Rule 497(b)
Registration No. 33-40625
Prospectus Part A Dated April 30, 1997
MUNICIPAL SECURITIES TRUST
SERIES 51
- ------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 51
("Municipal Trust") with an underlying portfolio of long-term tax-exempt bonds
issued by or on behalf of states, municipalities and public authorities, and was
formed to preserve capital and to provide interest income (including, where
applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently exempt
from regular Federal income tax (including where applicable earned original
discount) under existing law but may be subject to state and local taxes. There
can be no assurance that the Trust's objectives will be achieved. Although the
Supreme Court has determined that Congress has the authority to subject interest
on bonds such as the Bonds in the Trust to regular federal income taxation,
existing law excludes such interest from regular federal income tax. Such
interest income may, however, be subject to the federal corporate alternative
minimum tax and to state and local taxes. (See "Description of Portfolio" in
this Part A for a description of those Bonds which pay interest income subject
to the federal individual alternative minimum tax.) In addition, capital gains
are subject to tax. (See "Tax Status" and "The Trust--Portfolio" in Part B of
this Prospectus.) The Sponsors are Reich & Tang Distributors L.P. and Gruntal &
Co., L.L.C. (sometimes referred to as the "Sponsor" or the "Sponsors"). The
value of the Units of the Trust will fluctuate with the value of the underlying
bonds.
Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 1996 (the "Evaluation
Date"), a summary of certain specific information regarding the Trust and
audited financial statements of the Trust, including the related portfolio, as
of the Evaluation Date. Part B of this Prospectus contains a general summary of
the Trust. Part A of this Prospectus may not be distributed unless accompanied
by Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
bonds (the "Bonds") issued by or on behalf of states, municipalities and public
authorities. All of the Bonds in the Trust were rated "A" or better by Standard
& Poor's Corporation or Moody's Investors Service, Inc. at the time originally
deposited in the Trust. For a discussion of the significance of such ratings see
"Description of Bond Ratings" in Part B of this Prospectus and for a list of
ratings on the Evaluation Date see the "Portfolio". Some of the Bonds in the
portfolio may be "Zero Coupon Bonds", which are original issue discount bonds
that provide for payment at maturity at par value, but do not provide for the
payment of any current interest.
Some of the Bonds in the portfolio may have been purchased at
an aggregate premium over par. Some of the Bonds in the Trust have been issued
111486.1
<PAGE>
with optional refunding or refinancing provisions ("Refunded Bonds") whereby the
issuer of the Bond has the right to call such Bond prior to its stated maturity
date (and other than pursuant to sinking fund provisions) and to issue new bonds
("Refunding Bonds") in order to finance the redemption. Issuers typically
utilize refunding calls in order to take advantage of lower interest rates in
the marketplace. Some of these Refunded Bonds may be called for redemption
pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby the proceeds
from the issue of the Refunding Bonds are typically invested in government
securities in escrow for the benefit of the holders of the Pre-Refunded Bonds
until the refunding call date. Usually, Pre-Refunded Bonds will bear a triple-A
rating because of this escrow. The issuers of Pre- Refunded Bonds must call such
Bonds on their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest income
with respect to them. For a list of those Bonds which are Pre-Refunded Bonds, if
any, as of the Evaluation Date, see "Notes to Financial Statements" in this Part
A. The payment of interest and preservation of capital are, of course, dependent
upon the continuing ability of the issuers of the Bonds to meet their
obligations.
Investment in the Trust should be made with an understanding
of the risks which an investment in long-term fixed rate obligations may entail,
including the risk that the value of the underlying portfolio will decline with
increases in interest rates, and that the value of Zero Coupon Bonds is subject
to greater fluctuations than coupon bonds in response to changes in interest
rates. A Trust designated as a long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/4854th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "The Trust--Organization" in Part B of this Prospectus.) The
Units being offered hereby are issued and outstanding Units which have been
purchased by the Sponsor in the secondary market.
PUBLIC OFFERING PRICE. The secondary market Public Offering
Price of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 4.6% of the
Public Offering Price, which is the same as 4.630% of the net amount invested in
Bonds per Unit. In addition, accrued interest to expected date of settlement is
added to the Public Offering Price. If Units had been purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $1,003.36
plus accrued interest of $11.22 under the monthly distribution plan, $16.75
under the semi-annual distribution plan and $16.74 under the annual distribution
plan, for a total of $1,014.58, $1,020.11 and $1,020.10, respectively. The
Public Offering Price per Unit can vary on a daily basis in accordance with
fluctuations in the aggregate bid price of the Bonds. (See the "Summary of
Essential Information" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing
the yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
A-2
111486.1
<PAGE>
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash
flow. Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the
Sponsor upon request.
DISTRIBUTIONS. Distributions of interest income, less
expenses, will be made by the Trust either monthly, semi-annually or annually
depending upon the plan of distribution applicable to the Unit purchased. A
purchaser of a Unit in the secondary market will initially receive distributions
in accordance with the plan selected by the prior owner of such Unit and may
thereafter change the plan as provided in "Interest and Principal Distributions"
in Part B of this Prospectus. Distributions of principal, if any, will be made
semi-annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsors, although not obligated to do
so, presently maintain and intend to continue to maintain a market for the Units
at prices based upon the aggregate bid price of the Bonds in the portfolio of
the Trust. The Secondary Market repurchase price is based on the aggregate bid
price of the Bonds in the Trust portfolio, and the reoffer price is based on the
aggregate bid price of the Bonds plus a sales charge of 4.6% of the Public
Offering Price (4.630% of the net amount invested) plus net accrued interest. If
such a market is not maintained, a Certificateholder will be able to redeem his
or her Units with the Trustee at a price also based upon the aggregate bid price
of the Bonds. (See "Sponsor Repurchase" and "Public Offering--Offering Price" in
Part B of this Prospectus.)
A-3
111486.1
<PAGE>
TOTAL REINVESTMENT PLAN. Certificateholders under the
semi-annual and annual plans of distribution have the opportunity to have their
interest distributions and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" and for residents of Texas,
see "Total Reinvestment Plan for Texas Residents" in Part B of this Prospectus.)
The Plan is not designed to be a complete investment program.
A-4
111486.1
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL SECURITIES TRUST
SERIES 51
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1996
<S> <C> <C>
Date of Deposit: June 5, 1991 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,570,000 $1.00 per Unit.
Number of Units ............. 4,854 Weighted Average Life to Maturity:
Fractional Undivided Inter- 13.6 Years.
est in Trust per Unit ..... 1/4854 Minimum Value of Trust: Trust may
Principal Amount of be terminated if value of Trust
Bonds per Unit ............ $941.49 is less than $2,000,000 in
Secondary Market Public principal amount of Bonds.
Offering Price** Mandatory Termination Date: The
Aggregate Bid Price earlier of December 31, 2040 or
of Bonds in Trust ....... $4,654,785+++ the disposition of the last Bond
Divided by 4,854 Units .... $958.96 in the Trust.
Plus Sales Charge of 4.6% Trustee***: The Chase Manhattan
of Public Offering Price $44.40 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $1,003.36+ plan $.96 per $1,000; semi-
Redemption and Sponsors' annual plan $.50 per $1,000; and
Repurchase Price annual plan is $.32 per $1,000.
per Unit .................. $958.96+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $7.50
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsors' Repurchase (treating separate maturities as
Price per Unit ............ $44.40++++ separate issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal &
and Principal Amount per Co., L.L.C.
Unit Premium/(Discount) ... $61.87 Sponsors' Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal amount
New York Time. of Bonds (see "Trust Expenses
and Charges" in Part B of this
Prospectus).
</TABLE>
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $67.30 $67.30 $67.30
Less estimated annual fees and
expenses ............................ 1.93 1.44 1.50
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $65.37 $65.86 $65.80
Estimated interest distribution# ...... 5.44 32.93 65.80
Estimated daily interest accrual# ..... .1815 .1829 .1827
Estimated current return+## ........... 6.51% 6.56% 6.56%
Estimated long term return++ .......... 4.05% 4.10% 4.10%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
111486.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of December 31, 1996 are reported in
the summary of essential information as if they had been distributed at
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately
three business days after purchase) of $11.22 monthly, $16.75
semi-annually and $16.74 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
<TABLE>
<CAPTION>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994 5,000 $1,008.30 $71.28 $71.90 $72.11 $ -0-
December 31, 1995 5,000 1,059.32 71.91 72.52 72.60 -0-
December 31, 1996 4,854 975.13 66.49 67.04 66.96 63.40
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
111486.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 11 issues representing
obligations of issuers located in 5 states. The Sponsors have not participated
as a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the Bonds
were acquired. Approximately 16.4% of the Bonds are obligations of state and
local housing authorities; approximately 31.7%+ are hospital revenue bonds;
approximately 4.4% are issued in connection with the financing of nuclear
generating facilities; and none are "mortgage subsidy" bonds. All of the Bonds
in the Trust are subject to redemption prior to their stated maturity dates
pursuant to sinking fund or optional call provisions. The Bonds may also be
subject to other calls, which may be permitted or required by events which
cannot be predicted (such as destruction, condemnation, termination of a
contract, or receipt of excess or unanticipated revenues). None of the Bonds are
general obligation bonds. Eleven issues representing $4,570,000 of the principal
amount of the Bonds are payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. The
portfolio is divided for purpose of issue as follows: Capital Improvement 1,
Federally Assisted Housing 1, Hospital 3, Nuclear Power 1, Pollution Control 1,
Single Family Mortgage Revenue 1, Special Obligation 1 and University 2. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of December 31, 1996, $1,200,000 (approximately 26.2% of
the aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds $250,000 (approximately 5.5% of the
aggregate principal amount of the Bonds) are Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 9.2% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 64.6% were purchased at a premium and
none were purchased at par. For an explanation of the significance of these
factors see "Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From January 1, 1997 to March 21,
1997, $25,000 of the principal amount of the Bond in portfolio no. 8
was called and is no longer contained in the Trust.
+ A trust is considered to be "concentrated" in a particular category or
industry when the securities in that category or industry constitute
25% or more of the aggregate face amount of the portfolio. See Part B
for disclosure, including risk factors, regarding this concentration.
A-7
111486.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Municipal Securities Trust, Series 51
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Securities Trust, Series
51 (the "Trust") at December 31, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at December
31, 1996 by correspondence with the Trustee, provides a reasonable basis for the
opinion expressed above. The financial statements for the prior periods
presented were audited by other independent accountants whose report dated March
31, 1996 expressed an unqualified opinion on those financial statements.
PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110
March 28, 1997
<PAGE>
<TABLE>
<CAPTION>
Municipal Securities Trust, Series 51
Portfolio
December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 Tampa Fla. Cap. Imprvmnt. Prog. Rev. BBB 8.375% 10/01/03 @ 100 S.F. $ 527,705
Bonds Series 1988B 10/01/2018 10/01/98 @ 100 Ref.
2 500,000 Ill. Hlth. Facs. Auth. Rev. Rfndg. Bonds A 6.750 11/01/01 @ 100 S.F. 504,245
(Riverside Med. Cntr.) Series 1989A 11/01/2015 11/01/99 @ 100 Ref.
3 450,000 Mass. Hlth. & Ed. Facs. Auth. Rev. A* 7.250 7/01/02 @ 100 S.F. 491,459
Bonds Charlton Mem. Hosp. Issue 7/01/2007 7/01/01 @ 102 Ref.
Series B
4 500,000 Mass Hsg. Finc. Agncy. Sngle. Fam. Aa* 7.350 6/01/04 @ 100 S.F. 529,915
Hsg. Rev. Bonds Series 18 12/01/2016 6/01/01 @ 102 Ref.
5 455,000 N.Y. State Dorm. Auth. State Univ. Ed. Aaa* 7.700 5/15/06 @ 100 S.F. 511,543
Facs. Rev. Bonds Series 1990A 5/15/2012 5/15/00 @ 102 Ref.
