MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 34, 485BPOS, 1995-04-17

MUNICIPAL SECURITIES TRUST MULTI STATE SERIES 34
485BPOS, 1995-04-17

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As filed with the Securities and Exchange Commission on April 17, 1995

Registration No. 33-26550*

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT No. 6
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 LLP
245 Park Avenue 75 East 55th Street
New York, NY 10167 New York, NY 10022
(212) 856-6858

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

/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x / on April 28, 1995 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.
787.1

<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

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

(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........ "

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

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

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

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

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763.1

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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 the earlier receipt of principal payments
with respect to 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, 1994 (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 (12/31/94)

California Trust 2,424 $1,285,000 $510.33
New York Trust 10,000 $4,675,000 $526.97
Pennsylvania Trust 3,691 $1,925,000 $585.04

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus Part A Dated April 28, 1995

109787.1

<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.

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109787.1

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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
$510.33 plus accrued interest of $8.31 under the monthly distribution plan,
$11.54 under the semi-annual distribution plan and $11.54 under the annual
distribution plan, for a total of $518.64, $521.87 and $521.87, respectively.
If Units of the New York Trust had been purchased on the Evaluation Date, the
Public Offering Price per Unit would have been $526.97 plus accrued interest
of $8.66 under the monthly distribution plan, $11.73 under the semi-annual
distribution plan and $11.70 under the annual distribution plan, for a total
of $535.63, $538.70 and $538.67, respectively. If Units of the Pennsylvania
Trust had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $585.04 plus accrued interest of $8.57 under the monthly
distribution plan, $12.39 under the semi-annual distribution plan and $12.37
under the annual distribution plan, for a total of $593.61, $597.43 and
$597.41, 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. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or
to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured
in terms of "Estimated Current Return" and "Estimated Long Term Return".

Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing
the average yield for the portfolio of the Trust in order to reflect estimated
fees and expenses of the Trust and the maximum sales charge paid by investors.
The resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated

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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.

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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.

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109787.1

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MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,285,000 $1.00 per Unit.
Number of Units ............. 2,424 Weighted Average Life to Maturity:
Fractional Undivided Inter- 14.7 Years.
est in Trust per Unit ..... 1/2424 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $530.12 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 ....... $1,168,997+++ The earlier of December 31,
2037 or the disposition of the
Divided by 2,424 Units .... $482.26 last Bond in the Trust.
Plus Sales Charge of 5.5% Trustee***: United States Trust
of Public Offering Price $28.07 Company of New York.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $510.33+ plan $1.05 per $1,000; semi-
Redemption and Sponsor's annual plan $.60 per $1,000;
Repurchase Price and annual plan is $.35 per
per Unit .................. $482.26+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $15
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $28.07++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Bear, Stearns & Co. Inc.
and Principal Amount per Sponsor's Annual Fee: Maximum of
Unit Premium/(Discount) ... $(19.79) $.25 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. 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# ......... $40.80 $40.80 $40.80
Less estimated annual fees and
expenses ............................ 1.90 1.52 1.36
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $38.90 $39.28 $39.44
Estimated interest distribution# ...... 3.24 19.64 39.44
Estimated daily interest accrual# ..... .1080 .1091 .1095
Estimated current return#++ ........... 7.62% 7.70% 7.73%
Estimated long term return++ .......... 6.58% 6.65% 6.68%
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

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MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,675,000 $1.00 per Unit.
Number of Units ............. 10,000 Weighted Average Life to Maturity:
Fractional Undivided Inter- 8.1 Years.
est in Trust per Unit ..... 1/10000 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $467.50 value of Trust is less than
Secondary Market Public $3,691,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $4,979,911+++ The earlier of December 31,
Divided by 10,000 Units ... $497.99 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $28.98 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $526.97+ 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 .................. $497.99+ 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 ............ $28.98++++ 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. Inc.
Unit Premium/(Discount) ... $59.47 Sponsor's Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal
New York Time. 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# ......... $40.84 $40.84 $40.84
Less estimated annual fees and
expenses ............................ 1.17 .80 .70
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $39.67 $40.04 $40.14
Estimated interest distribution# ...... 3.30 20.02 40.14
Estimated daily interest accrual# ..... .1101 .1112 .1115
Estimated current return#++ ........... 7.53% 7.60% 7.62%
Estimated long term return ++ ......... 4.76% 4.83% 4.85%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-7
109787.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 34

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: February 2, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,925,000 $1.00 per Unit.
Number of Units ............. 3,691 Weighted Average Life to Maturity:
Fractional Undivided Inter- 10.6 Years.
est in Trust per Unit ..... 1/3691 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $521.54 value of Trust is less than
Secondary Market Public $1,600,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $2,040,590+++ The earlier of December 31,
Divided by 3,691 Units .... $552.86 2037 or the disposition of the
Plus Sales Charge of 5.5% last Bond in the Trust.
of Public Offering Price $32.18 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $585.04+ 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 .................. $552.86+ 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 ............ $32.18++++ 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. Inc.
Unit Premium/(Discount) ... $63.50 Sponsor's Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal
New York Time. 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# ......... $47.73 $47.73 $47.73
Less estimated annual fees and
expenses ............................ 1.57 1.19 1.04
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $46.16 $46.54 $46.69
Estimated interest distribution# ...... 3.84 23.27 46.69
Estimated daily interest accrual# ..... .1282 .1292 .1296
Estimated current return#++ ........... 7.89% 7.96% 7.98%
Estimated long term return ++ ......... 4.88% 4.95% 4.98%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-8
109787.1

<PAGE>

* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.

** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.

*** The Trustee maintains its corporate 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 $8.31 monthly, $11.54 semi-annually and
$11.54 annually for the California Trust, $8.66 monthly, $11.73
semi-annually and $11.70 annually for the New York Trust, and $8.57
monthly, $12.39 semi-annually and $12.37 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.

A-9
109787.1

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1994

DESCRIPTION OF PORTFOLIOS

California Trust*

Each Unit in the California Trust consists of a 1/2424th undivided
interest in the principal and net income of the Trust in the ratio of one Unit
for each $530.12 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 6 issues of 5 issuers located in California and 1 in Puerto
Rico. Approximately 12.4% of the Bonds are obligations of state and local
housing authorities; approximately 19.5% 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 $1,285,000 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 1, 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.

As of December 31, 1994, $160,000 (approximately 12.4% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $160,000 (approximately 12.4% 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 87.6% 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
the entire principal amount of the Bond in portfolio no. 1 has been
called for redemption pursuant to pre-refunding provisions and is no
longer contained in the Trust. 56 Units have been redeemed from the
Trust.

A-10
109787.1

<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 $467.50 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 13 issues of 12 issuers located in New York and 1 in Puerto
Rico. None of the Bonds are obligations of state and local housing
authorities; approximately 32.1% 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). One issue representing $500,000 of the principal
amount of the Bonds is a general obligation bond. All 12 of the remaining
issues representing $4,175,000 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 3, 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.

As of December 31, 1994, 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
$240,000 of the principal amount of the Bond in portfolio no. 6 has been
called and is no longer contained in the Trust. 33 Units have been
redeemed from the Trust.

A-11
109787.1

<PAGE>

Pennsylvania Trust*

Each Unit in the Pennsylvania Trust consists of a 1/3691st
undivided interest in the principal and net income of the Trust in the ratio
of one Unit for each $521.54 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 48.1% 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 $1,825,000
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
PartB 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
21 Units have been redeemed from the Trust.

A-12
109787.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

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

California 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, 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
December 31, 1994 2,424 493.21 38.61 39.06 39.24 1.98

New York Trust

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
December 31, 1994 10,000 509.47 40.56 41.01 41.11 49.20

Pennsylvania Trust

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
December 31, 1994 3,691 564.24 46.08 46.51 46.67 -0-

- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.

A-13
109787.1
<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, 1994, and the related statements of operations, and changes in
net assets for each of the years in the three year period then ended. These
financial statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective trusts
constituting the Municipal Securities Trust, Multi-State Series 34 as of
December 31, 1994, 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 LLP

New York, New York
March 31, 1995

<PAGE>

<TABLE>

Statements of Net Assets

December 31, 1994
<CAPTION>

California New York Pennsylvania
Trust Trust Trust

<S> <C> <C> <C>
Investments in marketable
securities, at market value (cost
$1,244,181, $5,100,541 and
$2,164,496 respectively) $ 1,168,992 4,979,846 2,043,452

Excess of other assets over
total liabilities 26,544 114,857 39,151
------------ ------------ -------------

Net assets (2,424, 10,000 and 3,691
units of fractional undivided interest
outstanding, $493.21, $509.47 and $564.24
per unit, respectively) $ 1,195,536 5,094,703 2,082,603
============ ============ =============
</TABLE>

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

CALIFORNIA TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
------------ ---- ------------ -----------
1994 1993 1992
------------ ------------ -----------

<S> <C> <C> <C>
Investment income - interest $ 100,159 105,725 120,646
------------ ------------ -----------

Expenses:
Trustee's fees 2,072 3,457 3,566
Evaluator's fees 1,379 1,483 1,370
Sponsor's advisory fee 421 768 624
------------ ------------ -----------

Total expenses 3,872 5,708 5,560
------------ ------------ -----------

Investment income, net 96,287 100,017 115,086
------------ ------------ -----------

Realized and unrealized losses on investments:
Net realized loss on
bonds sold or called (1,255) (10,144) -
Unrealized depreciation
for the year (78,123) (11,154) (25,291)
------------ ------------ -----------

Net loss
on investments (79,378) (21,298) (25,291)
------------ ------------ -----------

Net increase in net
assets resulting
from operations $ 16,909 78,719 89,795
============ ============ ===========
</TABLE>

See accompanying notes to financial statements.

NEW YORK TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
--------------- --- ------------ -----------
1994 1993 1992
--------------- ------------ -----------

<S> <C> <C> <C>
Investment income - interest $ 414,268 460,438 489,712
--------------- ------------ -----------

Expenses:
Trustee's fees 6,594 7,345 9,425
Evaluator's fees 1,382 1,483 1,370
Sponsor's advisory fee 1,289 2,343 2,500
--------------- ------------ -----------

Total expenses 9,265 11,171 13,295
--------------- ------------ -----------

Investment income, net 405,003 449,267 476,417
--------------- ------------ -----------

Realized and unrealized gain
(loss) on investments:
Realized loss on bonds (54,211) (70,923) -
sold or called
Unrealized appreciation
(depreciation) for the year (274,164) (8,306) 48,170
--------------- ------------ -----------

Net gain (loss)
on investments (328,375) (79,229) 48,170
--------------- ------------ -----------

Net increase in net
assets resulting
from operations $ 76,628 370,038 524,587
=============== ============ ===========
</TABLE>

See accompanying notes to financial statements.

PENNSYLVANIA TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
---------- ----- ---------- ---------
1994 1993 1992
---------- ---------- ---------

<S> <C> <C> <C>
Investment income - interest $ 185,722 192,794 195,735
---------- ---------- ---------

Expenses:
Trustee's fees 2,965 4,089 4,614
Evaluator's fees 1,379 1,483 1,370
Sponsor's advisory fee 520 929 1,000
---------- ---------- ---------

Total expenses 4,864 6,501 6,984
---------- ---------- ---------

Investment income, net 180,858 186,293 188,751
---------- ---------- ---------

Realized and unrealized losses
on investments:
Realized loss on bonds
sold or called (6,400) (14,544) (2,748)
Unrealized depreciation
for the year (137,431) (3,327) (9,548)
---------- ---------- ---------

Net loss
on investments (143,831) (17,871) (12,296)
---------- ---------- ---------

Net increase in net
assets resulting
from operations $ 37,027 168,422 176,455
========== ========== =========
</TABLE>

See accompanying notes to financial statements.

<PAGE>

<TABLE>

CALIFORNIA TRUST

Statements of Changes in Net Assets

Years ended December 31,
<CAPTION>
------------ --- ------------- -- -------------
1994 1993 1992
------------ ------------- -------------

<S> <C> <C> <C>
Operations:
Investment income, net $ 96,287 100,017 115,086
Net realized loss on
bonds sold or called (1,255) (10,144) -
Unrealized depreciation
for the year (78,123) (11,154) (25,291)
------------ ------------- -------------

Net increase in net
assets resulting
from operations 16,909 78,719 89,795
------------ ------------- -------------

Distributions to Certificateholders:
Investment income 94,218 97,415 110,712
Principal 4,800 196,577 -

Redemptions:
Interest 209 699 82
Principal 10,483 29,707 3,039
------------ ------------- -------------

Total distributions
and redemptions 109,710 324,398 113,833
------------ ------------- -------------

Total decrease (92,801) (245,679) (24,038)

Net assets at beginning of year 1,288,337 1,534,016 1,558,054
------------ ------------- -------------

Net assets at end of year (including
undistributed net investment
income of $29,949, $34,830, and
$41,303 respectively) $ 1,195,536 1,288,337 1,534,016
============ ============= =============
</TABLE>

See accompanying notes to financial statements.

NEW YORK TRUST

Statements of Changes in Net Assets

Years ended December 31,
<CAPTION>
----------- -- ------------ ----------
1994 1993 1992
----------- ------------ ----------

<S> <C> <C> <C>
Operations:
Investment income, net $ 405,003 449,267 476,417
Realized loss on bonds
sold or called (54,211) (70,923) -
Unrealized appreciation
(depreciation) for the year (274,164) (8,306) 48,170
----------- ------------ ----------

Net increase in net
assets resulting
from operations 76,628 370,038 524,587
----------- ------------ ----------

Distributions to Certificateholders:
Investment income 407,593 448,185 -
Principal 492,000 299,300 459,201
----------- ------------ ----------

Total distributions 899,593 747,485 459,201
----------- ------------ ----------

Total increase (decrease) (822,965) (377,447) 65,386

Net assets at beginning of year 5,917,668 6,295,115 6,229,729
----------- ------------ ----------

Net assets at end of year (including
undistributed net investment
income of $114,792, $117,382,
and $169,478, respectively) $ 5,094,703 5,917,668 6,295,115
=========== ============ ==========
</TABLE>

See accompanying notes to financial statements.

PENNSYLVANIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
------------- -- ------------ -------------
1994 1993 1992
------------- ------------ -------------
<S> <C> <C> <C>

Operations:
Investment income, net $ 180,858 186,293 188,751
Realized loss on bonds
sold or called (6,400) (14,544) (2,748)
Unrealized depreciation
for the year (137,431) (3,327) (9,548)
------------- ------------ -------------

Net increase in net
assets resulting
from operations 37,027 168,422 176,455
------------- ------------ -------------

Distributions to Certificateholders:
Investment income 178,465 184,468 183,899
Principal 0 33,480 6,040

Redemptions:
Investment income 5,337 - -
Principal 174,245 - -
------------- ------------ -------------

Total distributions 358,047 217,948 189,939
------------- ------------ -------------

Total decrease (321,020) (49,526) (13,484)

Net assets at beginning of year 2,403,623 2,453,149 2,466,633
------------- ------------ -------------

Net assets at end of year (including
undistributed net investment
income of $42,013, $44,957 and
$60,238 respectively) $ 2,082,603 2,403,623 2,453,149
============= ============ =============
</TABLE>

See accompanying notes to financial statements.

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Notes to Financial Statements

December 31, 1994, 1993 and 1992

(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 Kenny
S&P Evaluation Services or Moody's Investors Service, Inc. (Evaluator) as
discussed in the Footnotes to Portfolios. 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.
(Continued)

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Notes to Financial Statements

(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,
1994, 1993, and 1992.

The Trust Indenture and Agreement also requires each state Trust to redeem
units tendered. 21, 0 and 309 were redeemed by the California, New York and
Pennsylvania Trusts, respectively, for the year ended December 31, 1994. 50
and 5 units were redeemed by the California Trust during the years ended
December 31, 1993 and 1992, respectively. No units were redeemed by the New
York and Pennsylvania Trusts for the years ended December 31, 1993 and 1992.

(5) Net Assets

At December 31, 1994, 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 (240,871) (863,321) (215,219)
Net unrealized depreciation (75,189) (120,695) (121,044)
Undistributed net
investment income 29,949 114,792 42,013
Undistributed (distributions in
excess of) proceeds from
bonds sold or called 5 65 (2,862)

Total $ 1,195,536 5,094,703 2,082,603

(Continued)
<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Notes to Financial Statements

(5), Continued

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 $3,410 for the California Trust.

<PAGE>

<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

CALIFORNIA TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding (2)(7) Value(3)
- ---- --------- --------------------- --- ------------- ---------------------- -----------

<S> <C> <C> <C> <C> <C>
1 $ 250,000 Fresno Calif. Hlth. AAA 8.750% 2/01/01 @ 100 S.F. $ 255,898
Facs. Rev. Bonds 2/01/2015 2/01/95 @ 102 Ref.
(Fresno Cmmnty. Hosp.
& Med. Cntr.) 1985
Series B (AMBAC) (5)

2 250,000 Irvine Ranch Calif. A+ 8.250 8/15/09 @ 100 S.F. 253,298
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. 261,875
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 262,318
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 130,083
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. 5,520
Multi-Fam. Hsg. Rev. 12/01/2026 None
Bonds (FHA Insrd.
Mtg. Loan-Pleasant
Valley Pines Aprtmts.
Prjt.) 1985 Series

--------- ----------
$ 1,285,000 $ 1,168,992
========= ===========
</TABLE>

See accompanying footnotes to portfolios and notes to financial statements.

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

NEW YORK TRUST
Portfolio
December 31, 1994

<S> <C> <C> <C> <C> <C> <C>
1 $ 105,000 Dorm. Auth. of the AAA 8.125% 7/01/08 @ 100 S.F. $ 113,665
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 523,115
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. 153,029
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. 528,065
Facs. Fin. Agy. (Mt. 1/15/2026 1/15/96 @ 102 Ref.
Sinai Hosp.) 1985
Series C FHA Insrd.
Bonds (5)

5 265,000 N.Y. State Med. Care BBB+ 8.875 2/15/00 @ 100 S.F. 285,538
Facs. Finc. Agncy. 8/15/2007 8/15/97 @ 102 Ref.
Mental Hlth. Svs.
Facs. Imprvmt. Rev.
Refndg. Bonds 1987
Series A

5a 235,000 N.Y. State Med. Care AAA 8.875 2/15/00 @ 100 S.F. 259,306
Facs. Finc. Agncy. 8/15/2007 8/15/97 @ 102 Ref.
Mental Hlth. Svs.
Facs. Imprvmt. Rev.
Refndg. Bonds 1987
Series A (5)

6 500,000 N.Y. State Med. Care A 9.000 No Sinking Fund 514,725
Facs. Finc. Agncy. 2/15/2026 2/15/95 @ 102 Ref.
(Insrd. Hosp. & Nrsg.
Home) Insrd. Rev.
Bonds 1985 Series C

7 125,000 N.Y. State Urban Dev. AAA* 8.125 1/01/09 @ 100 S.F. 136,519
Corp. Correctnl. 1/01/2014 1/01/98 @ 102 Ref.
Facs. Rev. Bonds 1988
Series E (5)

8 500,000 N.Y. City Gen. Oblig. A- 8.750 No Sinking Fund 551,650
Rev. Bonds 1988 11/01/2014 11/01/97 @ 101.5 Ref.
Series A (5)

9 250,000 Nassau Cnty. N.Y. A 8.250 7/01/01 @ 100 S.F. 272,528
Ind. Dev. Agncy. 7/01/2003 7/01/98 100 Ref.
Civic Fac. Rev. Bonds
(Hofstra Univ. Prjt.)
Series 1987 (5)

10 500,000 Metro. Trans. Auth. AAA 8.500 7/01/07 @ 100 S.F. 546,145
N.Y. Transit Facs. 7/01/2017 7/01/97 @ 102 Ref.
Rev. Bonds 1987
Series 1 (5)

11 500,000 Triborough Bridge & AAA 9.000% 1/01/03 @ 100 S.F. $ 521,060
Tunnel Auth. NY (Cond.) 1/01/2011 7/01/95 @ 102 Ref.

Cnvntn. Cntr. Prjt.
Bonds 1985 Series D
(5)

12 125,000 United Nations Dev. AAA* 7.875 1/01/07 @ 100 S.F. 132,220
Corp. of N.Y. Phase 2 7/01/2026 7/01/96 @ 102 Ref.
& 3 Sr. Lien 1986
Series A (5)

13 425,000 P.R. Pub. Bldgs. AAA 8.875 No Sinking Fund 442,281
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)

--------- -----------
$ 4,675,000 $ 4,979,846
========= ===========
</TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

PENNSYLVANIA TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding (2) (7) Value(3)
- ---- ---------- --------------------- --- ------------ ------------------------ -----------

<S> <C> <C> <C> <C> <C> <C>
1 $ 230,000 Penn. Hghr. Ed. Facs. AA* 9.250% 7/01/02 @ 100 S.F. $ 241,482
Auth. Hosp. Rev. 7/01/2008 11/01/95 @ 102 Ref.
Rfndg. Bonds 1985B
Thomas Jefferson
Univ. Hosp.

2 190,000 Bucks Cnty. Penn. AAA 9.400 7/01/06 @ 100 S.F. 198,022
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. 271,973
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. A2* 9.375 No Sinking Fund 363,657
Dev. Auth. Poll. 7/01/2015 7/01/95 @ 102 Ref.
Cntrl. Rev. Bonds
(Penn. Pwr. & Lt. Co.
Prjt.) Series 1985A

5 255,000 Montgomery Cnty. AAA 9.375 12/01/03 @ 100 S.F. 285,773
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. 105,184
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 369,229
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 208,132
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)

---------- -----------
$ 1,925,000 $ 2,043,452
========== ===========
</TABLE>

See accompanying footnotes to portfolios and notes to financial statements.

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 34

Footnotes to Portfolios

December 31, 1994

(1) All ratings are by Kenny S&P Evaluation Services, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc. A
brief description of the ratings symbols and their meanings is set forth under
"Description of Bond Ratings" in Part B of this Prospectus.

(2) See "The Trust - Portfolio" in Part B of this Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of this
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.

(3) At December 31, 1994, the net unrealized depreciation of all the bonds was
comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ - 39,405 -
Gross unrealized depreciation (75,189) (160,100) (121,044)

Net unrealized depreciation $ (75,189) (120,695) (121,044)

(4) The annual interest income, based upon bonds held at December 31, 1994,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Municipal Securities Trust, Multi-State Series 34 is $98,906, $408,475 and
$176,204 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, 1994 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.

(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues).

<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 (12/31/94)

California Trust 2,401 $1,030,000 $478.97
New York Trust 7,740 $4,215,000 $610.15
Pennsylvania Trust 3,023 $1,630,000 $600.24

Prospectus Part A Dated April 28, 1995

109754.1

<PAGE>

A-2
109754.1

<PAGE>

PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 5.5% 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
$478.97 plus accrued interest of $8.54 under the monthly distribution plan,
$11.48 under the semi-annual distribution plan and $11.46 under the annual
distribution plan, for a total of $487.51, $490.45 and $490.43, respectively.
If Units of the New York Trust had been purchased on the Evaluation Date, the
Public Offering Price per Unit would have been $610.15 plus accrued interest
of $8.73 under the monthly distribution plan, $12.25 under the semi-annual
distribution plan and $12.26 under the annual distribution plan, for a total
of $618.88, $622.40 and $622.41, respectively. If Units of the Pennsylvania
Trust had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $600.24 plus accrued interest of $9.23 under the monthly
distribution plan, $12.70 under the semi-annual distribution plan and $12.69
under the annual distribution plan, for a total of $609.47, $612.94 and
$612.93, 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.)

A-3
109754.1

<PAGE>

Long Term Return to Certificateholders under the monthly, semi-annual and
annual distribution plans, see "Summary of Essential Information".)

