<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1995
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
A. EXACT NAME OF TRUST:
NATIONAL MUNICIPAL TRUST
MDSC SERIES
B. NAME OF DEPOSITOR:
PRUDENTIAL SECURITIES INCORPORATED
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE:
One Seaport Plaza
199 Water Street
New York, New York 10292
D. NAME AND COMPLETE ADDRESSES OF AGENT FOR SERVICE:
COPY TO:
LEE B. SPENCER, JR., ESQ. KENNETH W. ORCE, ESQ.
PRUDENTIAL SECURITIES INCORPORATED CAHILL GORDON & REINDEL
One Seaport Plaza 80 Pine Street
199 Water Street New York, New York 10005
New York, New York 10292
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
1,394 UNITS*, NATIONAL MUNICIPAL TRUST
MDSC SERIES
___________________
* Including 465 Units registered for purposes of resale by the Depositor.
<PAGE>
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
$1,449,240.00*
G. AMOUNT OF FILING FEE, COMPUTED AT ONE-TWENTY-NINTH OF 1 PERCENT OF THE
PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC:
$500.00
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
/ / CHECK BOX IF IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON
IMMEDIATELY UPON FILING PURSUANT TO RULE 487.
___________________
* Estimated solely for the purpose of calculating the filing fee at a price
of $1,040 per Unit. The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
NATIONAL MUNICIPAL TRUST
MDSC SERIES
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Trust .........................) Prospectus front cover
(b) Title of securities issued ............)
2. Name and address of each depositor .......... Sponsor; Prospectus back
cover
3. Name and address of trustee ................. Trustee
4. Name and address of each principal
underwriter ............................... Sponsor
5. State of organization of trust .............. The Trust
6. Execution and termination of trust
agreement ................................. Summary of Essential
Information; The
Trust; Amendment and
Termination of the
Indenture
7. Changes of Name .............................) *
8. Fiscal year .................................) *
9. Litigation ..................................) *
II. General Description of the Trust and
Securities of the Trust
_______________________
* Inapplicable, answer negative or not required.
i
10. (a) Registered or bearer securities .......) *
(b) Cumulative or distributive
securities .......................... *
(c) Redemption ............................ Rights of Unit Holders
-- Redemption
(d) Conversion, transfer, etc. ............ Rights of Unit Holders
-- Redemption
(e) Periodic payment plan .................) *
(f) Voting rights ......................... *
(g) Notice to certificateholders .......... The Trust; Rights of
Unit Holders -- Reports
and Records; Sponsor
-- Responsibility;
Sponsor --
Resignation; Trustee
-- Resignation;
Amendment and
Termination of the
Indenture
(h) Consents required ..................... The Trust; Amendment and
Termination of the
Indenture
(i) Other provisions ...................... Tax Status
11. Type of securities comprising units ......... Prospectus front cover;
The Trust
12. Certain information regarding
periodic payment certificates ............. *
13. (a) Load, fees, expenses, etc. ............ Summary of Essential
Information; Public
Offering of Units --
Public Offering Price;
Public Offering of
Units -- Sponsor's and
Underwriter's Profits;
Public Offering of
Units -- Volume
Discount; Public
Offering of Units --
Employee Discount;
Exchange Option;
Reinvestment Program;
Expenses and Charges;
Sponsor --
Responsibility
_______________________
* Inapplicable, answer negative or not required.
ii
(b) Certain information regarding
periodic payment certificates ....... *
(c) Certain percentages ................... Summary of Essential
Information; Public
Offering of Units --
Public Offering Price;
Public Offering of
Units -- Profit of
Sponsor; Public
Offering of Units --
Volume Discount;
Public Offering of
Units -- Employee
Discount; Exchange
Option
(d) Price Differentials ................... Public Offering of Units
-- Employee Discount
(e) Certain other fees, etc. payable
by holders .......................... Rights of Unit Holders
-- Certificates
(f) Certain other profits receivable
by depositor, principal under-
writer, trustee or affiliated
persons ............................. The Trust -- Objectives
and Securities
Selection; Rights of
Unit Holders --
Redemption -- Purchase
by the Sponsor of
Units Tendered for
Redemption
(g) Ratio of annual charges to
income .............................. *
14. Issuance of trust's securities .............. The Trust; Rights of
Unit Holders --
Certificates
15. Receipt and handling of payments from
purchasers ................................ *
16. Acquisition and disposition of under-
lying securities .......................... The Trust -- Portfolio
Summary; The Trust --
Objectives and
Securities Selection;
Rights of Unit Holders
_______________________
* Inapplicable, answer negative or not required.
iii
-- Redemption; Sponsor
- Responsibility
17. Withdrawal or redemption .................... Rights of Unit Holders
-- Redemption
18. (a) Receipt, custody and disposition
of income ........................... Rights of Unit Holders
-- Distribution of
Interest and
Principal; Rights of
Unit Holders - Reports
and Records
(b) Reinvestment of distributions ......... Reinvestment Programs
(c) Reserves or special funds ............. Expenses and Charges;
Rights of Unit Holders
-- Distribution of
Interest and Principal
(d) Schedule of distributions ............. *
19. Records, accounts and reports ............... Rights of Unit Holders
-- Distributions of
Interest and
Principal; Rights of
Unit Holders --
Reports and Records
20. Certain miscellaneous provisions of
trust agreement ........................... Sponsor -- Limitations
on Liabil-
(a) Amendment .............................) ity; Sponsor --
Resignation;
(b) Termination ...........................) Trustee -- Limitations
on Liabil-
(c) and (d) Trustee, removal and ity; Trustee -
successor ...........................) Resignation;
Amendment and
Termination of
(e) and (f) Depositor, removal and the Indenture
successor ...........................)
21. Loans to security holders ................... *
22. Limitation on liability ..................... The Trust -- Portfolio
Summary; Sponsor --
Limitations on
Liability; Trustee --
_______________________
* Inapplicable, answer negative or not required.
iv
Limitations on
Liability; Evaluator
-- Limitations on
Liability
23. Bonding arrangements ........................ Additional Information
-- Item A
24. Other material provisions of trust
agreement ................................. *
III. Organization, Personnel and
Affiliated Persons of Depositor
25. Organization of depositor ................... Sponsor
26. Fees received by depositor .................. *
27. Business of depositor ....................... Sponsor
28. Certain information as to officials
and affiliated persons of
depositor ................................. Contents of Registration
Statement -- Part II
29. Companies controlling depositor ............. Sponsor
30. Persons controlling depositor ............... *
31. Payments by depositor for certain
services rendered to trust ................) *
32. Payments by depositor for certain
other services rendered to trust ..........) *
33. Remuneration of employees of depositor
for certain services rendered to
trust .....................................) *
34. Remuneration of other persons for
certain services rendered to trust ........) *
35. Distribution of trust's securities
in states ................................. Public Offering of Units
-- Public Distribution
_______________________
* Inapplicable, answer negative or not required.
v
36. Suspension of sales of trust's
securities ................................) *
37. Revocation of authority to distribute .......) *
38. (a) Method of distribution ................) *
(b) Underwriting agreements ............... Public Offering of Units
(c) Selling agreements ....................) *
39. (a) Organization of principal under-
writer ..............................) Sponsor
(b) N.A.S.D. membership of principal
underwriter .........................) Sponsor
40. Certain fees received by principal
underwriter ............................... *
41. (a) Business of principal underwriter ..... Sponsor
(b) Branch offices of principal
underwriter .........................) *
(c) Salesmen of principal underwriter .....) *
42. Ownership of trust's securities by
certain persons ...........................) *
43. Certain brokerage commissions received
by principal underwriter ..................) *
44. (a) Method of valuation ................... Summary of Essential
Information; Public
Offering of Units --
Public Offering Price;
Public Offering of
Units -- Public
Distribution; Public
Offering of Units --
Secondary Market
(b) Schedule as to offering price ......... *
(c) Variation in offering price to
certain persons ..................... Public Offering of Units
-- Public
Distribution; Public
Offering of Units --
Volume Discount;
Public Offering of
Units -- Employee
_______________________
* Inapplicable, answer negative or not required.
vi
Discount; Exchange
Option
45. Suspension of redemption rights ............. *
46. (a) Redemption Valuation .................. Summary of Essential
Information; Rights of
Unit Holders --
Redemption --
Computation of
Redemption Price per
Unit
(b) Schedule as to redemption price ....... *
47. Maintenance of position in underlying
securities ................................ Public Offering of Units
-- Secondary Market;
Rights of Unit Holders
-- Redemption --
Computation of
Redemption Price per
Unit; Rights of Unit
Holders -- Redemption
-- Purchase by the
Sponsor of Units
Tendered for
Redemption
IV. Information Concerning the Trustee
or Custodian
48. Organization and regulation of
trustee ................................... Trustee
49. Fees and expenses of trustee ................ Expenses and Charges
50. Trustee's lien .............................. Expenses and Charges --
Other Charges
V. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's
securities ................................. The Trust -- Insurance
on the Securities in
the Portfolio of an
Insured Trust
_______________________
* Inapplicable, answer negative or not required.
vii
VI. Policy of Registrant
52. (a) Provisions of trust agreement with
respect to selection or elimina-
tion of underlying securities ....... Prospectus front cover;
The Trust -- Portfolio
Summary; The Trust --
Insurance on the
Securities in the
Portfolio of an Insured
Trust; The Trust --
Objectives and
Securities Selection;
Sponsor --
Responsibility
(b) Transactions involving elimination
of underlying securities ............ *
(c) Policy regarding substitution or
elimination of underlying
securities .......................... Sponsor --
Responsibility
(d) Fundamental policy not otherwise
covered ............................. *
53. Tax status of trust ......................... Prospectus front cover;
Tax Status
VII. Financial and Statistical Information
54. Trust's securities during last ten
years .....................................) *
55. )
56. Certain information regarding periodic
payment certificates ......................) *
57. )
58. )
59. Financial statements (Instruction 1(c)
to Form S-6) .............................. Statement of Financial
Condition of the Trust
-vi-
<PAGE>
Subject to Completion dated June 1, 1995
Information contained herein is subject to completion
or amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to
buy them be accepted prior to the time the registration
statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any
State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of such state.
PART A
- ---------------------------------------------------------------
NATIONAL MUNICIPAL TRUST
MDSC SERIES
- ---------------------------------------------------------------
National Municipal Trust, MDSC Series designated as
the National Trust (the 'National Trust' or the 'Trust') is
composed of interest-bearing municipal bonds and contracts and
funds for the purchase thereof (the 'Securities'). The
interest on these bonds, in the opinion of bond counsel to the
issuing governmental authorities is, under existing law,
excludable from gross income for Federal income tax purposes
(except in certain instances depending on the Unit Holder).
The Prospectus indicates the extent to which interest income of
the Trust is subject to alternative minimum tax under the
Internal Revenue Code of 1986, as amended. See 'Schedule of
Portfolio Securities' and 'Portfolio Summary as of Date of
Deposit'.
_____% of the aggregate principal amount of the
Securities consists of investment grade state, municipal and
public authority debt obligations ("Long-Term Securities") with
a dollar weighted average life to maturity of [20] years and
_____% of the aggregate principal amount of the Securities
consists of municipal securities with a dollar weighted average
life to maturity of [2_] years (the "DSC Payment Securities"),
the principal and interest from which will be used in payment
of the deferred sales charge ("DSC").
A-1
<PAGE>
The objectives of the Trust are (1) the providing of
interest income which, in the opinion of counsel is, under
existing law, excludable from gross income for Federal income
tax purposes (except in certain instances depending on the Unit
Holder) through investment in a fixed portfolio consisting
primarily of investment grade long-term state, municipal and
public authority debt obligations, and the conservation of
capital and (2) the payment of the DSC from the interest
payments, if any, on, and the principal paid at the maturity
of, the DSC Payment Securities. There is, of course, no
guarantee that the Trust's objectives will be achieved. The
value of the Units of the Trust will fluctuate with the value
of the portfolio of underlying Securities. The Securities in
the Trust are not insured by The Prudential Insurance Company
of America.
Minimum Purchase: 1 Unit.
PUBLIC OFFERING PRICE of the Units of the Trust
during the initial public offering period is equal to the
aggregate offering side evaluation of the underlying Securities
in the Trust's Portfolio divided by the number of Units
outstanding in such Trust, plus the applicable sales charge as
set forth herein plus cash held by the Trust. (See Part
B--'Public Offering of Units--Volume Discount.')
- ---------------------------------------------------------------
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.
- ---------------------------------------------------------------
A-2
<PAGE>
- ---------------------------------------------------------------
SPONSOR: PRUDENTIAL SECURITIES
PLEASE READ AND RETAIN Prospectus dated
THIS PROSPECTUS FOR FUTURE REFERENCE , 1995
- ---------------------------------------------------------------
A-3
<PAGE>
This Prospectus does not contain all of the
information with respect to the investment company set forth in
its registration statement and exhibits relating thereto which
have been 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.
A-4
<PAGE>
MONTHLY DISTRIBUTIONS of principal, premium, if any,
and interest received by the Trust will be made on or shortly
after the twenty-fifth day of each month to Unit Holders of
record on the tenth day of such month, commencing with the
first distribution on the date indicated herein. In some cases
distribution on a semiannual basis may be available. (See
Part B -- 'Rights of Unit Holders -- Distribution of Interest
and Principal'). Alternatively, Unit Holders may elect to have
their distributions reinvested in the Reinvestment Program of
the Sponsor, as, if and when such program is available to Unit
Holders. (See Part B -- 'Reinvestment Program.')
THE SPONSOR, although not obligated to do so,
presently intends to maintain a secondary market for the Units
in the Trust based on the aggregate bid side evaluation of the
underlying Securities, as more fully described under Part B --
'Public Offering of Units -- Secondary Market.' If such a
market is not maintained, a Unit Holder may be able to dispose
of his Units only through redemption at prices based on the
aggregate bid side evaluation of the underlying Securities.
The Sponsor's Repurchase Price, like the Redemption Price, will
reflect the deduction from the value of the underlying
Securities of any unpaid amount of the Deferred Sales Charge
and to the extent the entire Deferred Sales Charge has not been
so deducted or paid at the time of redemption or sale of the
Units, the remainder will be deducted from the proceeds of
redemption or sale. (See Part B -- 'Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit.')
Subsequent to the Date of Deposit, the Sponsor may
deposit additional Securities in a trust (where additional
Units are to be offered to the public). (See Part B -- 'The
Trust.')
RISK CONSIDERATIONS. [ ]% of the estimated
annual income of the National Trust is subject to alternative
minimum tax under the Internal Revenue Code of 1986, as
amended. An investment in Units of the Trust should be made
with an understanding of the risks which an investment in fixed
rate long-term and short-term debt obligations may entail,
including the risk that the value of the Units will decline
with increases in interest rates. In the event a default by
the issuer of a DSC Payment Security, other assets of the Trust
would be utilized to pay the deferred sales charge, and the
sale of Securities other than the DSC Payment Securities may be
required. Subsequent to the Date of Deposit the ratings of the
Securities set forth in Part A -- 'Schedule of Portfolio
Securities' may have declined due to, among other factors, a
decline in creditworthiness of the issuer of said Securities.
A-5
<PAGE>
PORTFOLIO SUMMARY AS OF DATE OF DEPOSIT
National Trust
The Portfolio contains ___issues of Securities of
issuers located in ___ states. All of the issues are payable
from the income of specific projects or authorities and are not
supported by the issuer's power to levy taxes. Although income
to pay such Securities may be derived from more than one
source, the primary sources of such income and the percentage
of issues deriving income from such sources are as follows:
health and hospital facilities: _____%* of the Trust; housing
facilities: _____%* of the Trust; lease facilities: ____%* of
the Trust; parking facilities: ____%* of the Trust; pollution
control facilities: ______%* of the Trust; power facilities:
_____%* of the Trust; miscellaneous: ____%* of the Trust. The
Trust is concentrated in facilities Securities.
The Portfolio also contains Securities representing
____%* of the Trust (single-family housing securities) which
are subject to the requirements of Section 103A of the Internal
Revenue Code of 1954, as amended, or Section 143 of the
Internal Revenue Code of 1986, as amended.
Approximately ______%* of the Securities in the Trust
also contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a
stated period which typically does not exceed three years from
the date of issuance of such Securities.
As of the Date of Deposit, _____%* of the Securities
in the Trust are rated by Standard & Poor's Corporation
(_____%* being rated AAA, _____%* being rated AA and _____%*
being rated A) and _____%* of the Securities in the Trust are
rated by Moody's Investors Service (_____%* being rated Aaa,
_____%* being rated Aa and _____%* being rated A). For a
description of the meaning of the applicable rating symbols as
published by Standard & Poor's and Moody's, see Part B -- '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 Securities which they undertake to rate and
that these ratings are general and are not absolute standards
of quality.
___________________
* Percentages computed on the basis of the aggregate offering price of
the Securities in the Trust on the Date of Deposit.
A-6
<PAGE>
[ ] Securities in the Trust have been issued with
an 'original issue discount'. (See Part B -- 'Tax Status'.)
Of these original issue discount bonds, approximately
_____% of the aggregate principal amount of the Securities in
the Trust (although only _____%* of the aggregate offering
price of all Securities in the Trust on the Date of Deposit)
are zero coupon bonds (including bonds known as multiplier
bonds, money multiplier bonds, capital appreciation bonds,
capital accumulator bonds, compound interest bonds, and
discount maturity payment bonds.)
Alternative Minimum Tax
The Sponsor's affiliate, The Prudential Investment
Corporation, estimates that _____% of the estimated annual
income per Unit consists of interest on private activity bonds,
which interest is to be treated as a tax preference item for
alternative minimum tax purposes (see 'Tax Status' and
'Schedule of Portfolio Securities').
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and the
number of Units to be sold by each are as follows:
UNITS
______________
UNDERWRITERS NATIONAL TRUST
Prudential Securities Incorporated...........
One New York Plaza
New York, New York 10292
A-7
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL MUNICIPAL TRUST
MDSC SERIES
AS OF _________, 1995*
The information contained in the following Summary of Essential
Information is for illustrative purposes ony and will differ
upon completion or amendment.
<TABLE>
<CAPTION>
<S> <C>
FACE AMOUNT OF SECURITIES.................... $10,330,000.00
NUMBER OF UNITS.............................. 10,000
FRACTIONAL UNDIVIDED INTEREST IN THE
TRUST REPRESENTED BY EACH UNIT............. 1/10,000th
PUBLIC OFFERING PRICE(1)
Aggregate offering side evaluation
of Securities in the Trust................. $10,013,869.05
Offering side evaluation per Unit of
Securities subject to a sales charge....... 968.18
Sales charge of 4.9% (5.152% of
Securities subject to a sales
charge).................................... 49.87
Offering side evaluation per Unit of
DSC Payment Securities..................... 33.31
Aggregate of offering side
evaluation plus the total sales
charge**................................... 1,051.26
Deferred sales charge...................... 36.51
Up-front sales charge...................... 13.36
Public Offering Price per Unit
(offer side evaluation of Securities
plus Up-front sales charge)***............. $ 1,014.75
SPONSOR'S INITIAL REPURCHASE PRICE PER
UNIT (based on offering side
evaluation of underlying Securities
less the DSC).............................. $ 964.88
REDEMPTION AND SPONSOR'S SECONDARY
MARKET REPURCHASE PRICE PER UNIT
(based on bid side evaluation of
A-8
<PAGE>
underlying Securities less the DSC,
$54.17 less than Public Offering
Price per Unit; $4.30 less than
Sponsor's Initial Repurchase Price
per Unit)(2)............................... $ 960.58
</TABLE>
MINIMUM PRINCIPAL DISTRIBUTION: No distribution need be made
from the Principal Account if the balance therein is less
than $5 per Unit.
SPONSOR'S ANNUAL PORTFOLIO SUPERVISION FEE: Maximum $.25 per
$1,000 face amount of underlying Securities.
PREMIUM AND DISCOUNT ISSUES IN PORTFOLIO Face amount of
Securities with offering side evaluation: over par-- %; at
par--0%; at a discount from par-- %
EVALUATOR'S FEE FOR EACH EVALUATION: $10 per evaluation of the
portfolio.
EVALUATION TIME: 4:00 P.M. New York time for primary market
transactions and 3:30 P.M. New York time for secondary market
transactions.
MANDATORY TERMINATION DATE: (5) The Trust will terminate on the
date of the maturity, redemption, sale or other disposition
of the last Security held in the Trust.
MINIMUM VALUE OF TRUST: The Trust may be terminated if the
value of the Trust is less than 40% of the face amount of
Securities deposited including supplemental deposits, if any.
WEIGHTED AVERAGE LIFE TO MATURITY of Long-Term
Securities: years
<TABLE>
<CAPTION>
MONTHLY
<S> <C>
CALCULATION OF ESTIMATED NET ANNUAL INCOME
PER UNIT(4)(6)
Estimated Annual Income per Unit............. $
Less estimated annual expenses per
Unit......................................... $
Estimated Net Annual Income per Unit......... $
Trustee's Annual Fee (including estimated
expenses and Evaluator's Fee) per
$1,000 principal amount of
Securities(7)................................ $ 2.09
A-9
<PAGE>
Estimated Organizational Expenses per
$1,000 principal amount of
Securities(7)................................ $
Daily Rate of Income Accrual per Unit(6).......... $
Estimated Current Return(3)(4)(6)................. %
Estimated Long-Term Return(3)..................... %
First distribution to be paid on
25, 1995 to Holders of
record on 10, 1995.................. $
CALCULATION OF SECOND AND FOLLOWING
DISTRIBUTIONS:
Estimated Net Annual Income per Unit
divided by 12................................ $
Record Dates--tenth day of each month
Distribution Dates--twenty-fifth day of
each month
Deferred Sales Charge Deduction Dates: The
[ ] day of each quarter commencing
________ and ending on ___________
</TABLE>
_______________________
* The Date of Deposit. The Date of Deposit is the date on
which the Indenture was signed and the deposit of
Securities with the Trustee was made.
** After the initial offering period, Units may be available
for purchase from the Sponsor at a price based upon the
bid side evaluation of the Bonds plus a sales charge as
set forth in Part B, 'Public Offering of Units -- Volume
Discount.'
