<PAGE>
Registration No. 33-52531
S E C U R I T I E S A N D E X C H A N G E C O M M I S
S I O
N
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
to
F O R M S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF
1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust:
TAX EXEMPT SECURITIES TRUST,
SERIES 390
B.
Name of Depositor:
SMITH BARNEY INC.
<TABLE>
<S> <C>
C. Complete address of depositor's principal executive
office:
SMITH BARNEY
INC.
388 Greenwich Street
New York, New York 10013
D. Name and complete address of agent for service:
LAURIE A. HESSLEIN
Smith Barney
Inc.
388 Greenwich Street
New York, New York 10013
</TABLE>
It is proposed that this filing will become effective June 5,
1995
pursuant to paragraph (b) of Rule 485.
<PAGE>
TAX EXEMPT SECURITIES TRUST
CROSS-REFERENCE SHEET
Pursuant to Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction
as to the Prospectus in Form S-6)
<TABLE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
<C> <S> <C>
1. . . . . . . . . (a) Name of trust Prospectus front cover
(b) Title of securities issued . .
2.Name and address of each depositor Sponsors: Prospectus back
cover
3. . . . Name and address of trustee Trustee
4.Name and address of each principal underwriterSponsors:
Prospectus back cover
5. . .State of organization of trust Tax Exempt Securities
Trust
6.Execution and termination of trust agreementTax Exempt
Securities Trust - The
Trust:
Amendment and Termination
of the Trust Agreement 7. .
. . . . . . . . Changes of name *
8. . . . . . . . . . . . Fiscal year *
9. . . . . . . . . . . . .Litigation *
II. General Description of the Trust and
Securities of the Trust
10.(a) Registered or bearer securities Rights of Unit Holders
(b) Cumulative or distributive securities
(c) Redemption . . . . . . . . . .
(d) Conversion, transfer, etc. . .
(e) Periodic payment plan. . . . . *
(f) Voting rights. . . . . . . . .
(g) Notice to certificate holders Rights of Unit Holders -
Reports and Records:
Sponsors -
Responsibility: Trustee -
Resignation: Amendment
and Termination of the
Trust Agreement -
Amendment
(h) Consents required. . . . . . . Sponsors - Responsibility:
Amendment and Termination
of the Trust Agreement (i) Other
provisions . . . . . . . Tax Exempt Securities Trust - Tax Status
11.Type of securities comprising units Prospectus front cover:
Tax Exempt Securities
Trust - Portfolio
12.Certain information regarding periodic
payment certificates. . . . . . . *
13.. .(a) Load, fees, expenses, etc. Prospectus front cover:
Summary of Essential
Information; Public
Offering - Offering
Price; Public Offering -
Sponsors' and
Underwriters' Profits:
Tax Exempt Securities
Trust - Expenses and
Charges
<PAGE>
Form N-89B-2 Form S-6
Item Number Heading in Prospectus
II. General Description of the Trust and
Securities of the Trust
<C> <S> <C>
(b) Certain information regarding periodic
payment certificates . . . . *
(c) Certain percentages. . . . . . Public Offering - Offering
Price
(d) Certain other fees, etc, payable by holders
Rights of Unit Holders - Certificates
(e) Certain profits receivable by depositors,
principal underwriters, trustee or
affiliated persons . . . . . . Public Offering - Sponsors'
and Underwriters' Profits:
Rights of Unit Holders -
Redemption of Units -
Purchase by the Sponsors of
Units Tendered for
Redemption
(f) Ratio of annual charges to income*
14.. .Issuance of trust's securities Tax Exempt Securities
Trust - The Trust: Rights
of Unit Holders -
Certificates
15.Receipt and handling of payments from purchasers*
16.Acquisition and disposition of underlying
securities . . . . . . . . . . . . Tax Exempt Securities Trust
- Portfolio: Sponsors -
Responsibility
17.. . . . .Withdrawal or redemption Rights of Unit Holders -
Redemption of Units
18.(a) Receipt, custody and disposition of incomeRights of Units
Holders - Distribution of
Interest and Principal:
Rights of Unit Holders -
Reports and Records
(b) Reinvestment of distributions *
(c) Reserves or special funds. . . Rights of Unit Holders -
Distribution of Interest
and Principal: Tax Exempt
Securities Trust - Expenses
and Charges - Other Charges (d) Schedule of
distributions. . . *
19.. . Records, accounts and reports Rights of Unit Holders -
Reports and Records:
Rights of Unit Holders -
Distribution of Interest
and Principal
20.Certain miscellaneous provisions of trust agreementAmendment
and Termination of the Trust
(a) Amendment. . . . . . . . . . . Agreement: Trustee -
Resignation: Trustee -
(b) Termination . . . . . . . . . Resignation: Trustee -
Limitations on Liability:
(c) and (d) Trustee, removal and successorSponsors -
Responsibility: Sponsors - Resignation
(e) and (f) Depositors, removal and successor
21.. . . . Loans to security holders *
22.. . . . .Limitations on liability Sponsors - Limitations on
Liability: Trustee -
Limitations on Liability:
Tax Exempt Securities
Trust - Portfolio
23.. . . . . . .Bonding arrangements *
24.Other material provisions of trust agreement*
______
* Inapplicable, answer negative or not required.
<PAGE>
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
III. Organization, Personnel and
Affiliated Persons of Depositor
<C> <S> <C>
25.. . . .Organization of depositors Sponsors
26.. . . Fees received by depositors *
27.. . . . . .Business of depositors Sponsors
28.Certain information as to officials and
affiliated persons of depositors [Contents of Registration
Statement]
29.. Voting securities of depositors *
30.. .Persons controlling depositors *
31.Payments by depositor for certain services
rendered to trust . . . . . . . . *
32.Payments by depositors for certain other services
rendered to trust . . . . . . . . *
33.Remuneration of employees of depositors for
certain services rendered to trust *
34.Remuneration of other persons for certain services
rendered to trust . . . . . . . . *
IV. General Description of the Trust and
Securities of the Trust
35.Distribution of trust's securities by statesPublic Offering -
Distribution of Units
36.Suspension of sales of trust's securities*
37.Revocation of authority to distribute*
38.. . . .(a) Method of distribution Public Offering -
Distribution of Units
(b) Underwriting agreements. . . .
(c) Selling agreements . . . . . .
39.(a) Organization of principal underwritersSponsors
(b) N.A.S.D. membership of principal underwriters
40.Certain fees received by principal underwriters*
41.(a) Business of principal underwritersSponsors
(b) Branch offices of principal underwriters*
(c) Salesmen of principal underwriters*
42.Ownership of trust's securities by certain persons*
43.Certain brokerage commissions received by principal
underwriters. . . . . . . . . . . *
44.. . . . . (a) Method of valuation Prospectus front cover:
Public Offering -
Offering Price: Public
Offering - Distribution
of Units
(b) Schedule as to offering price *
(c) Variation in offering price to certain personsPublic
Offering - Distribution of Units
45.. Suspension of redemption rights *
46.. . . . .(a) Redemption Valuation Rights of Unit Holders -
Redemption of Units -
Computation of Redemption
Price per Unit
(b) Schedule as to redemption price *
47.Maintenance of position in underlying securities
Public Offering - Market for Units: Rights of Unit Holders -
Redemption of Units - Purchase by the Sponsors of Units
tendered for Redemption; Rights of Unit Holders - Redemption
of Units - Computation of Redemption Price per Unit
______
* Inapplicable, answer negative or not required.<PAGE>
<PAGE> Form N-89B-2 Form S-6
Item Number Heading in Prospectus
V. Information Concerning the Trustee
or Custodian
<C> <S> <C>
48.Organization and regulation of trusteeTrustee
49.. . .Fees and expenses of trustee Tax Exempt Securities
Trust - Expenses and
Charges
50.. . . . . . . . . .Trustee's lien Tax Exempt Securities
Trust - Expenses and
Charges - Other Charges
VI. Information Concerning Insurance of
Holders of Securities
51.Insurance of holders of trust's securities*
VI. Policy of Registrant
52. (a) Provisions of trust agreement with respect to
selection or elimination of underlying securitiesProspectus
front cover: Sponsors-Responsibility
(b)Transactions involving elimination of
underlying securities . . . . . *
(c)Policy regarding substitution or elimination
of underlying securities. . . . Sponsors - Responsibility
(d)Fundamental policy not otherwise covered*
53. Tax status of trust . . . . . . Prospectus front cover: Tax
Exempt Securities Trust -
Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during last ten years*
55. . . . . . . . . . . . . . . . . *
56. Certain information regarding periodic payment
securities . . . . . . . . . . . . *
57. . . . . . . . . . . . . . . . . *
58. . . . . . . . . . . . . . . . . *
59. Financial statements (Instruction 1(c) to form S-6)
Statement of Financial Condition of The Tax Exempt Securities
Trust
______
* Inapplicable, answer negative or not required.
<PAGE>
</TABLE>
NATIONAL TRUST 190
[S][C]
In the opinion of counsel, under existing law interest income to the
Trusts and, with certain exceptions, to Unit holders is exempt from all
Federal income tax. In addition, in the opinion of counsel, the interest
income of each State Trust is similarly exempt from state income taxes
in the state for which such Trust is named. Capital gains, if any, are
subject to tax. Investors should retain both parts of this Prospectus for
future reference.
THE INITIAL PUBLIC OFFERING OF UNITS IN THE TRUSTS
HAS BEEN COMPLETED. THE UNITS OFFERED HEREBY ARE
ISSUED AND OUTSTANDING UNITS WHICH HAVE BEEN
ACQUIRED BY THE SPONSORS EITHER BY PURCHASE FROM
THE TRUSTEE OF UNITS TENDERED FOR REDEMPTION OR
IN THE SECONDARY MARKET. SEE PART B, "RIGHTS OF
UNIT HOLDERS--REDEMPTION OF UNITS--PURCHASE BY
THE SPONSORS OF UNITS TENDERED FOR REDEMPTION"
AND "MARKET FOR UNITS". THE PRICE AT WHICH THE
UNITS OFFERED HEREBY WERE ACQUIRED WAS NOT LESS
THAN THE REDEMPTION PRICE DETERMINED AS PROVIDED
HEREIN. SEE PART B, "RIGHTS OF UNIT HOLDERS--
REDEMPTION OF UNITS--COMPUTATION OF REDEMPTION
PRICE PER UNIT".
THE TAX EXEMPT SECURITIES TRUST SERIES 390 consists of
1 underlying separate unit investment Trust (the "Trust") designated
as National Trust 190, formed for the purpose of obtaining for its Unit
holders tax-exempt interest income and conservation of capital through
investment in a fixed portfolio of municipal bonds rated at the time of
deposit A or better by Standard & Poor's Corporation or Moody's
Investors Service, with certain ratings being provisional or conditional.
(See "Portfolio of Securities".) The Trust is comprised of a fixed
portfolio of interest-bearing obligations issued on behalf of states,
counties, territories, possessions and municipalities of the United
States and authorities or political subdivisions thereof. The interest on
all bonds in the Trust is, in the opinion of recognized bond counsel to
the issuers of the obligations, (i) exempt under existing law (except in
certain instances depending upon the Unit holders) from all Federal
income tax and (ii) subject to the alternative minimum tax under the
Tax Reform Act of 1986 as respects the required inclusion in the
alternative minimum tax base of one-half of adjusted net book income
of corporate Unit holders (see Part B, "Tax Exempt Securities Trust -
Tax Status").
THE OBJECTIVES of the Trust are tax-exempt income and
conservation of capital through an investment in a diversified portfolio
consisting primarily of municipal bonds. There is, of course, no
guarantee that the Trust's objectives will be achieved since the
payment of interest and preservation of principal are dependent upon
the continued ability of the issuers of the bonds to meet such
obligations.
THE PUBLIC OFFERING PRICE of the Units is equal to the
aggregate bid price of the underlying Securities in the Trust's portfolio
divided by the number of Units outstanding, plus a sales charge equal
to 5% of the Public Offering Price (5.263% of the aggregate bid price
of the Securities per Unit). A proportional share of accrued and
undistributed interest on the Securities at the date of delivery of the
Units to the purchaser is also added to the Public Offering Price.
THE SPONSORS, although not obligated to do so, intend to maintain
a market for the Units at prices based upon the aggregate bid price of
the underlying Securities, as more fully described in Part B, "Market
for Units". If such a market is not maintained, a Unit holder may be
able to dispose of his Units only through redemption at prices based
upon the aggregate bid price of the underlying Securities.
MONTHLY DISTRIBUTIONS of principal and interest received by
the Trust will be made on or shortly after the fifteenth day of each
month to holders of record on the first day of that month. For further
information regarding the distributions by the Trust, see the "Summary
of Essential Information".
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A dated June 5, 1995
Note: Part A of this Prospectus may not be distributed unless
accompanied by Part B.
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 7,
1995+
Sponsor:SMITH BARNEY INC.
Trustee:UNITED STATES TRUST COMPANY OF NEW YORK
Evaluator:KENNY S&P EVALUATION SERVICES
<S><C>
Principal Amount of Securities in Trust$12,000,000
Number of Units 12,000
Fractional Undivided Interest in Trust per Unit 1/12,000
Principal Amount of Securities in Trust per Unit$1,000.00
Public Offering Price per Unit #*$1,010.86
Sales Charge (5% of Public Offering Price)# 50.54
Approximate Redemption and Sponsor's Repurchase Price
per Unit
(per Unit Bid Price of Securities)#**$960.32
Calculation of Estimated Net Annual Income per Unit:
Estimated Annual Income per Unit$61.68
Less Estimated Annual Expenses per Unit 2.28
Estimated Net Annual Income per Unit$59.40
Monthly Income Distribution per Unit$4.95
Daily Rate (360 day basis) of Income Accrual per
Unit$.1650
Estimated Current Return Based on Public Offering Price#
5.87%
Estimated Long-Term Return# 5.87%
<FN>
#Subject to changes in the prices of the underlying securities. The
aggregate bid price of the securities is determined on each business
day as of the Evaluation Time.
*Plus $2.64 per Unit representing accrued interest and the net of
cash on hand, accrued expenses and amounts distributable to Unit
holders through the expected date of settlement (five business days
after April 7, 1995). (See "Public Offering--Offering Price".)
**Plus $1.00 per Unit representing accrued interest and the net of
cash on hand, accrued expenses and amounts distributable to Unit
holders of record as of April 7, 1995 on a pro rata basis . (See
"Redemption of Units--Computation of Redemption Price per Unit".)
</TABLE>
Record Dates: The first day of each month
Distribution Dates: The fifteenth day of each month
Evaluation Time: Close of trading on the New York Stock
Exchange (currently 4:00 P.M. New York time)
Date of Deposit and Trust Agreement: April 28, 1994
Mandatory Termination Date: The Trust will terminate on the date
of maturity, redemption, sale or other disposition of the last Bond
held in the Trust. The actual date of termination of the Trust may
be considerably earlier (see Part B, "Amendment and Termination of
the Trust Agreement--Termination").
Minimum Value of Trust: Trust may be terminated if the value of
the Trust is less than $6,000,000
Trustee's Annual Fee: $1.48 per $1,000 principal amount of bonds
($17,760 per year on the basis of bonds in the principal amount of
$12,000,000) plus expenses.
Evaluator's Fee: $.30 per bond per evaluation Number of
issues: 21 Number of States: 15
Sponsor's Annual Portfolio Supervision Fees: Maximum of $.25
per $1,000 face amount of the underlying bonds.
As of April 7, 1995, 15 (70%) of the Bonds were rated by Standard
& Poor's Corporation (31% being rated AAA, 4% being rated AA
and 35% being rated A) and 6 (30%) were rated by Moody's
Investors Service (9% being rated Aa, 19% being rated A and 2%
being rated Baa). Ratings assigned by the bond rating services are
subject to change from time to time.<PAGE>
<PAGE>
Additional Considerations - Investment in the Trust should be made with
an understanding that the value of the underlying Portfolio may decline
with increases in interest rates. Approximately 36% of the Bonds in the
Trust consist of hospital revenue bonds (including obligations of health
care facilities). Approximately 38% of the Bonds in the Trust consist of
obligations of municipal housing authorities. Approximately 29% of the
Bonds in the Trust consist of bonds which are subject to the Mortgage
Subsidy Bond Tax Act of 1980. Approximately 9% of the Bonds in the
Trust consist of bonds in the power facilities category. (See Part B,
"Tax Exempt Securities Trust-Portfolio" for a brief summary of
additional considerations relating to certain of these issues.)
+The percentages referred to in this summary are each computed on the
basis of the aggregate bid price of the Bonds as of April 7, 1995.
