baa group which Moody's believes
possess the strongest investment attributes are designated by the symbol
A 1 and Baa 1. Other A bonds comprise the balance of the group. These
rankings (1) designate the bonds which offer the maximum in security
within their quality group, (2) designate bonds which can be bought for
possible upgrading in quality and (3) additionally afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.

Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.

Con-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are debt obligations secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.

* * *

<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST

MULTISTATE SERIES 1-11

==========================================================================

AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST,
MULTI-STATE SERIES ____

TRP PLAN - TOTAL REINVESTMENT PLAN

I hereby elect to participate in the TRP Plan and am the owner of ____
units of __________ Trust.

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, Wall Street Trust Division, as TRP
Plan Agent, who shall immediately invest the distributions in units of the
available series of The State Trust above or, if unavailable, of other
available series of regular Municipal Securities Trust.

The foregoing authorization is subject in Date ____________, 19__
all respects to the terms and conditions
of participation set forth in the pros
pectus 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 and Zip Code

Salesman's Name ___________________ Salesman's No.

==========================================================================

UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM.

MAIL TO YOUR BROKER
OR
THE BANK OF NEW YORK
ATTN: UNIT INVESTMENT TRUST DIVISION
101 BARCLAY STREET
NEW YORK, NEW YORK 10286

<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST

MULTISTATE SERIES 12-36

==========================================================================

AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST,
MULTI-STATE SERIES ____

TRP PLAN - TOTAL REINVESTMENT PLAN

I hereby elect to participate in the TRP Plan and am the owner of ____
units of __________ Trust.

I hereby authorize the United States Trust Company 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, as TRP
Plan Agent, who shall immediately invest the distributions in units of the
available series of The State Trust above or, if unavailable, of other
available series of regular Municipal Securities Trust.

The foregoing authorization is subject in Date ____________, 19__
all respects to the terms and conditions
of participation set forth in the pros
pectus 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 and Zip Code

Salesman's Name ___________________ Salesman's No.

==========================================================================

UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM.

MAIL TO YOUR BROKER
OR
UNITED STATES TRUST COMPANY OF NEW YORK
ATTN: THE UIT REINVESTMENT UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003

<PAGE>

INDEX MUNICIPAL SECURITIES
TRUST
Title Page MULTI-STATE SERIES

Summary of Essential Information . . . . A-5 (A Unit Investment Trust)
Information Regarding the Trust . . . . . A-9
Financial and Statistical Information . . A-12
Audit and Financial Information Prospectus
Report of Independent Accountants . . . F-1
Statement of Net Assets . . . . . . . . F-2 Dated: April 29, 1994
Statement of Operations . . . . . . . . F-3
Statement of Changes in Net Assets . . F-6 Sponsor:
Notes to Financial Statements . . . . . F-10
Portfolio . . . . . . . . . . . . . . . F-13 Bear, Stearns & Co. Inc.
The Trust . . . . . . . . . . . . . . . . 1 245 Park Avenue
The State Trusts . . . . . . . . . . . . 7 New York, N.Y. 10167
Public Offering . . . . . . . . . . . . . 56 212-272-2500
Estimated Long Term Return and Estimated
Current Return . . . . . . . . . . . . 58 Trustee:
Rights of Certificateholders . . . . . . 59
Tax Status . . . . . . . . . . . . . . . 61 United States Trust
Liquidity . . . . . . . . . . . . . . . . 67 Company
Total Reinvestment Plan . . . . . . . . . 70 of New York
Trust Administration . . . . . . . . . . 73 770 Broadway
Trust Expenses and Charges . . . . . . . 77 New York, N.Y. 10003
Exchange Privilege and Conversion Offer . 77 1-800-428-8890
Other Matters . . . . . . . . . . . . . . 82
Description of Bond Ratings . . . . . . . 82 or

Parts A and B of this Prospectus do The Bank of New York
not contain all of the information set forth in 101 Barclay Street
the registration statement and exhibits New York, N.Y. 10286
relating thereto, filed with the Securities and 1-800-431-8002
Exchange Commission, Washington, D.C., under
the Securities Act of 1933, and to which Evaluator:
reference is made.
Kenny S&P Evaluation
* * * Services
65 Broadway
New York, N.Y. 10006

This Prospectus does not constitute an offer to sell, or a
solicitation of any 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.