The total sales charge consists, during the initial
offering period, of an Upfront Sales Charge and a Deferred
Sales Charge, the total of which equals 4.90% of the aggregate
of the offer side evaluation of the Securities subject to a
sales charge plus the total sales charge (5.152% of the offer
side evaluation of the Securities other than the DSC Payment
Securities). The Upfront Sales Charge is computed by deducting
the Deferred Sales Charge from the total sales charge; thus, on
the date of the Summary Essential Information, the Upfront
Sales Charge is $_______ per Unit. The Upfront Sales Charge is
calculated based on the total sales charge at the time of
purchase and added to the net asset value of a Unit and,
therefore, may vary based on changes in the valuation of the
Securities. The Upfront Sales Charge will be reduced on a
graduated basis on purchases of $[ ] or more. See Part
B - Public Offering of Units - Volume Discount. The Deferred
Sales Charge is paid through reduction of the net asset value
A-10
<PAGE>
of the Trust by [$3.00] per Unit quarterly on each Deferred
Sales Charge Deduction Date commencing on the first Deferred
Sales Charge Deduction Date shown on the Summary of Essential
Information. The total sales charge consists, after the
initial offering period, of a sales charge based on the bid
side evaluation of the Securities subject to a sales charge
calculated as set forth in Part B - Public Offering of Units -
Secondary Market Sales Charge. The Upfront Sales Charge for a
secondary market purchase will equal the difference between
such total secondary market sales charge and any unpaid DSC
remaining at the time of purchase. If a Unit Holder exchanges,
redeems or sells his Units to the Sponsor prior to the last
Deferred Sales Charge Deduction Date, the Unit Holder is
obligated to pay any remaining Deferred Sales Charge, the
amount of which will reduce the disposition proceeds.
*** This Public Offering Price is computed as of the Date of
Deposit and may vary from the Public Offering Price on the
date of this Prospectus or any subsequent date.
(1) No accrued interest will be added to the Public Offering
Price in connection with purchase of Units contracted for
on _________, 1995. With respect to purchases contracted
for after such date, accrued interest on the Securities
other than the DSC Payment Securities from ____________,
1995, the first expected settlement date, to, but not
including the date of settlement (normally three business
days after purchase) will be added to the Public Offering
Price.
(2) Upon redemption the price to be paid will include accrued
interest on the Securities other than the DSC Payment
Securities.
(3) The Estimated Current Return is calculated by dividing the
Estimated Net Annual Income (which does not include the
income on the DSC Payment Securities) per Unit by the
Public Offering Price per Unit. The Estimated Net Annual
Income per Unit will vary with changes in fees and
expenses of the Trust and with the principal prepayment,
redemption, maturity, exchange or sale of Securities while
the Public Offering Price will vary with changes in the
offering price of the underlying Securities; therefore,
there is no assurance that the present Estimated Current
Return indicated above will be realized in the future.
The Estimated Long-Term Return is calculated on a pre-tax
basis using a formula which (1) takes into consideration,
and factors in the relative weightings of, the market
values, yields (which takes into account the amortization
A-11
<PAGE>
of premiums and the accretion of discounts) and estimated
retirements of all of the Securities in the Trust
(including the DSC Payment Securities) and (2) takes into
account the expenses and sales charge associated with each
Unit. Since the market values and estimated retirements
of the Securities and the expenses of the Trust will
change, there is no assurance that the present Estimated
Long-Term Return as indicated above will be realized in
the future. The after-tax Estimated Long-Term Return will
be lower to the extent of any taxation on the disposition
of Securities. The Estimated Current Return and Estimated
Long-Term Return are expected to differ because the
calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the
Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price as of the
Date of Deposit. (A projected cash flow statement as of
the Date of Deposit is available upon request from the
Trustee.)
(4) Does not include discount accretion on original issue
discount or zero coupon bonds.
(5) The actual date of termination of the Trust may be
considerably earlier. (See Part B, 'Amendment and
Termination of the Indenture -- Termination.')
(6) In calculating these figures the interest income on the
DSC Payment Securities has not been included.
(7) See Part B, Expenses and Charges - Expenses.
FEE TABLE
This Fee Table is intended to help you to understand
the costs and expenses that you will bear directly or
indirectly. See Part B -- "Public Offering of Units" and
"Expenses and Charges." Although the Trust is a unit
investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees and an understanding
of the costs and expenses that you pay.
A-12
<PAGE>
<TABLE>
<CAPTION>
As a percentage
of offer side
evaluation
Unit Holder plus total Amount per
Transaction Expenses sales charge $____ Unit
<S> <C> <C>
Aggregate Sales Charge Imposed on
Securities subject to a sales
charge...................... 4.90% $
Deferred Sales Charge......... $ (b)
Upfront Sales Charge.......... $ (a)
Annual Trust Operating Expenses
Trustee's Fee............... % $
Organizational Expenses..... % $
Other Operating Expenses
(including Portfolio
Supervision, Bookkeeping and
Administrative Fees)........ % $
Total ........................ % $
</TABLE>
Example
<TABLE>
<CAPTION>
Cumulative Expenses
__Paid for Period:_
1 3
year years(d)
<S> <C> <C>
An investor would pay the following
expenses on a $1,000 investment,
assuming the Trust's operating
expense ratio of ____% and a 5%
annual return on the investment
throughout the periods and
redemption at the end of each
time period ........................... $ $
</TABLE>
The Example assumes reinvestment of all distributions
into additional units of the Trust (a reinvestment option
different from that offered by the Trust) and utilizes a 5%
A-13
<PAGE>
annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. The Example
should not be considered a representation of past or future
expenses or annual rate of return; the actual expenses and
annual rate of return may be more or less than those assumed
for purposes of the Example.
__________________
(a) The Upfront Sales Charge is the difference between the
total sales charge and the Deferred Sales Charge.
(b) The DSC will be paid at a rate of [$3.00] per quarter per
Unit, irrespective of purchase or redemption price, in
each of the first 12 quarters of the Trust. If a Holder
sells, exchanges or redeems Units before all of these
payments have been made, the balance of the Deferred Sales
Charge will be deducted from the Unit proceeds.
A-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE UNIT HOLDERS, SPONSOR AND TRUSTEE
OF THE NATIONAL MUNICIPAL TRUST
MDSC SERIES
We have audited the accompanying statement of
financial condition and schedule of portfolio securities of the
National Municipal Trust MDSC Series as of _______, 1995. These
financial statements are the responsibility of the Trustee and
Sponsor (see note (e) to the statement of financial condition).
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
an irrevocable letter of credit and contracts for the purchase
of securities, as shown in the statement of financial condition
and schedule of portfolio securities as of _____________, 1995,
by correspondence with United States Trust Company of New York,
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 statement of financial condition
and schedule of portfolio securities referred to above present
fairly, in all material respects, the financial condition of
the National Municipal Trust MDSC Series as of ___________,
1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
________, 1995
New York, New York
A-15
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION
NATIONAL MUNICIPAL TRUST
MDSC SERIES
AS OF DATE OF DEPOSIT, __________, 1995
TRUST PROPERTY
<S> <C>
Sponsor's Contracts to Purchase underlying
Securities backed by an irrevocable
letter of credit(a)..........................$
Accrued interest to Date of Deposit of
underlying Securities(a)(b)..................
Organizational Costs(f)........................... _________
Total........................................ $
LIABILITY AND INTEREST OF UNIT HOLDERS
Liability:
Accrued interest to Date of Deposit of
underlying Securities(a)(b)..................$
Payment of deferred portion of sales
charges......................................
Interest of Unit Holders:
Units of fractional undivided interest
outstanding:
Cost to investors(c).........................
Gross underwriting commissions(d)............
Accrued Liability(f).........................
Total........................................$
</TABLE>
__________________
(a) The aggregate value of the Securities represented by
Contracts to Purchase listed under 'Schedule of Portfolio
Securities' included herein and their cost to the Trust
are the same. The value is determined by the Evaluator on
the basis set forth under Part B - 'Public Offering of
Units - Public Offering Price.' An irrevocable letter of
credit covering MDSC Series drawn on Mellon Bank, N.A. in
the amount of $_____________ has been deposited with the
Trustee. The amount of the letter of credit includes
$____________ (equal to the Purchase Price to Sponsor) for
the purchase of $_____________ face amount of Securities
pursuant to contracts to purchase Securities, plus
$__________ covering accrued interest thereon.
A-16
<PAGE>
(b) The Trustee will advance $__________, which is an amount
equal to the accrued interest on the underlying Securities
to the first expected settlement date (normally three
business days after purchase) and such amount will be
distributed to the Sponsor as the holder of record on such
date as set forth under Part B - 'Public Offering of Units
- Public Offering Price.'
(c) The aggregate Public Offering Price (exclusive of accrued
interest) is computed on the basis set forth under Part B
- 'Public Offering of Units -- Public Offering Price.'
(d) The aggregate sales charge of 4.90% of the aggregate
offering side evaluation of the Securities (other than the
DSC Payment Securities) plus the total sales charge per
Unit is computed on the basis set forth under Part B -
'Public Offering of Units - Public Offering Price.'
(e) The Trustee has custody of and responsibility for all
accounting and financial books, records, financial
statements and related data of the 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 the Trust. The
Trustee is also responsible for all estimates and accruals
reflected in the Trust's financial statements. The
Evaluator determines the price for each underlying
Security included in the Trust's Schedule of Portfolio
Securities on the basis set forth in Part B - 'Public
Offering of Units - Public Offering Price.' Under the
Securities Act of 1933, as amended (the 'Act'), the
Sponsor is deemed to be an issuer of the Trust's Units. As
such, the Sponsor has the responsibility of an issuer
under the Act with respect to financial statements of the
Trust included in the Registration Statement under the Act
and amendments thereto.
(f) A portion of the Trust's organizational costs have been
deferred and amortized over a period of five years.
A-17
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL MUNICIPAL TRUST
MDSC SERIES
ON DATE OF DEPOSIT, ____________, 1995
SECURITIES SINKING OPTIONAL
REPRESENTED FUND REFUNDING
PORTFOLIO BY PURCHASE AGGREGATE INTEREST DATES OF REDEMPT- REDEMPT-
CONTRACTS(4)(5) PRINCIPAL RATES MATURITY IONS (6) IONS (6)
<S> <C> <C> <C> <C> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.(8)
12.(8)
A-18
<PAGE>
13.(8)
YIELD TO
COST OF MATURITY
PORTFOLIO SECURITIES ON DATE OF
NO. TO TRUST(3) DEPOSIT(1) RATING
1
2
3
4
5
6
7
_______________________
</TABLE>
(1) Yield of Securities was computed on the basis of offering prices on the
Date of Deposit. Evaluation of Securities by the Evaluator is made on the
basis of the current offering side evaluation. The offering side evaluation is
greater than the current bid side evaluation of the Securities, which is the
basis on which Redemption Price per Unit is determined. (See Part B --
'Rights of Unit Holders -- Redemption -- Computation of Redemption Price per
Unit,' herein). The aggregate value based on the bid side evaluation at the
Evaluation Time on the Date of Deposit was $____________ which is $_______-
__ lower than the aggregate Cost of Securities to Trust based on the
offering side evaluation of the Trust. On such date the bid side evaluation of
the Securities was lower than the offering side evaluation by 0.4% of the
aggregate face amount of the Securities in the Trust. Yield to Maturity on
Date of Deposit of Securities was computed on the basis of the offering side
evaluation at the Evaluation Time on the Date of Deposit. Percentages in
this column represent Yield to Maturity on Date of Deposit unless followed
by '+' which indicates yield to an earlier redemption date.
A-19
<PAGE>
(2) There is shown under this heading the year in which each issue of Securi-
ties initially is redeemable by the operation of optional call provisions
and the redemption price for that year; unless otherwise indicated, each
issue continues to be redeemable at declining prices thereafter but not below
par. Securities listed as non-callable, as well as Securities listed as
callable, may also be redeemable at par under certain circumstances from
special redemption payments. Such circumstances include redemptions by issuers
utilizing unexpended bond proceeds, proceeds of condemnation or sale of a
project, insurance proceeds from the destruction of a project or as a
result of other factors. Redemption of a bond at par will result in a loss to
Unit Holders to the extent that the value of the bonds at the time of
purchase of Units plus the sales charge allocated to such bond exceeds the
amount paid upon redemption.
(3) Offering prices of Securities are determined by the Evaluator on the basis
stated under Part B--'Public Offering of Units--Public Offering Price'
herein. The Profit/Loss to Sponsor on Deposit totals $_________.
(4) The Contracts to purchase Securities were entered into from _________, 1995
through 1995 with the final settlement date expected to be ________, 1995.
All contracts are expected to be settled by the final settlement date for
the purchase of Units.
(5) Certain of the Securities may have been purchased from the Sponsor's
proprietary accounts or from affiliates.
(6) There is shown under this heading the first year in which an issue of
Securities is subject to scheduled sinking fund redemption and the redemp-
tion price for that year.
(7) In the opinion of bond counsel to the issuing governmental authorities,
interest payments on these bonds will be a tax preference item for individ-
uals and corporations for alternative minimum tax purposes. Normally, the
bonds pay interest semiannually. The payment dates can generally be
determined based on the date of maturity, i.e., a bond maturing on December
1 will pay interest semiannually on June 1 and December 1 (see 'Tax Status').
(8) DSC Payment Security - The interest payments and principal payments on
these Securities will be distributed by the Trust to the Sponsor in payment
of the deferred sales charge.
* Moody's Investors Service rating.
A-20
<PAGE>
PROSPECTUS--PART B:
_______________________________________________________________
NOTE THAT PART B OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED
UNLESS ACCOMPANIED BY PART A.
_______________________________________________________________
NATIONAL MUNICIPAL TRUST
THE TRUST
Each Trust set forth in Part A is one of a series of
similar but separate unit investment trusts. Unless the
context otherwise requires, each trust, including each trust
comprising a Multistate Series, a 'State Trust', hereinafter
will be referred to as the 'Trust' or the 'Trusts', and as the
context requires, for an insured Trust, the 'Insured Trust.'
Each Trust was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement and a related
Reference Trust Agreement dated the Date of Deposit
(collectively, the 'Indenture'),* among Prudential Securities
Incorporated (the 'Sponsor'), United States Trust Company of
New York (the 'Trustee') and Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. (the 'Evaluator'). On the
Date of Deposit, debt obligations and contracts and funds
(represented by irrevocable letter(s) of credit issued by major
commercial bank(s)) for the purchase of such debt obligations
(collectively, the 'Securities') were deposited into the Trust
and evaluated at prices equal to the evaluation of such
Securities on the offering side of the market (which evaluation
takes into account any insurance obtained by the issuers or
previous owners of the Securities) as determined by the
Evaluator as of the Date of Deposit. The Trustee then
immediately delivered to the Sponsor certificates of beneficial
interest (the 'Certificates') representing the units (the
'Units') comprising the entire ownership of each Trust which
Units the Sponsor, through this Prospectus, is offering for
sale to the public. The holders of Units (the 'Unit Holders'
or 'Unit Holder', as the context requires) will have the right
to have their Units redeemed at a price based on the aggregate
bid side evaluation of the Securities if they cannot be sold in
___________________
* Reference is hereby made to said Indenture and any statements
contained herein are qualified in their entirety by the provisions of
said Indenture.
B-1
<PAGE>
the secondary market which the Sponsor, although not obligated
to do so, proposes to maintain. The Sponsor, Prudential
Securities Incorporated, is a wholly-owned, indirect subsidiary
of The Prudential Insurance Company of America. Each Trust has
a mandatory termination date set forth under Part A--'Summary
of Essential Information', but may be terminated substantially
prior thereto upon the occurrence of certain events, including
a reduction in the value of the Trust below the value set forth
under Part A--'Summary of Essential Information'.
Notwithstanding the availability of the above-mentioned
irrevocable letter(s) of credit, it is expected that the
Sponsor will pay for the Securities as the contracts for their
purchase become due. A substantial portion of such contracts
have not become due by the date of this Prospectus. To the
extent Units are sold prior to the settlement of such
contracts, the Sponsor will receive the purchase price on such
Units prior to the time at which it pays for Securities
pursuant to such contracts and have the use of such funds
during this period.
During the 90-day period following the first deposit of
Securities in the Trust, the Sponsor may deposit in the Trust
additional Securities which are substantially similar to the
initially deposited Securities (including, in each case,
Securities described in purchase contracts, together with cash
or a letter of credit to be used to effectuate their purchase)
and cash, if required. Any deposit made after the close of
such 90-day period must exactly replicate the Securities and
any cash (other than cash distributable only to the Sponsor or
to Unit Holders who were Unit Holders prior to the date of
deposit of the additional Securities) held in the Trust
immediately prior to the deposit. Deposits made during the
90-day period following the first deposit of Securities in the
Trust shall similarly replicate as to identity of Security and
proportion of principal amount represented the Securities and
any cash (other than cash distributable only to the Sponsor or
to Unit Holders who were Unit Holders prior to the date of
deposit) held in the Trust immediately prior to the deposit,
except that the additional Securities deposited need only be
substantially similar to (rather than identical with) those
held in the Trust immediately prior to the deposit and the
proportionality requirements need be met only to the extent
practicable. Among other things, a failure to meet the
proportionality requirements due to establishment by the
Sponsor of a minimum amount of a particular Security to be
included in a deposit or the fact that a Security identical to
a Security in the Trust immediately prior to the deposit is not
B-2
<PAGE>
readily obtainable will be considered as justifying a variation
in such requirements.
The objectives of each Trust are the providing of
interest income which, in the opinion of counsel is, with
certain exceptions, exempt from all Federal income taxes under
existing law through investment in a fixed portfolio of
Securities (the 'Portfolio') consisting primarily of investment
grade long-term (or intermediate term if so designated in Part
A or with maturities as designated in Part A) state, municipal
and public authority ('Issuers') debt obligations, and the
conservation of capital and, for a Trust with a deferred sales
charge ("DSC") feature, the payment of the DSC from the
interest payments, if any, on, and the principal paid at the
maturity of the Securities held by the Trust for purposes of
paying the DSC. In addition, in the opinion of counsel,
interest income of each State Trust is exempt, to the extent
indicated, from state and any local income taxes in the State
for which such State Trust is named. The Securities in the
Portfolio of each Trust were, as of the Date of Deposit, rated
in the category of BBB or better by Standard & Poor's
Corporation, Baa or better by Moody's Investors Service or BBB
or better by Fitch Investors Service, Inc. or if not rated had
comparable credit characteristics in the opinion of The
Prudential Investment Corporation, the Sponsor's affiliate.
There is, of course, no guarantee that the Trust's objectives
will be achieved. Subsequent to the Date of Deposit, a
Security in the Trust may cease to be rated or the rating
assigned may be reduced below the minimum requirements of such
Trust for the acquisition of Securities. Although such events
may be considered by the Sponsor in determining whether to
direct the Trustee to dispose of the Security (see
'Sponsor-Responsibility', herein), such events do not
automatically require the elimination of such Security from the
Portfolio. An investment in the Trust should be made with an
understanding of the risks which an investment in fixed rate
debt obligations may entail, including the risk that the value
of the Units will decline with increases in interest rates.
On the Date of Deposit, a Unit of the Trust represented
the fractional undivided interest in the Securities and net
income of such Trust set forth under Part A--'Summary of
Essential Information' in the ratio of 1 Unit for each
approximately $1,000 face amount of Securities initially
deposited in such Trust. If any Units are redeemed by the
Trustee, the face amount of Securities in the Trust will be
reduced by an amount allocable to redeemed Units and the
fractional undivided interest in such Trust represented by each
unredeemed Unit will be increased. Units will remain
B-3
<PAGE>
outstanding until redeemed upon tender to the Trustee by any
Unit Holder (which may include the Sponsor) or until the
termination of the Trust pursuant to the Indenture.
Certain of the Securities in the Portfolio of the
Trust are valued at prices in excess of prices at which such
Securities may be redeemed in the future. (See Part
A--'Schedule of Portfolio Securities' for information relating
to the particular series described therein on the Date of
Deposit.) To the extent that a Security is redeemed (or sold)
at a price which is less than the valuation of such Security on
the date a Unit Holder acquired his Units, the proceeds
distributable to such Unit Holder in respect of such redemption
(or sale) will be less than that portion of the purchase price
for such Units which was attributable to such Security
(representing a loss of capital to such Unit Holder). Such
proceeds, however, may be more or less than the valuation of
such Security at the time of such redemption (or sale).
Similarly, certain of the Securities in the Trust may be valued
at a price in excess of their face value at maturity (i.e.,
such Securities were valued at a premium above par). (See Part
A--'Schedule of Portfolio Securities' for information relating
to the particular series described therein on the Date of
Deposit.) The proceeds distributable to a Unit Holder upon the
maturity of a Security which was valued at a premium on the
date he acquired his Units will be less than that portion of
the purchase price for such Units which was attributable to
such Security (representing a loss of capital to such Unit
Holder).
The Portfolio of the Trust may consist of Securities
the current market value of some of which were below face
value. A primary reason for the market value of such
Securities being less than face value at maturity is that the
interest coupons of such Securities are at lower rates than the
current market interest rate for comparably rated debt
securities, even though at the time of the issuance of such
Securities the interest coupons thereon generally represented
then prevailing interest rates on comparably rated debt
securities then newly issued. The current yields (coupon
interest income as a percentage of market price, ignoring any
original issue discount) of such Securities are lower than the
current yields (computed on the same basis) of comparably rated
debt securities of similar type newly issued at currently
prevailing interest rates. Securities 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 Security held to maturity will have a
larger portion of its total return in the form of taxable
B-4
<PAGE>
income or gain and less in the form of tax-exempt income than a
comparable Security bearing interest at current market rates.
Under the provisions of the Internal Revenue Code in effect on
the date of this Prospectus, any gain attributable to market
discount will not be recognized until maturity, redemption or
sale of the Securities or Units. The current yield of such
discounted securities carrying the same coupon interest rate
and which are otherwise comparable tends to be higher for
securities with longer periods to maturity than it is for those
with shorter periods to maturity because the market value of
such securities with a longer period to maturity tends to be
less than the market value of such a bond with a shorter period
to maturity. If currently prevailing interest rates for newly
issued and otherwise comparable securities increase, the market
discount of previously issued bonds will become deeper and if
such currently prevailing interest rates for newly issued
comparable securities decline, the market discount of
previously issued securities will be reduced, other things
being equal. Market discount attributable to interest rate
changes does not indicate a lack of market confidence in the
issue.