<TABLE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding
IncomePrincipal
UnitsNet AssetDistributionsDistributions
Period EndedOutstandingValue Per UnitPer UnitPer Unit
<S><C><C><C><C>
April 28, 199412,000$963.66$-$-
February 15, 199512,000939.04 44.88-
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Unit Holders, Sponsor and Trustee of
Tax Exempt Securities Trust, Series 390 National Trust 190:
We have audited the accompanying balance sheet of Tax Exempt
Securities Trust, Series 390 National Trust 190, including the portfolio
of securities, as of February 15, 1995, and the related statements of
operations and changes in net assets for the period from April 28, 1994
(date of deposit) through February 15, 1995. These financial statements
are the responsibility of the Trustee (see Note 5). Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned
as of February 15, 1995 by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tax Exempt Securities
Trust, Series 390 National Trust 190 as of February 15, 1995, and the
results of its operations and changes in its net assets for the period from
April 28, 1994 (date of deposit) through February 15, 1995, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
June 2, 1995<PAGE>
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190
BALANCE SHEET
February 15, 1995
ASSETS
<S><C>
Investments in tax exempt bonds, at market value
(Cost $11,611,882) (Note 3 to Portfolio of
Securities)$11,233,146
Accrued interest 120,879
Total Assets$11,354,025
LIABILITIES AND NET ASSETS
Overdraft payable$ 84,663
Accrued expenses 807
Total Liabilities 85,470
Net Assets (12,000 units of fractional
undivided interest outstanding):
Original cost to investors (Note 1)$12,184,580
Less initial underwriting commission (sales charge)
(Note 1) 572,698
11,611,882
Net unrealized market depreciation (378,736)
11,233,146
Undistributed net investment income 35,409
Net Assets 11,268,555
Total Liabilities and Net Assets$11,354,025
Net asset value per unit$939.04
STATEMENT OF OPERATIONS
For the period from April 28, 1994 (date of deposit) through
February 15, 1995
<S><C>
Investment Income-interest (Note 2)$ 590,094
Less expenses:
Trustee's fees and expenses 14,881
Evaluator's fees 1,244
Total expenses 16,125
Net investment income 573,969
Realized and unrealized gain (loss) on investments:
Net unrealized market depreciation (378,736)
Net loss on investments (378,736)
Net increase in net assets resulting from operations$195,233
The accompanying Notes to Financial Statements are an
integral part of these statements.<PAGE>
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190
STATEMENT OF CHANGES IN NET ASSETS
For the period from April 28, 1994 (date of deposit) through
February 15, 1995
Operations:
Net investment income$573,969
Net unrealized market depreciation (378,736)
Net increase in net assets resulting from operations 195,233
Distributions to Unit Holders:
Net investment income (Note 4) (538,560)
Accrued interest at date of deposit (228,054)
Total Distributions (766,614)
Decrease in net assets (571,381)
Net Assets:
Beginning of period 11,839,936
End of period (including undistributed net
investment income of $35,409)$11,268,555
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(1)The original cost to the investors represents the aggregate initial
public offering price as of the date of deposit (April 28, 1994),
exclusive of accrued interest, computed on the basis of the aggregate
offering price of the securities. The initial underwriting commission
(sales charge) was 4.70% of the aggregate public offering price
(4.943% of the aggregate offering price of the securities).
(2)Interest income represents interest earned on the Trust's portfolio
and has been recorded on the accrual basis.
(3)No Units were redeemed by the Trustee during the period from
April 28, 1994 (date of deposit) through February 15, 1995.
(4)Interest received by the Trust is distributed to Unit holders on the
fifteenth day of each month, after deducting applicable expenses.
(5)The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of each
Trust and is responsible for establishing and maintaining a system of
internal control directly related to, and designed to provide reasonable
assurance as to the integrity and reliability of, financial reporting of
each Trust. The Trustee is also responsible for all estimates of
expenses and accruals reflected in each Trust's financial statements.
The Evaluator determines the price for each underlying Bond included
in each Trust's Portfolio of Securities on the basis set forth in Part B,
"Public Offering - Offering Price". Under the Securities Act of 1933,
as amended (the "Act"), the Sponsor is deemed to be issuer of each
Trust's Units. As such, the Sponsor has the responsibility of issuer
under the Act with respect to financial statements of each Trust
included in the Registration Statement.
<PAGE>
<TABLE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190 - PORTFOLIO OF SECURITIES -
February 15, 1995
RatingsRedemptionPrincipalMarket
Security Description (1) Provisions (2) Amount Value (3)
<S><C><C><C><C>
California Health Facilities Financing
Authority, Insured Revenue Bonds, San
Diego Christian Foundation, A7/1/02 @ 102$500,000$461,350
6.25% due 7/1/2022S.F. 7/1/13 @ 100
Fontana, California, Redevelopment Agency,
Multifamily Housing Mortgage Revenue
Refunding Bonds, FHA-Insured Mortgage
Loan, Village Drive Apartments, AAA5/1/02 @ 102750,000777,503
7.15% due 5/1/2028S.F. 5/1/95 @ 100
Metropolitan Pier and Exposition
Authority, Illinois, McCormick
Place Expansion Project Bonds, A+6/15/03 @ 102500,000495,270
6.50% due 6/15/2027S.F. 6/15/23 @ 100
Indiana Recreational Development
Commission Revenue Bonds, A7/1/04 @ 101250,000240,950
6.125% due 7/1/2019S.F. 7/1/15 @ 100
Indiana Transportation Finance Authority,
Airport Facilities Lease Revenue Bonds, A11/1/02 @ 102100,00097,440
6.25% due 11/1/2016S.F. 11/1/12 @ 100
Maryland Health and Higher Educational
Facilities Authority Refunding Revenue
Bonds, Suburban Hospital Issue, A1*7/1/03 @ 102300,000242,478
5.125% due 7/1/2021S.F. 7/1/14 @ 100
Montgomery County, Maryland, Housing
Opportunities Commission, Single Family
Mortgage Refunding Revenue Bonds, Aa*7/1/02 @
1021,000,0001,001,620
6.625% due 7/1/2028S.F. 7/1/23 @ 100
Massachusetts Health & Educational
Facilities Authority Revenue Bonds,
Cape Cod Health System,AAA11/15/03 @ 102750,000673,935
5.625% due 11/15/2023S.F. 11/15/22 @ 100
Massachusetts Housing Finance Agency,
Housing Project Revenue Bonds,A+4/1/03 @ 1021,000,000981,820
6.375% due 4/1/2021S.F. 4/1/16 @ 100
Outer Drive Housing Finance Corporation,
Michigan, Mortgage Revenue Refunding
Bonds, Greenhouse Project, AAA1/1/02 @ 102600,000557,910
6.00% due 1/1/2023S.F. 1/1/04 @ 100
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue Bonds, National Benevolent
Association, Lenior Retirement Community Baa1*2/1/04 @
100250,000208,455
Project, 6.00% due 2/1/2024S.F. 2/1/18 @ 100
A-6<PAGE>
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190 - PORTFOLIO OF SECURITIES -
February 15, 1995
(Continued)
RatingsRedemptionPrincipalMarket
Security Description (1) Provisions (2) Amount Value (3)
County of Franklin, Ohio, Hospital
Facilities Revenue Refunding and
Improvement Bonds, Doctors Hospital A*12/1/03 @
102$750,000$654,285
Project, 5.875% due 12/1/2023S.F. 12/1/14 @ 100
South Fork Municipal Authority,
Pennsylvania, Hospital Revenue Bonds, A-7/1/03 @ 102500,000408,535
Lee Hospital, 5.50% due 7/1/2023S.F. 7/1/12 @ 100
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue Refunding AAA1/1/03 @
1021,000,000996,040
Bonds, 6.30% due 1/1/2022S.F. 1/1/15 @ 100
South Carolina Public Service Authority
Revenue Refunding Bonds, Santee Cooper,A+1/1/03 @
102500,000405,950
5.125% due 1/1/2032S.F. 1/1/26 @ 100
Tennessee Housing Development Agency,
Mortgage Finance Program Bonds,A+7/1/03 @ 1021,000,000893,110
5.95% due 7/1/2028S.F. 1/1/19 @ 100
Wilson County, Tennessee, Certificates of
Participation, Wilson County EducationalA*6/30/04 @
102250,000246,435
Facilities Corporation, 6.25% due 6/30/2015S.F. 6/30/11 @ 100
Metro Health Facilities Development
Corporation, Hospital Revenue Bonds, The
Wilson N. Jones Memorial Hospital Project, AAA1/1/04 @
102500,000431,975
Sherman, Texas, 5.375% due 1/1/2023S.F. 1/1/18 @ 100
Public Utility District No. 1, Lewis
County, Washington, Cowlitz Falls
Hydroelectric Project Revenue Bonds, AA10/1/01 @ 100250,000242,573
6.00% due 10/1/2024S.F. 10/1/23 @ 100
Municipality of Metropolitan Seattle,
Seattle, Washington, Sewer Refunding AA-1/1/02 @ 102250,000239,192
Revenue Bonds, 6.20% due 1/1/2032S.F. 1/1/17 @ 100
Wisconsin Health and Educational
Facilities Authority Revenue Bonds,
St. Clare Hospital Project, A*2/15/02 @ 102 1,000,000 976,320
7.00% due 2/15/2022S.F. 2/15/12 @ 100
$12,000,000$11,233,146
The accompanying Notes are an integral part of this Portfolio.
A-7
<PAGE>
TAX EXEMPT SECURITIES TRUST, SERIES 390
NATIONAL TRUST 190 - PORTFOLIO OF SECURITIES -
February 15, 1995
(Continued)
At February 15, 1995, the net unrealized market depreciation of all tax
exempt bonds was comprised of the following:
<S><C>
Gross unrealized market appreciation$-
Gross unrealized market depreciation (378,736)
Net unrealized market depreciation$(378,736)
</TABLE>
NOTES TO PORTFOLIO OF SECURITIES:
(1)All Ratings are by Standard & Poor's Corporation, except those
identified by an asterisk (*) which are by Moody's Investors Service.
The meaning of the applicable rating symbols is set forth in Part B,
"Ratings".
(2)There is shown under this heading the year in which each issue of
bonds initially or currently is redeemable and the redemption price for
that year; unless otherwise indicated, each issue continues to be
redeemable at declining prices thereafter, but not below par. "S.F."
indicates a sinking fund has been or will be established with respect to
an issue of bonds. The prices at which bonds may be redeemed or called
prior to maturity may or may not include a premium and, in certain
cases, may be less than the cost of the bonds to the Trust. Certain bonds
in the portfolio, including bonds not listed as being subject to redemption
provisions, may be redeemed in whole or in part other than by operation
of the stated redemption or sinking fund provisions under certain unusual
or extraordinary circumstances specified in the instruments setting forth
the terms and provisions of such bonds. For example, see discussion of
obligations of municipal housing authorities under "Tax Exempt
Securities Trust-Portfolio" in Part B.
(3)The market value of securities as of February 15, 1995 was
determined by the Evaluator on the basis of bid prices for the securities
at such date.
A-8
<PAGE>
PROSPECTUS -- PART B
Note that Part B of the Prospectus may not be distributed
unless accompanied by Part A.
TAX EXEMPT SECURITIES TRUST
The Trusts
For over 20 years, Tax Exempt Securities Trust has
specialized in quality municipal bond investments designed to meet a
variety of investment objectives and tax situations. Tax Exempt
Securities Trust is a convenient and cost effective alternative to
individual bond purchases. Each Trust is one of a series of similar but
separate unit investment trusts created under the laws of the State of
New York by a Trust Indenture and Agreement and related Reference
Trust Agreement dated the Date of Deposit (collectively, the "Trust
Agreement"), among the sponsors, United States Trust Company of
New York, as trustee (the "Trustee"), and J.J. Kenny Co., Inc., as
evaluator (the "Evaluator"). The sponsor is Smith Barney Inc. (the
"Sponsor"). Each Trust containing Bonds of a state for which such
Trust is named (a "State Trust") and each Long Term Trust, National
Trust, Long-Intermediate Term Trust, Intermediate Term Trust,
Selected Term Trust, Short-Intermediate Term Trust and Short Term
Trust are referred to herein as the "Trust" or "Trusts," unless the
context requires otherwise. On the Date of Deposit, the deposited
contracts and funds (represented by a certified check or checks and/or
an irrevocable letter or letters of credit, issued by a major commercial
bank) for the purchase of certain interest-bearing obligations (the
"Bonds") and/or Units of preceding Series of Tax Exempt Securities
Trust (such Bonds, if any, being referred to herein collectively as the
"Securities"). The Trustee thereafter delivered to the Sponsor
registered certificates of beneficial interest (the "Certificates")
representing the units (the "Units") comprising the entire ownership of
each Trust. The initial public offering of Units in each Trust has been
completed. The Units offered hereby are issued and outstanding Units
which have been acquired by the Sponsor either by purchase from the
Trustee of Units tendered for redemption or in the secondary market.
See "Rights or Unit Holders -- Redemption of Units -- Purchase by the
Sponsor of Units Tendered for Redemption" and "Market for Units".
References to multiple Trusts in Part B herein should be read as
references to a single Trust if Part A indicates the creation of only one
Trust.
Objectives
A Tax-exempt unit investment trust provides many of the
same benefits as individual bond purchases, while the Unit holder
avoids the complexity of analyzing, selecting and monitoring a multi-
bond portfolio. The objectives of a Trust are tax-exempt income and
conservation of capital through an investment in a diversified portfolio
of municipal bonds. There is, of course, no guarantee that a Trust's
objectives will be achieved since the payment of interest and the
preservation of principal are dependent upon the continued ability of the
issuers of the bonds to meet such obligations. Subsequent to the Date
of Deposit, the ratings of the Bonds set forth in Part A - "Portfolio of
Securities" may have declined due to, among other factors, a decline
in creditworthiness of the issuer of said Bonds.
Portfolio
The following factors, among others, were considered
in selecting the Bonds for each Trust: (1) the Bonds are obligations of
the states, counties, municipalities, territories or possessions of the
United States and authorities or political subdivisions thereof, so that
the interest on them will, in the opinion of recognized bond counsel to
the issuing governmental authorities, given on the date of the original
delivery of the Bonds, be exempt from Federal income tax under
existing law to the extent described in "Tax Status" herein, (2) all the
Bonds deposited in a State Trust are obligations of the state for which
such Trust is named or of the counties, territories or municipalities of
such state, and authorities or political subdivisions thereof, or of the
Territory of Guam or the Commonwealth of Puerto Rico, so that the
interest on them will, in the opinion of recognized bond counsel to the
issuing governmental authorities, be exempt from Federal income tax
under existing law to the extent described in "Tax Status" herein and
from state income taxes in the state for which such Trust is named in
each case to the extent described in "Tax Exempt Securities Trust --
Taxes ", (3) the Bonds were chosen in part on the basis of their
respective maturity dates, (4) the Bonds are diversified as to purpose
of issue and location of issuer, except in the case of a State Trust
where the Bonds are diversified only as to purpose of issue, and (5) in
the opinion of the the Bonds are fairly valued relative to other bonds
of comparable quality and maturity. The rating of each issue as of a
recent date is set forth in Part A, "Portfolio of Securities" (the
"Portfolio"). For a description of the meaning of the applicable rating
symbols as published by Standard & Poor's and Moody's, see "Bond
Ratings". It should be emphasized, however, that the ratings of
Standard & Poor's and Moody's represent their opinions as to the
quality of the bonds which they undertake to rate, and that these ratings
are general and not absolute standards of quality.
The Bonds in the Portfolio of a Trust were chosen in
part on the basis of their respective maturity dates. An Intermediate
Term Trust and a Selected Term Trust will have a dollar-weighted
average portfolio maturity of more than three years but not more than
ten years from the Date of Deposit. A Long-Intermediate Term Trust
will have a dollar-weighted average portfolio maturity of more than ten
years but less than fifteen years from the Date of Deposit. A Long
Term Trust, National Trust or a State Trust not specified as to term
will have a dollar-weighted average portfolio maturity of more than ten
years from the Date of Deposit. For the actual maturity dates of each
of the Bonds contained in a Trust, see Part A, "Portfolio of Securities".
A sale or other disposition of a Bond by the Trust prior to the maturity
of such Bond may be at a price which results in a loss to the Trust.
The inability of an issuer to pay the principal amount due upon
maturity of a Bond would result in a loss to the Trust.
The Trusts may be an appropriate investment vehicle for
investors who desire to participate in a portfolio of tax-exempt fixed
income securities with greater diversification than they might be able
to acquire individually. In addition, bonds of the type deposited in the
Trusts are often not available in small amounts. Investors should be
aware that ordinarily the market value of bonds will decrease as
prevailing interest rates increase, and will increase as interest rates
decrease. In general, bonds with long term maturities (such as those
held in a Long Term Trust) usually yield more than bonds with shorter
term maturities (such as those held in a Short Term Trust), assuming
all bonds share similar credit characteristics. Long term bonds,
however, are often more vulnerable to a decline in market value than
are short term bonds, in the event interest rates and yields rise. If long
term bonds are held for a period approaching their maturity dates, such
impact on the value of the long term bonds will be lessened.