<PAGE>
PART II

ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS

CONTENTS OF REGISTRATION STATEMENT

This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:

The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Consent of Independent Auditors.
Consent of Counsel (included in Exhibits 99.3.1 and 99.3.1.1).
Consent of Special California Counsel (included in Exhibit 99.3.2).
Consent of Special Pennsylvania Counsel (included in Exhibit 99.3.3).
Consents of the Evaluator including Confirmation of Ratings
(included in Exhibit 99.5.1).

The following exhibits:

99.1.1 -- Form of Reference Trust Agreement, as amended (filed as
Exhibit 1.1 to Amendment No. 1 to Form S-6 Registration
Statements Nos. 33-26550, 33-27109 and 33-28234 of
Municipal Securities Trust, Multi-State Series 34, Multi-
State Series 35 and Multi-State Series 36, respectively,
on February 2, 1989, March 9, 1989 and May 11, 1989,
respectively, and incorporated herein by reference).

99.1.1.1 -- Trust Indenture and Agreement for Municipal Securities
Trust, Multi-State Series 12 (and Subsequent Series)
(filed as Exhibit 1.1.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-20718 of Municipal
Securities Trust, Multi-State Series 29 on April 22, 1988
and incorporated herein by reference).

99.1.3.4 -- Certificate of Incorporation of Bear, Stearns & Co. Inc.,
as amended (filed as Exhibit 99.1.3.4 to Form S-6
Registration Statement Nos. 33-50891 and 33-50901 of
Insured Municipal Securities Trust, New York Navigator
Insured Series 15 and New Jersey Navigator Insured
Series 11; and Municipal Securities Trust, Multi-State
Series 44, respectively, on December 9, 1993 and
incorporated herein by reference).

99.1.3.5 -- By-Laws of Bear, Stearns & Co. Inc., as amended (filed as
Exhibit 99.1.3.5 to Form S-6 Registration Statement Nos.
33-50891 and 33-50901 of Insured Municipal Securities
Trust, New York Navigator Insured Series 15 and New Jersey
Navigator Insured Series 11; and Municipal Securities
Trust, Multi-State Series 44, respectively, on December 9,
1993 and incorporated herein by reference).

99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4
to Amendment No. 1 to Form S-6 Registration Statement
No. 33-10963 of Municipal Securities Trust, Series 36 and
53rd Discount Series on January 8, 1987 and incorporated
herein by reference).

99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-11274 of
Municipal Securities Trust, 54th Discount Series on
February 5, 1987 and incorporated herein by reference).

99.3.1 -- Opinion of Berger Steingut Tarnoff & Stern (formerly
Berger & Steingut) as to the legality of the securities
being registered, including their consent to the filing
thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and
to the filing of their opinion regarding tax status of the
Trust (filed as Exhibit 3.1 to Amendment No. 1 to Form S-6
Registration Statements Nos. 33-26550, 33-27109 and
33-28234 of Municipal Securities Trust, Multi-State
Series 34, Multi-State Series 35 and Multi-State
Series 36, respectively, on February 2, 1989, March 9,
1989 and May 11, 1989, respectively, and incorporated
herein by reference).

99.3.1.1 -- Opinion of Battle, Fowler, as to tax status of Securities
being registered including their consent to the delivery
thereof and to the use of, their name under the heading
"Tax Status" in the Prospectus (filed as Exhibit 3.1.1 to
Post-Effective Amendment No. 1 to Form S-6 Registration
Statements Nos. 33-26550, 33-27109 and 33-28234 of
Municipal Securities Trust, Multi-State Series 34, Multi-
State Series 35 and Multi-State Series 36, respectively,
on May 1, 1990 and incorporated herein by reference).

99.3.2 -- Opinion of Brown & Wood, Special California Counsel (filed
as Exhibit 3.2 to Amendment No. 1 to Form S-6 Registration
Statements Nos. 33-26550, 33-27109 and 33-28234 of
Municipal Securities Trust, Multi-State Series 34, Multi-
State Series 35 and Multi-State Series 36, respectively,
on February 2, 1989, March 9, 1989 and May 11, 1989,
respectively, and incorporated herein by reference).

*99.3.3 -- Opinion of Saul, Ewing, Remick & Saul, Special
Pennsylvania Counsel.

*99.5.1 -- Consents of the Evaluator including Confirmation of
Ratings.