PORTFOLIO SUMMARY
The Securities in the Portfolio of the Trust consist of
Securities issued by or on behalf of states, counties,
municipalities or other political subdivisions of the United
States or issued by or on behalf of the Commonwealth of Puerto
Rico or possessions of the United States, or municipalities or
other political subdivisions thereof. The interest on such
Securities is, with certain exceptions, or upon their delivery
will be, in each instance, in the opinion of recognized bond
counsel to the Issuer of such Securities or by ruling of the
Internal Revenue Service, exempt from all Federal income taxes
under existing law (but may be subject to state and local
taxation). In the case of State Trusts, the Securities are
obligations of the specified state or counties, municipalities,
authorities or political subdivisions thereof or of the
Commonwealth of Puerto Rico or possessions of the United
States, interest on which will, in the opinion of recognized
bond counsel to the issuing governmental authorities, be exempt
under existing law from Federal and the specified state and
local income taxes to the extent indicated. (See 'Tax
Status'.) Capital gains, if any, will be subject to Federal
income tax and, generally, to state and/or local income taxes.
The Portfolio of the Trust may contain Securities
that are general obligations of governmental entities and/or
bonds that are guaranteed by governmental entities. (See Part
B-5
<PAGE>
A -- 'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) Such
general obligations and guarantees are backed by the taxing
power of the respective entities. The ability of the issuer of
a general obligation bond to meet its obligation depends
largely upon its economic condition. Many issuers rely upon ad
valorem real property taxes as a source of revenue. Proposals
in the form of state legislative or voter initiatives to limit
ad valorem real property taxes have been introduced in various
states. It is not presently possible to predict the impact of
these or future proposals, if adopted, on states, local
governments or school districts or on their abilities to make
future payments of their outstanding debt obligations. The
remaining issues are payable from the income of specific
projects or authorities and are not supported by the issuer's
power to levy taxes. This latter group of issues contains
Securities that are also supported by the moral obligations of
governmental entities. In the event of a deficiency in the
debt service reserve funds of moral obligation Securities, the
governmental entity having the moral commitment may (but is not
legally obligated to) satisfy such deficiency. However, in the
event of a deficiency in the debt service reserve funds of
Securities not backed by such moral obligations, no such moral
commitment of a governmental entity exists.
The Portfolio of the Trust may contain zero coupon
bond(s) (including bonds known as multiplier bonds, money
multiplier bonds, capital appreciation bonds, capital
accumulator bonds, compound interest bonds, and discount
maturity payment bonds) or one or more other Securities which
were issued with an 'original issue discount'. 'Original issue
discount' bonds are acquired at prices which represent a
discount from face amount, principally because such bonds bear
interest at rates which are lower than currently-prevailing
market rates. (See Part A--'Portfolio Summary as of Date of
Deposit' for information relating to the particular series
described therein.) A discounted bond held to maturity will
have a larger portion of its total return in the form of
capital gain and less in the form of tax-exempt income than a
comparable bond bearing interest at current market rates. Zero
coupon bonds do not provide for the payment of any current
interest and provide for payment at maturity at face value
unless sooner sold or redeemed. Zero coupon bonds may be
subject to more price volatility than conventional bonds, i.e.,
the market value of zero coupon bonds is subject to greater
fluctuation in response to changes in interest rates than is
the market value of bonds which pay interest currently. Zero
coupon bonds generally are subject to redemption at compound
accreted value based on par value at maturity. Because the
B-6
<PAGE>
issuer is not obligated to make current interest payments, zero
coupon bonds may be less likely to be redeemed than coupon
bonds issued at a similar interest rate. While some types of
zero coupon bonds, such as multipliers and capital appreciation
bonds, define par as the initial offering price rather than the
maturity value, they share the basic zero coupon bond features
of (1) not paying interest on a semi-annual basis and (2)
providing for the reinvestment of the bond's semi-annual
earnings at the bond's stated yield to maturity. In addition,
in the event the portfolio is valued at less than the optional
termination value, the Trust may terminate at a time when the
only Securities in the portfolio are zero coupon bonds. The
sale of such zero coupon bonds at such time may result in a
loss to Unit Holders.
The Portfolio of the Trust may contain Securities of
housing authorities payable from revenues derived by state
housing finance agencies or municipal housing authorities from
repayments on mortgage and home improvement loans made by such
agencies. (See Part A--'Portfolio Summary as of Date of
Deposit' for information relating to the particular series
therein.) Since housing authority obligations, which are not
general obligations of a particular state, are generally
supported to a large extent by Federal housing subsidy
programs, the failure of a housing authority to meet the
qualifications required for coverage under the Federal
programs, or any legal or administrative determination that the
coverage of such Federal programs is not available to a housing
authority, could result in a decrease or elimination of
subsidies available for payment of principal and interest on
such housing authority's obligations. Weaknesses in Federal
housing subsidy programs and their administration may result in
a decrease in subsidies available for payment of principal and
interest on housing authority bonds. Repayment of housing
loans and home improvement loans in a timely manner is
dependent on factors affecting the housing market generally and
upon the underwriting and management ability of the individual
agencies (i.e., the initial soundness of the loan and the
effective use of available remedies should there be a default
in loan payments). Economic developments, including failure or
inability to increase rentals, fluctuations in interest rates
and increasing construction and operating costs may also have
an adverse impact on revenues of housing authorities. In the
case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to
pay existing obligations.
The Portfolio of the Trust may contain Securities which
are subject to the requirements of Section 103A of the Internal
B-7
<PAGE>
Revenue Code of 1954, as amended, (the '1954 Code'), or Section
143 of the Internal Revenue Code of 1986, as amended (the '1986
Code' or the 'Code'). Sections 103A and 143 provide that
obligations issued to provide single family housing will be
exempt from Federal income taxation if all of the proceeds of
the issue (exclusive of issuance costs and a reasonably
required reserve) are used to make or acquire loans which meet
requirements including certain requirements which must be
satisfied after issuance. If proceeds of the issue are not
used to acquire such loans, the issuer may be required to
redeem all or a portion of such issue from such uncommitted
proceeds to maintain the issue's tax exemption. Bond counsel
to each such issuer has issued an opinion that the interest on
such Securities was exempt from Federal income tax at the time
the Securities were issued. The failure of the issuers of such
Securities to meet certain ongoing compliance requirements
imposed by Sections 103A and 143 could render the interest on
such Securities subject to Federal income taxation, possibly
from the date of their issuance. If interest on such
Securities in a Trust is deemed to be subject to Federal income
taxation, the loss of tax-exempt status can be expected to
adversely affect the market value of such Securities. In this
event and under the terms of the Indenture the Sponsor may
direct the sale of such Securities. The sale of such
Securities in such circumstances is likely to result in a loss
to the Trust.
The Portfolio of the Trust may include certain housing
authority obligations whose tax exemption depends upon
qualification under Section 103(b)(4)(A) of the 1954 Code, or
Section 142 of the 1986 Code, and appropriate Treasury
Regulations. Both Sections require that specified minimum
percentages of the units in each rental housing project
financed by tax-exempt debt are to be continuously occupied by
low or moderate income tenants for specified periods.
Department of the Treasury Regulations issued under Section
103(b)(4)(A) of the 1954 Code provide that in order to prevent
possible retroactive Federal income taxation of interest on
such Securities certain conditions must be met. The
regulations provide, however, that such retroactive taxation
will not occur if the issuer corrects any non-compliance
occurring after the issuance of the Securities within a
reasonable period after such non-compliance is first discovered
or should have been discovered by the issuer. Similar
regulations are expected to be issued under 1986 Code Section
142. If the interest on any of the Securities in the Trust
that are housing securities should ultimately be deemed to be
taxable, the Sponsor may instruct the Trustee to sell such
Securities and, since they would be sold as taxable securities,
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it is expected that such Securities would have to be sold at a
substantial discount from the current market price of a
comparable tax-exempt security.
The Portfolio of the Trust may contain Securities
which contain provisions which require the issuer to redeem
such obligations at par from unused proceeds of the issue
within a stated period which typically does not exceed three
years from the date of issuance of such Securities. (See Part
A--'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) In
periods in which interest rates decline there may be increased
redemptions of housing securities pursuant to such redemption
provisions. Such an increase in redemptions may occur because
conventional mortgage loans may have become available at
interest rates equal to or less than the interest rates charged
on the mortgage loans previously made available from the
proceeds of such housing securities. Therefore, some issuers
of such housing securities may have experienced insufficient
demand to complete mortgage loan originations for all of the
money made available from such securities. In addition,
mortgage loans made with the proceeds of housing securities, in
general, do not carry prepayment penalties and therefore
certain mortgage loans may be prepaid earlier than their
maturity dates. If the issuers of such housing securities are
unable to or choose not to reloan these monies, they will
generally redeem housing securities in an amount approximately
equal to such prepayments. The Sponsor is unable to predict at
this time whether such redemptions will be made at a high rate.
The disposition of such Securities may result in a loss to the
Trust.
The Portfolio of the Trust may contain Securities in
the hospital facilities category that are payable from revenues
derived from hospitals and health care facilities which,
generally, were constructed or are being constructed from the
proceeds of such Securities. (See Part A--'Portfolio Summary
as of Date of Deposit' for information relating to the
particular series described therein.) The continuing
availability of sufficient revenues is dependent upon several
factors affecting all such facilities generally, including,
among other factors, the ability of the facilities to provide
the services required by patients, changes in Medicare and
Medicaid reimbursement regulations, the success of efforts by
the states and the Federal government to limit the cost of
health care, changes in contracts between health care
institutions and public or private insurers, the timely
completion of the construction of projects and achieving and
maintaining projected rates of utilization. Additionally, a
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major portion of hospital revenues typically is derived from
Federal or state programs such as Medicare and Medicaid and
from Blue Cross and other insurers. The future solvency of the
Medicare trust fund is periodically subject to question.
Changes in the compensation and reimbursement formulas of these
governmental programs or in the rates of insurers may reduce
revenues available for the payment of principal of, or interest
on, hospital revenue bonds. Governmental legislation or
regulations and other factors, such as the inability to obtain
sufficient malpractice insurance, may also adversely impact
upon the revenues or costs of hospitals and may also adversely
affect the ratings of hospital revenue bonds held in the Trust.
Future actions by the Federal government with respect to
Medicare and by the Federal and State governments with respect
to Medicaid, reducing the total amount of funds available for
either or both of these programs or changing the reimbursement
regulations, or their interpretations, could adversely affect
the amount of reimbursement available to hospital facilities.
A number of additional legislative proposals concerning health
care are typically under review by the United States Congress
at any given time. These proposals span a wide range of
topics, including cost control, national health insurance,
incentives for competition in the provision of health care
services, tax incentives and penalties related to health care
insurance premiums and promotion of prepaid health care plans.
The Sponsor is unable to predict the effect of these proposals,
if enacted, on any of the Securities in the Portfolio of the
Trust.
The Portfolio of the Trust may contain Securities in
the power and electric facilities category payable from
revenues derived from power facilities, which generally include
revenues from the sale of electricity generated and distributed
by power agencies using hydro-electric, nuclear, fossil or
other power sources. (See Part A--'Portfolio Summary as of
Date of Deposit' for information relating to the particular
series described therein.) The ability of the issuers of such
Securities to make payments of principal of, or interest on,
such obligations is dependent, among other things, upon the
continuing ability of such issuers to derive sufficient
revenues from their operations to meet debt service
requirements. General problems of the power and electric
utility industry include difficulty in financing large
construction programs during an inflationary period,
restrictions on operations and increased cost and delays
attributable to environmental considerations, uncertain
technical and cost factors relating to the construction and
operation of nuclear power generating facilities, the
difficulty of the capital markets in absorbing utility debt and
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equity securities, the availability of fuel for electric
generation at reasonable prices, the steady rise in fuel costs
and the costs associated with conversion to alternate fuel
sources such as coal. Some of the issuers of Securities in the
Portfolio may own or operate nuclear facilities for electric
generation. Additional considerations in the case of such
issuers include the problems associated with the use and
disposal of radioactive materials and wastes, and other
problems associated with construction, licensing, regulation
and operation of such facilities. In addition, Federal, state
or municipal governmental authorities may from time to time
impose additional regulations or take other governmental action
which might cause delays in the licensing, construction or
operation of nuclear power plants, or the suspension of
operation of such plants which have been or are being financed
by proceeds of certain of the Securities held in the Portfolio
of the Trust. Such delays, suspensions or other action may
affect the payment of interest on, or the repayment of the
principal amount of, such Securities. The Clean Air Act
Amendments of 1990 provide for attainment and maintenance of
health protective national ambient air quality standards. The
goal of the law is to cut acid rain pollutants by half, sharply
reduce urban smog and eliminate most of the toxic chemical
emissions from industrial plants by the turn of the century.
As enacted, the law affects nearly all electric power
facilities that burn oil or coal. Greenhouse effect bills and
hazardous waste bills may further increase the cost of utility
service. The Sponsor is unable to predict the ultimate form
that any such regulations or other governmental action may take
or when such legislation may be enacted or the resulting impact
on the Securities in the Portfolio of the Trust.
The Portfolio of the Trust may contain Securities
which are in the industrial revenue facilities category. (See
Part A--'Portfolio Summary as of Date of Deposit' for
information relating to the particular series described
therein.) Industrial Revenue Bonds ('IRBs') are tax-exempt
securities issued by states, municipalities or public
authorities to finance the cost of acquiring, constructing or
improving various projects, including pollution control,
environmental improvement, industrial or special airport
facilities. IRBs are payable from the income of specific
facilities or from payments made by private corporations to the
state authorities issuing such bonds. (See 'Tax Status.')
The Portfolio of the Trust may contain Securities
which are in the water and sewer facilities category. (See
Part A--'Portfolio Summary as of Date of Deposit' for
information relating to the particular series described
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therein.) Bonds in the water and sewer facilities category
include securities issued to finance public water and sewer
projects for water management and supply and sewer control and
securities issued by public issuers on behalf of private
corporations for such projects. These bonds are payable from
the income of specific facilities or from payments made by such
private corporations to the state authorities issuing such
bonds. The income of such facilities is generated from the
payment of 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, the difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs
and the impact of 'no growth' zoning ordinances.
The Portfolio of the Trust may contain Securities
which are in the revenue obligations of universities and
schools category. (See Part A--'Portfolio Summary as of Date
of Deposit' for information relating to the particular series
described therein.) The ability of universities and schools to
meet their obligations is dependent upon various factors,
including the revenues, costs, and enrollment levels of the
institutions. In addition, their ability may be affected by
declines in enrollment and tuition revenue, the availability of
Federal, state and alumni financial support, the method and
validity, under state constitutions, of present systems of
financing public education, fluctuations in interest rates and
construction costs, increased maintenance and energy costs,
failure or inability to raise tuition or room charges and
adverse results of endowment fund investments. Studies
undertaken by public and private groups differ with respect to
statistics and projections for postsecondary enrollment at
educational institutions in the 1990s.
The Portfolio of the Trust may contain Securities in
the pollution control facilities category. (See Part
A--'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) Bonds in
the pollution control facilities category include securities
issued to finance public water, sewage or solid waste treatment
facilities and securities issued by a public issuer on behalf
of a private corporation to provide facilities for the
treatment of air, water and solid waste pollution. These
Securities are payable from the income of specific facilities,
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state authorities or from payments made by such private
corporations.
The Portfolio of the Trust may contain Securities
which are in the redevelopment facilities category. (See Part
A--'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) The
purpose of redevelopment is to revitalize deteriorated and/or
underdeveloped areas within a community. As new construction
progresses, property values normally increase significantly and
the ultimate result is a proportionate increase in ad valorem
property tax revenues. However, if, due to various economic
factors, the assessed valuation is reduced, such reduction may
result in insufficient tax revenues, which could in turn impair
the ability of the issuer to make payments of principal and/or
interest on the bonds when due. A reduction in property tax
rates or delinquencies in the payment of property taxes could
have a similar adverse effect.
The Portfolio of the Trust may contain Securities in
the resource recovery category. (See Part A--'Portfolio
Summary as of Date of Deposit' for information relating to the
particular series described therein.) The issuers of such
Securities are municipalities or agencies or authorities
thereof that have allocated the proceeds of the issue towards
the construction and operation of a resource recovery facility
operated by a corporate operator. Payments on the bonds are
dependent upon the creditworthiness of the corporate operator
of the particular project. The operation of such facilities
typically depends upon the delivery thereto of specified
quantities of solid waste from which refuse-derived fuel can be
extracted and in turn converted into electricity or steam by
the facility. The operation of the facility may be limited or
totally curtailed from operating because of failure to comply
with governmental regulations concerning the environment,
failure to obtain necessary environmental permits, zoning
permits and other municipal ordinances or inability to maintain
or renew such permits because of an inability to comply with
changes in government environmental regulations. If the
resource recovery facility is unable to operate or cannot
operate at full capacity, the corporate operator of such
facility will be unable to generate revenues necessary to cover
payments on the resource recovery bonds. Furthermore, the
corporate operator's revenue is typically derived from the sale
of the power generated by the facility to a power agency or
company under a power purchase agreement. The continued flow
and level of payments made by the corporate operator might
therefore depend upon the financial condition of the purchaser
under such a power agreement and the operator's continued
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ability to generate the minimum amount of power required to be
delivered thereunder. Such a purchaser may be subject to the
various general problems and risks associated with the power
industry and the regulatory environment in which it operates.
A decline in price of the extracted materials or the
electricity or steam created by the facility may also result in
insufficient revenues generated by the corporate operator as
will an increase in its operating costs. Finally there may be
technological risks that become apparent in the long run that
are not presently apparent because of the relatively short
history of these facilities which risks may involve the
successful construction or operation of such facilities.
The Portfolio of the Trust may contain Securities of
issuers in the transportation facilities category. Bonds in
the transportation facilities category may be used to finance
capital projects in connection with bridges, highways,
airports, tunnels, bus terminals, ports or other property owned
by transportation authorities. These bonds are generally
payable from the income of the specific facilities, existing
facilities or future sales of bonds. The risks of an
investment in such bonds include a deterioration of national
and regional economic conditions, including fuel availability
and costs, labor and equipment costs and the nature of
governmental regulations with respect to transportation,
commerce, energy, safety and environmental protection. Revenue
of toll facilities may be affected by lower costs of
alternative modes of transportation or construction and
operation in its vicinity of another transportation facility
which could alter established transportation patterns. Other
risks include reductions in various Federal programs and a
shift in local demographic trends.
The Portfolio of the Trust may contain Securities
which are in the special tax bond category. (See Part A --
'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) Special
tax bonds are payable from and secured by the revenues derived
by a municipality from a particular tax. 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, the ability of the issuers of special tax bonds to
pay interest and/or principal on special tax bonds may be
adversely affected by the inability to collect all or part of
the special tax due to various factors including: a general
decline in the local economy or population, inability or
failure to pay the special tax, failure to develop property
backing certain special tax bonds for reasons including
prohibitions or restraints on development such as failure to
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receive regulatory agency approval for development and
fluctuations in the real estate market, a decline in the value
of projects backing certain tax bonds, natural disasters or
environmental hazards.
The Portfolio of the Trust may contain Securities
which are in the tax allocation bond category. (See Part
A -- 'Portfolio Summary as of Date of Deposit' for information
relating to the particular series described therein.) These
Securities 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.
The Portfolio of the Trust may contain Securities
secured in whole or in part by governmental payments, pursuant
to a lease agreement, service contract, installment sale or
other agreement. (See Part A -- 'Portfolio Summary as of Date
of Deposit' for information relating to the particular series
described therein.) A governmental entity that enters into
such an agreement cannot obligate future governments to make
payments thereunder, but generally has covenanted to take such
action as is necessary to include all such payments due under
such agreement in its annual budgets and to make the
appropriations therefor. However, a budgetary imbalance in
future fiscal years could affect the ability and willingness of
the governing legislative body to appropriate, and the
availability of monies to make, the payments provided for under
such agreement. The failure of a governmental entity to meet
its obligations under such an agreement could result in an
insufficient amount of funds to cover the debt service on the
Securities.
The Portfolio of the Trust may contain Securities in
the certificates of participation category. (See Part A --
'Portfolio Summary as of Date of Deposit' for information
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relating to the particular series described therein.) Each
certificate represents an undivided and proportionate interest
in lease or installment purchase payments to be made by
governmental entities (which are the participants) to a third
party for the use and possession or acquisition of a particular
project or equipment. Each payment is divided into an interest
portion and a principal portion, the interest portion of which
constitutes tax-exempt interest in the opinion of special
counsel retained in connection with the issue. The third party
assigns its rights to the payments to a trustee for the benefit
of the certificate holders. The amounts paid to the trustee by
the participants are used to make the payments of principal and
interest due with respect to the certificates. The obligation
of a participant to make the payments does not constitute an
obligation for which the participant is obligated to levy or
pledge any form of taxation.
The Portfolio of the Trust may contain obligations of
issuers located in the Commonwealth of Puerto Rico. (See Part
A -- 'Portfolio Summary as of Date of Deposit.') The ability
of the issuers of such bonds to meet their obligations may be
affected by the economic and social problems facing Puerto
Rico. Unemployment in Puerto Rico remains high by United
States standards. The island's per capita personal income has
been lower than in any state of the United States. Transfer
payments from the United States Government under various social
welfare programs (such as food stamps, social security and
veterans' benefits) contribute significantly to personal
income.
The economy of Puerto Rico is closely integrated
with that of the mainland United States and is largely
dependent for its development on U.S. policies and programs
that could be eliminated by the U.S. Congress. Aid for Puerto
Rico's economy has traditionally depended heavily on Federal
programs which may not always be available. 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. Growth in the Puerto
Rican economy will depend on several factors including the
state of the U.S. economy.
The Puerto Rican economy consists principally of
manufacturing (pharmaceuticals, scientific instruments,
computers, microprocessors, medical products, textiles and
petrochemicals), agriculture (largely sugar), tourism and the
service sector (including finance, insurance, and real estate).