Risk Factors
Most of the Bonds in the Portfolio of a Trust are subject to
redemption prior to their stated maturity date pursuant to sinking fund
or call provisions. (See Part A-"Portfolio Summary as of Date of
Deposit" for information relating to the particular Trust described
therein.) In general, a call or redemption provision is more likely to be
exercised when the offering price valuation of a bond is higher than its
call or redemption price, as it might be in periods of declining interest
rates, than when such price valuation is less than the bond's call or
redemption price. To the extent that a Bond was deposited in a Trust
at a price higher than the price at which it is redeemable, redemption
will result in a loss of capital when compared with the original public
offering price of the Units. Conversely, to the extent that a Bond was
acquired at a price lower than the redemption price, redemption will
result in an increase in capital when compared with the original public
offering price of the Units. Monthly distributions will generally be
reduced by the amount of the income which would otherwise have been
paid with respect to redeemed bonds. The Estimated Current Return
and Estimated Long-Term Return of the Units may be affected by such
redemptions. Each Portfolio of Securities in Part A contains a listing
of the sinking fund and call provisions, if any, with respect to each of
the Bonds in a Trust. Because certain of the Bonds may from time to
time under certain circumstances be sold or redeemed or will mature
in accordance with their terms and the proceeds from such events will
be distributed to Unit holders and will not be reinvested, no assurance
can be given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
The Portfolio of the Trust may consist of some Bonds whose current
market values were below face value on the Date of Deposit. A
primary reason for the market value of such Bonds being less than face
value at maturity is that the interest coupons of such Bonds are at lower
rates than the current market interest rate for comparably rated Bonds,
even though at the time of the issuance of such Bonds the interest
coupons thereon represented then prevailing interest rates on
comparably rated Bonds then newly issued. Bonds selling at market
discounts tend to increase in market value as they approach maturity
when the principal amount is payable. A market discount tax-exempt
Bond held to maturity will have a larger portion of its total return in
the form of taxable ordinary income and less in the form of tax-exempt
income than a comparable Bond bearing interest at current market
rates. Under the provisions of the Internal Revenue Code in effect on
the date of this Prospectus any ordinary income attributable to market
discount will be taxable but will not be realized until maturity,
redemption or sale of the Bonds or Units.
As set forth under "Portfolio Summary as of Date of Deposit", the
Trust may contain or be concentrated in one or more of the
classifications of Bonds referred to below. A Trust is considered to be
"concentrated" in a particular category when the Bonds in that category
constitute 25% or more of the aggregate value of the Portfolio. (See
Part A-"Portfolio Summary as of Date of Deposit" for information
relating to the particular Trust described therein.) An investment in
Units of the Trust should be made with an understanding of the risks
that these investments may entail, certain of which are described below.
General Obligation Bonds. Certain of the Bonds in the Portfolio may
be general obligations of a governmental entity that are secured by the
taxing power of the entity. General obligation bonds are backed by the
issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. However, the taxing power of any
governmental entity may be limited by provisions of state constitutions
or laws and an entity's credit will depend on many factors, including
an erosion of the tax base due to population declines, natural disasters,
declines in the state's industrial base or inability to attract new
industries, economic limits on the ability to tax without eroding the tax
base and the extent to which the entity relies on Federal or state aid,
access to capital markets or other factors beyond the entity's control.
As a result of the recent recession's adverse impact upon both their
revenues and expenditures, as well as other factors, many state and
local governments are confronting deficits and potential deficits which
are the most severe in recent years. Many issuers are facing highly
difficult choices about significant tax increases and/or spending
reductions in order to restore budgetary balance. Failure to implement
these actions on a timely basis could force the issuers to depend upon
market access to finance deficits or cash flow needs.
In addition, certain of the Bonds in the Trust may be obligations of
issuers (including California issuers) who rely in whole or in part on
ad valorem real property taxes as a source of revenue. Certain
proposals, in the form of state legislative proposals or voter initiatives,
to limit ad valorem real property taxes have been introduced in various
states, and an amendment to the constitution of the State of California,
providing for strict limitations on ad valorem real property taxes, has
had a significant impact on the taxing powers of local governments and
on the financial conditions of school districts and local governments in
California. It is not possible at this time to predict the final impact of
such measures, or of similar future legislative or constitutional
measures, on school districts and local governments or on their abilities
to make future payments on their outstanding debt obligations.
Industrial Development Revenue Bonds ("IDRs"). IDRs, including
pollution control revenue bonds, are tax-exempt securities issued by
states, municipalities, public authorities or similar entities ("issuers")
to finance the cost of acquiring, constructing or improving various
projects, including pollution control facilities and certain industrial
development facilities. These projects are usually operated by corporate
entities. IDRs are not general obligations of governmental entities
backed by their taxing power. Issuers are only obligated to pay amounts
due on the IDRs to the extent that funds are available from the
unexpended proceeds of the IDRs or receipts or revenues of the issuer
under arrangements between the issuer and the corporate operator of a
project. These arrangements may be in the form of a lease, installment
sale agreement, conditional sale agreement or loan agreement, but in
each case the payments to the issuer are designed to be sufficient to
meet the payments of amounts due on the IDRs.
IDRs are generally issued under bond resolutions, agreements or trust
indentures pursuant to which the revenues and receipts payable under
the issuer's arrangements with the corporate operator of a particular
project have been assigned and pledged to the holders of the IDRs or
a trustee for the benefit of the holders of the IDRs. In certain cases, a
mortgage on the underlying project has been assigned to the holders of
the IDRs or a trustee as additional security for the IDRs. In addition,
IDRs are frequently directly guaranteed by the corporate operator of the
project or by another affiliated company. Regardless of the structure,
payment of IDRs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate
operators or guarantors that are industrial companies may be affected
by many factors which may have an adverse impact on the credit
quality of the particular company or industry. These include cyclicality
of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents or environmentally-caused illnesses,
extensive competition (including that of low-cost foreign companies),
unfunded pension fund liabilities or off-balance sheet items, and
financial deterioration resulting from leveraged buy-outs or takeovers.
However, certain of the IDRs in the Portfolio may be additionally
insured or secured by letters of credit issued by banks or otherwise
guaranteed or secured to cover amounts due on the IDRs in the event
of default in payment by an issuer.
Hospital and Health Care Facility Bonds. The ability of hospitals and
other health care facilities to meet their obligations with respect to
revenue bonds issued on their behalf is dependent on various factors,
including the level of payments received from private third-party payors
and government programs and the cost of providing health care
services.
A significant portion of the revenues of hospitals and other health care
facilities is derived from private third-party payors and government
programs, including the Medicare and Medicaid programs. Both private
third-party payors and government programs have undertaken cost
containment measures designed to limit payments made to health care
facilities. Furthermore, government programs are subject to statutory
and regulatory changes, retroactive rate adjustments, administrative
rulings and government funding restrictions, all of which may
materially decrease the rate of program payments for health care
facilities. There can be no assurance that payments under governmental
programs will remain at levels comparable to present levels or will, in
the future, be sufficient to cover the costs allocable to patients
participating in such programs. In addition, there can be no assurance
that a particular hospital or other health care facility will continue to
meet the requirements for participation in such programs.
The costs of providing health care services are subject to increase as
a result of, among other factors, changes in medical technology and
increased labor costs. In addition, health care facility construction and
operation is subject to federal, state and local regulation relating to the
adequacy of medical care, equipment, personnel, operating policies and
procedures, rate-setting, and compliance with building codes and
environmental laws. Facilities are subject to periodic inspection by
governmental and other authorities to assure continued compliance with
the various standards necessary for licensing and accreditation. These
regulatory requirements are subject to change and, to comply, it may
be necessary for a hospital or other health care facility to incur
substantial capital expenditures or increased operating expenses to effect
changes in its facilities, equipment, personnel and services.
Hospitals and other health care facilities are subject to claims and
legal actions by patients and others in the ordinary course of business.
Although these claims are generally covered by insurance, there can be
no assurance that a claim will not exceed the insurance coverage of a
health care facility or that insurance coverage will be available to a
facility. In addition, a substantial increase in the cost of insurance could
adversely affect the results of operations of a hospital or other health
care facility. The Clinton Administration may impose regulations which
could limit price increases for hospitals or the level of reimbursements
for third-party payors or other measures to reduce health care costs and
make health care available to more individuals, which would reduce
profits for hospitals. Some states, such as New Jersey, have
significantly changed their reimbursement systems. If a hospital cannot
adjust to the new system by reducing expenses or raising rates,
financial difficulties may arise. Also, Blue Cross has denied
reimbursement for some hospitals for services other than emergency
room services. The lost volume would reduce revenues unless
replacement patients were found.
Certain hospital bonds may provide for redemption at par at any time
upon the sale by the issuer of the hospital facilities to a non-affiliated
entity, if the hospital becomes subject to ad valorem taxation, or in
various other circumstances. For example, certain hospitals may have
the right to call bonds at par if the hospital may be legally required
because of the bonds to perform procedures against specified religious
principles or to disclose information that is considered confidential or
privileged. Certain FHA-insured bonds may provide that all or a
portion of these bonds, otherwise callable at a premium, can be called
at par in certain circumstances. If a hospital defaults upon a bond
obligation, the realization of Medicare and Medicaid receivables may
be uncertain and, if the bond obligation is secured by the hospital
facilities, legal restrictions on the ability to foreclose upon the facilities
and the limited alternative uses to which a hospital can be put may
severely reduce its collateral value.
The Internal Revenue Service is currently engaged in a program of
intensive audits of certain large tax-exempt hospital and health care
facility organizations. Although these audits have not yet been
completed, it has been reported that the tax-exempt status of some of
these organizations may be revoked. At this time, it is uncertain
whether any of the hospital and health care facility bonds held by the
Trust will be affected by such audit proceedings.
Single Family and Multi-Family Housing Bonds. Multi-family housing
revenue bonds and single family mortgage revenue bonds are state and
local housing issues that have been issued to provide financing for
various housing projects. Multi-family housing revenue bonds are
payable primarily from the revenues derived from mortgage loans to
housing projects for low to moderate income families. Single-family
mortgage revenue bonds are issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on
residences.
Housing obligations are not general obligations of the issuer although
certain obligations may be supported to some degree by Federal, state
or local housing subsidy programs. Budgetary constraints experienced
by these programs as well as the failure by a state or local housing
issuer to satisfy the qualifications required for coverage under these
programs or any legal or administrative determinations that the
coverage of these programs is not available to a housing issuer,
probably will result in a decrease or elimination of subsidies available
for payment of amounts due on the issuer's obligations. The ability of
housing issuers to make debt service payments on their obligations will
also be affected by various economic and non-economic developments
including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income in multi-family
projects, the rate of default on mortgage loans underlying single family
issues and the ability of mortgage insurers to pay claims, employment
and income conditions prevailing in local markets, increases in
construction costs, taxes, utility costs and other operating expenses, the
managerial ability of project managers, changes in laws and
governmental regulations and economic trends generally in the localities
in which the projects are situated. Occupancy of multi-family housing
projects may also be adversely affected by high rent levels and income
limitations imposed under Federal, state or local programs.
All single family mortgage revenue bonds and certain multi-family
housing revenue bonds are prepayable over the life of the underlying
mortgage or mortgage pool, and therefore the average life of housing
obligations cannot be determined. However, the average life of these
obligations will ordinarily be less than their stated maturities.
Single-family issues are subject to mandatory redemption in whole or
in part from prepayments on underlying mortgage loans; mortgage
loans are frequently partially or completely prepaid prior to their final
stated maturities as a result of events such as declining interest rates,
sale of the mortgaged premises, default, condemnation or casualty loss.
Multi-family issues are characterized by mandatory redemption at par
upon the occurrence of monetary defaults or breaches of covenants by
the project operator. Additionally, housing obligations are generally
subject to mandatory partial redemption at par to the extent that
proceeds from the sale of the obligations are not allocated within a
stated period (which may be within a year of the date of issue). To the
extent that these obligations were valued at a premium when a Holder
purchased Units, any prepayment at par would result in a loss of capital
to the Holder and, in any event, reduce the amount of income that
would otherwise have been paid to Holders.
The tax exemption for certain housing revenue bonds depends on
qualification under Section 143 of the Internal Revenue Code of 1986,
as amended (the "Code"), in the case of single family mortgage
revenue bonds or Section 142(a)(7) of the Code or other provisions of
Federal law in the case of certain multi-family housing revenue bonds
(including Section 8 assisted bonds). These sections of the Code or
other provisions of Federal law contain certain ongoing requirements,
including requirements relating to the cost and location of the
residences financed with the proceeds of the single family mortgage
revenue bonds and the income levels of tenants of the rental projects
financed with the proceeds of the multi-family housing revenue bonds.
While the issuers of the bonds and other parties, including the
originators and servicers of the single-family mortgages and the owners
of the rental projects financed with the multi-family housing revenue
bonds, generally covenant to meet these ongoing requirements and
generally agree to institute procedures designed to ensure that these
requirements are met, there can be no assurance that these ongoing
requirements will be consistently met. The failure to meet these
requirements could cause the interest on the bonds to become taxable,
possibly retroactively to the date of issuance, thereby reducing the
value of the bonds, subjecting the Holders to unanticipated tax liabilities
and possibly requiring the Trustee to sell the bonds at reduced values.
Furthermore, any failure to meet these ongoing requirements might not
constitute an event of default under the applicable mortgage or permit
the holder to accelerate payment of the bond or require the issuer to
redeem the bond. In any event, where the mortgage is insured by the
Federal Housing Administration, its consent may be required before
insurance proceeds would become payable to redeem the mortgage
bonds.
Power Facility Bonds. The ability of utilities to meet their obligations
with respect to revenue bonds issued on their behalf is dependent on
various factors, including the rates they may charge their customers,
the demand for a utility's services and the cost of providing those
services. Utilities, in particular investor-owned utilities, are subject to
extensive regulations relating to the rates which they may charge
customers. Utilities can experience regulatory, political and consumer
resistance to rate increases. Utilities engaged in long-term capital
projects are especially sensitive to regulatory lags in granting rate
increases. Any difficulty in obtaining timely and adequate rate increases
could adversely affect a utility's results of operations.
The demand for a utility's services is influenced by, amoung other
factors, competition, weather conditions and economic conditions.
Electric utilities, for example, have experienced increased competition
as a result of the availability of other energy sources, the effects of
conservation on the use of electricity, self-generation by industrial
customers and the generation of electricity by co-generators and other
independent power producers. Also, increased competition will result
if federal regulators determine that utilities must open their transmission
lines to competitors. Utilities which distribute natural gas also are
subject to competition from alternative fuels, including fuel oil, propane
and coal.
The utility industry is an increasing cost business making the cost of
generating electricity more expensive and heightening its sensitivity to
regulation. A utility's costs are influenced by the utility's cost of
capital, the availability and cost of fuel and other factors. In addition,
natural gas pipeline and distribution companies have incurred increased
costs as a result of long-term natural gas purchase contracts containing
"take or pay" provisions which require that they pay for natural gas
even if natural gas is not taken by them. There can be no assurance that
a utility will be able to pass on these increased costs to customers
through increased rates. Utilities incur substantial capital expenditures
for plant and equipment. In the future they will also incur increasing
capital and operating expenses to comply with environmental legislation
such as the Clean Air Act of 1990, and other energy, licensing and
other laws and regulations relating to, among other things, air
emissions, the quality of drinking water, waste water discharge, solid
and hazardous substance handling and disposal, and siting and licensing
of facilities. Environmental legislation and regulations are changing
rapidly and are the subject of current public policy debate and
legislative proposals. It is increasingly likely that some or many utilities
will be subject to more stringent environmental standards in the future
that could result in significant capital expenditures. Future legislation
and regulation could include, among other things, regulation of
so-called electromagnetic fields associated with electric transmission
and distribution lines as well as emissions of carbon dioxide and other
so-called greenhouse gases associated with the burning of fossil fuels.
Compliance with these requirements may limit a utility's operations or
require substantial investments in new equipment and, as a result, may
adversely affect a utility's results of operations.
The electric utility industry in general is subject to various external
factors including (a) the effects of inflation upon the costs of operation
and construction, (b) substantially increased capital outlays and longer
construction periods for larger and more complex new generating units,
(c) uncertainties in predicting future load requirements, (d) increased
financing requirements coupled with limited availability of capital, (e)
exposure to cancellation and penalty charges on new generating units
under construction, (f) problems of cost and availability of fuel, (g)
compliance with rapidly changing and complex environmental, safety
and licensing requirements, (h) litigation and proposed legislation
designed to delay or prevent construction of generating and other
facilities, (i) the uncertain effects of conservation on the use of electric
energy, (j) uncertainties associated with the development of a national
energy policy, (k) regulatory, political and consumer resistance to rate
increases and (l) increased competition as a result of the availability of
other energy sources. These factors may delay the construction and
increase the cost of new facilities, limit the use of, or necessitate costly
modifications to, existing facilities, impair the access of electric utilities
to credit markets, or substantially increase the cost of credit for electric
generating facilities. The Sponsor cannot predict at this time the
ultimate effect of such factors on the ability of any issuers to meet their
obligations with respect to Bonds.