99.6.0 -- Power of Attorney of Bear, Stearns & Co. Inc., the
Depositor, by its Officers and a majority of its Directors
(filed as Exhibit 6.0 to Post-Effective Amendment No. 8 to
Form S-6 Registration Statements Nos. 2-92113, 2-92660,
2-93073, 2-93884 and 2-94545 of Municipal Securities
Trust, Multi-State Series 4, 5, 6, 7 and 8, respectively,
on October 30, 1992 and incorporated herein by reference).
* Being filed by this Amendment.

<PAGE>
CONSENT OF INDEPENDENT AUDITORS

We consent to the use in these Post-Effective Amendments to the Registration
Statements of our reports on the financial statements of Municipal Securities
Trust, Multi-State Series 34; Municipal Securities Trust, Multi-State Series
35 and Municipal Securities Trust, Multi-State Series 36 included herein and
to the reference to our firm under the heading "Independent Auditors" in the
Prospectus which is part of this Registration Statement.

KPMG PEAT MARWICK

New York, New York
April 15, 1994

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrants, Municipal Securities Trust, Multi-State Series 34, Multi-
State Series 35 and Multi-State Series 36 certify that they have met all
of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statements pursuant to Rule 485(b) under the Securities
Act of 1933. The registrants have duly caused this Post-Effective
Amendment to the Registration Statements to be signed on their behalf by
the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 19th day of April, 1994.

MUNICIPAL SECURITIES TRUST,
MULTI-STATE SERIES 34, MULTI-STATE SERIES 35 and
MULTI-STATE SERIES 36
(Registrants)

BEAR, STEARNS & CO. INC.
(Depositor)

By: PETER J. DeMARCO
(Authorized Signator)

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statements has been signed
below by the following persons who constitute the principal officers and a
majority of the directors of Bear, Stearns & Co. Inc., the Depositor, in
the capacities and on the dates indicated.

Name Title Date

ALAN C. GREENBERG Chairman of the Board, Chief )
Executive Officer, Director and )
Senior Managing Director )
JAMES E. CAYNE President, Director and Senior )
Managing Director )April 19, 1994
ALVIN H. EINBENDER Chief Operating Officer, Executive)
Vice President, Director and )
Senior Managing Director )
JOHN C. SITES, JR. Executive Vice President, Director)
and Senior Managing Director )By:PETER J. DeMARCO
MICHAEL L. TARNOPOL Executive Vice President, Director) Attorney-in-Fact*
and Senior Managing Director )
VINCENT J. MATTONE Executive Vice President, Director)
and Senior Managing Director )
ALAN D. SCHWARTZ Executive Vice President, Director)
and Senior Managing Director )
DOUGLAS P.C. NATION Director and Senior Managing )
Director )
WILLIAM J. MONTGORIS Chief Financial Officer, Senior )
Vice President-Finance and Senior )
Managing Director )
KENNETH L. EDLOW Secretary and Senior Managing )
Director )
MICHAEL MINIKES Treasurer and Senior Managing )
Director )
MICHAEL J. ABATEMARCO Controller, Assistant Secretary )
and Senior Managing Director )
MARK E. LEHMAN Senior Vice President - General )
Counsel and Senior Managing )
Director )
FREDERICK B. CASEY Assistant Treasurer and Senior )
Managing Director )

_______________

* An executed power of attorney was filed as Exhibit 6.0 to Post-
Effective Amendment No. 8 to Registration Statements Nos. 2-92113,
2-92660, 2-93073, 2-93884 and 2-94545 on October 30, 1992.

<PAGE>
EXHIBIT INDEX

Exhibit Description Page No.

99.1.1 Form of Reference Trust Agreement, as
amended (filed as Exhibit 1.1 to Amendment
No. 1 to Form S-6 Registration Statements
Nos. 33-26550, 33-27109 and 33-28234 of
Municipal Securities Trust, Multi-State
Series 34, Multi-State Series 35 and
Multi-State Series 36, respectively, on
February 2, 1989, March 9, 1989 and
May 11, 1989, respectively, and
incorporated herein by reference).

99.1.1.1 Trust Indenture and Agreement for
Municipal Securities Trust, Multi-State
Series 12 (and Subsequent Series) (filed
as Exhibit 1.1.1 to Amendment No. 1 to
Form S-6 Registration Statement
No. 33-20718 of Municipal Securities
Trust, Multi-State Series 29 on April 22,
1988 and incorporated herein by
reference).

