<PAGE>
Registration No. 33-32047
S E C U R I T I E S A N D E X C H A N G E C O M M I S
S I O
N
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4
to
F O R M S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF
1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust:
TAX EXEMPT SECURITIES TRUST,
SERIES 317
B.
Names of Depositors:
SMITH BARNEY SHEARSON INCORPORATED
KIDDER, PEABODY & CO. INCORPORATED
<TABLE>
<S> <C>
C. Complete addresses of depositors' principal executive
offices:
SMITH BARNEY SHEARSON KIDDER,
PEABODY & CO.
SHEARSON INC.
INCORPORATED
1345 Avenue of the Americas 60 Broad Street
New York, New York 10105 New York, New York 10005
D. Names and complete addresses of agents for service:
STEPHEN J. TREADWAY GILBERT R. OTT, JR.
Smith Barney Kidder, Peabody & Co.
Shearson Inc. Incorporated
1345 Avenue of the Americas 10 Hanover Square
New York, New York 10105 New York, New York 10005
</TABLE>
It is proposed that this filing will become effective June 14,
1994
pursuant to paragraph (b) of Rule 485.
<PAGE>
TAX EXEMPT SECURITIES TRUST
CROSS-REFERENCE SHEET
Pursuant to Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction
as to the Prospectus in Form S-6)
<TABLE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
<C> <S> <C>
1. . . . . . . . . (a) Name of trust Prospectus front cover
(b) Title of securities issued . .
2.Name and address of each depositor Sponsors: Prospectus back
cover
3. . . . Name and address of trustee Trustee
4.Name and address of each principal underwriterSponsors:
Prospectus back cover
5. . .State of organization of trust Tax Exempt Securities
Trust
6.Execution and termination of trust agreementTax Exempt
Securities Trust - The
Trust:
Amendment and Termination
of the Trust Agreement 7. .
. . . . . . . . Changes of name *
8. . . . . . . . . . . . Fiscal year *
9. . . . . . . . . . . . .Litigation *
II. General Description of the Trust and
Securities of the Trust
10.(a) Registered or bearer securities Rights of Unit Holders
(b) Cumulative or distributive securities
(c) Redemption . . . . . . . . . .
(d) Conversion, transfer, etc. . .
(e) Periodic payment plan. . . . . *
(f) Voting rights. . . . . . . . .
(g) Notice to certificate holders Rights of Unit Holders -
Reports and Records:
Sponsors -
Responsibility: Trustee -
Resignation: Amendment
and Termination of the
Trust Agreement -
Amendment
(h) Consents required. . . . . . . Sponsors - Responsibility:
Amendment and Termination
of the Trust Agreement (i) Other
provisions . . . . . . . Tax Exempt Securities Trust - Tax Status
11.Type of securities comprising units Prospectus front cover:
Tax Exempt Securities
Trust - Portfolio
12.Certain information regarding periodic
payment certificates. . . . . . . *
13.. .(a) Load, fees, expenses, etc. Prospectus front cover:
Summary of Essential
Information; Public
Offering - Offering
Price; Public Offering -
Sponsors' and
Underwriters' Profits:
Tax Exempt Securities
Trust - Expenses and
Charges
<PAGE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
II. General Description of the Trust and
Securities of the Trust
<C> <S> <C>
(b) Certain information regarding periodic
payment certificates . . . . *
(c) Certain percentages. . . . . . Public Offering - Offering
Price
(d) Certain other fees, etc, payable by holders
Rights of Unit Holders - Certificates
(e) Certain profits receivable by depositors,
principal underwriters, trustee or
affiliated persons . . . . . . Public Offering - Sponsors'
and Underwriters' Profits:
Rights of Unit Holders -
Redemption of Units -
Purchase by the Sponsors of
Units Tendered for
Redemption
(f) Ratio of annual charges to income*
14.. .Issuance of trust's securities Tax Exempt Securities
Trust - The Trust: Rights
of Unit Holders -
Certificates
15.Receipt and handling of payments from purchasers*
16.Acquisition and disposition of underlying
securities . . . . . . . . . . . . Tax Exempt Securities Trust
- Portfolio: Sponsors -
Responsibility
17.. . . . .Withdrawal or redemption Rights of Unit Holders -
Redemption of Units
18.(a) Receipt, custody and disposition of incomeRights of Units
Holders - Distribution of
Interest and Principal:
Rights of Unit Holders -
Reports and Records
(b) Reinvestment of distributions *
(c) Reserves or special funds. . . Rights of Unit Holders -
Distribution of Interest
and Principal: Tax Exempt
Securities Trust - Expenses
and Charges - Other Charges (d) Schedule of
distributions. . . *
19.. . Records, accounts and reports Rights of Unit Holders -
Reports and Records:
Rights of Unit Holders -
Distribution of Interest
and Principal
20.Certain miscellaneous provisions of trust agreementAmendment
and Termination of the Trust
(a) Amendment. . . . . . . . . . . Agreement: Trustee -
Resignation: Trustee -
(b) Termination . . . . . . . . . Resignation: Trustee -
Limitations on Liability:
(c) and (d) Trustee, removal and successorSponsors -
Responsibility: Sponsors - Resignation
(e) and (f) Depositors, removal and successor
21.. . . . Loans to security holders *
22.. . . . .Limitations on liability Sponsors - Limitations on
Liability: Trustee -
Limitations on Liability:
Tax Exempt Securities
Trust - Portfolio
23.. . . . . . .Bonding arrangements *
24.Other material provisions of trust agreement*
______
* Inapplicable, answer negative or not required.
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
III. Organization, Personnel and
Affiliated Persons of Depositor
<C> <S> <C>
25.. . . .Organization of depositors Sponsors
26.. . . Fees received by depositors *
27.. . . . . .Business of depositors Sponsors
28.Certain information as to officials and
affiliated persons of depositors [Contents of Registration
Statement]
29.. Voting securities of depositors *
30.. .Persons controlling depositors *
31.Payments by depositor for certain services
rendered to trust . . . . . . . . *
32.Payments by depositors for certain other services
rendered to trust . . . . . . . . *
33.Remuneration of employees of depositors for
certain services rendered to trust *
34.Remuneration of other persons for certain services
rendered to trust . . . . . . . . *
IV. General Description of the Trust and
Securities of the Trust
35.Distribution of trust's securities by statesPublic Offering -
Distribution of Units
36.Suspension of sales of trust's securities*
37.Revocation of authority to distribute*
38.. . . .(a) Method of distribution Public Offering -
Distribution of Units
(b) Underwriting agreements. . . .
(c) Selling agreements . . . . . .
39.(a) Organization of principal underwritersSponsors
(b) N.A.S.D. membership of principal underwriters
40.Certain fees received by principal underwriters*
41.(a) Business of principal underwritersSponsors
(b) Branch offices of principal underwriters*
(c) Salesmen of principal underwriters*
42.Ownership of trust's securities by certain persons*
43.Certain brokerage commissions received by principal
underwriters. . . . . . . . . . . *
44.. . . . . (a) Method of valuation Prospectus front cover:
Public Offering -
Offering Price: Public
Offering - Distribution
of Units
(b) Schedule as to offering price *
(c) Variation in offering price to certain personsPublic
Offering - Distribution of Units
45.. Suspension of redemption rights *
46.. . . . .(a) Redemption Valuation Rights of Unit Holders -
Redemption of Units -
Computation of Redemption
Price per Unit
(b) Schedule as to redemption price *
47.Maintenance of position in underlying securities
Public Offering - Market for Units: Rights of Unit Holders -
Redemption of Units - Purchase by the Sponsors of Units
tendered for Redemption; Rights of Unit Holders - Redemption
of Units - Computation of Redemption Price per Unit
______
* Inapplicable, answer negative or not required.
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
V. Information Concerning the Trustee
or Custodian
<C> <S> <C>
48.Organization and regulation of trusteeTrustee
49.. . .Fees and expenses of trustee Tax Exempt Securities
Trust - Expenses and
Charges
50.. . . . . . . . . .Trustee's lien Tax Exempt Securities
Trust - Expenses and
Charges - Other Charges
VI. Information Concerning Insurance of
Holders of Securities
51.Insurance of holders of trust's securities*
VI. Policy of Registrant
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying securitiesProspectus
front cover: Sponsors-Responsibility
(b)Transactions involving elimination of
underlying securities . . . . . *
(c)Policy regarding substitution or elimination
of underlying securities. . . . Sponsors - Responsibility
(d)Fundamental policy not otherwise covered*
53. Tax status of trust . . . . . . Prospectus front cover: Tax
Exempt Securities Trust -
Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during last ten years*
55. . . . . . . . . . . . . . . . . *
56. Certain information regarding periodic payment
securities . . . . . . . . . . . . *
57. . . . . . . . . . . . . . . . . *
58. . . . . . . . . . . . . . . . . *
59. Financial statements (Instruction 1(c) to form S-6)
Statement of Financial Condition of The Tax Exempt Securities
Trust
______
* Inapplicable, answer negative or not required.
<PAGE>
</TABLE>
SERIES 317
[S] [C]
In the opinion of counsel, under existing law interest income to the
Trusts and, with certain exceptions, to Unit holders is exempt from
all Federal income tax. In addition, in the opinion of counsel, the
interest income of each State Trust is similarly exempt from state
income taxes in the state for which such Trust is named. Capital
gains, if any, are subject to tax. Investors should retain both parts
of this Prospectus for future reference.
THE INITIAL PUBLIC OFFERING OF UNITS IN THE TRUSTS
HAS BEEN COMPLETED. THE UNITS OFFERED HEREBY ARE
ISSUED AND OUTSTANDING UNITS WHICH HAVE BEEN
ACQUIRED BY THE SPONSORS EITHER BY PURCHASE FROM
THE TRUSTEE OF UNITS TENDERED FOR REDEMPTION OR
IN THE SECONDARY MARKET. SEE PART B, "RIGHTS OF
UNIT HOLDERS--REDEMPTION OF UNITS--PURCHASE BY
THE SPONSORS OF UNITS TENDERED FOR REDEMPTION"
AND "MARKET FOR UNITS". THE PRICE AT WHICH THE
UNITS OFFERED HEREBY WERE ACQUIRED WAS NOT LESS
THAN THE REDEMPTION PRICE DETERMINED AS PROVIDED
HEREIN. SEE PART B, "RIGHTS OF UNIT HOLDERS--
REDEMPTION OF UNITS--COMPUTATION OF REDEMPTION
PRICE PER UNIT".
THE TAX EXEMPT SECURITIES TRUST SERIES 317 consists of
1 underlying separate unit investment Trust (the "Trust") designated as
National Trust 159, formed for the purpose of obtaining for its Unit
holders tax-exempt interest income and conservation of capital through
investment in a fixed portfolio of municipal bonds rated at the time of
deposit A or better by Standard & Poor's Corporation or Moody's
Investors Service, with certain ratings being provisional or conditional.
(See "Portfolio of Securities".) The Trust is comprised of a fixed
portfolio of interest-bearing obligations issued on behalf of states,
counties, territories, possessions and municipalities of the United States
and authorities or political subdivisions thereof. The interest on all
bonds in the Trust is, in the opinion of recognized bond counsel to the
issuers of the obligations, (i) exempt under existing law (except in certain
instances depending upon the Unit holders) from all Federal income tax
and (ii) subject to the alternative minimum tax under the Tax Reform Act
of 1986 as respects the required inclusion in the alternative minimum tax
base of one-half of adjusted net book income of corporate Unit holders
(see Part B, "Tax Exempt Securities Trust - Tax Status").
THE OBJECTIVES of the Trust are tax-exempt income and
conservation of capital through an investment in a diversified portfolio
consisting primarily of municipal bonds. There is, of course, no
guarantee that the Trust's objectives will be achieved since the payment
of interest and preservation of principal are dependent upon the continued
ability of the issuers of the bonds to meet such obligations.
THE PUBLIC OFFERING PRICE of the Units is equal to the
aggregate bid price of the underlying Securities in the Trust's portfolio
divided by the number of Units outstanding, plus a sales charge equal to
5% of the Public Offering Price (5.263% of the aggregate bid price of
the Securities per Unit). A proportional share of accrued and
undistributed interest on the Securities at the date of delivery of the Units
to the purchaser is also added to the Public Offering Price.
THE SPONSORS, although not obligated to do so, intend to maintain
a market for the Units at prices based upon the aggregate bid price of the
underlying Securities, as more fully described in Part B, "Market for
Units". If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities.
MONTHLY DISTRIBUTIONS of principal and interest received by the
Trust will be made on or shortly after the fifteenth day of each month to
holders of record on the first day of that month. For further information
regarding the distributions by the Trust, see the "Summary of Essential
Information".
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
Prospectus Part A dated June 14, 1994
Note: Part A of this Prospectus may not be distributed unless
accompanied by Part B.
<PAGE>
<TABLE>TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159
SUMMARY OF ESSENTIAL INFORMATION AS OF MARCH 25,
1994+
Sponsors: SMITH BARNEY SHEARSON INC. and
KIDDER, PEABODY & CO.
INCORPORATED
Trustee: UNITED STATES TRUST COMPANY
OF NEW YORK
Evaluator: KENNY S&P EVALUATION SERVICES
<S> <C>
Principal Amount of Securities in Trust
$13,145,000
Number of Units
15,242
Fractional Undivided Interest in Trust per Unit
1/15,242
Principal Amount of Securities in Trust per Unit
$862.41
Public Offering Price per Unit #*
$ 964.20
Sales Charge (5% of Public Offering Price)#
48.21
Approximate Redemption and Sponsors' Repurchase
Price per Unit
(per Unit Bid Price of Securities)#**
$915.99
Calculation of Estimated Net Annual Income per Unit:
Estimated Annual Income per Unit
$65.23
Less Estimated Annual Expenses per Unit
1.26
Estimated Net Annual Income per Unit
$63.97
Monthly Income Distribution per Unit
$5.33
Daily Rate (360-day basis) of Income Accrual per Unit
$.1776
Estimated Current Return Based on Public Offering
Price# 6.63%
Estimated Long-Term Return#
5.84%
<FN>
#Subject to changes in the prices of the underlying
securities. The aggregate bid price of the securities is determined
on each business day as of the Evaluation Time.
*Plus $18.26 per Unit representing accrued interest and
the net of cash on hand, accrued expenses and amounts
distributable to Unit holders through the expected date of
settlement (five business days after March 25, 1994). (See "Public
Offering--Offering Price".)
**Plus $17.00 per Unit representing accrued interest and
the net of cash on hand, accrued expenses and amounts
distributable to Unit holders of record as of March 25, 1994 on
a pro rata basis . (See "Redemption of Units--Computation of
Redemption Price per Unit".)
</TABLE>
Record Dates: The first day of each month
Distribution Dates: The fifteenth day of each month
Evaluation Time: Close of trading on the
New York Stock Exchange (currently 4:00 P.M.
New York time)
Date of Deposit and Trust Agreement: March 20, 1990
Mandatory Termination Date: January 1, 2040
Minimum Value of Trust: Trust may be terminated if the value
of the Trust is less than $8,000,000 and must be
terminated if the value of the Trust is less
than $4,000,000
Trustee's Annual Fee: $1.03 per $1,000 principal
amount of bonds ($13,539 per year on the basis
of bonds in the principal amount of $13,145,000)
plus expenses.
Evaluator's Fee: $.30 per bond per evaluation
Number of issues: 26
Number of States: 16
As of March 25, 1994, 19 (75%) of the Bonds were rated
by Standard & Poor's Corporation (8% being rated AAA, 21%
being rated AA, 27% being rated A and 19% being rated BBB)
and 6 (21%) of the Bonds were rated by Moody's Investors
Service (10% being rated Aaa, 3% being rated Aa, 3% being
rated A and 5% being rated Baa) and 1 (4%) was not rated by
either service. Ratings assigned by the bond rating services are
subject to change from time to time.
<PAGE>
Additional Considerations - Investment in the Trust should be made
with an understanding that the value of the underlying Portfolio may
decline with increases in interest rates. Approximately 38% of the
Bonds in the Trust consist of hospital revenue bonds (including
obligations of health care facilities). Approximately 11% of the
Bonds in the Trust consist of obligations of municipal housing
authorities. Approximately 6% of the Bonds in the Trust consist of
Bonds which are subject to the Mortgage Subsidy Bond Tax Act of
1980. Approximately 24% of the Bonds in the Trust consist of bonds
in the power facilities category. (See Part B, "Tax Exempt Securities
Trust-Portfolio" for a brief summary of additional considerations
relating to certain of these issues.)
+ The percentages referred to in this summary are each computed
on the basis of the aggregate bid price of the Bonds as of March 25,
1994.