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Since Puerto Rico is an island and is heavily dependent upon
imports and exports, maritime and air transportation are of
basic importance to its economy. The manufacturing and service
sectors generate the largest portion of gross product. Most of
the island's manufacturing output is shipped to the mainland
United States, which is also the chief source of semi-finished
manufactured articles on which further manufacturing operations
are performed in Puerto Rico. The finance, insurance and real
estate components of this sector have recently experienced the
most growth. The level of tourism is affected by various
factors, including the strength of the U.S. dollar. During
periods when the dollar is strong, tourism in foreign countries
becomes relatively more attractive.
The government sector of the Commonwealth plays an
important role in the economy of the island. Since World War
II, the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has
declined. Nevertheless, the Commonwealth-controlled sugar
monopoly remains an important economic factor and is largely
dependent upon Federal maintenance of sugar prices, the
discontinuation of which could severely affect Puerto Rican
sugar production.
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 generally
provides deferral of Federal income taxes for U.S. companies
operating on the island until profits are repatriated. No
assessment can be made as to whether or not Section 936 and
other incentive programs will be continued. It is expected
that the elimination of Section 936, if it occurred, would have
a strongly negative impact on Puerto Rico's economy.
There have for many years been two major viewpoints
in Puerto Rico with respect to the island's relationship to the
United States, one essentially favoring the existing
commonwealth status (but with modifications providing for
greater local autonomy), and the other favoring statehood. A
third viewpoint favors independence from the United States.
The Sponsor cannot predict what effect, if any, a change in the
relationship between Puerto Rico and the United States would
have on the issuers' ability to meet their obligations.
Certain Securities in each Trust may be purchased by
the Sponsor on a 'when, as and if issued' basis; that is, they
may not yet be issued by their governmental entities on the
Date of Deposit (although such governmental entities are
committed to issue such Securities). Contracts relating to
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such 'when, as and if issued' Securities may not settle by the
first settlement date for Units. Moreover, the delivery of
such Securities may be delayed or may not occur. Unit Holders
who purchase Units prior to settlement of such Securities will
be 'at risk' with respect to these Securities (i.e., they may
derive either gain or loss from changes in the prices of the
Securities) from the date they commit to purchase such Units.
Interest on the Securities begins accruing to the benefit of
Unit Holders as municipal interest on the respective delivery
dates of such Securities. In order to provide level interest
payments to Unit Holders where the Trust purchases Securities
which will settle after the settlement date for Units, the
Trustee will reduce its fee over a period of time in an amount
equal to the amount of interest that would have so accrued on
such Securities between the initial settlement date for the
Units and the delivery date of any such Securities as if such
Securities had been delivered prior to purchase of the Units.
The reduction of the Trustee's fee eliminates the necessity of
reducing regular monthly interest distributions until such
Securities are delivered. The Trustee will be reimbursed for
the reduction in its fee by the Sponsor. To the extent that
the delivery of such Securities is delayed beyond their
respective expected delivery dates, the Estimated Current
Returns and Estimated Long-Term Return for the first year may
be lower than indicated in the 'Summary of Essential
Information' in Part A.
Each Trust consists of the Securities (or contracts
to purchase such Securities together with an irrevocable letter
or letters of credit for the purchase of such contracts) listed
under Part A -- 'Schedule of Portfolio Securities' herein, as
long as such Securities may continue to be held from time to
time in the Trust (including certain securities deposited in
the Trust in exchange or substitution for any Securities
pursuant to the Indenture) together with accrued and
undistributed interest thereon and undistributed and uninvested
cash realized from the disposition of Securities. BECAUSE
CERTAIN OF THE SECURITIES FROM TIME TO TIME MAY BE REDEEMED OR
WILL MATURE IN ACCORDANCE WITH THEIR TERMS OR MAY BE SOLD UNDER
CERTAIN CIRCUMSTANCES DESCRIBED HEREIN, NO ASSURANCE CAN BE
GIVEN THAT THE TRUST WILL RETAIN FOR ANY LENGTH OF TIME ITS
PRESENT SIZE AND COMPOSITION. THE TRUSTEE HAS NOT PARTICIPATED
IN THE SELECTION OF SECURITIES FOR THE TRUST, AND NEITHER THE
SPONSOR NOR THE TRUSTEE WILL BE LIABLE IN ANY WAY FOR ANY
DEFAULT, FAILURE OR DEFECT IN ANY SECURITIES.
In the event that any contract for the purchase of
any Security fails, the Sponsor is authorized under the
Indenture, subject to the conditions set forth below, to
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instruct the Trustee to acquire other securities (the
'Replacement Securities') for inclusion in the portfolio of a
Trust. Any Replacement Securities must be deposited not later
than the earlier of (i) the first Monthly Distribution Date of
the Trust or (ii) 90 days after the Trust was established. The
cost and aggregate principal amount of the Replacement
Securities may not exceed the cost and aggregate principal
amount of the Securities which they replace. In addition, the
Replacement Securities must (1) be tax-exempt bonds; (2) have a
fixed maturity date in the same category as the Security
replaced; (3) be purchased at a price that results in a yield
to maturity and in a current return, in each case as of the
execution and delivery of the Indenture, which is approximately
equivalent to the yield to maturity and current return of the
Securities which they replace; (4) be purchased within twenty
days after delivery of notice of the failed contracts; (5) for
an Insured Trust, be insured either by insurance obtained by
the issuer or under a Portfolio Insurance policy obtained by a
Trust and be eligible for Permanent Insurance and not cause the
Units of an Insured Trust to cease to be rated AAA by Standard
& Poor's and (6) for a trust which is not an insured trust, be
rated by at least one national rating organization in the same
category as the Security which it replaces or have, in the
opinion of the Sponsor's affiliate, comparable credit
characteristics. Whenever a Replacement Security has been
acquired for the Trust, the Trustee will, within five days
thereafter, notify all Unit Holders of the acquisition of the
Replacement Security.
In the event a contract to purchase Securities fails
and Replacement Securities are not acquired, the Trustee will,
not later than the second Monthly Distribution Date, distribute
to Unit Holders the funds attributable to the failed contract.
The Sponsor will, in such a case, refund the sales charge
applicable to the failed contract. If less than all the funds
attributable to a failed contract are applied to purchase
Replacement Securities, the remaining moneys will be
distributed to Unit Holders not later than the second Monthly
Distribution Date. Moreover, the failed contract will reduce
the Estimated Net Annual Income per Unit, and may lower the
Estimated Current Return and Estimated Long-Term Return.
To the best knowledge of the Sponsor, there was no
material litigation pending as of the Date of Deposit in
respect of any Securities which might reasonably be expected to
have a material adverse effect upon the Trust. At any time
after the Date of Deposit, litigation may be initiated on a
variety of grounds with respect to Securities in the Trust.
Such litigation may affect the validity of such Securities or
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the tax-free nature of the interest thereon. Although the
outcome of litigation of such nature cannot be predicted,
opinions of bond counsel are delivered with respect to each
Security on the date of issuance to the effect that such
Security has been validly issued and that the interest thereon
is exempt from Federal income tax under then existing law. If
legal proceedings are instituted after the Date of Deposit
seeking, among other things, to restrain or enjoin the payment
of principal or interest on any of the Securities or attacking
their validity or the authorization or existence of the issuer,
the Sponsor may, in accordance with the Indenture, direct the
Trustee to sell such Securities and distribute the proceeds of
such sale to Unit Holders. In addition, other factors may
arise from time to time which potentially may impair the
ability of issuers to meet obligations undertaken with respect
to Securities (e.g., state legislative proposals or voter
initiatives to limit ad valorem real property taxes).
Under the Federal Bankruptcy Code, political
subdivisions, public agencies or other instrumentalities of any
state (including municipalities) which are insolvent or unable
to meet their debts as they mature and which meet certain other
conditions may file a petition in Federal bankruptcy court.
Generally, the filing of such a petition operates as a stay of
any proceeding to enforce a claim against the debtor. The
Federal Bankruptcy Code also requires the debtor to file a plan
for the adjustment of its debts which may modify or alter the
rights of creditors. Under such a plan the Federal bankruptcy
court may permit the debtor to issue certificates of
indebtedness which have priority over existing creditors and
which could be secured. Any plan of adjustment confirmed by
the court must be approved by the requisite majorities of
creditors of different classes. If confirmed by the bankruptcy
court, the plan would be binding upon all creditors affected by
it. The Sponsor is unable to predict the effect these
bankruptcy provisions may have on the Trust.
Most of the Securities are subject to redemption
prior to their stated maturity dates pursuant to optional
refunding redemption and/or sinking fund provisions. In
general, optional refunding redemption provisions are more
likely to be exercised when the evaluation of a Security is at
a premium over par than when it is at a discount from par.
Generally, the evaluation of Securities will be at a premium
over par when market interest rates fall below the coupon rate
on such Securities. In addition, certain Securities 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
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instruments setting forth the terms and provisions of such
Securities. The redemption of a Security at par may result in
a loss to the Trust. See Part A--'Schedule of Portfolio
Securities' for those Securities in the Portfolio of a Trust
which as of the date of such schedule had an offering side
evaluation in excess of par. Certain Securities in the
Portfolio may be subject to sinking fund provisions during the
life of a Trust. Such provisions are designed to redeem a
significant portion of an issue of Securities gradually over
the life of such issue. Particular bonds of an issue of
Securities to be redeemed are generally chosen by lot. The
'Schedule of Portfolio Securities' herein contains a listing of
the optional refunding and sinking fund redemption provisions,
if any, with respect to each of the Securities.
BECAUSE THE REDEMPTION PRICE AND THE SPONSOR'S
REPURCHASE PRICE ARE BASED ON BID PRICES FOR THE SECURITIES,
THEY MAY BE LESS THAN THE PRICE PAID BY A UNIT HOLDER
PURCHASING IN THE PRIMARY MARKET (OFFERING PRICES ARE NORMALLY
HIGHER THAN BID PRICES). DUE TO FLUCTUATIONS IN THE MARKET
PRICE OF THE SECURITIES IN THE PORTFOLIO AND THE FACT THAT THE
PUBLIC OFFERING PRICE INCLUDES A SALES CHARGE, AMONG OTHER
FACTORS, THE AMOUNT REALIZED BY A UNIT HOLDER UPON THE
REDEMPTION OR SALE OF UNITS MAY BE LESS THAN THE PRICE PAID FOR
SUCH UNITS BY THE HOLDER. (SEE 'RIGHTS OF UNIT
HOLDERS -- REDEMPTION -- COMPUTATION OF REDEMPTION PRICE PER
UNIT', HEREIN.)
Unit Holders of a Trust not designated as Insured
should omit the following and continue with 'Objectives and
Securities Selection'. All of the Securities in any Series not
identified as insured are not insured and the following section
'Insurance on the Securities in the Portfolio of an Insured
Trust' is inapplicable to such Series.
INSURANCE ON THE SECURITIES IN THE PORTFOLIO OF AN INSURED
TRUST
Certain of the Securities in an Insured Trust are
insured to maturity by AMBAC, CapMAC, ConnieLee, Cap. Gty.,
FSA, MBIA, MBIAC, BIGI + and/or Financial Guaranty (the
'Insurance Companies') at the cost of the issuer of such
Security and the remainder of the Securities are insured by
Financial Guaranty under a Portfolio Insurance policy obtained
by such Insured Trust (see Part A--'Portfolio Summary as of
Date of Deposit' for the percentage of the Securities in a
Trust insured by insurance obtained by the issuer and the
percentage for which a Trust purchased Portfolio Insurance).
The respective insurance policies are noncancellable and,
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except in the case of any Portfolio Insurance, will continue in
force so long as Securities are outstanding and the insurers
remain in business. The insurance policies guarantee the
scheduled payment of principal and interest on but do not
guarantee the market value of the Securities covered by each
policy or the value of the Units. The value of any insurance
obtained by the issuer of a Security is reflected and included
in the market value of such Security. In the event the issuer
of an insured Security defaults in payment of interest or
principal the insurance company insuring the Security will be
required to pay to the Trustee any interest or principal
payments due. Payment under the insurance policies is to be
made in respect of principal of and interest on Securities
covered thereby which becomes due for payment but is unpaid.
Each such policy provides for payment of the defaulted
principal or interest due to a trustee or paying agent. In
turn, such trustee or paying agent will make payment to the
bondholder (in this case, the Trustee) upon presentation of
satisfactory evidence of such bondholder's right to receive
such payment. The single premium for any insurance policy or
policies obtained by an issuer of Securities has been paid in
advance by such issuer and any such policy or policies are
noncancellable and will continue in force so long as the
Securities so insured are outstanding. Insurance is not a
substitute for the basic credit of an issuer, but supplements
the existing credit and provides additional security.
Contracts to purchase Securities are not covered by insurance
although Securities underlying such contracts are covered by
insurance upon physical delivery to the Trust.
A description of each of the insurers follows:
AMBAC Indemnity Corporation
AMBAC Indemnity Corporation ('AMBAC Indemnity') is a
Wisconsin-domiciled stock insurance company, regulated by the
Office of the Commissioner of Insurance of the State of
Wisconsin. Such regulation, however, is no guarantee that
AMBAC Indemnity will be able to perform on its contracts of
insurance in the event a claim should be made thereunder at
some time in the future. AMBAC Indemnity is licensed to do
business in 50 states, the District of Columbia and the
Commonwealth of Puerto Rico, with admitted assets of
approximately $2,060,000,000 (unaudited) and statutory capital
of approximately $1,178,000,000 (unaudited) as of June 30,
1994. Statutory capital consists of statutory contingency
reserve and AMBAC Indemnity's policyholders' surplus. AMBAC
Indemnity is a wholly owned subsidiary of AMBAC, Inc., a 100%
publicly-held company. Moody's Investors Service, Inc. and
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Standard & Poor's Corporation have both assigned a triple-A
claims-paying ability rating to AMBAC Indemnity. The address
of the administrative offices of AMBAC Indemnity is One State
Street Plaza, New York, New York 10004.
Capital Markets Assurance Corporation
Capital Markets Assurance Corporation ('CapMAC') is a
New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety
insurance. CapMAC is licensed in 50 states in addition to the
District of Columbia, the Commonwealth of Puerto Rico and the
territory of Guam. CapMAC insures structured asset-backed,
corporate, municipal and other financial obligations in the
U.S. and international markets. CapMAC also provides financial
guarantee reinsurance for structured asset-backed, corporate,
municipal and other financial obligations written by other
major insurance companies. Neither CapMAC Holdings Inc. nor
any of its stockholders is obligated to pay any claims under
any surety bond issued by CapMAC or any debts of CapMAC or to
make additional capital contributions. CapMAC is wholly owned
by CapMAC Holdings Inc., a company that is owned by a group of
institutional and other investors, including CapMAC's
management and employees. As of December 31, 1993 and 1992,
CapMAC had statutory capital and surplus of approximately
$146.4 million and $148.0 million, respectively. CapMAC's
claims-paying ability is rated triple-A by Moody's Investors
Service, Inc., Standard & Poor's Corporation and Duff & Phelps,
Inc. The address of CapMAC is 885 Third Avenue, New York, New
York 10022.
Connie Lee Insurance Co.
Connie Lee Insurance Co. ('ConnieLee'), a Wisconsin
stock insurance company, is a wholly owned subsidiary of the
College Construction Loan Insurance Association, an insurance
holding company authorized and established by Congress as a
private corporation under the laws of the District of Columbia.
The legislation establishing the company stipulated that it
provide a mix of direct insurance and reinsurance business to
issuers incurring debt obligations for an 'educational
facilities purpose.' The enabling legislation calls for
ConnieLee to provide credit enhancement services to colleges,
universities, teaching hospitals, and other educational
institutions. As of June 30, 1994 policyholders' surplus
(unaudited) was $105,010,000, stockholders' equity (unaudited)
was $142,913,000 and total assets (unaudited) were
$227,149,000. Standard & Poor's Corporation has rated the
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claims-paying ability of ConnieLee 'AAA'. The address of
ConnieLee is 2445 M Street, N.W., Washington, D.C. 20037.
Capital Guaranty Insurance Company
Capital Guaranty Insurance Company ('Cap. Gty.'), a
Maryland-domiciled insurance company, which was incorporated in
Maryland on June 25, 1986, and commenced its operations in
November 1986 is a wholly-owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company. As a result
of the recent initial public stock offering on October 6, 1993
of Cap. Gty., public stockholders now own 82.7% of Cap. Gty.
The remaining 17.3% is held by three original investors:
Constellation Investments, Inc., an affiliate of Baltimore Gas
& Electric; Safeco Corporation; and Sibag Finance Corporation,
an affiliate of Sieman's A.G. Cap. Gty., a monoline financial
guaranty insurer, insures general obligation, tax supported and
revenue bonds structured as tax-exempt and taxable securities.
Cap. Gty.'s insured portfolio currently includes over $12.9
billion in net exposure outstanding. As of June 30, 1994, the
total statutory policyholders' surplus and contingency reserve
of Cap. Gty. was $89,917,075 (unaudited), and the total
admitted assets were $286,825,253 (unaudited) as reported to
the Insurance Department of the State of Maryland. Cap. Gty.'s
claims-paying ability is rated triple-A by Moody's Investors
Service, Inc. and Standard & Poor's Corporation. The address
of Cap. Gty. is One Market, San Francisco, California 94105.
Financial Security Assurance
Financial Security Assurance ('FSA') is a monoline
insurance company incorporated on March 16, 1984 under the laws
of the State of New York. Financial Security is a wholly owned
subsidiary of Financial Security Assurance Holdings Ltd.
('Holdings'), a New York Stock Exchange listed company.
Holdings is owned approximately 60.5% by U S WEST Capital
Corporation ('U S WEST'), 7.6% by Fund American Enterprises
Holdings, Inc. ('Fund American'), and 7.4% by The Tokio Marine
and Fire Insurance Co., Ltd. ('Tokio Marine'). 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 mid-western United
States. Fund American is a financial services holding company
whose principal operating subsidiary is one of the nation's
largest mortgage servicers. Tokio Marine is a major Japanese
property and casualty insurance company. U S WEST has
announced its intention to dispose of its remaining interest in
Holdings as part of its strategic plan to withdraw from
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businesses not directly involved in telecommunications. Fund
American has certain rights to acquire additional shares of
Holdings from U S WEST and Holdings. No shareholder of
Holdings is obligated to pay any debt of FSA or any claim under
any insurance policy issued by FSA or to make any additional
contribution to the capital of FSA. FSA and its two wholly
owned subsidiaries are licensed to engage in financial guaranty
insurance business in all 50 states, the District of Columbia,
Puerto Rico and the United Kingdom.
FSA and its subsidiaries are engaged exclusively in
the business of writing financial guaranty insurance,
principally in respect of securities offered in domestic and
foreign markets. FSA and its subsidiaries principally insure
asset-backed, collateralized and municipal securities.
Financial Security insures both newly issued securities sold in
the primary market and outstanding securities sold in the
secondary market that satisfy Financial Security's underwriting
criteria.
Pursuant to an intercompany agreement, liabilities on
financial guaranty insurance written by FSA or either of its
subsidiaries are reinsured among such companies on an agreed-
upon percentage substantially proportional to their respective
capital, surplus and reserves, subject to applicable statutory
risk limitations. In addition, FSA reinsures a portion of its
liabilities under certain of its financial guaranty insurance
policies with other reinsurers 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 June 30, 1994, the unearned premium reserve of
FSA was $206,026,000 (unaudited) and its total shareholder's
equity was $530,024,000 (unaudited). FSA's claims-paying
ability is rated 'Aaa' by Moody's Investors Service, Inc. and
'AAA' by Standard & Poor's Corporation. The principal
executive offices of Financial Security are located at 350 Park
Avenue, New York New York 10022.
MBIA
The insurance companies comprising MBIA and their
respective percentage liabilities are as follows: The Aetna
Casualty and Surety Company, thirty-three percent (33%);
Fireman's Fund Insurance Company, thirty percent (30%); The
Travelers Indemnity Company, fifteen percent (15%); Cigna
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<PAGE>
Property and Casualty Company, twelve percent (12%); and The
Continental Insurance Company, ten percent (10%). As a several
obligor, each such insurance company will be obligated only to
the extent of its percentage of any claim under the MBIA policy
and will not be obligated to pay any unpaid obligation of any
other member of MBIA. Each insurance company's participation
is backed by all of its assets. However, each insurance
company is a multiline insurer involved in several lines of
insurance other than municipal bond insurance, and the assets
of each insurance company also secure all of its other
insurance policy and surety bond obligations. The total New
York statutory assets of the participating insurance companies
as of June 30, 1994 was $34,872,354,000, the statutory
liabilities were $28,955,229,000 and policyholder's surplus was
$5,917,125,000. Standard & Poor's Corporation rates all new
issues insured by MBIA 'AAA' and Moody's Investors Service
rates all bond issues insured by MBIA 'Aaa'. The address of
MBIA is 113 King Street, Armonk, New York 10504.
MBIAC
MBIAC (The Municipal Bond Investors Assurance
Corporation) is the principal operating subsidiary of MBIA,
Inc. Neither MBIA, Inc. nor its shareholders are obligated to
pay the debts of or claims against MBIAC. MBIAC is a limited
liability corporation rather than a several liability
association. MBIAC is domiciled in the State of New York and
licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico.
As of June 30, 1994, MBIAC had admitted assets
(unaudited) of $3.3 billion, total liabilities (unaudited) of
$2.2 billion, and total capital and surplus (unaudited) of $1.1
billion, determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory
authorities. Standard & Poor's Corporation rates all new
issues insured by MBIAC and Moody's Investors Service rates all
bond issues insured by MBIAC 'AAA' and 'Aaa', respectively.
The address of MBIAC is 113 King Street, Armonk, New York
10504. Portfolio Insurance
In an effort to protect Unit Holders against delay in
payment of interest and against principal loss, insurance
('Portfolio Insurance') may be obtained by an Insured Trust
from Financial Guaranty for those Securities not insured by the
issuer, guaranteeing the scheduled payment of interest and
principal with respect to certain of the Securities deposited
in and delivered to an Insured Trust. Any Portfolio Insurance
policy obtained by an Insured Trust will be noncancellable and
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<PAGE>
will continue in force so long as an Insured Trust is in
existence and the securities described in the policy continue
to be held by an Insured Trust (see Part A--'Schedule of
Portfolio Securities') and Financial Guaranty remains in
business. As a result of any such Portfolio Insurance and any
Insurance obtained by the issuer from the Insurance Companies
the Units of an Insured Trust were rated AAA by Standard &
Poor's Corporation as of the Date of Deposit. (See 'Bond
Ratings'.) Portfolio Insurance obtained by an Insured Trust is
effective only while the Securities thus insured are held in an
Insured Trust.