99.1.3.4 Certificate of Incorporation of Bear,
Stearns & Co. Inc., as amended (filed as
Exhibit 99.1.3.4 to Form S-6 Registration
Statement Nos. 33-50891 and 33-50901 of
Insured Municipal Securities Trust, New
York Navigator Insured Series 15 and New
Jersey Navigator Insured Series 11; and
Municipal Securities Trust, Multi-State
Series 44, respectively, on December 9,
1993 and incorporated herein by
reference).

99.1.3.5 By-Laws of Bear, Stearns & Co. Inc., as
amended (filed as Exhibit 99.1.3.5 to Form
S-6 Registration Statement Nos. 33-50891
and 33-50901 of Insured Municipal
Securities Trust, New York Navigator
Insured Series 15 and New Jersey Navigator
Insured Series 11; and Municipal
Securities Trust, Multi-State Series 44,
respectively, on December 9, 1993 and
incorporated herein by reference).

99.1.4 Form of Agreement Among Underwriters
(filed as Exhibit 1.4 to Amendment No. 1
to Form S-6 Registration Statement No. 33-
10963 of Municipal Securities Trust,
Series 36 and 53rd Discount Series on
January 8, 1987 and incorporated herein by
reference).

99.2.1 Form of Certificate (filed as Exhibit 2.1
to Amendment No. 1 to Form S-6
Registration Statement No. 33-11274 of
Municipal Securities Trust, 54th Discount
Series 1 on February 5, 1987 and
incorporated herein by reference).

99.3.1 Opinion of Berger Steingut Tarnoff & Stein
(formerly Berger & Steingut) as to the
legality of the securities being
registered, including their consent to the
filing thereof and to the use of their
name under the headings "Tax Status" and
"Legal Opinions" in the Prospectus, and to
the filing of their opinion regarding tax
status of the Trust filed as Exhibit 3.1
to Amendments No. 1 to Form S-6
Registration Statements Nos. 33-26550,
33-27109 and 33-28234 of Municipal
Securities Trust, Multi-State Series 34,
Multi-State Series 35 and Multi-State
Series 36, respectively, on February 2,
1989, March 9, 1989 and May 11, 1989,
respectively, and incorporated herein by
reference).

99.3.1.1 Opinion of Battle Fowler as to tax
status of securities being registered
including their consent to the filing
thereof and to the use of, their name
under the heading "Tax Status" in the
Prospectus (filed as Exhibit 3.1.1 to
Post-Effective Amendment No. 1 to Form S-6
Registration Statements Nos. 33-26550, 33-
27109 and 33-28234 of Municipal Securities
Trust, Multi-State Series 34, Multi-State
Series 35 and Multi-State Series 36,
respectively, on May 1, 1990 and
incorporated herein by reference).

99.3.2 Opinion of Brown & Wood, Special
California Counsel (filed as Exhibit 3.2
to Amendment No. 1 to Form S-6
Registration Statements Nos. 33-26550, 33-
27109 and 33-28234 of Municipal Securities
Trust, Multi-State Series 34, Multi-State
Series 35 and Multi-State Series 36,
respectively, on February 2, 1989,
March 9, 1989 and May 11, 1989,
respectively, and incorporated herein by
reference).

99.3.3 Opinion of Saul, Ewing, Remick & Saul,
Special Pennsylvania Counsel..............

99.5.1 Consents of the Evaluator including
Confirmation of Ratings...................

99.6.0 Power of Attorney of Bear, Stearns & Co.
Inc., the Depositor, by its Officers and a
majority of its Directors (filed as
Exhibit 6.0 to Post-Effective Amendment
No. 8 to Form S-6 Registration Statements
Nos. 2-92113, 2-92660, 2-93073, 2-93884
and 2-94545 of Municipal Securities Trust,
Multi-State Series 4, 5, 6, 7 and 8,
respectively, on October 30, 1992 and
incorporated herein by reference).