FINANCIAL AND STATISTICAL INFORMATION
<TABLE>Selected data for each Unit outstanding
IncomePrincipal
Units Net AssetDistributions
Distributions
Period Ended Outstanding Value Per UnitPer Unit
Per Unit
<S> <C> <C> <C> <C>
February 15, 1992 15,632 $ 1,030.58$ 74.07 $-
February 15, 1993 15,428 1,074.7573.85 3.24
February 15, 1994 15,242 961.6371.35
130.33
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Unit Holders, Sponsors and Trustee of
Tax Exempt Securities Trust, Series 317 National Trust 159:
We have audited the accompanying balance sheet of Tax Exempt
Securities Trust, Series 317 National Trust 159, including the portfolio
of securities, as of February 15, 1994, and the related statements of
operations and changes in net assets for each of the years in the
three-year period ended February 15, 1994. These financial
statements are the responsibility of the Trustee (see Note 6). Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of February 15, 1994 by
correspondence with the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the
Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tax Exempt
Securities Trust, Series 317 National Trust 159 as of February 15,
1994, and the results of its operations and changes in its net assets for
each of the years in the three-year period ended February 15, 1994,
in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK
New York, New York
May 18, 1994
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159
BALANCE SHEET
February 15, 1994
ASSETS
<S> <C>
Investments in tax exempt bonds, at market value
(Cost $12,956,688) (Note 3 to Portfolio of Securities)
$14,391,285
Accrued interest
145,043
Cash
121,865
Total Assets
$14,658,193
LIABILITIES AND NET ASSETS
Accrued expenses
$ 939
Net Assets (15,242 units of fractional
undivided interest outstanding):
Original cost to investors (Note 1)
$16,505,107
Less initial underwriting commission (sales charge)
(Note 1)
776,000
15,729,107
Cost of securities sold or redeemed since date of
deposit (March 20, 1990)
(2,772,419
)
Net unrealized market appreciation
1,434,597
14,391,285
Undistributed net investment income
230,898
Undistributed proceeds from securities sold or
redeemed
35,071
Net Assets
14,657,254
Total Liabilities and Net Assets
$14,658,193
Net asset value per unit
$961.63
STATEMENTS OF OPERATIONS
For the years ended February 15, 1994, 1993 and 1992
1994 1993 1992
<S>
<C>
<C>
<C>
Investment Income-interest (Note 2). . . . . . . . . . . . . . . . .
$ 1,084,224 . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
1,159,255. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
1,200,270
Less expenses:
Trustee's fees and expenses. . . . . . . . . . . . . . . . . . .
16,644 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,535 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,506
Evaluator's fees . . . . . . . . . . . . . . . . . . . . . . . .
2,324. . . . . . . . . . . . . . . . . . . . . . . 2,360
2,088
Total expenses. . . . . . . . . . . . . . . . . . . . . . .
18,968. . . . . . . . . . . . . . . . . . . . . . . 18,895
17,594
Net investment income. . . . . . . . . . . . . . . . . . . . . .
1,065,256. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,140,360 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,182,676
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on securities transactions
(Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
112,734. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,706 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,090 )
Net increase in unrealized market appreciation . . . . . . . . .
185,082. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
733,833 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,840
Net gain on investments. . . . . . . . . . . . . . . . . . . . .
297,816. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
737,539 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,750
Net increase in net assets resulting from operations . . . . . .
$1,363,072$. . . . . . . . . . . . . . . . . . . . . . . . .1,877,899
$ 1,262,426
The accompanying Notes are an integral part of these
statements.
<PAGE>TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended February 15, 1994, 1993 and 1992
1994 1993 1992
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . .
$1,065,256$. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,140,360. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
1,182,676
Net realized gain (loss) on securities transactions
(Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
112,734. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,706 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,090 )
Net increase in unrealized market appreciation . . . . . . . . .
185,082. . . . . . . . . . . . . . . . . . . . . . . . . . . .
733,833. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,840
Net increase in net assets resulting from operations . . . . . .
1,363,072 . . . . . . . . . . . . . . . . . . . . . . . . . .
1,877,899 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,262,426
Distributions to Unit Holders:
Net investment income (Note 4) . . . . . . . . . . . . . . . . .
(1,097,129). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,143,138 )
(
1
,
1
8
2
,
0
0
4
)
Proceeds from securities sold or redeemed. . . . . . . . . . . .
(2,002,705 )
(
4
9
,
9
8
7
)
-
Total Distributions . . . . . . . . . . . . . . . . . . . .
(3,099,834). . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,193,125 )
(
1
,
1
8
2
,
0
0
4
)
Unit Redemptions by Unit Holders (Note 3):
Accrued interest at date of redemption . . . . . . . . . . . . .
(3,012 )
(
3
,
7
7
0
)
(
6
,
4
6
8
)
Value of Units at date of redemption . . . . . . . . . . . . . .
(184,356 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(209,734) . . . . . . . . . . . . . . . . . . . . . . . . .
(375,916)
Total Redemptions . . . . . . . . . . . . . . . . . . . . .
(187,368 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(213,504) . . . . . . . . . . . . . . . . . . . . . . . . .
(382,384)
Increase (decrease) in net assets. . . . . . . . . . . . . . . .
(1,924,130). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
471,270 . . . . . . . . . . . . . . . . . . . . . . . . . .
(301,962)
Net Assets:
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . .
16,581,384 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,110,114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,412,076
End of year (including undistributed net
investment income of $230,898, $265,783
and $272,331, respectively). . . . . . . . . . . . . . . . . .
$14,657,254. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
16,581,384 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$
16,110,114
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(1) The original cost to the investors represents the
aggregate initial public offering price as of the date of
deposit (March 20, 1990), exclusive of accrued interest,
computed on the basis of the aggregate offering price of
the securities. The initial underwriting commission
(sales charge) was 4.70% of the aggregate public
offering price (4.932% of the aggregate offering price of
the securities).
(2) Interest income represents interest earned on the Trust's
portfolio and has been recorded on the accrual basis.
(3) 758 Units were redeemed by the Trustee during the
three years ended February 15, 1994 (186 Units, 204
Units and 368 Units being redeemed in 1994, 1993 and
1992, respectively).
(4) Interest received by the Trust is distributed to Unit
holders on the fifteenth day of each month, after
deducting applicable expenses.
(5) The gain (loss) from the sale or redemption of securities
is computed on the basis of average cost of the issue
sold or redeemed.
(6) The Trustee has custody of and responsibility for all
accounting and financial books, records, financial
statements and related data of each Trust and is
responsible for establishing and maintaining a system of
internal control directly related to, and designed to
provide reasonable assurance as to the integrity and
reliability of, financial reporting of each Trust. The
Trustee is also responsible for all estimates of expenses
and accruals reflected in each Trust's financial
statements. The Evaluator determines the price for
each underlying Bond included in each Trust's Portfolio
of Securities on the basis set forth in Part B, "Public
Offering - Offering Price". Under the Securities Act of
1933, as amended (the "Act"), the Sponsors are deemed
to be issuers of each Trust's Units. As such, the
Sponsors have the responsibility of issuers under the Act
with respect to financial statements of each Trust
included in the Registration Statement.
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159 - PORTFOLIO OF SECURITIES -
February 15, 1994
Ratings
Redemption Principal
Market
Security Description (1)
Provisions (2) Amount
Value (3)
<S> <C> <C> <C>
<C>
Colorado Housing and Finance Authority,
Single-Family Program Senior Bonds,
Federally Insured or Guaranteed AA 2/1/00 @
102 $ 205,000$219,774
Mortgage Loans, 7.625% due 8/1/2017 S.F. 2/1/11
@ 100
District of Columbia Revenue Bonds, Assoc.
of American Medical Colleges Issue, AA- 2/15/00 @
102 445,000507,678
7.50% due 2/15/2020 S.F.
2/15/11 @ 100
City of Miami, Florida, Health Facilities
Authority, Hospital Revenue Refunding Bonds, A* 8/1/98
@ 102 350,000401,583
Mercy Hospital, Inc., 8.125% due 8/1/2011 S.F. 8/1/01
@ 100
Municipal Electric Authority of Georgia,
General Power Revenue Bonds,
8.375% due 1/1/2020 AA- 1/1/97 @
102 300,000340,851
S.F. 1/1/13
@ 100
8.375% due 1/1/2020 AA- 1/1/97 @
102 1,000,0001,136,170
S.F. 1/1/13
@ 100
City of Chicago, Illinois, Water A+ 11/15/99
@ 100 500,000515,230
Revenue Bonds, 6.00% due 11/15/2019 S.F.
11/15/17 @ 100
Illinois Educational Facilities Authority
Revenue Bonds, Loyola University, Aaa* 7/1/96 @
102 190,000198,892
7.30% due 7/1/2014 (p)
Illinois Health Facilities Authority Revenue
Refunding Bonds, Lutheran General Health A+ 4/1/99 @
102 330,000327,875
Care System, 6.00% due 4/1/2011 S.F. 4/1/09
@ 100
Illinois Health Facilities Authority
Revenue Bonds, ServantCor, BBB+ 8/15/99 @
102 1,000,0001,117,640
7.875% due 8/15/2019 S.F.
8/15/02 @ 100
Illinois Health Facilities Authority
Revenue Bonds, Illinois Masonic Aaa* 10/1/99 @
102 1,000,0001,185,680
Medical Center, 7.70% due 10/1/2019 (p)
The City of Indianapolis, Indiana,
Economic Development Revenue Bonds,
National Benevolent Association-Robin AA- 2/1/06 @
100 500,000551,155
Run Village Project, 7.70% due 2/1/2010 (p)
Michigan State Hospital Finance Authority,
Hospital Revenue and Refunding Bonds,
The Detroit Medical Center Obligated A* 8/15/98 @
102 750,000856,717
Group, 8.125% due 8/15/2012
<PAGE>A-6
TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159 - PORTFOLIO OF SECURITIES -
February 15, 1994
(Continued)
Ratings
Redemption Principal
Market
Security Description (1)
Provisions (2) Amount
Value (3)
Health and Educational Facilities Authority
of The State of Missouri, Health Facilities
Revenue Bonds, Missouri Baptist Medical
Center, 7.625% due 7/1/2018 BBB+ 1/1/00 @
102 $ 500,000$554,635
S.F. 7/1/11
@ 100
8.00% due 1/1/2019 BBB+ 1/1/00 @
102 980,0001,106,792
S.F. 1/1/11
@ 100
Montana Board of Housing, Single Family
Mortgage Senior Bonds, FHA Insured or
VA Guaranteed Mortgage Loans, AA 4/1/00 @
102 $ 300,000$320,697
7.625% due 10/1/2017 S.F. 4/1/11
@ 100
Ohio Air Quality Development Authority,
State of Ohio, Pollution Control Revenue
Bonds, The Dayton Power and Light A 12/1/95 @
102 1/2 235,000263,005
Company Project, 9.50% due 12/1/2015
Trustees of the Tulsa, Oklahoma,
Municipal Airport Trust Revenue Bonds, Baa2* 12/1/95 @
102 500,000548,970
9.50% due 6/1/2020
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue Refunding A* 1/1/96 @
100 595,000595,054
Bonds, 5.75% due 1/1/2024 S.F. 1/1/23
@ 100
Grapevine Industrial Development Corporation,
Texas, Airport Facilities Revenue Bonds,
American Airlines, Inc. Project, Baa1* 12/1/95 @
102 185,000202,333
9.25% due 12/1/2012
Lower Colorado River, Texas, Authority A+ 1/2/96 @
100 800,000841,328
Priority Revenue Bonds, 6.50% due 1/1/2016 (p)
Texas Housing Agency, Residential Aa* 7/1/00 @
102 460,000469,191
Mortgage Revenue Bonds, 7.60% due 7/1/2016 S.F. 1/1/04
@ 100
Emery County, Utah, Pollution Control
Revenue Bonds, Utah Power & Light AAA 3/15/94 @
100 1/2 500,000501,855
Company, 5.90% due 4/1/2008 S.F. 4/1/99
@ 100
Utah Housing Finance Agency, Single
Family Mortgage Purchase Bonds,
Federally Insured or Guaranteed AA 7/1/99 @
102 520,000547,550
Mortgage Loans, 7.50% due 7/1/2016 S.F. 7/1/08
@ 100
Municipality of Metropolitan Seattle,
Washington, Sewerage Revenue & AAA 1/1/95 @
102 500,000524,980
Refunding Bonds, 7.00% due 1/1/2016 (p)
Sweetwater County, Wyoming, Pollution
Control Revenue Bonds, Idaho Power A- 11/3/96 @
103 500,000 555,650
Company, 7.625% due 12/1/2014
$13,145,000$14,391,285
<PAGE>The accompanying Notes are an integral part of this
Portfolio.
A-7
TAX EXEMPT SECURITIES TRUST, SERIES 317
NATIONAL TRUST 159 - PORTFOLIO OF SECURITIES -
February 15, 1994
(Continued)
At February 15, 1994, the net unrealized market appreciation of all
tax exempt bonds was comprised of the following:
<S> <C>
Gross unrealized market appreciation $ 1,434,597
Gross unrealized market depreciation -
Net unrealized market appreciation $ 1,434,597
</TABLE>
NOTES TO PORTFOLIO OF SECURITIES:
(1) All Ratings are by Standard & Poor's Corporation, except those
identified by an asterisk (*) which are by Moody's Investors
Service. The meaning of the applicable rating symbols is set
forth in Part B, "Ratings".
(2) There is shown under this heading the year in which each issue
of bonds initially or currently is redeemable and the redemption
price for that year; unless otherwise indicated, each issue
continues to be redeemable at declining prices thereafter, but
not below par. "S.F." indicates a sinking fund has been or will
be established with respect to an issue of bonds. The prices at
which bonds may be redeemed or called prior to maturity may
or may not include a premium and, in certain cases, may be less
than the cost of the bonds to the Trust. Certain bonds in the
portfolio, including bonds not listed as being subject to
redemption provisions, may be redeemed in whole or in part
other than by operation of the stated redemption or sinking
fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the
terms and provisions of such bonds. For example, see
discussion of obligations of municipal housing authorities under
"Tax Exempt Securities Trust-Portfolio" in Part B.
(3) The market value of securities as of February 15, 1994 was
determined by the Evaluator on the basis of bid prices for the
securities at such date.
(p) It is anticipated that these bonds will be redeemed prior to
their scheduled maturity, pursuant to a pre-refunding, as
reflected under the column "Redemption Provisions".
A-8
<PAGE>
[TEXT]
PROSPECTUS -- PART B
Note that Part B of the Prospectus may not be distributed
unless accompanied by Part A.
TAX EXEMPT SECURITIES TRUST
The Trusts
Each Trust is one of a series of similar but separate unit
investment trusts created under the laws of the State of New York by a
Trust Indenture and Agreement and related Reference Trust Agreement
dated the Date of Deposit (collectively, the "Trust Agreement"), among
the sponsors, United States Trust Company of New York, as trustee (the
"Trustee"), and Kenny Information Systems, Inc., as evaluator (the
"Evaluator"). The sponsors are Smith Barney Shearson Inc. and Kidder,
Peabody & Co. Incorporated (the "Sponsors" or "Co-sponsors"). Each
Trust containing Bonds of a state for
which such Trust is named (a "State Trust") and each Long Term Trust,
National Trust, Long-Intermediate Term Trust, Intermediate Term Trust,
Selected Term Trust, Short-Intermediate Term Trust and Short Term
Trust are referred to herein as the "Trust" or "Trusts," unless the context
requires otherwise. On the Date of Deposit, the Sponsors deposited
contracts and funds (represented by a certified check or checks and/or an
irrevocable letter or letters of credit, issued by a major commercial bank)
for the purchase of certain interest-bearing obligations (the "Bonds")
and/or Units of preceding Series of Tax Exempt Securities Trust (the
"Deposited Units") (such Bonds and Deposited
<PAGE>
Units, if any, being referred to herein collectively as the "Securities").
The Trustee thereafter delivered to the Sponsors registered certificates of
beneficial interest (the "Certificates") representing the units (the "Units")
comprising the entire ownership of each Trust. The initial public
offering of Units in each Trust has been completed. The Units offered
hereby are issued and outstanding Units which have been acquired by the
Sponsors either by purchase from the Trustee of Units tendered for
redemption or in the secondary market. See
"Rights or Unit Holders -- Redemption of Units -- Purchase by the
Sponsors of Units Tendered for Redemption" and "Market for Units".
References to multiple Trusts in Part B herein should be read as
references to a single Trust if Part A indicates the creation of only one
Trust.
Objectives
The objectives of a Trust are tax-exempt income and conservation
of capital through an investment in a diversified portfolio of municipal
bonds. There is, of course, no guarantee that a Trust's objectives will be
achieved since the payment of interest and the preservation of principal
are dependent upon the continued ability of the issuers of the bonds to
meet such obligations. Subsequent to the Date of Deposit, the ratings of
the Bonds set forth in Part A - "Portfolio of Securities" may have
declined due to, among other factors, a
decline in creditworthiness of the issuer of said Bonds.