The National Energy Policy Act ("NEPA"), which became law in
October, 1992, makes it mandatory for a utility to permit non-utility
generators of electricity access to its transmission system for wholesale
customers, thereby increasing competition for electric utilities. NEPA
also mandated demand-side management policies to be considered by
utilities. NEPA prohibits the Federal Energy Regulatory Commission
from mandating electric utilities to engage in retail wheeling, which is
competition among suppliers of electric generation to provide electricity
to retail customers (particularly industrial retail customers) of a utility.
However, under NEPA, a state can mandate retail wheeling under
certain conditions.
There is concern by the public, the scientific community, and the
U.S. Congress regarding environmental damage resulting from the use
of fossil fuels. Congressional support for the increased regulation of
air, water, and soil contaminants is building and there are a number of
pending or recently enacted legislative proposals which may affect the
electric utility industry. In particular, on November 15, 1990,
legislation was signed into law that substantially revises the Clean Air
Act (the "1990 Amendments"). The 1990 Amendments seek to improve
the ambient air quality throughout the United States by the year 2000.
A main feature of the 1990 Amendments is the reduction of sulphur
dioxide and nitrogen oxide emissions caused by electric utility power
plants, particularly those fueled by coal. Under the 1990 Amendments
the U.S. Environmental Protection Agency ("EPA") must develop
limits for nitrogen oxide emissions by 1993. The sulphur dioxide
reduction will be achieved in two phases. Phase I addresses specific
generating units named in the 1990 Amendments. In Phase II the total
U.S. emissions will be capped at 8.9 million tons by the year 2000.
The 1990 Amendments contain provisions for allocating allowances to
power plants based on historical or calculated levels. An allowance is
defined as the authorization to emit one ton of sulphur dioxide.
The 1990 Amendments also provide for possible further regulation of
toxic air emissions from electric generating units pending the results of
several federal government studies to be conducted over the next three
to four years with respect to anticipated hazards to public health,
available corrective technologies, and mercury toxicity.
Electric utilities which own or operate nuclear power plants are
exposed to risks inherent in the nuclear industry. These risks include
exposure to new requirements resulting from extensive federal and state
regulatory oversight, public controversy, decomissioning costs, and
spent fuel and radioactive waste disposal issues. While nuclear power
construction risks are no longer of paramount concern, the emerging
issue is radioactive waste disposal. In addition, nuclear plants typically
require substantial capital additions and modifications throughout their
operating lives to meet safety, environmental,operational and regulatory
requirements and to replace and upgrade various plant systems. The
high degree of regulatory monitoring and controls imposed on nuclear
plants could cause a plant to be out of service or on limited service for
long periods. When a nuclear facility owned by an investor-owned
utility or a state or local municipality is out of service or operating on
a limited service basis, the utility operator or its owners may be liable
for the recovery of replacement power costs. Risks of substantial
liability also arise from the operation of nuclear facilities and from the
use, handling, and possible radioactive emissions associated with
nuclear fuel. Insurance may not cover all types or amounts of loss
which may be experienced in connection with the ownership and
operation of a nuclear plant and severe financial consequences could
result from a significant accident or occurrence. The Nuclear
Regulatory Commission has promulgated regulations mandating the
establishment of funded reserves to assure financial capability for the
eventual decommissioning of licensed nuclear facilities. These funds are
to be accrued from revenues in amounts currently estimated to be
sufficient to pay for decommissioning costs.
The ability of state and local joint action power agencies to make
payments on bonds they have issued is dependent in large part on
payments made to them pursuant to power supply or similar
agreements. Courts in Washington, Oregon and Idaho have held that
certain agreements between the Washington Public Power Supply
System ("WPPSS") and the WPPSS participants are unenforceable
because the participants did not have the authority to enter into the
agreements. While these decisions are not specifically applicable to
agreements entered into by public entities in other states, they may
cause a reexamination of the legal structure and economic viability of
certain projects financed by joint power agencies, which might
exacerbate some of the problems referred to above and possibly lead to
legal proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Water and Sewer Revenue Bonds. Water and sewer bonds are
generally payable from user fees. The ability of state and local water
and sewer authorities to meet their obligations may be affected by
failure of municipalities to utilize fully the facilities constructed by
these authorities, economic or population decline and resulting decline
in revenue from user charges, rising construction and maintenance costs
and delays in construction of facilities, impact of environmental
requirements, failure or inability to raise user charges in response to
increased costs, the difficulty of obtaining or discovering new supplies
of fresh water, the effect of conservation programs and the impact of
"no growth" zoning ordinances. In some cases this ability may be
affected by the continued availability of Federal and state financial
assistance and of municipal bond insurance for future bond issues.
University and College Bonds. The ability of universities and colleges
to meet their obligations is dependent upon various factors, including
the size and diversity of their sources of revenues, enrollment,
reputation, management expertise, the availability and restrictions on
the use of endowments and other funds, the quality and maintenance
costs of campus facilities, and, in the case of public institutions, the
financial condition of the relevant state or other governmental entity
and its policies with respect to education. The institution's ability to
maintain enrollment levels will depend on such factors as tuition costs,
demographic trends, geographic location, geographic diversity and
quality of the student body, quality of the faculty and the diversity of
program offerings.
Legislative or regulatory action in the future at the Federal, state or
local level may directly or indirectly affect eligibility standards or
reduce or eliminate the availability of funds for certain types of student
loans or grant programs, including student aid, research grants and
work-study programs, and may affect indirect assistance for education.
Lease Rental Bonds. Lease rental bonds are issued for the most part
by governmental authorities that have no taxing power or other means
of directly raising revenues. Rather, the authorities are financing
vehicles created solely for the construction of buildings (administrative
offices, convention centers and prisons, for example) or the purchase
of equipment (police cars and computer systems, for example) that will
be used by a state or local government (the "lessee"). Thus, the bonds
are subject to the ability and willingness of the lessee government to
meet its lease rental payments which include debt service on the bonds.
Willingness to pay may be subject to changes in the views of citizens
and government officials as to the essential nature of the finance
project. Lease rental bonds are subject, in almost all cases, to the
annual appropriation risk, i.e., the lessee government is not legally
obligated to budget and appropriate for the rental payments beyond the
current fiscal year. These bonds are also subject to the risk of
abatement in many states - rental bonds cease in the event that damage,
destruction or condemnation of the project prevents its use by the
lessee. (In these cases, insurance provisions and reserve funds designed
to alleviate this risk become important credit factors). In the event of
default by the lessee government, there may be significant legal and/or
practical difficulties involved in the reletting or sale of the project.
Some of these issues, particularly those for equipment purchase,
contain the so-called "substitution safeguard", which bars the lessee
government, in the event it defaults on its rental payments, from the
purchase or use of similar equipment for a certain period of time. This
safeguard is designed to insure that the lessee government will
appropriate the necessary funds even though it is not legally obligated
to do so, but its legality remains untested in most, if not all, states.
Capital Improvement Facility Bonds. The Portfolio of a Trust may
contain Bonds which are in the capital improvement facilities category.
Capital improvement bonds are bonds issued to provide funds to assist
political subdivisions or agencies of a state through acquisition of the
underlying debt of a state or local political subdivision or agency which
bonds are secured by the proceeds of the sale of the bonds, proceeds
from investments and the indebtedness of a local political subdivision
or agency. The risks of an investment in such bonds include the risk of
possible prepayment or failure of payment of proceeds on and default
of the underlying debt.
Solid Waste Disposal Bonds. Bonds issued for solid waste disposal
facilities are generally payable from tipping fees and from revenues that
may be earned by the facility on the sale of electrical energy generated
in the combustion of waste products. The ability of solid waste disposal
facilities to meet their obligations depends upon the continued use of
the facility, the successful and efficient operation of the facility and, in
the case of waste-to-energy facilities, the continued ability of the
facility to generate electricity on a commercial basis. All of these
factors may be affected by a failure of municipalities to fully utilize the
facilities, an insufficient supply of waste for disposal due to economic
or population decline, rising construction and maintenance costs, any
delays in construction of facilities, lower-cost alternative modes of
waste processing and changes in environmental regulations. Because of
the relatively short history of this type of financing, there may be
technological risks involved in the satisfactory construction or operation
of the projects exceeding those associated with most municipal
enterprise projects. Increasing environmental regulation on the federal,
state and local level has a significant impact on waste disposal facilities.
While regulation requires more waste producers to use waste disposal
facilities, it also imposes significant costs on the facilities. These costs
include compliance with frequently changing and complex regulatory
requirements, the cost of obtaining construction and operating permits,
the cost of conforming to prescribed and changing equipment standards
and required methods of operation and, for incinerators or
waste-to-energy facilities, the cost of disposing of the waste residue that
remains after the disposal process in an environmentally safe manner.
In addition, waste disposal facilities frequently face substantial
opposition by environmental groups and officials to their location and
operation, to the possible adverse effects upon the public health and the
environment that may be caused by wastes disposed of at the facilities
and to alleged improper operating procedures. Waste disposal facilities
benefit from laws which require waste to be disposed of in a certain
manner but any relaxation of these laws could cause a decline in
demand for the facilities' services. Finally, waste-to-energy facilities
are concerned with many of the same issues facing utilities insofar as
they derive revenues from the sale of energy to local power utilities
(see Power Facility Bonds above).
Moral Obligation Bonds. The Trust may also include "moral
obligation" bonds. If an issuer of moral obligation bonds is unable to
meet its obligations, the repayment of the bonds becomes a moral
commitment but not a legal obligation of the state or municipality in
question. Even though the state may be called on to restore any deficits
in capital reserve funds of the agencies or authorities which issued the
bonds, any restoration generally requires appropriation by the state
legislature and accordingly does not constitute a legally enforceable
obligation or debt of the state. The agencies or authorities generally
have no taxing power.
Refunded Bonds. Refunded Bonds are typically secured by direct
obligations of the U.S. Government, or in some cases obligations
guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. These obligations are generally noncallable prior to
maturity or the predetermined redemption date. In a few isolated
instances to date, however, bonds which were thought to be escrowed
to maturity have been called for redemption prior to maturity.
Airport, Port and Highway Revenue Bonds. Certain facility revenue
bonds are payable from and secured by the revenues from the
ownership and operation of particular facilities, such as airports
(including airport terminals and maintenance facilities), bridges, marine
terminals, turnpikes and port authorities. For example, the major
portion of gross airport operating income is generally derived from fees
received from signatory airlines pursuant to use agreements which
consist of annual payments for airport use, occupancy of certain
terminal space, facilities, service fees, concessions and leases. Airport
operating income may therefore be affected by the ability of the airlines
to meet their obligations under the use agreements. The air transport
industry is experiencing significant variations in earnings and traffic,
due to increased competition, excess capacity, increased aviation fuel
costs, deregulation, traffic constraints, the recent recession and other
factors. As a result, several airlines are experiencing severe financial
difficulties. Several airlines including America West Airlines have
sought protection from their creditors under Chapter 11 of the
Bankruptcy Code. In addition, other airlines such as Midway Airlines,
Inc., Eastern Airlines, Inc. and Pan American Corporation have been
liquidated. However, within the past few months Northwest Airlines,
Continental Airlines and Trans World Airlines have emerged from
bankruptcy. The Sponsor cannot predict what effect these industry
conditions may have on airport revenues which are dependent for
payment on the financial condition of the airlines and their usage of the
particular airport facility.
Furthermore, proposed Legislation would provide the U.S. Secretary
of Transportation with the temporary authority to freeze airport fees
upon the occurrence of disputes between a particular airport fees upon
the occurrence of disputes between a particular airport facility and the
airlines utilizing that facility.
Similarly, payment on bonds related to other facilities is dependent on
revenues from the projects, such as use fees from ports, tolls on
turnpikes and bridges and rents from buildings. Therefore, payment
may be adversely affected by reduction in revenues due to such factors
and increased cost of maintenance or decreased use of a facility, lower
cost of alternative modes of transportation or scarcity of fuel and
reduction or loss of rents.
Special Tax Bonds. Special tax bonds are payable from and secured
by the revenues derived by a municipality from a particular tax such as
a tax on the rental of a hotel room, on the purchase of food and
beverages, on the rental of automobiles or on the consumption of
liquor. Special tax bonds are not secured by the general tax revenues
of the municipality, and they do not represent general obligations of the
municipality. Therefore, payment on special tax bonds may be
adversely affected by a reduction in revenues realized from the
underlying special tax due to a general decline in the local economy or
population or due to a decline in the consumption, use or cost of the
goods and services that are subject to taxation. Also, should spending
on the particular goods or services that are subject to the special tax
decline, the municipality may be under no obligation to increase the
rate of the special tax to ensure that sufficient revenues are raised from
the shrinking taxable base.
Tax Allocation Bonds. Tax allocation bonds are typically secured by
incremental tax revenues collected on property within the areas where
redevelopment projects financed by bond proceeds are located ("project
areas"). Such payments are expected to be made from projected
increases in tax revenues derived from higher assessed values of
property resulting from development in the particular project area and
not from an increase in tax rates. Special risk considerations include:
reduction of, or a less than anticipated increase in, taxable values of
property in the project area, caused either by economic factors beyond
the Issuer's control (such as a relocation out of the project area by one
or more major property owners) or by destruction of property due to
natural or other disasters; successful appeals by property owners of
assessed valuations; substantial delinquencies in the payment of
property taxes; or imposition of any constitutional or legislative
property tax rate decrease.
Transit Authority Bonds. Mass transit is generally not self-supporting
from fare revenues. Therefore, additional financial resources must be
made available to ensure operation of mass transit systems as well as
the timely payment of debt service. Often such financial resources
include Federal and state subsidies, lease rentals paid by funds of the
state or local government or a pledge of a special tax such as a sales
tax or a property tax. If fare revenues or the additional financial
resources do not increase appropriately to pay for rising operating
expenses, the ability of the issuer to adequately service the debt may be
adversely affected.
Convention Facility Bonds. The Portfolio of a Trust may contain
Bonds of issuers in the convention facilities category. Bonds in the
convention facilities category include special limited obligation
securities issued to finance convention and sports facilities payable from
rental payments and annual governmental appropriations. The
governmental agency is not obligated to make payments in any year in
which the monies have not been appropriated to make such payments.
In addition, these facilities are limited use facilities that may not be
used for purposes other than as convention centers or sports facilities.
Puerto Rico . The Portfolio may contain bonds of issuers which will
be affected by general economic conditions in Puerto Rico. Puerto
Rico's unemployment rate remains significantly higher than the U.S.
unemployment rate. Furthermore, the economy is largely dependent for
its development upon U.S. policies and programs that are being
reviewed and may be eliminated.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section 936
of the Internal Revenue Code (the "Code") provides for a credit against
Federal income taxes for U.S. companies operating on the island if
certain requirements are met. The Omnibus Budget Reconciliation Act
of 1993 imposed limits on such credit, effective for tax years beginning
after 1993. In addition, from time to time proposals are introduced in
Congress which, if enacted into law, would eliminate some or all of the
benefits of Section 936. Although no assessment can be made at this
time of the precise effect of such limitation, it is expected that the
limitation of Section 936 credits would have a negative impact on
Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily on
Federal programs, and current Federal budgetary policies suggest that
an expansion of aid to Puerto Rico is unlikely. An adverse effect on the
Puerto Rican economy could result from other U.S. policies, including
a reduction of tax benefits for distilled products, further reduction in
transfer payment programs such as food stamps, curtailment of military
spending and policies which could lead to a stronger dollar.
In a plebiscite held in November, 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved the
federal tax exempt status of the outstanding debts of Puerto Rico and
its public corporations regardless of the outcome of the referendum, to
the extent that similar obligations issued by states are so treated and
subject to the provisions of the Code currently in effect. There can be
no assurance that any pending or future legislation finally enacted will
include the same or similar protection against loss of tax exemption.
The November 1993 plebiscite can be expected to have both direct and
indirect consequences on such matters as the basic characteristics of
future Puerto Rico debt obligations, the markets for these obligations,
and the types, levels and quality of revenue sources pledged for the
payment of existing and future debt obligations. Such possible
consequences include, without limitation, legislative proposals seeking
restoration of the status of Section 936 benefits otherwise subject to the
limitations discussed above. However, no assessment can be made at
this time of the economic and other effects of a change in federal laws
affecting Puerto Rico as a result of the November 1993 plebiscite.
Insurance. Certain Bonds (the "Insured Bonds") may be
insured or guaranteed by AMBAC Indemnity Corporation ("AMBAC"),
Asset Guaranty Reinsurance Company ("Asset Guaranty"), Capital
Guaranty Insurance Company ("CGIC"), Capital Markets Assurance
Corp. ("CAPMAC"), Connie Lee Insurance Company ("Connie Lee"),
Financial Guaranty Insurance Company "Financial Guaranty"),
Financial Security Assurance Inc. ("FSA"), or Municipal Bond
Investors Assurance Corporation ("MBIA") (collectively, the
"Insurance Companies"). The claims-paying ability of each of these
companies, unless otherwise indicated, is rated AAA by Standard &
Poor's or another acceptable national rating service. The ratings are
subject to change at any time at the discretion of the rating agencies.