6 500,000 N.Y. State Dorm Auth. City Univ. Baa1* 8.125 7/01/01 @ 100 S.F. 535,970
Rfndg. Rev. Bonds 1988A Issue 7/01/2007 7/01/98 @ 102 Ref.
7 415,000 N.Y. State Urban Dev. Corp. State Facs. Aaa* 7.500 4/01/12 @ 100 S.F. 471,751
Rev. Bonds Series 1991 4/01/2020 4/01/01 @ 102 Ref.
8 500,000 Brazos Cnty. Tx. Hlth. Facs. Dev. Corp. NR 7.750 1/01/02 @ 100 S.F. 541,895
Franciscan Servs. Corp. Rev. Bonds (St. 1/01/2019 1/01/99 @ 102 Ref.
Joseph Hosp. & Hlth. Cntr. of Bryan
Tx.) Series 1989
9 200,000 Matagorda Cnty. Tx. Navgtion. Dstrct. A 7.500 No Sinking Fund 220,656
No. One Colltzd. Poll. Cntrl. Rev. Bonds 12/15/2014 12/15/99 @ 103 Ref.
(Central Pwr. & Lt. Co. Prjt.) Series 1984A
10 300,000 Matagorda Cnty. Tx Navgtion. Dstrct. A- 7.700 No Sinking Fund 313,554
No. One Colltzd. Rev. Rfndg. Bonds 2/01/2019 2/01/98 @ 102 Ref.
(Houston Ltg. & Pwr. Co. Prjt.)
Series 1989B
11 250,000 Ill. Hsg. Dev. Auth. Multi-Fam. Hsg. A+ 0.000 7/01/06 @ 13.676 S.F. 13,900
Rev. Bonds 1983 Series A 7/01/2025 None
---------- -------------
$4,570,000 Total Investments (Cost $4,379,540) $ 4,662,593
========== =============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Municipal Securities Trust, Series 51
Footnotes to Portfolio
- -------------------------------------------------------------------------------
1. All ratings are by Kenny S&P Evaluation Services, a business unit of J.J.
Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies, Inc.,
except for those identified by an asterisk (*) which are by Moody's
Investors Service, Inc. A brief description of the ratings symbols and
their meaning is set forth under "Description of Bond Ratings" in Part B of
the Prospectus.
2. See "The Trust - Portfolio" in Part B of the Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of the Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
3. At December 31, 1996, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 289,154
Gross unrealized depreciation (6,101)
-------------
Net unrealized appreciation $ 283,053
=============
4. The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 51
Statement of Net Assets
December 31, 1996
Investments in Securities,
at Market Value (Cost $4,379,540) $ 4,662,593
--------------
Other Assets
Accrued Interest 97,708
--------------
Total Other Assets 97,708
--------------
Liabilities
Accrued Expenses 1,175
Advance from Trustee 25,861
--------------
Total Liabilities 27,036
--------------
Excess of Other Assets over Total Liabilities 70,672
--------------
Net Assets (4,854 Units of Fractional Undivided
Interest Outstanding, $975.13 per Unit) $ 4,733,265
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Municipal Securities Trust, Series 51
Statement of Operations
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 334,815 $ 366,954 $ 367,846
----------- ----------- ----------
Expenses
Trustee's Fees 5,665 5,717 5,772
Evaluator's Fees 2,200 2,000 2,386
Sponser's Advisory Fee 1,175 1,250 1,250
----------- ----------- ----------
Total Expenses 9,040 8,967 9,408
----------- ----------- ----------
Net Investment Income 325,775 357,987 358,438
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments 17,325 (24,240) ----
Change in Unrealized Appreciation
(Depreciation) on Investments (118,384) 282,182 (444,724)
----------- ----------- ----------
Net Gain (Loss) on Investments (101,059) 257,942 (444,724)
----------- ----------- ----------
Net Increase (Decrease)
in Net Assets
Resulting From Operations $ 224,716 $ 615,929 $ (86,286)
=========== =========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Municipal Securities Trust, Series 51
Statement of Changes in Net Assets
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 325,775 $ 357,987 $ 358,438
Realized Gain (Loss)
on Investments 17,325 (24,240) ----
Change in Unrealized Appreciation
(Depreciation) on Investments (118,384) 282,182 (444,724)
------------ ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
From Operations 224,716 615,929 (86,286)
------------ ------------- -------------
Distributions to Certificateholders
Investment Income 325,820 360,807 357,759
Principal 316,692 ---- ----
Redemptions
Interest 4,372 ---- ----
Principal 141,184 ---- ----
------------ ------------- -------------
Total Distributions
and Redemptions 788,068 360,807 357,759
------------ ------------- -------------
Total Increase (Decrease) (563,352) 255,122 (444,045)
Net Assets
Beginning of Year 5,296,617 5,041,495 5,485,540
------------ ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $83,091, $87,508
and $90,328, Respectively) $ 4,733,265 $ 5,296,617 $ 5,041,495
============ ============= =============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Municipal Securities Trust, Series 51
Notes to Financial Statements
1. Organization
Municipal Securities Trust, Series 51 (the "Trust") was organized on June
5, 1991 by Bear, Stearns & Co. Inc. and Gruntal & Co., Incorporated under
the laws of the State of New York by a Trust Indenture and Agreement, and
is registered under the Investment Company Act of 1940. The Trust was
formed to preserve capital and to provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of the
unit investment trusts previously sponsored by Bear, Stearns & Co. Inc. As
successor Sponsor, Reich & Tang has assumed all of the obligations and
rights of Bear, Stearns & Co. Inc., the previous sponsor. Effective
September 2, 1995, United States Trust Company of New York was merged into
The Chase Manhattan Bank (the "Trustee"). Accordingly, Chase is the
successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual
amounts could differ from those estimates.
Interest Income
Interest income is recorded on the accrual basis. The discount on the
zero-coupon bonds is accreted by the interest method over the respective
lives of the bonds. The accretion of such discount is included in interest
income; however, it is not distributed until realized in cash upon maturity
or sale of the respective bonds.
Security Valuation
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost to
the Trust based on the offering prices for investments at that date. The
difference between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
<PAGE>
Municipal Securities Trust, Series 51
Notes to Financial Statements
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify for
the tax treatment applicable to Grantor Trusts under the Internal Revenue
Code. Under existing law, if the Trust so qualifies, it will not be subject
to federal income tax on net income and capital gains that are distributed
to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
The Trust Indenture and Agreement further requires that principal received
from the disposition of bonds, other than those bonds sold in connection
with the redemption of units, be distributed to Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. For the year ended December 31, 1996, 146 units were redeemed. No
units were redeemed during the years ended December 31, 1995 and 1994.
The Trust pays an annual fee for trustee services rendered by the Trustee
that ranges from $.32 to $.96 per $1,000 of outstanding investment
principal. In addition, a minimum fee of $7.50 is paid to a service bureau
for each portfolio valuation. A maximum fee of $.25 per $1,000 of
outstanding investment principal is paid to the Sponsor. For the year ended
December 31, 1996, the "Trustee's Fees" are comprised of Trustee fees of
$3,833 and other expenses of $1,832. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Municipal Securities Trust, Series 51
Notes to Financial Statements
5. Net Assets
At December 31, 1996, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 5,080,875
Less Initial Gross Underwriting Commission 248,963
---------------
4,831,912
Accumulated Cost of Securities Sold,
Matured or Called (459,078)
Net Unrealized Appreciation 283,053
Undistributed Net Investment Income 83,091
Undistributed Proceeds From Investments (5,713)
---------------
Total $ 4,733,265
===============
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering
price net of the applicable sales charge on 5,000 units of fractional
undivided interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $6,706.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it may
be affected by economic and political developments in the municipalities.
Certain debt obligations held by the Trust may be entitled to the benefit
of insurance, standby letters of credit or other guarantees of banks or
other financial institutions.
<PAGE>
Municipal Securities Trust, Series 51
Notes to Financial Statements
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
December 31, 1996:
Net Asset Value, Beginning of Year** $ 1,059.32
---------------
Interest Income 67.96
Expenses (1.83)
---------------
Net Investment Income 66.13
---------------
Net Gain or Loss on Investments(1) (19.02)
---------------
Total from Investment Operations 47.11
---------------
Less Distributions
to Certificateholders
Income 66.13
Principal 64.28
for Redemptions
Interest .89
---------------
Total Distributions 131.30
---------------
Net Asset Value, End of Year** $ 975.13
===============
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years ended
December 31, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding units
since January 1, 1996 and the dates of net gain and loss on investments.
- --------------
* Unless otherwise stated, based upon average units outstanding during
the year of 4,927 ([4,854 + 5,000]/2).
** Based upon actual units outstanding.
Note: Part B of This Prospectus May Not Be
Distributed Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus for Future Reference.
MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: April 30, 1997
THE TRUST
ORGANIZATION. "Municipal Securities Trust" (the "Trust")
consists of the "unit investment trusts" designated as set forth in Part A.* The
Trust was created under the laws of the State of New York pursuant to the Trust
Indenture and Agreements** (collectively, the "Trust Agreement"), dated the Date
of Deposit, among Reich & Tang Distributors L.P., or depending on the particular
Trust, among Reich & Tang Distributors L.P. and Gruntal & Co., L.L.C., as
Co-Sponsors (the Sponsors or Co-Sponsors, if applicable, are referred to herein
as the "Sponsor"), Kenny S&P Evaluation Services, a business unit of J.J. Kenny
Company, Inc., a subsidiary of The McGraw-Hill Companies, as Evaluator, and,
depending on the particular Trust, either The Bank of New York or The Chase
Manhattan Bank, as Trustee. The name of the Sponsor and the Trustee for a
particular Trust is contained in the "Summary of Essential Information" in Part
A.
On the Date of Deposit the Sponsor deposited with the Trustee
long-term bonds and/or delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds") and cash or an irrevocable letter
of credit issued by a major commercial bank in the amount required for such
purchases. Thereafter, the Trustee, in exchange for the Bonds so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all Units
of the Trust.
The Trust consists of the bonds described under "The Trust" in
Part A of this Prospectus, the interest (including, where applicable earned
original discount) on which, in the opinions of bond counsel to the respective
issuers given at the time of original delivery of the Bonds, is exempt from
regular federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the Trust
in the per Unit ratio set forth under "Summary of Essential Information" in Part
A. To the extent that any Units are redeemed by the Trustee, the fractional
undivided interest or pro rata share in the Trust represented by each unredeemed
Unit will increase, although the actual interest in the Trust represented by
such fraction will remain unchanged. Units will remain
- --------
* This Part B relates to the outstanding series of Municipal Securities
Trust or Municipal Securities Trust Discount Series as reflected in
Part A attached hereto.
** References in this Prospectus to the Trust Agreements are qualified in
their entirety by the respective Trust Indentures and Agreements which
are incorporated herein by reference.
1173.5
<PAGE>
outstanding until redeemed upon tender to the Trustee by Certificateholders,
which may include the Sponsor or until the termination of the Trust Agreement.
OBJECTIVES. The Trust, one of a series of similar but separate
unit investment trusts formed by the Sponsor, offers investors the opportunity
to participate in a portfolio of long-term tax-exempt bonds with a greater
diversification than they might be able to acquire themselves. The objectives of
the Trust are to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers given at the time of original delivery of the
Bonds, is, with certain exceptions, exempt from regular federal income tax under
existing law. Such interest income may, however, be subject to the federal
corporate alternative minimum tax and to state and local taxes. An investor will
realize taxable income upon maturity or early redemption of the market discount
bonds in a Trust portfolio and will realize, where applicable, tax-exempt income
to the extent of the earned portion of interest, including original issue
discount earned on the bonds in a Trust portfolio. Investors should be aware
that there is no assurance the Trust's objectives will be achieved as these
objectives are dependent on the continuing ability of the issuers of the Bonds
to meet their interest and principal payment requirements, on the continuing
satisfaction of the Bonds of the conditions required for the exemption of
interest thereon from regular federal income tax, and on the market value of the
Bonds, which can be affected by fluctuations in interest rates and other
factors.