Portfolio
The following factors, among others, were considered in selecting
the Bonds for each Trust: (1) the Bonds are obligations of the states,
counties, municipalities, territories or possessions of the United States
and authorities or political subdivisions thereof, so that the interest on
them will, in the opinion of recognized bond counsel to the issuing
governmental authorities, given on the
date of the original delivery of the Bonds, be exempt from Federal
income tax under existing law to the extent described in "Tax Status"
herein, (2) all the Bonds deposited in a State Trust are obligations of the
state for which such Trust is named or of the counties, territories or
municipalities of such state, and
authorities or political subdivisions thereof, or of the Territory of Guam
or the Commonwealth of Puerto Rico, so that the interest on them will,
in the opinion of recognized bond counsel to the issuing governmental
authorities, be exempt from Federal income tax under existing law to the
extent described in "Tax Status" herein and from state income taxes in
the state for which such Trust is
named in each case to the extent described in "Tax Exempt Securities
Trust --Tax Status", (3) the Bonds were chosen in part on the basis of
their respective maturity dates, (4) the Bonds are diversified as to
<PAGE>
purpose of issue and location of issuer, except in the case of a State
Trust where the Bonds are diversified only as to purpose of issue, and
(5) in the opinion of the Sponsors, the Bonds
are fairly valued relative to other bonds of comparable quality and
maturity. The rating of each issue as of a recent date is set forth in Part
A, "Portfolio of Securities" (the "Portfolio"). For a description of the
meaning of the applicable rating symbols as published by Standard &
Poor's and Moody's, see "Bond Ratings". It should be emphasized,
however, that the ratings of Standard & Poor's and Moody's represent
their opinions as to the quality of the bonds which
they undertake to rate, and that these ratings are general and not absolute
standards of quality.
The Bonds in the Portfolio of a Trust were chosen in part on the
basis of their respective maturity dates. An Intermediate Term Trust and
a Selected Term Trust will have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years from the
Date of Deposit. A Long-Intermediate Term Trust will have a
dollar-weighted average portfolio
maturity of more than ten years but less than fifteen years from the Date
of Deposit. A Long Term Trust, National Trust or a State Trust not
specified as to term will have a dollar-weighted average portfolio
maturity of more than ten years from the Date of Deposit. For the actual
maturity dates of each of the Bonds contained in a Trust, see Part A,
"Portfolio of Securities". A sale or other disposition of a Bond by the
Trust prior to the maturity of such Bond may
be at a price which results in a loss to the Trust. The inability of an
issuer to pay the principal amount due upon maturity of a Bond would
result in a loss to the Trust.
The Trusts may be an appropriate investment vehicle for investors
who desire to participate in a portfolio of tax-exempt fixed income
securities with greater diversification than they might be able to acquire
individually. In addition, bonds of the type deposited in the Trusts are
often not available in small amounts. Investors should be aware that
ordinarily the market value of bonds will decrease as prevailing interest
rates increase, and will increase as interest rates decrease. In general,
bonds with long term maturities (such as those held in a Long Term
Trust) usually yield more than bonds with shorter
term maturities (such as those held in a Short Term Trust), assuming all
bonds share similar credit characteristics. Long term bonds, however,
are often more vulnerable to a decline in market value than are short
term bonds, in the event interest rates and yields rise. If long term
bonds are held for a period approaching their maturity dates, such impact
on the value of the long term bonds will be lessened.
<PAGE>
<PAGE>
Risk Factors
Certain Bonds in a Trust may have been purchased by the Sponsors
on a "when, as and if issued" basis; that is, they had not yet been
issued by their governmental entity on the Date of Deposit (although
such governmental entity had committed to issue such Bonds).
Contracts relating to such "when, as and if issued" Bonds are not
expected to be settled by the first settlement date for Units. In the
case of these and/or certain other Bonds, the delivery of the
Bonds may be delayed ("delayed delivery") or may not occur. Unit
holders who purchased their Units of a Trust prior to the date such
Bonds are actually delivered to the Trustee may have to make a
downward adjustment in the tax basis of their Units for interest
accruing on such "when, as and if issued" or "delayed delivery" Bonds
during the interval between their purchase of Units and delivery of
such Bonds, since the Trust and the Unit holders will not be
reimbursing the Sponsors for interest accruing on such "when, as and
if issued" or "delayed delivery" Bonds during the period between the
settlement date for the Units and the delivery of such Bonds into the
Trust. (See "Taxes.") Such adjustment has been taken into account in
computing the Estimated Current Return and Estimated Long-Term
Return set forth herein, which is slightly lower than Unit holders may
receive after the first year. (See Part A, "Summary of Essential
Information.") To the extent that the delivery of such Bonds is
delayed beyond their respective expected delivery dates, the Estimated
Current Return and Estimated Long-Term Return for the first year may
be lower than indicated in the "Summary of Essential Information" in
Part A.
Most of the Bonds in the Portfolio of a Trust are subject to
redemption prior to their stated maturity date pursuant to sinking fund
or call provisions. (See Part A-"Portfolio Summary as of Date of
Deposit" for information relating to the particular Trust described
therein.) In general, a call or redemption provision is more likely to be
exercised when the offering price valuation of a bond is higher than its
call or redemption price, as it might be in periods of
declining interest rates, than when such price valuation is less than the
bond's call or redemption price. To the extent that a Bond was
deposited in a Trust at a price higher than the price at which it is
redeemable, redemption will result in a loss of capital when compared
with the original public offering price of the Units. Conversely, to the
extent that a Bond was acquired at a price lower than the redemption
price, redemption will result in an
increase in capital when compared with the original public offering
price of the Units. Monthly distributions will generally be reduced by
the amount of the income which would otherwise have been paid with
respect to redeemed bonds. The Estimated Current Return and
Estimated Long-Term Return of the Units may be affected by such
<PAGE>
redemptions. Each Portfolio of Securities in Part A contains a listing of
the sinking fund and call provisions, if any, with respect to each of the
Bonds in a Trust. Because certain of the Bonds may from time to time
under certain circumstances be sold or redeemed or will mature in
accordance with their terms and the proceeds from such events will be
distributed to Unit holders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present size
and composition. Neither the Sponsors nor the Trustee shall be liable in
any way for any default, failure or defect in any Bond.
The Portfolio of the Trust may consist of some Bonds whose current
market values were below face value on the Date of Deposit. A
primary reason for the market value of such Bonds being less than face
value at maturity is that the interest coupons of such Bonds are at
lower rates than the current market interest rate for comparably rated
Bonds, even though at the time of the issuance of such Bonds the
interest coupons thereon represented then prevailing
interest rates on comparably rated Bonds then newly issued. Bonds
selling at market discounts tend to increase in market value as they
approach maturity when the principal amount is payable. A market
discount tax-exempt Bond held to maturity will have a larger portion
of its total return in the form of taxable ordinary income and less in the
form of tax-exempt income than a comparable Bond bearing interest
at current market rates. Under the provisions of the
Internal Revenue Code in effect on the date of this Prospectus any
ordinary income attributable to market discount will be taxable but will
not be realized until maturity, redemption or sale of the Bonds or Units.
As set forth under "Portfolio Summary as of Date of Deposit", the
Trust may contain or be concentrated in one or more of the
classifications of Bonds referred to below. A Trust is considered to be
"concentrated" in a particular category when the Bonds in that
category constitute 25% or more of the aggregate value of the
Portfolio. (See Part A-"Portfolio Summary as of Date of Deposit" for
information relating to the particular Trust described therein.) An
investment in Units of the Trust should be made with an understanding
of the risks that these investments may entail, certain of which are
described below.
General Obligation Bonds. Certain of the Bonds in the Portfolio may
be general obligations of a governmental entity that are secured by the
taxing power of the entity. General obligation bonds are backed by the
issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. However, the taxing power of any
governmental entity may be limited by provisions of state constitutions
or laws and an entity's credit will depend
on many factors, including an erosion of the tax base due to
population declines, natural disasters, declines in the state's industrial
<PAGE>
base or inability to attract new industries, economic limits on the
ability to tax without eroding the tax base and the extent to which the
entity relies on Federal or state aid, access to capital markets or other
factors beyond the entity's control.
As a result of the recent recession's adverse impact upon both their
revenues and expenditures, as well as other factors, many state and
local governments are confronting deficits and potential deficits which
are the most severe in recent years. Many issuers are facing highly
difficult choices about significant tax increases and/or spending
reductions in order to restore budgetary balance. Failure to implement
these actions on a timely basis could force the issuers to depend upon
market access to finance deficits or cash flow needs.
In addition, certain of the Bonds in the Trust may be obligations of
issuers (including California issuers) who rely in whole or in part on ad
valorem real property taxes as a source of revenue. Certain proposals,
in the form of state legislative proposals or voter initiatives, to limit ad
valorem real property taxes have been introduced in various states,
and an amendment to the constitution of the State of California,
providing for strict limitations on ad valorem real property taxes, has had
a significant impact on the taxing powers of local governments and on
the financial conditions of school districts and local governments in
California. It is not possible at this time to predict the final impact of
such measures, or of similar future legislative or constitutional measures,
on school districts and local governments or on their abilities to make
future payments on their outstanding debt obligations.
Industrial Development Revenue Bonds ("IDRs"). IDRs, including
pollution control revenue bonds, are tax-exempt securities issued by
states, municipalities, public authorities or similar entities ("issuers")
to finance the cost of acquiring, constructing or improving various
projects, including pollution control facilities and certain industrial
development facilities. These projects are usually operated by
corporate entities. IDRs are not general obligations of governmental
entities backed by their taxing power. Issuers are only obligated to pay
amounts due on the IDRs to the extent that funds are available from
the unexpended proceeds of the IDRs or receipts or revenues of the
issuer under arrangements between the issuer and the corporate
operator of a project. These arrangements may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to
be sufficient to meet the payments of amounts due on the IDRs.
IDRs are generally issued under bond resolutions, agreements or trust
indentures pursuant to which the revenues and receipts payable under
the issuer's arrangements with the corporate operator of a particular
project have been assigned and pledged to the holders of the IDRs or
a trustee for the benefit of the holders of the IDRs. In certain cases, a
<PAGE>
mortgage on the underlying project has been assigned to the holders
of the IDRs or a trustee as
additional security for the IDRs. In addition, IDRs are frequently directly
guaranteed by the corporate operator of the project or by another
affiliated company. Regardless of the structure, payment of IDRs is
solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Corporate operators or
guarantors that are industrial companies may be affected by many
factors which may have an adverse impact on the credit
quality of the particular company or industry. These include cyclicality
of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents or environmentally-caused illnesses,
extensive competition (including that of low-cost foreign companies),
unfunded pension fund liabilities or off-balance sheet items, and
financial deterioration resulting from leveraged buy-outs or takeovers.
However, certain of the IDRs in the Portfolio may be additionally
insured or secured by letters of creditissued by banks or otherwise
guaranteed or secured to cover amounts
due on the IDRs in the event of default in payment by an issuer.
Hospital and Health Care Facility Bonds. The ability of hospitals and
other health care facilities to meet their obligations with respect to
revenue bonds issued on their behalf is dependent on various factors,
including the level of payments received from private third-party
payors and government programs and the cost of providing health care
services.
A significant portion of the revenues of hospitals and other health
care facilities is derived from private third-party payors and
government programs, including the Medicare and Medicaid programs.
Both private third-party payors and government programs have
undertaken cost containment measures designed to limit payments
made to health care facilities. Furthermore, government programs are
subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding
restrictions, all of which may materially decrease the rate of program
payments for health care facilities. There can be no assurance that
payments under governmental programs will remain at levels comparable
to present levels or will, in the future, be sufficient to cover the costs
allocable to patients participating in such programs. In addition, there can
be no assurance that a particular hospital or other health care facility will
continue to meet the requirements for participation in such programs.
The costs of providing health care services are subject to increase as
a result of, among other factors, changes in medical technology and
increased labor costs. In addition, health care facility construction and
operation is subject to federal, state and local regulation relating to the
adequacy of medical care, equipment, personnel, operating policies and
procedures, rate-setting, and compliance with building codes and
<PAGE>
environmental laws. Facilities are subject to periodic inspection by
governmental and other authorities to assure continued compliance with
the various standards necessary for licensing and accreditation. These
regulatory requirements are subject to change and, to comply, it may be
necessary for a hospital or other health care facility to incur substantial
capital expenditures or increased operating
expenses to effect changes in its facilities, equipment, personnel and
services.
Hospitals and other health care facilities are subject to claims and
legal actions by patients and others in the ordinary course of business.
Although these claims are generally covered by insurance, there can
be no assurance that a claim will not exceed the insurance coverage
of a health care facility or that insurance coverage will be available to
a facility. In addition, a substantial increase in the cost of insurance
could adversely affect the results of operations of a hospital or other
health care facility. The Clinton Administration may impose regulations
which could limit price increases for hospitals or the level of
reimbursements for third-party payors or other measures to reduce health
care costs and make health care available to more individuals, which
would reduce profits for hospitals. Some states, such as New Jersey,
have significantly changed their reimbursement systems. If a hospital
cannot adjust to the new system by reducing expenses or raising rates,
financial difficulties may arise. Also, Blue Cross has denied
reimbursement for some hospitals for services other than emergency
room services. The lost volume would reduce revenues unless
replacement patients were found.
Certain hospital bonds may provide for redemption at par at any time
upon the sale by the issuer of the hospital facilities to a non-affiliated
entity, if the hospital becomes subject to ad valorem taxation, or in
various other circumstances. For example, certain hospitals may have
the right to call bonds at par if the hospital may be legally required
because of the bonds to perform procedures against specified religious
principles or to disclose information
that is considered confidential or privileged. Certain FHA-insured bonds
may provide that all or a portion of these bonds, otherwise callable at
a premium, can be called at par in certain circumstances. If a hospital
defaults upon a bond obligation, the realization of Medicare and
Medicaid receivables may be uncertain and, if the bond obligation is
secured by the hospital facilities, legal restrictions on the ability to
foreclose upon the facilities and the limited alternative uses to which a
hospital can be put may severely reduce its
collateral value.
The Internal Revenue Service is currently engaged in a program of
intensive audits of certain large tax-exempt hospital and health care
facility organizations. Although these audits have not yet been
<PAGE>
completed, it has been reported that the tax-exempt status of some of
these organizations may be revoked. At this time, it is uncertain
whether any of the hospital and health care facility bonds held by the
Trust will be affected by such audit
proceedings.
Single Family and Multi-Family Housing Bonds. Multi-family housing
revenue bonds and single family mortgage revenue bonds are state and
local housing issues that have been issued to provide financing for
various housing projects. Multi-family housing revenue bonds are
payable primarily from the revenues derived from mortgage loans to
housing projects for low to moderate income families. Single-family
mortgage revenue bonds are issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on
residences.
Housing obligations are not general obligations of the issuer although
certain obligations may be supported to some degree by Federal, state
or local housing subsidy programs. Budgetary constraints experienced
by these programs as well as the failure by a state or local housing
issuer to satisfy the qualifications required for coverage under these
programs or any legal or administrative determinations that the coverage
of these programs is not available to a housing issuer, probably will
result in a decrease or elimination of subsidies available for payment of
amounts due on the issuer's obligations. The ability of housing issuers
to make debt service payments on their obligations will also be affected
by various economic and non-economic developments including, among
other things, the achievement and maintenance of sufficient occupancy
levels and adequate rental income in multi-family projects, the rate of
default on mortgage loans underlying single family issues and the ability
of mortgage insurers to pay claims, employment and income conditions
prevailing in local markets, increases in construction costs, taxes, utility
costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations and economic
trends generally in the localities in which the projects are situated.
Occupancy of multi-family housing projects may also be adversely
affected by high rent levels and income limitations imposed under
Federal, state or local programs.
All single family mortgage revenue bonds and certain multi-family
housing revenue bonds are prepayable over the life of the underlying
mortgage or mortgage pool, and therefore the average life of housing
obligations cannot be determined. However, the average life of these
obligations will ordinarily be less than their stated maturities.
Single-family issues are subject to mandatory redemption in whole or
in part from prepayments on underlying mortgage loans; mortgage
loans are frequently partially or completely prepaid prior to their final
stated maturities as a result of events such as declining interest rates,
sale of the mortgaged premises, default, condemnation or casualty loss.
<PAGE>
Multi-family issues are characterized by mandatory redemption at par
upon the occurrence of monetary defaults or breaches or covenants by
the project operator. Additionally, housing obligations are generally
subject to mandatory partial redemption at par to the extent that proceeds
from the sale of the obligations are not allocated within a stated period
(which may be within a year of the date of issue). To the extent that
these obligations were valued at a premium when a Holder purchased
Units, any prepayment at par would result in a loss of capital to the
Holder and, in any event, reduce the amount of income that would
otherwise have been paid to Holders.