Insurance is not a substitute for the basic credit of
an issuer, but supplements the existing credit and provides
additional security therefor. If an issue is accepted for
insurance, a noncancellable policy for the scheduled payment of
interest and principal on the Security is issued by the
Insurance Company. A single premium is paid by the issuer for
Securities insured by the issuer. A monthly premium is paid by
an Insured Trust for the Portfolio Insurance obtained by such
Insured Trust. Upon the sale of a Security from an Insured
Trust, the Trustee, pursuant to an irrevocable commitment of
Financial Guaranty, has the right to obtain permanent insurance
(i.e., insurance to maturity of the Security regardless of the
identity of the holder thereof) ('Permanent Insurance') with
respect to such Security upon the payment of a single
predetermined insurance premium from the proceeds of the sale
of such Security. An Insured Trust will obtain and pay a
premium for the Permanent Insurance upon the sale of a Security
if the Sponsor determines that such sale will result in a net
realization greater than would the sale of such Security
without the purchase of such Permanent Insurance. Accordingly,
any Security covered by Portfolio Insurance in an Insured Trust
is eligible to be sold on an insured basis. The premium for
any Permanent Insurance with respect to a Security is
determined based upon the insurability of such Security as of
the Date of Deposit and will not be increased or decreased
thereafter. Standard & Poor's Corporation and Moody's
Investors Service have rated the claims-paying ability of
Financial Guaranty 'AAA' and 'Aaa', respectively.
Neither the Public Offering Price nor any evaluation
of Units for purposes of repurchases or redemptions reflects
any element of value for any Portfolio Insurance obtained and
any Permanent Insurance obtainable by an Insured Trust unless a
Security is in default in payment of principal or interest or
in significant risk of such default. The value of any
Permanent Insurance will be equal to the difference between (i)
the market value of defaulted Securities assuming the exercise
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<PAGE>
of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance)
and (ii) the market value of such defaulted Securities not
covered by Permanent Insurance. In addition, the Evaluator
will consider the ability of Financial Guaranty to meet its
commitments under an Insured Trust's insurance policy,
including the commitments to issue Permanent Insurance.
Nonpayment of premiums on a Portfolio Insurance
policy obtained by an Insured Trust will not result in the
cancellation of the insurance but will permit Financial
Guaranty to take action against the Insured Trust to recover
premium payments due it. Premium rates for each issue of
Securities protected by Portfolio Insurance obtained by an
Insured Trust are fixed for the life of an Insured Trust.
Under the provisions of a Financial Guaranty
insurance policy, Financial Guaranty unconditionally and
irrevocably agrees to pay to Citibank, N.A., or its successor,
as its agent (the 'Fiscal Agent'), that portion of the
principal of and interest on a Security which shall become due
for payment but shall be unpaid by reason of nonpayment by the
issuer of the Security and which has not been paid by insurance
of the Security obtained by the issuer. The term 'due for
payment' means, when referring to the principal of a Security,
its stated maturity date or the date on which it shall have
been called for mandatory sinking fund redemption and does not
refer to any earlier date on which payment is due by reason of
call for redemption (other than by mandatory sinking fund
redemption), acceleration or other advancement of maturity.
When used in reference to interest on a Security, the term 'due
for payment' means the stated date for payment of interest.
When, however, the interest on a Security shall have been
determined (as provided in the underlying documentation
relating to such Security) to be subject to Federal income
taxation, the term 'due for payment' also means, (i) when
referring to the principal of such Security, the date on which
such Security has been called for mandatory redemption as a
result of such determination of taxability, and (ii) when
referring to interest on such Security, the accrued interest at
the rate provided in such documentation to the date on which
such Security has been called for such mandatory redemption,
together with any applicable redemption premium.
Financial Guaranty will make any such payments to the
Fiscal Agent on the date such principal or interest becomes due
for payment or on the business day next following the day on
which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse
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to the Trustee the face amount of principal and interest which
is then due for payment but is unpaid by reason of nonpayment
by the issuer but only upon receipt by the Fiscal Agent of (i)
evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence,
including any appropriate instruments of assignment, that all
of the rights to payment of such principal or interest due for
payment shall thereupon vest in Financial Guaranty. Upon any
such disbursement, Financial Guaranty shall become the owner of
the Security, appurtenant coupon or right to payment of
principal or interest on such Security, and shall succeed to
all of the Trustee's rights thereunder, including the right to
payment thereof.
In determining whether to insure bonds, Financial
Guaranty applies its own standards which are not necessarily
the same as the criteria used in regard to the selection of
bonds by the Sponsor. Financial Guaranty's determination to
issue insurance with respect to a bond is made prior to or on
the date of deposit of a bond in an Insured Trust. Any
Portfolio Insurance obtained by an Insured Trust covers certain
Securities deposited in an Insured Trust and physically
delivered to the Trustee or a custodian for an Insured Trust in
the case of bearer bonds or registered in the name of the
Trustee or its nominee or delivered along with an assignment in
the case of registered bonds, or registered in the name of the
Trustee or its nominee in the case of Securities held in book-
entry form. Contracts to purchase Securities are not covered
by insurance obtained by an Insured Trust although Securities
underlying such contracts are covered by insurance upon
physical delivery to the Trust.
Insurance obtained by an Insured Trust or by the
Security issuer does not guarantee the market value of the
Securities or the value of the Units. Any Portfolio Insurance
obtained by an Insured Trust is effective only as to Securities
owned by and held in such Insured Trust. In the event of a
sale of any such Security by the Trustee, the Portfolio
Insurance terminates as to such Security on the date of sale
but the Trustee may exercise the right to obtain Permanent
Insurance with respect to the Security upon the payment of an
insurance premium from the proceeds of the sale of such
Security. Except as indicated below, Portfolio Insurance
obtained by an Insured Trust has no effect on the price or
redemption value of Units. The Evaluator will attribute a
value to the Portfolio Insurance obtained by an Insured Trust
(including the right to obtain Permanent Insurance) for the
purpose of computing the price or redemption value of Units
only if the Securities covered by such insurance are in default
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in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default. (See 'Public
Offering of Units -- Public Offering Price'.) Insurance
obtained by the issuer of a Security is effective so long as
such Security is outstanding. Such insurance may be considered
to represent an element of market value in regard to the
Securities thus insured.
A contract of Portfolio Insurance relating to an
Insured Trust and the negotiations in respect thereof represent
the only relationship between Financial Guaranty and the Trust.
Otherwise neither Financial Guaranty nor its parent, FGIC
Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with a Trust or the Sponsor,
except that the Sponsor has in the past and may from time to
time in the future, in the normal course of its business,
participate as sole underwriter or as manager or as a member of
underwriting syndicates in the distribution of new issues of
municipal bonds in which the investors or the affiliates of
FGIC Corporation have or will be participants or for which a
policy of insurance guaranteeing the scheduled payment of
interest and principal has been obtained from Financial
Guaranty. Neither an Insured Trust nor the Units nor the
Portfolio is insured directly or indirectly by FGIC
Corporation.
The purpose of any Portfolio Insurance obtained by an
Insured Trust is to obtain a higher yield on the Securities in
the Portfolio than would be available if all the Securities in
such Portfolio had the Standard & Poor's Corporation 'AAA',
Moody's Investors Service 'Aaa' and/or Fitch Investors Service,
Inc. 'AAA' rating(s) and, at the same time, to have the
protection of Portfolio Insurance with respect to scheduled
payment of interest and principal on the Securities. There is,
of course, no certainty that such purpose will be realized.
Financial Guaranty
Financial Guaranty Insurance Company ("Financial
Guaranty") is a wholly-owned subsidiary of FGIC Corporation
(the "Corporation"), a Delaware holding company. Financial
Guaranty, domiciled in the State of New York, commenced its
business of providing insurance and financial guarantees for a
variety of investment instruments in January 1984. The
Corporation is a subsidiary of General Electric Capital
Corporation. The Corporation and General Electric Capital
Corporation are not obligated to pay the debts of or the claims
against Financial Guaranty.
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<PAGE>
Financial Guaranty, in addition to providing
insurance for the payment of interest on and principal of
municipal bonds and notes held in unit investment trust
portfolios, provides insurance for all or portions of new
issues of municipal bonds and notes and municipal bonds and
notes held by mutual funds. Financial Guaranty expects to
provide other forms of financial guaranties in the future. It
is also authorized to write fire, property damage liability,
workmen's compensation and employer's liability and fidelity
and surety insurance. As of June 30, 1994, the total capital
and surplus of Financial Guaranty was approximately
$850,000,000 as reported to the State of New York Insurance
Department. Although the Sponsor has not undertaken an
independent investigation of Financial Guaranty, the Sponsor is
not aware that the information herein is inaccurate or
incomplete.
Financial Guaranty is currently licensed or otherwise
authorized to provide insurance in 49 states and the District
of Columbia, files reports with state insurance regulatory
agencies and is subject to audit and review by such
authorities. Financial Guaranty is also subject to regulation
by the State of New York Insurance Department. Such
regulation, however, is no guarantee that Financial Guaranty
will be able to perform on its commitments or contracts of
insurance in the event claims should be made thereunder at some
time in the future. Fitch Investors Service, Inc., Standard &
Poor's Corporation and Moody's Investors Service have rated the
claims paying ability of Financial Guaranty 'AAA', 'AAA' and
'Aaa', respectively. The address of Financial Guaranty is 115
Broadway, New York, New York 10006.
The information relating to the above referenced
insurers has been furnished by publicly available sources
including the respective issuers. The financial information
contained herein with respect to Financial Guaranty is
unaudited but appears in reports or other materials filed with
state insurance regulatory authorities and is subject to audit
and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as
to the absence of material adverse changes in such information
subsequent to the date thereof, but the Sponsor is not aware
that the information herein is inaccurate or incomplete.
Because the Securities in an Insured Trust are
insured by the Insurance Companies as to the scheduled payment
of principal and interest and on the basis of the financial
condition and the method of operation of the Insurance
Companies, Standard & Poor's Corporation has assigned a 'AAA'
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investment rating to Units of an Insured Trust. This is the
highest rating assigned to securities by Standard & Poor's
Corporation. (See "Bond Ratings.") The obtaining of this
rating by an Insured Trust should not be construed as an
approval of the offering of the Units by Standard & Poor's
Corporation or as a guarantee of the market value of an Insured
Trust or the Units. Standard & Poor's Corporation has
indicated that this rating is not a recommendation to buy, hold
or sell Units nor does it take into account the extent to which
expenses of an Insured Trust or sales by an Insured Trust of
Securities for less than the purchase price paid by an Insured
Trust will reduce payment to Unit Holders of the interest and
principal required to be paid on the insured Securities. There
is no guarantee that the 'AAA' investment rating with respect
to the Securities or Units will be maintained.
OBJECTIVES AND SECURITIES SELECTION
The objectives of each Trust are the providing of
interest income which, in the opinion of counsel is, under
existing law, excludable from gross income for Federal income
tax purposes through investment in a fixed portfolio consisting
primarily of investment grade long-term (or intermediate term
if so designated in Part A or with maturities as designated in
Part A) state, municipal and public authority debt obligations,
and the conservation of capital and, in the case of a Trust
with a deferred sales charge feature "DSC", the payment of the
DSC from the interest payments, if any, on, and the principal
paid at the maturity of the Securities deposited to pay the
DSC. There is, of course, no guarantee that a Trust's
objectives will be achieved.
The Prudential Insurance Company of America, the
indirect parent of the Sponsor, or a division or subsidiary
thereof (collectively, 'Prudential') has selected and
negotiated for the Securities purchased by the Sponsor. In
selecting Securities for a Trust, Prudential considered factors
established by the Sponsor including, among others, the
following: (a) ratings as of the Date of Deposit in the
category of BBB or better by Standard & Poor's Corporation or
Baa or better by Moody's Investors Service or BBB or better by
Fitch Investors Service, Inc. (see "Bond Ratings") or
comparable credit characteristics in the opinion of Prudential,
(b) maturities or mandatory payment dates consistent with the
life and objectives of a Trust, (c) yields of the Securities
relative to other securities of comparable quality and
maturity, (d) the availability and cost of, rating of the
claims paying ability of an insurer of, insurance of the
scheduled payment of principal and interest, when due, on the
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Securities in an Insured Trust, and (e) diversification of the
Securities as to purpose and location of Issuer (purpose only
in the case of State Trusts).
Prudential, for selecting and negotiating the
purchase of the Securities, will receive from the Sponsor a fee
based on the face amount of Securities selected and a portion
of the Sponsor's net profit on the Date of Deposit.
The Trust may contain Securities which were acquired
through the Sponsor's participation as sole underwriter or
manager or as a member of the underwriting syndicate for such
Securities. (See Part A -- "Portfolio Summary.") An
underwriter typically purchases securities, such as the
Securities in each Trust, from the issuer on a negotiated or
competitive bid basis in order to market such securities to
investors at a profit.
The yields on Securities of the type deposited in
each Trust are dependent on a variety of factors, including
interest rates, general conditions of the municipal bond
market, size of a particular offering, the maturity of the
obligation and rating of the issue. The ratings represent the
opinions of the rating organizations as to the quality of the
securities which they undertake to rate. It should be
emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, securities with
the same maturity, coupon and rating may have different yields,
while securities of the same maturity and coupon with different
ratings may have the same yield.
ESTIMATED ANNUAL INCOME PER UNIT
On the Date of Deposit the Estimated Net Annual
Income per Unit of the Trust was the amount set forth above
under Part A -- "Summary of Essential Information." This
figure is computed by dividing the aggregate net annual
interest income (i.e., less estimated annual fees and expenses
of the Sponsor, the Trustee, counsel and the Evaluator),
ignoring any original issue discount, by the number of Units
outstanding. Thereafter, the net annual interest income per
Unit for the Trust will change whenever Securities mature, are
redeemed or are sold, or as the expenses of the Trust change.
The fees of the Trustee, the Sponsor, counsel and the Evaluator
are subject to change without the consent of Unit Holders, to
the extent provided under "Expenses and Charges."
Interest on the Securities, less estimated expenses
of the Trust, is expected to accrue at the daily rate shown
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under Part A -- "Summary of Essential Information." This rate
will change as Securities mature, are redeemed or are sold, or
as the expenses of the Trust change.
The Public Offering Price will vary due to
fluctuations in the offering and/or bid prices of the
Securities and the net annual interest income per Unit may
change as Securities mature, are redeemed or are sold or as the
expenses of the Trust change.
TAX STATUS
In the opinion of bond counsel to the issuing
governmental authorities, interest income on the Securities
comprising the Portfolio of the 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 as in effect at the date of issuance. In
the case of Securities issued at a time when the 1954 Code was
in effect, redesignation of the Code as the Internal Revenue
Code of 1986 (the "Code" or the "1986 Code") has not adversely
affected the exemption from Federal income tax of interest
income on such Securities. Gain (exclusive of any earned
original issue discount) realized on sale or redemption of the
Securities or on sale of a Unit is, however, includible in
gross income for Federal income tax purposes and for state and
local income tax purposes generally. (It should be noted in
this connection that such gain does not include any amounts
received in respect of accrued interest.) Such gain may be
capital gain or ordinary income and if capital gain may be long
or short-term depending upon the facts and circumstances.
Securities selling at market discount tend to increase in
market value as they approach maturity when the principal
amount is payable, thus increasing the potential for taxable
gain on their maturity, redemption or sale.
In the opinion of Messrs. Cahill Gordon & Reindel,
special counsel for the Sponsor, under existing law:
The Trust is not an association taxable as a
corporation for Federal income tax purposes, and
interest on an underlying Security which is exempt
from Federal income tax under the Code when
received by the Trust will retain its status as
tax exempt interest for Federal income tax
purposes to the Unit Holders.
Each Unit Holder will be considered the owner
of a pro rata portion of the Trust's assets under
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Sections 671-678 of the Code. Each Unit Holder
will be considered to have received a pro rata
share of interest derived from the Trust's assets
when it is received by the Trust and each Unit
Holder will have a taxable event when an
underlying Security is disposed of (whether by
sale, exchange, redemption, or payment at
maturity) or when the Unit Holder redeems or sells
Units. The total tax cost of each Unit to a Unit
Holder is allocated among each of the underlying
Securities (in accordance with the proportion of
the Trust's assets comprised by each Security) in
order to determine the Unit Holder's per Unit tax
cost for each Security, and the tax cost reduction
requirements of the Code relating to amortization
of bond premium will apply separately to the per
Unit tax cost of each Security. Therefore, under
some circumstances a Unit Holder may realize
taxable gains when Units are sold or redeemed for
an amount equal to or less than the Unit Holder's
original cost. The relevant tax reporting forms
sent to Unit Holders will reflect the actual
amount paid to them net of any deferred sales
charge. Accordingly, Unit Holders should not
increase the total cost for their Units by the
amount of any deferred sales charge.
When a contract to acquire an underlying
Security is settled after the Unit Holder's
settlement date for a Unit, the Unit Holder's
proportionate share of the interest accrued on the
underlying Security on the Security settlement
date will exceed the portion of the purchase price
that was allocable to interest accrued on the Unit
settlement date. A Unit Holder will not be
subject to Federal income tax on the Unit Holder's
proportionate share of the interest which accrues
during the period between the Unit settlement date
and the Security settlement date either when such
interest is received by the Trust or when it is
distributed to the Unit Holder.
Under the income tax laws of the State and
City of New York, the income of the Trust will be
treated as the income of its Unit Holders.
If the proceeds received by the Trust upon the sale
or redemption of an underlying Security exceed a Unit Holder's
adjusted tax cost allocable to the Security disposed of, that
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Unit Holder will realize a taxable gain to the extent of such
excess. Conversely, if the proceeds received by the Trust upon
the sale or redemption of an underlying Security are less than
a Unit Holder's adjusted tax cost allocable to the Security
disposed of, that Unit Holder will realize a loss for tax
purposes to the extent of such difference.
Any gain recognized on a sale or exchange of a Unit
Holder's pro rata interest in a Security, and not constituting
a realization of accrued "market discount," and any loss will
be a capital gain or loss, except in the case of a dealer or
financial institution. Gain realized on the disposition of the
interest of a Unit Holder in a market discount Security is
treated as ordinary income to the extent the gain does not
exceed the accrued market discount. A Unit Holder has an
interest in a market discount Security in a case in which the
tax cost for the Unit Holder's pro rata interest in the
Security is less than the stated redemption price thereof at
maturity (or the issue price plus original issue discount
accrued up to the acquisition date, in the case of an original
issue discount Security). If the market discount is less than
.25% of the stated redemption price of the Security at maturity
multiplied by the number of complete years to maturity, the
market discount shall be considered to be zero. Any capital
gain or loss arising from the disposition of a Unit Holder's
pro rata interest in a Security will be a long-term capital
gain or loss if the Unit Holder has held his or her Units and
the Trust has held the Security for more than one year. Under
the Code, net capital gain (i.e., the excess of net long-term
capital gain over net short-term capital loss) of individuals,
estates and trusts is subject to a maximum nominal tax rate of
28%. Such net capital gain may, however, result in a
disallowance of itemized deductions and/or affect a personal
exemption phase-out.
Opinions relating to the validity of the underlying
Securities and the exemption of interest thereon from Federal
income tax are rendered by bond counsel to the issuing
governmental authorities. It is the view of The Prudential
Investment Corporation, which is an affiliate of the Sponsor,
that interest on the Securities will not be a tax preference
item unless otherwise indicated on the "Schedule of Portfolio
Securities" as Securities the interest on which is in the
opinion of bond counsel, treated as a tax preference item for
alternative minimum tax purposes. See "Schedule of Portfolio
Securities." Neither the Sponsor nor its counsel have made any
review of proceedings relating to the issuance of underlying
Securities or the bases for bond counsel's opinions or the view
of The Prudential Investment Corporation, the Sponsor's
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affiliate. The Sponsor and its counsel are, however, aware of
nothing which would indicate to the contrary.
Furthermore, exemption of interest on a Security from
regular income tax requires that the issuer of the Security (or
other user of the Security proceeds) meet certain ongoing
compliance requirements. Failure to meet these requirements
could result in loss of the exemption and such loss of
exemption could apply retroactively from the date of issuance.
A Security may provide that if a loss of exemption is
determined to have occurred, the Security is immediately due
and payable; and, in the case of a secured Security, that the
security can be reached if the Security is not then paid. If
such a loss of exemption were to occur and the Security did not
contain such an acceleration clause, or if the acceleration did
not in fact result in payment of the Security, the affected
Security would likely be sold as a taxable bond. Sale of a
Security as a taxable bond would likely result in a realization
of proceeds less than the cost of the Security.
In the case of certain of the underlying Securities
comprising the Portfolio of the Trust, the opinions of bond
counsel indicate that although interest on such underlying
Securities is generally exempt from Federal income tax, such
underlying Securities are "industrial development bonds" under
the 1954 Code or "private activity bonds" under the 1986 Code
as those terms are defined in the relevant Code provisions, and
interest on such underlying Securities will not be exempt from
Federal income tax for any period during which such underlying
Securities are held by a "substantial user" of the facilities
financed by the proceeds of such underlying Securities (or a
"related person" to such a "substantial user"). In the opinion
of Messrs. Cahill Gordon & Reindel, interest attributable to
such underlying Securities (although not subject to Federal
income tax to the Trust), if received by the Trust for the
account of a Unit Holder who is such a "substantial user" or
"related person," will be taxable (i.e., not tax exempt) to the
same extent as if such underlying Securities were held directly
by the Unit Holder as owner. No investigation as to the users
or of the facilities financed by the underlying Securities has
been made by the Sponsor or its counsel. Investors should
consult their tax counsel for advice with respect to the effect
of these provisions on their particular tax situations.
In the case of an Insured Trust, assuming that the
insurance policies and any related agreements described in
"Insurance on the Securities in the Portfolio of an Insured
Trust" have been validly issued, are of standard form with
respect to subrogation and do not relieve the issuer of the
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Security of its obligations thereunder, and provided that, at
the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the Securities,
rather than the insurer, will pay debt service on the
Securities, Messrs. Cahill Gordon & Reindel are of the opinion
that proceeds received under the insurance policies
representing matured interest on a defaulted obligation will be
excludable from Federal gross income if, and to the same
extent, such interest would have been so excludable if paid by
the issuer of such defaulted obligation.