Since disposition of Units prior to final liquidation of the
Trust may result in an investor receiving less than the amount paid for such
Units (see "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price"), the purchase of a Unit should be looked upon as a long-term
investment. Neither the Trust nor the Total Reinvestment Plan is designed to be
a complete investment program.
PORTFOLIO. All of the Bonds in the Trust were rated "A" or
better by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies ("Standard & Poor's") or Moody's Investors Service, Inc. ("Moody's")
at the time originally deposited in the Trust. For a list of the ratings of each
Bond on the Evaluation Date, see "Portfolio" in Part A.
For information regarding (i) the number of issues in the
Trust, (ii) the range of fixed maturities of the Bonds, (iii) the number of
issues payable from the income of a specific project or authority and (iv) the
number of issues constituting general obligations of a government entity, see
"The Trust" and "Portfolio" in Part A.
When selecting Bonds for the Trust, the following factors,
among others, were considered by the Sponsor on the Date of Deposit: (a) the
quality of the Bonds and whether such Bonds were rated "A" or better by either
Standard & Poor's or Moody's, (b) the yield and price of the Bonds relative to
other tax-exempt securities of comparable quality and maturity, (c) income to
the Certificateholders of the Trust and (d) the diversification of the Trust
portfolio, as to purpose of issue and location of issuer, taking into account
the availability in the market of issues which meet the Trust's quality, rating,
yield and price criteria. Subsequent to the Evaluation Date, a Bond may cease to
be rated or its rating may be reduced below that specified above. Neither event
requires an elimination of such Bond from a Trust but may be considered in the
Sponsor's determination to direct the Trustee to dispose of the Bond. See
"Portfolio Supervision". For an interpretation of the bond ratings see
"Description of Bond Ratings".
Housing Bonds: Some of the aggregate principal amount of the
Bonds may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to rental housing projects
-2-
1173.5
<PAGE>
for low to moderate income families. Since such obligations are usually not
general obligations of a particular state or municipality and are generally
payable primarily or solely from rents and other fees, adverse economic
developments including failure or inability to increase rentals, fluctuations of
interest rates and increasing construction and operating costs may reduce
revenues available to pay existing obligations. See "Description of Portfolio"
in Part A for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds: Some of the aggregate principal amount
of the Bonds may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary considerably
from such projections. A hospital's gross receipts and net income will be
affected by future events and conditions including, among other things, demand
for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
third-party payors and government programs such as Medicare and Medicaid. Both
private third-party payors and government programs have undertaken cost
containment measures designed to limit payments. 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 health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could result
in (i) an early redemption of bonds, (ii) alteration of the facilities financed
by the Bonds or which secure the Bonds, (iii) a change in the tax exempt status
of the Bonds or (iv) an inability to produce revenues sufficient to make timely
payment of debt service on the Bonds. Future legislation or changes in the areas
noted above, among other things, would affect all hospitals to varying degrees
and, accordingly, any adverse change in these areas may affect the ability of
such issuers to make payment of principal and interest on such bonds. See
"Description of Portfolio" in Part A for the amount of hospital revenue bonds
contained therein.
Nuclear Power Facility Bonds: Certain Bonds may have been
issued in connection with the financing of nuclear generating facilities. In
view of recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsor is unable to predict
whether any such actions or whether any such proposals or litigation, if enacted
or instituted, will have an adverse impact on the revenues available to pay the
debt service on the Bonds in the portfolio issued to finance such nuclear
projects. See "Description of Portfolio" in Part A for the amount of bonds
issued to finance nuclear generating facilities contained therein.
Mortgage Subsidy Bonds: Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
provided as a general rule that interest on "mortgage subsidy bonds" will not
-3-
1173.5
<PAGE>
be exempt from Federal income tax. An exception is provided for certain
"qualified mortgage bonds." Qualified mortgage bonds are bonds that are used to
finance owner-occupied residences and that meet numerous statutory requirements.
These requirements include certain residency, ownership, purchase price and
target area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions and (for bonds issued after December 31, 1984) certain information
reporting, certification, public hearing and policy statement requirements. In
the opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds" will
be exempt from Federal income tax when issued. See "Description of Portfolio" in
Part A for the amount of mortgage subsidy Bonds contained therein.
Mortgage Revenue Bonds: Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to residency,
ownership, purchase price and target area requirements, ceiling amounts for
state and local issuers, arbitrage restrictions, and certain information
reporting certification, and public hearing requirements. There can be no
assurance that additional federal legislation will not be introduced or that
existing legislation will not be further amended, revised, or enacted after
delivery of these Bonds or that certain required future actions will be taken by
the issuing governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion of the
Bonds proceeds are not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds"). See "Description of
Portfolio" in Part A for the amount of mortgage revenue bonds contained therein.
Private Activity Bonds: The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial Revenue
Bonds ("IRBs") if issued prior to 1987) which would be primarily of two types:
(1) Bonds for a publicly owned facility which a private entity may have a right
to use or manage to some degree, such as an airport, seaport facility or water
system and (2) facilities deemed owned or beneficially owned by a private entity
but which were financed with tax-exempt bonds of a public issuer, such as a
manufacturing facility or a pollution control facility. In the case of the first
type, bonds are generally payable from a designated source of revenues derived
from the facility and may further receive the benefit of the legal or moral
obligation of one or more political subdivisions or taxing jurisdictions. In
most cases of project financing of the first type, receipts or revenues of the
Issuer are derived from the project or the operator or from the unexpended
proceeds of the bonds. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which
are owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of the
project or corporate guarantor.
The private activity bonds in the Trust have generally been
issued under bond resolutions, agreements or trust indentures pursuant to which
the revenues and receipts payable under the issuer's arrangements with the users
or the corporate operator of a particular project have been assigned and pledged
to the holders of the private activity bonds. In certain cases a mortgage on the
underlying project has been assigned to the holders of the
-4-
1173.5
<PAGE>
private activity bonds or a trustee as additional security. In addition, private
activity bonds are frequently directly guaranteed by the corporate operator of
the project or by another affiliated company. See "Description of Portfolio" in
Part A for the amount of private activity bonds contained therein.
Litigation: Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In addition,
legislation to effect changes in public school financing has been introduced in
a number of states. The Sponsor is unable to predict the outcome of the pending
litigation and legislation in this area and what effect, if any, resulting
changes in the sources of funds, including proceeds from property taxes applied
to the support of public schools, may have on the school bonds in a Trust.
Legal Proceedings Involving the Trusts: The Sponsor has not
been notified or made aware of any litigation pending with respect to any Bonds
which might reasonably be expected to have a material adverse effect on a Trust.
Such litigation, as, for example, suits challenging the issuance of pollution
control revenue bonds under recently-enacted environmental protection statutes,
may affect the validity of such Bonds or the tax-free nature of the interest
thereon. At any time after the date of this Prospectus litigation may be
instituted on a variety of grounds with respect to any Bond in a Trust. The
Sponsor is unable to predict whether any such litigation may be instituted or,
if instituted, whether it might have a material adverse effect on a Trust.
Other Factors: The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 years after
the original issuance dates of such bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period. In
recent periods there have been increased redemptions of bonds, particularly
housing bonds, pursuant to such redemption provisions. In addition, the Bonds in
the Trusts are also subject to mandatory redemption in whole or in part at par
at any time that voluntary or involuntary prepayments of principal on the
underlying collateral are made to the trustee for such bonds or that the
collateral is sold by the bond issuer. Prepayments of principal tend to be
greater in periods of declining interest rates; it is possible that such
prepayments could be sufficient to cause a bond to be redeemed substantially
prior to its stated maturity date, earliest call date or sinking fund redemption
date.
The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as destruction,
condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the Sponsors are
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore, what
effect, if any, the applicable federal bankruptcy law provisions will have on
the Trusts.
The Trust may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if an issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
-5-
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<PAGE>
legal obligation of the state or municipality in question. See "Description of
Portfolio" and "The Trust" in Part A of this Prospectus for the amount of moral
obligations bonds contained in the Trust.
Certain of the Bonds in the Trust are subject to redemption
prior to their stated maturity dates pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund appropriated specifically toward
the retirement of a debt. A callable bond is one which is subject to redemption
or refunding prior to maturity at the option of the issuer. A refunding is a
method by which a bond is redeemed at or before maturity from the proceeds of a
new issue of bonds. In general, call provisions are more likely to be exercised
when the offering side evaluation of a bond is at a premium over par than when
it is at a discount from par. A listing of the sinking fund and call provisions,
if any, with respect to each of the Bonds is contained under "Portfolio" in Part
A of this Prospectus. Certificateholders will realize a gain or loss on the
early redemption of such Bonds, depending upon whether the price of such Bonds
is at a discount from or at a premium over par at the time Certificateholders
purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds. Because certain of the
Bonds from time to time may be redeemed or will mature in accordance with their
terms or may be sold under certain circumstances, no assurance can be given that
a Trust will retain its present size and composition for any length of time. The
proceeds from the sale of a Bond or the exercise of any redemption or call
provision will be distributed to Certificateholders on the next distribution
date, except to the extent such proceeds are applied to meet redemptions of
Units. See "Trustee Redemption".
Discount and Zero Coupon Bonds: Some of the Bonds in the
Municipal Discount Trust and Municipal Trust may contain original issue discount
bonds (see "Description of Portfolio" in the Part A). The original issue
discount, which is the difference between the initial purchase price of the
Bonds and the face value, is deemed to accrue on a daily basis and the accrued
portion will be treated as tax-exempt interest income for regular federal income
tax purposes. Upon sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable as capital gain.
(See "Tax Status".) The current value of an original issue discount bond
reflects the present value of its face amount at maturity. The market value
tends to increase more slowly in early years and in greater increments as the
Bonds approach maturity. Of these original issue discount bonds, a portion of
the aggregate principal amount of the Bonds in the Trust are Zero Coupon Bonds.
Zero Coupon Bonds do not provide for the payment of any current interest and
provide for payment at maturity at face value unless sooner sold or redeemed.
The market value of Zero Coupon Bonds is subject to greater fluctuation than
coupon bonds in response to changes in interest rates. Zero Coupon Bonds
generally are subject to redemption at compound accreted value based on par
value at maturity. Because the issuer is not obligated to make current interest
payments, Zero Coupon Bonds may be less likely to be redeemed than coupon bonds
issued at a similar interest rate.
Some of the Bonds in the Trust may have been purchased at a
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in the Trust were lower than the current market interest rates for
newly issued bonds of comparable rating and type. At the time of issuance the
discount bonds were for the most part issued at then current coupon interest
rates. The current returns (coupon interest income as a percentage of market
price) of discount bonds will be lower than the current returns of comparably
rated bonds of similar type newly issued at current interest rates because
discount bonds tend to increase in market value as they approach maturity and
the full principal amount becomes payable. A discount bond held to maturity
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<PAGE>
will have a larger portion of its total return in the form of capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. Gain on the disposition of a Bond purchased at a
market discount generally will be treated as ordinary income, rather than
capital gain, to the extent of accrued market discount. Discount bonds with a
longer term to maturity tend to have a higher current return and a lower current
market value than otherwise comparable bonds with a shorter term of maturity. If
interest rates rise, the value of discount bonds will decrease; and if interest
rates decline, the value of discount bonds will increase. The discount does not
necessarily indicate a lack of market confidence in the issuer.
PUBLIC OFFERING
OFFERING PRICE. The secondary market Public Offering Price per
Unit is computed by adding to the aggregate bid price of the Bonds in each Trust
divided by the number of Units outstanding, an amount based on the applicable
sales charge times such aggregate bid price of the Bonds in each Trust.