The tax exemption for certain housing revenue bonds depends on
qualification under Section 143 of the Internal Revenue Code of 1986,
as amended (the "Code"), in the case of single family mortgage
revenue bonds or Section 142(a)(7) of the Code or other provisions of
Federal law in the case of certain multi-family housing revenue bonds
(including Section 8 assisted bonds). These sections of the Code or
other provisions of Federal law contain certain ongoing
requirements, including requirements relating to the cost and location
of the residences financed with the proceeds of the single family
mortgage revenue bonds and the income levels of tenants of the rental
projects financed with the proceeds of the multi-family housing
revenue bonds. While the issuers of the bonds and other parties,
including the originators and servicers of the single-family mortgages
and the owners of the rental projects financed with the multi-family
housing revenue bonds, generally covenant to meet these ongoing
requirements and generally agree to institute procedures designed to
ensure that these requirements are met, there can be no assurance
that these ongoing requirements will be consistently met. The failure
to meet these requirements could cause the interest on the bonds to
become taxable, possibly retroactively from the date of issuance,
thereby reducing the value of the bonds, subjecting the Holders to
unanticipated tax liabilities and possibly requiring the Trustee to sell
the bonds at reduced values. Furthermore, any failure to meet these
ongoing requirements might not constitute an event of default under
the applicable mortgage or permit the holder to accelerate payment of
the bond or require the issuer to redeem the bond. In any event, where
the mortgage is insured by the Federal Housing Administration, its
consent may be required before insurance proceeds would become
payable to redeem the mortgage bonds.
Power Facility Bonds. The ability of utilities to meet their obligations
with respect to revenue bonds issued on their behalf is dependent on
various factors, including the rates they may charge their customers,
the demand for a utility's services and the cost of providing those
services. Utilities, in particular investor-owned utilities, are subject to
extensive regulations relating to the rates which they may charge
customers. Utilities can experience regulatory, political and consumer
resistance to rate increases. Utilities
<PAGE>
engaged in long-term capital projects are especially sensitive to
regulatory lags in granting rate increases. Any difficulty in obtaining
timely and adequate rate increases could adversely affect a utility's
results of operations.
The demand for a utility's services is influenced by, amoung other
factors, competition, weather conditions and economic conditions.
Electric utilities, for example, have experienced increased competition
as a result of the availability of other energy sources, the effects of
conservation on the use of electricity, self-generation by industrial
customers and the generation of electricity by co-generators and other
independent power producers. Also,
increased competition will result if federal regulators determine that
utilities must open their transmission lines to competitors. Utilities
which distribute natural gas also are subject to competition from
alternative fuels, including fuel oil, propane and coal.
The utility industry is an increasing cost business making the cost of
generating electricity more expensive and heightening its sensitivity to
regulation. A utility's costs are influenced by the utility's cost of
capital, the availability and cost of fuel and other factors. In addition,
natural gas pipeline and distribution companies have incurred increased
costs as a result of long-term natural gas purchase contracts containing
"take or pay" provisions which require that they pay for natural gas even
if natural gas is not taken by them. There can be no assurance that a
utility will be able to pass on these increased costs to customers through
increased rates. Utilities incur substantial capital expenditures for plant
and equipment. In the future they will also incur increasing capital and
operating expenses to comply with environmental legislation such as the
Clean Air Act of 1990, and other energy, licensing and other laws and
regulations relating to, among other things, air emissions, the quality of
drinking water, waste water discharge, solid and hazardous substance
handling and disposal, and siting and licensing of facilities.
Environmental legislation and regulations are changing rapidly and are
the subject of current public policy debate and legislative proposals. It
is increasingly likely that some or many utilities will be subject to more
stringent environmental standards in the future that could result in
significant capital expenditures. Future legislation and regulation could
include, among other things, regulation of so-called electromagnetic
fields associated with electric transmission and distribution lines as well
as emissions of carbon dioxide and other so-called greenhouse gases
associated with the burning of fossil fuels. Compliance with these
requirements may limit a utility's operations or require substantial
investments in new equipment and, as a result, may adversely affect
a utility's results of operations.
The electric utility industry in general is subject to various external
factors including (a) the effects of inflation upon the costs of operation
and construction, (b) substantially increased capital outlays and longer
<PAGE>
construction periods for larger and more complex new generating
units, (c) uncertainties in predicting future load requirements, (d)
increased financing requirements coupled with limited availability of
capital, (e) exposure to cancellation and penalty charges on new
generating units under construction, (f) problems of cost and
availability of fuel, (g) compliance with rapidly changing and complex
environmental, safety and licensing requirements, (h) litigation and
proposed legislation designed to delay or
prevent construction of generating and other facilities, (i) the uncertain
effects of conservation on the use of electric energy, (j) uncertainties
associated with the development of a national energy policy, (k)
regulatory, political and consumer resistance to rate increases and (l)
increased competition as a result of the availability of other energy
sources. These factors may delay the construction and increase the cost
of new facilities, limit the use of, or necessitate costly modifications to,
existing facilities, impair the access of electric utilities to credit
markets, or substantially increase the cost of credit for electric
generating facilities. The Sponsors cannot predict at this time the
ultimate effect of such factors on the ability
of any issuers to meet their obligations with respect to Bonds.
The National Energy Policy Act ("NEPA"), which became law in
October, 1992, makes it mandatory for a utility to permit non-utility
generators of electricity access to its transmission system for
wholesale customers, thereby increasing competition for electric
utilities. NEPA also mandated demand-side management policies to be
considered by utilities. NEPA prohibits the Federal Energy Regulatory
Commission from mandating electric utilities to engage in
retail wheeling, which is competition among suppliers of electric
generation to provide electricity to retail customers (particularly
industrial retail customers) of a utility. However, under NEPA, a state
can mandate retail wheeling under certain conditions.
There is concern by the public, the scientific community, and the
U.S. Congress regarding environmental damage resulting from the use
of fossil fuels. Congressional support for the increased regulation of
air, water, and soil contaminants is building and there are a number of
pending or recently enacted legislative proposals which may affect the
electric utility industry. In particular, on November 15, 1990,
legislation was signed into law that substantially revises the Clean Air
Act (the "1990 Amendments"). The 1990 Amendments seek to
improve the ambient air quality throughout the United States by the
year 2000. A main feature of the 1990 Amendments is the reduction
of sulphur dioxide and nitrogen oxide emissions caused by electric
utility power plants, particularly those fueled by coal. Under the 1990
Amendments the U.S. Environmental Protection Agency ("EPA") must
develop limits for nitrogen oxide emissions by 1993. The sulphur dioxide
reduction will be achieved in two phases. Phase I addresses specific
generating units named in the 1990 Amendments. In Phase II the total
<PAGE>
U.S. emissions will be capped at 8.9 million tons by the year 2000. The
1990 Amendments contain provisions for allocating allowances to power
plants based on historical or calculated levels. An allowance is defined
as the authorization to emit one ton of sulphur dioxide.
The 1990 Amendments also provide for possible further regulation
of toxic air emissions from electric generating units pending the results
of several federal government studies to be conducted over the next
three to four years with respect to anticipated hazards to public health,
available corrective technologies, and mercury toxicity.
Electric utilities which own or operate nuclear power plants are
exposed to risks inherent in the nuclear industry. These risks include
exposure to new requirements resulting from extensive federal and state
regulatory oversight, public controversy, decomissioning costs, and spent
fuel and radioactive waste disposal issues. While nuclear power
construction risks are no longer of paramount concern, the emerging
issue is radioactive waste disposal. In addition, nuclear plants typically
require substantial capital additions and
modifications throughout their operating lives to meet safety,
environmental,operational and regulatory requirements and to replace
and upgrade various plant systems. The high degree of regulatory
monitoring and controls imposed on nuclear plants could cause a plant
to be out of service or on limited service for long periods. When a
nuclear facility owned by an investor-owned utility or a state or local
municipality is out of service or operating on a limited
service basis, the utility operator or its owners may be liable for the
recovery of replacement power costs. Risks of substantial liability also
arise from the operation of nuclear facilities and from the use,
handling, and possible radioactive emissions associated with nuclear
fuel. Insurance may not cover all types or amounts of loss which may
be experienced in connection with the ownership and operation of a
nuclear plant and severe financial consequences could result from a
significant accident or occurrence. The Nuclear Regulatory Commission
has promulgated regulations mandating the establishment of funded
reserves to assure financial capability for the eventual
decommissioning of licensed nuclear facilities. These funds are to be
accrued from revenues in amounts currently estimated to be sufficient
to pay for decommissioning costs.
The ability of state and local joint action power agencies to make
payments on bonds they have issued is dependent in large part on
payments made to them pursuant to power supply or similar
agreements. Courts in Washington, Oregon and Idaho have held that
certain agreements between the Washington Public Power Supply
System ("WPPSS") and the WPPSS participants are unenforceable
because the participants did not have the authority to enter into the
agreements. While these decisions are not specifically applicable to
agreements entered into by public entities in other states, they may
<PAGE>
cause a reexamination of the legal structure and economic viability of
certain projects financed by joint power agencies, which might
exacerbate some of the problems referred to above and possibly lead to
legal proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Water and Sewer Revenue Bonds. Water and sewer bonds are
generally payable from user fees. The ability of state and local water
and sewer authorities to meet their obligations may be affected by
failure of municipalities to utilize fully the facilities constructed by
these authorities, economic or population decline and resulting decline
in revenue from user charges, rising construction and maintenance
costs and delays in construction of facilities, impact of environmental
requirements, failure or inability to raise user charges in response to
increased costs, the difficulty of obtaining or discovering new supplies
of fresh water, the effect of conservation programs and the impact of
"no growth" zoning ordinances. In some
cases this ability may be affected by the continued availability of
Federal and state financial assistance and of municipal bond insurance
for future bond issues.
University and College Bonds. The ability of universities and colleges
to meet their obligations is dependent upon various factors, including
the size and diversity of their sources of revenues, enrollment,
reputation, management expertise, the availability and restrictions on
the use of endowments and other funds, the quality and maintenance
costs of campus facilities, and, in the case of public institutions, the
financial condition of the relevant state or other governmental entity
and its policies with respect to education. The institution's ability to
maintain enrollment levels will depend on such factors as tuition costs,
demographic trends, geographic location, geographic diversity and
quality of the student body, quality of the faculty and the diversity of
program offerings.
Legislative or regulatory action in the future at the Federal, state or
local level may directly or indirectly affect eligibility standards or reduce
or eliminate the availability of funds for certain types of student loans or
grant programs, including student aid, research grants and work-study
programs, and may affect indirect assistance for education.
Lease Rental Bonds. Lease rental bonds are issued for the most part
by governmental authorities that have no taxing power or other means
of directly raising revenues. Rather, the authorities are financing
vehicles created solely for the construction of buildings (administrative
offices, convention centers and prisons, for example) or the purchase
of equipment (police cars and computer systems, for example) that will
be used by a state or local government
(the "lessee"). Thus, the bonds are subject to the ability and
willingness of the lessee government to meet its lease rental payments
<PAGE>
which include debt service on the bonds. Willingness to pay may be
subject to changes in the views of citizens and government officials as
to the essential nature of the finance project. Lease rental bonds are
subject, in almost all cases, to the annual appropriation risk, i.e., the
lessee government is not legally obligated to
budget and appropriate for the rental payments beyond the current
fiscal year. These bonds are also subject to the risk of abatement in many
states-rental bonds cease in the event that damage, destruction or
condemnation of the project prevents its use by the lessee. (In these
cases, insurance provisions and reserve funds designed to alleviate this
risk become important credit factors). In the event of default by the
lessee government, there may be significant legal and/or practical
difficulties involved in the reletting or
sale of the project. Some of these issues, particularly those for
equipment purchase, contain the so-called "substitution safeguard",
which bars the lessee government, in the event it defaults on its rental
payments, from the purchase or use of similar equipment for a certain
period of time. This safeguard is designed to insure that the lessee
government will appropriate the necessary
funds even though it is not legally obligated to do so, but its legality
remains untested in most, if not all, states.
Capital Improvement Facility Bonds. The Portfolio of a Trust may
contain Bonds which are in the capital improvement facilities category.
Capital improvement bonds are bonds issued to provide funds to assist
political subdivisions or agencies of a state through acquisition of the
underlying debt of a state or local political subdivision or agency which
bonds are secured by the proceeds of the sale of the bonds, proceeds
from investments and the indebtedness of a local political subdivision or
agency. The risks of an investment in such bonds include the risk of
possible prepayment or failure of payment of proceeds on and default of
the underlying debt.
Solid Waste Disposal Bonds. Bonds issued for solid water disposal
facilities are generally payable from tipping fees and from revenues
that may be earned by the facility on the sale of electrical energy
generated in the combustion of waste products. The ability of solid
waste disposal facilities to meet their obligations depends upon the
continued use of the facility, the successful and efficient operation of
the facility and, in the case of waste-to-energy
facilities, the continued ability of the facility to generate electricity on
a commercial basis. All of these factors may be affected by a failure
of municipalities to fully utilize the facilities, an insufficient supply of
waste for disposal due to economic or population decline, rising
construction and maintenance costs, any delays in construction of
facilities, lower-cost alternative modes of waste processing and changes
in environmental regulations. Because of the relatively short history of
this type of financing, there may be
technological risks involved in the satisfactory construction or
<PAGE>
operation of the projects exceeding those associated with most
municipal enterprise projects. Increasing environmental regulation on
the federal, state and local level has a significant impact on waste
disposal facilities. While regulation requires more waste producers to
use waste disposal facilities, it also imposes significant costs on the
facilities. These costs include compliance with
frequently changing and complex regulatory requirements, the cost of
obtaining construction and operating permits, the cost of conforming
to prescribed and changing equipment standards and required methods
of operation and, for incinerators or waste-to-energy facilities, the cost
of disposing of the waste residue that remains after the disposal
process in an environmentally safe manner. In addition, waste disposal
facilities frequently face substantial
opposition by environmental groups and officials to their location and
operation, to the possible adverse effects upon the public health and
the environment that may be caused by wastes disposed of at the
facilities and to alleged improper operating procedures. Waste disposal
facilities benefit from laws which require waste to be disposed of in a
certain manner but any relaxation of these laws could cause a decline
in demand for the facilities' services. Finally, waste-to-energy facilities
are concerned with many of the same issues facing utilities insofar as
they derive revenues from the sale of energy to local power utilities (see
Power Facility Bonds above).
Moral Obligation Bonds. The Trust may also include "moral
obligation" bonds. If an issuer of moral obligation bonds is unable to
meet its obligations, the repayment of the bonds becomes a moral
commitment but not a legal obligation of the state or municipality in
question. Even though the state may be called on to restore any
deficits in capital reserve funds of the agencies or authorities which
issued the bonds, any restoration generally requires appropriation by
the state legislature and accordingly does not constitute a legally
enforceable obligation or debt of the state. The agencies or authorities
generally have no taxing power.
Refunded Bonds. Refunded Bonds are typically secured by direct
obligations of the U.S. Government, or in some cases obligations
guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. These obligations are generally noncallable prior to
maturity or the predetermined redemption date. In a few isolated
instances to date, however, bonds which were thought to be
escrowed to maturity have been called for redemption prior to
maturity.
Airport, Port and Highway Revenue Bonds. Certain facility revenue
bonds are payable from and secured by the revenues from the
ownership and operation of particular facilities, such as airports
(including airport terminals and maintenance facilities), bridges, marine
<PAGE>
terminals, turnpikes and port authorities. For example, the major
portion of gross airport operating income is generally derived from fees
received from signatory airlines pursuant to use
agreements which consist of annual payments for airport use,
occupancy of certain terminal space, facilities, service fees,
concessions and leases. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under the
use agreements. The air transport industry is experiencing significant
variations in earnings and traffic, due to
increased competition, excess capacity, increased aviation fuel,
deregulation, traffic constraints, the current recession and other factors.
As a result, several airlines are experiencing severe financial difficulties.
Several airlines including America West Airlines have sought protection
from their creditors under Chapter 11 of the Bankruptcy Code. In
addition, other airlines such as Midway Airlines, Inc., Eastern Airlines,
Inc. and Pan American
Corporation have been liquidated. However, within the past few
months Northwest Airlines, Continental Airlines and Trans World
Airlines have emerged from bankruptcy. The Sponsors cannot predict
what effect these industry conditions may have on airport revenues which
are dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility.
Similarly, payment on bonds related to other facilities is dependent
on revenues from the projects, such as use fees from ports, tolls on
turnpikes and bridges and rents from buildings. Therefore, payment
may be adversely affected by reduction in revenues due to such
factors and increased cost of maintenance or decreased use of a
facility, lower cost of alternative modes of transportation or scarcity
of fuel and reduction or loss of rents.
Special Tax Bonds. Special tax bonds are payable from and secured
by the revenues derived by a municipality from a particular tax such as
a tax on the rental of a hotel room, on the purchase of food and
beverages, on the rental of automobiles or on the consumption of
liquor. Special tax bonds are not secured by the general tax revenues
of the municipality, and they do not represent general obligations of
the municipality. Therefore, payment on special tax
bonds may not be adversely affected by a reduction in revenues
realized from the underlying special tax due to a general decline in the
local economy or population or due to a decline in the consumption,
use or cost of the goods and services that are subject to taxation.