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

A-4
109754.1

<PAGE>

A-5
109754.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: March 9, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,030,000 $1.00 per Unit.
Number of Units ............. 2,401 Weighted Average Life to Maturity:
Fractional Undivided Inter- 5.8 Years.
est in Trust per Unit ..... 1/2401 Minimum Value of Trust: Trust may
Principal Amount of be terminated if value of
Bonds per Unit ............ $428.99 Trust is less than $1,000,000
Secondary Market Public in principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31,
of Bonds in Trust ....... $1,086,756+++ 2037 or the disposition of
Divided by 2,401 Units .... $452.63 the last Bond in the Trust.
Plus Sales Charge of 5.5% Trustee***: United States Trust
of Public Offering Price $26.34 Company of New York.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $478.97+ plan $1.05 per $1,000; semi-
Redemption and Sponsor's annual plan $.60 per $1,000;
Repurchase Price and annual plan is $.35 per
per Unit .................. $452.63+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $15
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $26.34++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Bear, Stearns & Co. Inc.
and Principal Amount per Sponsor's Annual Fee: Maximum of
Unit Premium/(Discount) ... $49.98 $.25 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. 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# ......... $39.24 $39.24 $39.24
Less estimated annual fees and
expenses ............................ 1.80 1.45 1.32
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $37.44 $37.79 $37.92
Estimated interest distribution# ...... 3.12 18.89 37.92
Estimated daily interest accrual# ..... .1040 .1049 .1053
Estimated current return#++ ........... 7.82% 7.89% 7.92%
Estimated long term return++ .......... 4.46% 4.53% 4.56%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-6
109754.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

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 Maturity:
Fractional Undivided Inter- 13.1 Years.
est in Trust per Unit ..... 1/7740 Minimum Value of Trust: Trust may
Principal Amount of be terminated if value of
Bonds per Unit ............ $544.57 Trust is less than
Secondary Market Public $3,200,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $4,462,771+++ The earlier of December 31,
Divided by 7,740 Units .... $576.59 2037 or the disposition of
Plus Sales Charge of 5.5% the last Bond in the Trust.
of Public Offering Price $33.56 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $610.15+ 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 .................. $576.59+ 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 ............ $33.56++++ Bonds in excess of 50 issues
Difference between Public (treating separate
Offering Price per Unit maturities as separate
and Principal Amount per issues).
Unit Premium/(Discount) ... $65.58 Sponsor: Bear, Stearns & Co. Inc.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in
Part B of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $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#++ ........... 7.63% 7.69% 7.71%
Estimated long term return ++ ......... 5.28% 5.35% 5.36%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-7
109754.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 35

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: March 9, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,630,000 $1.00 per Unit.
Number of Units ............. 3,023 Weighted Average Life to Maturity:
Fractional Undivided Inter- 11.2 Years.
est in Trust per Unit ..... 1/3023 Minimum Value of Trust: Trust may
Principal Amount of be terminated if value of
Bonds per Unit ............ $539.20 Trust is less than
Secondary Market Public $1,400,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $1,714,734+++ The earlier of December 31,
Divided by 3,023 Units .... $567.23 2037 or the disposition of
Plus Sales Charge of 5.5% the last Bond in the Trust.
of Public Offering Price. $33.01 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $600.24+ 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 .................. $567.23+ 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 ............ $33.01++++ Bonds in excess of 50 issues
Difference between Public (treating separate
Offering Price per Unit maturities as separate
and Principal Amount per issues).
Unit Premium/(Discount) ... $61.04 Sponsor: Bear, Stearns & Co. Inc.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in
Part B of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $47.99 $47.99 $47.99
Less estimated annual fees and
expenses ............................ 1.67 1.28 1.11
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $46.32 $46.71 $46.88
Estimated interest distribution# ...... 3.86 23.35 46.88
Estimated daily interest accrual# ..... .1286 .1297 .1302
Estimated current return#++ ........... 7.72% 7.78% 7.81%
Estimated long term return ++ ......... 5.28% 5.34% 5.37%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-8
109754.1

<PAGE>

* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.

** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.

+ Plus accrued interest to expected date of settlement (approximately five
business days after purchase) of $8.56 monthly, $11.48 semi-annually and
$11.46 annually for the California Trust, $8.73 monthly, $12.25
semi-annually and $12.26 annually for the New York Trust, and $9.23
monthly, $12.70 semi-annually and $12.69 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.

A-9
109754.1

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1994

DESCRIPTION OF PORTFOLIOS

California Trust*

Each Unit in the California Trust consists of a 1/2401st undivided
interest in the principal and net income of the Trust in the ratio of one Unit
for each $428.99 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 63.6% 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 $1,030,000 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
the entire principal amount of the Bond in portfolio no. 2 has been
called for redemption pursuant to pre-refunding provisions and is no
longer contained in the Trust.

A-10
109754.1

<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.

As of December 31, 1994, 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
$195,000 of the principal amount of the Bond in portfolio no. 5 has been
called and is no longer contained in the Trust.

A-11
109754.1

<PAGE>

Pennsylvania Trust*

Each Unit in the Pennsylvania Trust consists of a 1/3023rd
undivided interest in the principal and net income of the Trust in the ratio
of one Unit for each $539.20 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 46.6% 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
$1,630,000 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
20 Units have been redeemed from the Trust.

A-12
109754.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

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

California Trust

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
December 31, 1994 2,401 463.68 37.68 38.10 -0- -0-

New York Trust

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
December 31, 1994 7,740 588.47 46.44 46.94 47.06 -0-

Pennsylvania Trust

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
December 31, 1994 3,023 578.15 46.39 46.83 47.00 -0-
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.

A-13
109754.1

<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, 1994, and the related statements of operations, and changes in
net assets for each of the years in the three year period then ended. These
financial statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.

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, 1994, 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 LLP

New York, New York
March 31, 1995

Statements of Net Assets

December 31, 1994

<CAPTION>
California New York Pennsylvania
Trust Trust Trust
<S> <C> <C> <C>

Investments in marketable
securities, at market value (cost
$1,145,276, $4,523,624 and
$1,757,708, respectively) $ 1,085,805 4,465,033 1,718,248

Excess of other assets over
total liabilities 27,486 89,736 29,492
----------- ------------ -------------

Net assets (2,401, 7,740 and 3,023
units of fractional undivided
interest outstanding, $463.68,
$588.47 and $578.15
per unit, respectively) $ 1,113,291 4,554,769 1,747,740
=========== ============ =============
</TABLE>

See accompanying notes to financial statements.

CALIFORNIA TRUST

Statements of Operations

Years ended December 31,
<CAPTION>
--------- --- ---------- --- ----------
1994 1993 1992
--------- ---------- ----------

<S> <C> <C> <C>
Investment income - interest $ 98,491 106,230 125,287
--------- ---------- ----------

Expenses:
Trustee's fees 1,839 3,433 3,723
Evaluator's fees 1,492 1,369 1,370
Sponsor's advisory fee 269 514 621
--------- ---------- ----------

Total expenses 3,600 5,316 5,714
--------- ---------- ----------

Investment income, net 94,891 100,914 119,573
--------- ---------- ----------

Realized and unrealized gain (loss)
on investments:
Realized loss on
bonds sold or called (6,891) (19,618) -
Unrealized appreciation
(depreciation) for the year (63,150) 1,900 (33,580)
--------- ---------- ----------

Net loss
on investments (70,041) (17,718) (33,580)
--------- ---------- ----------

Net increase in net
assets resulting
from operations $ 24,850 83,196 85,993
========= ========== ==========
</TABLE>

See accompanying notes to financial statements.

NEW YORK TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
--------- --- ---------- -----------
1994 1993 1992
--------- ---------- -----------

<S> <C> <C> <C>
Investment income - interest $ 370,432 378,299 395,905
--------- ---------- -----------

Expenses:
Trustee's fees 6,255 6,614 8,398
Evaluator's fees 1,494 1,369 1,370
Sponsor's advisory fee 1,054 2,021 2,000
--------- ---------- -----------

Total expenses 8,803 10,004 11,768
--------- ---------- -----------

Investment income, net 361,629 368,295 384,137
--------- ---------- -----------

Realized and unrealized gain (loss)
on investments
Realized loss on bonds
sold or called - (32,754) -
Unrealized appreciation
(depreciation) for the year (302,411) (16,311) 30,467
--------- ---------- -----------

Net gain (loss) on investments (302,411) (49,065) 30,467
--------- ---------- -----------

Net increase in net
assets resulting
from operations $ 59,218 319,230 414,604
========= ========== ===========
</TABLE>

See accompanying notes to financial statements.

PENNSYLVANIA TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
------------ --- ---------- ----------
1994 1993 1992
------------ ---------- ----------

<S> <C> <C> <C>
Investment income - interest $ 161,056 170,576 173,823
------------ ---------- ----------

Expenses:
Trustee's fees 2,967 4,052 4,263
Evaluator's fees 1,492 1,369 1,370
Sponsor's advisory fee 471 891 875
------------ ---------- ----------

Total expenses 4,930 6,312 6,508
------------ ---------- ----------

Investment income, net 156,126 164,264 167,315
------------ ---------- ----------

Realized and unrealized gain (loss)
on investments:
Realized loss on
bonds sold or called (12,225) (12,651) (2,228)
Unrealized appreciation
(depreciation) for the year (115,551) 16 22,678
------------ ---------- ----------

Net gain (loss) on investments (127,776) (12,635) 20,450
------------ ---------- ----------

Net increase in net
assets resulting
from operations $ 28,350 151,629 187,765
============ ========== ==========
</TABLE>

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

CALIFORNIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
------------ -- ----------- -----------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 94,891 100,914 119,573
Net realized loss on
bonds sold or called (6,891) (19,618) -
Unrealized appreciation
(depreciation) for the year (63,150) 1,900 (33,580)
------------ ----------- -----------

Net increase in net
assets resulting
from operations 24,850 83,196 85,993
------------ ----------- -----------

Distributions to Certificateholders:
Investment income 93,793 98,868 114,959
Principal - 300,701 -

Redemptions:
Investment income 1,445 - -
Principal 45,086 - -
------------ ----------- -----------
Total distributions
and redemptions 140,324 399,569 114,959
------------ ----------- -----------

Total decrease (115,474) (316,373) (28,966)

Net assets at beginning of year 1,228,765 1,545,138 1,574,104
------------ ----------- -----------

Net assets at end of year (including
undistributed net investment
income of $26,535, $26,882, and
$42,542, respectively) $ 1,113,291 1,228,765 1,545,138
============ =========== ===========
</TABLE>

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

NEW YORK TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
----------- - ------------- ----------
1994 1993 1992
----------- ------------- ----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 361,629 368,295 384,137
Realized loss on bonds
sold or called - (32,754) -
Unrealized appreciation
(depreciation) for the year (302,411) (16,311) 30,467
----------- ------------- ----------

Net increase in net
assets resulting
from operations 59,218 319,230 414,604
----------- ------------- ----------

Distributions to Certificateholders:
Investment income 360,603 363,315 370,669
Principal - 102,000 -
Redemptions:
Interest - 6,003 -
Principal - 161,196 -
----------- ------------- ----------

Total distributions
and redemptions 360,603 632,514 370,669
----------- ------------- ----------

Total increase (decrease) (301,385) (313,284) 43,935

Net assets at beginning of year 4,856,154 5,169,438 5,125,503
----------- ------------- ----------

Net assets at end of year (including
undistributed net investment
income of $91,998, $90,972, and
$132,576, respectively) $ 4,554,769 4,856,154 5,169,438
=========== ============= ==========
</TABLE>
See accompanying notes to financial statements.

PENNSYLVANIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
---------- -- ----------- -----------
1994 1993 1992
---------- ----------- -----------
<S> <C> <C> <C>
Operations:

Investment income, net $ 156,126 164,264 167,315
Net realized loss on
bonds sold or called (12,225) (12,651) (2,228)
Unrealized appreciation
(depreciation) for the year (115,551) 16 22,678
---------- ----------- -----------

Net increase in net
assets resulting
from operations 28,350 151,629 187,765
---------- ----------- -----------

Distributions to Certificateholders:
Investment income 154,734 162,884 162,411
Principal - 28,210 5,040
Redemptions:
Investment income 7,008 - -
Principal 274,753 - -
---------- ----------- -----------

Total distributions
and redemptions 436,495 191,094 167,451
---------- ----------- -----------

Total increase (decrease) (408,145) (39,465) 20,314

Net assets at beginning of year 2,155,885 2,195,350 2,175,036
---------- ----------- -----------

Net assets at end of year (including
undistributed net investment
income of $33,006, $38,623, and
$52,052, respectively) $ 1,747,740 2,155,885 2,195,350
========== =========== ===========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Notes to Financial Statements

December 31, 1994, 1993 and 1992

(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 Kenny
S&P Evaluation Services or Moody's Investors Service, Inc. (Evaluator) as
discussed in the Footnotes to Portfolios. 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 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.
(Continued)

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Notes to Financial Statements

(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,
1994, 1993 and 1992.

The Trust Indenture and Agreement also requires each state Trust to redeem
units tendered. 99, 0 and 477 were redeemed by the California, New York and
Pennsylvania Trusts for the year ended December 31, 1994. No units have been
redeemed during the years ended 1993 and 1992 by the California Trust and the
Pennsylvania Trust. 260 and 0 units were redeemed by the New York Trust,
during the years ended December 31, 1993 and 1992, respectively.

(5) Net Assets

At December 31, 1994, 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 (355,551) (253,107) (314,954)
Net unrealized depreciation (59,471) (58,591) (39,460)
Undistributed net
investment income 26,535 91,998 33,006
Undistributed proceeds (Distributions
in excess of proceeds) from bonds
sold or called 951 (2,262) (3,514)

Total $ 1,113,291 4,554,769 1,747,740

(Continued)

<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Notes to Financial Statements

(5), Continued

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.

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

CALIFORNIA TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref. --Refunding(2)(7) Value(3)
- ----- ---------- ---------------------- ---- ------------ ---------------------- -----------

<S> <C> <C> <C> <C> <C> <C>
1 $ 250,000 Calif. Ed. Facs. Auth. AAA 9.200% 10/01/01 @ 100 S.F. $ 262,685
Rev. Bonds (Univ. of 10/01/2015 10/01/95 @ 102 Ref.
So. Calif. Prjt.) 1985
First Series (5)

2 155,000 Glendale Calif. Hosp. AAA 10.375 3/01/05 @ 100 S.F. 159,630
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. 263,353
Kaiser Permanente Rev. 12/01/2015 12/01/95 @ 102 Ref.
Bonds Series 1985 A

4 250,000 Tracy Cnty. Calif. A 8.625 1/01/03 @ 100 S.F. 270,054
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. Auth. AAA 8.875 No Sinking Fund 130,083
Pub. Ed. & Hlth. Facs. 7/01/2012 7/01/95 @ 102 Ref.
Rfndg. Bonds 1985
Series E (Guaranteed
by the Commonwlth. of
P.R.) (5)

---------- -----------

$ 1,030,000 $ 1,085,805
========== ===========
</TABLE>

See accompanying footnotes to portfolios and notes to financial
statements.
<PAGE>

<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

NEW YORK TRUST

Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding(2)(7) Value(3)
- ----- ----------- ---------------------- ---- ------------ ---------------------- -----------

<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 N.Y. State Dorm. Auth. AAA 7.850% No Sinking Fund $ 530,045
GNMA Colltld. Rev. 2/01/2029 2/01/99 @ 102 Ref.
Bonds (Park Ridge HsG.
Inc. Prjt.) Series
1989

2 100,000 Dorm. Auth. of the AAA 8.125 7/01/08 @ 100 S.F. 108,252
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 523,115
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. 528,065
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 A 9.000 No Sinking Fund 411,780
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 567,566
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 429,960
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. 533,000
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. 515,849
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. Auth. AAA 8.875 No Sinking Fund 317,401
Pub. Ed. & Hlth. Facs. 7/01/2012 7/01/95 @ 102 Ref.
Rfndg. Bonds 1985
Series E (Guaranteed
by the Commonwlth. of
P.R.) (5)

---------- -----------
$ 4,215,000 $ 4,465,033
========== ===========
</TABLE>

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

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

PENNSYLVANIA TRUST

Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref. --Refunding(2)(7) Value(3)
- ----- ---------- ---------------------- ---- ------------ ---------------------- -----------

<S> <C> <C> <C> <C> <C> <C>
1 $ 210,000 Delaware Cnty. Indus. AA3* 8.100% 12/01/06 @ 100 S.F. $ 221,369
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 262,285
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. A2* 9.375 No Sinking Fund 363,657
Dev. Auth. Poll. 7/01/2015 7/01/95 @ 102 Ref.
Cntrl. Rev. Bonds
(Penn. Pwr. & Lt. Co.
Prjt.) Series 1985A

4 210,000 Monroeville Hosp. AAA 9.700 10/01/01 @ 100 S.F. 221,126
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. A* 8.375 7/01/00 @ 100 S.F. 379,831
Hosp. Auth. (Luzerne 7/01/2006 7/01/97 @ 102 Ref.
Cnty. Penn.) Hosp.
Rev. Bonds
(Wilkes-Barre Gen.
Hosp.) 1987, Series B
(5)

6 200,000 Scranton-Lakawanna A- 10.250 10/01/97 @ 100 S.F. 207,540
Penn. Hlth. & Welfare 10/01/2003 10/01/95 @ 100 Ref.
Auth. Univ. Rev.
Rfndg. Bonds (Univ. of
Scranton Prjt.) Series
1985 (5)

7 60,000 P.R. Pub. Bldgs. Auth. AAA 8.875 No Sinking Fund 62,440
Pub. Ed. & Hlth. Facs. 7/01/2012 7/01/95 @ 102 Ref.
Rfndg. Bonds 1985
Series E (Guaranteed
by the Commonwlth. of
P.R.) (5)

---------- -----------

$ 1,630,000 $ 1,718,248
========== ===========
</TABLE>

See accompanying footnotes to portfolios and notes to financial
statements.
<PAGE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 35

Footnotes to Portfolios

December 31, 1994

(3) At December 31, 1994, the net unrealized depreciation of all the bonds was
comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 0 51,370 29,232
Gross unrealized depreciation (59,471) (109,961) (68,692)

Net unrealized depreciation $ (59,471) (58,591) (39,460)

(4) The annual interest income, based upon bonds held at December 31, 1994,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Municipal Securities Trust, Multi-State Series 35 is $94,238, $370,432 and
$145,079 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, 1994 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 (12/31/94)

California Trust 2,500 $2,500,000 $594.43
New York Trust 7,632 $4,120,000 $599.65
Pennsylvania Trust 3,356 $1,595,000 $526.96

Prospectus Part A Dated April 28, 1995

109750.1

<PAGE>

A-2
109750.1

<PAGE>

PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 5.5% 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
$594.43 plus accrued interest of $8.55 under the monthly distribution plan,
$12.24 under the semi-annual distribution plan and $12.24 under the annual
distribution plan, for a total of $602.98, $606.67 and $606.67, respectively.
If Units of the New York Trust had been purchased on the Evaluation Date, the
Public Offering Price per Unit would have been $599.65 plus accrued interest
of $8.89 under the monthly distribution plan, $12.50 under the semi-annual
distribution plan and $12.51 under the annual distribution plan, for a total
of $608.54, $612.15 and $612.16, respectively. If Units of the Pennsylvania
Trust had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $526.96 plus accrued interest of $8.76 under the monthly
distribution plan, $11.98 under the semi-annual distribution plan and $11.97
under the annual distribution plan, for a total of $535.72, $538.94 and
$538.93, 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.)

A-3
109750.1

<PAGE>

Long Term Return to Certificateholders under the monthly, semi-annual and
annual distribution plans, see "Summary of Essential Information".)

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

A-4
109750.1

<PAGE>

A-5
109750.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

CALIFORNIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

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
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $1,404,352+++ The earlier of December 31,
2037 or the disposition of
Divided by 2,500 Units .... $561.74 the last Bond in the Trust.
Plus Sales Charge of 5.5% Trustee***: United States Trust
of Public Offering Price $32.69 Company of New York.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $594.43+ plan $1.05 per $1,000; semi-
Redemption and Sponsor's annual plan $.60 per $1,000;
Repurchase Price and annual plan is $.35 per
per Unit .................. $561.74+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $15
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $32.69++++ (treating separate
Difference between Public maturities as separate
Offering Price per Unit issues).
and Principal Amount per Sponsor: Bear, Stearns & Co. Inc.
Unit Premium/(Discount) ... $(405.57) Sponsor's Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal
New York Time. 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 ............................ 2.31 1.75 1.49
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $44.91 $45.47 $45.73
Estimated interest distribution# ...... 3.74 22.73 45.73
Estimated daily interest accrual# ..... .1247 .1263 .1270
Estimated current return#++ ........... 7.56% 7.65% 7.69%
Estimated long term return++ .......... 6.32% 6.44% 6.50%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-6
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<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

NEW YORK TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: May 11, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,120,000 $1.00 per Unit.
Number of Units ............. 7,632 Weighted Average Life
Fractional Undivided Inter- to Maturity: 8.2 Years.
est in Trust per Unit ..... 1/7632 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $539.83 value of Trust is less than
Secondary Market Public $3,200,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $4,324,792 The earlier of December 31,
Divided by 7,632 Units .... $566.67 2037 or the disposition of
Plus Sales Charge of 5.5% the last Bond in the Trust.
of Public Offering Price $32.98 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $599.65+ 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 .................. $566.67+ 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 ............ $32.98++++ Bonds in excess of 50 issues
Difference between Public (treating separate
Offering Price per Unit maturities as separate
and Principal Amount per issues).
Unit Premium/(Discount) ... $59.82 Sponsor: Bear, Stearns & Co. Inc.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in
Part B of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $48.07 $48.07 $48.07
Less estimated annual fees and
expenses ............................ 1.30 .90 .79
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $46.77 $47.17 $47.28
Estimated interest distribution# ...... 3.89 23.58 47.28
Estimated daily interest accrual# ..... .1299 .1310 .1313
Estimated current return#++ ........... 7.80% 7.87% 7.88%
Estimated long term return ++ ......... 4.61% 4.68% 4.70%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-7
109750.1

<PAGE>

MUNICIPAL SECURITIES TRUST
MULTI-STATE SERIES 36

PENNSYLVANIA TRUST

SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994

Date of Deposit: May 11, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,595,000 $1.00 per Unit.
Number of Units ............. 3,356 Weighted Average Life
Fractional Undivided Inter- to Maturity: 10.2 Years.
est in Trust per Unit ..... 1/3356 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $475.27 value of Trust is less than
Secondary Market Public $1,400,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $1,671,215+++ The earlier of December 31,
Divided by 3,356 Units .... $497.98 2037 or the disposition of
Plus Sales Charge of 5.5% the last Bond in the Trust.
of Public Offering Price $28.98 Trustee***: United States Trust
Public Offering Price Company of New York.
per Unit ................ $526.96+ 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 .................. $497.98+ 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 ............ $28.98++++ Bonds in excess of 50 issues
Difference between Public (treating separate
Offering Price per Unit maturities as separate
and Principal Amount per issues).
Unit Premium/(Discount) ... $51.69 Sponsor: Bear, Stearns & Co. Inc.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in
Part B of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $43.49 $43.49 $43.49
Less estimated annual fees and
expenses ............................ 1.60 1.24 1.09
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $41.89 $42.25 $42.40
Estimated interest distribution# ...... 3.49 21.12 42.40
Estimated daily interest accrual# ..... .1163 .1173 .1177
Estimated current return#++ ........... 7.95% 8.02% 8.05%
Estimated long term return ++ ......... 4.72% 4.79% 4.82%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15

A-8
109750.1

<PAGE>

* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.

** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.

+ Plus accrued interest to expected date of settlement (approximately five
business days after purchase) of $8.55 monthly, $12.24 semi-annually and
$12.24 annually for the California Trust, $8.89 monthly, $12.50
semi-annually and $12.51 annually for the New York Trust, and $8.76
monthly, $11.98 semi-annually and $11.97 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.

A-9
109750.1

<PAGE>

INFORMATION REGARDING THE TRUSTS
AS OF DECEMBER 31, 1994

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, 1994, $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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995
the entire principal amount of the Bonds in portfolio nos. 2 and 3, have
been called for redemption pursuant to pre-refunding provisions and are
no longer contained in the Trust. 15 Units have been redeemed from the
Trust.

A-10
109750.1

<PAGE>

New York Trust*

Each Unit in the New York Trust consists of a 1/7632nd undivided
interest in the principal and net income of the Trust in the ratio of one Unit
for each $539.83 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 34.2% 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). One issue representing $405,000 of the principal
amount of the Bonds is a general obligation bond. All 8 of the remaining
issues representing $3,715,000 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.

As of December 31, 1994, 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
$140,000 of the principal amount of the Bond in portfolio no. 3 has been
called and is no longer contained in the Trust. 10 Units have been
redeemed from the Trust.

A-11
109750.1

<PAGE>

Pennsylvania Trust*

Each Unit in the Pennsylvania Trust consists of a 1/3356th
undivided interest in the principal and net income of the Trust in the ratio
of one Unit for each $475.27 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 15.9% 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 $1,595,000 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, 1994, 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 PartB 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.

- --------
* Changes in the Trust Portfolio: From January 1, 1995 to March 23, 1995,
30 Units have been redeemed from the Trust.

A-12
109750.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

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

California Trust

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-
December 31, 1994 2,500 573.34 44.76 45.40 45.69 -0-

New York Trust

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-
December 31, 1994 7,632 578.74 46.56 47.02 47.13 -0-

Pennsylvania Trust

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-
December 31, 1994 3,356 509.37 43.73 44.15 44.31 60.36

A-13
109750.1

<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, 1994, and the related statements of operations, and changes in
net assets for each of the years in the three year period then ended. These
financial statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.

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, 1994, 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 LLP

New York, New York
March 31, 1995
<PAGE>
<TABLE>

Statements of Net Assets

December 31, 1994

<CAPTION>
California New York Pennsylvania
Trust Trust Trust

<S> <C> <C> <C>
Investments in marketable
securities, at market value (cost
$1,502,111, $4,471,074 and
$1,761,754, respectively) $ 1,404,352 4,339,399 1,671,193

Excess of other assets over
total liabilities 29,001 77,574 38,238
------------- ------------ ----------

Net assets (2,500, 7,632 and
3,356 units of fractional
undivided interest outstanding,
$573.34, $578.74 and $509.37
per unit, respectively) $ 1,433,353 4,416,973 1,709,431
============= ============ ==========

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

Statements of Operations

<CAPTION>
Years ended December 31,
----------- --- ----------- -----------
1994 1993 1992
----------- ----------- -----------

<S> <C> <C> <C>
Investment income - interest $ 123,344 122,854 122,738
----------- ----------- -----------

Expenses:
Trustee's fees 3,227 3,715 3,608
Evaluator's fees 1,492 1,369 1,370
Sponsor's advisory fee 625 994 625
----------- ----------- -----------

Total expenses 5,344 6,078 5,603
----------- ----------- -----------

Investment income, net 118,000 116,776 117,135

Unrealized depreciation
for the year (101,714) (5,732) (25,847)
----------- ----------- -----------

Net increase in net
assets resulting
from operations $ 16,286 111,044 91,288
=========== =========== ===========

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

NEW YORK TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
----------- --- ---------- -----------
1994 1993 1992
----------- ---------- -----------

<S> <C> <C> <C>
Investment income - interest $ 372,194 382,475 396,734
----------- ---------- -----------

Expenses:
Trustee's fees 6,017 6,382 8,095
Evaluator's fees 1,493 1,369 1,370
Sponsor's advisory fee 1,063 1,680 2,000
----------- ---------- -----------

Total expenses 8,573 9,431 11,465
----------- ---------- -----------

Investment income, net 363,621 373,044 385,269
----------- ---------- -----------

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on
bonds sold or called 2,994 (54,512) -
Unrealized depreciation
for the year (266,779) (49,541) (715)
----------- ---------- -----------

Net loss
on investments (263,785) (104,053) (715)
----------- ---------- -----------

Net increase in net
assets resulting
from operations $ 99,836 268,991 384,554
=========== ========== ===========

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

PENNSYLVANIA TRUST

Statements of Operations

<CAPTION>
Years ended December 31,
--------- --- ---------- -----------
1994 1993 1992
--------- ---------- -----------

<S> <C> <C> <C>
Investment income - interest $ 153,556 170,776 172,850
--------- ---------- -----------

Expenses:
Trustee's fees 2,646 3,400 4,006
Evaluator's fees 1,492 1,369 1,370
Sponsor's advisory fee 470 754 875
--------- ---------- -----------

Total expenses 4,608 5,523 6,251
--------- ---------- -----------

Investment income, net 148,948 165,253 166,599
--------- ---------- -----------

Realized and unrealized gain (loss)
on investments:
Realized loss on bonds
sold or called (8,397) (10,736) (1,976)
Unrealized appreciation
(depreciation) for the year (104,528) 1,777 (2,353)
--------- ---------- -----------

Net loss
on investments (112,925) (8,959) (4,329)
--------- ---------- -----------

Net increase in net
assets resulting
from operations $ 36,023 156,294 162,270
========= ========== ===========

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

CALIFORNIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
------------- --- ------------- -------------
1994 1993 1992
------------- ------------- -------------

<S> <C> <C> <C>
Operations:
Investment income, net $ 118,000 116,776 117,135
Unrealized depreciation
for the year (101,714) (5,732) (25,847)
------------- ------------- -------------

Net increase in net
assets resulting
from operations 16,286 111,044 91,288

Distributions to Certificateholders:
Investment income 112,267 112,266 112,299
------------- ------------- -------------

Total decrease (95,981) (1,222) (21,011)

Net assets at beginning of year 1,529,334 1,530,556 1,551,567
------------- ------------- -------------

Net assets at end of year (including
undistributed net investment
income of$53,116, $47,383, and
$42,873, respectively) $ 1,433,353 1,529,334 1,530,556
============= ============= =============

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

NEW YORK TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
----------- -- ------------- -------------
1994 1993 1992
----------- ------------- -------------

<S> <C> <C> <C>
Operations:
Investment income, net $ 363,621 373,044 385,269
Realized gain (loss) on
bonds sold or called 2,994 (54,512) -
Unrealized depreciation
for the year (266,779) (49,541) (715)
----------- ------------- -------------

Net increase in net
assets resulting
from operations 99,836 268,991 384,554
----------- ------------- -------------

Distributions to Certificateholders:
Investment income 362,633 370,741 371,110
Principal - 92,432 -

Redemptions:
Interest 3,270 1,192 -
Principal 154,127 63,034 -
----------- ------------- -------------

Total distributions
and redemptions 520,030 527,399 371,110
----------- ------------- -------------

Total increase (decrease) (420,194) (258,408) 13,444

Net assets at beginning of year 4,837,167 5,095,575 5,082,131
----------- ------------- -------------

Net assets at end of year (including
undistributed net investment
income of$92,180, $94,462, and
$135,191, respectively) $ 4,416,973 4,837,167 5,095,575
=========== ============= =============

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

PENNSYLVANIA TRUST

Statements of Changes in Net Assets

<CAPTION>
Years ended December 31,
------------ ------------ ------------
1994 1993 1992
------------ ------------ ------------

<S> <C> <C> <C>
Operations:
Investment income, net $ 148,948 165,253 166,599
Realized loss on bonds
sold or called (8,397) (10,736) (1,976)
Unrealized appreciation
(depreciation) for the year (104,528) 1,777 (2,353)
------------ ------------ ------------

Net increase in net
assets resulting
from operations 36,023 156,294 162,270
------------ ------------ ------------

Distributions to Certificateholders:
Investment income 149,252 162,889 162,394
Principal 202,568 28,175 5,145

Redemptions:
Investment income 2,310 - -
Principal 82,432 - -
------------ ------------ ------------
Total distributions
and redemptions 436,562 191,064 167,539
------------ ------------ ------------

Total decrease (400,539) (34,770) (5,269)

Net assets at beginning of year 2,109,970 2,144,740 2,150,009
------------ ------------ ------------

Net assets at end of year (including
undistributed net investment
income of$38,216, $40,830 and
$52,028, respectively) $ 1,709,431 2,109,970 2,144,740
============ ============ ============

See accompanying notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

Notes to Financial Statements

December 31, 1994, 1993 and 1992

(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

United States Trust Company of New York (Trustee) has custody of
and responsibility for the accounting records and financial
statements of the Trust and is responsible for establishing and
maintaining a system of internal control related thereto.

The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The
accompanying financial statements have been adjusted to record the
unrealized appreciation (depreciation) of investments and to record
interest income and expenses on the accrual basis.

The discount on the zero-coupon bonds is accreted by the interest
method over the respective lives of the bonds. The accretion of
such discount is included in interest income; however, it is not
distributed until realized in cash upon maturity or sale of the
respective bonds.

Investments are carried at market value which is determined by
either Kenny S&P Evaluation Services or Moody's Investors Service,
Inc. (Evaluator) as discussed in the Footnotes to Portfolios. 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).

The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.

See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the years
ended December 31, 1994, 1993 and 1992.

The Trust Indenture and Agreement also requires each state Trust to
redeem units tendered. 0, 265 and 144 were redeemed by the California,
New York and Pennsylvania Trusts for the year ended December 31, 1994.
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 year ended December 31,
1992.

(5) Net Assets

At December 31, 1994, the net assets of the Trust represented the
interests of Certificateholders as follows:

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) (121,403)

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

Cost of bonds sold or called - (304,665) (324,176)
Net unrealized depreciation (97,759) (131,675) (90,561)
Undistributed net
investment income 53,116 92,180 38,216
Undistributed (distributions
in excess of) proceeds
from bonds sold or called - (14,606) 22

Total $ 1,433,353 4,416,973 1,709,431

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 $24,115 for the California Trust.
<PAGE>
<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

CALIFORNIA TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding(2)(7) Value(3)
- -- ----------- --------------------- ------ ------------ ---------------------- ---------

<S> <C> <C> <C> <C> <C> <C>
1 $ 230,000 Calif. Ed. Facs. AAA* 9.125% 2/01/06 @ 100 S.F. $ 244,000
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. 285,600
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. 283,047
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. 165,724
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 Ranch Calif. A+ 8.250 8/15/09 @ 100 S.F. 253,298
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 130,188
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. 42,495
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 $ 1,404,352
=========== =========

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

<TABLE>

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

NEW YORK TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding(2)(7) Value(3)
- -- ----------- --------------------- ------ ------------ ---------------------- ---------

<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 Dorm. Auth. of the AAA 8.125% 7/01/08 @ 100 S.F. $ 541,260
State of N.Y. (City 7/01/2017 7/01/97 @ 102 Ref.
Univ.) Sys. Consol.
Rev. Bonds Series
1987A (5)

2 455,000 N.Y. Energy Rsrch. & AA2* 9.000 No Sinking Fund 476,035
Dev. Auth. Elec. Fac. 8/15/2020 8/15/95 @ 102 Ref.
Rev. Bonds 1985A (Con
Edison Co. of N.Y.
Inc. Prjt.)

3 460,000 N.Y. State Med. Care A 8.625 Currently @ 100 S.F. 471,679
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. 528,065
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. 456,453
Facs. Finc. Agncy. 1/15/2024 2/1/95 @ 101 Ref.
Nrsg. Home Insrd.
Mtg. Rev. Bonds 1984
Series B

6 405,000 N.Y. City Gen. Oblig. AAA 8.750 No Sinking Fund 446,338
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. 533,980
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. 521,060
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 364,529
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)

----------- ---------
$ 4,120,000 $ 4,339,399
=========== =========

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

MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

PENNSYLVANIA TRUST
Portfolio
December 31, 1994

<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-- Refunding(2)(7) Value(3)
- -- ----------- --------------------- ------ ------------ ---------------------- ---------

<S> <C> <C> <C> <C> <C> <C>
1 $ 65,000 Penn. State Pooled AAA 8.000% No Sinking Fund $ 65,341
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. 371,840
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. NR 10.000 7/01/97 @ 100 S.F. 266,786
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. A2* 9.375 No Sinking Fund 363,657
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 369,229
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 234,340
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)

----------- ---------
$ 1,595,000 $ 1,671,193
=========== =========

See accompanying footnotes to portfolios and notes to financial statements.
</TABLE>
<PAGE>
MUNICIPAL SECURITIES TRUST, MULTI-STATE SERIES 36

Footnotes to Portfolios

December 31, 1994

(1) All ratings are by Kenny S&P Evaluation Services, except for those
identified by an asterisk (*) which are by Moody's Investors Service,
Inc. A brief description of the ratings symbols and their meanings
is set forth under "Description of Bond Ratings" in Part B of this
Prospectus.

(2) See "The Trust - Portfolio" in Part B of this Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of
this Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.

(3) At December 31, 1994, the net unrealized depreciation of all the bonds
was comprised of the following:

California New York Pennsylvania
Trust Trust Trust

Gross unrealized appreciation $ 5,477 30,177
Gross unrealized depreciation (103,236) (161,852) (90,561)

Net unrealized depreciation $ (97,759) (131,675) (90,561)

(4) The annual interest income, based upon bonds held at December 31, 1994,
(excluding accretion of original issue discount on zero-coupon bonds)
to the Municipal Securities Trust, Multi-State Series 36 is $118,057,
$366,876 and $145,957 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, 1994 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.

<PAGE>

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 28, 1995

THE TRUST

Organization

"Municipal Securities Trust," Multi-State Series (the "Trust")
consists of several separate "unit investment trusts," which may include
California Trust, Florida Trust, New York Trust, Pennsylvania Trust and/or
Virginia 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 the Trust Indenture and Agreement* (collectively, the "Trust
Agreement"), dated the Date of Deposit, among Bear, Stearns & Co. Inc., as
Sponsor, or depending on the particular Trust, among Bear Stearns & Co. Inc.
and Gruntal & Co., Incorporated, as Co-Sponsors (the Sponsors or Co-Sponsors,
if applicable, are referred to herein as the "Sponsor"), Kenny S&P Evaluation
Services, a division of J.J. Kenny Co., Inc., as Evaluator, and, depending on
the particular 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.

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 "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
- --------
* 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.

82600.2

<PAGE>

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 tax-exempt bonds, which may include
deep "market" discount and original issue discount 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, currently
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. 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
"The Trust" and "Description of 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

-2-
82600.2

<PAGE>

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.

The health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could
result in (i) an early redemption of bonds, (ii) alteration of the facilities
financed by the Bonds or which secure the Bonds, (iii) a change in the tax
exempt status of the Bonds or (iv) an inability to produce revenues sufficient
to make timely payment of debt service on the Bonds.

Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in
the areas noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse change in these areas may affect
the ability of such issuers to make payment of principal and interest on such
bonds. See "Description of Portfolio" in Part A for the amount of hospital
revenue bonds contained therein.

Nuclear Power Facility Bonds. Certain Bonds may have been issued
in connection with the financing of nuclear generating facilities. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the
development and operation of nuclear generating facilities. The Sponsor is
unable to predict whether any such actions or whether any such proposals or
litigation, if enacted or instituted, will have an adverse impact on the
revenues available to pay the debt service on the Bonds in the portfolio
issued to finance such nuclear projects. See "Description of Portfolio" in
Part A for the amount of bonds issued to finance nuclear generating facilities
contained therein.

-3-
82600.2

<PAGE>

Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
provided as a general rule that interest on "mortgage subsidy bonds" will not
be exempt from Federal income tax. An exception is provided for certain
"qualified mortgage bonds." Qualified mortgage bonds are bonds that are used
to finance owner-occupied residences and that meet numerous statutory
requirements. These requirements include certain residency, ownership,
purchase price and target area requirements, ceiling residency, ownership,
purchase price and target area requirements, ceiling amounts for state and
local issuers, arbitrage restrictions and (for bonds issued after December 31,
1984) certain information reporting, certification, public hearing and policy
statement requirements. In the opinions of bond counsel to the issuing
governmental authorities, interest on all the Bonds in a Trust that might be
deemed "mortgage subsidy bonds" will be exempt from Federal income tax when
issued. See "Description of Portfolio" in Part A for the amount of mortgage
subsidy Bonds contained therein.

Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting certification, and public hearing requirements. There
can be no assurance that additional federal legislation will not be introduced
or that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bonds proceeds are not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds").
See "Description of Portfolio" in Part A for the amount of mortgage revenue
bonds contained therein.

Private Activity Bonds. The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial
Revenue Bonds ("IRBs") if issued prior to 1987) which would be primarily of
two types: (1) Bonds for a publicly owned facility which a private entity may
have a right to use or manage to some degree, such as an airport, seaport
facility or water system and (2) facilities deemed owned or beneficially owned
by a private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first type,
receipts or revenues of the issuer are derived from the project or the
operator or from the unexpended proceeds of the bonds. Such revenues include
user fees, service charges, rental and lease payments, and mortgage and other
loan payments.

The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of
the project or corporate guarantor.

-4-
82600.2

<PAGE>

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.

Legal Proceedings Involving the Trusts. The Sponsor has not been
notified or made aware of any litigation pending with respect to any Bonds
which might reasonably be expected to have a material effect on the State
Trusts other than that which is discussed under "The State Trusts" herein.
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 State Trusts, 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 State 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

-5-
82600.2

<PAGE>

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.

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."

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 1993, approximately 86% of Puerto Rico's exports
were to the United States mainland, which was also the source of 69% of Puerto
Rico's imports. In fiscal 1993, Puerto Rico experienced a $2.5 billion
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
1993, aggregate personal income was $24.1 billion ($20.6 billion in 1987
prices) and personal income per capita was $6,760 ($5,767 in 1987 prices).
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

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basis in Puerto Rico than in any state. Transfer payments to individuals in
fiscal 1993 were $5.3 billion, of which $3.6 billion, or 67.6%, 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 1993. Unemployment, although at the lowest level since the late
1970s, remains above the average for the United States. In fiscal 1994, the
unemployment rate in Puerto Rico was 15.9%. Puerto Rico's decade long economic
expansion continued through fiscal 1993. 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 $20.07 billion in fiscal 1993, or 3.1% above the fiscal 1992
level. The Puerto Rico Planning Board's economic activity index, a composite
index for thirteen economic indicators, increased .6% in fiscal 1994, compared
to fiscal 1993, which period showed an increase of 1.4% over the same period
in fiscal 1992. Growth in the Puerto Rico economy in fiscal 1995 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 accreted value based on par value at maturity.
Because the issuer is not obligated to make current interest payments, Zero
Coupon Bonds may be less likely to be redeemed than coupon bonds issued at a
similar interest rate. 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

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comparable bond newly issued at current market rates. Gain on the disposition
of a Bond purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market discount.
Discount bonds with a longer term to maturity tend to have a higher current
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

The Sponsor believes the information summarized below describes
some of the more significant events relating to the State Trusts. Sources of
such information are the official statements of the issuers located in the
states of the State Trusts which have been issued in connection with debt
offerings by such states, as well as other publicly available documents and
information. While the Sponsor has not independently verified such
information, it has no reason to believe it is not correct in all material
respects.

California Trust

California Risk Factors

Because the California Trust invests in California issues, it is
susceptible to political, economic, regulatory or other factors affecting
issuers of California municipal securities. The following information is drawn
from offering documents of California issuers, primarily those of the State of
California (the "State") and constitutes only a brief summary of a number of
the complex factors which may have an impact on issuers of California
municipal securities. It 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 California 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 California 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.

Bonds in the California Trust include primarily debt obligations
of the State 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 obligations 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, 1993 population of almost 32
million represents more than 12.0 percent of the total United States

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population. Total employment is about 14.0 million, the majority of which is
in the service, trade and manufacturing sectors.

Recent California Economic Trends. From mid-1990 to late 1993, the
State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. Construction, manufacturing (especially
aerospace), and financial services, among others, were all severely affected.
Job losses were the worst of any post-war recession. Employment levels
stabilized by late 1993 and steady growth occurred in 1994 and is expected to
continue in 1995, but pre-recession job levels are not expected to be reached
until late 1996. Economic indicators show a steady recovery underway in the
State since the start of 1994.

The recession seriously affected State tax revenues, which
basically mirror economic conditions. It also caused increased expenditures
for health and welfare programs. The State has also been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund--K-12 schools and community colleges, health and welfare, and
corrections--growing at rates higher than the growth rates for the principal
revenue sources of the State General Fund. As a result, the State experienced
recurring budget deficits in the late 1980s and early 1990s. The State
Controller reports that expenditures exceeded revenues for four of the five
fiscal years ending with 1991-92; revenues and expenditures were equal in
1992-3, and the State had an operating surplus of $1.1 billion in 1993-94.
However, at June 30, 1994, according to the Department of Finance, the State's
Special Fund for Economic Uncertainties still had an accumulated deficit, on a
budget basis, of approximately $1.5 billion.

Orange County Bankruptcy. On December 6, 1994, Orange County,
California (the "County"), together with its pooled investment funds (the
"Funds") filed for protection under Chapter 9 of the federal Bankruptcy Code,
after reports that the Funds had suffered significant market losses in their
investments, causing a liquidity crisis for the Funds and the County. More
than 180 other public entities, most of which, but not all, are located in the
County, were also depositors in the Funds. As of mid-January, 1995, following
a restructuring of most of the Funds' assets to increase their liquidity and
reduce their exposure to interest rate increases, the County estimated the
Funds' loss at about $1.69 billion, or 22% of their initial deposits of
approximately $7.5 billion. Many of the entities which deposited moneys in the
Funds are facing cash flow difficulties because of the bankruptcy filing and
may be required to reduce programs or capital projects. This may also affect
the ability of these entities to meet their outstanding obligations.

The State has no existing obligation with respect to any
outstanding obligations or securities of the County or any of the other
participating entities. However, in the event the County is unable to maintain
County administered State programs because of insufficient resources, it may
be necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur. At this time, it appears that school
districts may have collectively lost up to $230 million from the amounts they
had on deposit in the Funds. Under existing legal precedent, the State is
obligated to intervene when a school district's fiscal problems would
otherwise deny its students basic educational quality.

National Economic Trends. The U.S. economic expansion gained
momentum in 1994, posting growth in real gross domestic product (GDP) of close
to 4 percent, following a gain of 3.1 percent in 1993. Inflation remained
subdued at slightly over 2 percent, as measured by the GDP implicit price
deflator, little changed from 1993's 2.2 percent rate. Fixed investment--both
in housing and business equipment--was the leading growth sector in 1994,
posting a double-digit percentage gain last year. Consumer spending increased

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<PAGE>

about 3 1/2 percent in real terms--slightly less than overall GDP growth--
while net exports and government purchases both declined in the year.

Reflecting the growth in real GDP, the nation's labor markets
tightened considerably over the course of the year. Nonfarm wage and salary
employment increased by 3.3 million or 3 percent between November 1993 and
1994. The U.S. unemployment rate dropped from 6.7 percent in January to 5.6
percent in November 1994. The unemployment figure is based on a new survey of
households and is not strictly comparable to prior readings. It is believed,
however, that the new unemployment figures are running about one-half
percentage point higher than would have been the case using the old survey.
Thus based on historically comparable data, the current jobless rate is
probably in the region of 5 percent.