Law Offices of
SAUL, EWING, REMICK & SAUL
3800 Centre Square West
Philadelphia, PA 19102
(215) 972-7777

Harrisburg, Pennsylvania Trenton, New Jersey
Malvern, Pennsylvania Voorhees, New Jersey
New York, New York Wilmington, Delaware

Cable Address Bidsal
Telecopier (215) 972-7725
TWX 83-4798

April 18, 1994

Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Re: Pennsylvania Trust of the
Municipal Securities Trust,
Multi-State Series 34

Gentlemen:

We are acting as special counsel with respect to Pennsylvania
tax matters for the Pennsylvania Trust of the Municipal Securities Trust,
Multi-State Series 34 (the "Trust") in connection with the issuance of
Units of fractional undivided interests in the Trust, under a Trust
Indenture and Agreement among Bear, Stearns & Co. Inc., as Depositor,
United States Trust Company, as Trustee and Standard & Poor's Corporation,
as Evaluator. It is our understanding that the Trust consists of a
portfolio composed of interest-bearing obligations (the "Bonds") issued by
the Commonwealth of Pennsylvania, by political subdivisions,
municipalities and other governmental authorities within the Commonwealth
of Pennsylvania (the "Pennsylvania Bonds") or by the Government of Puerto
Rico or its public authorities (the "Puerto Rico Bonds").

We have not examined any preliminary or final official
statements of issuers of the Bonds, nor have we examined any legal
opinions, or summaries of such opinions, relating to the validity of the
Bonds in the Trust, the exemption of interest thereon from federal income
tax, the exemption of the Bonds from personal property taxes in
Pennsylvania, or the exemption of the interest on and any gain from the
sale of the Bonds from the Pennsylvania personal income tax, given by bond
counsel to the issuer at the time such Bonds were issued. Further, we
have made no review of the proceedings relating to the issuance of the
Bonds or of the basis for such opinions. Our opinion expressed below is
based in part on the assurances of Bear, Stearns & Co. Inc. that the Bonds
deposited in the Trust have been issued only by the Commonwealth of
Pennsylvania, by or on behalf of political subdivisions, municipalities or
other governmental authorities within the Commonwealth of Pennsylvania or
by the Government of Puerto Rico or its public authorities.

We have examined portions of the Prospectus dated April 30, 1993
that pertain to the Trust and certified copies, or copies otherwise
identified to our satisfaction, of such other documents as we have deemed
necessary or appropriate for the purpose of rendering this opinion.

Based upon the foregoing, we are of the opinion that:

(1) Units evidencing fractional undivided interests in the
Trust, to the extent represented by obligations issued by the Commonwealth
of Pennsylvania, any public authority, commission, board or other agency
created by the Commonwealth of Pennsylvania, any political subdivision of
the Commonwealth of Pennsylvania or any public authority created by any
such political subdivision, or by the Government of Puerto Rico or its
public authorities, are not taxable under any of the personal property
taxes presently in effect in Pennsylvania;

(2) Distributions of interest income to Unitholders that would
not be taxable if received directly by a Pennsylvania resident are not
subject to personal income tax under the Pennsylvania Tax Reform Code of
1971; nor will such interest be taxable under Philadelphia School District
Investment Income Tax imposed on Philadelphia resident individuals;

(3) A Unitholder which is an individual, estate or trust will
have a taxable event under the Pennsylvania state and local income tax
referred to in the preceding paragraph upon the redemption or sale of
Units;

(4) A Unitholder which is a corporation will have a taxable
event under the Pennsylvania Corporate Net Income Tax or, if applicable,
the Mutual Thrift Institutions Tax, upon the redemption or sale of its
Units. Interest income distributed to Unitholders which are corporations
is not subject to Pennsylvania Corporate Net Income Tax or Mutual Thrift
Institutions Tax. However, banks, title insurance companies and trust
companies may be required to take the value of Units into account in
determining the taxable value of their shares subject to Shares Tax;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania Bonds
may be subject to Pennsylvania personal or corporate income taxes. Those
gains which are distributed by the Trust to Unitholders who are
individuals will be subject to Pennsylvania Personal Income Tax and, for
residents of Philadelphia, to Philadelphia School District Investment
Income Tax. For Unitholders which are corporations, the distributed gains
will be subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax.

(6) For Pennsylvania Bonds, gains which are not distributed by
the Trust will nevertheless be taxable to Unitholders if derived by the
Trust from the sale, exchange or other disposition of these Bonds issued
on or after February 1, 1994. Such gains which are not distributed by
the Trust will remain nontaxable to Unitholders if derived by the Trust
from the sale, exchange or other disposition of Bonds issued prior to
February 1, 1994. However, for gains from the sale, exchange or other
disposition of these Bonds to be taxable under the Philadelphia School
District Investment Income Tax, the Bonds must be held for six months or
less;

(7) Gains from the sale, exchange or other disposition of
Puerto Rico Bonds will be taxable to Unit holders if distributed or
retained by the Trust. However, for gains from the sale, exchange or
other disposition of these Bonds to be taxable under the Philadelphia
School District Investment Income Tax, the Bonds must be held for six
months or less;

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income if, and
to the same extent as, such interest would have been so excludable if paid
in the normal course by the issuer of the defaulted obligations; and

(10) The Trust is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.