Also, should spending on the particular goods or services that are
subject to the special tax decline, the municipality may be under no
obligation to increase the rate of the special tax to ensure
that sufficient revenues are raised from the shrinking taxable base.
Tax Allocation Bonds. Tax allocation bonds are typically secured by
incremental tax revenues collected on property within the areas where
<PAGE>
redevelopment projects, financed by bond proceeds are located
("project areas"). Such payments are expected to be made from
projected increases in tax revenues derived from higher assessed
values of property resulting from development in the particular project
area and not from an increase in tax
rates. Special risk considerations include: reduction of, or a less than
anticipated increase in, taxable values of property in the project area,
caused either by economic factors beyond the Issuer's control (such
as a relocation out of the project area by one or more major property
owners) or by destruction of property due to natural or other disasters;
successful appeals by property owners of assessed valuations;
substantial delinquencies in the payment of
property taxes; or imposition of any constitutional or legislative
property tax rate decrease.
Transit Authority Bonds. Mass transit is generally not self-supporting
from fare revenues. Therefore, additional financial resources must be
made available to ensure operation of mass transit systems as well as
the timely payment of debt service. Often such financial resources
include Federal and state subsidies, lease rentals paid by funds of the
state or local government or a pledge of a special tax such as a sales
tax or a property tax. If fare revenues
or the additional financial resources do not increase appropriately to
pay for rising operating expenses, the ability of the issuer to
adequately service the debt may be adversely affected.
Convention Facility Bonds. The Portfolio of a Trust may contain
Bonds of issuers in the convention facilities category. Bonds in the
convention facilities category include special limited obligation
securities issued to finance convention and sports facilities payable
from rental payments and annual governmental appropriations. The
governmental agency is not obligated to make payments in any year
in which the monies have not been appropriated to make such
payments. In addition, these facilities are limited use facilities that may
not be used for purposes other than as convention centers or sports
facilities.
Puerto Rico . The Portfolio may contain bonds of issuers which will
be affected by general economic conditions in Puerto Rico. Puerto
Rico's unemployment rate remains significantly higher than the U.S.
unemployment rate. Furthermore, the economy is largely dependent for
its development upon U.S. policies and programs that are being
reviewed and may be eliminated.
The Puerto Rican economy is affected by a number of
Commonwealth and Federal investment incentive programs. For
example, Section 936 of the Internal Revenue Code (the "Code")
provides for a credit against Federal income taxes for U.S. companies
operating on the island if certain requirements are met. The Omnibus
<PAGE>
Budget Reconciliation Act of 1993 imposes limits on such credit,
effective for tax years beginning after 1993. In addition, from time to
time proposals are introduced in Congress which, if enacted into law,
would eliminate some or all of the benefits of Section 936. Although
no assessment can be made at this time of the precise effect of such
limitation, it is expected that the limitation
of Section 936 credits would have a negative impact on Puerto Rico's
economy.
Aid for Puerto Rico's economy has traditionally depended heavily on
Federal programs, and current Federal budgetary policies suggest that
an expansion of aid to Puerto Rico is unlikely. An adverse effect on the
Puerto Rican economy could result from other U.S. policies, including
a reduction of tax benefits for distilled products, further reduction in
transfer payment programs such as food stamps, curtailment of
military spending and policies which could lead to a stronger dollar.
In a plebiscite held in November, 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved the
federal tax exempt status of the outstanding debts of Puerto Rico and its
public corporations regardless of the outcome of the referendum, to
the extent that similar obligations issued by states are so treated and
subject to the provisions of the Code currently in effect. There can be
no assurance that any pending or future legislation
finally enacted will include the same or similar protection against loss
of tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as the
basic characteristics of future Puerto Rico debt obligations, the
markets for these obligations, and the types, levels and quality of
revenue sources pledged for the payment of existing and future debt
obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status of
Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
Litigation and Legislation. To the best knowledge of the Sponsors,
there is no litigation pending as of the Initial Date in respect of any
Bonds which might reasonably be expected to have a material adverse
effect upon the Trust. At any time after the Initial Date of Deposit,
litigation may be initiated on a variety of grounds, or legislation may
be enacted, with respect to Bonds in the Trust. Litigation, for example,
challenging the issuance of pollution control
revenue bonds under environmental protection statutes may affect the
validity of Bonds or the tax-free nature of their interest. While the
outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each
<PAGE>
Bond to the effect that the Bond has been validly issued and that the
interest thereon is exempt from Federal income tax. In addition, other
factors may arise from time to time
which potentially may impair the ability of issuers to make payments
due on the Bonds.
Under the Federal Bankruptcy Act, a political subdivision or public
agency or instrumentality of any state, including municipalities, may
proceed to restructure or otherwise alter the terms of its obligations,
including those of the type comprising the Trust's Portfolio. The
Sponsors are unable to predict what effect, if any, this legislation might
have on the Trust.
From time to time Congress considers proposals to tax the interest
on state and local obligations, such as the Bonds. The Supreme Court
clarified in South Carolina v. Baker (decided April 20, 1988) that the
U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This
type of legislation, if enacted into law, could adversely affect an
investment in Units. Holders are urged to consult their own tax
advisers.
Tax Exemption. In the opinion of bond counsel rendered on the date
of issuance of each Bond, the interest on each Bond is excludable from
gross income under existing law for regular Federal income tax
purposes (except in certain circumstances depending on the Holder)
but may be subject to state and local taxes. As discussed under Taxes
below, interest on some or all of the Bonds may become subject to
regular Federal income tax, perhaps retroactively
to their date of issuance, as a result of changes in Federal law or as a
result of the failure of issuers (or other users of the proceeds of the
Bonds) to comply with certain ongoing requirements.
Moreover, the Internal Revenue Service announced on June 14, 1993
that it will be expanding its examination program with respect to
tax-exempt bonds. The expanded examination program will consist of,
among other measures, increased enforcement against abusive
transactions, broader audit coverage (including the expected issuance
of audit guidelines) and expanded compliance achieved by means of
expected revisions to the tax-exempt bond information return forms.
At this time, it is uncertain whether the tax exempt status of any of
the Bonds would be affected by such proceedings, or whether such
effect, if any, would be retroactive.
In certain cases, a Bond may provide that if the interest on the Bond
should ultimately be determined to be taxable, the Bond would become
due and payable by its issuer, and, in addition, may provide that any
related letter of credit or other security could be called upon if the
issuer failed to satisfy all or part of its obligation. In other cases,
<PAGE>
however, a Bond may not provide for the acceleration or redemption
of the Bond or a call upon the related letter of
credit or other security upon a determination of taxability. In those
cases in which a Bond does not provide for acceleration or redemption
or in which both the issuer and the bank or other entity issuing the
letter of credit or other security are unable to meet their obligations to
pay the amounts due on the Bond as a result of a determination of
taxability, the Trustee would be obligated to sell the Bond and, since
it would be sold as a taxable security,
it is expected that it would have to be sold at a substantial discount
from current market price. In addition, as mentioned above, under
certain circumstances Holders could be required to pay income tax on
interest received prior to the date on which the interest is determined
to be taxable.
The Units
On the date of this Prospectus each Unit in a Trust represented
a fractional undivided interest in the principal and net income of such
Trust as is set forth in Part A, "Summary of Essential Information". If
any Units are redeemed after the date of this Prospectus by the Trustee,
the principal amount of Bonds in the affected Trust will be reduced by
an amount allocable to redeemed Units and the fractional undivided
interest in the affected Trust represented by each unredeemed Unit will
be increased. Units will remain outstanding until redeemed upon tender
to the Trustee by any Unit holder, which
may include the Sponsors, or until the termination of the Trust
Agreement. (See "Amendment and Termination of the Trust
Agreement-Termination.") References in this Prospectus to "Units" are
to Units which represented the fractional undivided interest indicated in
the "Summary of Essential Information"in Part A.
Estimated Current Return And Estimated Long-Term Return
Under accepted bond practice, tax-exempt bonds are customarily
offered to investors on a "yield price" basis (as contrasted to a "dollar
price" basis) at the lesser of the yield as computed to maturity of the
bonds or to an earlier redemption date and which takes into account not
only the interest payable on the bonds but also the amortization or
accretion to a specified date of any premium over or discount from the
par (maturity) value in the bond's purchase price. Since Units of a Trust
are offered on a dollar price basis, the rate of return on an investment in
Units of a Trust is stated in terms of "Estimated Current Return,"
computed by dividing the Net Annual Income per
Unit by the Public Offering Price per Unit. Any change in either the
Net Annual Income per Unit or the Public Offering Price per Unit will
result in a change in the Estimated Current Return. The Net Annual
<PAGE>
Income per Unit of a Trust is determined by dividing the total annual
interest income to such Trust, less estimated annual fees and expenses of
the Trustee, the Sponsor and the Evaluator, by the number of Units of
such Trust outstanding. The Net Annual Income per Unit of a Trust will
change as the income or expenses of such Trust
changes and as Bonds are redeemed, paid, sold or exchanged. For a
statement of the Net Annual Income per Unit and the Estimated Current
Return based on the Public Offering Price, see Part A, "Summary of
Essential Information".
The Estimated Long-Term Return for each Trust is a measure of
the return to the investor over the estimated life of the Trust. The
Estimated Long-Term Return represents an average of the yields to
maturity (or call) of the Bonds in the Trust's portfolio calculated in
accordance with accepted bond practice and adjusted to reflect expenses
and sales charges. In calculating Estimated Long-Term Return, the
average yield for the Trust's portfolio is
derived by 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. Once the average portfolio yield is computed, this figure is then
reduced to reflect estimated expenses and the effect of the maximum
sales charge paid by investors.
A Trust may experience expenses and portfolio changes different
from those assumed in the calculation of Estimated Long-Term Return.
There thus can be no assurance that the Estimated Current Returns or the
Estimated Long-Term Returns quoted for a Trust will be realized in the
future. Since both Estimated Current Return and Estimated Long-Term
Return quoted on a given business day are based on the market value of
the underlying Bonds on that day, subsequent calculations of these
performance measures will reflect the then-current market value of the
underlying bonds and may be higher or lower.
Taxes
In the opinion of bond counsel to the issuing governmental
authorities given at the time of the original delivery of the Bonds,
interest income on the Bonds comprising the Portfolio of each Trust is
(except in certain instances, depending upon the Unit holder, as
described below) exempt from Federal income tax under the provisions
of the Internal Revenue Code in effect as of the date of issuance. In the
case of Bonds issued when the Internal Revenue Code of 1954 was in
effect, redesignation of the Code as the Internal
Revenue Code of 1986 (the "Code" or the "1986 Code") has not
adversely affected such exemption. (See "Tax Exempt Securities Trust
- - Portfolio.")
<PAGE>
On the Date of Deposit for the Trusts, Messrs. Davis Polk &
Wardwell, special counsel for the Sponsors, rendered an opinion under
then existing provisions of the Code, the regulations then promulgated
thereunder and then current rulings of the Internal Revenue Service
substantially to the effect that:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated
as the income of the Unit holders ("Holders") in the manner set forth
below.
Each Holder will be considered the owner of a pro rata portion of each
Bond in the Trust under the grantor trust rules of Sections 671-679 of the
Internal Revenue Code of 1986, as amended (the "Code"). In order to
determine the face amount of a Holder's pro rata portion of each Bond
on the Date of Deposit, see "Aggregate Principal" under "Portfolio of
Securities". The total cost to a Holder
of his Units, including sales charges, is allocated to his pro rata portion
of each Bond, in proportion to the fair market values thereof on the date
the Holder purchases his Units, in order to determine his tax basis for his
pro rata portion of each Bond. In order for a Holder who purchases his
Units on the Date of Deposit to determine the fair market value of his
pro rata portion of each Bond on such date, see "Cost of Securities to
Trust" under "Portfolio of Securities".
Each Holder will be considered to have received the interest on his pro
rata portion of each Bond when interest on the Bond is received by the
Trust. In the opinion of bond counsel (delivered on the date of issuance
of each Bond), such interest will be excludable from gross income for
regular Federal income tax purposes (except in certain limited
circumstances referred to below). Amounts
received by the Trust pursuant to a bank letter of credit, guarantee or
insurance policy with respect to payments of principal, premium or
interest on a Bond in the Trust will be treated for Federal income tax
purposes in the same manner as if such amounts were paid by the issuer
of the Bond.
The Trust may contain Bonds which were originally issued at a
discount ("original issue discount"). The following principles will apply
to each Holder's pro rata portion of any Bond originally issued at a
discount. In general, original issue discount is defined as the difference
between the price at which a debt obligation was issued and its stated
redemption price at maturity. Original issue discount on a tax-exempt
obligation issued after September 3, 1982, is deemed to accrue as
tax-exempt interest over the life of the obligation
under a formula based on the compounding of interest. Original
issue discount on a tax-exempt obligation issued before July 2, 1982 is
deemed to accrue as tax-exempt interest ratably over the life of the
obligation. Original issue discount on any tax-exempt obligation issued
<PAGE>
during the period beginning July 2, 1982 and ending September 3, 1982
is also deemed to accrue as tax-exempt interest over the life of the
obligation, although it is not clear whether such accrual is ratable or is
determined under a formula based on the compounding of interest. If a
Holder's tax basis for his pro rata portion of a
Bond issued with original issue discount is greater than its "adjusted issue
price" but less than its stated redemption price at maturity (as may be
adjusted for certain payments), the Holder will be considered to have
purchased his pro rata portion of the Bond at an "acquisition premium."
A Holder's adjusted tax basis for his pro rata portion of a Bond issued
with original issue discount will include original issue discount accrued
during the period such Holder held his Units. Such increases to the
Holder's tax basis in his pro rata portion of the Bond resulting from the
accrual of original issue discount, however, will be reduced by the
amount of any such acquisition premium.
If a Holder's tax basis for his pro rata portion of a Bond exceeds the
redemption price at maturity thereof (subject to certain adjustments), the
Holder will be considered to have purchased his pro rata portion of the
Bond with "amortizable bond premium". The Holder is required to
amortize such bond premium over the term of the Bond. Such
amortization is only a reduction of basis for his pro rata portion of the
Bond and does not result in any deduction against the Holder's income.
Therefore, under some circumstances, a Holder
may recognize taxable gain when his pro rata portion of a Bond is
disposed of for an amount equal to or less than his original tax basis
therefor.
A Holder will recognize taxable gain or loss when all or part of his pro
rata portion of a Bond is disposed of by the Trust for an amount greater
or less than his adjusted tax basis. Any such taxable gain or loss will be
capital gain or loss, except that any gain from the disposition of a
Holder's pro rata portion of a Bond acquired by the Holder at a "market
discount" (i.e., where the Holder's original tax basis for his pro rata
portion of the Bond (plus any original issue discount which will accrue
thereon until its maturity) is less than its stated
redemption price at maturity) would be treated as ordinary
income to the extent the gain does not exceed the accrued market
discount. Capital gains are generally taxed at the same rate as ordinary
income. However, the excess of net long-term capital gains over net
short-term capital losses may be taxed at a lower rate than ordinary
income for certain noncorporate taxpayers. A capital gain or loss is
long-term if the asset is held for more than
one year and short-term if held for one year or less. The deduction of
capital losses is subject to limitations. A Holder will also be considered
to have disposed of all or part of his pro rata portion of each Bond when
he sells or redeems all or some of his Units.
<PAGE>
Under the income tax laws of the State and City of New York, the
Trust is not an association taxable as a corporation and income received
by the Trust will be treated as the income of the Holders in the same
manner as for Federal income tax purposes, but will not necessarily be
tax-exempt.
Under Section 265 of the Code, a Holder (except a corporate Holder)
is not entitled to a deduction for his pro rata share of fees and expenses
of the Trust because the fees and expenses are incurred in connection
with the production of tax-exempt income. Further, if borrowed funds
are used by a Holder to purchase or carry Units of the Trust, interest on
such indebtedness will not be deductible for Federal income tax
purposes. In addition, under rules used by the Internal Revenue Service,
the purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds
are not directly traceable to the purchase of Units. Similar rules may be
applicable for state tax purposes.
From time to time proposals are introduced in Congress and state
legislatures which, if enacted into law, could have an adverse impact on
the tax-exempt status of the Bonds. It is impossible to predict whether
any legislation in respect of the tax status of interest on such obligations
may be proposed and eventually enacted at the Federal or state level.
The foregoing discussion relates only to Federal and certain aspects of
New York State and City income taxes. Depending on their state of
residence, Holders may be subject to state and local taxation and should
consult their own tax advisers in this regard.
* * * * *
Interest on certain tax-exempt bonds issued after August 7, 1986 will
be a preference item for purposes of the alternative minimum tax
("AMT"). The Sponsors believe that interest (including any original issue
discount) on the Bonds should not be subject to the AMT for individuals
or corporations under this rule. A corporate Holder should be aware,
however, that the accrual or receipt of tax-exempt interest not subject to
the AMT may give rise to an alternative minimum tax liability (or
increase an existing liability) because the interest income will be included
in the corporation's "adjusted current earnings"
for purposes of the adjustment to alternative minimum taxable income
required by Section 56(g) of the Code and will be taken into account for
purposes of the environmental tax on corporations under Section 59A of
the Code, which is based on an alternative minimum taxable income.