Concerns over the rapid pace of economic growth, and the
possibility of future inflation, were reflected in the nation's credit
markets. Interest rates rose throughout 1994, as the Federal Reserve Board
("Fed") boosted its target rate for Federal funds (overnight money traded
among banks) from 3 percent in January 1994 to 5.5 percent at year end. Longer
term interest rates, such as the U.S. Treasury's 30-year bond, rose in yield
from 6.3 percent in January to over 8 percent by early autumn, before falling
back to the 7.8 percent area in December.

Despite these credit market worries, inflation remained a threat
rather than a realty in 1994. The broadest measures of inflation averaged near
the 2 percent reading for the implicit price deflator, ranging from a little
over 2 1/2 percent for consumer prices to less than 1 percent for finished
goods at the wholesale level. Nor was there any evidence of acceleration in
labor costs, which rose less than 3 1/2 percent including both wages and
employee benefits.

California Economy. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability, a
recovery is now underway. The State's unemployment rate fell last year, from
10.1 percent in January to 7.7 percent in October and November. The gap
between the national and California jobless rates narrowed from 3.4 percentage
points at the beginning of 1994 to an average of 2 percentage points in
October and November. The number of unemployed Californians fell by nearly
400,000 during the year, while civilian employment increased more than
300,000.

Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's recovery.
U.S. Department of Commerce survey data show retail sales up over 8 percent in
September and October 1994 from year-earlier data. Information from major
credit card companies and the leading check verification service suggest that
holiday-season sales growth in California out-paced the national performance.
Despite rising interest rates, existing home sales were up 18 percent through
the first 10 months of 1994, while permits to build new homes rose 16 percent
over the same period. Nonresidential construction has stabilized, and office
occupancy rates are moving up in most areas. Commercial lending by the State's
major banks is also on the rise after a three-year decline.

Personal income was severely affected by the January 1994
earthquake in Southern California (the "Northridge Earthquake") which reduced
the first quarter 1994 figure by $22 billion at an annual rate, reflecting the
uninsured damage to residences and unincorporated businesses. As a result,
personal income growth for all of 1994 was about 4.2 percent. However,
excluding the Northridge Earthquake effects, growth would have been in excess
of 5 percent.

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Only the nonfarm wage and salary employment figures have yet to
confirm this recovery. Federal figures indicate that jobs reached a low in
December 1993 and have shown little growth since then (although the November
1994 figure was up slightly from the year-earlier level). However, State
payroll tax data, the basis for the March 1995 revision in the California
Employment Development Department's ("EDD") wage and salary job figures, paint
a different picture. These tax-based data, reflecting the entire universe of
employers, indicate that employment bottomed in the spring of 1993, and after
a period of stability, began a sustained recovery later that year. Based on
preliminary second quarter payroll tax data, the Department of Finance
estimates that employment grew by more than 150,000 last year.

Payroll tax data indicate employment growth is concentrated in
services, construction, and wholesale and retail trade. Manufacturing
continues to be affected by Federal defense spending cuts and the weak market
for commercial aircraft. Aerospace (aircraft, missiles and space equipment and
search and navigation instruments) lost 36,000 jobs last year, and employment
is now down by more than half from the 1988 peak. Electronics has stabilized
and is showing some growth, particularly in the components industry. Excluding
these high-technology industries, manufacturing is now posting small
employment gains.

Many of the new jobs in the service-producing sector are in high-
wage industries, including motion pictures, business services (which includes
computer software and consulting), and engineering and management consulting.
Much of the growth in wholesale trade is related to foreign trade. Dollar
volumes through California ports were up an estimated 16 percent last year,
considerably above the nationwide gain of about 9 percent. Job gains in these
high-wage service industries are helping to cushion the ongoing losses in
aerospace.

Housing, which normally suffers when interest rates rise, may
experience a setback. However, homebuilding in the State has continued to
recover despite the 2 1/2 percentage-point rise in fixed rate mortgages since
late 1993. Job growth seems to be the key: in a reversal of traditional roles,
the rest of the State's economy is pulling housing out of the doldrums.

Inflation in California, which has traditionally run slightly
above the national average, is now lagging the U.S. The California consumer
price index (a weighted average of published indexes for the five-county Los
Angeles and ten-county San Francisco Bay regions) averaged only a 1 1/2
percent rise last year, compared to a 2.7 percent estimate for the nation. In
1995 and 1996, the California price measure should average 3 percent annual
increases, still below the expected national pace of 3 1/2 percent.
Subtracting inflation from the rise in personal income, real incomes rose 2.7
percent last year, and without the Northridge Earthquake the gain would have
been 3.5 percent. In both 1995 and 1996, real income growth is expected to
exceed 3 percent.

Recent Events. The Department of Finance Bulletin for February,
1995 reports that the State's unemployment rate rose slightly to 8.2 percent
in January from 7.7 percent in December, after dropping dramatically over the
course of last year. Heavy rainfall and widespread flooding throughout the
State in mid-January were at least partially responsible for the weakness in
the January report. Despite this slight rise in January unemployment, the
pattern of economic recovery in California that has been evident over the last
year appears to be continuing.

Retail sales continued to gain momentum throughout 1994. Sales in
October and November were up 8.2 and 9.2 percent, respectively--outpacing
national sales gains in both months. Sales in total for 1994 appear destined
to show the largest gain since the recession began in 1990. Motor vehicle

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registration data indicate that new car and light truck sales were an
important component of the sales growth--up 6.7 percent in the fourth quarter
of 1994. Annual auto sales growth of 3.7 percent exceeded any year since 1986.

New home construction continued to improve despite rising
long-term mortgage rates. Residential building permits for November and
December combined were up 13 percent from the prior-year level. Growth in
resales of existing homes slowed from the strong pace early in the year;
however, resales in October remained at a respectable 470,000 unit annual
rate. Nonresidential construction has also begun to show signs of improvement.
The value of nonresidential construction permits rose three percent during
1994--the first annual increase since 1988.

The Mexican currency crisis is expected to have some mild
dampening effect on the California economy. The peso's devaluation will make
California exports much more expensive in Mexican markets. Although the
economic impact of this is unknown, an export reduction of 20 percent would
reduce trade by approximately $1.5 billion. This represents less than two
percent of all exports through California ports. San Diego, however, is likely
to be more severely affected due to substantial reductions in cross-border
traffic.

The State. Since 1986, the State has experienced a series of
fiscal years in which revenue came in significantly higher or lower than
original estimates. The 1989-90 Fiscal Year ended with revenues below
estimates, so that the State's budget reserve (the Special Fund for Economic
Uncertainties or "SFEU") was fully depleted by June 30, 1990. This date
essentially coincided with the start of the current recession, and the State
has subsequently accumulated a budget deficit in the SFEU approaching $2.8
billion at its peak. The State's budget problems in recent years have also
been caused by a structural imbalance which has been identified by the current
and previous Administrations. The largest General Fund Programs--K-12
education, health, welfare and corrections--were increasing faster than the
revenue base, driven by the State's rapid population increases. Starting in
the 1990-91 Fiscal Year, each budget required multibillion dollar actions to
bring projected revenues and expenditures into balance and to close large
"budget gaps" which were identified.

1993-94 Fiscal Year. The 1993-94 Budget Act was signed by the
Governor on June 30, 1993, along with implementing legislation.

The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenue were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales tax,
a deferral of operating loss carryforwards, and repeal by initiative of a
sales tax on candy and snack foods.

Administration reports during the course of the 1993-94 Fiscal
Year indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer than
had been anticipated when the 1993-94 Budget Act was adopted. Overall,
revenues for the 1993-94 Fiscal Year were about $800 million lower than
original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property taxes
which required greater State support for K-12 education to make up the
shortfall, and lower than anticipated federal government payments for
immigration-related costs. The reports in May and June, 1994, indicated that
revenues in the second half of the 1993-94 Fiscal Year were very close to the

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projections made in the Governor's Budget of January 10, 1994, which was
consistent with a slow turnaround in the economy.

The Department of Finance's July 1994 Bulletin, including the
final June receipts, reported that June revenues were $114 million (2.5
percent) above projection, with final end-of-year results at $377 million
(about 1 percent) above the May Revision projections. Part of this result was
due to end-of-year adjustments and reconciliations. Personal income tax and
sales tax continued to track projections very well. The largest factor in the
higher than anticipated revenues was from bank and corporation taxes, which
were $140 million (18.4 percent) above projection in June.

During the 1993-94 Fiscal Year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 maturing December
21, 1994. This borrowing reduced the cash deficit at the end of the 1993-94
Fiscal Year. Nevertheless, because of the $1.5 billion variance from the
original 1993-94 Budget Act assumptions, the General Fund ended the fiscal
year at June 30, 1994 carrying forward an accumulated deficit of approximately
$1.8 billion, as identified in the State Controller's General Fund Preliminary
Annual Report for Fiscal Year 1993-94.

Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the State
issued an additional $2.0 billion of revenue anticipation warrants, maturing
July 26, 1994, which were needed to fund the State's obligations and expenses
through the end of the 1993-94 Fiscal Year.

Northridge Earthquake. On January 17, 1994, a major earthquake
measuring an estimated 6.8 on the Richter Scale struck Los Angeles.
Significant property damage to private and public facilities occurred in a
four-county area including northern Los Angeles County, Ventura County, and
parts of Orange and San Bernardino Counties. These areas were declared as
State and federal disaster areas by January 18. Current estimates of total
property damage (private and public) are in the range of $20 billion, but
these estimates are subject to change.

Despite such damage, on the whole, the vast majority of structures
in the areas, including large manufacturing and commercial buildings and all
modern high-rise offices, survived the earthquake with minimal or no damage,
validating the cumulative effect of strict building codes and thorough
preparation for such an emergency the State and local agencies.

Damage to State-owned facilities included transportation corridors
and facilities such as Interstate Highways 5 and 10 and State Highways 14, 118
and 210. Most of the major highways (Interstates 5 and 10) have now been
reopened. The campus at California State University-Northridge (very near the
epicenter) suffered an estimated $350 million damage, resulting in temporary
closure of the campus. The campus has reopened on a reduced operating basis
using borrowed facilities elsewhere in the area and many temporary structures.
Overall, except for the temporary road and bridge closures, and CSU-
Northridge, the earthquake did not and is not expected to significantly affect
state government operations.

The President immediately allocated some available disaster funds,
and Congress has approved additional funds for a total of at least $9.5
billion of federal funds for earthquake relief, including assistance to
homeowners and small businesses, and costs for repair of damaged public
facilities. The Governor originally proposed that the State pay about $1.9
billion for earthquake relief costs, including a 10 percent match to some of
the federal funds, and costs for some programs not covered by the federal aid.

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The Governor proposed to cover $1.05 billion of these costs from a general
obligation bond issue which was on the June 1994 ballot, but was not approved
by the voters. The Governor subsequently announced that the State's share for
transportation projects would come from existing Department of Transportation
funds (thereby delaying other, non-earthquake related projects), that the
State's share for certain other costs (including local school building
repairs) would come from reallocating existing bond funds, and that a proposed
program for homeowner and small business aid supplemental to federal aid would
have to be abandoned. Some other costs are being borrowed from the federal
government in a manner similar to that used by the State of Florida after
Hurricane Andrew; repayment will be addressed in 1995-96 and beyond.

1994-95 Budget Act. The 1994-95 Fiscal Year represents the fourth
consecutive year the Governor and Legislature were faced with a very difficult
budget environment to produce a balanced budget. Many program cuts and
budgetary adjustments have already been made in the last three years. The
Governor's Budget Proposal, as updated in May and June, 1994, recognized that
the accumulated deficit could not be repaid in one year, and proposed a
two-year solution. The budget proposal sets forth revenue and expenditure
forecasts and revenue and expenditure proposals which result in operating
surpluses for the budget for 1994-95, and lead to the elimination of the
accumulated budget deficit, estimated at about $2.0 billion at June 30, 1994,
by June 30, 1996.

The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was a projected receipt of
about $360 million from the Federal Government to reimburse the State's cost
of incarcerating undocumented immigrants.

Pursuant to legislation (the "Budget Adjustment Law"), the State
Controller was required to make a report by November 15, 1994 on whether the
projected cash resources for the State's General Fund as of June 30, 1995 will
decrease more than $430 million from the amount projected by the State in its
Official Statement in July, 1994 for the sale of $4,000,000,000 of Revenue
Anticipation Warrants. On November 15, 1994, the State Controller issued the
report on the State's cash position required by the Budget Adjustment Law. The
report indicated that the cash position of the General Fund on June 30, 1995
would be $581 million better than was estimated in the July, 1994 cash flow
projections and therefore, no budget adjustment procedures will be invoked for
the 1994-95 Fiscal Year.

The State Controller's report identified a number of factors which
have led to the improved cash position of the State. Estimated revenues and
transfers for the 1994-95 Fiscal Year other than federal reimbursement for
immigration costs were up about $650 million. The largest portion of this was
in higher bank and corporation tax receipts, but all major tax sources were
above original projections. However, most of the federal immigration aid
revenues projected in connection with the 1994-95 Budget Act and in the July,
1994 cash flows will not be received, leaving a net increase in revenues of
$322 million.

On the expenditure side, the State Controller reported that
estimated reduced caseload growth in health and welfare programs, reduced
school enrollment growth, and an accounting adjustment reducing a transfer
from the General Fund to the Special Fund for Economic Uncertainties resulted
in overall General Fund expenditure reductions (again before adjusting for
federal aid) of $672 million. However, the July, 1994 cash flow projected that
General Fund health and welfare and education expenditures would be offset by
the anticipated receipt of $407 million in federal aid for illegal immigrant
costs. The State Controller now estimates that none of these funds

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will be received, so the net reduction in General Fund expenditures is $265
million.

Finally, the State Controller indicated that a review of balances
in special funds available for internal borrowing resulted in an estimated
reduction of such borrowable resources of $6 million. The combination of these
factors results in the estimated improvement of the General Funds cash
position of $581 million. The State Controller's revised cash flow projections
for 1994-95 have allocated this improvement to two line items: an increase
from $0 to $427 million in the estimated ending cash balance of the General
Fund on June 30, 1995, and an increase in unused borrowable resources of $154
million.

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.

The 1995-96 Governor's Budget, issued January 10, 1995, contains a
reforecast of revenues and expenditures for the 1994-95 Fiscal Year. See
"Revenue and Expenditure Assumptions," below. The Department of Finance
Bulletin for February, 1995 reports that General Fund revenues for January
were $240 million above the 1995-96 Governor's Budget forecast of $4,025
million. The largest component of the increase is attributable to cash flow
factors in the sales and use tax, which were $297 million above the month's
forecast of $809 million. Additionally, personal income tax receipts were $80
million below the month's forecast of $2,845 million, and bank and corporation
receipts were $18 million below the month's forecast of $211 million. Neither
loss is considered significant at this time. Finally, miscellaneous revenues
were $42 million above the month's forecast of $160 million. Most of the
surplus is attributable to "other revenues," which are a composite of many
minor revenues. At this time, the gains in miscellaneous revenues appear to be
related to cash flow and are not considered permanent.

Initial analysis of the federal Fiscal Year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act. Because of timing considerations in applying for these
federal funds, the Department estimates that about $33 million of these funds
will be received during the State's 1994-95 Fiscal Year, with the balance
received in the following fiscal year. It does not appear that the federal
budget contains any of the additional $400 million in funding for refugee
assistance and health costs which were also assumed in the 1994-95 Budget Act,
but the Department expects the State to continue its efforts to obtain some or
all of these federal funds.

The 1995-96 Budget will be subject to the Budget Adjustment or
"Trigger" legislation enacted in June, 1994. The Proposed Budget contains a
cash flow projection (based on all the assumptions described above) which
shows about $1 billion of unused borrowable resources at June 30, 1996,
providing this amount of "cushion" before the budget "trigger" would have to
be invoked.

However, a report issued by the Legislative Analysis in February
1995 notes that the Proposed Budget (and hence the margin of cushion under the
"trigger") is subject to a number of major risks, including receipt of the
expected federal immigration aid and other federal actions to allow health and
welfare cuts, and the outcome of several lawsuits concerning previous budget
actions which the State has lost at the trial court level, and which are under
appeal. This Analyst's Report also estimates that, despite more favorable
revenues, the two-year budget estimates made in July, 1994 are about $2

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billion out of balance, principally because federal immigration aid appears
likely to be much lower than previously estimated.

Constitutional and Statutory Limitations; Recent Initiatives;
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% 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% 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%) 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.

Article XIIIB of the California Constitution limits the amount of
appropriations of the State and of local governments to the amount of
appropriations of the entity for the prior year, adjusted for changes in the
cost of living, population and the services that the local government has
financial responsibility for providing. To the extent the revenues of the
state and/or local government exceed its appropriations, the excess revenues
must be rebated to the public either directly or through a tax decrease.
Expenditures for voter-approved debt services are not included in the
appropriations limit.

In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) required that any tax for general
governmental purposes imposed by local governments be approved by a majority
of the electorate of the government entity, (ii) required that any special tax
(defined as taxes levied for other than general government purposes) imposed
by a local government entity be approved by a two-thirds vote of the voters
within that jurisdiction, (iii) restricted the use of revenues from a special
tax to the purposes or for the service for which the special tax is imposed,
(iv) prohibited the imposition of ad valorem taxes on real property by local
government entities except as permitted by Article XIIIA, (v) prohibited the
imposition of transaction taxes and sales taxes on the sale of real property
by local governments, (vi) required that any tax imposed by a local government
on or after August 1, 1985 be ratified by a majority vote of the electorate
within two years of the adoption of the initiative or be terminated by
November 15, 1988, (vii) required that, in the event a local government fails
to comply with the provisions of this measure, a reduction in the amount of
property tax revenues allocated to such local government occur in an amount
equal to the revenues received by such entity attributable to the tax levied
in violation of the initiative, and (viii) permitted those provisions to be
amended exclusively by the voters of the State of California. While several
recent decisions of the California Courts of Appeal have held that all or
portions of Proposition 62 are unconstitutional, the California Supreme Court
has yet to consider the matter.

In 1988, California voters approved an initiative known as
Proposition 98. This initiative amends Article XIIIB to require that (i) the
California legislature establish a prudent state reserve fund in an amount as
it shall deem reasonable and necessary and (ii) revenues in excess of amounts
permitted to be spent and which would otherwise be returned pursuant to

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Article XIIIB by revision of tax rates or fee schedules, be transferred and
allocated (up to a maximum of 40%) to the State School Fund and be expended
solely for purposes of instructional improvement and accountability.
Proposition 98 also amends Article XVI to require that the State of California
provide a minimum level of funding for public schools and community colleges.
Commencing with the 1988-89 fiscal year, money to be applied by the State for
the support of school districts and community college districts shall not be
less than the greater of: (i) the amount which, as a percentage of the State
general fund revenues which may be appropriated pursuant to Article XIIIB,
equals the percentage of such State general fund revenues appropriated for
school districts and community college districts, respectively, in fiscal year
1986-87 or (ii) the amount required to ensure that the total allocations to
school districts and community college districts from the State general fund
proceeds of taxes appropriated pursuant to Article XIIIB and allocated local
proceeds of taxes shall not be less than the total amount from these sources
in the prior year, adjusted for increases in enrollment and adjusted for
changes in the costs of living pursuant to the provisions of Article XIIIB.
The initiative permits the enactment of legislation, by a two-thirds vote, to
suspend the minimum funding requirement for one year. As a result of
Proposition 98, funds that the State might otherwise make available to its
political subdivisions may be allocated instead to satisfy such minimum
funding level.

Proposition 187. On November 8, 1994, California voters approved a
state-wide initiative entitled "Illegal Aliens Ineligibility for Public
Services Verification and Reporting Initiative Statute" ("Proposition 187").
Proposition 187 makes persons with foreign citizenship who have entered
California illegally ineligible for public social services, public health care
services (unless an emergency), and public school education at elementary,
secondary and post-secondary levels. The United States Immigration and
Naturalization Service ("INS") estimates that currently there are over 1.5
million illegal immigrants in California. Further, Proposition 187 requires
every school district to verify the status of every child enrolling for the
first time on and after January 1, 1995. By January 1, 1996, every school
district will be required to have verified the legal status of every child
enrolled in the school district as well as the parents and guardians of those
students. If a district "reasonably suspects" that a student, parent or
guardian is not legally in the United States, such district must report the
student to the United States Immigration and Naturalization Service and
certain other parties. The measure also prohibits a school district from
providing education to a student it does not verify as either a United States
citizen or a person legally admitted to the United States.

The California Legislative Analyst estimates that verification
costs could be in the tens of millions of dollars on a statewide level
(including verification costs incurred by other local governments under
Proposition 187) with first-year costs potentially in excess of $100 million.
The California Legislative Analyst also estimates that approximately 300,000
students in the California public education system are illegal immigrants.

It is possible that for every student a school district would be
forced to exclude under Proposition 187, it may lose a portion of the State
revenues it receives annually. Additionally, school districts must comply with
a variety of federal laws in order to receive federal funds. Both the
exclusion of students and the verification and reporting requirements of
Proposition 187 appear to be at odds with various federal and State laws. The
reporting requirements specifically may violate the Family Educational Rights
and Privacy Act ("FERPA") which generally prohibits schools that receive
federal funds from disclosing information in student records without parental
consent. Compliance with FERPA is a condition of receiving federal education
funds, which total $2.3 billion annually to California school districts. The
Secretary of the U.S. Department of Education has indicated that the reporting

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requirement in Proposition 187 could jeopardize the ability of school
districts to receive these funds.

The United States Supreme Court in Plyler v. Doe held that access
to public education must be granted to all children. According to the State
Legislative Analyst, the exclusion of illegal immigrant children as set forth
in Proposition 187 is in direct conflict with Plyler v. Doe. Unless the
Supreme Court alters the position it took in Plyler v. Doe, the provision of
Proposition 187 mandating the exclusion of illegal immigrant children appears
likely to be struck down. Even assuming an effective challenge regarding
exclusion of students, it is possible that school districts might still bear
the financial burden of verifying the legal status of its students and
reporting that status to the INS as well as a loss of federal funds as
discussed above.

Opponents of Proposition 187 have filed at least eight lawsuits
challenging the constitutionality and validity of the measure. A United States
District Court judge overseeing four of the lawsuits has granted a preliminary
injunction enjoining the implementation of most of the provisions of
Proposition 187.

Article XIIIA, Article XIIIB and a number of propositions have
been adopted pursuant to California's constitutional initiative process. From
time to time, other initiative measures could be adopted by California voters.
The adoption of any such initiatives may cause California issuers to receive
reduced revenues, or to increase expenditures, or both.

Pending Litigation. In Hayes v. Commission on State Mandates,
described on page B-63 of Appendix B, the Court of Appeal issued its decision
on December 31, 1992 remanding the case to the Commission on State Mandates.
The court held that the federal law (Education of the Handicapped Act)
constitutes a federal mandate as to the State, and further that federal and
state mandates are not mutually exclusive. The remaining issue is whether new
special education costs were imposed upon local school districts by federal
mandate or by state choice in the implementation of the federal program. The
California Supreme Court has denied review of the Court of Appeal's decision.
The matter has been remanded to the Commission on State Mandates for findings.

In the Yuba River flood litigation in which the State is a
defendant in a coordinated action, the trial court has found liability in
inverse condemnation and awarded damages of $500,000 to 12 sample plaintiffs.
Potential liability to the remaining 3,000 plaintiffs, from claims filed,
ranges from $800 million to $1.5 billion. An appeal has been filed.

In Parr v. State of California, the federal district court issued
an order on March 1, 1995, withdrawing its December 1992 order which found
that payment of wages with registered warrants violated the Fair Labor
Standards Act. Further proceedings are undetermined at this time. The maximum
amount of damages could be approximately $500 million.