Persons in receipt of Social Security benefits should
be aware that a portion of such Social Security benefits may be
includible in gross income. For a taxpayer whose modified
adjusted gross income plus one-half of his or her Social
Security benefits does not exceed $34,000 ($44,000 for married
taxpayers filing a joint return), the includible amount is the
lesser of (i) one-half of the Social Security benefits or (ii)
one-half of the amount by which the sum of "modified adjusted
gross income" plus one-half of the Social Security benefits
exceeds $25,000 in the case of unmarried taxpayers and $32,000
in the case of married taxpayers filing a joint return. All
other taxpayers receiving Social Security benefits are required
to include up to 85% of their Social Security benefits in
income.
Modified adjusted gross income is adjusted gross
income determined without regard to certain otherwise allowable
deductions and exclusions from gross income, plus tax exempt
interest on municipal obligations including interest on the
Securities. To the extent that Social Security benefits are
includible in gross income they will be treated as any other
item of gross income and therefore may be taxable.
Investors should also consult their tax counsel for
advice with respect to the effect, if any, on the tax cost of
Units to a Unit Holder in cases in which a contract to acquire
a Security is settled after the settlement date for such Units
and the Unit Holder's proportionate share of the interest
accrued on the underlying Security on the Security settlement
date will exceed the portion of the purchase price allocable to
interest accrued on the Unit settlement date. In such cases,
the Unit Holder may have an adjustment to the tax basis in the
Units for interest accruing on such Securities during the
interval between purchase of Units and delivery of Securities.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS
FOR FEDERAL INCOME TAX PURPOSES DOES NOT NECESSARILY RESULT IN
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EXEMPTION UNDER ANY OTHER FEDERAL TAX LAW OR UNDER THE INCOME
OR OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF THE
SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH
OBLIGATIONS. (See "Rights of Unit Holders -- Reports and
Records.")
State risk factors, including opinions of special
State counsels with respect to certain state tax aspects of an
investment in Units of a State Trust are discussed in Part C,
if applicable.
The Portfolio of the Trust may contain zero coupon
bond(s) or one or more other Securities which were originally
issued at a discount ("original issue discount"). In general,
original issue discount can be defined as the difference
between the price at which a Security was issued and its stated
redemption price at maturity. If the original issue discount
is less than .25% of the stated redemption price of the
Security at maturity multiplied by the number of complete years
to maturity, the original issue discount shall be considered to
be zero. In the case of a Security issued before September 4,
1982, original issue discount is deemed to accrue (be "earned")
as tax-exempt interest ratably over the period from the date of
issuance of the Security to the date of maturity and is
apportioned among the original holder of the obligation and
subsequent purchasers in accordance with a ratio the numerator
of which is the number of calendar days the obligation was
owned by the holder and the denominator of which is the total
number of calendar days from the date of issuance of the
obligation to its date of maturity. Gain or loss upon the
disposition of an original issue discount Security in a
Portfolio is measured by the difference between the amount
realized upon disposition of and the amount paid for such
obligation. A holder is entitled, however, to exclude from
gross income that portion of such gain attributable to accrued
interest and the "earned" portion of original issue discount.
In the case of a Security issued after September 3,
1982, original issue discount is deemed to accrue on a constant
interest method which corresponds, in general, to the economic
accrual of interest (adjusted to eliminate proportionately on
an elapsed-time basis any excess of the amount paid for the
Security over the sum of the issue price and the accrued
original issue discount on the acquisition date). The tax
basis in the Security is increased by the amount of original
issue discount that is deemed to accrue while the Security is
held. The difference between the amount realized on a
disposition of the Security (ex currently accrued interest) and
the adjusted tax basis of the Security will give rise to
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<PAGE>
taxable gain or deductible loss upon a disposition of the
Security by the Trust (or a sale or redemption of Units by a
Unit Holder).
The Code provides, generally, that adjustments to
taxable income to produce alternative minimum taxable income
for corporations will include 75% of the amount by which
adjusted current earnings (which would include tax-exempt
interest) of the taxpayer exceeds the alternative minimum
taxable income of the taxpayer before any amount is added to
alternative minimum taxable income because of this adjustment.
For Federal income tax purposes, Trust expenses
allocable to producing or collecting Trust interest income are
not deductible because the interest income derived by the Trust
is exempt from Federal income tax. A state or local income tax
may provide for a deduction for the portion of such Trust
expenses attributable to the production or collection of income
derived by the Trust and taxed by the state or locality. The
effect on any such deductions of the Code rules whereby
investment expenses and other miscellaneous deductions are
deductible only to the extent in excess of 2% of adjusted gross
income would depend upon the law of the particular state or
locality involved.
The Code also imposes an additional 12/100% ($12.00
per $10,000) environmental tax on the alternative minimum
taxable income (determined without regard to any alternative
tax net operating loss deduction) of a corporation in excess of
$2,000,000 for each taxable year beginning before January 1,
1996. The environmental tax is an excise tax and is deductible
for United States Federal income tax purposes (but not for
purposes of the environmental tax itself). Although the
environmental tax is based on alternative minimum taxable
income, the environmental tax must be paid in addition to any
Federal income taxes payable by the corporation.
From time to time proposals have been introduced
before Congress the purpose of which is to restrict or
eliminate the Federal income tax exemption for interest on
securities similar to the Securities in the Trust or to require
treatment of such interest as a "tax preference" for
alternative minimum tax purposes, and it can be expected that
similar proposals may be introduced in the future. The Trust
and the Sponsor cannot predict what legislation, if any, in
respect of the tax status of interest on Securities may be
proposed by the Executive Branch or by members of Congress, nor
can they predict which proposals, if any, might be enacted or
whether any legislation if enacted would apply to the
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Securities in the Trust. At any time Congress may have under
consideration various proposals to revise the tax system in the
United States including current proposals to impose a flat tax
system. Any flat tax system may have the effect of reducing or
eliminating the benefit presently received in connection with
the receipt of interest on municipal debt obligations as
compared to the receipt of interest on other obligations.
Moreover, a flat tax system, if implemented, may have an
adverse effect on the value of the Securities held in the
portfolio of the Trust. The Sponsor cannot predict whether a
flat tax or similar system will be enacted nor can it predict
the impact any such system would have on the portfolio of the
Trust.
In addition, investors should be aware that no
deduction is allowed for Federal income tax purposes for
interest on indebtedness incurred or continued to purchase or
carry Units in the Trust. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of Units may be considered to
have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of the Units.
All taxpayers are required to report for
informational purposes on their Federal income tax returns the
amount of tax-exempt interest they receive.
Investors should consult their own tax advisors with
respect to the applicability of the foregoing general comments
to their own particular situations and as respects state and
local tax consequences of an investment in Units.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE
The Public Offering Price of Units during the initial
public offering period is computed by adding to the aggregate
offering price of the Securities in a Trust, any money in the
Principal Account other than money required to redeem tendered
Units, dividing such sum by the number of Units outstanding,
and then adding a sales charge of 4.75% of the Public Offering
Price (in the case of a Trust with a DSC feature, 4.9% of the
offering price of the Securities subject to a sales charge plus
the total sales charge (5.152% of the offering side evaluation
of such Securities)) in the case of a trust composed of long
term securities (4.987% of the net amount invested) or a sales
charge of 3.00% of the Public Offering Price in the case of an
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Intermediate Term Trust (3.093% of the net amount invested) or
such other sales charge as is designated in Part A. For
purchases settling after the first settlement date (including
purchases of Units created after the initial date of deposit) a
proportionate share of accrued and undistributed interest on
the Securities from such date to the settlement date for Units
is also added to the Public Offering Price. After the initial
public offering period the Public Offering Price of the Units
will be determined by adding to the Evaluator's determination
of the aggregate bid price of the Securities per Unit a sales
charge as set forth under Secondary Market Sales Charge herein.
A proportionate share of accrued and undistributed interest on
the Securities (other than DSC Payment Securities) to the
settlement date for Units purchased and of cash on hand in the
Trust is also added to the Public Offering Price.
The Public Offering Price on the date of this
Prospectus or any subsequent date may vary from the Public
Offering Price set forth in the Part A --"Summary of Essential
Information" in accordance with fluctuations in the evaluation
of the underlying Securities in the Trust.
The aggregate bid or offering prices of the
Securities in the Trust, as is appropriate, shall be determined
for the Trust by the Evaluator as of the Evaluation Time, in
the following manner: (a) on the basis of current bid or
offering prices for the Securities as obtained from investment
dealers or brokers (including the Sponsor) who customarily deal
in securities comparable to those held in the Trust, (b) if
there is no market for such securities and bid or offering
prices are not available, on the basis of prices for comparable
securities, (c) by determining the value of the Securities on
the bid or offering side of the market by appraisal, or (d) by
any combination of the above. Unless a Security covered by
Portfolio Insurance is in default in payment of principal or
interest or in significant risk of such default, the Evaluator
will not attribute any value to the Portfolio Insurance
obtained by an Insured Trust or to an Insured Trust's right to
secure Permanent Insurance with respect to such Security in the
event of a sale of such Security. The value of insurance to
maturity obtained by the issuer of a Security or by the Sponsor
on the Date of Deposit is reflected and included in the market
value of such Security. With respect to the initial evaluation
of the offering prices of Securities which at the Date of
Deposit were subject to syndicate offering period pricing
restrictions, it is the practice of the Evaluator to determine
such evaluation on the basis of the syndicate offering price,
unless factors cause the Evaluator to conclude that such
syndicate offering price does not then accurately reflect the
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free market value of such Securities, in which case the
Evaluator will also take into account the other criteria
described above for the purpose of making its determination.
The Public Offering Price will be effective for all sales of
Units made during the preceding 24-hour period. Following the
initial public offering period, determinations of the aggregate
bid price of the Securities, for purposes of secondary market
transactions by the Sponsor and redemptions by the Trustee,
will be made each business day as of the Evaluation Time,
effective for all sales or redemptions made subsequent to the
last preceding determination. (See 'Rights of Unit
Holders--Redemption'.) The difference between the bid and
offering prices of the Securities may be expected to average
approximately 1 1/2% of principal amount. In the case of
actively traded securities, the difference may be as little as
1/2 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 (such
repurchase price will be reduced by any unpaid DSC). On the
Date of Deposit the aggregate current offering price of such
Securities per Unit exceeded the bid price of such Securities
per Unit by the amount set forth under 'Summary of Essential
Information'. For information relating to the calculation of
the Redemption Price, which, like the Public Offering Price in
the secondary market, is based upon the aggregate bid price of
the underlying Securities and which may be expected to be less
than the aggregate offering price, see 'Rights of Unit
Holders -- Redemption--Computation of Redemption Price per
Unit'.
In an effort to reduce the amount of accrued interest
which investors would have to pay in addition to the Public
Offering Price, the Trustee has agreed to advance to the Trust
the amount of accrued interest due on the Securities to the
first expected settlement date for Units. This accrued
interest amount will be paid to the Sponsor as the holder of
record of all Units on such date. Consequently, when the
Sponsor sells Units of the Trust, the amount of accrued
interest to be added to the Public Offering Price of the Units
purchased by an investor will include only accrued interest
from the settlement date for Units purchased on the date of
this Prospectus to, but not including, the date of settlement
of the investor's purchase (normally five business days after
purchase), less any distributions from the Interest Account.
The Trustee will recover its advancements to the Trust (without
interest or other cost to the Trust) from interest received on
the Securities deposited in the Trust.
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On the Date of Deposit, the Public Offering Price per
Unit and the Sponsor's Initial Repurchase Price per Unit (based
on the offering side evaluation of the Securities in a Trust)
each exceeded the Redemption and Sponsor's Secondary Market
Repurchase Price per Unit (based upon the bid side evaluation
of the Securities in a Trust) by the amounts set forth in Part
A--'Summary of Essential Information,' herein.
PUBLIC DISTRIBUTION
During the initial public offering period, Units will
be distributed to the public by the Sponsor and through dealers
at the Public Offering Price, calculated on each business day,
plus accrued interest. The initial public offering period is
30 days, unless all Units are sold prior thereto whereupon the
initial public offering period will terminate. The initial
public offering period may be extended by the Sponsor for up to
four successive 30-day periods as long as Units remain unsold.
Upon the termination of the initial public offering period,
unsold Units or Units acquired by the Sponsor in the secondary
market referred to below may be offered to the public by this
Prospectus at the then current Public Offering Price, plus
accrued interest.
The underwriters of the Units are listed in Part
A--'Underwriting Account.' It is the Underwriters' intention to
qualify Units for sale in the states and to effect a public
distribution of the Units solely through their own
organizations. However, Units may be sold through dealers who
are members of the National Association of Securities Dealers,
Inc. at prices which represent a concession or agency
commission per Unit. In the State of Virginia, Units of a
State Trust will not be offered for sale. Sales to dealers
will initially be made at prices which include a concession per
Unit as set forth below, but subject to change from time to
time at the discretion of the Sponsor. The Sponsor reserves
the right to reject, in whole or in part, any order for the
purchase of Units.
The dealer concession will be $33 per Unit in the
primary market. The dealer concession per Unit in the
secondary market will generally be 65% of the sales charge per
Unit. However, the Sponsor may negotiate a different
concession (either higher or lower) with dealers on a
case-by-case basis. In addition to such discounts, the Sponsor
may, from time to time, pay or allow an additional discount in
the form of cash or other compensation, to dealers who
underwrite additional Units of a Trust or who sell, during a
specified time period, a minimum dollar amount of Units of a
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Trust and other unit investment trusts underwritten by the
Sponsor.
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.
In addition, sales of Units may be made pursuant to
distribution arrangements with certain banks which are acting
as agents for their customers. These banks are making Units of
the Trust available to their customers on an agency basis. A
portion of the sales charge paid by these customers is retained
by or remitted to the banks in amounts comparable to the
aforementioned dealers' concessions. The Glass-Steagall Act
prohibits banks from underwriting certain securities, including
Units of the Trust; however, this Act does permit certain
agency transactions, and banking regulators have not indicated
that these particular agency transactions are impermissible
under this Act. In certain states, any bank making Units
available must be registered as a broker-dealer in that state.
SECONDARY MARKET
While not obligated to do so, it is the Sponsor's
present intention to maintain a secondary market for Units of
each Trust and to continuously offer to repurchase Units from
Unit Holders at the applicable Sponsor's Repurchase Price.
(See Part A-- 'Summary of Essential Information.') During the
initial offering period the Sponsor's Repurchase Price is
computed by adding to the aggregate of the offering prices of
the Securities in a Trust, any money in the Principal Account
other than money required to redeem tendered Units, plus
accrued interest, deducting therefrom expenses of the Trust,
Trustee, Evaluator, Sponsor and counsel, and taxes and any
unpaid DSC, if any, and then dividing the resulting sum by the
number of Units outstanding, as of the date of such
computation. Following the initial public offering period, the
Sponsor, although it is not obligated to do so, presently
intends to maintain a market for the Units of the Trust at
prices based upon each Unit's pro rata share of the aggregate
value of the Securities determined (by the Evaluator) on the
basis of the bid side of the market. Any Units repurchased by
the Sponsor at the Sponsor's Repurchase Price may be reoffered
to the public by the Sponsor at the then current Public
Offering Price, plus accrued interest. Any profit or loss
resulting from the resale of such Units will belong to the
Sponsor.
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If the supply of Units exceeds demand (or for any
other business reason), the Sponsor may, at any time,
occasionally, from time to time, or permanently, discontinue
the repurchase of Units. In such event, Unit Holders
(including the Sponsor) may redeem their Units through the
Trustee at the Redemption Price, which is based upon the
aggregate bid price of the Securities and which may be expected
to be less than the aggregate offering price. (See "Rights of
Unit Holders -- Redemption -- Computation of Redemption Price
per Unit.") If the Sponsor repurchases Units in the secondary
market at the "Redemption Price," it may reoffer these Units in
the secondary market at the 'Public Offering Price,' or the
Sponsor may tender Units so purchased to the Trustee for
redemption. In no event will the price offered by the Sponsor
for the repurchase of Units be less than the current Redemption
Price for those Units. (See "Rights of Unit Holders --
Redemption.")
SPONSOR'S AND UNDERWRITERS' PROFITS
The Sponsor receives a sales charge as set forth in
the table below in the primary market and in the secondary
market. On the sale of Units to dealers, the Sponsor will
retain the difference between the dealer concession and the
sales charge. (See "Public Distribution," herein.) For their
services, the Underwriters receive a concession as provided in
the Agreement Among Underwriters.
The Sponsor may have also realized a book profit (or
a loss) on the deposit of the Securities in the Trust
representing the difference between the cost of the Securities
to the Sponsor and the cost of the Securities to such Trust.
(For a description of such profit (or loss) and the amount of
such difference, see Part A--"Schedule of Portfolio
Securities.") The Sponsor may realize profits or sustain losses
in respect of Securities which were acquired from the Sponsor
or from underwriting syndicates of which it was a member. (See
Part A--"Portfolio Summary as of Date of Deposit.") An
underwriter or underwriting syndicate purchases bonds from the
issuer on a negotiated or competitive bid basis as principal
with the motive of marketing such bonds to investors at a
profit. In addition, the Sponsor may realize profits (or
sustain losses) due to daily fluctuations in the offering
prices of the Securities in the Trust and thus in the Public
Offering Price of Units received by the Sponsor. Cash, if any,
received by the Sponsor from the Unit Holders prior to the
settlement date for purchase of Units may be used in the
Sponsor's business to the extent permitted by applicable
regulations and may be of benefit to the Sponsor.
B-46
<PAGE>
The Sponsor may also realize profits (or sustain
losses) while maintaining a secondary market in the Units, in
the amount of any difference between the prices at which the
Sponsor buys Units (based on the bid side evaluation of the
Securities in a Trust) and the prices at which the Sponsor
resells such Units or the prices at which the Sponsor redeems
such Units (also based on the bid side evaluation of the
Securities in the Trust), as the case may be.
VOLUME DISCOUNT
Although under no obligation to do so, the Sponsor
intends to permit volume purchasers of Units to purchase Units
at a reduced sales charge. The Sponsor may at any time change
the amount by which the sales charge is reduced, or discontinue
the discount altogether.
The sales charge per Unit will be reduced pursuant to
the following graduated scale for sales to any person of Units
in the primary market as set forth below:
PRIMARY MARKET SALES TRUST SUB-
CHARGE________ JECT TO DSC (1)
PERCENT PERCENT
OF PUBLIC OF NET
OFFERING AMOUNT
NUMBER OF UNITS PRICE INVESTED
___________________________________________________________________________
less than 100 Units................. 4.75% 4.987% 4.90% (a), 5.152% (b)
100-249 Units....................... 4.25% 4.439%
250-499 Units....................... 4.00% 4.167%
500-749 Units....................... 3.50% 3.627%
750-999 Units....................... 3.25% 3.359%
1,000 Units or more................. 3.00% 3.093%
(1)Units subject to DSC: (a) Percent of the offer side evaluation of the
Securities on which a sales charge is imposed plus the total sales charge. (b)
Percent of the offering side evaluation of the Securities on which a
sales charge is imposed. The up-front sale charge will equal the
difference between the amount of the total sales charge and any unpaid DSC.
SECONDARY MARKET SALES CHARGE
The sales charge per Unit in the secondary market
will be computed by multiplying the Evaluator's determination
of the bid side evaluation of each Security by a sales charge
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<PAGE>
determined in accordance with the table set forth below based
upon the number of years remaining to the maturity of each such
Security, totalling all such calculations, and dividing this
total by the number of Units then outstanding. In calculating
the date of maturity, a Security will be considered to mature
on its stated maturity date unless: (a) the Security has been
called for redemption or funds or securities have been placed
in escrow to redeem it on an earlier call date, in which case
the call date will be deemed the date on which such Security
matures; or (b) the Security is subject to a mandatory tender,
in which case the mandatory tender date will be deemed the date
on which such Security matures.
(AS (AS
PERCENT PERCENT
OF BID OF PUBLIC
SIDE OFFERING
TIME TO MATURITY EVALUATION) PRICE) 2
___________________________________________________________________________
Less than six months.......... 0% 0%
Six months to 1 year.......... 0.756% 0.75%
Over 1 year to 2 years........ 1.523% 1.50%
Over 2 years to 4 years....... 2.564% 2.50%
Over 4 years to 8 years....... 3.627% 3.50%
Over 8 years to 15 years...... 4.712% 4.50%
Over 15 years................. 5.820% 5.50%
(2) Units subject to DSC - as a percent of the bid side evaluation of the
Securities on which a sales charge is imposed plus the total sales charge. The
up-front sales charge will equal the difference between the amount of the total
secondary market sales charge and any unpaid DSC remaining and, therefore, as
the amount of the unpaid DSC declines, the amount of the
up-front sales charge will increase.
The sales charge per Unit will be reduced pursuant to the
following graduated scale for sales to any person of at least 100 Units in the
secondary market.
% OF
NUMBER OF UNITS SALES CHARGE
___________________________________________________________________________
Less than 100 Units ............................ 100%
100-249 Units ................................... 90%
250-499 Units.................................... 80%
500-749 Units.................................... 75%
750-999 Units.................................... 70%
1,000 Units or More.............................. 65%
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<PAGE>
The respective reduced sales charges as shown on each
of the above charts will apply to all purchases of Units in any
fourteen day period by the same person in the amounts stated
herein, and for this purpose, purchases of Units of the Trust
will be aggregated with concurrent purchases of Units of any
other trust that may be offered by the Sponsor.
Units held in the name of the purchaser's spouse, in
the name of a purchaser's child under the age of 21 or in the
name of an entity controlled by the purchaser are deemed for
the purposes hereof to be acquired by the purchaser. The
reduced sales charges are also applicable to a trustee or other
fiduciary purchasing Units for a single trust estate or single
fiduciary account.