In addition, interest on the Bonds must be taken into consideration in
computing the portion, if any, of social security benefits that will be
included in an individual's gross income and subject to Federal income
tax. Holders are urged to consult their own tax advisers concerning an
<PAGE>
investment in Units.
At the time of issuance of each Bond, an opinion relating to the validity
of the Bond and to the exemption of interest thereon from regular
Federal income taxes was or will be rendered by bond counsel. Neither
the Sponsors nor Davis Polk & Wardwell nor any of the special counsel
for state tax matters have made or will make any review of the
proceedings relating to the issuance of the Bonds
or the basis for these opinions. The tax exemption is dependent upon the
issuer's (and other users') compliance with certain ongoing requirements,
and the opinion of bond counsel assumes that these requirements will be
complied with. However, there can be no assurance that the issuer (and
other users) will comply with these requirements, in which event the
interest on the Bond could be determined to be taxable retroactively from
the date of issuance.
In the case of certain of the Bonds, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of such Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or
related person, will not be exempt from regular Federal income taxes,
although interest on such Bonds received by
others would be exempt from regular Federal income taxes. "Substantial
user" is defined under U.S. Treasury Regulations to include only a
person whose gross revenue derived with respect to the facilities financed
by the issuance of bonds is more than 5% of the total revenue derived by
all users of such facilities, or who occupies more than 5% of the usable
area of such facilities or for whom such
facilities or a part thereof were specifically constructed, reconstructed or
acquired. "Related persons" are defined to include certain related natural
persons, affiliated corporations, partners and partnerships. Similar rules
may be applicable for state tax purposes.
After the end of each calendar year, the Trustee will furnish to each
Holder an annual statement containing information relating to the interest
received by the Trust on the Bonds, the gross proceeds received by the
Trust from the disposition of any Bond (resulting from redemption or
payment at maturity of any Bond or the sale by the Trust of any Bond),
and the fees and expenses paid by the Trust. The Trustee will also
furnish annual information returns to each Holder and to the Internal
Revenue Service. Holders are required to report to
the Internal Revenue Service the amount of tax-exempt interest received
during the year.
<PAGE>
Expenses and Charges
Initial Expenses
At no cost to a Trust the Sponsors have borne all the expenses of
creating and establishing the Trust, including the cost of the initial
preparation and execution of the Trust Agreement, initial preparation and
printing of the certificates for Units, the fees of the Evaluator during the
initial public offering, legal expenses, advertising and selling expenses
and other out-of-pocket expenses. The costs of maintaining the
secondary market, such as printing,
legal and accounting, will be borne by the Sponsors except as otherwise
provided in the Trust Agreement.
Trustee's, Sponsors' and Evaluator's Fees
The Trustee will receive for its ordinary recurring services to a
Trust an annual fee in the amount set forth under Part A, "Summary of
Essential Information." For a discussion of the services performed by
the Trustee pursuant to its obligations under the Trust Agreement, see
"Rights of Unit Holders." The Trustee will receive the benefit of any
reasonable cash balances in the Interest and Principal accounts.
The Portfolio supervision fee (the "Supervision Fee"), which is
earned for Portfolio supervisory services, is based upon the greatest face
amount of Bonds in the Trust at any time during the calendar year with
respect to which the fee is being computed. The Supervision Fee has
been incurred by Portfolios which have come into existence after August
14, 1991, beginning with Series 345 initially, and each Series, in
existence, thereafter.
The Supervision Fee, which is not to exceed the amount set forth
in Part A--"Summary of Essential Information", may exceed the actual
costs of providing Portfolio supervisory services for such Trust, but at
no time will the total amount the Sponsors receive for Portfolio
supervisory services rendered to all series of Tax Exempt Securities
Trust in any calendar year exceed the aggregate cost to them of
supplying such services in such year. In addition, the
Sponsors may also be reimbursed for bookkeeping and other
administrative services provided to the Trust in amounts not exceeding
their costs of providing these services.
The Evaluator determines the aggregate bid price of the
underlying securities on a daily basis at a fee in the amount set forth
under Part A, "Summary of Essential Information," for each evaluation
of the Bonds in a Trust. For a discussion of the services performed by
the Evaluator pursuant to its obligations under the Trust Agreement, see
"Evaluator-Responsibility" and "Public Offering-Offering Price".
<PAGE>
Any of such fees may be increased without approval of the Unit
holders by amounts not exceeding proportionate increases in consumer
prices for services as measured by the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent" or, if
such Index is no longer published, in a similar index to be determined by
the Trustee and the Sponsors. In addition, at the time of any such
increase, the Trustee shall also be entitled
to charge thereafter an additional fee at a rate or amount to be
determined by the Trustee and the Sponsors based upon the face amount
of Deposited Units in a Trust, for the Trustee's services in maintaining
such Deposited Units. The approval of Unit holders shall not be
required for charging of such additional
fee.
Other Charges
The following additional charges are or may be incurred by a
Trust: all expenses of the Trustee (including fees and expenses of counsel
and auditors) incurred in connection with its activities under the Trust
Agreement, including reports and communications to Unit holders;
expenses and costs of any action undertaken by the Trustee to protect a
Trust and the rights and interests
of the Unit holders; fees of the Trustee for any extraordinary services
performed under the Trust Agreement; indemnification of the Trustee for
any loss or liability accruing to it without gross negligence, bad faith or
willful misconduct on its part, arising out of or in connection with its
acceptance or administration
of a Trust; in the case of certain trusts to the extent lawful, expenses
(including legal, accounting and printing expenses) of maintaining
registration or qualification of the Units and/or a Trust under Federal or
state securities laws subsequent to initial registration so long as the
Sponsors are maintaining a market for the Units and all taxes and other
governmental charges imposed upon
the Bonds or any part of a Trust (no such taxes or charges are being
levied or made or, to the knowledge of the Sponsors, contemplated).
The above expenses, including the Trustee's fee, when paid by or owing
to the Trustee, are secured by a lien on the Trust. In addition, the
Trustee is empowered to sell Bonds in order to make funds available to
pay all expenses.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units of a Trust is determined
by adding to the Evaluator's determination of the aggregate bid price of
the Bonds per Unit a sales charge equal to the percentage of the Public
Offering Price indicated for each Trust in Part A, "Summary of Essential
<PAGE>
Information". The aggregate bid price of the underlying Bonds may be
expected to be less than the aggregate offering price (see "Public
Offering - Method of Evaluation"). A
proportionate share of accrued and undistributed interest on the Bonds in
a Trust at the date of delivery of the Units of such Trust to the purchaser
is also added to the Public Offering Price.
Pursuant to employee benefit plans, Units of a Trust are available
to employees of certain of the Sponsors at a Public Offering Price equal
to the Evaluator's determination of the aggregate bid price of Bonds of
a Trust per Unit plus a sales charge of 1.25% of the Public Offering
Price. Sales through such plans to employees of the Sponsors require
less selling effort and selling expenses than sales to the general public.
Method of Evaluation
The aggregate bid price of the Bonds (which is used to calculate
the price at which the Sponsors repurchase and sell Units in the
secondary market and the Redemption Price at which Units may be
redeemed) will be determined by the Evaluator (1) on the basis of the
current bid prices for the Bonds, (2) if bid prices are not available for
any Bonds, on the basis of current bid prices of comparable securities,
(3) by appraisal, or (4) by any combination of
the above. Such determinations will be made each business day as of the
Evaluation Time set forth in the "Summary of Essential Information," in
Part A, effective for all sales made subsequent to the last preceding
determination. The term "business day", as used herein shall exclude
Saturdays, Sundays and any day on which the New York Stock Exchange
is closed. The difference between the bid and offering prices of the
Bonds may be expected to average approximately 1.5 % of principal
amount. In the case of actively traded securities, the difference may be
as little as 0.5 of 1%, and in the case of
inactively traded securities such difference will usually not exceed 3%.
The price at which Units may be repurchased by the Sponsors in the
secondary market could be less than the price paid by the Unit holder.
For information relating to the calculation of the Redemption Price per
Unit, which is also based upon the aggregate bid price of the underlying
Bonds and which may be expected to be less than the Public Offering
Price per Unit, see "Rights of Unit Holders - Redemption of Units".
Distribution of Units
Units acquired in the secondary market (see "Public Offering -
Market for Units") may be offered by this Prospectus at the Public
Offering Price determined in the manner provided above (see "Public
Offering - Offering Price").
<PAGE>
The Sponsors will allow a discount on Units sold to members of
the National Association of Securities Dealers, Inc. Such discount is
subject to change from time to time.
Sales will be made only with respect to whole Units, and the
Sponsors reserve the right to reject, in whole or in part, any order for
the purchase of Units. A purchaser does not become a Unit holder
(Certificate holder) or become entitled to exercise the rights of a Unit
holder (including the right to redeem his Units) until he has paid for his
Units. Generally, such payment must be made within five business days
after an order for the purchase of Units has been placed. The price paid
by a Unit holder is the Public Offering Price in effect at the time his
order is received, plus accrued interest (see
"Public Offering - Method of Evaluation"). This price may be different
from the Public Offering Price in effect on any other day, including the
day on which the Unit holder made payment for the Units.
Market for Units
Although not obligated to do so, the Sponsors presently intend to
maintain a market for the Units of a Trust and to continuously offer to
purchase such Units at prices based upon the aggregate bid price of the
underlying Bonds which may be less than the price paid by the Unit
holder. For information relating to the method and frequency of the
Evaluator's determination of the
aggregate bid price of the underlying Bonds, see "Public Offering --
Method of Evaluation". The costs of maintaining the secondary market,
such as printing, legal and accounting, will be borne by the Sponsors
except as otherwise provided in the Trust Agreement. The Sponsors may
cease to maintain such a market at any time and from time to time
without notice if the supply of Units
of a Trust of this Series exceeds demand or for any other reason. In this
event the Sponsors may nonetheless purchase Units, as a service to Unit
holders, at prices based on the current Redemption Price of those Units.
In the event that a market is not maintained for the Units of a Trust, a
Unit holder of such Trust desiring to dispose of his Units may be able to
do so only by tendering such Units to the Trustee for redemption at the
Redemption Price, which is based upon the aggregate bid price of the
underlying Bonds. (See "Rights of Unit Holders - Redemption of
Units").
Exchange Option
Unit holders may elect to exchange any or all of their Units of
this series for units of one or more of any series of Tax Exempt
Securities Trust (the "Exchange Trust") available for sale in the state in
<PAGE>
which the Unit holder resides at a Public Offering Price for the units of
the Exchange Trust to be acquired based on a fixed sales charge of $25
per unit. The Sponsors reserve the right to modify, suspend or terminate
this plan at any time without further
notice to Unit holders. Therefore, there is no assurance that a market
for units will in fact exist on any given date on which a Unit holder
wishes to sell his Units of this series and thus there is no assurance that
the Exchange Option will be available to a Unit holder. Exchanges will
be effected in whole units only. Any excess proceeds from Unit holders'
Units being surrendered will be returned and Unit holders will not be
permitted to advance any new money in order to complete an exchange.
An exchange of Units pursuant to the Exchange Option for units
of an Exchange Trust will generally constitute a "taxable event" under
the Code, i.e., a Holder will recognize a gain or loss at the time of
exchange. However, an exchange of Units of this Trust for units of any
other similar series of the Tax Exempt Securities Trust which are grantor
trusts for U.S. federal income tax purposes will not constitute a taxable
event to the extent that the underlying securities in each trust do not
differ materially either in kind or in extent. Unit
holders are urged to consult their own tax advisors as to the tax
consequences to them of exchanging Units in particular cases.
Units of the Exchange Trust will be sold under the Exchange
Option at the bid prices of the underlying securities in the particular
portfolio involved per unit plus a fixed charge of $25 per unit. As an
example, assume that a Unit holder, who has three units of a trust with
a current price of $1,020 per unit based on the bid prices of the
underlying securities, desires to exchange his Units for units of a series
of an Exchange Trust with a current price of $880
per unit based on the bid prices of the underlying securities. In this
example, the proceeds from the Unit holder's units will aggregate
$3,060. Since only whole units of an Exchange Trust may be purchased
under the Exchange Option, the Unit holder would be able to acquire
three units in the Exchange Trust for a total cost of $2,715 ($2,640 for
the units and $75 for the sales charge). The remaining $345 would be
returned to the Unit holder in cash.
Reinvestment Programs
Distributions of interest and principal, if any, are made to Unit
holders monthly. The Unit holder will have the option of either
receiving his monthly income check from the Trustee or participating in
one of the reinvestment programs offered by certain of the Sponsors
provided such Unit holder meets the minimum qualifications of the
reinvestment program and such program lawfully qualifies for sale in the
jurisdiction in which the Unit holder
resides. Upon enrollment in a reinvestment program, the Trustee will
<PAGE>
direct monthly interest distributions and principal distributions, if any,
to the reinvestment program selected by the Unit holder. Since each
Sponsor has arranged for different reinvestment alternatives, Unit holders
should contact the Sponsors for more complete information, including
charges and expenses. The appropriate prospectus will be sent to the
Unit holder. The Unit holder should read the prospectus for a
reinvestment program carefully before deciding to
participate. Participation in the reinvestment program will apply to all
Units of a Trust owned by a Unit holder and may be terminated at any
time by the Unit holder, or the program may be modified or terminated
by the Trustee or the program's Sponsor.
Sponsors' Profits
For their services the Sponsors receive a gross commission equal
to a percentage of the Public Offering Price of the Units. In maintaining
a market for the Units of a Trust (see "Public Offering - Market for
Units"), the Sponsors also realize profits or sustain losses in the amount
of any difference between the price at which they buy such Units and the
price at which they resell or redeem such Units (see "Public Offering -
Offering Price").
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units of a Trust is evidenced by registered
certificates executed by the Trustee and the Sponsors. A Certificate is
transferable by presentation and surrender of the Certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer.
Certificates may be issued in denominations of one Unit or any
multiple thereof. A Unit holder may be required to pay $2.00 per
certificate reissued or transferred, and to pay any governmental charge
that may be imposed in connection with each such transfer or
interchange. For new certificates issued to replace destroyed, stolen or
lost certificates, the Unit holder must furnish indemnity satisfactory to
the Trustee and must pay such expenses
as the Trustee may incur. Mutilated certificates must be surrendered to
the Trustee for replacement.
Distribution of Interest and Principal
Interest and principal received by a Trust will be distributed on
each Monthly Distribution Date on a pro rata basis to Unit holders in
<PAGE>
such Trust of record as of the preceding Record Date. All distributions
will be net of applicable expenses and funds required for the redemption
of Units and, if applicable, reimbursements to the Trustee for interest
payments advanced to Unit holders on previous Monthly Distribution
Dates. (See Part A, "Summary of Essential Information," and "Tax
Exempt Securities Trust -Expenses and Charges" and "Rights of Unit
Holders - Redemption of Units" in this Section.)
The Trustee will credit to the Interest Account of a Trust all
interest received by such Trust, including that part of the proceeds of any
disposition of Bonds of such Trust which represents accrued interest.
Other receipts will be credited to the Principal Account of the affected
Trust. The pro rata share of the Interest Account and the pro rata share
of cash in the Principal Account represented by each Unit of a Trust will
be computed by the Trustee each month as of the Record Date. (See
Part A, "Summary of Essential Information"). Proceeds received from
the disposition of any of the Bonds subsequent to a Record Date and
prior to the next succeeding Distribution Date
will be held in the Principal Account and will not be distributed until the
following Distribution Date. The distribution to the Unit holders as of
each Record Date will be made on the following Distribution Date or
shortly thereafter and shall consist of an amount substantially equal to
one-twelfth of such holders' pro rata share of the estimated annual
income to the Interest Account after deducting estimated expenses (the
"Monthly Interest Distribution") plus such holders' pro rata share of the
cash balance in the Principal Account computed as of the close of
business on the preceding Record Date. Persons
who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following
their purchase of Units. No distribution need be made from the Principal
Account if the balance therein is less than an amount sufficient to
distribute $1.00 per Unit. The Monthly Interest Distribution per Unit as
of the date shown under Part A, "Summary of Essential Information" for
a Trust will change as the income and expenses of such Trust change and
as Bonds are exchanged, redeemed, paid or sold.
Normally, interest on the Bonds in the Portfolio of a Trust is paid
on a semi-annual basis. Because Bond interest is not received by a Trust
at a constant rate throughout the year, any Monthly Interest Distribution
may be more or less than the amount credited to the Interest Account as
of the Record Date. In order to eliminate fluctuations in Monthly
Interest Distributions resulting from such variances, the Trustee is
required by the Trust Agreement to advance such amounts as may be
necessary to provide Monthly Interest
Distributions of approximately equal amounts. The Trustee will be
reimbursed, without interest, for any such advances from funds available
from the Interest Account on the next ensuing Record Date or Record
Dates, as the case may be.