In Penny Newman v. J.B. Stringfellow, et al., 17 of the 3,800
plaintiffs have litigated their claims; in half of these cases plaintiffs'
verdicts in the total amount of $159,000 were received and in the remaining
cases verdicts were rendered for the State. The other cases, which have not
been litigated, are in the process of settlement. In a separate suit, United
States, People of the State of California v. J.B. Stringfellow Jr. et al., the
State has been found liable by the District Court on the counterclaim. The
amount of liability is still being litigated.

The State recently lost several tax refund cases concerning the
method of determining gross insurance premiums involving health insurance. The
loss to the State will be approximately $200 million.

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Several lawsuits have been filed by Malibu Video Systems in State
and Federal court to challenge the transfer of moneys from special fund
accounts within the State Treasury to the State's General Fund pursuant to the
Budget Acts of 1991, 1992 and 1993. Plaintiffs seek to have the transfers
reversed and the moneys, allegedly totaling approximately $800 million,
returned to the special funds.

A federal Court of Appeals in the case of Deanna Beno, et al. v.
Donna Shalala, et al., reversing a trial court ruling in favor of the State,
recently determined that the Secretary of the United States Department of
Health and Human Services violated the federal Administrative Procedure Act
when she approved California's Assistance Payment Demonstration Project,
which, in part, granted California a waiver from complying with requirements
for state participation in the federal program for medical assistance
(Medicaid). The waiver had allowed California to reduce payments under the Aid
to Families with Dependent Children program (AFDC) below 1988 payment levels
without jeopardizing Medicaid requirements relating to maintenance of AFDC
payment levels. The Court of Appeals remanded the case to the trial court with
instructions to remand the demonstration project to the Secretary for
additional consideration of objections raised by the plaintiffs. The State has
submitted a renewed waiver request to the Secretary, which is currently
pending. The effect of the court's decision on California is uncertain at this
time.

One of the features of the 1994-95 Budget Act is a 2.3 percent
reduction in AFDC payments. In Welch v. Anderson, on August 19, 1994, the San
Francisco Superior Court issued a preliminary injunction against the
California Director of Social Services to prevent the 2.3 percent AFDC cuts
from becoming effective September 1, 1994. While September cuts were already
in process and could not be halted, the court ordered the cuts to be restored.
The case has been appealed, and the effect of the court's order cannot be
determined until the appellate process is complete.

The State is a respondent/defendant in two consolidated cases
(American Lung Association of California v. Wilson; Americans for Nonsmokers'
Rights v. State of California) challenging the purposes of specific
appropriations of funds totaling approximately $65 million for Fiscal Year
1994-95 and approximately $68 million for Fiscal Year 1995-96 from the
Cigarette and Tobacco Products Surtax Fund created by Proposition 99. The
petitioners/plaintiffs argue that the funds can only used for health education
and tobacco-related disease research programs. The appropriations primarily
fund health care services for low-income persons. On January 23, 1995, the
Superior Court issued an interim order in the consolidated cases prohibiting
the State from further encumbering the specifically appropriated funds and
from issuing or negotiating warrants from the appropriated funds. A final
order is expected to be issued after a further hearing on the remedy to be
granted. The effect on the General Fund is unclear. A third lawsuit
challenging the similar appropriations of Proposition 99 funds for Fiscal
Years 1989-90 through 1995-96 has been filed and is pending.

In the case of Board of Administration, California Public
Employees' Retirement System, et al. v. Pete Wilson, Governor, et al.,
plaintiffs challenged the constitutionality of legislation which deferred
payment of the State's employer contribution to the Public Employees'
Retirement System beginning in fiscal year 1992-93. On January 11, 1995, the
Sacramento County Superior Court entered a judgment finding that the
legislation unconstitutionally impaired the vested contract rights of PERS
members. The judgment provides for issuance of a writ of mandate directing
State defendants to disregard the provisions of the legislation, to implement
the statute governing employer contributions that existed before the changes
in the legislation found to be constitutional, and to transfer to PERS the

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1993-94 and 1994-95 contributions that are unpaid to date. The State
defendants have appealed.

In Jernigan & Burleson v. State, filed in federal district court,
the prison inmate plaintiffs claim they are entitled to minimum wages while
working for the Prison Industry Authority. The inmates claim the State has
violated the Fair Labor Standards Act. Plaintiffs are seeking back pay for the
period from August 1990 onward, and liquidated damages, for a total of
approximately $350 million. Both liability and damages are being contested by
the State.

Other California issuers are subject to litigation which may in
the event of an adverse ruling affect the finances of such issuer.

Florida Trust

Florida Risk Factors

The State Economy. In 1980 the State of Florida (the "State")
ranked seventh among the fifty states with a population of 9.7 million people.
The State has grown dramatically since then and, as of April 1, 1993, ranked
fourth with an estimated population of 13.6 million, an increase of
approximately 44.7% since 1980. Since 1983 migration has been fairly steady
with an average of 292,988 new residents each year. Since 1983 the prime
working age population (18-44) has grown at an average annual rate of 2.6%.
The share of Florida's total working age population (18-59) to total state
population is approximately 54%. Non-farm employment has grown by
approximately 64% since 1980. The service sector is Florida's largest
employment sector, presently accounting for 32.6% of total non-farm
employment. Manufacturing jobs in Florida are concentrated in the area of
high-tech and value added sectors, such as electrical and electronic equipment
as well as printing and publishing. Job gains in Florida's manufacturing
sector have exceeded national averages, increasing by 11.7% between 1980 and
1993. Foreign trade has contributed significantly to Florida's employment
growth. Florida's dependence on highly cyclical construction and construction
related manufacturing has declined. Total contract construction employment as
a share of total non-farm employment has fallen from 10% in 1973, to 7% in
1980, to 5% in 1993. Although the job creation rate for the State of Florida
since 1980 is over two times the rate for the nation as a whole, since 1989
the unemployment rate for the State has risen faster than the national
average. The average rate of unemployment for Florida since 1980 is 6.5%,
while the national average is 7.1%. Because Florida has a proportionately
greater retirement age population, property income (dividends, interest and
rent) and transfer payments (social security and pension benefits) are a
relatively more important source of income. In 1993, Florida employment income
represented 62% of total personal income while nationally, employment income
represented 72% of total personal income.

The ability of the State and its local units of government to
satisfy the Debt Obligations may be affected by numerous factors which impact
on the economic vitality of the State in general and the particular region of
the State in which the issuer of the Debt Obligations is located. South
Florida is particularly susceptible to international trade and currency
imbalances and to economic dislocations in Central and South America, due to
its geographical location and its involvement with foreign trade, tourism and
investment capital. The central and northern portions of the State are
impacted by problems in the agricultural sector, particularly with regard to
the citrus and sugar industries. Short-term adverse economic conditions may be
created in these areas, and in the State as a whole, due to crop failures,
severe weather conditions or other agriculture-related problems. The State

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economy also has historically been somewhat dependent on the tourism and
construction industries and is sensitive to trends in those sectors.

The State Budget. The State operates under a biennial budget which
is formulated in even numbered years and presented for approval to the
Legislature in odd numbered years. A supplemental budget request process is
utilized in the even numbered years for refining and modifying the primary
budget. Under the State Constitution and applicable statutes, the State budget
as a whole, and each separate fund within the State budget, must be kept in
balance from currently available revenues during each State fiscal year. (The
State's fiscal year runs from July 1 through June 30.) The Governor and the
Comptroller of the State are charged with the responsibility of ensuring that
sufficient revenues are collected to meet appropriations and that no deficit
occurs in any State funds.

The financial operations of the State covering all receipts and
expenditures are maintained through the use of three types of funds: the
General Revenue Fund, Trust Funds and Working Capital Fund. The majority of
the State's tax revenues are deposited in the General Revenue Fund and moneys
in the General Revenue Fund are expended pursuant to appropriations acts. In
fiscal year 1992-94, expenditures for education, health and welfare and public
safety represented approximately 49%, 32% and 12%, respectively, of
expenditures from the General Revenue Fund. The Trust Funds consist of moneys
received by the State which under law or trust agreement are segregated for a
purpose authorized by law. Revenues in the General Revenue Fund which are in
excess of the amount needed to meet appropriations may be transferred to the
Working Capital Fund.

State Revenues. Estimated General Revenues and Working Capital
Fund and Budget Stabilization Funds revenue of $14,624.4 million for 1993-94
represent an increase of 5.7% over revenues for 1993-94. Estimated Revenue for
1994-95 of $13,858.4 million (excluding Hurricane Andrew impacts) represents
an increase of 7.9% over 1993-1994.

In fiscal year 1992-93, the State derived approximately 66% of its
total direct revenues for deposit in the General Revenue Fund, Trust Funds and
Working Capital Fund from State taxes. Federal grants and other special
revenues accounted for the remaining revenues. The greatest single source of
tax receipts in the State is the 6% sales and use tax. For the fiscal year
ended June 30, 1994, receipts from the sales and use tax totaled $10,012.5
million, an increase of approximately 6.9% over fiscal year 1992-93. This
amount includes non-recurring increases attributable to the rebuilding and
reconstruction following the hurricane. The second largest source of State tax
receipts is the tax on motor fuels including the tax receipts distributed to
local governments. Receipts from the taxes on motor fuels are almost entirely
dedicated to trust funds for specific purposes or transferred to local
governments and are not included in the General Revenue Fund. Preliminary data
for the fiscal year ended June 30, 1994, show collections of this tax totaling
$1,733.4 million.

The State currently does not impose a personal income tax.
However, the State does impose a corporate income tax on the net income of
corporations, organizations, associations and other artificial entities for
the privilege of conducting business, deriving income or existing within the
State. For the fiscal year ended June 30, 1994, receipts from the corporate
income tax totaled $1,047.4 million, an increase of approximately 23.7% from
fiscal year 1992-1993. The Documentary Stamp Tax collections totaled $775
million during fiscal year 1993-1994, or approximately 21.3% over fiscal year
1992-93. The Alcoholic Beverage Tax, an excise tax on beer, wine and liquor
totaled $139.8 million in fiscal year 1993-94. The Florida lottery produced
sales of $2.15 billion of which $816.2 million was used for education in
fiscal year 1993-94.

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While the State does not levy ad valorem taxes on real property or
tangible personal property, counties, municipalities and school districts are
authorized by law, and special districts may be authorized by law, to levy ad
valorem taxes. Under the State Constitution, ad valorem taxes may not be
levied by counties, municipalities, school districts and water management
districts in excess of the following respective millages upon the assessed
value of real estate and tangible personal property: for all county purposes,
ten miles; for all municipal purposes, ten miles; for all school purposes, ten
miles; and for water management purposes, either 0.05 miles or 1.0 miles,
depending upon geographic location. These millage limitations do not apply to
taxes levied for payment of bonds and taxes levied for periods not longer than
two years when authorized by a vote of the electors. (Note: one mile equals
one-tenth of one cent.)

The State Constitution and statues provide for the exemption of
homesteads from certain taxes. The homestead exemption is an exemption from
all taxation, except for assessments for special benefits, up to a specific
amount of the assessed valuation of the homestead. This exemption is available
to every person who has the legal or equitable title to real estate and
maintains thereon his or her permanent home. All permanent residents of the
State are currently entitled to a $25,000 homestead exemption from levies by
all taxing authorities, however, such exemption is subject to change upon
voter approval.

On November 3, 1992, the voters of the State of Florida passed an
amendment to the Florida Constitution establishing a limitation on the annual
increase in assessed valuation of homestead property commencing January 1,
1994, of the lesser of 3% or the increase in the Consumer Price Index during
the relevant year, except in the event of a sale thereof during such year, and
except as to improvements thereto during such year. The amendment did not
alter any of the millage rates described above.

Since municipalities, counties, school districts and other special
purpose units of local governments with power to issue general obligation
bonds have authority to increase the millage levy for voter approved general
obligation debt to the amount necessary to satisfy the related debt service
requirements, the amendment is not expected to adversely affect the ability of
these entities to pay the principal of or interest on such general obligation
bonds. However, in periods of high inflation, those local government units
whose operating millage levies are approaching the constitutional cap and
whose tax base consists largely of residential real estate, may, as a result
of the above-described amendment, need to place greater reliance on non-ad
valorem revenue sources to meet their operating budget needs.

State General Obligation Bonds and State Revenue Bonds. The State
Constitution does not permit the State to issue debt obligations to fund
governmental operations. Generally, the State Constitution authorizes State
bonds pledging the full faith and credit of the State only to finance or
refinance the cost of State fixed capital outlay projects, upon approval by a
vote of the electors, and provided that the total outstanding principal amount
of such bonds does not exceed 50% of the total tax revenues of the State for
the two preceding fiscal years. Revenue bonds may be issued by the State or
its agencies without a vote of the electors only to finance or refinance the
cost of State fixed capital outlay projects which are payable solely from
funds derived directly from sources other than State tax revenues.

Exceptions to the general provisions regarding the full faith and
credit pledge of the State are contained in specific provisions of the State
Constitution which authorize the pledge of the full faith and credit of the
State, without electorate approval, but subject to specific coverage
requirements, for: certain road projects, county education projects, State
higher education projects, State system of Public Education and construction

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of air and water pollution control and abatement facilities, solid waste
disposal facilities and certain other water facilities.

Local Bonds. The State Constitution provides that counties, school
districts, municipalities, special districts and local governmental bodies
with taxing powers may issue debt obligations payable from ad valorem taxation
and maturing more than 12 months after issuance, only (i) to finance or
refinance capital projects authorized by law, provided that electorate
approval is obtained; or (ii) to refund outstanding debt obligations and
interest and redemption premium thereon at a lower net average interest cost
rate.

Counties, municipalities and special districts are authorized to
issue revenue bonds to finance a variety of self-liquidating projects pursuant
to the laws of the State, such revenue bonds to be secured by and payable from
the rates, fees, tolls, rentals and other charges for the services and
facilities furnished by the financed projects. Under State law, counties and
municipalities are permitted to issue bonds payable from special tax sources
for a variety of purposes, and municipalities and special districts may issue
special assessment bonds.

Bond Ratings. General obligation bonds of the State are currently
rated Aa by Moody's Investors Service and AA by Standard & Poor's Corporation.

Litigation. Due to its size and its broad range of activities, the
State (and its officers and employees) are involved in numerous routine
lawsuits. The managers of the departments of the State involved in such
routine lawsuits believed that the results of such pending litigation would
not materially affect the State's financial position. In addition to the
routine litigation pending against the State, its officers and employees, the
following lawsuits and claims are also pending:

A. In a suit, plaintiff has sought title to Hugh Taylor Birch
State Recreation Area by virtue of a reverter clause in the deed from
Hugh Taylor Birch to the State. A final judgment at trial was entered in
favor of the State. The case has been appealed to the Fourth District
Court of Appeal. The Department of Natural Resources anticipates the
area will remain in State lands; however, in the event the court should
rule in favor of the plaintiff, the State is subject to a loss of real
property valued at approximately $400 million.

B. In a suit, the Florida Supreme Court prospectively invalidated
a tax preference methodology under former Sections 554.06 and 565.12 of
the Florida Statutes (1985). This ruling was appealed to the United
States Supreme Court which reversed the State Supreme Court and remanded
the matter back to the State court. The Supreme Court's opinion
suggested that one of the State's options for correcting the
constitutional problems would be to assess and collect back taxes at the
higher rates applicable to those who were ineligible for the tax
preference from all taxpayers who had benefitted from the tax preference
during the contested tax period. The State chose to seek a recovery of
taxes from those who benefitted from the tax preference by requiring
them to pay taxes at the higher rate that applied to out-of-state
manufacturers and distributors. The Florida Supreme Court remanded the
matter to the Circuit Court for the 2nd Judicial Circuit to hear
arguments on the method chosen by the State to provide a clear and
certain remedy. The trial court's decision against the State is on
appeal at the First District Court of Appeal. With the exception of two
parties, all parties have settled their claims with the State. Should an
unfavorable outcome result in this case, approximately $33 million may
be refunded.

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C. A class action suit brought against the Department of
Corrections, alleging race discrimination in hiring and employment
practices, originally went to trial in 1982 with the Department
prevailing on all claims except a partial summary judgment to a
plaintiff sub-class claiming a discriminatory impact on hiring caused by
an examination requirement. Jurisdictional aspects of the testing issue
were appealed to the Eleventh Circuit Court of Appeals which vacated the
trial court's order and was upheld by the United States Supreme Court.
The district court consolidated three successor lawsuits with this case
and entered a final judgment in favor of the State. This judgment,
however, has been appealed to the Eleventh Circuit Court of appeals.
Should the department fail in future appeals, the liability of the State
for back pay and other monetary relief could exceed $40 million.

D. Complaints were filed in the Second Judicial Circuit seeking a
declaration that Sections 624.509, 624.512 and 624.514, F.S. (1988)
violate various U.S. and Florida Constitutional provisions. Relief was
sought, in the form of a tax refund. The Florida Supreme Court reversed
the trial court in favor of the State. Plaintiffs have petitioned for
certiorari with the United States Supreme Court. The State has settled
all outstanding litigation in this area. Similar issues had been raised
in the following cases which were part of the settlement: Ford Motor
Company v. Bill Gunter, Case No. 86-3714, 2nd Judicial Circuit, and
General Motors Corporation v. Tom Gallagher, Case Nos. 90-2045 and
88-2925, 2nd Judicial Circuit, where the plaintiffs are challenging
Section 634.131, F.S., which imposes taxes on the premiums received for
certain motor vehicle service agreements. Current estimates indicate
that the State's potential refund exposure is unclear. The remaining
refund applications yet to be denied is approximately $150 million.
However, the State hopes that refund exposure will be reduced as these
refund requests begin to be denied based upon the Florida Supreme Court
decision in the instant case.

E. In two cases, plaintiffs have sought approximately $25 million
in intangible tax refunds based partly upon claims that Florida's
intangible tax statutes are unconstitutional.

F. A lawsuit was filed against the Department of Health and
Rehabilitative Services (DHRS) and the Comptroller of the State of
Florida involving a number of issues arising out of the implementation
of a DHRS computer system and seeking declaratory relief and money
damages. The estimated potential liability to the state is in excess of
$40 million.

G. Plaintiffs in a case have sought a declaration that statutory
assessments on certain hospital net revenues are invalid,
unconstitutional, and unenforceable and request temporary and permanent
injunctive relief be granted prohibiting the enforcement or collection
of the assessment and that all monies paid to the State by the
plaintiffs and the class members within the four years preceding the
filing of the action be reimbursed by the defendants with interest. An
unfavorable outcome to this case could result in the possibility of
refunds exceeding $50 million.

H. In an inverse condemnation suit, claiming that the actions of
the State constitute a taking of certain leases for which compensation
is due, the Circuit Judge granted the State's motion for summary
judgment finding that the State had not deprived plaintiff of any
royalty rights they might have. Plaintiff has appealed. Additionally,
plaintiff's request for a drilling permit was rejected after
administrative proceedings before the Department of Environmental
Protection. Plaintiff is expected to challenge the decision.

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<PAGE>

I. In an inverse condemnation suit alleging the regulatory taking
of property without compensation in the green Swamp Area of Critical
State Concern, discovery is concluding and a motion for a summary
judgment will likely be made. If the judgment should be for the
plaintiff, condemnation procedures would be instituted with costs of $30
million, plus interest from 1975.

J. In two cases, plaintiffs have challenged the constitutionality
of the $295 fee imposed on the issuance of certificates of title for
vehicles previously titled outside the State. The circuit court granted
summary judgment to the plaintiff, finding that the fee violated the
Commerce Clause of the U.S. Constitution. The Court enjoined further
collection of the fee and has ordered refunds to all those who have paid
since the statute came into existence in mid-1991. The State has noticed
an appeal and is entitled to a stay of the lower court ruling's
effectiveness, thus the fee continues to be collected during the appeal.
The potential refund exposure may be in excess of $100 million.

K. Santa Rosa County has filed a complaint for declaratory relief
against the State requesting the Circuit Court to: (1) find that Section
206.60(2)(a), F.S., does not allow the Department to deduct
administrative expenses unrelated to the collection, administration, and
distribution of the county gas tax; and (2) order the department to pay
Santa Rosa County all moneys shown to have been unlawfully deducted from
the motor fuel tax revenues plus interest. All hearings in the case have
been postponed until early 1994. This case seeks refunds of
approximately $45 million.

L. Lee Memorial Hospital has contested the calculation of its
disproportionate share payment for the 1992-93 State fiscal year. An
unfavorable outcome to this case could result in a possible settlement
of $20 to $30 million.

M. A lawsuit has challenged the freezing of nursing home
reimbursement rates for the period January 1, 1990 through July 1, 1990.
The First District Court of Appeals ruled against the Agency for Health
Care Administration (AHCA). The AHCA has petitioned the Florida Supreme
Court for review of this decision. An unfavorable outcome to this case
could result in a potential liability of $40 million.

Summary. Many factors including national, economic, social and
environmental policies and conditions, most of which are not within the
control of the State or its local units of government, could affect or could
have an adverse impact on the financial condition of the State. Additionally,
the limitations placed by the State Constitution on the State and its local
units of government with respect to income taxation, ad valorem taxation, bond
indebtedness and other matters discussed above, as well as other applicable
statutory limitations, may constrain the revenue-generating capacity of the
State and its local units of government and, therefore, the ability of the
issuers of the Bonds to satisfy their obligations thereunder.

New York Trust

New York Risk Factors

This summary is included for the purpose of providing a general
description of New York State's (the "State") and New York City's (the "City")
credit and financial condition. The information set forth below is derived
from the official statements and/or preliminary drafts of official statements
prepared in connection with the issuance of State and City municipal bonds.
The Fund has not independently verified this information.

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<PAGE>

State Economic Trends. Over the long term, the State and the City
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.

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 downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product (GCP) fell in those two years. In order to achieve a balanced budget
as required by the laws of the State 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 projected tax revenue of approximately
$1.4 billion, reduced State aid for the City and greater than projected
increases in legally mandated expenditures, including public assistance and
Medicaid expenditures. Beginning in calendar year 1992, the improvement in the
national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage
gains. The City's current four-year financial plan assumes that, after
noticeable improvements in the City's economy during calendar year 1994,
economic growth will slow in calendar years 1995 and 1996 with local
employment increasing modestly. In December 1994, the City experienced
substantial shortfalls in payments of non-property tax revenues from those
forecasted. Through December 1994, collections of non-property taxes were
approximately $200 million lower than projected.

For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted

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<PAGE>

accounting principles ("GAAP"), and the City's 1995 fiscal year results are
projected to be balanced in accordance with GAAP. The City was required to
close substantial budget gaps in recent years in order to maintain balanced
operating results. For fiscal year 1995, the City has adopted a budget which
has halted the trend in recent years of substantial increases in City spending
from one year to the next. 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 reductions 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 and
outlines proposed gap-closing programs for years with projected budget gaps.
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.

The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements. There can be no
assurance that there will not be reductions in State aid to the City from
amounts currently projected or that State budgets in future fiscal years will
be adopted by the April 1 statutory deadline and that such reductions or
delays will not have adverse effects on the City's cash flow or expenditures.

The Mayor is responsible for preparing the City's four-year
financial plan, including the City's current financial plan for the 1995
through 1998 fiscal years (the "1995-1998 Financial Plan" or "Financial
Plan"). The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize.

Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City
employees consistent with those assumed in the Financial Plan, employment
growth, the results of a pending actuarial audit of the City's pension system
which is expected to significantly increase the City's annual pension costs,
the ability to implement proposed reductions in City personnel and other cost
reduction initiatives, which may require in certain cases the cooperation of
the City's municipal unions, revenue generating transactions and provision of
State and Federal aid and mandate relief.

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 1995 through 1998
contemplates the issuance of $10.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. 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, and no assurance can be
given that such sales will be completed. If the City were unable to sell its

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<PAGE>

general obligation bonds and notes, it would be prevented from meeting its
planned capital and operating expenditures.