On December 3, 1993, changes to Pennsylvania law affecting
taxation of income and gains from the sale of Commonwealth of Pennsylvania
and local obligations were enacted. Among these changes was the repeal of
the exemption from tax of gains realized upon the sale or other
disposition of such obligations. The Pennsylvania Department of Revenue
has issued only limited guidance concerning these changes, and that
guidance has not addressed the issues noted above. The opinions expressed
above are based on our analysis of the law but are subject to modification
upon review of regulations or other guidance that may be issued by the
Department of Revenue.

We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement relating to the Units referred to above and to
the use of our name and to the reference to our firm in the said
Registration Statement and in the related Prospectus.

Very truly yours,

Saul, Ewing, Remick & Saul

SERS:LST/cp
<PAGE>

Law Offices of
SAUL, EWING, REMICK & SAUL
3800 Centre Square West
Philadelphia, PA 19102
(215) 972-7777

Harrisburg, Pennsylvania Trenton, New Jersey
Malvern, Pennsylvania Voorhees, New Jersey
New York, New York Wilmington, Delaware

Cable Address Bidsal
Telecopier (215) 972-7725
TWX 83-4798

April 18, 1994

Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Re: Pennsylvania Trust of the
Municipal Securities Trust,
Multi-State Series 35

Gentlemen:

We are acting as special counsel with respect to Pennsylvania
tax matters for the Pennsylvania Trust of the Municipal Securities Trust,
Multi-State Series 35 (the "Trust") in connection with the issuance of
Units of fractional undivided interests in the Trust, under a Trust
Indenture and Agreement among Bear, Stearns & Co. Inc., as Depositor,
United States Trust Company, as Trustee and Standard & Poor's Corporation,
as Evaluator. It is our understanding that the Trust consists of a
portfolio composed of interest-bearing obligations (the "Bonds") issued by
the Commonwealth of Pennsylvania, by political subdivisions,
municipalities and other governmental authorities within the Commonwealth
of Pennsylvania (the "Pennsylvania Bonds") or by the Government of Puerto
Rico or its public authorities (the "Puerto Rico Bonds").

Based upon the foregoing, we are of the opinion that:

(1) Units evidencing fractional undivided interests in the
Trust, to the extent represented by obligations issued by the Commonwealth
of Pennsylvania, any public authority, commission, board or other agency
created by the Commonwealth of Pennsylvania, any political subdivision of
the Commonwealth of Pennsylvania or any public authority created by any
such political subdivision, or by the Government of Puerto Rico or its
public authorities, are not taxable under any of the personal property
taxes presently in effect in Pennsylvania;

(2) Distributions of interest income to Unitholders that would
not be taxable if received directly by a Pennsylvania resident are not
subject to personal income tax under the Pennsylvania Tax Reform Code of
1971; nor will such interest be taxable under Philadelphia School District
Investment Income Tax imposed on Philadelphia resident individuals;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania Bonds
may be subject to Pennsylvania personal or corporate income taxes. Those
gains which are distributed by the Trust to Unitholders who are
individuals will be subject to Pennsylvania Personal Income Tax and, for
residents of Philadelphia, to Philadelphia School District Investment
Income Tax. For Unitholders which are corporations, the distributed gains
will be subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax.

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income if, and
to the same extent as, such interest would have been so excludable if paid
in the normal course by the issuer of the defaulted obligations; and

(10) The Trust is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.