In determining whether to insure bonds, the Insurance Companies
severally apply their own standards. The cost of this insurance is borne
either by the issuers or previous owners of the bonds or by the
Sponsor. The insurance policies are non-cancellable and will continue
in force so long as the Insured Bonds are outstanding and the insurers
remain in business. The insurance policies guarantee the timely
payment of principal and interest on but do not guarantee the market
value of the Insured Bonds or the value of the Units. The insurance
policies generally do not provide for accelerated payments of principal
or, except in the case of any portfolio insurance policies, cover
redemptions resulting from events of taxability. If the issuer of any
Insured Bond should fail to make an interest or principal payment, the
insurance policies generally provide that the Trustee or its agent shall
give notice of nonpayment to the Insurance Company or its agent and
provide evidence of the Trustee's right to receive payment. The
Insurance Company is then required to disburse the amount of the
failed payment to the Trustee or its agent and is thereafter subrogated
to the Trustee's right to receive payment from the issuer.
The following are brief descriptions of certain of the
insurance companies that may insure or guarantee certain Bonds. The
financial information presented for each company has been determined
on a statutory basis and is unaudited.
AMBAC is a Wisconsin-domiciled stock insurance
company, regulated by the Insurance Department of the State of
Wisconsin, and licensed to do business in various states, with admitted
assets of approximately $2,145,000,000 and policyholders' surplus of
approximately $782,000,000 as of December 31, 1994. AMBAC is a
wholly-owned subsidiary of AMBAC Inc., a financial holding company
which is publicly owned following a complete divestiture by Citibank
during the first quarter of 1992.
Asset Guaranty is a New York State insurance company
licensed to write financial guarantee, credit, residual value and surety
insurance. Asset Guaranty commenced operations in mid-1988 by
providing reinsurance to several major monoline insurers. Asset
Guaranty also issued limited amounts of primary financial guaranty
insurance, but not in direct competition with the primary mono-line
companies for which it acts as a reinsurer. The parent holding company
of Asset Guaranty, Asset Guarantee Inc. (AGI), merged with Enhance
Financial Services (EFS) in June, 1990 to form Enhance Financial
Services Group Inc. (EFSG). The two main, 100%-owned subsidiaries
of EFSG, Asset Guaranty and Enhance Reinsurance Company (ERC),
share common management and physical resources. After an initial
public offering completed in February 1992 and the sale by Merrill
Lynch & Co. of its stake, EFSG is 49.8%-owned by the public, 29.9%
by US West Financial Services, 14.1% by Manufacturers Life
Insurance Co. and 6.2% by senior management. Both ERC and Asset
Guaranty are rated "AAA" for claims paying ability by Duff & Phelps.
ERC is rated triple-A for claims-paying ability by both S&P and
Moody's. Asset Guaranty received a "AA" claims-paying-ability rating
from S&P during August 1993, but remains unrated by Moody's. As
of December 31, 1994 Asset Guaranty had admitted assets of
approximately $159,000,000 and policyholders' surplus of
approximately $140,000,000.
CAPMAC commenced operations in December 1987, as
the second mono-line financial guaranty insurance company (after FSA)
organized solely to insure non-municipal obligations. CAPMAC, a New
York corporation, is a wholly-owned subsidiary of CAPMAC
Holdings, Inc. (CHI), which was sold in 1992 by Citibank (New York
State) to a group of 12 investors led by the following: Dillon Read's
Saratoga Partners Il; L.P. (Saratoga), an acquisition fund; Caprock
Management, Inc., representing Rockefeller family interests;
Citigrowth Fund, a Citicorp venture capital group; and CAPMAC
senior management and staff. These groups control approximately 70%
of the stock of CHI. CAPMAC had traditionally specialized in
guaranteeing consumer loan and trade receivable asset-backed
securities. Under the new ownership group CAPMAC intends to
become involved in the municipal bond insurance business, as well as
their traditional non-municipal business. As of December 31, 1994
CAPMAC's admitted assets were approximately $199,000,000 and its
policyholders' surplus was approximately $140,000,000.
CGIC, a monoline bond insurer headquartered in San
Francisco, California, was established in November 1986 to assume the
financial guaranty business of United States Fidelity and Guaranty
Company ("USF&G'). It is a wholly-owned subsidiary of Capital
Guaranty Corporation ("CGC") whose stock is owned by: Constellation
Investments, Inc., an affiliate of Baltimore Gas & Electric,
Fleet/Norstar Financial Group, Inc., Safeco Corporation, Sibag Finance
Corporation, an affiliate of Siemens AG, and USF&G, the 8th largest
property/casualty company in the U.S. as measured by net premiums
written, and CGC management. As of December 31, 1994, CGIC had
total admitted assets of approximately $304,000,000 and total statutory
policyholders' surplus of approximately $166,000,000.
Connie Lee is a wholly owned subsidiary of College
Construction Loan Insurance Association ("CCLIA"), a
government-sponsored enterprise established by Congress to provide
American academic institutions with greater access to low-cost capital
through enhancement. Connie Lee, the operating insurance company,
was incorporated in 1987 and began business as a reinsurer of
tax-exempt bonds of colleges, universities, and teaching hospitals with
a concentration on the hospital sector. During the fourth quarter of
1991 Connie Lee began underwriting primary bond insurance which
will focus largely on the college and university sector. CCLIA's
founding shareholders are the U.S. Department of Education, which
owns 36% of CCLIA, and the Student Loan Marketing Association
("Sallie Mae"), which owns 14%. The other principal owners are:
Pennsylvania Public School Employees' Retirement System,
Metropolitan Life Insurance Company, Kemper Financial Services,
Johnson family funds and trusts, Northwestern University, Rockefeller
& Co., Inc. administered trusts and funds, and Stanford University.
Connie Lee is domiciled in the state of Wisconsin and has licenses to
do business in 47 states and the District of Columbia. As of December
31, 1994, its total admitted assets were approximately $194,000,000
and policyholders' surplus was approximately $106,000,000 .
Financial Guaranty, a New York stock insurance
company, is a wholly-owned subsidiary of FGIC Corporation which is
wholly-owned by General Electric Capital Corporation. The investors
in the FGIC Corporation are not obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty commenced its
business of providing insurance and financial guarantees for a variety
of investment instruments in January 1984 and is currently authorized
to provide insurance in 49 states and the District of Columbia. It files
reports with state regulatory agencies and is subject to audit and review
by those authorities. As of December 31, 1994, its total admitted assets
were approximately $2,131,000,000 and its policyholders' surplus was
approximately $894,000,000.
FSA is a monoline property and casualty insurance
company incorporated in New York in 1984. It is a wholly-owned
subsidiary of Financial Security Assurance Holdings Ltd., a New York
Stock Exchange listed company which is in turn approximately 60.5%
owned by U.S. West Capital Corportion (U.S. West) 7.6% by Fund
American Enterprises Holdings Inc. and 7.4% by the Tokio Marine and
Fire Insurance Co. Ltd. FSA is licensed directly or indirectly through
its subsidiaries to engage in the special guaranty insurance business in
all 50 states, the District of Columbia, Puerto Rico and the United
Kingdom.
U.S. West is a subsidiary of U.S. West, Inc., which
operates businesses involved in communications, data solutions,
marketing services and capital assets, including the provision of
telephone services in 14 states in the western and midwestern United
States.
Pursuant to an intercompany agreement, liabilities on
financial guaranty insurance written by FSA or either of its subsidiaries
proportional to their respective capital surplus and reserves, subject to
applicalbe statutory risk limitations. In addition, FSA reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsureres under various quota-share treaties and
on a transaction-by-transaction basis. Such reinsurance is utilized by
FSA as a risk management device and to comply with certain statutory
and rating agency requirements; it does not alter or limit FSA's
obligations under any financial guaranty insurance policy. As of
December 31, 1994 total total admitted assets were $804,000,000 and
policyholders' surplus was approxiamtely $344,000,000.
MBIA is the principal operating subsidiary of MBIA Inc.
The principal shareholders of MBIA Inc. were originally Aetna
Casualty and Surety Company, The Fund American Companies, Inc.,
subsidiaries of CIGNA Corporation and Credit Local de France,
CAECL, S.A. These principal shareholders now own approximately
13% of the outstanding common stock of MBIA Inc., following a series
of four public equity offerings over a five-year period. As of December
31, 1994, MBIA had admitted assets of approximately $3.4 billion and
policyholders' surplus of approximately $1,100,000,000.
Insurance companies are subject to regulation and
supervision in the jurisdictions in which they do business under statutes
which delegate regulatory, supervisory and administrative powers to
state insurance commissioners. This regulation, supervision and
administration relate, among other things, to: the standards of solvency
which must be met and maintained; the licensing of insurers and their
agents; the nature of and limitations on investments; deposits of
securities for the benefit of policyholders;
approval of policy forms and premium rates; periodic examinations of
the affairs of insurance companies; annual and other reports required
to be filed on the financial condition of insurers or for other purposes;
and requirements regarding reserves for unearned premiums, losses and
other matters. Regulatory agencies require that premium rates not be
excessive, inadequate or unfairly discriminatory. Insurance regulation
in many states also includes "assigned risk" plans, reinsurance
facilities, and joint underwriting associations, under which all insurers
writing particular lines of insurance within the jurisdiction must accept,
for one or more of those lines, risks unable to secure coverage in
voluntary markets. A significant portion of the assets of insurance
companies is required by law to be held in reserve against potential
claims on policies and is not available to general creditors.
Although the Federal government does not regulate the
business of insurance, Federal initiatives can significantly impact the
insurance business. Current and proposed Federal measures which may
significantly affect the insurance business include pension regulation
(ERISA), controls on medical care costs, minimum standards for
no-fault automobile insurance, national health insurance, personal
privacy protection, tax law changes affecting life insurance companies
or the relative desirability of various personal investment vehicles and
repeal of the current antitrust exemption for the insurance business. (If
this exemption is eliminated, it will substantially affect the way
premium rates are set by all property-liability insurers.) In addition, the
Federal government operates in some cases as a co-insurer with the
private sector insurance companies.
Insurance companies are also affected by a variety of
state and Federal regulatory measures and judicial decisions that define
and extend the risks and benefits for which insurance is sought and
provided. These include judicial redefinitions of risk exposure in areas
such as products liability and state and Federal extension and protection
of employee benefits, including pension, workers' compensation, and
disability benefits. These developments may result in short-term
adverse effects on the profitability of various lines of insurance.
Longer-term adverse effects can often be minimized through prompt
repricing of coverages and revision of policy terms. In some instances,
these developments may create new opportunities for business growth.
All insurance companies write policies-and set premiums based on
actuarial assumptions about mortality, injury, the occurrence of
accidents and other insured events. These assumptions, while well
supported by past experience, necessarily do not take account of future
events. The occurrence in the future of unforeseen circumstances could
affect the financial condition of one or more insurance companies. The
insurance business is highly competitive and with the deregulation of
financial service businesses, it should become more competitive. In
addition, insurance companies may expand into non-traditional lines of
business which may involve different types of risks.
The above financial information relating to the Insurance
Companies has been obtained from publicly available information. No
representation is made as to the accuracy or adequacy of the
information or as to the absence of material adverse changes since the
information was made available to the public.
Litigation and Legislation. To the best knowledge of the Sponsor,
there was no litigation pending as of the Date of Deposit in respect of
any Bonds which might reasonably be expected to have a material
adverse effect upon the Trust. At any time after the Initial Date of
Deposit, litigation may be initiated on a variety of grounds, or
legislation may be enacted, with respect to Bonds in the Trust.
Litigation, for example, challenging the issuance of pollution control
revenue bonds under environmental protection statutes may affect the
validity of Bonds or the tax-free nature of their interest. While the
outcome of litigation of this nature can never be entirely predicted,
opinions of bond counsel are delivered on the date of issuance of each
Bond to the effect that the Bond has been validly issued and that the
interest thereon is exempt from Federal income tax. In addition, other
factors may arise from time to time which potentially may impair the
ability of issuers to make payments due on the Bonds.
Under the Federal Bankruptcy Act, a political subdivision or public
agency or instrumentality of any state, including municipalities, may
proceed to restructure or otherwise alter the terms of its obligations,
including those of the type comprising the Trust's Portfolio. The
Sponsor is unable to predict what effect, if any, this legislation might
have on the Trust.
From time to time Congress considers proposals to tax the interest on
state and local obligations, such as the Bonds. The Supreme Court
clarified in South Carolina v. Baker (decided April 20, 1988) that the
U.S. Constitution does not prohibit Congress from passing a
nondiscriminatory tax on interest on state and local obligations. This
type of legislation, if enacted into law, could adversely affect an
investment in Units. Holders are urged to consult their own tax
advisers.
Tax Exemption. In the opinion of bond counsel rendered on the date
of issuance of each Bond, the interest on each Bond is excludable from
gross income under existing law for regular Federal income tax
purposes (except in certain circumstances depending on the Holder) but
may be subject to state and local taxes. As discussed under Taxes
below, interest on some or all of the Bonds may become subject to
regular Federal income tax, perhaps retroactively to their date of
issuance, as a result of changes in Federal law or as a result of the
failure of issuers (or other users of the proceeds of the Bonds) to
comply with certain ongoing requirements.
Moreover, the Internal Revenue Service announced on June 14, 1993
that it will be expanding its examination program with respect to
tax-exempt bonds. The expanded examination program will consist of,
among other measures, increased enforcement against abusive
transactions, broader audit coverage (including the expected issuance
of audit guidelines) and expanded compliance achieved by means of
expected revisions to the tax-exempt bond information return forms. At
this time, it is uncertain whether the tax exempt status of any of the
Bonds would be affected by such proceedings, or whether such effect,
if any, would be retroactive.
In certain cases, a Bond may provide that if the interest on the Bond
should ultimately be determined to be taxable, the Bond would become
due and payable by its issuer, and, in addition, may provide that any
related letter of credit or other security could be called upon if the
issuer failed to satisfy all or part of its obligation. In other cases,
however, a Bond may not provide for the acceleration or redemption
of the Bond or a call upon the related letter of credit or other security
upon a determination of taxability. In those cases in which a Bond does
not provide for acceleration or redemption or in which both the issuer
and the bank or other entity issuing the letter of credit or other security
are unable to meet their obligations to pay the amounts due on the Bond
as a result of a determination of taxability, the Trustee would be
obligated to sell the Bond and, since it would be sold as a taxable
security, it is expected that it would have to be sold at a substantial
discount from current market price. In addition, as mentioned above,
under certain circumstances Holders could be required to pay income
tax on interest received prior to the date on which the interest is
determined to be taxable.
The Units
On the date of this Prospectus each Unit in a Trust
represented a fractional undivided interest in the principal and net
income of such Trust as is set forth in Part A, "Summary of Essential
Information". If any Units are redeemed after the date of this
Prospectus by the Trustee, the principal amount of Bonds in the
affected Trust will be reduced by an amount allocable to redeemed
Units and the fractional undivided interest in the affected Trust
represented by each unredeemed Unit will be increased. Units will
remain outstanding until redeemed upon tender to the Trustee by any
Unit holder, which may include the Sponsor, or until the termination
of the Trust Agreement. (See "Amendment and Termination of the
Trust Agreement-Termination.") References in this Prospectus to
"Units" are to Units which represented the fractional undivided interest
indicated in the "Summary of Essential Information" in Part A.
Estimated Current Return And Estimated Long-Term Return
Under accepted bond practice, tax-exempt bonds are
customarily offered to investors on a "yield price" basis (as contrasted
to a "dollar price" basis) at the lesser of the yield as computed to
maturity of the bonds or to an earlier redemption date and which takes
into account not only the interest payable on the bonds but also the
amortization or accretion to a specified date of any premium over or
discount from the par (maturity) value in the bond's purchase price.
Since Units of a Trust are offered on a dollar price basis, the rate of
return on an investment in Units of a Trust is stated in terms of
"Estimated Current Return," computed by dividing the Net Annual
Income per Unit by the Public Offering Price per Unit. Any change
in either the Net Annual Income per Unit or the Public Offering Price
per Unit will result in a change in the Estimated Current Return. The
Net Annual Income per Unit of a Trust is determined by dividing the
total annual interest income to such Trust, less estimated annual fees
and expenses of the Trustee, the Sponsor and the Evaluator, by the
number of Units of such Trust outstanding. The Net Annual Income
per Unit of a Trust will change as the income or expenses of such Trust
changes and as Bonds are redeemed, paid, sold or exchanged. For a
statement of the Net Annual Income per Unit and the Estimated Current
Return based on the Public Offering Price, see Part A, "Summary of
Essential Information".
The Estimated Long-Term Return for each Trust is a
measure of the return to the investor over the estimated life of the
Trust. The Estimated Long-Term Return represents an average of the
yields to maturity (or call) of the Bonds in the Trust's portfolio
calculated in accordance with accepted bond practice and adjusted to
reflect expenses and sales charges. In calculating Estimated Long-
Term Return, the average yield for the Trust's portfolio is derived by
weighting each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced.