On October 25, 1994, the City published the Financial Plan for the
1995-1998 fiscal years, which is a proposed modification to a financial plan
submitted to the Control Board on July 8, 1994 (the "July Financial Plan") and
which relates to the City, the Board of Education ("BOE") and the City
University of New York.

The City's July Financial Plan set forth proposed actions for the
1995 fiscal year to close a previously projected gap of approximately $2.3
billion for the 1995 fiscal year, which included City actions aggregating $1.9
billion, a $288 million increase in State actions over the 1994 and 1995
fiscal years, and a $200 million increase in Federal assistance. The City
actions included proposed agency actions aggregating $1.1 billion, including
productivity savings; tax and fee enforcement initiatives; service reductions;
and savings for the restructuring of City services. City actions also included
savings of $45 million resulting from proposed tort reform, the projected
transfer to the 1995 fiscal year of $171 million of the projected 1994 fiscal
year surplus, savings of $200 million for employee health care costs, $51
million in reduced pension costs, savings of $225 million from refinancing
City bonds and $65 million from the proposed sale of certain City assets.

The 1995-1998 Financial Plan published on October 25, 1994
reflects actual receipts and expenditures and changes in forecast revenues and
expenditures since the July Financial Plan and projects revenues and
expenditures for the 1995 fiscal year balanced in accordance with GAAP. For
the 1995 fiscal year, the Financial Plan includes actions to offset an
additional potential $1.1 billion budget gap, resulting principally from a
$104 million decrease in the $171 million projected surplus from the 1994
fiscal year to be transferred to the 1995 fiscal year, due primarily to lower
than projected tax revenues for the 1994 fiscal year; reductions in projected
tax revenues for the 1995 fiscal year totaling $170 millon; $60 million of
increased City pension contributions resulting from lower than expected
earnings on pension fund assets for the 1994 fiscal year; a $166 million
shortfall in projected increased Federal assistance due primarily to the
failure to enact national health care reform; the failure of the State
Legislature to approve tort reform; the failure to achieve the projected
savings of $200 million for employee health care costs; a $165 million
increase in projected overtime expenditures; and additional agency spending
requirements, primarily for increased costs for foster care and homeless
services, and other decreased projected revenues.

The gap-closing measures for the 1995 fiscal year set forth in the
1995-1998 Financial Plan include additional proposed agency actions
aggregating $851 million, including $342 million of reduced personal services
costs resulting from a reduction in the number of city employees, additional
expenditure reductions and $42 million of greater than forecast miscellaneous
revenues. Additional proposed gap-closing actions include the availability of
$200 million, primarily from reserves held for unreported health insurance
claims. The $851 million of agency actions proposed in the Financial Plan for
the 1995 fiscal year, together with the $1.1 billion of agency actions
proposed in the July Financial Plan, are substantial and difficult to
implement. Agency actions proposed in the Financial Plan for the 1995 fiscal
year include reduced expenditures for the Police Department totaling $67
million, a $107 million reduction in the City's subsidy to the New York City
Health and Hospital Corporation ("HHC"), reduced allocations to BOE totaling
$190 million, expenditure reductions totaling $102 million for the Human
Resources Administration, expenditure reduction totaling $32 million for the
Department of Corrections, a portion of which is subject to modification of a
court consent decree, and a $113 million reduction in the City's subsidy to

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<PAGE>

the Metropolitan Transportation Authority (the "MTA"). The Financial Plan is
subject to the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives.

Based on currently available results, the Mayor's Office of
Management and Budget ("OMB") believes that developments since the publication
of the Financial Plan on October 25, 1994 have caused an additional $650
million budget gap in the 1995 fiscal year due to (i) projected tax revenue
shortfalls of $400 million, (ii) failure to renegotiate the terms of certain
Port Authority leases to increase revenues by $75 million, (iii) miscellaneous
revenue shortfalls of $25 million, and (iv) increases in certain agency
expenditures of $150 million. The projected tax revenue shortfalls for the
1995 fiscal year result from lower capital gains, bonuses and business
profits, the timing of certain payments and discounting by retailers. OMB has
also identified gap-closing actions totaling $650 million in the 1995 fiscal
year. Certain of these gap-closing actions will be subject to the ability of
the City to implement expenditure reduction initiatives and, in the case of
the social security refund, final approval by the Internal Revenue Service. In
the event these gap-closing actions cannot be fully implemented, the City will
be required to adopt additional gap-closing measures for the remainder of the
1995 fiscal year, and there is no assurance that such measures will enable the
City to achieve a balanced budget for the 1995 fiscal year. Current forecasts
of revenues and expenditures for the fiscal year 1995, including the
gap-closing actions, could require the City to take actions within the 1995
fiscal year to meet its cash flow requirements.

The Financial Plan also sets forth projections for the 1996
through 1998 fiscal years and outlines a proposed gap-closing program to close
projected gaps of $1.0 billion, $1.5 billion and $2.0 billion for the 1996
through 1998 fiscal years, respectively, after successful implementation of
the $1.1 billion gap-closing program for the 1995 fiscal year.

OMB believes that developments since the publication of the
Financial Plan have caused the $1.0 billion gap projected in the Financial
Plan for the 1996 fiscal year to increase to $2.7 billion. The $1.5 billion
increase in the forecast budget gap for fiscal year 1996 is due to (i) a
projected tax revenue shortfall of approximately $400 million, reflecting the
impact of the recent shortfall in collections of non-property taxes described
above, (ii) an $80 million shortfall in projected property tax receipts due to
a lower than forecast increase in the tentative assessment roll published by
the New York City Department of Finance, (iii) a reduction of $390 million in
the forecast receipts of State and Federal aid, (iv) a reduction of $75
million in forecast receipts of lease payments for New York City airports, (v)
higher costs of $260 million for Medicaid and agency spending, (vi) additional
pension funding costs of $300 million resulting from an ongoing actuarial
audit of the City pension systems and (vii) $45 million in additional costs
for unachieved tort reform.

In February the Mayor published a modification (the "February
Modification") to the Financial Plan for the City's 1995 through 1998 fiscal
years and a preliminary budget for the City's 1996 fiscal year. The February
Modification reflected changes since the Financial Plan including measures to
be taken to assure balance in the 1995 fiscal year described above and the
City's program to address the currently forecast gap of approximately $2.7
billion in fiscal year 1996 which gap is projected to increase to $3.2 billion
and $3.8 billion in 1997 and 1998, respectively. The gap-closing program is
subject to change. However, the major components of the gap-closing program
for fiscal year 1996 are (i) a reduction in spending for entitlements of
approximately $1.2 billion, primarily affecting public assistance and Medicaid
payments by the City, (ii) $600 million in savings from municipal unions and
(iii) $500 million from the Board of Education. In addition, the City will
continue to seek mandate relief such as tort reform and other changes in City

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procedures and use of resources through privatization and efficient
utilization of the City's assets.

The proposals contained in the February Modification to close the
projected budget gaps for the 1995 and 1996 fiscal years engendered
substantial public debate, and the public debate relating to the 1996 fiscal
year budget will most likely continue through the time the budget is scheduled
to be adopted in June 1995. On January 17, 1995, Standard & Poor's placed the
City's general obligation bonds on CreditWatch with negative implications.
Standard & Poor's stated that it will review the February Modification for
evidence of continued progress toward long-term structural balance, and
eventual elimination of certain types of budget devices, as well as the next
State budget proposal, to determine the extent of the City's relief from State
mandates in education, social services, and health care expenditures. Standard
& Poor's stated that, by April 1995, financial plans which continue to
incorporate budget devices, or fail to reflect ongoing budget relief from the
State, will result in a lowering of the rating to the "BBB" category for New
York City's general obligation bonds.

In January 1993, the City announced a settlement with a coalition
of municipal unions, including Local 237 of the International Brotherhood of
Teamsters, District Council 37 of the American Federation of State, County and
Municipal Employees and other unions covering approximately 44% of the City's
workforce. 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. The City is presently bargaining with
the Correction Officers' Benevolent Association and the Sanitation Officers'
Association. In addition, the Transit Police Benevolent Association's delegate
body rejected a tentative settlement with the City. The contract dispute is
currently being arbitrated before the State's Public Employment Relations
Board. Moreover, a contract dispute between the City and the Licensed
Practical Nurses is currently in arbitration before the City's Office of
Collective Bargaining.

The Financial Plan provides no additional wage increases for City
employees after their contracts expire in the 1995-1996 fiscal years. Each 1%
wage increase for all employees commencing in the 1995 and 1996 fiscal years
would cost the City an additional $28 million for the 1995 fiscal year, $140
million for the 1996 fiscal year and $150 million each year thereafter above
the amounts provided for in the Financial Plan.

Various actions proposed in the Financial Plan, including 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. State and Federal actions are
uncertain and no assurance can be given that such actions will in fact be
taken or that the savings that the City projects will result from these
actions will be realized. The State Legislature failed to approve a
substantial portion of the proposed State assumption of Medicaid costs in the
last session. The Financial Plan assumes that these proposals will be approved
by the State Legislature during the 1995 fiscal year and that the Federal
government will increase its share of funding for the Medicaid program. If
these measures cannot be implemented, the City will be required to take other
actions to decrease expenditures or increase revenues to maintain a balanced
financial plan.

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 1995 fiscal year, there can be no assurance that the gap-
closing actions proposed by 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

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tax increases and reductions in essential City services could adversely affect
the City's economic base.

The 1995-1998 Financial Plan is based on numerous assumptions,
including the continuing improvement in the City's and the region's economy
and a modest employment recovery during calendar year 1994 and the concomitant
receipt of the economically sensitive tax revenues in the amounts projected.
The 1995-1998 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
1995 through 1998 fiscal years; continuation of the 9% interest earnings
assumptions for pension fund assets and current assumptions with respect to
wages for City employees affecting the City's required pension fund
contributions; the willingness and ability of the State, in the context of the
State's current financial condition, 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 Health and Hospitals Corporation ("HHC"), BOE and
other such agencies to maintain balanced budgets; the willingness of the
Federal government to provide Federal aid; approval of the proposed
continuation of the personal income tax surcharge; adoption of the City's
budgets by the City Council in substantially the forms submitted by the Mayor;
the ability of the City to implement proposed reductions in City personnel and
other cost reduction initiatives, which may require in certain cases the
cooperation of the City's municipal unions, and the success with which the
City controls expenditures; savings for health care costs for City employees
in the amounts projected in the Financial Plan; additional expenditures that
may be incurred due to the requirements of certain legislation requiring
minimum levels of funding for education; the impact on real estate tax
revenues of the current weakness in the real estate market; the City's ability
to market its securities successfully in the public credit markets; 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.

The projections and assumptions contained in the 1995-1998
Financial Plan are subject to revision, which may involve substantial change,
and no assurance can be given that these estimates and projections, which
include actions which the City expects will be taken but which are not within
the City's control, will be realized.

From time to time, the Control Board staff, the City Comptroller
and others issue reports and make public statements regarding the City's
financial condition, commenting on, among other matters, the City's financial
plans, projected revenues and expenditures and actions by the City to
eliminate projected operating deficits. Some of these reports and statements
have warned that the City may have underestimated certain expenditures and
overestimated certain revenues and have suggested that the City may not have
adequately provided for future contingencies. Certain of these reports have
analyzed the City's future economic and social conditions and have questioned
whether the City has the capacity to generate sufficient revenues in the
future to meet the costs of its expenditure increases and to provide necessary
services.

On January 17, 1995, the City Comptroller issued a report which
concluded that the risks for the 1995 fiscal year had increased from $453
million to $658 million, primarily as a result of the lower-than-projected tax
revenues totaling $400 million, partially offset by the anticipated receipt of
an additional $100 million of revenues from the refund by the Internal Revenue
Service of social security overpayments by the City in the 1995 fiscal year.
The report stated that the shortfall in tax revenue collections is explained
largely by weaknesses in the banking industry and securities sector, which

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have been hurt by the tight monetary policies of the Federal Reserve Board
which have resulted in losses from bond trading operations, layoffs and lower
year-end bonuses. The report stated that this shortfall may increase if total
returns in the financial sector do not improve in the first half of the 1995
calendar year.

On December 27, 1994, the City Comptroller issued a report on the
City's economy which noted that the City's economic recovery had slowed in the
third quarter of the 1994 calendar year and concluded that the City's economy
is still very weak and the local recovery is fragile. The report noted that
the indications of weakness in the City's economy included slower growth in
payroll employment and retail sales in the third quarter, as well as softness
in the Manhattan commercial real estate market. The report also noted that the
tight monetary policies implemented by the Federal Reserve Bank since February
1994 to curb inflationary pressures were particularly harmful to interest rate
sensitive and cyclical sectors, such as retailing, the securities industry,
banking and manufacturing and that the City's service driven economy has not
benefited from the national recovery, which was largely driven by interest
rate sensitive sectors of housing, capital goods and consumer durable goods.
The report noted that the slow-down in economic activity was expected to
continue in the fourth quarter of 1994, with more cutbacks in local
governments and additional layoffs in the financial sector, which will offset
new hiring in other areas and result in a slow growth in the 1995 calendar
year.

On November 30, 1994, OSDC issued a report reviewing the Financial
Plan. The report concluded that a projected budget gap of $252 million existed
for the 1995 fiscal year, due largely to higher social service costs and
uncertainties concerning the receipt of revenues from increased collection
efforts. The report identified additional substantial risks for the 1995
fiscal year totaling $351 million, including the proposed reduction in the
City subsidy to the Transit Authority, the receipt of revenues by the City as
a result of the refund of social security overpayments, the projected
subleasing of certain assets and possible additional expenditures for the BOE.
After taking into account possible reduced expenditures of $100 millon, OSDC
concluded that the City faces risks of approximately $500 million for the
remainder of the 1995 fiscal year.

With respect to the 1996 through 1998 fiscal years, the OSDC in
its March 21, 1995 report projects gaps of approximately $3 billion, $3.6
billion and $4.1 billion, respectively. According to the OSDC, the projected
gap could be greater than forecast by the City primarily because the City has
not yet secured $133 million in anticipated health insurance savings and
overtime costs from uniformed agencies are likely to be $80 million higher
than projected by the City. The report also identified a number of additional
risks which could raise the 1996 budget gap by another $400 millon (a net gap
of $232 million after accounting for possible savings from overestimating
prior year's expenses). These risks include (i) the expiration of the 14%
personal income tax surcharge which the Financial Plan assumes will be
extended by the State, (ii) unfunded liabilities at the Board of Education and
(iii) potentially higher pension costs. Additionally, the 1996 gap-closing
program relies to a very large degree on cooperation from Federal and State
governments and municipal unions. In fact, the City has direct control of less
than $500 million of the total gap-closing measures. Therefore, no assurance
can be given that the 1996 measures will be successfully implemented.

On December 8, 1994, the staff of the Control Board issued a
report on the Financial Plan. In its report the staff concluded that the City
faced risks of more than $513 million in the 1995 fiscal year. The staff noted
that tax receipts are stagnant, primarily because of a further contraction in
the property tax and sluggish growth in the non-property taxes,

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related to erosion of profits in the securities industry, and that there are
substantial risks for the 1995 fiscal year with respect to possible increased
overtime and City Medicaid payments to HHC, shortfalls in parking fine
collections, the projected refund of social security payments, a proposed
asset sale, the renegotiation of certain Port Authority leases and possible
additional expenditures at BOE. In addition, the staff indicated that there
are risks of $2.0 billion, $2.6 billion and $3.1 billion for the 1996, 1997
and 1998 fiscal years, respectively. Risks for 1996 through 1998 fiscal years
include the potential for increased overtime and lower nonproperty tax
revenues, increased spending for City Medicaid payments to HHC, additional
expenditures at BOE, uncertainties concerning the proposed reduction in City
expenditures for health care costs, the anticipated revenues from
renegotiation of the terms of certain Port Authority leases, savings resulting
from the proposed tort reform to limit damage claims against the City, and
increased Federal aid for Medicaid. The report noted that the City faced
additional risks with respect to its assumptions regarding pension costs, a
reduced subsidy to the Transit Authority, social services savings and the cost
of wages. The staff noted that it is imperative that the City Council and the
Mayor work together to ensure that the actions taken for the 1995 fiscal year
are recurring and help reduce the over $2 billion gap for the 1996 fiscal year
and that a cooperative effort is necessary if the City is to solve its
structural budget problems and bring stability to the delivery of services to
its residents.

On March 17, 1995 the Control Board staff issued its report
commenting on the February Modification. The report notes that the February
Modification attempts to address the structural imbalances by dramatically
lowering expenditures in large budget areas while continuing the restructuring
of the City's finances. Their analysis does show a risk of at least $486
million in fiscal 1996, particularly because more than $2 billion in projected
budget relief is dependent upon the action of others. Both the Control Board
and the OSDC have noted that the City has not yet brought its long term
expenditures in line with recurring revenues; therefore, the City is likely to
face future budget gaps requiring it to reduce expenditures and/or increase
revenues.

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, 1994, MAC had outstanding an aggregate of
approximately $4.885 billion of its bonds.

The City's general obligation bonds are rated Baa1 by Moody's.
Standard & Poor's has rated the City's general obligation bonds A-. Fitch
Investors Service, Inc. ("Fitch") has rated them A-. Such ratings reflect only
the view of Moody's, Standard & Poor's and Fitch, from which an explanation of
the significance of such ratings may be obtained. There is no assurance that
such ratings will continue for any given period of time or that they will not
be revised downward or withdrawn entirely. Any such downward

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revision or withdrawal could have an adverse effect on the market prices of
the City's general obligation bonds.

New York State and its Authorities. The State's current fiscal
year commenced on April 1, 1995, and ends on March 31, 1996, and is referred
to herein as the State's 1995-96 fiscal year. The prior fiscal year, which
ended on March 31, 1995, is referred to herein as the State's 1994-95 fiscal
year. The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The State Financial Plan for the 1994-95 fiscal year was formulated
on June 16, 1994 and is based on the State's budget as enacted by the
Legislature and signed into law by then Governor Cuomo. On February 1,
Governor Pataki presented his 1995-96 Executive Budget, containing his
recommendations for the upcoming fiscal year. The Governor's budget is
balanced on a cash basis in the General Fund (described below). However, there
can be no assurance that the Legislature will enact the proposed Executive
Budget into law, that the budget will be adopted in a more timely manner than
the prior year's budget, or that actual results will not differ materially and
adversely from the projections set forth below.

The economic and financial condition of the State may be affected
by various financial, social, economic and political factors. Those factors
can be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its agencies
and instrumentalities, but also by entities, such as the Federal government,
that are not under the control of the State.

The State Financial Plan is based upon forecasts of national and
State economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economics. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, Federal
financial and monetary policies, the availability of credit, and the condition
of the world economy, which could have an adverse effect on the State. There
can be no assurance that the State economy will not experience results in the
current fiscal year that are worse than predicted, with corresponding material
and adverse effects on the State's projections of receipts and disbursements.

The State Division of the Budget ("DOB") believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth below, and those projections may be changed materially
and adversely from time to time.

As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and regional economy
and actions of the Federal government, as well as State actions affecting the
level of receipts and disbursements. Owing to these and other factors, the
State may, in future years, face substantial potential budget gaps resulting
from a significant disparity between tax revenues projected from a lower
recurring receipts base and the future costs of maintaining State programs at
current levels. Any such recurring imbalance would be exacerbated if the State
were to use a significant amount of nonrecurring resources to balance the
budget in a particular fiscal year. To address a potential imbalance for a
given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution the Governor is required to propose a
balanced budget each year. To correct recurring budgetary imbalances, the

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State would need to take significant actions to align recurring receipts and
disbursements in future fiscal years. There can be no assurance, however, that
the State's actions will be sufficient to preserve budgetary balance in a
given fiscal year or to align recurring receipts and disbursements in future
fiscal years.

The General Fund is the general operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. In the State's 1994-95 fiscal year, the General Fund was expected to
account for approximately 52 percent of total governmental-fund receipts and
51 percent of total governmental-fund disbursements. General Fund moneys are
also transferred to other funds, primarily to support certain capital projects
and debt service payments in other fund types.

As a result of the national and regional economic recession, the
State's tax receipts for its 1991 and 1992 fiscal years were substantially
lower than projected, which resulted in reductions in State aid to localities
for the State's 1992 and 1993 fiscal years from amounts previously projected.
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 State's economy, as measured by employment, started to recover
near the start of the 1993 calendar year, continued into mid-1994 and then
virtually ceased and the State completed its 1994 fiscal year with a
cash-basis balanced budget in the State's General Fund (the major operating
fund of the State), after depositing $1.5 billion in various reserve funds.

The State's 1994-95 Financial Plan, which is based upon the
enacted State budget, projected a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions, which
include increased State education aid and State assumption of certain costs
previously paid by the City and restoration of certain prior year revenue
sharing reductions. However, the State Legislature failed to enact a
substantial portion of the proposed State assumption of local Medicaid costs,
other significant mandate relief items, and the proposed tort reform
legislation, which would have provided the City with additional savings. On
February 1, 1995, as part of his Executive Budget for the 1995-96 fiscal year,
the Governor submitted the third quarterly update to the State Financial Plan
for the 1994-95 fiscal year. This update reflects changes to receipts and
disbursements. The update revises the projected General Fund receipts and
disbursements contained in the 1994-95 State Financial Plan as revised by the
first and second quarterly updates issued on July 29, 1994 and October 28,
1994. The update reflected that estimates of General Fund receipts for the
1994-95 fiscal year have been reduced by $585 million, from the mid-year
update, and are down $1.058 billion from the budget enacted in June 1994 (of
which $227 million results from a post mid-year accounting restatement of the
State Financial Plan). Offsetting this projected loss in receipts, however,
are projected reductions of $312 million in disbursements from the mid-year
update, attributable to lower spending through the first nine months of the
fiscal year, and to the use of greater than anticipated receipts from the
State lottery. The net result of the projected reductions in receipts and
disbursements is a negative margin of $273 million against the mid-year
update's projection of a $14 million surplus, producing a potential deficit of
$259 million for the 1994-95 fiscal year. The Governor has proposed to close
this deficit through a hiring freeze, a review of pending contracts, and
spending cuts in certain programs that were started or expanded in the 1994-95
budget. Governor Pataki submitted a proposed budget for the State's 1995-96
fiscal year on February 1, 1995. The Governor's budget for 1995-96 fiscal year
included significant savings from Medicaid cost containment measures and
welfare reform and substantial reductions in State aid to localities,
including the City.

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The 1995-96 Executive Budget is the first to be submitted by the
Governor, who assumed office on January 1. It proposes actual reductions in
the year-over-year dollar levels of State spending from the General Fund for
the first time in over half a century with a proposed cut of 3.4 percent.
There are, however, risks and uncertainties concerning whether or not certain
tax and spending cuts proposed in the Executive Budget will be upheld in the
face of potential legal challenges. For example, there can be no assurance
that cuts in social-welfare entitlement programs will not be challenged in
court. Further, the Comptroller has indicated his intention to challenge in
Court the proposed use of certain pension reserves in the Executive Budget.

According to the Executive Budget, in the 1995-96 fiscal year, the
State Financial Plan would be out of balance by almost $4.7 billion, as a
result of three key factors: (1) the projected structural deficit resulting
from the ongoing disparity between sluggish growth in receipts, the effect of
prior-year tax changes, and the rapid acceleration of spending growth ($2.1
billion); (2) the impact of unfunded 1994-95 initiatives, including capital
projects such as sports and recreational facilities, an increase in revenue
sharing to local governments, further State takeover of local Medicaid costs,
more school aid, and increased tuition assistance ($1.1 billion); and (3) the
use of one-time solutions to fund recurring spending in the 1994-95 budget
($1.5 billion). Tax cuts proposed to spur economic growth and provide relief
for low and middle-income taxpayers add $240 million to the projected
imbalance or budget gap, bringing the total to approximately $5 billion.