The method used by the Evaluator for computing the sales
charge for secondary market purchases shall be based upon the number of years
remaining to maturity of each bond in the portfolio. Bonds will be deemed to
mature on their stated maturity dates unless bonds have been called for
redemption, funds have been placed in escrow to redeem them on an earlier call
date or are subject to a "mandatory put," in which case the maturity will be
deemed to be such other date.
The table below sets forth the various sales charges based on
the length of maturity of each Bond:
As Percent of Public
Time to Maturity Offering Price
- ---------------- --------------
less than 6 months 0%
6 mos. to 1 year 1%
over 1 yr. to 2 yrs. 1 1/2%
over 2 yrs. to 4 yrs. 2 1/2%
over 4 yrs. to 8 yrs. 3 1/2%
over 8 yrs. to 15 yrs. 4 1/2%
over 15 years 5 1/2%
(see "Public Offering Price" in Part A for the applicable sales charge for the
Trust). A proportionate share of accrued interest on the Bonds to the expected
date of settlement for the Units is added to the Public Offering Price. Accrued
interest is the accumulated and unpaid interest on a Bond from the last day on
which interest was paid and is initially accounted for daily by the Trust at the
daily rate set forth under "Summary of Essential Information" in Part A. The
secondary market Public Offering Price can vary on a daily basis from the amount
stated in Part A in accordance with fluctuations in the prices of the Bonds. The
price to be paid by each investor will be computed on the basis of an evaluation
made on the day the Units are purchased. The aggregate bid price evaluation of
the Bonds is determined in the manner set forth under "Trustee Redemption".
The Evaluator may obtain current prices for the Bonds from
investment dealers or brokers (including the Sponsor) that customarily deal in
tax-exempt obligations or from any other reporting service or source of
information which the Evaluator deems appropriate.
-7-
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<PAGE>
ACCRUED INTEREST. An amount of accrued interest which
represents accumulated unpaid or uncollected interest on a Bond from the last
day on which interest was paid thereon will be added to the Public Offering
Price and paid by the Certificateholder at the time the Units are purchased.
Since the Trust normally receives the interest on Bonds twice a year and the
interest on the Bonds in the Trust is accrued on a daily basis, the Trust will
always have an amount of interest accrued but not actually received and
distributed to Certificateholders. A Certificateholder will not recover his
proportionate share of accrued interest until the Units are sold or redeemed, or
the Trust is terminated. At that time, the Certificateholder will receive his
proportionate share of the accrued interest computed to the settlement date in
the case of a sale or termination and to the date of tender in the case of
redemption.
EMPLOYEE DISCOUNTS. Employees (and their immediate families)
of Reich & Tang Distributors L.P. and its affiliates, Gruntal & Co. L.L.C. and
of any underwriter of a Trust, pursuant to employee benefit arrangements, may
purchase Units of a Trust at a price equal to the bid side evaluation of the
underlying securities in the Trust divided by the number of Units outstanding
plus a reduced sales charge. Such arrangements result in less selling effort and
selling expenses than sales to employee groups of other companies. Resales or
transfers of Units purchased under the employee benefit arrangements may only be
made through the Sponsor's secondary market, so long as it is being maintained.
DISTRIBUTION OF UNITS. Certain banks and thrifts will make
Units of the Trust available to their customers on an agency basis. A portion of
the sales charge paid by their customers is retained by or remitted to the
banks. Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have indicated that these particular agency
transactions are permitted under such Act. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law.
The Sponsor intends to qualify the Units for sale in
substantially all States through dealers who are members of the National
Association of Securities Dealers, Inc. Units may be sold to dealers at prices
which represent a concession of up to (a) 4% of the Public Offering Price for
the Municipal Securities Trust Series or (b) $25.00 per unit for the Municipal
Securities Trust Discount Series, subject to the Sponsor's right to change the
dealers' concession from time to time. Such Units may then be distributed to the
public by the dealers at the Public Offering Price then in effect. In addition,
for transactions of 1,000,000 Units or more, the Sponsor intends to negotiate
the applicable sales charge and such charge will be disclosed to any such
purchaser. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units. The Sponsor reserves the right to change the
discounts from time to time.
SPONSOR'S PROFITS. The Sponsor will receive a gross commission
on all Units sold in the secondary market equal to the applicable sales charge
on each transaction. (See "Offering Price".) In addition, in maintaining a
market for the Units (see "Sponsor Repurchase"), the Sponsor will realize
profits or sustain losses in the amount of any difference between the price at
which it buys Units and the price at which it resells such Units.
Participants in the "Total Reinvestment Plan" can designate a
broker as the recipient of a dealer concession. See "Total Reinvestment
Plan".
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COMPARISON OF PUBLIC OFFERING PRICE, SPONSOR'S REPURCHASE
PRICE AND REDEMPTION PRICE. The secondary market Public Offering Price of Units
will be determined on the basis of the current bid prices of the Bonds in the
Trust, plus the applicable sales charge. The value at which Units may be resold
in the secondary market or redeemed will be determined on the basis of the
current bid prices of such Bonds without any sales charge. On the Evaluation
Date, the Public Offering Price per Unit (based on the bid prices of the Bonds
in the Trust plus the sales charge) exceeded the Repurchase and Redemption Price
per Unit (based upon the bid prices of the Bonds in the Trust without the sales
charge) by the amount shown under "Summary of Essential Information" in Part A
of this Prospectus. For this reason, among others (including fluctuations in the
market prices of Bonds and the fact that the Public Offering Price includes the
applicable sales charge), the amount realized by a Certificateholder upon any
redemption or repurchase of Units may be less than the price paid for such
Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing the
average yield for the portfolio of each Trust in order to reflect estimated fees
and expenses of that Trust and the maximum sales charge paid by
Certificateholders. The resulting Estimated Long Term Return represents a
measure of the return to Certificateholders earned over the estimated life of
each Trust. The Estimated Long Term Return as of the day prior to the Evaluation
Date is stated for each Trust under "Summary of Essential Information" in Part
A.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of each Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current interest
rates on newly issued bonds of a similar type with comparable rating, the
Estimated Current Return per Unit may be affected adversely if such Bonds are
redeemed prior to their maturity. On the day prior to the Evaluation Date, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for each Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each
Trust will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to each Trust and with the redemption, maturity, sale or
other disposition of the Bonds in each Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future.
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A schedule of cash flow projections is available from the
Sponsors upon request.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. Ownership of Units of the Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor. Certificates
may be issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been selected
by the Certificateholder. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and/or accompanied by a written
instrument or instruments of transfer. Although no such charge is presently made
or contemplated, the Trustee may require a Certificateholder to pay $2.00 for
each Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Interest received by the
Trust is credited by the Trustee to an Interest Account and a deduction is made
to reimburse the Trustee without interest for any amounts previously advanced.
Proceeds representing principal received from the maturity, redemption, sale or
other disposition of the Bonds are credited to a Principal Account.
Distributions to each Certificateholder from the Interest
Account are computed as of the close of business on each Record Date for the
following Payment Date and consist of an amount substantially equal to
one-twelfth, one-half or all of each Certificateholder's pro rata share of the
Estimated Net Annual Interest Income in the Interest Account, depending upon the
applicable plan of distribution. Distributions from the Principal Account will
be computed as of each semi-annual Record Date, and will be made to the
Certificateholders on or shortly after the next semi-annual Payment Date.
Proceeds representing principal received from the disposition of any of the
Bonds between a Record Date and a Payment Date which are not used for
redemptions of Units will be held in the Principal Account and not distributed
until the second succeeding semi-annual Payment Date. No distributions will be
made to Certificateholders electing to participate in the Total Reinvestment
Plan, except as provided thereunder. Persons who purchase Units between a Record
Date and a Payment Date will receive their first distribution on the second
Payment Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date. For
the purpose of minimizing fluctuations in the distributions from the Interest
Account, the Trustee will advance sufficient funds, without interest, as may be
necessary to provide interest distributions of approximately equal amounts. All
funds in respect of the Bonds received and held by the Trustee prior to
distribution to Certificateholders may be of benefit to the Trustee and do not
bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct
from the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Trust
(as determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time
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as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Interest and Principal
Accounts such amounts as may be necessary to cover redemptions of Units by the
Trustee.
The estimated monthly, semi-annual or annual interest
distribution per Unit will be in the amount shown under Summary of Essential
Information and will change and may be reduced as bonds mature or are redeemed,
exchanged or sold, or as expenses of the Trust fluctuate. No distribution need
be made from the Principal Account until the balance therein is an amount
sufficient to distribute $1.00 per Unit.
DISTRIBUTION ELECTIONS. Interest is distributed monthly,
semi-annually or annually, depending upon the distribution plan applicable to
the Unit purchased. Record Dates are the first day of each month for monthly
distributions, the first day of each June and December for semi-annual
distributions and the first day of each December for annual distributions.
Payment Dates will be the fifteenth day of each month following the respective
Record Dates. Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Every October each Certificateholder may change his distribution election
by notifying the Trustee in writing of such change between October 1 and
November 1 of each year. (Certificateholders deciding to change their election
should contact the Trustee by calling the number listed on the back cover hereof
for information regarding the procedures that must be followed in connection
with this written notification of the change of election.) Failure to notify the
Trustee on or before November 1 of each year will result in a continuation of
the plan for the following 12 months.
RECORDS. The Trustee shall furnish Certificateholders in
connection with each distribution a statement of the amount of interest, if any,
and the amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year (normally prior to January 31 of the succeeding year), the
Trustee will furnish to each person who at any time during the calendar year was
a Certificateholder of record, a statement showing (a) as to the Interest
Account: interest received (including any earned original issue discount and
amounts representing interest received upon any disposition of Bonds), amounts
paid for redemptions of Units, if any, deductions for applicable taxes and fees
and expenses of the Trust, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (b) as to the Principal Account: the dates of
disposition of any Bonds and the net proceeds received therefrom (including any
unearned original issue discount but excluding any portion representing accrued
interest), deductions for payments of applicable taxes and fees and expenses of
the Trust, amounts paid for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each
Unit outstanding on the last business day of such calendar year; (c) a list of
the Bonds held and the number of Units outstanding on the last business day of
such calendar year; (d) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (e) amounts actually
distributed to Certificateholders during such calendar year from the Interest
and Principal Accounts, separately stated, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share of each Unit
outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by
Certificateholders at all reasonable times during usual business hours, books of
record and account of its transactions as Trustee, including records of the
names and
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addresses of Certificateholders, Certificates issued or held, a current list of
Bonds in the portfolio and a copy of the Trust Agreement.
TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax, but such interest may be subject to
the federal corporate alternative minimum tax and to state and local taxes.
Neither the Sponsor nor the Trustee nor their respective counsel have made any
review of the proceedings relating to the issuance of the Bonds or the bases for
such opinions, and express no opinion as to these matters, and neither the
Trustee nor the Sponsor nor their respective counsel have made an independent
examination or verification that the federal income tax status of the Bonds has
not been altered since the time of the original delivery of those opinions.
In rendering the opinion set forth below, counsel has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for
federal income tax purposes under the Internal Revenue Code of 1986
(the "Code"), and income received by the Trust that consists of
interest excludable from federal gross income under the Code will be
excludable from the federal gross income of the Certificateholders of
the Trust.
Each Certificateholder will be considered the owner of a pro
rata portion of the Trust under Section 676(a) of the Code. Thus, each
Certificateholder will be considered to have received his pro rata
share of Bond interest when it is received by the Trust, and the net
income distributable to Certificateholders that is exempt from federal
income tax when received by the Trust will constitute tax-exempt income
when received by the Certificateholders.