If all or a portion of the Bonds for which advances have been made
<PAGE>
subsequently fail to pay interest when due, the Trustee may recoup
advances made by it in anticipation of receipt of interest payments on
such Bonds by reducing the amount distributed per Unit in one or more
Monthly Interest Distributions. If
units are redeemed subsequent to such advances by the Trustee, but prior
to receipt by the Trustee of actual notice of such failure to pay interest,
the amount of which was so advanced by the Trustee, each remaining
Unit holder will be subject to a greater pro rata reduction in his Monthly
Interest Distribution than would have occurred absent such redemptions.
Funds which are available for future distributions, payments of expenses
and redemptions are in accounts which are non-interest bearing to Unit
holders and are available for use by United States Trust Company of
New York, pursuant to normal banking procedures. The Trustee is
entitled to the benefit of holding any reasonable cash
balances in the Interest and Principal Accounts. The Trustee anticipates
that the average cash balance in the Interest Account will be
approximately 2% in excess of the amounts anticipated to be required for
Monthly Distributions to Unit holders. In addition, because of the
varying interest payment dates of the Bonds
comprising a Trust Portfolio, accrued interest at any point in time will
be greater than the amount of interest actually received by a Trust and
distributed to Unit holders. Therefore, there will always remain an item
of accrued interest that is added to the value of the Units. This accrued
but undistributed interest is known as the accrued interest carryover. If
a Unit holder sells or redeems all or a portion of his Units, a portion of
his sale proceeds will be allocable to his
proportionate share of the accrued interest carryover. Similarly, if a
Unit holder redeems all or a portion of his Units, the Redemption Price
per Unit which he is entitled to receive from the Trustee will include his
accrued interest carryover on the Bonds. (See "Rights of Unit Holders
- - Redemption of Units - Computation of Redemption Price per Unit.")
As of the first day of each month the Trustee will deduct from the
Interest Account of a Trust and, to the extent funds are not sufficient
therein, from the Principal Account of such Trust, amounts necessary to
pay the expenses of such Trust. (See "Tax Exempt Securities Trust -
Expenses and Charges".) The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish a
reserve for any governmental charges payable out of a Trust. Amounts
so withdrawn shall not be considered a part
of a Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the Trustee
may withdraw from the Interest Account and the Principal Account such
amounts as may be necessary to cover redemption of Units by the
Trustee. (See "Rights of Unit Holders - Redemption of Units".) The
Trustee is also entitled to withdraw from
the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, on one or more Record Dates as may be
<PAGE>
appropriate, amounts sufficient to recoup advances which the Trustee has
made in anticipation of the receipt by a Trust of interest in respect of
Bonds which subsequently fail to pay interest when due.
Reports and Records
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of interest, if any, and the amount
of other receipts, if any, which are being distributed, expressed in each
case as a dollar amount per Unit. In the event that the issuer of any of
the Bonds fails to make payment when due of any interest or principal
and such failure results in a change in the amount which would otherwise
be distributed as a monthly distribution, the Trustee will, with the first
such distribution following such failure, set forth in an accompanying
statement, the issuer and the Bond, the amount of the reduction in the
distribution per Unit resulting from such failure, the percentage of the
aggregate principal amount of Bonds which such Bond represents and,
to the extent then determined, information regarding any
disposition or legal action with respect to such Bond. Within a
reasonable time after the end of each calendar year, the Trustee will
furnish to each person who at any time during the calendar year was a
Unit holder of record, a statement (1) as to the Interest Account: interest
received (including amounts representing
interest received upon any disposition of Bonds), if the issuers of the
Bonds are located in different states or territories, then the percentage of
such interest by such states or territories, deductions for payment of
applicable taxes and for fees and expenses of a Trust, redemptions of
Units and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and
as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (2) as to the
Principal Account: the dates of disposition of any Bonds and the net
proceeds received therefrom (excluding any portion representing
interest), deductions for payments of
applicable taxes and for fees and expenses of a Trust, redemptions of
Units, and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (3)
a list of the Bonds held and the number of Units outstanding on the last
business day of such calendar year; (4) the Redemption Price per Unit
based upon the last computation thereof made during such calendar year;
and (5) amounts actually distributed during such calendar year from the
Interest Account and from the
Principal Account, separately stated, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share of each
Unit outstanding. The accounts of a Trust will be audited not less
frequently than annually by independent auditors designated by the
<PAGE>
Sponsors, and the report of such auditors
shall be furnished by the Trustee to Unit holders upon request.
The Trustee shall keep available for inspection by Unit holders
at all reasonable times during the usual business hours, books of record
and account of its transactions as Trustee including records of the names
and addresses of Unit holders, certificates issued or held, a current list
of Bonds in the Portfolio of a Trust and a copy of the Trust Agreement.
Redemption of Units
Units may be tendered to the Trustee for redemption at its unit
investment trust office at 770 Broadway, New York, New York 10003,
upon payment of any relevant tax. At the present time there are no
specific taxes related to the redemption of the Units. No redemption fee
will be charged by the Sponsors or the Trustee. Units redeemed by the
Trustee will be canceled.
Certificates for Units to be redeemed must be properly endorsed
or accompanied by a written instrument of transfer. Unit holders must
sign exactly as their name appears on the face of the certificate with the
signature guaranteed by an officer of a national bank or trust company
or by a member of either the New York, Midwest or Pacific Stock
Exchange. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates of
corporate authority.
Within seven calendar days following such tender, the Unit holder
will be entitled to receive in cash an amount for each Unit tendered equal
to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the "Summary of Essential Information" in Part A on the date
of tender. (See "Redemption of Units - Computation of Redemption
Price per Unit".) The "date of tender" is deemed to be the date on
which Units are received by the Trustee, except as regards Units
received after the close of trading on the New
York Stock Exchange, the date of tender is the next day on which such
Exchange is open for trading, and such Units will be deemed to have
been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day. For information relating to the
purchase by the Sponsors of Units tendered to the Trustee for redemption
at prices which may be, in certain circumstances, in excess of the
Redemption Price, see "Redemption of Units - Purchase by the Sponsors
of Units Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn from the
Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be
<PAGE>
withdrawn from the Principal Account. The Trustee is empowered to
sell Bonds in order to make funds available for redemption. Such sales,
if required, could result in a sale
of Bonds by the Trustee at a loss. To the extent Bonds are sold, the size
and diversity of a Trust will be reduced.
The Trustee reserves the right to suspend the right of redemption
and to postpone the date of payment of the Redemption Price per Unit
for any period during which the New York Stock Exchange is closed,
other than weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or
evaluation of the underlying Bonds is not reasonably practicable, or for
such other periods as the Securities and Exchange Commission has by
order permitted.
Computation of Redemption Price per Unit - The Redemption
Price per Unit of a Trust is determined by the Trustee on the basis of the
bid prices of the Bonds in such Trust as of the Evaluation Time on the
date any such determination is made. The Redemption Price per Unit of
a Trust is each Unit's pro rata share, determined by the Trustee, of: (1)
the aggregate value of the Bonds in such Trust on the bid side of the
market (determined by the Evaluator
as set forth under "Public Offering - Method of Evaluation") (2) cash on
hand in such Trust and accrued and unpaid interest on the Bonds as of
the date of computation, less (a) amounts representing taxes or
governmental charges payable out of such Trust, (b) the accrued
expenses of such Trust, and (c) cash
held for distribution to Unit holders of such Trust of record as of a date
prior to the evaluation.
Purchase by the Sponsors of Units Tendered for Redemption
- - The Trust Agreement requires that the Trustee notify the Sponsors of
any tender of Units for redemption. So long as the Sponsors are
maintaining a bid in the secondary market, the Sponsors, prior to the
close of business on the second succeeding business day, will purchase
any Units tendered to the Trustee for redemption at the price so bid by
making payment therefor to the Unit holder
in an amount not less than the Redemption Price not later than the day
on which the Units would otherwise have been redeemed by the Trustee.
(See"Public Offering - Market for Units".) Units held by the Sponsors
may be tendered to the Trustee for redemption as any other Units,
provided that the Sponsors shall not receive for Units purchased as set
forth above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors will be the
Public Offering Price determined in the manner provided in this
Prospectus. (See "Public Offering - Offering Price".) Any profit
resulting from the resale of such Units will belong to the Sponsors which
<PAGE>
likewise will bear any loss resulting from a lower offering or redemption
price subsequent to their acquisition of such Units. (See "Public Offering
- - Sponsors' Profits".)
SPONSORS
Smith Barney Shearson Inc., 1345 Avenue of the Americas, New
York, New York 10105 ("Smith Barney"), was incorporated in Delaware
in 1960 and traces its history through predecessor partnerships to 1873.
Smith Barney, an investment banking and securities broker-dealer firm,
is a member of the New York Stock Exchange, Inc. and other major
securities and commodities exchanges, the National Association of
Securities Dealers, Inc. and the Securities Industry Association. Smith
Barney is an indirect wholly-owned subsidiary of The Travelers Inc.
(formerly, Primerica Corporation).
Kidder, Peabody & Co. Incorporated, 10 Hanover Square, New
York, New York 10005 ("Kidder, Peabody"), was incorporated in
Delaware in 1956 and traces its history through predecessor partnerships
to 1865. Kidder, Peabody, an investment banking and securities
broker-dealer firm, is a member of the New York Stock Exchange, Inc.
and other major securities and option exchanges, the National
Association of Securities Dealers, Inc. and the
Securities Industry Association.
On May 26, 1989 the Commission granted Kidder, Peabody a
permanent exemption from certain provisions of the Investment Company
Act of 1940 which otherwise would have rendered Kidder, Peabody
ineligible to serve as sponsor, depositor or underwriter of the Trust, as
a result of an injunction entered against Kidder, Peabody. The injunction
arose out of certain alleged activities of Kidder, Peabody not involving
the Trust or any other investment company and which are described
below. In order to obtain the permanent exemption, Kidder, Peabody
retained a consultant (at its own expense) to review the policies and
procedures utilized by it to prevent violations
of the federal securities laws in connection with its investment company
business, and to recommend, where appropriate, changes in policies,
procedures and staffing necessary to assure ongoing compliance. The
Commission considered the application of Kidder, Peabody for a
permanent exemption after
the Commission had received a copy of the consultant's report and
recommendations and reports from Kidder, Peabody setting forth the
actions it had taken or proposed to take in respect of the implementation
of the consultant's recommendations.
On June 4, 1987 the Commission filed a complaint (the
"Complaint") in the United States District Court for the Southern District
of New York, in a civil action entitled Securities and Exchange
<PAGE>
Commission v. Kidder, Peabody & Co. Incorporated, 87 Civ. 3869 (R0)
(the "SEC Action"). On the same day, Kidder, Peabody entered into,
and the parties filed in the SEC
Action, a related Consent and Undertakings, in which Kidder, Peabody
neither admitted nor denied any of the allegations in the Complaint
except as to jurisdiction, and pursuant to which Consent and
Undertakings the District Court
entered a Final Judgment of Permanent Injunction and other relief as to
Kidder, Peabody (the "Final Judgment"). The exemption from the Act
was requested by Kidder, Peabody as a result of the Final Judgment.
The Complaint in the injunctive action brought by the
Commission alleges that Kidder, Peabody violated sections 10(b) and
14(e) of the Securities Exchange Act of 1934 (the "Exchange Act") and
rules promulgated thereunder by engaging, for its own account, in
purchases or sales of the securities of six named companies while in the
possession of material, non-public information concerning tender offers
or other extraordinary corporate transactions concerning such companies.
The Complaint asserts that such information was obtained by a former
executive of Kidder, Peabody as part of a scheme for the exchange of
non-public information with a partner at another
investment banking firm. These allegations are directed to events in
1984 and 1985; the executive ceased employment with Kidder, Peabody
in February, 1986. Other allegations of the Complaint allege violations
by Kidder, Peabody of sections 7(c) and 17(a)(1) of the Exchange Act
and various rules promulgated thereunder and aiding and abetting in
violations by another entity of sections
15(c)(3) and 17(a)(1) of the Exchange Act and various rules promulgated
thereunder. These provisions relate to the maintenance and preservation
of accurate books and records, adherence to margin requirements
prescribed by the Federal Reserve Board and compliance with net capital
requirements applicable to broker-dealers. The violations alleged in the
Complaint with respect to all of these provisions stem from several
transactions in 1984 and 1985 involving another broker-dealer.
According to the Complaint, oral understandings
between Kidder, Peabody and the other broker-dealer enabled the other
broker-dealer to avoid adherence to the net capital requirements and
constituted an impermissible extension of credit to such entity by Kidder,
Peabody.
Among other provisions, the Final Judgment enjoins Kidder,
Peabody from engaging in certain transactions, acts, practices or courses
of business which constitute or would constitute violations of Sections
7(c), 10(b), 14(e) and 17(a)(1), or constitute or would constitute aiding
and abetting violations of Sections 15(c)(3) and 17(a)(1), of the Exchange
Act and various rules promulgated thereunder. The Final Judgment also
requires that Kidder, Peabody pay a penalty of approximately $11.6
million to the U.S. Treasury under the Insider Trading Sanctions Act of
1984, and establish a fund of approximately $13.7 million which would
<PAGE>
be available to compensate anyone with valid claims of injury from the
conduct alleged.
Also, on June 4, 1987, the Commission instituted administrative
proceedings against Kidder, Peabody pursuant to Section 15(b)(4) of the
Exchange Act, entitled In the Matter of Kidder, Peabody & Co.
Incorporated, Administrative Proceeding File No. 3-6855 (the "SEC
Order"). On the same day, Kidder, Peabody filed an Offer of Settlement
(the "Offer") with respect to the SEC Order, which was accepted by the
Commission and incorporated into the SEC Order. The Final Judgment
was the basis for the SEC Order. In the SEC Order, the Commission
censured Kidder, Peabody and ordered that Kidder, Peabody comply
with its undertakings (consisting of certain
remedial measures to be taken by Kidder, Peabody designed to prevent
future occurrence of the conduct alleged in the Complaint and to ensure
Kidder, Peabody's compliance on an ongoing basis with the federal
securities laws and the rules and regulations of self-regulatory
organizations) set forth in the Order.
None of the allegations in the Complaint relate to any of Kidder,
Peabody's activities in connection with any unit investment trust or any
other investment company.
Smith Barney sponsors numerous open-end investment companies
and closed-end investment companies. Smith Barney also sponsors all
Series of Corporate Securities Trust, Government Securities Trust and
Harris, Upham Tax-Exempt Fund and acts as co-sponsor of certain trusts
of The Equity Income Fund, Concept series. Kidder, Peabody sponsors
Target Corporate High Yield Series Unit Trust and a family of open-end
investment companies, presently including: Kidder, Peabody Government
Money Fund, Inc., Kidder, Peabody Premium Account Fund, Kidder,
Peabody Tax Exempt Money Fund, Inc., Kidder, Peabody Cash Reserve
Fund, Inc., Kidder, Peabody Equity Income
Fund, Inc., Kidder, Peabody Government Income Fund, Inc., Kidder,
Peabody California Tax Exempt Money Fund, Liquid Institutional
Reserves (Government Securities Income Fund, Money Market Fund and
Treasury Securities Fund), Kidder, Peabody Global Equity Fund, Kidder,
Peabody Intermediate Fixed Income Fund, Kidder, Peabody Adjustable
Rate Government Fund, Kidder, Peabody Global Fixed Income Fund,
Kidder, Peabody Municipal Money Market
Series (Connecticut, New Jersey and New York), Kidder, Peabody
Municipal Bond Fund, Kidder, Peabody Emerging Markets Equity Fund,
Kidder, Peabody Small Cap Equity
Fund, Institutional Adjustable Rate Government Portfolio and Kidder,
Peabody Asset Allocation Fund. Kidder Peabody Asset Management,
Inc., a subsidiary of Kidder, Peabody, is the investment adviser and/or
manager of each of these open-end investment companies. The Sponsors
have acted previously as managing underwriters of other investment
companies. In addition to participating as a member of various
<PAGE>
underwriting and selling groups or as agent of other investment
companies, the Sponsors also execute orders for the
purchase and sale of securities of investment companies and sell
securities to such companies in their capacities as brokers or dealers in
securities.
Limitations on Liability
The Sponsors are jointly and severally liable for the performance
of their obligations arising from their responsibilities under the Trust
Agreement, but will be under no liability to Unit holders for taking any
action or refraining from any action in good faith or for errors in
judgment or responsible in any way for depreciation or loss incurred by
reason of the sale of any Bonds, except in cases of willful misfeasance,
bad faith, gross negligence or reckless disregard of their obligations and
duties. (See "Tax Exempt Securities Trust - Portfolio" and "Sponsors -
Responsibility.")