The Executive Budget proposes to close the budget gap for the
1995-96 fiscal year through (1) $1.9 billion from cost containment savings in
social-welfare programs, particularly Medicaid cost-containment
recommendations ($1.277 billion), Income-Maintenance restructuring
recommendations ($340 million), and the consolidation of various child-care
programs into a Family Services Block Grant to counties and New York City; (2)
$2.5 billion in savings from State agency restructuring that is expected to
reduce spending on the State workforce, SUNY and CUNY, mental hygiene
programs, capital projects, the prison population, and public authorities; (3)
$350 million in savings from local assistance reforms, by freezing school aid,
revenue sharing and county costs of preschool special education at current
levels, while proposing program legislation to provide relief from certain
mandates that increase local spending; and (4) $200 million in new revenue
measures, primarily a new Quick Draw Lottery game and changes to tax-payment
schedules. The Executive Budget indicates that for years State revenues have
grown at a lower rate than State spending, producing an increasing structural
deficit, and that if the proposals in the Executive Budget are upheld
(particularly the spending cuts described above) the State will start to
eliminate the structural imbalance that has characterized the State's fiscal
record. There can, however, be no assurances that the tax and spending cuts
proposed in the Executive Budget will be upheld or enacted as proposed, or
that if enacted, will eliminate potential imbalances in future fiscal years.

As expected, the Governor's proposals have engendered substantial
public debate which will continue until the enactment of the budget by the
State legislature, which as expected, did not occur before April 1, 1995. In
certain recent fiscal years, the State has failed to enact a budget prior to
the beginning of the State's fiscal year. The delay in the adoption of the
State's budget could delay 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.

As a result of various uncertainties and other factors, including
consumer attitudes toward spending, Federal financial and monetary policies,
the availability of credit and the condition of the world economy, actual
results could differ materially and adversely from the State's current

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projections and the State's projections could be materially and adversely
changed from time to time.

On January 13, 1992 Standard & Poor's Corporation ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from A to
A- and, in addition, reduced its ratings on the State's moral obligation,
lease purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's raised
its outlook to positive and, on December 12, 1994, confirmed its A- rating. On
January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On December 12, 1994, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.

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 $63.5 billion as
of September 30, 1993. As of March 31, 1994, aggregate public authority debt
outstanding as State-supported debt was $21.1 billion and as State-related
debt was $29.4 billion.

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 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 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% or approximately $456
million. For the 1994-95 State fiscal year, total State assistance to the MTA
is estimated at approximately $1.3 billion.

In 1993, State legislation authorized the funding of a five-year
$9.56 billion MTA capital plan for the five-year period, 1992 through 1996
(the "1992-1996 Capital Program"). The MTA has received approval of the
1992-96 Capital Program based on this legislation from the 1992-96 Capital
Program Review Board, as State law requires. This is the third five-year plan
since the Legislature authorized procedures for the adoption, approval and
amendment of a five-year plan in 1981 for a capital program designed to
upgrade the performance of the MTA's transportation systems and to supplement,

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<PAGE>

replace and rehabilitate facilities and equipment. The MTA, the TBTA and the
TA are collectively authorized to issue an aggregate of $3.1 billion of bonds
(net of certain statutory exclusions) to finance a portion of the 1992-96
Capital Program. The 1992-96 Capital Program is expected to be financed in
significant part through the dedication of State petroleum business taxes.

There can be no assurance that all the necessary governmental
actions for the Capital Program will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the 1992-96 Capital
Program, or parts thereof, will not be delayed or reduced. Furthermore, the
power of the MTA to issue certain bonds expected to be supported by the
appropriation of State petroleum business taxes is currently the subject of
court challenge. If the Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional State assistance.

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, and contract
claims and the monetary damages sought are substantial. Adverse development in
these proceedings or the initiation of new proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the
current fiscal year or thereafter.

In addition to the proceedings noted below, the State is party to
other claims and litigation which its legal counsel has advised are not
probable of adverse court decisions. Although the amounts of potential losses,
if any, are not presently determinable, it is the State's opinion that its
ultimate liability in these cases is not expected to have a material adverse
effect on the State's financial position in the current fiscal year or
thereafter.

On May 31, 1988, the United States Court took jurisdiction of a
claim of the State of Delaware that certain unclaimed dividends, interest and
other distributions made by issuers of securities and held by New York-based
brokers incorporated in Delaware for beneficial owners who cannot be
identified or located, had been, and were being, wrongfully taken by the State
of New York pursuant to New York's Abandoned Property Law (State of Delaware
v. State of New York, United States Supreme Court). All 50 states and the
District of Columbia moved to intervene, claiming a portion of such
distributions and similar property taken by the State of New York from New
York-based banks and depositories incorporated in Delaware. In a decision
dated March 30, 1993, the Court granted all pending motions of the states and
the District of Columbia to intervene and remanded the case to a Special
Master for further proceedings consistent with the Court's decision. The

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<PAGE>

Court determined that the abandoned property should be remitted first to the
state of the beneficial owner's last known address, if ascertainable and, if
not, then to the states of incorporation of the intermediary bank, broker or
depository. New York and Delaware have executed a settlement agreement which
provides for payment by New York to Delaware of $35 million in the State's
1993-94 fiscal year and five annual payments thereafter of $33 million. New
York and Massachusetts have executed a settlement agreement which provided for
aggregate payments by New York of $23 million, payable over consecutive years.
The claims of the other states and the District of Columbia remain.

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
1991; (11) a challenge to the constitutionality of financing programs of the
MTA and the Thruway Authority authorized by Chapter 56 of the laws 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 inpatient 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; (16) challenges to the rationality and
retroactive application of State regulations recalibrating nursing home
Medicaid rates; and (17) challenge by AT&T to New York Tax Law ss.186-a (2-a)
as violative of the Commerce Clause of the U.S. Constitution.

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. 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 Pennsylvania 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 issue is of such securities

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held by the Pennsylvania 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 Pennsylvania 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 Finance

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 $3.6 billion in crop and livestock products annually,
while agribusiness and food related industries support $39 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
three years, employment in the Commonwealth has declined 1.2 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 1993 level of 81.6 percent of total employment. Consequently,
manufacturing employment constitutes a diminished share of total employment
within the Commonwealth. Manufacturing, contributing 18.4 percent of 1993
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 1993, the services sector accounted for 29.9 percent of all
non-agricultural employment while the trade sector accounted for 22.4 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 October 1994, the seasonally adjusted unemployment rate
for the Commonwealth was 6.0 percent compared to 5.8 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

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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 150 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

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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.

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

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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 Financial Results (Budgetary Basis). Commonwealth
revenues during the fiscal year totaled $15,210.7 million, $38.6 million above
the fiscal year estimate, and 3.9 percent over Commonwealth revenues during
the previous fiscal year. The sales tax was an important contributor to the
higher than estimated revenues. Collections from the sales tax were $5.124
billion, a 6.1 percent increase from the prior fiscal year and $81.3 million
above estimate. The strength of collections from the sales tax offset the
lower than budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the personal income
tax was largely due to shortfalls in income not subject to withholding such as
interest, dividends and other income. Tax refunds in fiscal 1994 were reduced
substantially below the $530 million amount provided in fiscal 1993. The
higher fiscal 1993 amount and the reduced fiscal 1994 amount occurred because
reserves of approximately $160 million were added to fiscal 1993 tax refunds
to cover potential payments if the Commonwealth lost litigation known

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as Philadelphia Suburban Corp. v. Commonwealth. Those reserves were carried
into fiscal 1994 until the litigation was decided in the Commonwealth's favor
in December 1993 and $147.3 million of reserves for tax refunds were released.

Expenditures, excluding pooled financing expenditures and net of
all fiscal 1994 appropriation lapses, totaled $14,934.4 million representing a
7.2 percent increase over fiscal 1993 expenditures. Medical assistance and
corrections spending contributed to the rate of spending growth for the fiscal
year.

The Commonwealth maintained an operating balance on a budgetary
basis for fiscal 1994 producing a fiscal year ending unappropriated surplus of
$335.8 million. By state statute, ten percent ($33.6 million) of that surplus
was transferred to the Tax Stabilization Reserve Fund and the remaining
balance will be carried over into the 1995 fiscal year. The balance in the Tax
Stabilization Reserve Fund as of October 31, 1994 was $63.9 million.

Fiscal 1995 Budget. The fiscal 1995 budget was approved by the
Governor on June 16, 1994 and provided for $15,652.9 million of appropriations
from Commonwealth funds, an increase of 3.9 percent over appropriations,
including supplemental appropriations, for fiscal 1994. Medical assistance
expenditures represent the largest single increase in the budget ($221
million) representing a nine percent increase over the prior fiscal year. The
budget includes a reform of the state-funded public assistance program that
added certain categories of eligibility to the program but also limited the
availability of such assistance to other eligible persons. Education subsidies
to local school districts were increased by $132.2 million to continue the
increased funding for the poorest school districts in the state.

The budget also includes tax reductions totaling an estimated
$166.4 million. Low income working families will benefit from an increase of
the dependent exemption to $3,000 from $1,500 for the first dependent and from
$1,000 for all additional dependents. A reduction to the corporate net income
tax rate from 12.25 percent to 9.99 percent to be phased in over a period of
four years was enacted. A net operating loss provision has been added to the
corporate net income tax and will be phased in over three years with a
$500,000 per firm annual cap on losses used to offset profits. Several other
tax changes to the sales tax, the inheritance tax and the capital stock and
franchise tax were also enacted.

Revenue collections through October 1994 have been above the
budget estimate. Total General Fund Commonwealth revenues are $94.9 million
(2.1 percent) above the estimate for that period led by $52.5 million (2.8
percent) of above estimate collections of sales tax receipts and $34.3 million
(5.1 percent) of collections from various corporate taxes.

The fiscal 1995 budget projects a $4 million fiscal year-end
unappropriated surplus based on estimates for fiscal 1994 and the adopted
budget. No assumption as to appropriation lapses in fiscal 1995 has been made.

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

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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
October 31, 1994, the balance in the Tax Stabilization Fund was $62.9 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 $5,075.8 million on
June 30, 1994, an increase of $37 million from June 30, 1993. Over the 10-year
period ending June 30, 1994, total outstanding general obligation debt
increased at an annual rate of 1.3 percent. Within the most recent 5-year
period, outstanding general obligation debt has grown at an annual rate of 1.5
percent.

General obligation debt for non-highway purposes of $3,998.4
million was outstanding on June 30, 1994. Outstanding debt for these purposes
increased $354.8 million since June 30, 1993, 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, 1994, the 10-year and
5-year average annual compounded growth rate for total outstanding debt for
non-highway purposes has been 4.1 percent and 6.0 percent, respectively. In

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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
$1,077.3 million on June 30, 1994, a decrease of $317.9 million from June 30,
1993. Highway outstanding debt has declined over the most recent 10-year and
5-year periods ending June 30, 1994 by the annual average rates of 5.1 percent
and 8.8 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 reimburse-
ments for the federally financed portion of these projects. As of June 30,
1994, $48.0 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 June 30, 1994, $3,965.6
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 June 30, 1994, the Commonwealth had $848.7 million of electorate
approved debt outstanding.

Debt issued to rehabilitate areas affected by disasters is
authorized by specific legislation. The Commonwealth had $51.2 million of
disaster relief debt outstanding as of June 30, 1994.

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

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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 a total of $600.0 million of tax
anticipation notes for the account of the General Fund in fiscal 1995. All
such notes will mature on June 30, 1995 and will be paid from fiscal 1995
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 June 30,
1994, had $1,972.0 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.

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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 $3,303
million, and for the State Employees' Retirement Fund were negative $847
million as of December 31, 1993.

Municipal Finance

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.

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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 originally
approved by PICA on April 6, 1992, with the latest update approved May 2,
1994.

To date, PICA has issued $1,296,660,000 of its Special Tax Revenue
Bonds in the following series: Series of 1992 in the amount of $474,555,000;
Series of 1993 in the amount of $643,430,000; and Series of 1993A in the
amount of $178,675,000. This financial assistance has included the refunding
of certain general obligation bonds, the funding of capital projects and the
liquidation of the Cumulative General Fund balance deficit as of June 30, 1992
of $224.9 million. The audited General Fund balance as of June 30, 1993 showed
a surplus of approximately $3.0 million. The unaudited preliminary General
Fund balance as of June 30, 1994 estimates a surplus of approximately $15.4
million. Pursuant to restrictions in the Act establishing PICA, the Authority
shall not issue bonds for the purpose of financing a capital project or
deficit on a date later than December 31, 1994, or financing a cash flow
deficit on a date later than December 31, 1996.

Litigation. According to the Official Statement dated November 29,
1994 describing General Obligation Bonds, Third Series of 1994 and Refunding
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 from the Motor License Fund. The
Motor License Fund tort claim appropriation for fiscal 1995 is $27.0 million.

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 et al., 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 then sought dismissal of the

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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.

The district court has since denied the ACLU's motion for class
certification. The parties have stipulated to a judgment against the
plaintiffs in order for plaintiffs to appeal the denial of class certification
to the Third Circuit.

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. By order dated May 26, 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 counties have requested a
continuance until next Spring.

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

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Fidelity Bank v. Commonwealth

In Dale National Bank v. Commonwealth the Pennsylvania Supreme
Court held that it was unconstitutional for the Commonwealth, in calculating
the bank shares tax, to include in the taxable base the value represented by
federal obligations. In response, in 1983, the Legislature enacted the single
excise tax which was levied on banking firms to recover refunds owed to each
bank as a result of Dale. First National Bank of Fredericksburg challenged the
constitutionality of the single excise tax. On February 3, 1989, the Supreme
Court in First National Bank of Fredericksburg v. Commonwealth held that the
single excise tax, as applied to the First National Bank of Fredericksburg and
its affiliated banks, violated the banks' due process rights and separation of
powers doctrine.

On July 1, 1989, the Governor signed into law Act 1989-21, the
Amended Bank Shares Tax. 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 1989-90 sufficient to meet the
Fredericksburg refund liabilities and to maintain a projected positive budget
balance for the General Fund. Single excise tax refunds were given in the form
of credits against the 1989 Amended Bank Shares Tax. After the first
installment of the Amended Bank Shares Tax became due on October 30, 1989,
First National Bank of Fredericksburg, Fidelity Bank, and Equibank filed
actions against the Commonwealth contesting the constitutionality of the tax.
First National Bank of Fredericksburg and Equibank have since withdrawn their
cases.

On July 7, 1994, the Commonwealth Court en banc ruled that the
1989 Amended Bank Shares Tax is constitutional. The Court also ruled that the
New Bank Shares Credit Law, passed by the General Assembly in 1989 to provide
a credit against the 1989 Amended Bank Shares Tax for banks chartered after
January 1, 1979, violates the Uniformity Clause of the Pennsylvania
Constitution. The ruling striking down the New Bank Shares Credit Law results
in an expected revenue gain of $11.6 million dollars for the Commonwealth.

Fidelity Bank has appealed to the Pennsylvania Supreme Court, and
the Commonwealth and a group of intervenor new banks have cross-appealed with
respect to the unconstitutionality of the New Bank Shares Credit Law.

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.

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.

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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.

The court recessed on January 3, 1994, prompted by settlement
negotiations between the parties. On August 1, 1994, the parties submitted a
proposed settlement agreement to the court for its review. On August 10, 1994,
copies of this agreement were made available to members of the class for
objection and comment. The court scheduled a conference on the objections of
the class members for November 18, 1994.

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.

In July 1994, the Court denied the plaintiffs' request to proceed
as a class action and dismissed five of the eighteen plaintiff organizations
from the case. The parties have reached a tentative settlement agreement which
they have submitted to the court for approval.

Pennsylvania Medical Society v. Karen F. Snider

The Pennsylvania Medical Society sued the Commonwealth for payment
of the full co-pay and deductible for outpatient services provided to medical
assistance clients who are also eligible for Medicare. The federal Medicare
program has an established fee schedule for services under Part B of which
Medicare pays 80 percent and the patient is responsible for the 20 percent co-
pay. For medical assistance eligible clients the medical assistance program
pays the 20 percent patient co-pay amount up to the maximum fee for service
set under the Commonwealth's medical assistance program. Consequently, when
the 80 percent portion paid by Medicare equals or exceeds the state
established medical assistance fee for that service, the Commonwealth has not
paid the remaining 20 percent portion of the fee. It is the position of the
Commonwealth that the medical assistance fee has precedence and the service
provider should not be paid more than the Commonwealth's fee schedule. The
Commonwealth received a favorable decision in the United States District Court
but the Pennsylvania Medical Society appealed that decision and won a reversal
in the United States Third Circuit Court. No detailed cost estimates have been
completed, but estimates made earlier have estimated the cost to the
Commonwealth of approximately $50 million per year. An appeal is under
consideration.

Virginia Trust

Virginia Risk Factors. Investors should be aware of certain
factors that might affect the financial condition of issuers of Virginia
municipal securities.

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Bonds in the Virginia Trust may include primarily debt obligations
of the subdivisions of the Commonwealth of Virginia issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, schools, streets and water and
sewer works. Other purposes for which bonds may be issued include the
obtaining of funds to lend to public or private institutions for the
construction of facilities such as educational, hospital, housing, and solid
waste disposal facilities. The latter are generally payable from private
sources which, in varying degrees, may depend on local economic conditions,
but are not necessarily affected by the ability of the Commonwealth of
Virginia and its political subdivisions to pay their debts. Therefore, the
general risk factors as to the credit of the State or its political
subdivision discussed herein may not be relevant to the Virginia Trust.

The Constitution of Virginia limits the ability of the
Commonwealth to create debt. The Constitution requires a balanced budget. The
Commonwealth has maintained a high level of fiscal stability for many years
due in large part to conservative financial operations and diverse sources of
revenue. The economy of the Commonwealth of Virginia is based primarily on
manufacturing, the government sector (including defense), agriculture, mining
and tourism. The Federal Base Closing Commission has ordered that a number of
military facilities in Virginia be closed or reduced. As a result of
recessionary conditions, the Commonwealth has experienced for the past several
years severe revenue shortfalls, which have necessitated cutbacks of
expenditures in the budgets for the 1992-1994 biennia. In the 1994 General
Assembly session, the 1992-1994 budget was amended to reflect $96,000,000 in
additional revenues.

In Davis v. Michigan (decided March 28, 1989), the United States
Supreme Court ruled unconstitutional Michigan's statute exempting from state
income tax the retirement benefits paid by the state and local governments and
not exempting retirement benefits paid by the federal government. In Harper v.
Virginia Department of Taxation (decided June 18, 1993), the United States
Supreme Court held, in a suit involving claims for refunds by Federal retirees
living in Virginia that Virginia State income tax Statutes violated the
principles of Davis v. Michigan, but remanded for further relief so long as
the relief was consistent with Federal due process. If the courts ultimately
rule that the Commonwealth must make full refunds of taxes imposed prior to
Davis v. Michigan, the State has estimated that the potential financial impact
on the Commonwealth based on its review of claims for refunds by federal
pensioners (including interest payable calculated as of December 31, 1993) is
approximately $700 million. The Governor and General Assembly of Virginia have
authorized a settlement of $340 million, plus interest, payable into a special
trust fund in amounts of $60 million in 1994 and $70 million in each of the
years 1995 through 1998. Acceptance of the settlement, which has been
recommended by the Plaintiffs' attorneys in the Harper case, is subject to
approval by individual retirees, which is currently being solicited by the
Virginia Department of Taxation. If the total principal amount of claims of
retirees deciding to opt out of the settlement exceeds $20 million by March 1,
1995, the settlement agreement becomes null and void, unless re-authorized by
the General Assembly. Although holders of more than $20 million in claims
opted out, the General Assembly reauthorized the settlement at its 1995
session, accepted the settlement of those who had accepted and established a
pro rata litigation reserve for those claimants who had opted out.

The Governor proposed a plan to the General Assembly to eliminate
or reduce parole for persons convicted of violent crime. In that connection he
proposed the issuance of bonds to finance part of the cost of additional
prisons that would result from the program. The General Assembly approved part
of the plan, with bonds to be issued by the Virginia Public Building
Authority.

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The Commonwealth currently has a Standard & Poor's rating of AAA
and a Moody's rating of Aaa on its general obligation bonds. There can be no
assurance that the economic conditions on which these ratings are based will
continue or that particular bond issues may not be adversely affected by
changes in economic or political conditions. Further, the credit of the
Commonwealth is not material to the ability of political subdivisions and
private entities to make payments on the obligations described below.

General obligations of cities, towns and counties in Virginia are
payable from the general revenues of the entity, including ad valorem tax
revenues on property within the jurisdiction. The obligation to levy taxes
could be enforced by mandamus, but such a remedy may be impracticable and
difficult to enforce. Under section 15.1-227.61 of the Code of Virginia of
1950, as amended, a holder of any general obligation bond in default may file
an affidavit setting forth such default with the Governor. If, after
investigating, the Governor determines that such default exists, he is
directed to order the State Comptroller to withhold State funds appropriated
and payable to the entity and apply the amount so withheld to unpaid principal
and interest. The Commonwealth, however, has no obligation to provide any
additional funds necessary to pay such principal and interest.

Revenue bonds issued by Virginia political subdivisions include
(1) revenue bonds payable exclusively from revenue producing governmental
enterprises and (2) industrial revenue bonds, college and hospital revenue
bonds and other "private activity bonds" which are essentially
non-governmental debt issues and which are payable exclusively by private
entities such as non-profit organizations and business concerns of all sizes.
State and local governments have no obligation to provide for payment of such
private activity bonds and in many cases would be legally prohibited from
doing so. The value of such private activity bonds may be affected by a wide
variety of factors relevant to particular localities or industries, including
economic developments outside of Virginia.

Virginia municipal securities that are lease obligations are
customarily subject to "non-appropriation" clauses which allow the
municipality to terminate its lease obligations if moneys to make the lease
payments are not appropriated for that purpose. See "Objectives". Legal
principles may restrict the enforcement of provisions in lease financing
limiting the municipal issuer's ability to utilize property similar to that
leased in the event that debt service is not appropriated.

No Virginia law expressly authorizes Virginia political
subdivisions to file under Chapter 9 of the United States Bankruptcy Code, but
some recent case law suggests that the granting of general powers to such
subdivisions may be sufficient to permit them to file voluntary petitions
under Chapter 9. Bonds payable exclusively by private entities may be subject
to the provisions of the United States Bankruptcy Code other than Chapter 9.

Virginia municipal issuers have generally not been required to
provide ongoing information about their finances and operations to holders of
their debt obligations, although a number of cities, counties and other
issuers prepare annual reports.

Although revenue obligations of the Commonwealth or its political
subdivisions may be payable from a specific project or source, including lease
rentals, there can be no assurance that future economic difficulties and the
resulting impact on Commonwealth and local government finances will not
adversely affect the market value of the portfolio of the Fund or the ability
of the respective obligors to make timely payments of principal and interest
on such obligations.

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The Sponsors believe the information summarized above describes
some of the more significant events relating to the Virginia Trust. Sources of
such information are the official statements of the issuers located in the
Commonwealth of Virginia, as well as other publicly available documents and
information. While the Sponsors have not independently verified such
information, they have no reason to believe it is not correct in all material
respects.

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 Certifi-
cateholder 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 Certificateholder 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 Certifi-
cateholder 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

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<PAGE>

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
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. The Sponsor reserves the right to change
the discounts from time to time.

Sponsor's Profits

The Sponsor will receive a gross commission on all Units sold in
the secondary market equal to the applicable sales charge 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
Certificateholder upon any redemption of Units may be less than the price paid
for such Units.