Gain (other than any earned original issue discount) realized
on a sale or redemption of the Bonds or on a sale of a Unit is,
however, includable in gross income for federal income tax purposes,
generally as capital gain, although gain on the disposition of a Bond
or a Unit purchased at a market discount generally will be treated as
ordinary income, rather than capital gain, to the extent of accrued
market discount. (It should be noted in this connection that such gain
does not include any amounts received in respect of accrued interest.)
Such gain may be long or short-term depending on the facts and
circumstances. Capital losses are deductible to the extent of capital
gains; in addition, up to $3,000 of capital losses of non-corporate
Certificateholders may be deducted against ordinary income. Capital
assets must be held for more than one year to qualify for long-term
capital gain treatment. Individuals who realize long-term capital gains
will be subject to a reduced maximum tax rate on such gain.
Each Certificateholder will realize taxable gain or loss when
the Trust disposes of a Bond (whether by sale, exchange, redemption or
payment at maturity), as if the Certificateholder had directly disposed
of his pro rata share of such Bond. The gain or loss is measured by the
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difference between (i) the tax cost of such pro rata share and (ii) the
amount received therefor. For this purpose, a Certificateholder's tax
cost for each Bond is determined by allocating the total tax cost of
each Unit among all of the Bonds held in the Trust (in accordance with
the portion of the Trust comprised by each Bond). In order to determine
the amount of taxable gain or loss, the Certificateholder's amount
received is similarly allocated at that time. The Certificateholder may
exclude from the amount received any amounts that represent accrued
interest or the earned portion of any original issue discount but may
not exclude amounts attributable to market discount. Thus, when a Bond
is disposed of by the Trust at a gain, taxable gain will equal the
difference between (i) the amount received and (ii) the amount paid
plus any original issue discount (limited, in the case of Bonds issued
after June 8, 1980, to the portion earned from the date of acquisition
to the date of disposition). Gain on the disposition of a Bond
purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market
discount. No deduction is allowed for the amortization of bond premium
on tax-exempt bonds such as the Bonds in computing regular federal
income tax.
Discount generally accrues based on the principle of
compounding of accrued interest, not on a straight-line or ratable
method, with the result that the amount of earned original issue
discount is less in the earlier years and more in the later years of a
bond term. The tax basis of a discount bond is increased by the amount
of accrued, tax-exempt original issue discount thus determined. This
method of calculation will produce higher capital gains (or lower
losses) to a Certificateholder, as compared to the results produced by
the straight-line method of accounting for original issue discount,
upon an early disposition of a Bond by the Trust or of a Unit by a
Certificateholder.
A Certificateholder may also realize taxable income or loss
when a Unit is sold or redeemed. The amount received is allocated among
all the Bonds in the Trust in the same manner as when the Trust
disposes of Bonds and the Certificateholder may exclude accrued
interest and the earned portion of any original issue discount (but not
amounts attributable to market discount). The return of a
Certificateholder's tax cost is otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross
income for taxpayers whose "modified adjusted gross income" combined
with a portion of their benefits exceeds a base amount. The base amount
is $25,000 for an individual, $32,000 for a married couple filing a
joint return and zero for married persons filing separate returns.
Interest on tax-exempt bonds is to be added to adjusted gross income
for purposes of computing the amount of benefits that are includable in
gross income and determining whether an individual's income exceeds the
base amount above which a portion of the benefits would be subject to
tax.
Corporate Certificateholders are required to include in
federal corporate alternative minimum taxable income 75 percent of the
amount by which the adjusted current earnings (which will include
tax-exempt interest) of the corporation exceeds alternative minimum
taxable income (determined without this item). In addition, in certain
cases, Subchapter S corporations with accumulated earnings and profits
from Subchapter C years will be subject to a minimum tax on excess
"passive investment income" which includes tax-exempt interest.
The Trust is not subject to the New York State Franchise Tax
on Business Corporations or the New York City General Corporation Tax.
For a Certificateholder who is a New York resident, however, a pro rata
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portion of all or part of the income of the Trust will be treated as
the income of the Certificateholder under the income tax laws of the
State and City of New York. Similar treatment may apply in other
states.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the income
tax laws of any state or political subdivision. In general, municipal bond
interest exempt from federal income tax is taxable income to residents of the
State or City of New York under the tax laws of those jurisdictions unless the
bonds are issued by the State of New York or one of its political subdivisions
or by the Commonwealth of Puerto Rico or one of its political subdivisions. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and instrumentalities,
must be included in calculating New York State and New York City entire net
income for purposes of computing New York State and New York City franchise
(income) tax. The laws of the several states and local taxing authorities vary
with respect to the taxation of such obligations and each Certificateholder is
advised to consult his own tax advisor as to the tax consequences of his
Certificates under state and local tax laws.
In the case of Bonds that are industrial revenue bonds
("IRBs") or certain types of private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on such
Bonds is exempt from regular federal income tax. However, interest on such Bonds
will not be exempt from regular federal income tax for any period during which
such Bonds are held by a "substantial user" of the facilities financed by the
proceeds of such Bonds or by a "related person" thereof within the meaning of
the Code. Therefore, interest on any such Bonds allocable to a Certificateholder
who is such a "substantial user" or "related person" thereof will not be
tax-exempt. Furthermore, in the case of Bonds that qualify for the "small issue"
exemption, the "small issue" exemption will not be available or will be lost if,
at any time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result
of other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current or
future owners or users of the facilities financed by the Bonds, the amount of
such persons' outstanding tax-exempt IRBs, or the facilities themselves, and no
assurance can be given that future events will not affect the tax-exempt status
of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for federal income tax purposes. In addition,
under rules used by the Internal Revenue Service for determining when borrowed
funds are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of Units. Also, in the case of certain financial institutions that acquire
Units, in general no deduction is allowed for interest expense allocable to such
Units.
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From time to time proposals have been introduced before
Congress to restrict or eliminate the federal income tax exemption for interest
on debt obligations similar to the Bonds in the Trust, and it can be expected
that similar proposals may be introduced in the future. In particular, Congress
may consider the adoption of some form of a "flat tax," which could have an
adverse impact on the value of tax-exempt bonds.
In South Carolina v. Baker, the U.S. Supreme Court held that
the federal government may constitutionally require states to register bonds
they issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the federal government to
regulate and control bonds such as the Bonds in the Trust and to tax interest on
such bonds in the future. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Bonds in the Trust in
accordance with Section 103 of the Code.
The opinions of bond counsel or special tax counsel to the
issuing governmental authorities to the effect that interest on the Bonds is
exempt from regular federal income tax may be limited to law existing at the
time the Bonds were issued, and may not apply to the extent that future changes
in law, regulations or interpretations affect such Bonds. Investors are advised
to consult their own tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
SPONSOR REPURCHASE. The Sponsor, although not obligated to do
so, intends to maintain a secondary market for the Units. The Sponsor's
secondary market repurchase price will be based on the aggregate bid price of
the Bonds in the Trust portfolio, determined by the Evaluator on a daily basis,
and will be the same as the redemption price. See "Trustee Redemption".
Certificateholders who wish to dispose of their Units should inquire of the
Sponsor prior to making a tender for redemption. The Sponsor may discontinue
repurchases of Units if the supply of Units exceeds demand, or for other
business reasons. The date of repurchase is deemed to be the date on which
Certificates representing Units are physically received in proper form by the
Sponsor, Reich & Tang Distributors L.P., 600 Fifth Avenue, New York, N.Y. 10020.
Units received after 4:00 P.M., New York Time, will be deemed to have been
repurchased on the next business day. In the event a market is not maintained
for the Units, a Certificateholder may be able to dispose of Units only by
tendering them to the Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsors, subject to change, to repurchase units on
the basis of a price higher than the bid prices of the bonds in the trust.
Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of this Trust,
although in all bond trusts, the purchase price of a unit depends primarily on
the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate bid price of
the Bonds in the Trust plus the applicable sales charge (see "Public Offering
Price" in Part A) plus net accrued interest. Any Units that are purchased by the
Sponsor in the secondary market also may be redeemed by the Sponsor if it
determines such redemption to be in its best interest.
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The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption. (See "Trustee Redemption".) For example, if in order to meet
redemptions of Units the Trustee must dispose of Bonds, and if such disposition
cannot be made by the redemption date (seven calendar days after tender), the
Sponsor may elect to purchase such Units. Such purchase shall be made by payment
to the Certificateholder not later than the close of business on the redemption
date of an amount equal to the Redemption Price on the date of tender.
TRUSTEE REDEMPTION. Units also may be tendered to the Trustee
for redemption at its corporate trust office as set forth in Part A of this
Prospectus, upon proper delivery of Certificates representing such Units and
payment of any relevant tax. At the present time there are no specific taxes
related to the redemption of Units. No redemption fee will be charged by the
Sponsor or the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be
delivered to the Trustee and must be properly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing satisfactory
indemnity, as in the case of lost, stolen or mutilated Certificates). Thus,
redemptions of Units cannot be effected until Certificates representing such
Units have been delivered by the person seeking redemption. (See
"Certificates".) Certificateholders must sign exactly as their names appear on
the faces of their Certificates. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
Within three business days following a tender for redemption,
the Certificateholder will be entitled to receive in cash an amount for each
Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time on the date of tender. The "date of tender" is deemed to be the
date on which Units are received by the Trustee, except that with respect to
Units received after the close of trading on the New York Stock Exchange, the
date of tender is the next day on which such Exchange is open for trading, and
such Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from
the Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn from
the Principal Account. The Trustee is empowered to sell Bonds in order to make
funds available for redemptions. Such sales, if required, could result in a sale
of Bonds by the Trustee at a loss. To the extent Bonds are sold, the size and
diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each
Unit in the Trust determined by the Trustee on the basis of (i) the cash on hand
in the Trust or moneys in the process of being collected, (ii) the value of the
Bonds in the Trust based on the bid prices of such Bonds and (iii) interest
accrued thereon, less (a) amounts representing taxes or other governmental
charges payable out of the Trust, (b) the accrued expenses of the Trust and (c)
cash allocated for the distribution to Certificateholders of record as of the
business day prior to the evaluation being made. The Evaluator may determine the
value of the Bonds in the Trust for purposes of redemption (1) on the basis of
current bid prices of the Bonds obtained from dealers or brokers who customarily
deal in bonds comparable to those held by the Trust, (2) on the basis of bid
prices for bonds comparable to any Bonds for which bid prices are not available,
(3) by determining the value of the Bonds by appraisal, or (4) by any
combination of the above.
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The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per Unit
for any period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual
and annual Certificateholders (except Texas residents*) may elect to have all
regular interest and principal distributions, if any, with respect to their
Units reinvested either in units of various series of "Municipal Securities
Trust" which will have been created shortly before each semi-annual or annual
Payment Date (a "Primary Series") or, if units of a Primary Series are not
available, in units of a previously formed series of the Trust which have been
repurchased by the Sponsor in the secondary market, including the units being
offered hereby (a "Secondary Series") (Primary Series and Secondary Series are
hereafter collectively referred to as "Available Series"). June 15 and December
15 of each year, in the case of semi-annual Certificateholders, and December 15
of each year in the case of annual Certificateholders, are the "Plan
Reinvestment Dates".
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor at a
price equal to the aggregate offering price per Unit of the bonds in the
Available Series portfolio during the initial offering of the Available Series
or at the aggregate bid price per Unit of the Available Series if its initial
offering has been completed, plus a sales charge equal to 3.627% of the net
amount invested in such bonds or 3-1/2% of the Reinvestment Price per Plan Unit,
plus accrued interest, divided by one hundred (the "Reinvestment Price per Plan
Unit"). All Plan Units will be sold at this reduced sales charge of 3-1/2% in
comparison to the regular sales charge levied on primary and secondary market
sales of units in any series of "Municipal Securities Trust". Participants in
the Plan will have the opportunity to designate, in the Authorization Form for
the Plan, the name of a broker to whom the Sponsor will allocate a sales
commission of 1-1/2% per Plan Unit, payable out of the 3-1/2%
- --------
* Texas residents may elect to participate in the "Total Reinvestment
Plan for Texas Residents" hereinafter described.