<PAGE>
<PAGE>
Responsibility
The Sponsors are empowered to direct the Trustee to dispose of
Bonds or deposited Units of other trusts when certain events occur that
adversely affect the value of the Bonds, including default in payment of
interest or principal, default in payment of interest or principal on other
obligations of the same issuer, institution of legal proceedings, default
under other documents adversely affecting debt service, decline in price
or the occurrence of other market or credit factors, or decline in
projected income pledged for debt service
on revenue bonds and advanced refunding that, in the opinion of the
Sponsors, may be detrimental to the interests of the Unit holders.
The Sponsors intend to provide portfolio services for each Trust
in order to determine whether the Trustee should be directed to dispose
of any such Bonds.
It is the responsibility of the Sponsors to instruct the Trustee to
reject any offer made by an issuer of any of the Bonds to issue new
obligations in exchange and substitution for any Bonds pursuant to a
refunding or refinancing plan, except that the Sponsors may instruct the
Trustee to accept such an offer or to take any other action with respect
thereto as the Sponsors may deem proper if the issuer is in default with
respect to such Bonds or in the judgment of the Sponsors the issuer will
probably default in respect to such Bonds in the foreseeable future. Any
obligations so received in exchange or
substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds originally
deposited thereunder.
Within five days after the deposit of obligations in exchange or
substitution for underlying Bonds, the Trustee is required to give notice
thereof to each Unit holder, identifying the Bonds eliminated and the
Bonds substituted therefor.
Except as stated in this paragraph, the acquisition by a Trust of any
securities other than the Bonds initially deposited in the Trust is
prohibited.
Smith Barney Shearson Inc. has been appointed by Kidder,
Peabody & 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 Smith Barney
Shearson 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 is automatically discharged
under the Trust Agreement and the remaining Sponsor acts as Sponsor.
<PAGE>
Resignation
Any Sponsor may resign provided that at the time of such
resignation each remaining Sponsor maintains a net worth of $1,000,000
and is agreeable to such resignation. Concurrently with or subsequent
to such resignation a new Sponsor may be appointed by the remaining
Sponsor and the Trustee to assume the duties of the resigning Sponsor.
If all Sponsors resign or otherwise fail or become unable to perform their
duties under the Trust Agreement, and no express provision is made for
action by the Trustee in such event, the Trustee may appoint a successor
sponsor or terminate the Trust Agreement and liquidate the affected
Trusts.
TRUSTEE
The Trustee is United States Trust Company of New York, with
its principal place of business at 114 West 47th Street, New York, New
York 10036. United States Trust Company of New York has, since its
establishment in 1853, engaged primarily in the management of trust and
agency accounts for individuals and corporations. The Trustee is a
member of the New York Clearing House Association and is subject to
supervision and examination by the Superintendent of Banks of the State
of New York, the Federal Deposit Insurance Corporation and the Board
of Governors of the Federal Reserve System. In connection with the
storage and handling of certain Bonds deposited in the Trust, the Trustee
may use the services of The Depository Trust
Company. These services may include safekeeping of the Bonds and
coupon-clipping, computer book-entry transfer and institutional delivery
services. The Depository Trust Company is a limited purpose trust
company organized under the Banking Law of the State of New York,
a member of the Federal Reserve
System and a clearing agency registered under the Securities Exchange
Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the disposition of any monies,
securities or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents
except in cases of willful misfeasance, bad faith, gross negligence or
reckless disregard for its obligations and duties. In addition, the Trustee
shall not be personally liable for any taxes or other governmental charges
imposed upon or in respect of a Trust which the Trustee may be required
to pay under current or future law
of the United States or any other taxing authority having jurisdiction.
(See"Tax Exempt Securities Trust - Portfolio".) For information relating
<PAGE>
to the responsibilities and indemnification of the Trustee under the Trust
Agreement, reference is made to the material set forth under "Rights of
Unit Holders," "Sponsors - Resignation" and "Other Charges".
Resignation
By executing an instrument in writing and filing the same with the
Sponsors, the Trustee and any successor may resign. In such an event,
the Sponsors are obligated to appoint a successor trustee as soon as
possible. If the Trustee becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, the Sponsors
may remove the Trustee and appoint a successor as provided in the Trust
Agreement. Such resignation or removal
shall become effective upon the acceptance of appointment by the
successor trustee. If no successor has accepted the appointment within
thirty days after notice of resignation, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only when the
successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc., with main offices located at 65
Broadway, New York, New York 10006.
Limitations on Liability
The Trustee, Sponsors and Unit holders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the Trust
Agreement shall be made in good faith upon the basis of the best
information available to it; provided, however, that the Evaluator shall
be under no liability to the Trustee, the Sponsors or Unit holders for
errors in judgment. But this provision shall not protect the Evaluator in
cases of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
<PAGE>
<PAGE>
Responsibility
The Trust Agreement requires the Evaluator to evaluate the Bonds
of a Trust on the basis of their bid prices on the last business day of June
and December in each year, on the day on which any Unit of such Trust
is tendered for redemption and on any other day such evaluation is
desired by the Trustee or is requested by the Sponsors. For information
relating to the responsibility of the Evaluator to evaluate the Bonds on
the basis of their bid prices, see "Public Offering - Offering Price".
Resignation
The Evaluator may resign or may be removed by the joint action
of the Sponsors and the Trustee, and in such event, the Sponsors and the
Trustee are to use their best efforts to appoint a satisfactory successor.
Such resignation or removal shall become effective upon the acceptance
of appointment by a successor evaluator. If upon resignation of the
Evaluator no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE TRUST
AGREEMENT
Amendment
The Sponsors and the Trustee have the power to amend the Trust
Agreement without the consent of any of the Unit holders when such an
amendment is (1) to cure any ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent
with any other provision contained therein, or (2) to make such other
provisions as shall not adversely affect the interests of the Unit holders;
provided, that the Trust Agreement is not amended to increase the
number of Units issuable thereunder or to permit the deposit or
acquisition of securities either in addition
to or in substitution for any of the Bonds initially deposited in a Trust,
except for the substitution of certain refunding securities for such Bonds
or to permit the Trustee to engage in business or investment activities not
specifically authorized in the Trust Agreement as originally adopted. In
the event of any amendment, the Trustee is obligated to notify promptly
all Unit holders of the substance of such amendment.
Termination
The Trust Agreement provides that if the principal amount of
Bonds is less than 50% of the principal amount of the Bonds originally
<PAGE>
deposited in such Trust, the Trustee may in its discretion and will, when
directed by the Sponsors, terminate such Trust. A Trust may be
terminated at any time by 100% of the Unit holders. See Part A for
additional optional and mandatory termination provisions. However, in
no event may a Trust continue beyond the
Mandatory Termination Date set forth under Part A, "Summary of
Essential Information". In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders. Within a
reasonable period after termination, the Trustee will sell any Bonds
remaining in the affected Trust, and, after
paying all expenses and charges incurred by such Trust, will distribute
to each Unit holder, upon surrender for cancellation of his certificate for
Units, his pro rata share of the balances remaining in the Interest and
Principal Account of such Trust.
LEGAL OPINIONS
Certain legal matters in connection with the Trusts have been
passed upon by Messrs. Davis Polk & Wardwewll, 450 Lexington
Avenue, New York, New York 10017, as special counsel for the
Sponsors. Messrs. Carter, Ledyard & Milburn, 2 Wall Street, New
York, New York 10005, act as counsel for the Trustee.
AUDITORS
The Statements of Financial Condition and Portfolio of Securities
of a trust included in this Prospectus have been audited by KPMG Peat
Marwick, independent auditors, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
BOND RATINGS
All ratings except those identified otherwise are by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. ("Standard &
Poor's").
Standard & Poor's
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to
a specific debt obligation. This assessment of creditworthiness may take
into consideration obligors such as guarantors, insurers, or lessees.
<PAGE>
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's from
other sources it considers reliable. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of,
such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation; and
III.Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.
A summary of the meaning of the applicable rating symbols as
published by Standard & Poor's follows:
AAA - This is the highest rating assigned by Standard & Poor's
to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.
AA - Bonds rated AA have a very strong capacity to pay interest
and repay principal, and in the majority of instances differ from AAA
issues only in small degrees.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in higher-rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to weakened capacity to
pay interest and repay principal for bonds in this category than for bonds
in the higher-rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
<PAGE>
of the obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus(+) or Minus(-): To provide more detailed indications of
credit quality, the ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" following a rating indicates
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the issuance of the bonds
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion
of the project. This rating,
however, while addressing credit quality subsequent to completion,
makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise
his own judgment with respect to such likelihood and risk.
Conditional Ratings: Indicated by "Con" are given to bonds for
which the continuance of the security rating is contingent upon Standard
& Poor's receipt of an executed copy of the escrow agreement or closing
issuance of insurance by the respective insurance company.
Moody's Investors Service
A brief description of the applicable Moody's Investors Service's
rating symbols and their meanings is as follows:
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. Aa bonds are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
<PAGE>
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over
any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Note: Those municipal bonds in the Aa, A, Baa, Ba and B groups
which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, Ba1 and B1, respectively. In
addition, Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category. Although Industrial Revenue Bonds and Environmental Control
Revenue Bonds are tax-exempt issues, they are included in the corporate
bond rating system.
<PAGE>
Conditional ratings, indicated by "Con" are given to bonds for
which the security depends upon the completion of some act or the
fulfillment of some condition. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects unseasoned in
operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which
some other limiting condition attaches. A parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
Note: NR indicates, among other things, that no rating has been
requested, that there is insufficient information on which to base a rating,
or that Standard & Poor's Corporation and Moody's Investors Service do
not rate a particular type of obligation as a matter of policy. Subsequent
to the Date of Deposit the credit characteristics of the Issuers of
Securities may have changed.
Currently, certain of the Securities in the Portfolio of a Trust may be
unrated and have credit characteristics comparable to securities rated
below the minimum requirements of such Trust for acquisition of a
Security. See Part A - "Portfolio of Securities" herein to ascertain the
ratings on the Securities, if any, on the date
of the Portfolios of Securities.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors Service, Inc.
rating symbols and their meanings is as follow:
AAA - Bonds which are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA - Bonds which are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong although not quite as strong as bonds rated AAA.
A - Bonds which are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds
with higher ratings.
BBB - Bonds which are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
<PAGE>
likelihood that these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Plus (+) Minus (-) - Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the `AAA',
`DDD', `DD' or `D' categories.
Conditional - A conditional rating is promised on the successful
completion of a project of the occurrence of a specific event.
Duff & Phelps Credit Rating Co.
A brief description of the applicable Duff & Phelps Credit Rating Co.
rating symbols and their meanings is as follows:
AAA-Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA-High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic
conditions.
A-Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB-Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
NR- Not rated (credit characteristics comparable to A or better
on the Date of Deposit).
[/TEXT]
<PAGE>
<TABLE>
Prospectus
This Prospectus contains information concerning the Trust and
the Sponsors, but does not contain all the information set forth
in the registration statements and exhibits relating thereto, which
the Trust has filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is
hereby made.
<S>
<C>
Index:
Page
Summary of Essential Information . . . . . . . . . . . . . . . . . . . . . A-
2
Series 317
Financial and Statistical Information. . . . . . . . . . . . . . . . . . . A-3
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . A-3
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Statements of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . A-5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . A-
5
15,242 Units
Portfolio of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Tax Exempt Securities Trust. . . . . . . . . . . . . . . . . . . . . . . . 1
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROSPECTUS
The Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dated June 14, 1994
Estimated Current Return and Estimated Long-Term Return. . . . . . . . . 14
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Expenses and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Public Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Sponsors
Method of Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Distribution of Units. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Market for Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SMITH BARNEY SHEARSON INC. . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Reinvestment Program . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1345 Avenue of the Americas
Sponsors' Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
New York, New York 10105
Rights of Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(800) 298-UNIT
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Distribution of Interest and Principal . . . . . . . . . . . . . . . . . 21
Reports and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Units. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
&
Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 27
Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
KIDDER, PEABODY & CO.
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Incorporated
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 28
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10 Hanover Square
Evaluator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
New York, New York 10005
Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . 29
(212) 747-5951
Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Amendment and Termination of the Trust Agreement . . . . . . . . . . . . . 29
Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Standard & Poor's Corporation. . . . . . . . . . . . . . . . . . . . . . 30
Moody's Investors Service. . . . . . . . . . . . . . . . . . . . . . . . 31
Fitch Investors Service, Inc . . . . . . . . . . . . . . . . . . . . . . 33
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, securities in any state to any person to whom it is
not lawful to make such offer in such state.
</TABLE>
<PAGE> PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement
on Form S-6 comprises the following papers and documents:
The facing Sheet on Form S-6.
The cross-reference sheet.
The Prospectus consisting of pages A-1 - A- , and 1- , back cover.
Signatures.
Written consents of the following persons:
KPMG Peat Marwick
Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc.
(included in Exhibit 4.6A)
The following exhibits:
*4.6A - Consent of Kenny S&P Evaluation Services, a division
of Kenny Information Systems, Inc. as Evaluator.
* Filed herewith.
II-1
<PAGE>
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 Broadway
New York, New York, 13176-2511
Telephone 212/770-4317
Smith Barney Shearson
Incorporated
1345 Avenue of the Americas
New York, NY 10105
RE:Tax Exempt Securities Trust
Series 317
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-32047 for the above-captioned
trust. We hereby acknowledge that Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust portfolio
are the ratings currently indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter
with the Securities and Exchange Commission.
Sincerely,
F.A. Shinal
Senior Vice President
Chief Financial Officer
tru:l-31
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to
the use of their name in the Prospectus included in this Post-
Effective Amendment to the Registration Statement ("Post-
Effective Amendment") is contained in their opinion filed as
Exhibit 3.1 to the Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of
our report dated May 18, 1994 included herein and to the
reference to our firm under the heading "AUDITORS" in the
prospectus.
KPMG PEAT MARWICK
New York, New York
May 20, 1994
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, Tax Exempt Securities Trust, Series 317,
certifies that it meets all the requirements for
effectiveness of this Post-Effective Amendment pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of New York,
and State of New York on the 20th day of May, 1994.
Signatures appear on pages II-3 and II-4.
A majority of the members of the Board of Directors of Smith
Barney Shearson Incorporated have signed this Post-Effective
Amendment pursuant to Powers of Attorney authorizing the person
signing this Post-Effective Amendment to do so on behalf of such
members.
These Powers of Attorney were filed with the Securities
and Exchange Commission under the Securities Act of 1933 with the
Registration Statement of Tax Exempt Securities Trust,
Appreciation Series 7, Registration No. 2-78499 and with the
Registration Statement of Tax Exempt Securities Trust, Series
110, Intermediate Term Series 15 and Short-Intermediate Term
Series 13, Registration Nos. 2-97179, 2-95591 and 2-96184,
respectively, with the Registration Statement of Tax Exempt
Securities Trust, Series 284, Amendment No. 2, Registration No.
33-22777, with the Registration Statement of Tax Exempt
Securities Trust, Series 295, Amendment No. 1, Registration No.
33-26376, and with the Registration Statement of Tax Exempt
Securities Trust, Series 335, Amendment No. 1, Registration No.
33-37952.
A majority of the members of the Board of Directors of
Kidder, Peabody & Co. Incorporated have signed this Post-
Effective Amendment pursuant to Powers of Attorney authorizing
the person signing this Post-Effective Amendment to do so on
behalf of such members. These Powers of Attorney were filed with
the Securities and Exchange Commission under the Securities Act
of 1933 as an exhibit to the Registration Statement of Tax Exempt
Securities Trust, Series 303, Post-Effective Amendment No. 1,
Registration No. 33-28378.
<PAGE>
TAX EXEMPT SECURITIES TRUST
BY SMITH BARNEY SHEARSON INC.
By
(George S. Michinard, Jr.)
By the following persons,* who constitute a majority of
the directors of Smith Barney Shearson Incorporated:
Steven D. Black
James S. Boshart III
Robert K. Difazio
James Dimon
Robert Druskin
Toni A. Elliot
Lewis L. Glucksman
John B. Hoffman
A. Richard Janiak, Jr.
Robert Q. Jones
Robert B. Kane
Jeffrey B. Lane
Thomas A. Maguire
Howard D. Marsh
William J. Mills II
John C. Morris
A. George Saks
Bruce D. Sargent
Melvin B. Taub
Jacques S. Theriot
Stephen J. Treadway
Paul Underwood
Philip M. Waterman, Jr.
By
(George S. Michinard, Jr.
Attorney-in-Fact)
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
TAX EXEMPT SECURITIES TRUST
By Kidder, Peabody & Co. Incorporated
By
(Gilbert R. Ott, Jr.)
By the following persons*, who constitute a majority
of the directors of Kidder, Peabody & Co. Incorporated:
Edward A. Cerullo
Michael A. M. Keehner
John M. Liftin
James A. Mullin
Richard W. O'Donnell
Thomas F. Ryan, Jr.
By
(Gilbert R. Ott, Jr.
Attorney-in-Fact)
___
* Pursuant to Powers of Attorney previously filed.
II-4