EMPLOYEE DISCOUNT
The Sponsor intends to permit employees of Prudential
Securities Incorporated and its subsidiaries and affiliates to
purchase Units of the Trust at a price equal to the offering
side evaluation of the Securities in the Trust divided by the
number of Units outstanding plus a reduced sales charge of
$5.00 per Unit (or in the case of Units subject to DSC, the
remaining DSC), subject to a limit of 5% of the Units of a
Trust at the discretion of the Sponsor.
EXCHANGE OPTION
Unit Holders may elect to exchange any or all of
their Units of this series of the National Municipal Trust for
units of one or more of any other series in the Prudential
Securities Incorporated family of unit investment trusts or
certain additional trusts that may from time to time be made
available for such exchange by the Sponsor (collectively
referred to as the "Exchange Trusts"). Such units may be
acquired at prices based on reduced sales charges per unit.
The purpose of such reduced sales charges is to permit the
Sponsor to pass on to the Unit Holder who wishes to exchange
Units the cost savings resulting from such exchange of Units.
The cost savings result from reductions in time and expense
related to advice, financial planning and operational expense
required for the Exchange Option. Exchange Trusts may have
different investment objectives; a Unit Holder should read the
prospectus for the applicable Exchange Trust carefully to
determine the investment objective prior to the exercise of
this option.
This option will be available provided that units of
the applicable Exchange Trust are available for sale and are
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<PAGE>
lawfully qualified for sale in the jurisdiction in which the
Unit Holder resides. 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 or exchange his units; thus there is no
assurance that the Exchange Option will be available to any
Unit Holder. The Sponsor reserves the right to modify, suspend
or terminate this option at any time without further notice to
Unit Holders (in the case of Units subject to a DSC, sixty
days' notice will be given prior to the date of the termination
of, or material amendment to, the Exchange Option except that
no notice need be given under certain circumstances). In the
event the Exchange Option is not available to a Unit Holder at
the time he wishes to exercise it, the Unit Holder will be
immediately notified and no action will be taken with respect
to his units without further instruction from the Unit Holder.
Exchanges will be effected in whole units only. If
the proceeds from the Units being surrendered are less than the
cost of a whole number of units being acquired, the exchanging
Unit Holder will be permitted to add cash in an amount to round
up to the next highest number of whole units. When units held
for less than five months are exchanged for units with a higher
regular sales charge, the sales charge will be the greater of
(a) the reduced sales charge or (b) the difference between the
sales charge paid in acquiring the units being exchanged and
the regular sales charge for the quantity of units being
acquired, determined as of the date of the exchange.
To exercise the Exchange Option, a Unit Holder should
notify the Sponsor of his desire to use the proceeds from the
sale of his Units to purchase units of one or more of the
Exchange Trusts. If units of the applicable outstanding series
of the Exchange Trust are at that time available for sale, the
Unit Holder may select the series or group of series for which
he desires his Units to be exchanged. The Unit Holder will be
provided with a current prospectus or prospectuses relating to
each series in which he indicates interest.
Units of the Exchange Trust trading in the secondary
market maintained by the Sponsor, if so maintained, will be
sold to the Unit Holder at a price equal to the aggregate bid
side evaluation per unit of the securities in that portfolio
plus accrued interest and the applicable sales charge of $15*
___________________
* In the case of Units subject to a DSC, the exchange sales charge will
be the remaining DSC if greater than the applicable reduced sales
Footnote continued on next page.
B-50
<PAGE>
per unit. Excess proceeds not used to acquire whole units will
be paid to the exchanging Unit Holder. Owners of units of any
registered unit investment trust other than National Municipal
Trust which was initially offered at a minimum applicable sales
charge of 3.0% of the public offering price exclusive of any
applicable sales charge discounts may elect to apply the cash
proceeds of sale or redemption of those units directly to
acquire units of any Exchange Trust trading in the secondary
market at the reduced sales charge of $20* per Unit, subject to
the terms and conditions applicable to the Exchange Option.
The reduced sales charge for Units of any Exchange Trust
acquired during the initial offering period for such Units will
be sold at a price equal to the offering side evaluation per
unit of the securities in the portfolio plus accrued interest
plus a reduced sales charge of $25* per unit. To exercise this
option, the owner should notify his retail broker. He will be
given a prospectus of each series in which he indicates
interest of which units are available. The Sponsor reserves
the right to modify, suspend or terminate the option at any
time without further notice, including the right to increase
the reduced sales charge applicable to this option (but not in
excess of $5 more per unit than the corresponding fee then
charged for a unit of an Exchange Trust which is being
exchanged).
For example, assume that a Unit Holder, who has three
units of a Trust with a 4.75% sales charge and a current price
of $1,100 per unit, sells his units and exchanges the proceeds
for units of a series of an Exchange Trust with a current price
of $950 per unit and an ordinary sales charge of 4.75%. The
proceeds from the Unit Holder's units will aggregate $3,300.
Since only whole units of an Exchange Trust may be purchased
under the Exchange Option, the Holder would be able to acquire
four units in the Exchange Trust for a total cost of $3,860
($3,800 for units and $60 for the $15 per unit sales charge) by
adding an extra $560 in cash. Were the Unit Holder to acquire
the same number of units at the same time in the regular
secondary market maintained by the Sponsor, the price would be
$3,989.50 [$3,800 for the units and $189.50 for the 4.75% sales
charge (4.987% of the net amount invested)].
___________________
Footnote continued from previous page.
charge ($15, $20 or $25) or if the remaining DSC is less than
applicable reduced sales charge, the Unit will be subject to the
remaining DSC and the sales charge payable at the time of the
exchange will be the difference between the amount of the reduced
sales charge and the remaining DSC.
B-51
<PAGE>
TAX CONSEQUENCES
An exchange of Units pursuant to the Exchange Option
will constitute a "taxable event" under the Code, i.e., a Unit
Holder will recognize gain or loss at the time of exchange,
except that upon an exchange of Units of this series of the
National Municipal Trust for units of any other series of
Exchange Trusts which are grantor trusts for U.S. federal
income tax purposes the Internal Revenue Service may seek to
disallow any loss incurred upon such exchange to the extent
that the underlying securities in each trust are substantially
identical and the purchase of Units of an Exchange Trust takes
place less than thirty-one days after the sale of the Units.
Unit Holders are urged to consult their own tax advisors as to
the tax consequences to them of exchanging Units in particular
cases.
REINVESTMENT PROGRAM
Distributions of interest and principal, if any, are
made to Unit Holders monthly or semiannually. A Unit Holder
will have the option of either receiving his monthly or
semiannual income check from the Trustee or reinvesting the
distribution in an open-end diversified management investment
company offered by the Sponsor or by one of the Underwriters
whose investment objective is to attain for investors the
highest level of current income that is exempt from Federal
income taxes, consistent with liquidity and the preservation of
capital. Participation in any such fund is conditioned on such
fund's lawful qualification for sale in the jurisdiction in
which the Unit Holder resides. There can be no assurance,
however, that such qualification will be obtained. Upon
enrollment in the reinvestment program, the Trustee will direct
monthly or semiannual interest distributions and principal
distributions, if any, to the designated fund. This
Reinvestment Program does not involve insured securities. The
appropriate prospectus will be sent to the Unit Holder. A Unit
Holder's election to participate in this reinvestment program
will apply to all Units of the Trust owned by such Unit Holder.
The Unit Holder should read the prospectus for the fund
carefully before deciding to participate. The Sponsor may
terminate or modify the reinvestment program at any time
without further notice to Unit Holders.
B-52
<PAGE>
EXPENSES AND CHARGES
EXPENSES
All or a portion of the organizational expenses and
charges incurred in connection with the establishment of the
Trust including the cost of the preparation, printing and
execution of the Indenture, the Certificates, Registration
Statement and other documents relating to the Trust, Federal
and State registration fees and costs, the initial fees and
expenses of the Trustee, and legal and auditing expenses and
other out-of-pocket expenses will be paid by the Trust.
Historically, the costs of establishing unit investment trusts
have been borne by a trust's sponsor. Advertising and selling
expenses will be paid by the Sponsor and the Underwriters, if
any, at no cost to the Trust.
FEES
The Portfolio supervision fee (the "Supervision Fee")
which is earned for Portfolio supervisory services, is based
upon the aggregate face amount of Securities in the Trust at
the beginning of each calendar year.
The Supervision Fee, which is not to exceed the
amount (set forth in Part A -- "Summary of Essential
Information") per $1,000 face amount of Securities in the
Trust, may exceed the actual costs of providing Portfolio
supervisory services for such Trust, but at no time will the
total amount the Sponsor and/or an affiliate thereof receive
for Portfolio supervisory services rendered to all series of
National Municipal Trust and Prudential Unit Trusts in any
calendar year exceed the aggregate cost to it of supplying such
services in such year. For a description of the Portfolio
supervisory services to be provided by the Sponsor and/or an
affiliate thereof, see "Sponsor--Responsibility." The
Supervision Fee will be paid to the Sponsor by the Trust. The
Prudential Insurance Company of America, the indirect parent of
the Sponsor, or a division or subsidiary thereof, has agreed to
advise the Sponsor regarding the Sponsor's Portfolio
supervisory services and will be compensated by the Sponsor for
such advisory services.
For its service as Trustee under the Indenture, the
Trustee receives an annual fee in the amount set forth under
Part A -- "Summary of Essential Information."
B-53
<PAGE>
For each evaluation of the Securities in a Trust, the
Evaluator will receive a fee in the amount set forth under Part
A -- "Summary of Essential Information."
The Supervision Fee accrues quarterly but is paid
annually, and the Trustee's fees and the Trust expenses and the
Evaluator's fees are payable monthly on or before each
Distribution Date from the Interest Account, to the extent
funds are available, and thereafter from the Principal Account.
Any of such fees may be increased without approval of the Unit
Holders in proportion to increases under the classification
"All Services Less Rent" in the Consumer Price Index published
by the United States Department of Labor. The Trustee also
receives benefits to the extent that it holds funds on deposit
in various non-interest bearing accounts created under the
Indenture.
AUTHORIZATION FOR REINVESTMENT
NATIONAL MUNICIPAL TRUST SERIES
I hereby elect to participate in the Reinvestment Program to
the extent indicated below and do authorize United States Trust
Company of New York, Trustee, to direct distributions as
indicated below to the Prudential Tax Free Money Fund, Inc.
where such amounts shall immediately be invested into shares of
the fund.
The foregoing authorization is subject in all respects to the
terms and conditions of participation set forth in the National
Municipal Trust prospectus and shall remain in effect until
such time as I notify United States Trust Company of New York
to the contrary in writing.
(fold here)
_______________________________________________________________
Soc. Sec./Tax I.D. No.: _____________________________________
Please reinvest all NMT series which
Series I/we own
Please list below the specific series
I/we wish to reinvest
___________________________________________
___________________________________________
___________________________________________
Check One Reinvest Interest
Reinvest Principal
B-54
<PAGE>
Reinvest Both Interest and Principal
Exact registration as it
appears on your Units:
Street address:
City, State, Zip Code:
Unit Holder Signature(s): Date:
(all joint holders must sign)
REINVESTMENT ADDRESS
US TRUST COMPANY
ATTN: DIVIDEND REINVESTMENT--DEPT. A
P.O. BOX 834
NEW YORK, N.Y. 10003
OTHER CHARGES
The following additional charges are or may be
incurred by the Trust as more fully described in the Indenture:
(a) fees of the Trustee for extraordinary services, (b)
expenses of the Trustee (including legal and auditing expenses)
and of counsel designated by the Sponsor, (c) various
governmental charges, (d) expenses and costs of any action
taken by the Trustee to protect a Trust and the rights and
interests of the Unit Holders, (e) indemnification of the
Trustee for any losses, liabilities or expenses incurred by it
in the administration of a Trust without gross negligence, bad
faith, willful misfeasance or willful misconduct on its part or
reckless disregard of its obligations and duties, (f)
indemnification of the Sponsor for any losses, liabilities and
expenses incurred in acting as Sponsor or Depositor under the
Indenture without gross negligence, bad faith, willful
misfeasance or willful misconduct or reckless disregard of its
obligations and duties, (g) expenditures incurred in contacting
Unit Holders upon termination of the Trust and (h) to the
extent then lawful, expenses (including legal, auditing and
printing expenses) of maintaining registration or qualification
of the Units and/or the Trust under Federal or state securities
laws so long as the Sponsor is maintaining a market for the
Units.
The fees and expenses set forth herein for the Trust
are payable out of such Trust and when so paid by or owing to
the Trustee are secured by a lien on such Trust. If the
balances in the Interest and Principal Accounts are
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<PAGE>
insufficient to provide for amounts payable by a Trust, the
Trustee has the power to sell Securities to pay such amounts.
To the extent Securities are sold, the size of such Trust will
be reduced and the proportions of the types of Securities will
change. Such sales might be required at a time when Securities
would not otherwise be sold and might result in lower prices
than might otherwise be realized. Moreover, due to the minimum
principal amount in which Securities may be required to be
sold, the proceeds of such sales may exceed the amount
necessary for the payment of such fees and expenses.
RIGHTS OF UNIT HOLDERS
CERTIFICATES
Ownership of Units is evidenced by registered
certificates executed by the Trustee and the Sponsor.
Certificates are transferable by presentation and surrender 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 will be
required 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 should be
surrendered to the Trustee for replacement.
DISTRIBUTION OF INTEREST AND PRINCIPAL
Interest and principal received by the Trust will be
distributed on each Distribution Date on a pro rata basis to
Unit Holders of record as of the preceding Record Date unless
distributed to the Sponsor in payment of the DSC. All
distributions will be net of applicable expenses, 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
"Summary of Essential Information," "Expenses and Charges" and
"Rights of Unit Holders -- Redemption.")
The Trustee will credit to the Interest Account all
interest received by the Trust, including that part of the
proceeds of any disposition of Securities which represents
accrued interest. Other receipts will be credited to the
B-56
<PAGE>
Principal Account. The pro rata share of the Interest Account
and the pro rata share of cash in the Principal Account
represented by each Unit will be computed by the Trustee each
month as of the Record Date. (See "Summary of Essential
Information" in Part A.) Proceeds received from the
disposition of any of the Securities 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 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 Unit Holders'
pro rata share of the estimated annual income to be credited to
the Interest Account after deducting estimated expenses (the
"Interest Distribution") plus such Unit 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
$5.00 per Unit. The Interest Distribution per Unit initially
will be in the amount shown under "Summary of Essential
Information" in Part A and will change as the income and
expenses of the Trust change and as Securities are exchanged,
redeemed, paid down or sold.
Normally, interest on the Securities in the Portfolio
is paid on a semiannual basis. Because 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 Indenture 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 advance 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
Securities 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
Securities by reducing the amount otherwise distributable per
Unit with respect to 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
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<PAGE>
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. In addition, because of
the varying interest payment dates of the Securities comprising
the Trust's Portfolio, accrued interest at any point in time
will be greater than the amount of interest actually received
by the Trust and distributed to Unit Holders. This excess
accrued but undistributed amount (the "accrued interest
carryover") will be added to the value of the Units on any
purchase after the date of the Prospectus. See Part A,
"Summary of Essential Information" for the Accrued Net Interest
Carryover for the particular Trust described therein. If a
Unit Holder sells all or a portion of his Units a portion of
his sale proceeds will be allocable to his proportionate share
of the accrued interest. 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
accrued interest. (See "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit.")
Purchasers of Units who desire to receive
distributions on a semi-annual basis (if available) may elect
to do so at the time of purchase during the initial public
offering period. Those indicating no choice will be deemed to
have chosen the monthly distribution plan. All Unit Holders,
however, purchasing Units during the initial public offering
period and prior to the first Record Date will receive the
first distribution of interest. Thereafter, record dates for
monthly distributions will be the tenth day of each month, and
record dates for semi-annual distributions will be the tenth
day of July and January.
The plan of distribution selected by a Unit Holder
will remain in effect until changed. Unit Holders purchasing
Units in the secondary market will initially receive
distributions in accordance with the election of the prior
owner. In November of each year, the Trustee will furnish each
Unit Holder a card to be returned to the Trustee by December 20
of such year if the Unit Holder desires to change such Unit
Holder's plan of distribution. Unit Holders desiring to change
the plan of distribution in which they are participating may so
indicate on the card and return same, together with their
Certificate to the Trustee. If the card and Certificate are
returned to the Trustee, the change will become effective on
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<PAGE>
December 21 of such year for the ensuing twelve months. If the
card and Certificate are not returned to the Trustee, the Unit
Holder will be deemed to have elected to continue with the same
plan for the following twelve months.
As of the tenth day of each month the Trustee will
deduct from the Interest Account and, to the extent funds are
not sufficient therein, from the Principal Account, amounts
necessary to pay the expenses of the Trust. (See "Expenses and
Charges.") The Trustee may also withdraw from said accounts
such amounts, if any, as it deems necessary to establish a
reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of a
Trust's assets for purposes of determining the amount of
distributions 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.") The Trustee is also entitled to
withdraw from the Interest Account, and, to the extent funds
are not sufficient therein, from the Principal Account, on one
or more record dates as may be appropriate, amounts sufficient
to recoup advances which the Trustee has made in anticipation
of the receipt by the Trust of interest in respect of
Securities which subsequently fail to pay interest when due.
In an effort to reduce the amount of accrued interest
which investors would have to pay in addition to the Public
Offering Price, the Trustee has agreed to advance to the Trust
the amount of accrued interest due on the Securities through
the first expected settlement date. This accrued interest
amount will be paid to the Sponsor as the holder of record of
all Units on such date. Consequently, when the Sponsor sells
Units after the date of the Prospectus, the amount of accrued
interest to be added to the Public Offering Price of the Units
purchased by an investor will include only accrued interest
from the first expected settlement date to, but not including,
the date of settlement of the investor's purchase (normally
five business days after purchase), less any distributions from
the Interest Account. Since a person who contracts to purchase
Units on the date of the prospectus will settle such purchase
on the first expected settlement date of the Units, no accrued
interest will be added to the Public Offering Price. The
Trustee will recover its advancements to the Trust (without
interest or other cost to the Trust) from interest received on
the Securities deposited in the Trust.
B-59
<PAGE>
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
Securities 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 distribution, the
Trustee will, with the first such distribution following such
failure, set forth in an accompanying statement, the Issuer and
the Securities, the amount of the reduction in the distribution
per Unit resulting from such failure, the percentage of the
aggregate face amount of Securities which such Security
represents and, to the extent then determined, information
regarding any disposition or legal action with respect to such
Security. 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 Securities), and, if the Issuers of the
Securities are located in different states or possessions or in
the Commonwealth of Puerto Rico, the percentage of such
interest by such states or other jurisdictions, deductions for
payment of applicable taxes and for fees and expenses of the
Trust, deferred sales charge, redemptions of Units, deferred
sales charge, 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 Securities and the net proceeds received
therefrom (excluding any portion representing interest and any
premium paid to obtain Permanent Insurance), deductions for
payments of applicable taxes and for fees and expenses of the
Trust and redemptions of Units, deferred sales charge, 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
Securities 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
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share of each Unit outstanding on the last business day of such
calendar year. The accounts of the Trust shall be audited not
less frequently than annually by independent certified public
accountants designated by the Sponsor, and the report of such
accountants will 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 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
Securities in the portfolio and a copy of the Indenture.
REDEMPTION
Tender 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 cancelled.
Certificates for Units to be redeemed must be
properly endorsed or accompanied by a written instrument of
transfer, although redemptions without the necessity of
certificate presentation will be effected for record Unit
Holders for whom Certificates have not been issued. 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 firm of either
the New York, Midwest or Pacific Stock Exchanges. In certain
instances the Trustee may require additional documents such as,
but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of
corporate authority.
Within three business days following such tender, or
if the third business day is not a business day, on the first
business day prior thereto, 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--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
that as regards Units received after the Evaluation Time, the
date of tender is the first day after such date on which the
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New York Stock Exchange is open for trading, and such Units
will be deemed to have been tendered to the Trustee on such day
for redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be
withdrawn from the Interest Account, or, if the balance therein
is insufficient, from the Principal Account. All other amounts
paid on redemption shall be withdrawn from the Principal
Account. The Trustee is empowered to sell Securities in order
to make funds available for redemption. Such sales, if
required, could result in a sale of Securities by the Trustee
at a loss. To the extent Securities are sold, the size and
diversity of the 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
by rule or regulation) an emergency exists as a result of which
disposal or evaluation of the underlying Securities is not
reasonably practicable, or for such other periods as the
Securities and Exchange Commission has by order permitted. The
Trustee is not liable to any person or in any way for any loss
or damage that may result from any such suspension or
postponement.
Computation of Redemption Price per Unit
The Redemption Price per Unit ("Redemption Price") of
the Trust is determined by the Trustee on the basis of the bid
prices of the Securities in the Trust (or contracts for
Securities to be acquired by the Trust) as of the Evaluation
Time on the date any such determination is made. The
Redemption Price per Unit is each Unit's pro rata share,
determined by the Trustee, of: (1) the aggregate value of the
Securities in the Trust (or contracts for securities to be
acquired by the Trust) on the bid side of the market
(determined by the Evaluator as set forth below), (2) cash on
hand in the Trust, and accrued and unpaid interest on the
Securities as of the date of computation, less (a) amounts
representing taxes or governmental charges payable out of the
Trust, (b) the accrued expenses of the Trust, (c) any unpaid
DSC and (d) cash held for distribution to Unit Holders of
record as of a date prior to the evaluation. Accrued interest
payable in respect of the Units from the date of tender to, but
not including, the third business day thereafter also comprises
a part of the Redemption Price per Unit. The Evaluator may
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determine the value of the Securities in the Trust (1) on the
basis of current bid prices for the Securities, (2) if bid
prices are not available for any Securities, on the basis of
current bid prices for comparable securities, (3) by appraisal,
or (4) by any combination of the above. In determining the
Redemption Price per Unit no value will be attributed to the
Portfolio Insurance obtained by an Insured Trust on a Security
or to an Insured Trust's right to obtain Permanent Insurance on
such Security in the event of its sale of such Security, unless
such Security is in default in payment of principal or interest
or in significant risk of such default. Securities insured
under a policy obtained by the issuer thereof or by the Sponsor
on the Date of Deposit are entitled to the benefits of such
insurance at all times and such benefits are reflected and
included in the market value of such Securities. (See "The
Trust--Insurance on the Securities in the Portfolio of an
Insured Trust.")