Once the average portfolio yield is computed, this figure is then
reduced to reflect estimated expenses and the effect of the maximum
sales charge paid by investors.
A Trust may experience expenses and portfolio changes
different from those assumed in the calculation of Estimated Long-
Term Return. There thus can be no assurance that the Estimated
Current Returns or the Estimated Long-Term Returns quoted for a
Trust will be realized in the future. Since both Estimated Current
Return and Estimated Long-Term Return quoted on a given business
day are based on the market value of the underlying Bonds on that day,
subsequent calculations of these performance measures will reflect the
then-current market value of the underlying bonds and may be higher
or lower.
<PAGE>
Taxes
In the opinion of bond counsel to the issuing
governmental authorities given at the time of the original delivery of
the Bonds, interest income on the Bonds comprising the Portfolio of
each Trust is (except in certain instances, depending upon the Unit
holder, as described below) exempt from Federal income tax under the
provisions of the Internal Revenue Code in effect as of the date of
issuance. In the case of Bonds issued when the Internal Revenue Code
of 1954 was in effect, redesignation of the Code as the Internal
Revenue Code of 1986 (the "Code" or the "1986 Code") has not
adversely affected such exemption. (See "Tax Exempt Securities Trust
- Portfolio.")
Messrs. Davis Polk & Wardwell, special counsel for the
Sponsor, rendered an opinion under existing provisions of the Code,
the regulations then promulgated thereunder and current rulings of the
Internal Revenue Service substantially to the effect that:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and income received by the Trust will be treated
as the income of the Unit holders ("Holders") in the manner set forth
below.
Each Holder will be considered the owner of a pro rata portion of
each Bond in the Trust under the grantor trust rules of Sections
671-679 of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to determine the face amount of a Holder's pro rata
portion of each Bond on the Date of Deposit, see "Aggregate Principal"
under "Portfolio of Securities". The total cost to a Holder of his Units,
including sales charges, is allocated to his pro rata portion of each
Bond, in proportion to the fair market values thereof on the date the
Holder purchases his Units, in order to determine his tax basis for his
pro rata portion of each Bond.
Each Holder will be considered to have received the interest on his
pro rata portion of each Bond when interest on the Bond is received by
the Trust. In the opinion of bond counsel (delivered on the date of
issuance of each Bond), such interest will be excludable from gross
income for regular Federal income tax purposes (except in certain
limited circumstances referred to below). Amounts received by the
Trust pursuant to a bank letter of credit, guarantee or insurance policy
with respect to payments of principal, premium or interest on a Bond
in the Trust will be treated for Federal income tax purposes in the same
manner as if such amounts were paid by the issuer of the Bond.
The Trust may contain Bonds which were originally issued at a
discount ("original issue discount"). The following principles will apply
to each Holder's pro rata portion of any Bond originally issued at a
discount. In general, original issue discount is defined as the difference
between the price at which a debt obligation was issued and its stated
redemption price at maturity. Original issue discount on a tax-exempt
obligation issued after September 3, 1982, is deemed to accrue as
tax-exempt interest over the life of the obligation under a formula based
on the compounding of interest. Original issue discount on a tax-exempt
obligation issued before July 2, 1982 is deemed to accrue as tax-exempt
interest ratably over the life of the obligation. Original issue discount
on any tax-exempt obligation issued during the period beginning July
2, 1982 and ending September 3, 1982 is also deemed to accrue as
tax-exempt interest over the life of the obligation, although it is not
clear whether such accrual is ratable or is determined under a formula
based on the compounding of interest. If a Holder's tax basis for his
pro rata portion of a Bond issued with original issue discount is greater
than its "adjusted issue price" but less than its stated redemption price
at maturity (as may be adjusted for certain payments), the Holder will
be considered to have purchased his pro rata portion of the Bond at an
"acquisition premium." A Holder's adjusted tax basis for his pro rata
portion of a Bond issued with original issue discount will include
original issue discount accrued during the period such Holder held his
Units. Such increases to the Holder's tax basis in his pro rata portion
of the Bond resulting from the accrual of original issue discount,
however, will be reduced by the amount of any such acquisition
premium.
If a Holder's tax basis for his pro rata portion of a Bond exceeds the
redemption price at maturity thereof (subject to certain adjustments),
the Holder will be considered to have purchased his pro rata portion of
the Bond with "amortizable bond premium". The Holder is required to
amortize such bond premium over the term of the Bond. Such
amortization is only a reduction of basis for his pro rata portion of the
Bond and does not result in any deduction against the Holder's income.
Therefore, under some circumstances, a Holder may recognize taxable
gain when his pro rata portion of a Bond is disposed of for an amount
equal to or less than his original tax basis therefor.
A Holder will recognize taxable gain or loss when all or part of his
pro rata portion of a Bond is disposed of by the Trust for an amount
greater or less than his adjusted tax basis. Any such taxable gain or loss
will be capital gain or loss, except that any gain from the disposition
of a Holder's pro rata portion of a Bond acquired by the Holder at a
"market discount" (i.e., where the Holder's original tax basis for his
pro rata portion of the Bond (plus any original issue discount which
will accrue thereon until its maturity) is less than its stated redemption
price at maturity) would be treated as ordinary income to the extent the
gain does not exceed the accrued market discount. Capital gains are
generally taxed at the same rate as ordinary income. However, the
excess of net long-term capital gains over net short-term capital losses
may be taxed at a lower rate than ordinary income for certain
noncorporate taxpayers. A capital gain or loss is long-term if the asset
is held for more than one year and short-term if held for one year or
less. The deduction of capital losses is subject to limitations. A Holder
will also be considered to have disposed of all or part of his pro rata
portion of each Bond when he sells or redeems all or some of his
Units.
Under Section 265 of the Code, a Holder (except a corporate Holder)
is not entitled to a deduction for his pro rata share of fees and expenses
of the Trust because the fees and expenses are incurred in connection
with the production of tax-exempt income. Further, if borrowed funds
are used by a Holder to purchase or carry Units of the Trust, interest
on such indebtedness will not be deductible for Federal income tax
purposes. In addition, under rules used by the Internal Revenue
Service, the purchase of Units may be considered to have been made
with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. Similar rules may be applicable for
state tax purposes.
From time to time proposals are introduced in Congress and state
legislatures which, if enacted into law, could have an adverse impact
on the tax-exempt status of the Bonds. It is impossible to predict
whether any legislation in respect of the tax status of interest on such
obligations may be proposed and eventually enacted at the Federal or
state level.
The foregoing discussion relates only to Federal and certain aspects
of New York State and City income taxes. Depending on their state of
residence, Holders may be subject to state and local taxation and should
consult their own tax advisers in this regard.
* * * * *
Interest on certain tax-exempt bonds issued after August 7, 1986 will
be a preference item for purposes of the alternative minimum tax
("AMT"). The Sponsor believes that interest (including any original
issue discount) on the Bonds should not be subject to the AMT for
individuals or corporations under this rule. A corporate Holder should
be aware, however, that the accrual or receipt of tax-exempt interest
not subject to the AMT may give rise to an alternative minimum tax
liability (or increase an existing liability) because the interest income
will be included in the corporation's "adjusted current earnings" for
purposes of the adjustment to alternative minimum taxable income
required by Section 56(g) of the Code and will be taken into account
for purposes of the environmental tax on corporations under Section
59A of the Code, which is based on an alternative minimum taxable
income.
In addition, interest on the Bonds must be taken into consideration in
computing the portion, if any, of social security benefits that will be
included in an individual's gross income and subject to Federal income
tax. Holders are urged to consult their own tax advisers concerning an
investment in Units.
At the time of issuance of each Bond, an opinion relating to the
validity of the Bond and to the exemption of interest thereon from
regular Federal income taxes was or will be rendered by bond counsel.
Neither the Sponsor nor Davis Polk & Wardwell nor any of the special
counsel for state tax matters have made or will make any review of the
proceedings relating to the issuance of the Bonds or the basis for these
opinions. The tax exemption is dependent upon the issuer's (and other
users') compliance with certain ongoing requirements, and the opinion
of bond counsel assumes that these requirements will be complied
with. However, there can be no assurance that the issuer (and other
users) will comply with these requirements, in which event the interest
on the Bond could be determined to be taxable retroactively to the date
of issuance.
In the case of certain of the Bonds, the opinions of bond counsel
indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of such Bonds, or
persons related thereto, for periods while such Bonds are held by such
a user or related person, will not be exempt from regular Federal
income taxes, although interest on such Bonds received by others would
be exempt from regular Federal income taxes. "Substantial user" is
defined under U.S. Treasury Regulations to include only a person
whose gross revenue derived with respect to the facilities financed by
the issuance of bonds is more than 5% of the total revenue derived by
all users of such facilities, or who occupies more than 5% of the usable
area of such facilities or for whom such facilities or a part thereof were
specifically constructed, reconstructed or acquired. "Related persons"
are defined to include certain related natural persons, affiliated
corporations, partners and partnerships. Similar rules may be applicable
for state tax purposes.
After the end of each calendar year, the Trustee will furnish to each
Holder an annual statement containing information relating to the
interest received by the Trust on the Bonds, the gross proceeds received
by the Trust from the disposition of any Bond (resulting from
redemption or payment at maturity of any Bond or the sale by the Trust
of any Bond), and the fees and expenses paid by the Trust. The Trustee
will also furnish annual information returns to each Holder and to the
Internal Revenue Service. Holders are required to report to the Internal
Revenue Service the amount of tax-exempt interest received during the
year.
Expenses and Charges
Initial Expenses
At no cost to a Trust the Sponsor has borne all the
expenses of creating and establishing the Trust, including the cost of
the initial preparation and execution of the Trust Agreement, initial
preparation and printing of the certificates for Units, the fees of the
Evaluator during the initial public offering, legal expenses, advertising
and selling expenses and other out-of-pocket expenses. The costs of
maintaining the secondary market, such as printing, legal and
accounting, will be borne by the Sponsor except as otherwise provided
in the Trust Agreement.
Trustee's, Sponsor's and Evaluator's Fees
The Trustee will receive for its ordinary recurring
services to a Trust an annual fee in the amount set forth under Part A,
"Summary of Essential Information." For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust
Agreement, see "Rights of Unit Holders." The Trustee will receive the
benefit of any reasonable cash balances in the Interest and Principal
accounts.
The Portfolio supervision fee (the "Supervision Fee"),
which is earned for Portfolio supervisory services, is based upon the
greatest face amount of Bonds in the Trust at any time during the
calendar year with respect to which the fee is being computed. The
Supervision Fee has been incurred by Portfolios which have come into
existence after August 14, 1991, beginning with Series 345 initially,
and each Series, in existence, thereafter.
The Supervision Fee, which is not to exceed the amount
set forth in Part A--"Summary of Essential Information", may exceed
the actual costs of providing Portfolio supervisory services for such
Trust, but at no time will the total amount the Sponsor receives for
Portfolio supervisory services rendered to all series of Tax Exempt
Securities Trust in any calendar year exceed the aggregate cost to them
of supplying such services in such year. In addition, the Sponsor may
also be reimbursed for bookkeeping and other administrative services
provided to the Trust in amounts not exceeding their costs of providing
these services.
The Evaluator determines the aggregate bid price of the
underlying securities on a daily basis at a fee in the amount set forth
under Part A, "Summary of Essential Information," for each evaluation
of the Bonds in a Trust. For a discussion of the services performed by
the Evaluator pursuant to its obligations under the Trust Agreement, see
"Evaluator-Responsibility" and "Public Offering-Offering Price".
Any of such fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases in
consumer prices for services as measured by the United States
Department of Labor's Consumer Price Index entitled "All Services
Less Rent" or, if such Index is no longer published, in a similar index
to be determined by the Trustee and the Sponsor. In addition, at the
time of any such increase, the Trustee shall also be entitled to charge
thereafter an additional fee at a rate or amount to be determined by the
Trustee and the Sponsor based upon the face amount of Deposited Units
in a Trust, for the Trustee's services in maintaining such Deposited
Units. The approval of Unit holders shall not be required for charging
of such additional fee.
Other Charges
The following additional charges are or may be incurred
by a Trust: all expenses of the Trustee (including fees and expenses of
counsel and auditors) incurred in connection with its activities under the
Trust Agreement, including reports and communications to Unit
holders; expenses and costs of any action undertaken by the Trustee to
protect a Trust and the rights and interests of the Unit holders; fees of
the Trustee for any extraordinary services performed under the Trust
Agreement; indemnification of the Trustee for any loss or liability
accruing to it without gross negligence, bad faith or willful misconduct
on its part, arising out of or in connection with its acceptance or
administration of a Trust; in the case of certain trusts to the extent
lawful, expenses (including legal, accounting and printing expenses) of
maintaining registration or qualification of the Units and/or a Trust
under Federal or state securities laws subsequent to initial registration
so long as the Sponsor is maintaining a market for the Units and all
taxes and other governmental charges imposed upon the Bonds or any
part of a Trust (no such taxes or charges are being levied or made or,
to the knowledge of the Sponsor, contemplated). The above expenses,
including the Trustee's fee, when paid by or owing to the Trustee, are
secured by a lien on the Trust. In addition, the Trustee is empowered
to sell Bonds in order to make funds available to pay all expenses.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units of a Trust is
determined by adding to the Evaluator's determination of the aggregate
bid price of the Bonds per Unit a sales charge equal to the percentage
of the Public Offering Price indicated for each Trust in Part A,
"Summary of Essential Information". The aggregate bid price of the
underlying Bonds may be expected to be less than the aggregate
offering price (see "Public Offering - Method of Evaluation"). A
proportionate share of accrued and undistributed interest on the Bonds
in a Trust at the date of delivery of the Units of such Trust to the
purchaser is also added to the Public Offering Price.
Pursuant to employee benefit plans, Units of a Trust are
available to employees of certain of the Sponsor at a Public Offering
Price equal to the Evaluator's determination of the aggregate bid price
of Bonds of a Trust per Unit plus a sales charge of 1.25% of the Public
Offering Price. Sales through such plans to employees of the Sponsor
requires less selling effort and selling expenses than sales to the general
public.
Method of Evaluation
The aggregate bid price of the Bonds (which is used to
calculate the price at which the Sponsor repurchases and sells Units in
the secondary market and the Redemption Price at which Units may be
redeemed) will be determined by the Evaluator (1) on the basis of the
current bid prices for the Bonds,
(2) if bid prices are not available for any Bonds, on the basis of current
bid prices of comparable securities, (3) by appraisal, or (4) by any
combination of the above. Such determinations will be made each
business day as of the Evaluation Time set forth in the "Summary of
Essential Information," in Part A, effective for all sales made
subsequent to the last preceding determination. The term "business
day", as used herein shall exclude Saturdays, Sundays and any day on
which the New York Stock Exchange is closed. The difference
between the bid and offering prices of the Bonds may be expected to
average approximately 1.5% of principal amount. In the case of
actively traded securities, the difference may be as little as 0.5 of 1%,
and in the case of inactively traded securities such difference will
usually not exceed 3%. The price at which Units may be repurchased
by the Sponsor in the secondary market could be less than the price
paid by the Unit holder. For information relating to the calculation of
the Redemption Price per Unit, which is also based upon the aggregate
bid price of the underlying Bonds and which may be expected to be less
than the Public Offering Price per Unit, see "Rights of Unit Holders -
Redemption of Units".
Distribution of Units
Units acquired in the secondary market (see "Public
Offering - Market for Units") may be offered by this Prospectus at the
Public Offering Price determined in the manner provided above (see
"Public Offering - Offering Price").
The Sponsor will allow a discount on Units sold to
members of the National Association of Securities Dealers, Inc. Such
discount is subject to change from time to time.
Sales will be made only with respect to whole Units, and
the Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units. A purchaser does not become a Unit holder
(Certificate holder) or become entitled to exercise the rights of a Unit
holder (including the right to redeem his Units) until he has paid for his
Units. Generally, such payment must be made within five business
days after an order for the purchase of Units has been placed. The
price paid by a Unit holder is the Public Offering Price in effect at the
time his order is received, plus accrued interest (see "Public Offering -
Method of Evaluation"). This price may be different from the Public
Offering Price in effect on any other day, including the day on which
the Unit holder made payment for the Units.
Market for Units
Although not obligated to do so, the Sponsor presently
intends to maintain a market for the Units of a Trust and to
continuously offer to purchase such Units at prices based upon the
aggregate bid price of the underlying Bonds which may be less than the
price paid by the Unit holder. For information relating to the method
and frequency of the Evaluator's determination of the aggregate bid
price of the underlying Bonds, see "Public Offering -- Method of
Evaluation". The costs of maintaining the secondary market, such as
printing, legal and accounting, will be borne by the Sponsor except as
otherwise provided in the Trust Agreement. The Sponsor may cease
to maintain such a market at any time and from time to time without
notice if the supply of Units of a Trust of this Series exceeds demand
or for any other reason. In this event the Sponsor may nonetheless
purchase Units, as a service to Unit holders, at prices based on the
current Redemption Price of those Units. In the event that a market is
not maintained for the Units of a Trust, a Unit holder of such Trust
desiring to dispose of his Units may be able to do so only by tendering
such Units to the Trustee for redemption at the Redemption Price,
which is based upon the aggregate bid price of the underlying Bonds.