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ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN

Units of each Trust are offered to investors on a "dollar price"
basis (using the computation method previously described under "Public
Offering Price") as distinguished from a "yield price" basis often used in
offerings of tax exempt bonds (involving the lesser of the yield as computed
to maturity of bonds or to an earlier redemption date). Since they are offered
on a dollar price basis, the rate of return on an investment in Units of each
Trust is measured in terms of "Estimated Current Return" and "Estimated Long
Term Return".

Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing
the average yield for the portfolio of each Trust in order to reflect
estimated fees and expenses of that Trust and the maximum sales charge paid by
Certificateholders. The resulting Estimated Long Term Return represents a
measure of the return to Certificateholders earned over the estimated life of
each Trust. The Estimated Long Term Return as of the day prior to the
Evaluation Date is stated for each Trust under "Summary of Essential
Information" in Part A.

Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of each Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current
interest rates on newly issued bonds of a similar type with comparable rating,
the Estimated Current Return per Unit may be affected adversely if such Bonds
are redeemed prior to their maturity. On the day prior to the Evaluation Date,
the Estimated Net Annual Interest Income per Unit divided by the Public
Offering Price resulted in the Estimated Current Return stated for each Trust
under "Summary of Essential Information" in Part A.

The Estimated Net Annual Interest Income per Unit of each Trust
will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to each Trust and with the redemption, maturity, sale or
other disposition of the Bonds in each Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future.

A schedule of cash flow projections is available from the 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

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<PAGE>

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 Certificate-
holders 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.

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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

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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") increases
maximum marginal income tax rates for individuals and corporations (generally
effective for taxable years beginning after December 31, 1992), extends the
authority to issue certain categories of tax-exempt bonds (qualified small
issue bonds and qualified mortgage bonds), limits the availability of capital
gain treatment for tax-exempt bonds purchased at a market discount, increases
the amount of Social Security benefits subject to tax (effective for taxable
years beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to the
effect of P.L. 103-66 on an investment in Units.

In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.

In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:

The 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 excludable 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

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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 gain
or loss when that State Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity), as if the Certificate-
holder 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 Certificate- holder,
as compared to the results produced by the straight-line method of
accounting for original issue discount, upon an early disposition of a
Bond by a State Trust or of a Unit by a Certificateholder.

A Certificateholder may also realize taxable income 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.

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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 has been
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 LLP 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 treated as an association taxable
as a corporation, and the income of the California Trust will be treated
as the income of the Certificateholders. Accordingly, interest on Bonds
received by the California Trust that is exempt from personal income

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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
received directly 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 Certificate-
holder'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 Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., special counsel to the Sponsors for Florida tax matters, under
existing Florida law:

1. The Florida Trust will not be subject to income, franchise or
other taxes of a similar nature imposed by the State of Florida or its
subdivisions, agencies or instrumentalities.

2. Because Florida does not impose a personal income tax,
non-corporate Certificateholders of Units of the Florida Trust will not
be subject to any Florida income taxes with respect to (i) amounts
received by the Florida Trust on the Bonds it holds; (ii) amounts which
are distributed by the Florida Trust to non-corporate Certificateholders
of the Florida Trust; or (iii) any gain realized on the sale or
redemption of Bonds by the Florida Trust or of a Unit of the Florida
Trust by a noncorporate Certificateholder. However, corporations as
defined in Chapter 220, Florida Statutes (1991), which are otherwise
subject to Florida income taxation will be subject to tax on their
respective share of any income and gain realized by the Florida Trust
and on any gain realized on the sale or redemption of Units of the
Florida Trust by the corporate Certificateholder.

3. The Units will be subject to Florida estate taxes only if held
by Florida residents, or if held by non-residents deemed to have
business situs in Florida. The Florida estate tax is limited to the
amount of the credit for state death taxes provided for in Section 2011
of the Internal Revenue Code of 1986, as amended.

4. Bonds issued by the State of Florida or its political
subdivisions are exempt from Florida intangible personal property
taxation under Chapter 199, Florida Statutes (1991), as amended. Bonds
issued by the Government of Puerto Rico or by the Government of Guam, or
by their authority, are exempt by Federal statute from taxes such as the
Florida intangible personal property tax. Thus, the Florida Trust will
not be subject to Florida intangible personal property tax on any Bonds
in the Florida Trust issued by the State of Florida or its political
subdivisions, by the Government of Puerto Rico or by its authority or by
the Government of Guam or by its authority. In addition, the Units of
the Florida Trust will not be subject to the Florida intangible personal
property tax if the Florida Trust invests solely in such Florida, Puerto
Rico or Guam debt obligations.

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

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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 Certificateholders 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

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<PAGE>

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 Hunton & Williams, special counsel to the
Sponsors for Virginia tax matters, under existing Virginia law applicable to
individuals who are Virginia residents and assuming that the Virginia Trust is
a grantor trust under the grantor trust rules of Sections 671-679 of the Code:

The Virginia Trust will be taxable as a grantor trust for Virginia
income tax purposes with the result that income of the Virginia Trust
will be treated as income of the Certificateholders of the Virginia
Trust. Consequently, the Virginia Trust will not be subject to any
income or corporate franchise tax imposed by the Commonwealth of
Virginia, or its subdivisions, agencies or instrumentalities.

Interest on the Bonds in the Virginia Trust that is exempt from
Virginia income tax when received by the Virginia Trust will retain its
tax exempt status in the hands of the Certificateholders of the Virginia
Trust.

A Certificateholder of the Virginia Trust will realize a taxable
event when the Virginia Trust disposes of a Bond (whether by sale,
exchange, redemption or payment at maturity) or when the
Certificateholder redeems or sells his Units, and taxable gain for
Federal income tax purposes may result in taxable gain for Virginia
income tax purposes. Certain Bonds, however, may have been issued under
Acts of the Virginia General Assembly which provide that all income from
such Bond, including any profit from the sale thereof, shall be free
from all taxation by the Commonwealth of Virginia. To the extent that
any such profit is exempt from Virginia income tax, any such profit
received by the Virginia Trust will retain its tax exempt status in the
hands of the Certificateholders of the Virginia Trust.

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,

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<PAGE>

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

The opinions of bond counsel to the issuing governmental
authorities to the effect that interest on the Bonds is exempt from regular
federal income tax may be limited to law existing at the time the Bonds were
issued, and may not apply to the extent that future changes in law,
regulations or interpretations affect such Bonds. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.

LIQUIDITY

Sponsor Repurchase

The Sponsor, although not obligated to do so, intends to maintain
a secondary market for the Units 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.") Certifi-
cateholders 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.

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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

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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 Certificate-
holder 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
- --------
* 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.

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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."

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 Certificateholder
who is entitled to receive $130.50 interest income from the Trust would
acquire 13.05 Plan Units assuming that the Reinvestment Price per Plan Unit,
plus accrued interest, 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

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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 Certificate-
holders, and December 1 of each year for annual Certificateholders. On each
Record Date the Sponsor will send a current Prospectus relating to the
Available Series being offered for the next Plan Reinvestment Date along with
a letter which reminds each participant that Plan Units are being purchased
for him as part of the Plan unless he notifies the Trustee in writing by that
Plan Reinvestment Date that he no longer wishes to participate in the Plan. In
the event a Primary Series has not been declared effective in sufficient time
to distribute a final Prospectus relating thereto and there is no Secondary
Series as to which a registration statement is currently effective, it is the
Sponsor's intention to suspend the Plan and distribute to each participant his
regular semi-annual or annual distribution. If the Plan is so suspended, it
will resume in effect with the next Plan Reinvestment Date, assuming units of
an Available Series are then being offered.

To aid a participant who might desire to withdraw either from the
Plan or from a particular distribution, the Trustee has established a toll
free number (see below) for participants to use for notification of
withdrawal, which must be confirmed in writing prior to the Plan Reinvestment
Date. Should the Trustee be so notified, it will make the appropriate cash
disbursement. Unless the withdrawing participant specifically indicates in his
written confirmation that (a) he wishes to withdraw from the Plan for that
particular distribution only, or (b) he wishes to withdraw from the Plan for
less than all units of each series of "Municipal Securities Trust" which he
might then own (and specifically identifies which series are to continue in
the Plan), he will be deemed to have withdrawn completely from the Plan in all
respects. Once a participant withdraws completely, he will only be allowed to
again participate in the Plan by submitting a new Authorization Form. A sale
or redemption of a portion of a participant's Plan Units will not constitute a
withdrawal from the Plan with respect to the remaining Plan Units owned by
such participant.

Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual
Certificateholder fail to have an annual distribution plan, such Certificate-
holder will be deemed to have elected the semi-annual plan of distribution,
and to participate in the Plan with respect to distributions made, in

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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 intends 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

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<PAGE>

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 Certificateholders. If a default in the payment of
principal or interest on any of the Bonds occurs and if the Sponsor fails to
instruct the Trustee to sell or hold such Bonds, the Trust Agreement provides
that the Trustee may sell such Bonds.

The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held
by the Trustee subject to the terms and conditions of the 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

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<PAGE>

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 Certificateholder
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

For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Sponsor is Bear, Stearns & Co. Inc., a
Delaware corporation, which is engaged in the underwriting, investment banking
and brokerage business and which is a member of the National Association of
Securities Dealers, Inc. and all principal securities and commodities
exchanges, including the New York Stock Exchange, the American Stock Exchange,
the Midwest Stock Exchange and the Pacific Stock Exchange. Bear Stearns
maintains its principal business offices at 245 Park Avenue, New York, New
York 10167 and, since its reorganization from a partnership to a corporation
in October 1985, has been a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Bear Stearns, through its predecessor entities, has been
engaged in the investment banking and brokerage business since 1923. Bear
Stearns is the sponsor for numerous series of unit investment trusts,
including: A Corporate Trust, Series 1, New York Municipal Trust, Series 1
(and Subsequent Series); Municipal 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) Short-
Intermediate Term 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), Navigator Series (and
Subsequent Series); Mortgage Securities Trust, CMO Series 1 (and Subsequent
Series) and Equity Securities Trust, Series 1, Signature Series, Gabelli
Communications Income Trust (and Subsequent Series). The information included
herein is only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. 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.

For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Company Sponsors are Bear, Stearns & Co. Inc. and
Gruntal & Co., Incorporated, both of whom have entered into an Agreement Among
Co-Sponsors pursuant to which both parties have agreed to act as Co-Sponsors
for the Trust.

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<PAGE>

Bear, Stearns & Co. Inc. has been appointed by Gruntal & Co.,
Incorporated as agent for purposes of taking any action required or permitted
to be taken by the Sponsors under the Trust Agreement. If the Sponsors are
unable to agree with respect to action to be taken jointly by them under the
Trust Agreement and they cannot agree as to which Sponsor shall act as sole
Sponsor, then Bear, Stearns & Co. Inc. shall act as sole Sponsor. If one of
the Sponsors fails to perform its duties under the Trust Agreement or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, that Sponsor may be discharged under the Trust Agreement
and a new Sponsor may be appointed or the remaining Sponsor(s) may continue to
act as Sponsor(s).

Gruntal & Co., Incorporated, a Delaware corporation, operates a
regional securities broker/dealer from its main office in New York City and
branch offices in nine states and the District of Columbia. The firm is very
active in the marketing of investment companies and has signed dealer
agreements with every mutual fund group, as well as being the managing
distributor for The Home Group Money Market and Mutual Funds. Further, through
its Syndicate Department, Gruntal & Co. Incorporated has underwritten a large
number of Closed-End Funds and has been Co-Manager on the following offerings:
Cigna High Income Shares; Dreyfus New York Municipal Income, Inc.; Franklin
Principal Maturity Trust and Van Kampen Merritt Limited Term High Income
Trust.

The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for
errors in judgment except in cases of its own willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties.

The Sponsor may resign at any time by delivering to the Trustee
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 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

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<PAGE>

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 J.
J. Kenny Co., Inc. with main offices located at 65 Broadway, New York, New
York 10006. The Evaluator is a wholly-owned subsidiary of McGraw-Hill, Inc.
The Evaluator is a registered investment advisor and also provides financial
information services.

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<PAGE>

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 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, legal
and auditing expenses, advertising and selling expenses, initial fees and
expenses of the Trustee and other out-of-pocket expenses. The fees of the
Evaluator, however, incurred during the initial public offering are paid
directly by the Trustee.

The Sponsor will not charge the 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 Certificate-
holders by amounts not exceeding proportionate increases in consumer prices
for services as measured by the United States Department of Labor's Consumer
Price Index entitled "All Services Less Rent."

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

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<PAGE>

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
(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 will be sold to Certificateholders 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
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 Certificateholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of Trust,
the sales charge applicable to the purchase of units of an Exchange Trust
shall be 1.5% per unit (or per 1,000 Units for the Mortgage Securities Trust
or per 100 Units for the Equity Securities Trust). For Certificateholders who
wish to exercise the Exchange Privilege within the first five months of their
purchase of Units of Trust, the sales charge applicable to the purchase of
units of an Exchange Trust shall be the greater of (i) 1.5% per unit (or per
1,000 Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust), or (ii) an amount which when coupled with the sales charge
paid by the unitholder upon his original purchase of Units of the Trust at
least equals the sales charge applicable in the direct purchase of units of an
Exchange Trust. The Exchange Privilege is subject to the following conditions:

(1) The Sponsor must be maintaining a secondary market in both the
Units of the Trust held by the Certificateholder and the Units of the
available Exchange Trust. While the Sponsor has indicated its intention
to maintain a market in the Units of all Trusts sponsored by it, the
Sponsor is under no obligation to continue to maintain a secondary
market and therefore there is no assurance that the Exchange Privilege
will be available to a Certificateholder at any specific time in the
future. At the time of the Certificateholder's election to participate
in the Exchange Privilege, there also must be Units of the Exchange
Trust available for sale, either under the initial primary distribution
or in the Sponsor's secondary market.

(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new

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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 Certificateholders 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
Certificateholders. Certificateholders may, during this 60 day period,
exercise the Exchange Privilege in accordance with its terms then in
effect. In the event the Exchange Privilege is not available to a
Certificateholder at the time he wishes to exercise it, the
Certificateholder will immediately be notified and no action will be
taken with respect to his Units without further instructions from the
Certificateholder.

To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If Units
of a designated, outstanding series of an Exchange Trust are at the time
available for sale and such Units may lawfully be sold in the state in which
the Certificateholder is a resident, the Certificateholder will be provided
with a current prospectus or prospectuses relating to each Exchange Trust in
which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary
market transaction except that units may be purchased at a reduced sales
charge.

Example: Assume that after the initial public offering has been
completed, a Certificateholder has five units of a Trust with a current value
of $700 per unit which he has held for more than 5 months and the Certificate-
holder wishes to exchange the proceeds for units of a secondary market
Exchange Trust with a current price of $725 per unit. The proceeds from the
Certificateholder's original units will aggregate $3,500. Since only whole
units of an Exchange Trust may be purchased under the Exchange Privilege, the
Certificateholder would be able to acquire four units (or 4,000 Units of the
Mortgage Securities Trust or 400 Units of the Equity Securities Trust) for a
total cost of $2,943.50 ($2,900 for unit and $43.50 for the sales charge). The
remaining $556.50 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.80
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).

The Conversion Offer

Certificateholders of any registered unit investment trust for
which there is no active secondary market in the units of such trust (a

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"Redemption Trust") may elect to redeem such units and apply the proceeds of
the redemption to the purchase of available Units of one or more series of A
Corporate Trust, Municipal Securities Trust, Insured Municipal Securities
Trust, Mortgage Securities Trust, New York Municipal Trust or Equity
Securities Trust sponsored by Bear, Stearns & Co. Inc. or the Sponsor (the
"Conversion Trusts") at the Public Offering Price for units of the Conversion
Trust based on a reduced sales charge as set forth below. Under the Conversion
Offer, units of the Redemption Trust must be tendered to the trustee of such
trust for redemption at the redemption price, which is based upon the
aggregate bid side evaluation of the underlying bonds in such trust and is
generally about 1-1.2% to 2% lower than the offering price for such bonds (or
for units of the 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 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 its initial offering period; or, at a price based on the
aggregate bid price of the underlying bonds if the initial public offering of
the Conversion Trust has been completed, plus accrued interest (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 Certificateholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of a Redemption
Trust, the sales charge applicable to the purchase of Units of the Conversion
Trust shall be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities
Trust or per 100 Units for the Equity Securities Trust). For
Certificateholders who wish to exercise the Conversion Offer within the first
five months of their purchase of units of a Redemption Trust, the sales charge
applicable to the purchase of Units of a Conversion Trust shall be the greater
of (i) 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust or
per 100 Units for the Equity Securities Trust) or (ii) an amount which when
coupled with the sales charge paid by the unitholder upon his original
purchase of units of the Redemption Trust at least equals the sales charge
applicable in the direct purchase of Units of a Conversion Trust. The
Conversion Offer is subject to the following limitations:

(1) The Conversion Offer is limited only to Certificateholders 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. Certificateholders 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 Certificateholders 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

-79-
82600.2

<PAGE>

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 $3,045
($3,000 for units and $45 for the sales charge). The remaining $330 would be
remitted to the unit owner in cash. If the unit owner acquired the same number
of Conversion Trust units at the same time in a regular secondary market
transaction, the price would have been $3,165.00 ($3,000 for units and $165.00
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 Municipal Securities Trust, Multi-State
Series is, in general, exempt from state and local taxes when held by
residents of the state where the issuers of bonds in such State Trusts are
located. The Insured Municipal Securities Trust combines the advantages of
providing interest income free from regular federal income tax under existing
law with the added safety of irrevocable insurance. Insured Navigator Series

-80-
82600.2

<PAGE>

further combines the advantages of providing interest income free from regular
federal income tax and state and local taxes when held by residents of the
state where issuers of bonds in such state trusts are located with the added
safety of irrevocable insurance. Mortgage Securities Trust offers an
investment vehicle for investors who are interested in obtaining safety of
capital and a high level of current distributions 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 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 Certificateholder
under the Code. The Certificateholder will recognize a tax gain or loss that
will be of a long or short-term capital or ordinary income nature depending on
the length of time the units have been held and other factors. A 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 LLP, 75 East 55th Street, New York, New York 10022, or Berger Steingut
Tarnoff & Stern, 600 Madison Avenue, New York, New York 10022, as counsel for
the Sponsor. 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 Florida tax law have been passed upon by Greenberg,
Traurig Hoffman Lipoff Rosen & Quentel, P.A., as special Florida 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. Certain matters relating to Virginia tax law have been passed upon by
Hunton & Williams, as special Virginia 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. Messrs. Booth & Baron, 122 East 42nd
Street, New York, New York 10168, have acted as counsel for The Bank of New
York.

Independent Auditors

The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A have been examined by KPMG Peat
Marwick, 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.

-81-
82600.2

<PAGE>

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:

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:

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.

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.

- --------
* As described by the rating agencies.

-82-
82600.2

<PAGE>

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.

* * *

-83-
82600.2

<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 Zipcode

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

82600.2

<PAGE>

FOR USE WITH MUNICIPAL SECURITIES TRUST

MULTISTATE SERIES 12-45

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

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

82600.2

<PAGE>

INDEX

Title Page * * *
MUNICIPAL SECURITIES TRUST
Summary of Essential Information........... A-5 MULTI-STATE SERIES
Information Regarding the Trust............ A-9
Financial and Statistical Information......A-12 (A Unit Investment Trust)
Audit and Financial Information
Prospectus
Report of Independent Accountants........ F-1
Statement of Net Assets.................. F-2 Dated: April 28, 1995
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.
245 Park Avenue
The Trust.................................. 1 New York, N.Y. 10167
The State Trusts........................... 8 212-272-2500
Public Offering............................ 45
Estimated Long Term Return and Estimated (and for certain Trusts:)
Current Return........................... 47 Gruntal & Co. Incorporated
Rights of Certificateholders............... 48 14 Wall Street
Tax Status................................. 50 New York, New York 10005
Liquidity.................................. 56 (212) 267-8800
Total Reinvestment Plan.................... 58
Trust Administration....................... 62 Trustee:
Trust Expenses and Charges................. 65
Exchange Privilege and Conversion Offer.... 66 United States Trust Company
Other Matters.............................. 71 of New York
Description of Bond Ratings................ 71 770 Broadway
New York, N.Y. 10003
Parts A and B of this Prospectus do not 1-800-428-8890
contain all of the information set forth in or the
registration statement and exhibits relating The Bank of New York
thereto, filed with the Securities and Exchange 101 Barclay Street
Commission, Washington, D.C., under the New York, N.Y. 10286
Securities Act of 1933, and to which reference is 1-800-431-8002
made.
Evaluator:

Kenny S&P Evaluation
Services,
a Division of
J.J. Kenny Co., Inc.
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.

82600.2

<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

II-1
787.1

<PAGE>

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 LLP, 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 (filed as Exhibit 99.3.3 to Post Effective Amendment
No. 6 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 April 28, 1994 and incorporated herein by
reference).

*99.5.1 -- Consents of the Eva uator 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.

II-2
787.1

<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 17th day of April, 1995.

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

BEAR, STEARNS & CO. INC.
(Depositor)

By: /s/PETER J. DeMARCO
Peter J. DeMarco
(Authorized Signatory)

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration 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, Director and )
Senior Managing Director )
JAMES E. CAYNE President, Chief Executive Officer, ) April 17, 1995
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 Operating Officer/Chief )
Financial Officer/Chief Operations )
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/Chief Legal Officer 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.

II-3
787.1
<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 LLP

New York, New York
April 17, 1995

<PAGE>

II-4
787.1

<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

-1-
787.1

<PAGE>

Exhibit Description Page No.

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 LLP as to tax status of
securities being registered including their
consent to the filing thereof and to the use of,
their name under the heading "Tax Status" in the
Prospectus (filed as Exhibit 3.1.1 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 (filed as Exhibit 99.3.3 to
Post Effective Amendment No. 6 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 April 28,
1994 and incorporated herein by reference).

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).

-2-
787.1

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<CIK> 0000846672
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<ARTICLE> 6
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in its entirety by reference to such financial
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<CIK> 0000846672
<NAME> MST, MULTISTATE SERIES 35
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<NUMBER> 2
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<NUMBER> 3
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in its entirety by reference to such financial
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<NUMBER> 2
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</TABLE>

KENNY S&P EVALUATION SERVICES
A Division of J.J. Kenny Co., Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4422
Fax 212/797-8681

Frank A. Ciccotto, Jr.
Vice President

April 28, 1995

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 J. J. Kenny
Co., Inc. is currently acting as the evaluator for the trust. We hereby
consent to the use in the Amendment of the reference to Kenny S&P Evaluation
Services, a division of J. J. Kenny Co., Inc. as evaluator.

In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the 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,

Frank A. Ciccotto

FAC/cns

<PAGE>

KENNY S&P EVALUATION SERVICES
A Division of J.J. Kenny Co., Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4422
Fax 212/797-8681

Frank A. Ciccotto, Jr.
Vice President

April 28, 1995

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 J. J. Kenny
Co., Inc. is currently acting as the evaluator for the trust. We hereby
consent to the use in the Amendment of the reference to Kenny S&P Evaluation
Services, a division of J. J. Kenny Co., Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/cns

<PAGE>

KENNY S&P EVALUATION SERVICES
A Division of J.J. Kenny Co., Inc.

65 Broadway
New York, New York 10006-2511
Telephone 212/770-4422
Fax 212/797-8681

Frank A. Ciccotto, Jr.
Vice President

April 28, 1995

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 J. J. Kenny
Co., Inc. is currently acting as the evaluator for the trust. We hereby
consent to the use in the Amendment of the reference to Kenny S&P Evaluation
Services, a division of J. J. Kenny Co., Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/cns