Very truly yours,

Saul, Ewing, Remick & Saul

SERS:LST/cp

<PAGE>

Law Offices of
SAUL, EWING, REMICK & SAUL
3800 Centre Square West
Philadelphia, PA 19102
(215) 972-7777

Harrisburg, Pennsylvania Trenton, New Jersey
Malvern, Pennsylvania Voorhees, New Jersey
New York, New York Wilmington, Delaware

Cable Address Bidsal
Telecopier (215) 972-7725
TWX 83-4798

April 18, 1994

Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Re: Pennsylvania Trust of the
Municipal Securities Trust,
Multi-State Series 36

Gentlemen:

We are acting as special counsel with respect to Pennsylvania
tax matters for the Pennsylvania Trust of the Municipal Securities Trust,
Multi-State Series 36 (the "Trust") in connection with the issuance of
Units of fractional undivided interests in the Trust, under a Trust
Indenture and Agreement among Bear, Stearns & Co. Inc., as Depositor,
United States Trust Company, as Trustee and Standard & Poor's Corporation,
as Evaluator. It is our understanding that the Trust consists of a
portfolio composed of interest-bearing obligations (the "Bonds") issued by
the Commonwealth of Pennsylvania, by political subdivisions,
municipalities and other governmental authorities within the Commonwealth
of Pennsylvania (the "Pennsylvania Bonds") or by the Government of Puerto
Rico or its public authorities (the "Puerto Rico Bonds").

Based upon the foregoing, we are of the opinion that:

(1) Units evidencing fractional undivided interests in the
Trust, to the extent represented by obligations issued by the Commonwealth
of Pennsylvania, any public authority, commission, board or other agency
created by the Commonwealth of Pennsylvania, any political subdivision of
the Commonwealth of Pennsylvania or any public authority created by any
such political subdivision, or by the Government of Puerto Rico or its
public authorities, are not taxable under any of the personal property
taxes presently in effect in Pennsylvania;

(2) Distributions of interest income to Unitholders that would
not be taxable if received directly by a Pennsylvania resident are not
subject to personal income tax under the Pennsylvania Tax Reform Code of
1971; nor will such interest be taxable under Philadelphia School District
Investment Income Tax imposed on Philadelphia resident individuals;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania Bonds
may be subject to Pennsylvania personal or corporate income taxes. Those
gains which are distributed by the Trust to Unitholders who are
individuals will be subject to Pennsylvania Personal Income Tax and, for
residents of Philadelphia, to Philadelphia School District Investment
Income Tax. For Unitholders which are corporations, the distributed gains
will be subject to Corporate Net Income Tax or Mutual Thrift Institutions
Tax.

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income if, and
to the same extent as, such interest would have been so excludable if paid
in the normal course by the issuer of the defaulted obligations; and

(10) The Trust is not taxable as a corporation under
Pennsylvania tax laws applicable to corporations.

Very truly yours,

Saul, Ewing, Remick & Saul

SERS:LST/cp

KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4990

F.A. Shinal
Senior Vice President
Chief Financial Officer

April 29, 1994

Bear, Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167

RE: Municipal Securities Trust
Multi-State Series 34

Gentlemen:

We have examined the post-effective Amendment to the
Registration Statement File No. 33-26550 for the above-captioned trust.
We hereby acknowledge that Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc. is currently acting as the evaluator for
the trust. We hereby consent to the use in the Amendment of the reference
to Kenny S&P Evaluation Services, a division of Kenny Information Systems,
Inc. as evaluator.

In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the
respective bonds comprising the trust portfolio are the ratings currently
indicated in our KENNYBASE database.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

F. A. Shinal
Senior Vice President
FAS/cns
<PAGE>

KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4990

F.A. Shinal
Senior Vice President
Chief Financial Officer

April 29, 1994

Bear, Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167

RE: Municipal Securities Trust
Multi-State Series 35

Gentlemen:

We have examined the post-effective Amendment to the
Registration Statement File No. 33-27109 for the above-captioned trust.
We hereby acknowledge that Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc. is currently acting as the evaluator for
the trust. We hereby consent to the use in the Amendment of the reference
to Kenny S&P Evaluation Services, a division of Kenny Information Systems,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

F. A. Shinal
Senior Vice President
FAS/cns
<PAGE>
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4990

F.A. Shinal
Senior Vice President
Chief Financial Officer

April 29, 1994

Bear, Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167

RE: Municipal Securities Trust
Multi-State Series 36

Gentlemen:

We have examined the post-effective Amendment to the
Registration Statement File No. 33-28234 for the above-captioned trust.
We hereby acknowledge that Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc. is currently acting as the evaluator for
the trust. We hereby consent to the use in the Amendment of the reference
to Kenny S&P Evaluation Services, a division of Kenny Information Systems,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

F. A. Shinal
Senior Vice President
FAS/cns