(See "Rights of Unit Holders - Redemption of Units").
Exchange Option
Unit holders may elect to exchange any or all of their
Units of this series for units of one or more of any series of Tax
Exempt Securities Trust (the "Exchange Trust") available for sale in the
state in which the Unit holder resides at a Public Offering Price for the
units of the Exchange Trust to be acquired based on a fixed sales
charge of $25 per unit. The Sponsor reserves the right to modify,
suspend or terminate this plan at any time without further notice to Unit
holders. Therefore, there is no assurance that a market for units will
in fact exist on any given date on which a Unit holder wishes to sell his
Units of this series and thus there is no assurance that the Exchange
Option will be available to a Unit holder. Exchanges will be effected
in whole units only. Any excess proceeds from Unit holders' Units
being surrendered will be returned and Unit holders will not be
permitted to advance any new money in order to complete an exchange.
An exchange of Units pursuant to the Exchange Option
for units of an Exchange Trust will generally constitute a "taxable
event" under the Code, i.e., a Holder will recognize a gain or loss at
the time of exchange. However, an exchange of Units of this Trust for
units of any other similar series of the Tax Exempt Securities Trust
which are grantor trusts for U.S. federal income tax purposes will not
constitute a taxable event to the extent that the underlying securities in
each trust do not differ materially either in kind or in extent. Unit
holders are urged to consult their own tax advisors as to the tax
consequences to them of exchanging Units in particular cases.
Units of the Exchange Trust will be sold under the
Exchange Option at the bid prices of the underlying securities in the
particular portfolio involved per unit plus a fixed charge of $25 per
unit. As an example, assume that a Unit holder, who has three units
of a trust with a current price of $1,020 per unit based on the bid
prices of the underlying securities, desires to exchange his Units for
units of a series of an Exchange Trust with a current price of $880 per
unit based on the bid prices of the underlying securities. In this
example, the proceeds from the Unit holder's units will aggregate
$3,060. Since only whole units of an Exchange Trust may be
purchased under the Exchange Option, the Unit holder would be able
to acquire three units in the Exchange Trust for a total cost of $2,715
($2,640 for the units and $75 for the sales charge). The remaining
$345 would be returned to the Unit holder in cash.
Reinvestment Programs
Distributions of interest and principal, if any, are made
to Unit holders monthly. The Unit holder will have the option of either
receiving his monthly income check from the Trustee or participating
in one of the reinvestment programs offered by the Sponsor provided
such Unit holder meets the minimum qualifications of the reinvestment
program and such program lawfully qualifies for sale in the jurisdiction
in which the Unit holder resides. Upon enrollment in a reinvestment
program, the Trustee will direct monthly interest distributions and
principal distributions, if any, to the reinvestment program selected by
the Unit holder. Since the Sponsor has arranged for different
reinvestment alternatives, Unit holders should contact the Sponsor for
more complete information, including charges and expenses. The
appropriate prospectus will be sent to the Unit holder. The Unit holder
should read the prospectus for a reinvestment program carefully before
deciding to participate. Participation in the reinvestment program will
apply to all Units of a Trust owned by a Unit holder and may be
terminated at any time by the Unit holder, or the program may be
modified or terminated by the Trustee or the program's Sponsor.
Sponsor's Profits
For their services the Sponsor receives a gross
commission equal to a percentage of the Public Offering Price of the
Units. In maintaining a market for the Units of a Trust (see "Public
Offering - Market for Units"), the Sponsor also realizes profits or
sustain losses in the amount of any difference between the price at
which they buy such Units and the price at which they resell or redeem
such Units (see "Public Offering - Offering Price").
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units of a Trust is evidenced by registered
certificates executed by the Trustee and the Sponsor. A Certificate is
transferable by presentation and surrender of the Certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer.
Certificates may be issued in denominations of one Unit
or any multiple thereof. A Unit holder may be required to pay $2.00
per certificate reissued or transferred, and to pay any governmental
charge that may be imposed in connection with each such transfer or
interchange. For new certificates issued to replace destroyed, stolen or
lost certificates, the Unit holder must furnish indemnity satisfactory to
the Trustee and must pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for
replacement.
Distribution of Interest and Principal
Interest and principal received by a Trust will be
distributed on each Monthly Distribution Date on a pro rata basis to
Unit holders in such Trust of record as of the preceding Record Date.
All distributions will be net of applicable expenses and funds required
for the redemption of Units and, if applicable, reimbursements to the
Trustee for interest payments advanced to Unit holders on previous
Monthly Distribution Dates. (See Part A, "Summary of Essential
Information," and "Tax Exempt Securities Trust -Expenses and
Charges" and "Rights of Unit Holders - Redemption of Units" in this
Section.)
The Trustee will credit to the Interest Account of a Trust
all interest received by such Trust, including that part of the proceeds
of any disposition of Bonds of such Trust which represents accrued
interest. Other receipts will be credited to the Principal Account of the
affected Trust. The pro rata share of the Interest Account and the pro
rata share of cash in the Principal Account represented by each Unit of
a Trust will be computed by the Trustee each month as of the Record
Date. (See Part A, "Summary of Essential Information"). Proceeds
received from the disposition of any of the Bonds subsequent to a
Record Date and prior to the next succeeding Distribution Date will be
held in the Principal Account and will not be distributed until the
following Distribution Date. The distribution to the Unit holders as of
each Record Date will be made on the following Distribution Date or
shortly thereafter and shall consist of an amount substantially equal to
one-twelfth of such holders' pro rata share of the estimated annual
income to the Interest Account after deducting estimated expenses (the
"Monthly Interest Distribution") plus such holders' pro rata share of the
cash balance in the Principal Account computed as of the close of
business on the preceding Record Date. Persons who purchase Units
between a Record Date and a Distribution Date will receive their first
distribution on the second Distribution Date following their purchase of
Units. No distribution need be made from the Principal Account if the
balance therein is less than an amount sufficient to distribute $1.00 per
Unit. The Monthly Interest Distribution per Unit as of the date shown
under Part A, "Summary of Essential Information" for a Trust will
change as the income and expenses of such Trust change and as Bonds
are exchanged, redeemed, paid or sold.
Normally, interest on the Bonds in the Portfolio of a
Trust is paid on a semi-annual basis. Because Bond interest is not
received by a Trust at a constant rate throughout the year, any Monthly
Interest Distribution may be more or less than the amount credited to
the Interest Account as of the Record Date. In order to eliminate
fluctuations in Monthly Interest Distributions resulting from such
variances, the Trustee is required by the Trust Agreement to advance
such amounts as may be necessary to provide Monthly Interest
Distributions of approximately equal amounts. The Trustee will be
reimbursed, without interest, for any such advances from funds
available from the Interest Account on the next ensuing Record Date or
Record Dates, as the case may be. If all or a portion of the Bonds for
which advances have been made subsequently fail to pay interest when
due, the Trustee may recoup advances made by it in anticipation of
receipt of interest payments on such Bonds by reducing the amount
distributed per Unit in one or more Monthly Interest Distributions. If
units are redeemed subsequent to such advances by the Trustee, but
prior to receipt by the Trustee of actual notice of such failure to pay
interest, the amount of which was so advanced by the Trustee, each
remaining Unit holder will be subject to a greater pro rata reduction in
his Monthly Interest Distribution than would have occurred absent such
redemptions. Funds which are available for future distributions,
payments of expenses and redemptions are in accounts which are non-
interest bearing to Unit holders and are available for use by United
States Trust Company of New York, pursuant to normal banking
procedures. The Trustee is entitled to the benefit of holding any
reasonable cash balances in the Interest and Principal Accounts. The
Trustee anticipates that the average cash balance in the Interest Account
will be approximately 2% in excess of the amounts anticipated to be
required for Monthly Distributions to Unit holders. In addition,
because of the varying interest payment dates of the Bonds comprising
a Trust Portfolio, accrued interest at any point in time will be greater
than the amount of interest actually received by a Trust and distributed
to Unit holders. Therefore, there will always remain an item of
accrued interest that is added to the value of the Units. This accrued
but undistributed interest is known as the accrued interest carryover.
If a Unit holder sells or redeems all or a portion of his Units, a portion
of his sale proceeds will be allocable to his proportionate share of the
accrued interest carryover. Similarly, if a Unit holder redeems all or
a portion of his Units, the Redemption Price per Unit which he is
entitled to receive from the Trustee will include his accrued interest
carryover on the Bonds. It should be noted that any Series formed after
Series 384 (including Series 384) that accrued interest carryover no
longer is implemented. (See "Rights of Unit Holders - Redemption of
Units - Computation of Redemption Price per Unit.")
As of the first day of each month the Trustee will deduct
from the Interest Account of a Trust and, to the extent funds are not
sufficient therein, from the Principal Account of such Trust, amounts
necessary to pay the expenses of such Trust. (See "Tax Exempt
Securities Trust - Expenses and Charges".) The Trustee also may
withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable
out of a Trust. Amounts so withdrawn shall not be considered a part
of a Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the
Trustee may withdraw from the Interest Account and the Principal
Account such amounts as may be necessary to cover redemption of
Units by the Trustee. (See "Rights of Unit Holders - Redemption of
Units".)
The Trustee has agreed to advance to a Trust the amount of accrued
interest due on the Bonds of such trust from their repective issue dates
or previous interest payment dates through the Date of Deposit. This
accrued interest amount will be paid to the Sponsor as the holder of
record of all Units on the first settlement date for the Units.
Consequently, when the Sponsor sells Units of a Trust, the amount of
accrued interest to beadded to the Public Offering Price of the Units
purchased by an investor will include only accrued interest from the
day after the Date of Deposit to, but not including, the date of
settlement of the investor's purchase (normally five business days after
purchase), less any distributions from the Interst Account. The Trustee
will recover its advancements to a Trust(without interest or other cost
to such Trust) from interest received on the Bonds deposited in such
Trust.
Reports and Records
The Trustee shall furnish Unit holders in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. In the event that the issuer
of any of the Bonds fails to make payment when due of any interest or
principal and such failure results in a change in the amount which
would otherwise be distributed as a monthly distribution, the Trustee
will, with the first such distribution following such failure, set forth in
an accompanying statement, the issuer and the Bond, the amount of the
reduction in the distribution per Unit resulting from such failure, the
percentage of the aggregate principal amount of Bonds which such
Bond represents and, to the extent then determined, information
regarding any disposition or legal action with respect to such Bond.
Within a reasonable time after the end of each calendar year, the
Trustee will furnish to each person who at any time during the calendar
year was a Unit holder of record, a statement (1) as to the Interest
Account: interest received (including amounts representing interest
received upon any disposition of Bonds), if the issuers of the Bonds are
located in different states or territories, then the percentage of such
interest by such states or territories, deductions for payment of
applicable taxes and for fees and expenses of a Trust, redemptions of
Units and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last
business day of such calendar year; (2) as to the Principal Account:
the dates of disposition of any Bonds and the net proceeds received
therefrom (excluding any portion representing interest), deductions for
payments of applicable taxes and for fees and expenses of a Trust,
redemptions of Units, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) a list of the Bonds held and
the number of Units outstanding on the last business day of such
calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts
actually distributed during such calendar year from the Interest Account
and from the Principal Account, separately stated, expressed both as
total dollar amounts and as dollar amounts representing the pro rata
share of each Unit outstanding. The accounts of a Trust will be audited
not less frequently than annually by independent auditors designated by
the Sponsor, and the report of such auditors shall be furnished by the
Trustee to Unit holders upon request.
The Trustee shall keep available for inspection by Unit
holders at all reasonable times during the usual business hours, books
of record and account of its transactions as Trustee including records
of the names and addresses of Unit holders, certificates issued or held,
a current list of Bonds in the Portfolio of a Trust and a copy of the
Trust Agreement.
Redemption of Units
Units may be tendered to the Trustee for redemption at
its unit investment trust office at 770 Broadway, New York, New York
10003, upon payment of any relevant tax. At the present time there are
no specific taxes related to the redemption of the Units. No redemption
fee will be charged by the Sponsor or the Trustee. Units redeemed by
the Trustee will be canceled.
Certificates for Units to be redeemed must be properly
endorsed or accompanied by a written instrument of transfer. Unit
holders must sign exactly as their name appears on the face of the
certificate with the signature guaranteed by an officer of a national bank
or trust company or by a member of either the New York, Midwest or
Pacific Stock Exchange. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority.
Within seven calendar days following such tender, the
Unit holder will be entitled to receive in cash an amount for each Unit
tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth in the "Summary of Essential Information"
in Part A on the date of tender. (See "Redemption of Units -
Computation of Redemption Price per Unit".) The "date of tender" is
deemed to be the date on which Units are received by the Trustee,
except as regards Units received after the close of trading on the New
York Stock Exchange, the date of tender is the next day on which such
Exchange is open for trading, and such Units will be deemed to have
been tendered to the Trustee on such day for redemption at the
Redemption Price computed on that day. For information relating to
the purchase by the Sponsor of Units tendered to the Trustee for
redemption at prices which may be, in certain circumstances, in excess
of the Redemption Price, see "Redemption of Units - Purchase by the
Sponsor of Units Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn
from the Interest Account, or, if the balance therein is insufficient,
from the Principal Account. All other amounts paid on redemption
shall be withdrawn from the Principal Account. The Trustee is
empowered to sell Bonds in order to make funds available for
redemption. Such sales, if required, could result in a sale of Bonds by
the Trustee at a loss. To the extent Bonds are sold, the size and
diversity of a Trust will be reduced.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption
Price per Unit for any period during which the New York Stock
Exchange is closed, other than weekend and holiday closings, or
trading on that Exchange is restricted or during which (as determined
by the Securities and Exchange Commission) an emergency exists as
a result of which disposal or evaluation of the underlying Bonds is not
reasonably practicable, or for such other periods as the Securities and
Exchange Commission has by order permitted.
Computation of Redemption Price per Unit - The
Redemption Price per Unit of a Trust is determined by the Trustee on
the basis of the bid prices of the Bonds in such Trust as of the
Evaluation Time on the date any such determination is made. The
Redemption Price per Unit of a Trust is each Unit's pro rata share,
determined by the Trustee, of: (1) the aggregate value of the Bonds in
such Trust on the bid side of the market (determined by the Evaluator
as set forth under "Public Offering - Method of Evaluation") (2) cash
on hand in such Trust and accrued and unpaid interest on the Bonds as
of the date of computation, less (a) amounts representing taxes or
governmental charges payable out of such Trust, (b) the accrued
expenses of such Trust, and (c) cash held for distribution to Unit
holders of such Trust of record as of a date prior to the evaluation. The
Evaluator may determine the value of the Bonds in the Trust (i) on the
basis of current bid prices for the Bonds,(ii) if bid prices are not
available for any Bonds, on the basis of current bid prices for
comparable securities, (iii) by appraisal, or (iv) by any combination of
the above.
The difference between the bid and offering prices of the
Bonds may be expected to average approxiamtely 1.5% of principal
amount. In the case of actively traded securities, the difference may be
as little as 0.5% of 1.0%, and in the case of inactively traded securities
such difference usually will not exceed 3.0%. The price at which Units
may be redeemed could be less than the price paid by the Unitholder.
On the Date of Deposit for each Trust the aggregate current offering
price of such Bonds per Unit exceeded the bid price of such Bonds per
Unit by the amounts set forth under Part A, "Summary of Essential
Information."
Purchase by the Sponsor of Units Tendered for
Redemption - The Trust Agreement requires that the Trustee notify the
Sponsor of any tender of Units for redemption. So long as the Sponsor
is maintaining a bid in the secondary market, the Sponsor, prior to the
close of business on the second succeeding business day, will purchase
any Units tendered to the Trustee for redemption at the price so bid by
making payment therefor to the Unit holder in an amount not less than
the Redemption Price not later than the day on which the Units would
otherwise have been redeemed by the Trustee. (See"Public Offering -
Market for Units".) Units held by the Sponsor may be tendered to the
Trustee for redemption as any other Units, provided that the Sponsor
shall not receive for Units purchased as set forth above a higher price
than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsor
will be the Public Offering Price determined in the manner provided in
this Prospectus. (See "Public Offering - Offering Price".) Any profit
resulting from the resale of such Units will belong to the Sponsor
which likewise will bear any loss resulting from a lower offering or
redemption price subsequent to their acquisition of such Units. (See
"Public Offering - Sponsor's Profits".)
Sponsor
Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013 ("Smith Barney"), was incorporated in Delaware in
1960 and traces its history through predecessor partnerships to 1873.