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sales charge. If no such designation is made, the Sponsor will retain the
sales commission.
Under the Plan, the entire amount of a participant's income
and principal distributions will be reinvested. For example, a Certificateholder
who is entitled to receive $130.50 interest income from the Trust would acquire
13.05 Plan Units assuming that the Reinvestment Price per Plan Unit, plus
accrued interest, was $10.
A semi-annual or annual Certificateholder may join the Plan at
the time he invests in Units of the Trust or any time thereafter by delivering
to the Trustee an Authorization Form which is available from brokers or the
Sponsor. In order that distributions may be reinvested on a particular Plan
Reinvestment Date, the Authorization Form must be received by the Trustee not
later than the 15th day of the month preceding such Date. Authorization Forms
not received in time for a particular Plan Reinvestment Date will be valid only
for the second succeeding Plan Reinvestment Date. Similarly, a participant may
withdraw from the Plan at any time by notifying the Trustee (see below).
However, if written confirmation of withdrawal is not given to the Trustee prior
to a particular distribution, the participant will be deemed to have elected to
participate in the Plan with respect to that particular distribution and his
withdrawal would become effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to Units
purchased of the Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased of the Trust) for each subsequent
distribution as long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from the Trust in
the opinion of the Sponsor, the authorization will be voided and participants
will be provided with both a notice of the material change and a new
Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan. The Sponsor
anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from
federal income tax, or the inclusion of bonds which were not rated "A" or better
by either Standard & Poor's Corporation or Moody's Investors Service, Inc. on
the date such bonds were initially deposited in the Available Series portfolio.
The Sponsor has the option at any time to use units of a
Secondary Series to fulfill the requirements of the Plan in the event units of a
Primary Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not declared
effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that the
quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered
on or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such Record Dates
are June 1 and December 1 of each year for semi-annual Certificateholders, and
December 1 of each year for annual Certificateholders. On each Record Date, the
Sponsor will send a current Prospectus relating to the Available Series being
offered for the next Plan Reinvestment Date along with a letter which reminds
each participant that Plan Units are being purchased for him as part of the Plan
unless he notifies the Trustee in writing by that Plan Reinvestment Date that he
no longer wishes to participate in the Plan. In the event a Primary Series has
not been declared effective in sufficient
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time to distribute a final Prospectus relating thereto and there is no Secondary
Series as to which a registration statement is currently effective, it is the
Sponsor's intention to suspend the Plan and distribute to each participant his
regular semi-annual or annual distribution. If the Plan is so suspended, it will
resume in effect with the next Plan Reinvestment Date assuming units of an
Available Series are then being offered.
To aid a participant who might desire to withdraw either from
the Plan or from a particular distribution, the Trustee has established a toll
free number (see below) for participants to use for notification of withdrawal,
which must be confirmed in writing prior to the Plan Reinvestment Date. Should
the Trustee be so notified, it will make the appropriate cash disbursement.
Unless the withdrawing participant specifically indicates in his written
confirmation that (a) he wishes to withdraw from the Plan for that particular
distribution only, or (b) he wishes to withdraw from the Plan for less than all
units of each series of "Municipal Securities Trust" which he might then own
(and specifically identifies which series are to continue in the Plan), he will
be deemed to have withdrawn completely from the Plan in all respects. Once a
participant withdraws completely, he will only be allowed to again participate
in the Plan by submitting a new Authorization Form. A sale or redemption of a
portion of a participant's Plan Units will not constitute a withdrawal from the
Plan with respect to the remaining Plan Units owned by such participant.
Unless a Certificateholder notifies the Trustee in writing to
the contrary, each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual
Certificateholder fail to have an annual distribution plan, such
Certificateholder will be deemed to have elected the semi-annual plan of
distribution, and to participate in the Plan with respect to distributions made
in connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash may
withdraw from the Plan with respect to such Plan Units and remain in the Plan
with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from the
Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor has maintained
and intends to continue to maintain a market for the Plan Units and continuously
to offer to purchase Plan Units at prices based upon the aggregate bid price of
the bonds in the Available Series portfolio, during the initial offering of the
Available Series, or at the aggregate bid price of the Bonds in the Available
Series if its initial offering has been completed. The Sponsor may discontinue
such purchases at any time. The aggregate bid price of the underlying bonds may
be expected to be less than the aggregate offering prices. In the event that a
market is not maintained for Plan Units, a participant desiring to dispose of
his Plan Units may be able to do so only by tendering such Plan Units to the
Trustee for redemption at the Redemption Price of full units in the Available
Series corresponding to such Plan Units, which is based upon the aggregate bid
price of the underlying bonds as described in the "Municipal Securities Trust"
Prospectus for the Available Series in question. If a participant wishes to
dispose of his Plan Units, he should inquire of the
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Sponsor as to current market prices prior to making a tender for redemption to
the Trustee.
Any participant may tender his Plan Units for redemption to
the Available Series trustee. Participants may redeem Plan Units by making a
written request to the Trustee, at the address listed in the "Summary of
Essential Information" in Part A on the Redemption Form supplied by the Trustee.
The redemption price per Plan Unit will be determined as set forth in the
"Municipal Securities Trust" Prospectus of the Available Series from which such
Plan Unit was purchased following receipt of the request and adjusted to reflect
the fact that it relates to a Plan Unit. There is no charge for the redemption
of Plan Units.
The Trust Agreement requires that the Trustee notify the
Sponsor of any tender of Plan Units for redemption. So long as the Sponsor is
maintaining a bid in the secondary market, the Sponsor will purchase any Plan
Units tendered to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such Plan
Units on the date of tender not later than the day on which such Plan Units
would otherwise have been redeemed by the Trustee.
Participants in the Plan will not receive individual
certificates for their Plan Units unless the amount of Plan Units accumulated
represents the principal amount of bonds originally underlying each Unit and, in
such case, a written request for certificates is made to the Trustee. All Plan
Units will be accounted for by the Trustee on a book entry system. Each time
Plan Units are purchased under the Plan, a participant will receive a
confirmation stating his cost, number of Units purchased and estimated current
return. Questions regarding a participant's statement should be directed to the
Trustee by calling the Trustee at the number listed in the "Summary of Essential
Information" in Part A.
All expenses relating to the operation of the Plan are borne
by the Sponsor. Both the Sponsor and the Trustee reserve the right to suspend,
modify or terminate the Plan at any time for any reason, including the right to
suspend the Plan if the Sponsor is unable or unwilling to establish a Primary
Series or is unable to provide Secondary Series units. All participants will
receive notice of any such suspension, modification or termination.
TOTAL REINVESTMENT PLAN FOR TEXAS RESIDENTS. Except as
specifically provided under this Section, and unless the context otherwise
requires, all provisions and definitions contained under the heading "Total
Reinvestment Plan" shall be applicable to the Total Reinvestment Plan for Texas
Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are
residents of Texas have the option prior to any semi-annual or annual
distribution to elect affirmatively to reinvest that distribution, including
both interest and principal, if any, in an Available Series.
A resident of Texas who is a semi-annual Certificateholder may
join the Texas Plan for any particular semi-annual or annual distribution by
delivering to the Trustee an Authorization Form For Texas Residents ("Texas
Authorization Form") specifically mentioning the date of the particular
semi-annual or annual distribution he wishes to reinvest. On or about each
semi-annual or annual Record Date, Texas Authorization Forms shall be sent by
the Trustee to every Certificateholder who is a resident of Texas. In the event
that the Sponsor suspends the Plan or the Texas Plan, no Texas Authorization
Forms shall be sent. In order that distributions may be reinvested on a
particular Plan Reinvestment Date, the Texas Authorization Form must be received
by the Trustee on or before such Date. Texas Authorization Forms not
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received in time for the Plan Reinvestment Date will be deemed void. A
participant who delivers a Texas Authorization Form to the Trustee may
thereafter withdraw said authorization by notifying the Trustee at its toll free
telephone number prior to a Plan Reinvestment Date. Such notification of a
withdrawal must be confirmed in writing prior to the Plan Reinvestment Date.
Under no circumstances shall a Texas Authorization Form be provided or accepted
by the Trustee which provides for the reinvestment of distributions for more
than one Plan Reinvestment Date.
On or about each semi-annual and annual Record Date, the
Sponsor will send a current Prospectus relating to the Available Series being
offered on the next Plan Reinvestment Date along with a letter incorporating a
Texas Authorization Form which specifies the funds available for reinvestment,
reminds each participant that no Plan Units will be purchased for him unless the
Texas Authorization Form is received by the Trustee on or before that particular
Plan Reinvestment Date, and states that the Texas Authorization Form is valid
only for that particular semi-annual or annual distribution. If the Available
Series should materially differ from the Trust, the participant will be provided
with a notice of the material change and a new Texas Authorization Form which
would have to be returned to the Trustee before the Certificateholder would
again be able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, with respect to such Units, but such
Certificateholder will not be deemed to participate in the Plan for any
particular distribution unless and until he delivers to the Trustee a Texas
Authorization Form pertaining to those Plan Units. (Should the Available Series
from which Plan Units are purchased for the account of an annual
Certificateholder fail to have an annual distribution plan, such
Certificateholder will be deemed to have elected the semi-annual plan of
distribution, and to participate in the Plan with respect to distributions made,
in connection with such Plan Units.)
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Sponsor may direct the Trustee to
dispose of Bonds upon (i) default in payment of principal or interest on such
Bonds, (ii) institution of certain legal proceedings with respect to the issuers
of such Bonds, (iii) default under other documents adversely affecting debt
service on such Bonds, (iv) default in payment of principal or interest on other
obligations of the same issuer or guarantor, (v) with respect to revenue Bonds,
decline in revenues and income of any facility or project below the estimated
levels calculated by proper officials charged with the construction or operation
of such facility or project or (vi) decline in price or the occurrence of other
market or credit factors which in the opinion of the Sponsor would make the
retention of such Bonds in the Trust detrimental to the interests of the
Certificateholders. If a default in the payment of principal or interest on any
of the Bonds occurs and if the Sponsor fails to instruct the Trustee to sell or
hold such Bonds, the Trust Agreement provides that the Trustee may sell such
Bonds.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Agreement to the same
extent as the Bonds originally deposited. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the bonds substituted therefor.
Except as stated, the acquisition by the Trust of any securities other than the
bonds initially deposited is prohibited.
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TRUST AGREEMENT, AMENDMENT AND TERMINATION. The Trust
Agreement may be amended by the Trustee, the Sponsor and the Evaluator without
the consent of any of the Certificateholders: (1) to cure any ambiguity or to
correct or supplement any provision which may be defective or inconsistent; (2)
to change any provision thereof as may be required by the Securities and
Exchange Commission or any successor governmental agency; or (3) to make such
other provisions in regard to matters arising thereunder as shall not adversely
affect the interests of the Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent of
the holders of Certificates evidencing 66-2/3% of the Units then outstanding,
for the purpose of modifying the rights of Certificateholders; provided that no
such amendment or waiver shall reduce any Certificateholder's interest in the
Trust without his consent or reduce the percentage of Units required to consent
to any such amendment or waiver without the consent of the holders of all
Certificates. The Trust Agreement may not be amended, without the consent of the
holders of all Certificates then outstanding, to increase the number of Units
issuable or to permit the acquisition of any bonds in addition to or in
substitution for those initially deposited in the Trust, except in accordance
with the provisions of the Trust Agreement. The Trustee shall promptly notify
Certificateholders, in writing, of the substance of any such amendment.