Smith Barney, an investment banking and securities broker-dealer firm,
is a member of the New York Stock Exchange, Inc. and other major
securities and commodities exchanges, the National Association of
Securities Dealers, Inc. and the Securities Industry Association. Smith
Barney is an indirect wholly-owned subsidiary of Travelers Group Inc.
Smith Barney sponsors numerous open-end investment
companies and closed-end investment companies. Smith Barney also
sponsors all Series of Corporate Securities Trust, Government
Securities Trust and Harris, Upham Tax-Exempt Fund and acts as co-
sponsor of certain trusts of The Equity Income Fund, Concept series.
The Sponsor has acted previously as managing underwriter of other
investment companies. In addition to participating as a member of
various underwriting and selling groups or as agent of other investment
companies, the Sponsor also executes orders for the purchase and sale
of securities of investment companies and sell securities to such
companies in its capacity as broker or dealer in securities.
Limitations on Liability
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 Unit holders for taking any action or
refraining from any action in good faith or for errors in judgment or
responsible in any way for depreciation or loss incurred by reason of
the sale of any Bonds, except in cases of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties. (See
"Tax Exempt Securities Trust - Portfolio" and "Sponsor -
Responsibility.")
Responsibility
Although the Trusts are not actively managed as mutual
funds are, the Portfolios are reviewed periodically on a regular cycle.
The Sponsor is empowered to direct the Trustee to dispose of Bonds or
deposited Units of other trusts when certain events occur that adversely
affect the value of the Bonds, including default in payment of interest
or principal, default in payment of interest or principal on other
obligations of the same issuer, institution of legal proceedings, default
under other documents adversely affecting debt service, decline in price
or the occurrence of other market or credit factors, or decline in
projected income pledged for debt service on revenue bonds and
advanced refunding that, in the opinion of the Sponsor, may be
detrimental to the interests of the Unit holders.
The Sponsor intends to provide portfolio services for
each Trust in order to determine whether the Trustee should be directed
to dispose of any such Bonds.
It is the responsibility of the Sponsor to instruct the
Trustee to reject any offer made by an issuer of any of the Bonds to
issue new obligations in exchange and substitution for any Bonds
pursuant to a refunding or refinancing plan, except that the Sponsor
may instruct the Trustee to accept such an offer or to take any other
action with respect thereto as the Sponsor may deem proper if the
issuer is in default with respect to such Bonds or in the judgment of the
Sponsor the issuer will probably default in respect to such Bonds in the
foreseeable future. Any obligations so received in exchange or
substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Bonds
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder,
identifying the Bonds eliminated and the Bonds substituted therefor.
Except as stated in this paragraph, the acquisition by a Trust of any
securities other than the Bonds initially deposited in the Trust is
prohibited.
Resignation
If the Sponsor resigns or otherwise fails or becomes
unable to perform its duties under the Trust Agreement, and no express
provision is made for action by the Trustee in such event, the Trustee
may appoint a successor sponsor or terminate the Trust Agreement and
liquidate the affected Trusts.
TRUSTEE
The Trustee is United States Trust Company of New
York, with its principal place of business at 114 West 47th Street, New
York, New York 10036. United States Trust Company of New York
has, since its establishment in 1853, engaged primarily in the
management of trust and agency accounts for individuals and
corporations. The Trustee is a member of the New York Clearing
House Association and is subject to supervision and examination by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal
Reserve System. In connection with the storage and handling of certain
Bonds deposited in the Trust, the Trustee may use the services of The
Depository Trust Company. These services may include safekeeping
of the Bonds and coupon-clipping, computer book-entry transfer and
institutional delivery services. The Depository Trust Company is a
limited purpose trust company organized under the Banking Law of the
State of New York, a member of the Federal Reserve System and a
clearing agency registered under the Securities Exchange Act of 1934.
Limitations on Liability
The Trustee shall not be liable or responsible in any way
for depreciation or loss incurred by reason of the disposition of any
monies, securities or certificates or in respect of any evaluation or for
any action taken in good faith reliance on prima facie properly executed
documents except in cases of willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations and duties. In
addition, the Trustee shall not be personally liable for any taxes or
other governmental charges imposed upon or in respect of a Trust
which the Trustee may be required to pay under current or future law
of the United States or any other taxing authority having jurisdiction.
(See"Tax Exempt Securities Trust - Portfolio".) For information
relating to the responsibilities and indemnification of the Trustee under
the Trust Agreement, reference is made to the material set forth under
"Rights of Unit Holders," "Sponsor - Resignation" and "Other
Charges".
Resignation
By executing an instrument in writing and filing the
same with the Sponsor, the Trustee and any successor may resign. In
such an event, the Sponsor is obligated to appoint a successor trustee
as soon as possible. If the Trustee becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, the
Sponsor may remove the Trustee and appoint a successor as provided
in the Trust Agreement. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee.
If no successor has accepted the appointment within thirty days after
notice of resignation, the retiring trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The
resignation or removal of a trustee becomes effective only when the
successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
The Evaluator is Kenny Information Systems, Inc., a
division of J.J. Kenny Co., Inc., with main offices located at 65
Broadway, New York, New York 10006.
Limitations on Liability
The Trustee, Sponsor and Unit holders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility
for the accuracy thereof. Determinations by the Evaluator under the
Trust Agreement shall be made in good faith upon the basis of the best
information available to it; provided, however, that the Evaluator shall
be under no liability to the Trustee, the Sponsor or Unit holders for
errors in judgment. But this provision shall not protect the Evaluator
in cases of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Responsibility
The Trust Agreement requires the Evaluator to evaluate
the Bonds of a Trust on the basis of their bid prices on the last business
day of June and December in each year, on the day on which any Unit
of such Trust is tendered for redemption and on any other day such
evaluation is desired by the Trustee or is requested by the Sponsor.
For information relating to the responsibility of the Evaluator to
evaluate the Bonds on the basis of their bid prices, see "Public Offering
- Offering Price".
Resignation
The Evaluator may resign or may be removed by the
joint action of the Sponsor and the Trustee, and in such event, 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 a successor evaluator.
If upon resignation of the Evaluator no successor has accepted
appointment within thirty days after notice of resignation, the Evaluator
may apply to a court of competent jurisdiction for the appointment of
a successor.
AMENDMENT AND TERMINATION OF THE TRUST
AGREEMENT
Amendment
The Sponsor and the Trustee have the power to amend
the Trust Agreement without the consent of any of the Unit holders
when such an amendment is (1) to cure any ambiguity or to correct or
supplement any provision of the Trust Agreement which may be
defective or inconsistent with any other provision contained therein, or
(2) to make such other provisions as shall not adversely affect the
interests of the Unit holders; provided, that the Trust Agreement is not
amended to increase the number of Units issuable thereunder or to
permit the deposit or acquisition of securities either in addition to or in
substitution for any of the Bonds initially deposited in a Trust, except
for the substitution of certain refunding securities for such Bonds or
to permit the Trustee to engage in business or investment activities not
specifically authorized in the Trust Agreement as originally adopted.
In the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
Termination
The Trust Agreement provides that if the principal
amount of Bonds is less than 50% of the principal amount of the Bonds
originally deposited in such Trust, the Trustee may in its discretion and
will, when directed by the Sponsor, terminate such Trust. A Trust may
be terminated at any time by 100% of the Unit holders. See Part A for
additional optional and mandatory termination provisions. However,
in no event may a Trust continue beyond the Mandatory Termination
Date set forth under Part A, "Summary of Essential Information". In
the event of termination, written notice thereof will be sent by the
Trustee to all Unit holders. Within a reasonable period after
termination, the Trustee will sell any Bonds remaining in the affected
Trust, and, after paying all expenses and charges incurred by such
Trust, will distribute to each Unit holder, upon surrender for
cancellation of his certificate for Units, his pro rata share of the
balances remaining in the Interest and Principal Account of such Trust.
LEGAL OPINIONS
Certain legal matters in connection with the Trusts have
been passed upon by Messrs. Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York 10017, as special counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, 2 Wall Street, New
York, New York 10005, act as counsel for the Trustee.
AUDITORS
The Statements of Financial Condition and Portfolio of
Securities of a trust included in this Prospectus have been audited by
KPMG Peat Marwick LLP, independent auditors, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
BOND RATINGS
All ratings except those identified otherwise are by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("Standard & Poor's").
Standard & Poor's
A Standard & Poor's corporate or municipal bond rating
is a current assessment of the creditworthiness of an obligor with
respect to a specific debt obligation. This assessment of
creditworthiness may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or
sell a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished
to Standard & Poor's by the issuer and obtained by Standard & Poor's
from other sources it considers reliable. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of,
such information.
<PAGE>
The ratings are based, in varying degrees, on the
following considerations:
I. Likelihood of default - capacity and willingness of
the obligor as to the timely payment of interest
and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligation; and
III.Protection afforded by, and relative position of,
the obligation in the event of bankruptcy,
reorganization or other arrangement under the
laws of bankruptcy and other laws affecting
creditors' rights.
A summary of the meaning of the applicable rating
symbols as published by Standard & Poor's follows:
AAA - This is the highest rating assigned by Standard
& Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal, and in the majority of instances differ from
AAA issues only in small degrees.
A - Bonds rated A have a strong capacity to pay interest
and repay principal, although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher-rated categories.
BBB - Bonds rated BBB are regarded as having an
adequate capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to
weakened capacity to pay interest and repay principal for bonds in this
category than for bonds in the higher-rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and
C is regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Plus(+) or Minus(-): To provide more detailed
indications of credit quality, the ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" following a rating
indicates the rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the issuance of
the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment
on the likelihood of, or the risk of default upon failure of, such
completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
Conditional Ratings: Indicated by "Con" are given to
bonds for which the continuance of the security rating is contingent
upon Standard & Poor's receipt of an executed copy of the escrow
agreement or closing issuance of insurance by the respective insurance
company.
Moody's Investors Service
A brief description of the applicable Moody's Investors
Service's rating symbols and their meanings is as follows:
Aaa - Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise
what are generally known as high grade bonds. Aa bonds are rated
lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as
medium grade obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: Those municipal bonds in the Aa, A, Baa, Ba and
B groups which Moody's believes possess the strongest investment
attributes are designated by the symbols Aa1, A1, Baa1, Ba1 and B1,
respectively. In addition, Moody's applies numerical modifiers, 1, 2,
and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
Although Industrial Revenue Bonds and Environmental Control
Revenue Bonds are tax-exempt issues, they are included in the
corporate bond rating system.
Conditional ratings, indicated by "Con" are given to
bonds for which the security depends upon the completion of some act
or the fulfillment of some condition. These are bonds secured by (a)
earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. A parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of
condition.
Note: NR indicates, among other things, that no rating
has been requested, that there is insufficient information on which to
base a rating, or that Standard & Poor's Corporation and Moody's
Investors Service do not rate a particular type of obligation as a matter
of policy. Subsequent to the Date of Deposit the credit characteristics
of the Issuers of Securities may have changed. Currently, certain of
the Securities in the Portfolio of a Trust may be unrated and have credit
characteristics comparable to securities rated below the minimum
requirements of such Trust for acquisition of a Security. See Part A -
"Portfolio of Securities" herein to ascertain the ratings on the
Securities, if any, on the date of the Portfolios of Securities.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors
Service, Inc. rating symbols and their meanings is as follow:
AAA - Bonds which are considered to be investment
grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable events.
AA - Bonds which are considered to be investment grade
and of very high credit quality. The obligor's ability to pay interest
and repay principal is very strong although not quite as strong as bonds
rated AAA.
A - Bonds which are considered to be investment grade
and of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB - Bonds which are considered to be investment
grade and of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are more
likely to have adverse impact on these bonds, and therefore impair
timely payment. The likelihood that these bonds will fall below
investment grade is higher than for bonds with higher ratings.
Plus (+) Minus (-) - Plus and minus signs are used with
a rating symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in the
`AAA', `DDD', `DD' or `D' categories.
Conditional - A conditional rating is promised on the
successful completion of a project of the occurrence of a specific event.
<PAGE>
Duff & Phelps Credit Rating Co.
A brief description of the applicable Duff & Phelps Credit Rating Co.
rating symbols and their meanings is as follows:
AAA-Highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S. Treasury
debt.
AA-High credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of
economic conditions.
A-Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.
BBB-Below average protection factors but still
considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.
NR- Not rated (credit characteristics comparable to A or
better on the Date of Deposit).
<PAGE>
<TABLE>
Prospectus
This Prospectus contains information concerning the Trust and
the Sponsors, but does not contain all the information set forth
in the registration statements and exhibits relating thereto, which
the Trust has filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is
hereby made.
<S>
<C>
Index:
Page
Summary of Essential Information. . . . . . . . . . . . . . . . . . . . . . . . . . .A-
2
Series 390
Financial and Statistical Information . . . . . . . . . . . . . . . . . . . . . . . .A-3
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-3
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Statements of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . .A-5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-
5
12,000 Units
Portfolio of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
Tax Exempt Securities Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROSPECTUS
The Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dated June 5, 1995
Estimated Current Return and Estimated Long-Term Return . . . . . . . . . . . . . . 16
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Expenses and Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Offering Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Sponsors
Method of Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Distribution of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Market for Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SMITH BARNEY INC.
Exchange Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reinvestment Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1345 Avenue of the Americas
Sponsor's Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
New York, New York 10105
Rights of Unit Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(800) 298-UNIT
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Distribution of Interest and Principal. . . . . . . . . . . . . . . . . . . . . . . 23
Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Redemption of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Limitations on Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Limitations on Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Evaluator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Limitations on Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Amendment and Termination of the Trust Agreement. . . . . . . . . . . . . . . . . . . 29
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Bond Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Standard & Poor's Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Moody's Investors Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fitch Investors Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, securities in any state to any person to whom it is
not lawful to make such offer in such state.
</TABLE>
<PAGE> PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement
on Form S-6 comprises the following papers and documents:
The facing Sheet on Form S-6.
The cross-reference sheet.
The Prospectus consisting of pages A-1 - A- , and 1- , back cover.
Signatures.
Written consents of the following persons:
KPMG Peat Marwick
Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc.
(included in Exhibit 4.6A)
The following exhibits:
*4.6A - Consent of Kenny S&P Evaluation Services, a division
of Kenny Information Systems, Inc. as Evaluator.
* Filed herewith.
II-1
<PAGE>
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 Broadway
New York, New York, 10006-2511
Telephone 212/770-4000
Smith Barney Incorporated
388 Greenwich Street
New York, NY 10013
RE:Tax Exempt Securities Trust
Series 390
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-52531 for the above-captioned
trust. We hereby acknowledge that Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services,
a division of Kenny Information Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the Registration
Statement for the respective bonds comprising the trust portfolio
are the ratings currently indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter
with the Securities and Exchange Commission.
Sincerely,
John R. Fitzgerald
Vice President
tru:l-31
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to
the use of their name in the Prospectus included in this Post-
Effective Amendment to the Registration Statement ("Post-
Effective Amendment") is contained in their opinion filed as
Exhibit 3.1 to the Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of
our report dated June 2, 1995 included herein and to the
reference to our firm under the heading "AUDITORS" in the
prospectus.
KPMG PEAT MARWICK
New York, New York
June 7, 1995
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, Tax Exempt Securities Trust, Series 390,
certifies that it meets all the requirements for
effectiveness of this Post-Effective Amendment pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of New York,
and State of New York on the 7th day of June, 1995.
Signatures appear on pages II-3.
A majority of the members of the Board of Directors of Smith
Barney Inc. have signed this Post-Effective Amendment
pursuant to Powers of Attorney authorizing the person signing
this Post-Effective Amendment to do so on behalf of such members.
These Powers of Attorney were filed with the Securities
and Exchange Commission under the Securities Act of 1933 with the
Registration Statement of Tax Exempt Securities Trust,
Appreciation Series 7, Registration No. 2-78499 and with the
Registration Statement of Tax Exempt Securities Trust, Series
110, Intermediate Term Series 15 and Short-Intermediate Term
Series 13, Registration Nos. 2-97179, 2-95591 and 2-96184,
respectively, with the Registration Statement of Tax Exempt
Securities Trust, Series 284, Amendment No. 2, Registration No.
33-22777, with the Registration Statement of Tax Exempt
Securities Trust, Series 295, Amendment No. 1, Registration No.
33-26376, and with the Registration Statement of Tax Exempt
Securities Trust, Series 335, Amendment No. 1, Registration No.
33-37952.
<PAGE>
TAX EXEMPT SECURITIES TRUST
BY SMITH BARNEY INC.
By
(George S. Michinard, Jr.)
By the following persons,* who constitute a majority of
the directors of Smith Barney Inc. :
Steven D. Black
James S. Boshart III
Robert A. Case
James Dimon
Robert Druskin
Robert F. Greenhill
Jeffrey B. Lane
Robert H. Lessin
John F. Lyness
Jack L. Rivkin
By
(George S. Michinard, Jr.
Attorney-in-Fact)
* Pursuant to Powers of Attorney previously filed.
II-3