The Trust Agreement provides that the Trust shall terminate
upon the maturity, redemption or other disposition, as the case may be, of the
last of the Bonds held in the Trust but in no event is it to continue beyond the
end of the calendar year preceding the fiftieth anniversary of the execution of
the Trust Agreement. If the value of the Trust shall be less than the minimum
amount set forth under "Summary of Essential Information" in Part A, the Trustee
may, in its discretion, and shall, when so directed by the Sponsor, terminate
the Trust. The Trust may also be terminated at any time with the consent of the
holders of Certificates representing 100% of the Units then outstanding. In the
event of termination, written notice thereof will be sent by the Trustee to all
Certificateholders. Within a reasonable period after termination, the Trustee
must sell any Bonds remaining in the Trust, and, after paying all expenses and
charges incurred by the Trust, distribute to each Certificateholder, upon
surrender for cancellation of his Certificate for Units, his pro rata share of
the Interest and Principal Accounts.
THE SPONSOR. The Sponsor, Reich & Tang Distributors L.P.
("Reich & Tang") is engaged in the brokerage business and is a member of the
National Association of Securities Dealers, Inc. Reich & Tang is also a
registered investment adviser. Reich & Tang maintains its principal business
offices at 600 Fifth Avenue, New York, New York 10020. Reich & Tang Asset
Management L.P. ("RTAM LP"), a registered investment adviser, having its
principal place of business at 399 Boylston Street, Boston, MA 02116, is the 99%
limited partner of the Sponsor. RTAM LP is 99.5% owned by New England Investment
Companies, LP ("NEIC LP") and Reich & Tang Asset Management, Inc., a wholly
owned subsidiary of NEIC LP, owns the remaining .5% interest of RTAM LP and is
its general partner. NEIC LP's general partner is New England Investment
Companies, Inc. ("NEIC"), a holding company offering a broad array of investment
styles across a wide range of asset categories through eleven subsidiaries,
divisions and affiliates offering a wide array of investment styles and products
to institutional clients. These affiliates in the aggregate are investment
advisers or managers to over 54 registered investment companies. Reich & Tang is
the successor sponsor for numerous series of unit investment trusts, including,
New York Municipal Trust, Series 1 (and Subsequent Series), Municipal Securities
Trust, Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent
Series), Multi-State Series 1 (and Subsequent Series), Mortgage Securities
Trust, Series 1 (and Subsequent Series), Insured Municipal Securities Trust,
Series 1 (and Subsequent Series),
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5th Discount Series (and Subsequent Series), and Equity Securities Trust, Series
1, Signature Series, Gabelli Communications Income Trust (and Subsequent
Series). The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations.
On August 30, 1996, of New England Mutual Life Insurance
Company ("The New England") and Metropolitan Life Insurance Company ("MetLife")
merged, with MetLife being the continuing company. RTAM L.P. remains a
wholly-owned subsidiary of NEIC LP, but RTAM Inc., its sole general partner, is
now an indirect subsidiary of MetLife. Also, Metlife New England Holdings, Inc.,
a wholly-owned subsidiary of MetLife, owns 55% of the outstanding limited
partnership interest of NEIC L.P., also indirectly owns a majority of the
outstanding limited partnership interest of NEIC LP.
MetLife is a mutual life insurance company with assets of
$142.2 billion at March 31, 1996. It is the second largest life insurance
company in the United States in terms of total assets. MetLife provides a wide
range of insurance and investment products and services to individuals and
groups and is the leader among United States life insurance companies in terms
of total life insurance in force, which exceeded $1.2 trillion at March 31, 1996
for MetLife and its insurance affiliates. MetLife and its affiliates provide
insurance or other financial services to approximately 36 million people
worldwide.
For certain other Trusts as set forth in the "Summary of
Essential Information" in Part A, the Co-Sponsors are Reich & Tang and Gruntal &
Co. L.L.C., both of whom have entered into an Agreement among Co-Sponsors
pursuant to which both parties have agreed to act as Co-Sponsors for the Trust.
Reich & Tang has been appointed by Gruntal & Co. L.L.C. 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 Reich & Tang shall act as sole
Sponsor. If one of the Sponsors fails to perform its duties under the Trust
Agreement or becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, that Sponsors may be discharged under the
Trust Agreement and a new Sponsor(s) may be appointed or the remaining
Sponsor(s) may continue to act as Sponsors.
Gruntal & Co., L.L.C., a Delaware limited liability company,
operates a regional securities broker/dealer from its main office in New York
City and branch offices in nine states and the District of Columbia. The firm is
very active in the marketing of investment companies and has signed dealer
agreements with many mutual fund groups. Further, through its Syndicate
Department, Gruntal & Co., L.L.C. has underwritten a large number of Closed-End
Funds and has been Co-Manager on the following offerings: Cigna High Income
Shares; Dreyfus New York Municipal Income, Inc.; Franklin Principal Maturity
Trust and Van Kampen Merritt Limited Term High Income Trust.
The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for errors
in judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the
Trustee an instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any
of its duties under the Trust Agreement or becomes incapable of acting or
becomes
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bankrupt or its affairs are taken over by public authorities, then the Trustee
may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
THE TRUSTEE. The Trustee is The Chase Manhattan Bank with its
principal executive office located at 270 Park Avenue, New York, New York 10017
(800) 428-8890 and its unit investment trust office at 4 New York Plaza, New
York, New York 10004. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System.
For certain other Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is The Bank of New York, a trust
company organized under the laws of New York, having its offices at 101 Barclay
Street, New York, New York 10286. The Bank of New York is subject to supervision
and examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law. The
Trustee must be a banking corporation organized under the laws of the United
States or any state which is authorized under such laws to exercise corporate
trust powers and must have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000. The duties of the Trustee are
primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for
taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, Bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect of
the Bonds or the Trust which it may be required to pay under current or future
law of the United States or any other taxing authority having jurisdiction. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of
the Trustee under the Trust Agreement, see "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is obligated
to appoint a successor Trustee as soon as possible. In addition, if the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Trust Agreement. Notice of such removal and appointment shall
be mailed to each Certificateholder by the Sponsor. If upon resignation of the
Trustee no successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The resignation or
removal of the Trustee becomes effective only when the successor Trustee accepts
its appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon
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execution of a written acceptance of such appointment by such successor Trustee,
all the rights, powers, duties and obligations of the original Trustee shall
vest in the successor.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
THE EVALUATOR. The Evaluator is Kenny S&P Evaluation Services,
a business unit of J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill
Companies, with main offices located at 65 Broadway, New York, New York 10006.
The Evaluator is a registered investment advisor and also provides financial
information services.
The Trustee, the Sponsor and Certificateholders may rely on
any evaluation furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsor, or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and
the Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within thirty
days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933,
preparation and printing of the Certificates, legal and auditing expenses,
advertising and selling expenses, initial fees and expenses of the Trustee and
other out-of-pocket expenses. The fees of the Evaluator, however, incurred
during the initial public offering are paid directly by the Trustee.
The Sponsor will not charge the Trust a fee for its services
as such. See "Sponsor's Profits".
The Trustee will receive for its ordinary recurring services
to the Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust Agreement,
see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the
Bonds in the Trust, a fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of
the Record Date from the Interest Account to the extent funds are available and
then from the Principal Account. Both fees may be increased without approval
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of the Certificateholders by amounts not exceeding proportionate increases in
consumer prices for services as measured by the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel and auditing fees) of the Trustee
incurred and advances made in connection with its activities under the Trust
Agreement, including the expenses and costs of any action undertaken by the
Trustee to protect the Trust and the rights and interests of the
Certificateholders; fees of the Trustee for any extraordinary services performed
under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any loss,
liabilities and expenses incurred in acting as Sponsor of the Trust without
gross negligence, bad faith or willful misconduct on its part; and all taxes and
other governmental charges imposed upon the Bonds or any part of the Trust (no
such taxes or charges are being levied, made or, to the knowledge of the
Sponsor, contemplated). The above expenses, including the Trustee's fees, when
paid by or owing to the Trustee are secured by a first lien on the Trust. In
addition, the Trustee is empowered to sell Bonds in order to make funds
available to pay all expenses.
Unless the Sponsor otherwise directs, the accounts of the
Trust shall be audited not less than annually by independent public accountants
selected by the Sponsor. The expenses of the audit shall be an expense of the
Trust. So long as the Sponsor maintains a secondary market, the Sponsor will
bear any audit expense which exceeds $.50 per 1,000 Units. Certificateholders
covered by the audit during the year may receive a copy of the audited
financials upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
EXCHANGE PRIVILEGE. Certificateholders will be able to elect
to exchange any or all of their Units of this Trust for Units of one or more of
any available series of Equity Securities Trust, Insured Municipal Securities
Trust, Municipal Securities Trust, New York Municipal Trust or Mortgage
Securities Trust (the "Exchange Trusts") at a reduced sales charge as set forth
below. Under the Exchange Privilege, the Sponsor's repurchase price during the
initial offering period of the Units being surrendered will be based on the
market value of the Securities in the Trust portfolio or on the aggregate offer
price of the Bonds in the other Trust Portfolios; and, after the initial
offering period has been completed, will be based on the aggregate bid price of
the Bonds in the particular Trust portfolio. Units in an Exchange Trust then
will be sold to the Certificateholder at a price based on the aggregate offer
price of the Bonds in the Exchange Trust portfolio (or for units of Equity
Securities Trust, based on the market value of the underlying securities in the
Trust portfolio) during the initial public offering period of the Exchange
Trust; and after the initial public offering period has been completed, based on
the aggregate bid price of the Bonds in the Exchange Trust Portfolio if its
initial offering has been completed plus accrued interest (or for units of
Equity Securities Trust, based on the market value of the underlying securities
in the Trust portfolio) and a reduced sales charge as set forth below.
Except for Certificateholders who wish to exercise the
Exchange Privilege within the first five months of their purchase of Units of
the Trust, any purchaser who purchases Units under the Exchange Privilege will
pay a lower sales charge than that which would be paid for the Units by a new
investor. For Certificateholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of the Trust, the
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1173.5
<PAGE>
sales charge applicable to the purchase of units of an Exchange Trust shall be
the greater of (i) the reduced sales charge or (ii) an amount which when coupled
with the sales charge paid by the Certificateholder upon his original purchase
of Units of the Trust would equal the sales charge applicable in the direct
purchase of units of an Exchange Trust.
Exercise of the Exchange Privilege by Certificateholders is
subject to the following conditions (i) the Sponsor must be maintaining a
secondary market in the units of the available Exchange Trust, (ii) at the time
of the Certificateholder's election to participate in the Exchange Privilege,
there must be units of the Exchange Trust available for sale, either under the
initial primary distribution or in the Sponsor's secondary market, (iii)
exchanges will be effected in whole units only, (iv) Units of the Mortgage
Securities Trust may only be acquired in blocks of 1,000 Units and (v) Units of
the Equity Securities Trust may only be acquired in blocks of 100 Units.
Certificateholders will not be permitted to advance any funds in excess of their
redemption in order to complete the exchange. Any excess proceeds received from
a Certificateholder for exchange will be remitted to such Certificateholder.
The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege. The Sponsor will provide Certificateholders of the Trust
with 60 days' prior written notice of any termination or material amendment to
the Exchange Privilege, provided that, no notice need be given if (i) the only
material effect of an amendment is to reduce or eliminate the sales charge
payable at the time of the exchange, to add one or more series of the Trust
eligible for the Exchange Privilege or to delete a series which has been
terminated from eligibility for the Exchange Privilege, (ii) there is a
suspension of the redemption of units of an Exchange Trust under Section 22(e)
of the Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest amounts
effectively in accordance with its investment objectives, policies and
restrictions. During the 60-day notice period prior to the termination or
material amendment of the Exchange Privilege described above, the Sponsor will
continue to maintain a secondary market in the units of all Exchange Trusts that
could be acquired by the affected Certificateholders. Certificateholders may,
during this 60-day period, exercise the Exchange Privilege in accordance with
its terms then in effect.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If Units of
a designated, outstanding series of an Exchange Trust are at the time available
for sale and such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Exchange Trust in which he
indicates an interest. He may then select the Trust or Trusts into which he
desires to invest the proceeds from his sale of Units. The exchange transaction
will operate in a manner essentially identical to a secondary market transaction
except that units may be purchased at a reduced sales charge.
THE CONVERSION OFFER. Unit owners of any registered unit
investment trust for which there is no active secondary market in the units of
such trust (a "Redemption Trust") will be able to elect to redeem such units
and apply the proceeds of the redemption to the purchase of available Units of
one or more series of Municipal Securities Trust, Insured Municipal Securities
Trust, Mortgage Securities Trust, New York Municipal Trust or Equity
Securities Trust (the "Conversion Trusts") at the Public Offering Price for
units of the Conversion Trust based on a reduced sales charge as set forth
below. Under the Conversion Offer, units of the Redemption Trust must be
tendered to the trustee of such trust for redemption at the redemption price
determined as set forth in the relevant Redemption Trust's prospectus. The
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<PAGE>
purchase price of the units will be based on the aggregate offer price of the in
the Conversion Trust's portfolio securities during its initial offering period;
or, at a price based on the aggregate bid price of the underlying bonds if the
initial public offering of the Conversion Trust has been completed, plus accrued
interest and a sales charge as set forth below. If the participant elects to
purchase units of the Equity Securities Trust under the Conversion Offer, the
purchase price of the units will be based, at all times, on the market value of
the underlying securities in the Trust portfolio plus a sales charge.
Except for Certificateholders who wish to exercise the
Conversion Offer within the first five months of their purchase of units of a
Redemption Trust, any Certificateholder who purchases Units under the Conversion
Offer will pay a lower sales charge than that which would be paid for the Units
by a new investor. For Certificateholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of Redemption
Trust, the sales charge applicable to the purchase of Units of a Conversion
Trust shall be the greater of (i) the reduced sales charge or (ii) an amount
which when coupled with the sales charge paid by the Certificateholder upon his
original purchase of units of the Redemption Trust would equal the sales charge
applicable in the direct purchase of Units of a Conversion Trust.
The exercise of the Conversion Offer is subject to the
following limitations: (i) the Conversion Offer is limited only to unit owners
of any Redemption Trust, (ii) at the time of the unit owner's election to
participate in the Conversion Offer, there also must be available units of a
Conversion Trust, either under a primary distribution or in the Sponsor's
secondary market, (iii) exchanges under the Conversion Offer will be effected in
whole units only, (iv) units of the Mortgage Securities Trust may only be
acquired in blocks of 1,000 units, (v) units of the Equity Securities Trust may
only be acquired in blocks of 100 Units. Unit owners will not be permitted to
advance any new funds in order to complete an exchange under the Conversion
Offer. Any excess proceeds from units being redeemed will be returned to the
unit owner.
The Sponsor reserves the right to modify, suspend or terminate
the Conversion Offer. The Sponsor will provide Certificateholders with 60 days
prior written notice of any termination or material amendment to the Conversion
Offer, provided that, no notice need be given if (i) the only material effect of
an amendment is to reduce or eliminate the sales charge payable at the time of
the exchange, to add one or more series of the Trusts eligible for the
Conversion Offer, to add any new unit investment trust sponsored by Reich & Tang
or a sponsor controlled by or under common control with Reich & Tang, or to
delete a series which has been terminated from eligibility for the Conversion
Offer, (ii) there is a suspension of the redemption of units of a Conversion
Trust under Section 22(e) of the Act, or (iii) a Conversion Trust temporarily
delays or ceases the sale of its units because it is unable to invest amounts
effectively in accordance with its investment objectives, policies and
restrictions.
To exercise the Conversion Offer, a unit owner of a Redemption
Trust should notify his retail broker of his desire to redeem his Redemption
Trust Units and use the proceeds from the redemption to purchase Units of one or
more of the Conversion Trusts. If Units of a designated, outstanding series of a
Conversion Trust are at that time available for sale and if such Units may
lawfully be sold in the state in which the unit owner is a resident, the unit
owner will be provided with a current prospectus or prospectuses relating to
each Conversion Trust in which he indicates an interest. He then may select the
Trust or Trusts into which he decides to invest the proceeds from the sale of
his Units. The transaction will be handled entirely through the unit owner's
retail broker. The retail broker must tender the units to the trustee of the
Redemption Trust for redemption and then apply the proceeds
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<PAGE>
to the redemption toward the purchase of units of a Conversion Trust at a price
based on the aggregate offer or bid side evaluation per Unit of the Conversion
Trust, depending on which price is applicable, plus accrued interest and the
applicable sales charge. The certificates must be surrendered to the broker at
the time the redemption order is placed and the broker must specify to the
Sponsor that the purchase of Conversion Trust Units is being made pursuant to
the Conversion Offer. The unit owner's broker will be entitled to retain a
portion of the sales charge.
DESCRIPTION OF THE EXCHANGE TRUSTS AND THE CONVERSION TRUSTS.
Municipal Securities Trust and New York Municipal Trust may be appropriate
investment vehicles for an investor who is more interested in tax-exempt income.
The interest income from New York Municipal Trust is, in general, also exempt
from New York State and local New York income taxes, while the interest income
from Municipal Securities Trust is subject to applicable New York State and
local New York taxes, except for that portion of the income which is
attributable to New York obligations in the Trust portfolio, if any. The
interest income from each State Trust of the Municipal Securities Trust,
Multi-State Series is, in general, exempt from state and local taxes when held
by residents of the state where the issuers of bonds in such State Trusts are
located. The Insured Municipal Securities Trust combines the advantages of
providing interest income free from regular federal income tax under existing
law with the added safety of irrevocable insurance. Insured Navigator Series
further combines the advantages of providing interest income free from regular
federal income tax and state and local taxes when held by residents of the state
where issuers of bonds in such state trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high level
of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust offers
investors an opportunity to achieve capital appreciation together with a high
level of current income.
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION
OFFER. A surrender of units pursuant to the Exchange Privilege or the Conversion
Offer normally will constitute a "taxable event" to the Certificateholder under
the Code. The Certificateholder will recognize a tax gain or loss that will be
of a long or short-term capital or ordinary income nature depending on the
length of time the units have been held and other factors. A Certificateholder's
tax basis in the Units acquired pursuant to the Exchange Privilege or Conversion
Offer will be equal to the purchase price of such Units. Investors should
consult their own tax advisors as to the tax consequences to them of exchanging
or redeeming units and participating in the Exchange Privilege or Conversion
Offer.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units originally offered
and certain matters relating to federal tax law have been passed upon by Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022, or Berger Steingut
Tarnoff & Stern, 600 Madison Avenue, New York, New York 10022, as counsel for
the Sponsor. Carter, Ledyard & Milburn, Two Wall Street, New York, New York
10005 have acted as counsel for The Chase Manhattan Bank. On the initial date of
deposit, Booth & Baron acted as counsel for The Bank of New York.
INDEPENDENT ACCOUNTANTS. The financial statements of the
Trusts for the year ended December 31, 1996 included in Part A of this
Prospectus have been examined by Price Waterhouse LLP, independent accountants.
The financial statements have been so included in reliance on their report given
upon the authority of said firm as experts in accounting and auditing. KPMG Peat
Marwick LLP has consented to the incorporation by reference of their
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<PAGE>
report on the statements of operations and changes in net assets for the Trusts
included in Part A of this Prospectus for the periods ended December 31, 1994
and December 31, 1995, respectively.
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<PAGE>
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Ratings Services
A brief description of the applicable Standard & Poor's rating
symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's from other
sources it considers reliable. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
(1) Likelihood of default--capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance with
the terms of the obligation.
(2) Nature of and provisions of the obligation.
(3) Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "BB" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
- --------
* As described by the rating agencies.
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Provisional Ratings -- (Prov.) following a rating indicates
the rating is provisional, which assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to such
likelihood and risk.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's Investors
Service, Inc.'s rating symbols and their meanings is as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat larger
than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Those bonds in the A and Baa group which Moody's believes
possess the strongest investment attributes are designated by the symbol A 1 and
Baa 1. Other A bonds comprise the balance of the group. These rankings (1)
designate the bonds which offer the maximum in security within their quality
group, (2) designate bonds which can be bought for possible upgrading in quality
and (3) additionally afford the investor an opportunity to gauge more precisely
the relative attractiveness of offerings in the market place.
Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are debt obligations secured by (a) earnings of projects under construction,
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(b) earnings of projects unseasoned in operating experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
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<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 1-25
1st-34th DISCOUNT SERIES
==============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units of
Series ___/___ Discount Series.
I hereby authorize The Bank of New York, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Municipal Securities
Trust.
The foregoing authorization is subject in Date ______________, 19__ all respects
to the terms and conditions of participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name
----------------------------------------------------
Street Address
--------------------------------------------------------------
City, State & Zip Code
------------------------------------------------------
Salesman's Name Salesman's No.
--------------------------- -----------------
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
==============================================================================
Mail to your Broker
or
The Bank of New York
101 Barclay Street
New York, New York 10286
1173.5
<PAGE>
FOR USE WITH MUNICIPAL SECURITIES TRUST
SERIES 26-55
35th-79th DISCOUNT SERIES
=============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units of
Series ___/___ Discount Series.
I hereby authorize The Chase Manhattan Bank, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Chase Manhattan Bank, as TRP Plan Agent, who shall immediately
invest the distributions in units of the available series of Municipal
Securities Trust.
The foregoing authorization is subject in Date ______________, 19__ all respects
to the terms and conditions of participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- ---------------------------------
Registered Holder (print) Registered Holder (print)
- ------------------------------------------- ---------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name
----------------------------------------------------
Street Address
--------------------------------------------------------------
City, State & Zip Code
------------------------------------------------------
Salesman's Name Salesman's No.
--------------------------- -----------------
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
==============================================================================
Mail to your Broker
or
The Chase Manhattan Bank
Attn: UIT Reinvestment Unit A
4 New York Plaza
New York, New York 10004
1173.5
<PAGE>
<TABLE>
<CAPTION>
INDEX MUNICIPAL SECURITIES TRUST
(Unit Investment Trust)
Prospectus
Title Page
Dated: April 30, 1997
<S> <C>
Summary of Essential Information..................................A-4
Financial and Statistical Information.............................A-6 Sponsor:
Information Regarding the Trust...................................A-7
Audit and Financial Information...................................F-1 Reich & Tang Distributors L.P.
600 Fifth Avenue
212-830-5200
(and for certain Trusts:)
Gruntal & Co., L.L.C.
14 Wall Street
New York, New York 10005
PART B 212-267-8800
The Trust.......................................................... 1
Public Offering.................................................... 7 Trustee:
Estimated Long Term Return and
Estimated Current Return......................................... 9 The Chase Manhattan Bank
Rights of Certificateholders.......................................10 4 New York Plaza
Tax Status.........................................................12 New York, New York 10004
Liquidity..........................................................15 1-800-882-9898
Total Reinvestment Plan............................................17
Trust Administration...............................................21 or
Trust Expenses and Charges.........................................25
Exchange Privilege and Conversion Offer............................26 The Bank of New York
Other Matters......................................................29 101 Barclay Street
Description of Bond Ratings........................................31 New York, New York 10286
1-800-431-8002
Parts A and B of this Prospectus do not Evaluator:
contain all of the information set forth in
the registration statement and exhibits Kenny S&P Evaluation Services
relating thereto, filed with the Securities 65 Broadway
and Exchange Commission, Washington, D.C., New York, New York 10006
under the Securities Act of 1933, and to
which reference is made.
</TABLE>
* * *
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the Sponsor.
The Trust is registered as a unit investment trust under the Investment Company
Act of 1940. Such registration does not imply that the Trust or any of its Units
have been guaranteed, sponsored, recommended or approved by the United States or
any state or any agency or officer thereof.
1173.5