Purchase by the Sponsor of Units Tendered for Redemption
The Indenture 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 of Units--Secondary Market.") Units held by
the Sponsor may be tendered to the Trustee for redemption as
any other Units.
The 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 of Units--Public
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 Public Offering or Redemption Price
subsequent to its acquisition of such Units. (See "Public
Offering of Units--Profit of Sponsor.")
SPONSOR
Prudential Securities Incorporated is a Delaware
corporation and is engaged in the underwriting, securities and
commodities brokerage business and is a member of the New York
Stock Exchange, Inc., other major securities exchanges and
commodity exchanges and the National Association of Securities
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Dealers, Inc. Prudential Securities Incorporated, a
wholly-owned subsidiary of Prudential Securities Group Inc.
and an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America, is engaged in the investment
advisory business. Prudential Securities Incorporated has
acted as principal underwriter and managing underwriter of
other investment companies. In addition to participating as a
member of various selling groups or as an agent of other
investment companies, Prudential Securities Incorporated
executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells
securities to such companies in its capacity as a broker or
dealer in securities.
Prudential Securities Incorporated is distributor for
Prudential Government Securities Trust (Intermediate Term
Series), The Target Portfolio Trust and for Class B shares of
The BlackRock Government Income Trust, and Prudential
Adjustable Rate Securities Fund, Inc. and for Class B and C
shares of Global Utility Fund, Inc., Nicholas-Applegate Fund,
Inc. (Nicholas-Applegate Growth Equity Fund), Prudential
Allocation Fund, Prudential California Municipal Fund
(California Income Series and Series), Prudential Europe Growth
Fund, Inc., Prudential Equity Fund, Inc., Prudential Equity
Income Fund, Prudential Global Fund, Inc., Prudential Global
Genesis Fund, Inc., Prudential Global Natural Resources Fund,
Inc., Prudential GNMA Fund, Inc., Prudential Government Income
Fund, Inc., Prudential Growth Opportunity Fund, Inc.,
Prudential High Yield Fund, Inc., Prudential
IncomeVertible[REGISTERED TRADEMARK SYMBOL] Plus Fund, Inc.,
Prudential Intermediate Global Income Fund, Prudential
Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund (except Connecticut Money
Market Series, Massachusetts Money Market Series, New York
Money Market Series and New Jersey Money Market Series),
Prudential National Municipals Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global Income Fund,
Inc., Prudential Strategist Income Fund, Inc., Prudential
Structured Maturity Fund, Inc., Prudential U.S. Government Fund
and Prudential Utility Fund, Inc.
On October 21, 1993, Prudential Securities
Incorporated entered into an omnibus settlement with the
Securities and Exchange Commission ("SEC"), state securities
regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and
the National Association of Securities Dealers, Inc. ("NASD")
to resolve allegations that from 1980 through 1990 Prudential
Securities Incorporated sold certain limited partnership
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interests in violation of securities laws to persons for whom
such securities were not suitable and misrepresented the
safety, potential returns and liquidity of these investments.
Without admitting or denying the allegations asserted against
it, Prudential Securities Incorporated consented to the entry
of an SEC Administrative Order which stated that the conduct of
Prudential Securities Incorporated violated the federal
securities laws, directed Prudential Securities Incorporated to
cease and desist from violating the federal securities laws,
pay civil penalties, and adopt certain remedial measures to
address the violations.
Pursuant to the terms of the SEC settlement,
Prudential Securities Incorporated agreed to the imposition of
a $10,000,000 civil penalty, established a settlement fund in
the amount of $330,000,000 and procedures to resolve legitimate
claims for compensatory damages by purchasers of the
partnership interests. Prudential Securities Incorporated has
agreed to provide additional funds, if necessary, for the
purpose of the settlement fund. The settlement with the state
securities regulators included an agreement to pay a penalty of
$500,000 per jurisdiction. Prudential Securities Incorporated
consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action.
In October 1994, a criminal complaint was filed with
the United States Magistrate for the Southern District of New
York alleging that Prudential Securities Incorporated committed
fraud in connection with the sale of certain limited
partnership interests in violation of federal securities laws.
An agreement was simultaneously filed to defer prosecution of
these charges for a period of three years from the signing of
the agreement, provided that Prudential Securities Incorporated
complies with the terms of the agreement. If, upon completion
of the three year period, Prudential Securities Incorporated
has complied with the terms of the agreement, no prosecution
will be instituted by the United States for the offenses
charged in the complaint. If on the other hand, during the
course of the three year period, Prudential Securities
Incorporated violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the
terms of the agreement, Prudential Securities Incorporated
agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to
investors who purchased certain Prudential Securities
Incorporated limited partnership interests.
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LIMITATIONS ON LIABILITY
The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the
Indenture, 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 liable or responsible in any way
for depreciation or loss incurred by reason of the sale of any
Securities, except in case of its own willful misfeasance, bad
faith, gross negligence or reckless disregard for its
obligations and duties. (See "Sponsor -- Responsibility.")
RESPONSIBILITY
The Trust is a unit investment trust and is not
actively managed. The Indenture, however, permits the Sponsor
to direct the Trustee to dispose of any Security in the Trust
upon the happening of certain events including the payment of
the DSC, including without limitation, the following:
1. Default in the payment of principal or
interest on any Security when due and payable,
2. Institution of legal proceedings seeking
to restrain or enjoin the payment of any Security
or attacking their validity,
3. A breach of covenant or warranty which
could adversely affect the payment of debt service
on the Security,
4. Default in the payment of principal or
interest on any other outstanding obligations of
the same Issuer of any Security,
5. In the case of a Security that is a
revenue bond, a fall in revenues, based upon
official reports, substantially below the
estimated revenues calculated to be necessary to
pay principal and interest,
6. A decline in market price to such an
extent, or such other market or credit factor, as
in the opinion of the Sponsor would make retention
of a Security detrimental to the Trust and to the
interests of the Unit Holders,
7. Refunding or refinancing of the
Security, as set forth in the Indenture, or
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8. The loss of Federal income tax exemption
with respect to interest on the Security and,
in the case of an Insured Trust, a determination by the Sponsor
that any insurance that may be applicable to the Security
cannot be relied upon to maintain the interests of such Insured
Trust to at least as great an extent as such disposition. An
Insured Trust will obtain and pay a premium for the Permanent
Insurance upon the sale of a Security if the Sponsor determines
that such sale and payment of premium will result in a net
realization of such Insured Trust greater than would the sale
of such Security without the purchase of such Permanent
Insurance.
The Sponsor and/or an affiliate thereof intend to
continuously monitor developments affecting the Securities in
each Trust in order to determine whether the Trustee should be
directed to dispose of any such Securities.
It is the responsibility of the Sponsor to instruct
the Trustee to reject any offer made by an Issuer of any of the
Securities to issue new obligations in exchange and
substitution for any Security 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 Security or in the
judgment of the Sponsor the Issuer will probably default in
respect to such Security 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 Indenture to the same extent as
Securities originally deposited thereunder. Within five days
after the deposit of obligations in exchange or substitution
for any of the underlying Securities, the Trustee is required
to give notice thereof to each Unit Holder, identifying the
Securities eliminated and the Securities substituted therefor.
Except as stated in this and the preceding paragraph, the
acquisition by the Trust of any securities other than the
Securities initially deposited and any additional Securities
supplementally deposited in the Trust (see "The Trust" herein),
and/or a Replacement Security is prohibited.
RESIGNATION
If at any time the Sponsor shall resign under the
Indenture or shall fail to perform or be incapable of
performing its duties thereunder or shall become bankrupt or if
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its affairs are taken over by public authorities, the Indenture
directs the Trustee to either (1) appoint a successor Sponsor
or Sponsors at rates of compensation deemed reasonable by the
Trustee not exceeding amounts prescribed by the Securities and
Exchange Commission, or (2) terminate the Trust. The Trustee
will promptly notify Unit Holders of any such action.
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 and a unit investment trust
office at 770 Broadway, New York, New York 10003. United
States Trust Company of New York has, since its establishment
in 1853, engaged primarily in the management of trust and
agency accounts for individuals and corporations. The Trustee
is a member of the New York Clearing House Association and is
subject to supervision and examination by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve
System. In connection with the storage and handling of certain
Securities deposited in a Trust, the Trustee may use the
services of the Depository Trust Company. These services may
include safekeeping of the Securities 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 moneys, 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 Indenture provides that the Trustee shall not be
personally liable for any taxes or other governmental charges
imposed upon or in respect of the Trust which the Trustee may
be required to pay under current or future laws of the United
States or any other authority having jurisdiction.
RESPONSIBILITY
For information relating to the responsibilities of
the Trustee under the Indenture, reference is made to the
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material set forth under "Rights of Unit Holders" and "Sponsor
- -- Resignation."
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 Indenture.
The Sponsor may also remove the Trustee in the event that the
Sponsor determines that the Trustee has materially failed to
perform its duties under the Indenture and the interest of Unit
Holders has been substantially impaired as a result, and such
failure has continued for a period of sixty days following the
Trustee's receipt of notice of such determination by the
Sponsor. Such resignation or removal shall become effective
upon the acceptance of appointment by the successor trustee.
If upon resignation of a trustee no successor has been
appointed or, if appointed, has not accepted the appointment
within thirty days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment
of a successor. The resignation or removal of a trustee
becomes effective only when the successor trustee accepts its
appointment as such or when a court of competent jurisdiction
appoints a successor trustee.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a
division of 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 Indenture 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.
This provision shall not protect the Evaluator in cases of
willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
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RESPONSIBILITY
The Indenture requires the Evaluator to evaluate the
Securities in 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 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 Securities on the basis of
their offering or bid prices as appropriate, see "Public
Offering of Units -- Public Offering Price."
RESIGNATION
The Evaluator may resign or may be removed by the
Sponsor, and in such event, the Sponsor is to use its 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 INDENTURE
AMENDMENT
The Sponsor and the Trustee have the power to amend
the Indenture 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 Indenture 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 Indenture may also be amended by the Sponsor and the
Trustee (or the performance of any of the provisions of the
Indenture may be waived) with the consent of Unit Holders
owning 51% of the Units of the Trust at the time outstanding
for the purposes of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of Unit Holders. In no
event, however, shall the Indenture be amended to increase the
number of Units issuable thereunder, to permit the deposit or
acquisition of securities or other property either in addition
to or in substitution for any of the Securities initially
deposited in the Trust, except for the substitution of certain
refunding securities for such Securities as initially provided
in the Indenture, or to provide the Trustee with the power to
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engage in business or investment activities not specifically
authorized in the Indenture as originally adopted or so as to
adversely affect the characterization of the Trust as a grantor
trust for federal income tax purposes. 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 may be terminated at any time by the
consent of the holders of 51% of the Units or by the Trustee
upon the direction of the Sponsor when the value of the Trust
as shown on the last business day of June or December in any
year is less than 40% of the principal amount of the Securities
initially deposited therein supplemented by the deposit of
additional Securities, if any. However, in no event may the
Trust continue beyond the Mandatory Termination Date set forth
under "Summary of Essential Information in Part A." 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 Securities
remaining in a Trust, and, after paying all expenses and
charges incurred by a 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 Accounts. The sale of Securities in the
Trust upon termination may result in a lower amount than might
otherwise be realized if such sale were not required at such
time. For this reason, among others, the amount realized by a
Unit Holder upon termination may be less than the principal
amount of Securities represented by the Units held by such Unit
Holder.
LEGAL OPINIONS
Certain legal matters in connection with the Units
offered hereby have been passed upon by Messrs. Cahill Gordon &
Reindel, a partnership including a professional corporation, 80
Pine Street, New York, New York 10005, as special counsel for
the Sponsor.
AUDITORS
The financial statements of the Trusts included in
this Prospectus have been audited by Deloitte & Touche LLP,
certified public accountants, as stated in their report
appearing herein, and are included in reliance upon such report
given upon the authority of that firm as experts in accounting
and auditing.
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BOND RATINGS+
ALL RATINGS EXCEPT THOSE IDENTIFIED OTHERWISE ARE BY
STANDARD & POOR'S CORPORATION.
STANDARD & POOR'S CORPORATION
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.
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.
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
they differ from AAA issues only in small degrees.
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A--Bonds rated A have a strong capacity to pay
interest and repay principal, although they are somewhat more
susceptible to the adverse affects 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.
Plus (+) or Minus (-): To provide more detailed
indications of credit quality, the ratings from "AA" to "BBB"
may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
__________________
+ As described by the rating agencies.
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.
Bond Investment Quality Standards: Under present
commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (AAA, AA, A,
BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In
addition, the Legal Investment Laws of various states impose
certain rating or other standards for obligations eligible for
investment by savings banks, trust companies, insurance
companies and fiduciaries generally.
Conditional rating(s), 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 documentation confirming
investments and cash flows and/or the security rating is
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conditional upon the 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.
Those municipal bonds in the Aa, A and Baa groups
which Moody's believes possess the strongest investment
attributes are designated by the symbols Aa1, A1 and Baa1. 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
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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.
FITCH INVESTORS SERVICE, INC.
A brief description of the applicable Fitch Investors
Service, Inc. rating symbols and their meanings is as follows:
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.
B-75
<PAGE>
__________________
NR--Not rated (credit characteristics comparable to A or better
(BBB or better in the case of an insured trust) in the opinion
of the Sponsor's affiliate on the Date of Deposit).
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 premised on the
successful completion of a project or the occurrence of a
specific event.
FEDERAL TAX-FREE VS. TAXABLE INCOME FOR A TRUST
This table shows the approximate yields which taxable
securities must earn in various income brackets to produce,
after Federal income tax, returns equivalent to specified
tax-exempt bond yields. The table is computed on the theory
that the taxpayer's highest bracket tax rate is applicable to
the entire amount of any increase or decrease in his taxable
income resulting from a switch from taxable to tax-exempt
securities or vice versa. The table reflects the Federal
income tax rates and tax brackets for the 1995 taxable year
under the Code as in effect on the date of this Prospectus.
Because the Federal rate brackets are subject to adjustment
based on changes in the Consumer Price Index, the taxable
equivalent yields for subsequent years may vary somewhat from
those indicated in the table. Use this table to find your tax
bracket. Read the columns below to determine the approximate
taxable yield you would need to equal a return free of Federal
income tax.
1995 TAX YEAR
_______________________________________________________________
$23,350 $56,550$117,950
TAXABLE INCOME BRACKET*UP TO TO TO TO OVER
SINGLE RETURN $23,350 $56,550 $117,950$256,500 $256,500
_______________________________________________________________
$39,000 $94,250$143,600
TAXABLE INCOME BRACKET*UP TO TO TO TO OVER
JOINT RETURN $39,000 $94,250 $143,600$256,500 $256,500
- ---------------------------------------------------------------
- -------------
B-76
<PAGE>
FEDERAL TAX RATE15% 28% 31% 36% 39.6%
_______________________________________________________________
TAX EXEMPT YIELD TAXABLE EQUIVALENT YIELD
4.00% 4.705 5.555 5.797 6.250 6.622
4.50 5.294 6.250 6.521 7.031 7.450
5.00 5.882 6.944 7.246 7.812 8.278
5.50 6.470 7.638 7.971 8.593 9.105
6.00 7.059 8.333 8.696 9.375 9.933
6.50 7.647 9.028 9.420 10.156 10.761
7.00 8.235 9.722 10.145 10.937 11.589
_______________________________________________________________
* The income amount shown is income subject to Federal
income tax reduced by adjustments to income, exemptions,
and itemized deductions or the standard deduction. It is
assumed that the investor is not subject to the
alternative minimum tax. Where applicable, investors
should take into account the provisions of the Code under
which the benefit of certain itemized deductions and the
benefit of personal exemptions are limited in the case of
higher income individuals. Under the Code, individual
taxpayers with adjusted gross income in excess of a
$114,700 threshold amount are subject to an overall
limitation on certain itemized deductions, requiring a
reduction equal to the lesser of (i) 3% of adjusted gross
income in excess of the $114,700 threshold amount or (ii)
80% of the amount of such itemized deductions otherwise
allowable. The benefit of each personal exemption is
phased-out for married taxpayers filing a joint return
with adjusted gross income in excess of $172,050 and for
single taxpayers with adjusted gross income in excess of
$114,700. Personal exemptions are phased out at the rate
of two percentage points for each $2,500 (or fraction
thereof) of adjusted gross income in excess of the
applicable threshold amount. The Federal tax brackets,
the threshold amounts at which itemized deductions are
subject to reduction, and the range over which personal
exemptions are phased out will be adjusted for inflation
for each year after 1995.
[This page intentionally left blank]
_______________________________________________________________
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS WITH RESPECT TO THIS INVESTMENT COMPANY NOT
CONTAINED HEREIN; AND ANY INFORMATION OR REPRESENTATIONS NOT
B-77
<PAGE>
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. 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.
_______________________________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
This Prospectus contains information concerning the Trust and
the Sponsor, but does not contain all of 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.
_______________________________________________________________
_______________________________________________________________
B-78
<PAGE>
INDEX
_______________________________________________________________
PAGE
Risk Considerations...................................... A- 1
Summary of Essential Information......................... A- 4
Independent Auditors' Report............................. A- 6
Statement of Financial Condition......................... A- 7
National Municipal Trust, The Trust...................... B- 1
Portfolio Summary..................................... B- 2
Insurance on the Securities in the
Portfolio of an Insured Trust....................... B- 9
Objectives and Securities Selection................... B-14
Estimated Annual Income Per Unit...................... B-14
Tax Status............................................... B-15
Public Offering of Units................................. B-18
Public Offering Price................................. B-18
Public Distribution................................... B-19
Secondary Market...................................... B-19
Sponsor's and Underwriters' Profits................... B-19
Volume Discount....................................... B-20
Employee Discount..................................... B-21
Exchange Option.......................................... B-21
Tax Consequences...................................... B-22
Reinvestment Program..................................... B-22
Expenses and Charges..................................... B-22
Initial Expenses...................................... B-22
Fees.................................................. B-22
Other Charges......................................... B-23
Rights of Unit Holders................................... B-23
Certificates.......................................... B-23
Distribution of Interest and Principal................ B-23
Reports and Records................................... B-25
Redemption............................................ B-25
Sponsor.................................................. B-26
Limitations on Liability.............................. B-27
Responsibility........................................ B-27
Resignation........................................... B-28
Trustee.................................................. B-28
Limitations on Liability.............................. B-28
Responsibility........................................ B-28
Resignation........................................... B-28
Evaluator................................................ B-29
Limitations on Liability.............................. B-29
Responsibility........................................ B-29
B-79
<PAGE>
Resignation........................................... B-29
Amendment and Termination of the Indenture............... B-29
Amendment............................................. B-29
Termination........................................... B-29
Legal Opinions........................................... B-30
Auditors................................................. B-30
Bond Ratings............................................. B-30
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
NMT
_______________________________________________________________
MDSC SERIES
_______________________________________________________________
NATIONAL TRUST--10,000 UNITS
_______________________________________________________________
10,000 UNITS
in a diversified
PORTFOLIO of
municipal bonds
_______________________________________________________________
Sponsor
Prudential Securities Incorporated
One Seaport Plaza
199 Water Street
New York, New York 10292
_______________________________________________________________
_______________________________________________________________
[This page intentionally left blank]
B-80
<PAGE>
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN
PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
ITEM A--BONDING ARRANGEMENTS
The employees of Prudential Securities Incorporated are
covered under Broker's Blanket Policies, Standard Form No. 14
in the aggregate amount of $62,500,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the
following papers and documents:
The cross-reference sheet.
The Prospectus.
Signatures.
Written consents of the following persons:
Cahill Gordon & Reindel (included in Exhibit 5)
Deloitte & Touche LLP
Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. (as Evaluator) (included in Exhibit 23).
THE FOLLOWING EXHIBITS:
*** Ex-3.(i) -- Certificate of Incorporation of
Prudential Securities Incorporated
dated March 29, 1993.
*** Ex-3.(ii) -- Revised By-Laws of Prudential
Securities Incorporated as amended
through March 5, 1993.
**** Ex-4.a -- Trust Indenture and Agreement dated
September 6, 1989.
+ Ex-4.b -- Draft of Reference Trust Agreement
dated , 1995.
* Ex-5 -- Opinion of counsel as to the
legality of the securities being
registered.
* Ex-23 -- Consent of Kenny S&P Evaluation
Services, a division of J.J. Kenny
Co., Inc. (as Evaluator).
****** Ex-24 -- Powers of Attorney executed by a
majority of the Board of Directors
B-81
<PAGE>
of Prudential Securities
Incorporated.
* Ex-27.1 -- Financial Data Schedule.
***** Ex-99 -- Form of Agreement Among
Underwriters.
Ex-99.1 -- Information as to Officers and
Directors of Prudential Securities
Incorporated is incorporated by
reference to Schedules A and D of
Form BD filed by Prudential
Securities Incorporated, pursuant
to Rules 15b1-1 and 15b3-1 under
the Securities Exchange Act of 1934
(1934 Act File No. 8-16267).
** Ex-99.2 -- Affiliations of Sponsor with other
investment companies.
** Ex-99.3 -- Broker's Blanket Policies, Standard
Form No. 14 in the aggregate amount
of $62,500,000.
**** Ex-99.4 -- Investment Advisory Agreement.
____________
+ Filed herewith.
* To be filed by amendment.
** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the
Securities Act of 1933 of Prudential Unit Trusts,
Insured Tax-Exempt Series 1, Registration No. 2-89263.
*** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the
Securities Act of 1933 of Government Securities Equity
Trust Series 5, Registration No. 33-57992.
**** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the
Securities Act of 1933 of National Municipal Trust,
Insured Series 43, Registration No. 33-29314.
***** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the
Securities Act of 1933 of National Municipal Trust,
Series 169, Registration No. 33-53569.
****** Incorporated by reference to exhibit of same designation
filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the
B-82
<PAGE>
Securities Act of 1933 of National Municipal Trust,
Series 172, Registration No. 33-54681.
B-83
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF
1933, THE REGISTRANT, NATIONAL MUNICIPAL TRUST, MDSC SERIES HAS
DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO 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 1ST DAY OF JUNE, 1995.
NATIONAL MUNICIPAL TRUST
MDSC Series
(Registrant)
By PRUDENTIAL SECURITIES
INCORPORATED
(Depositor)
By the following persons,* who
constitute a majority of the
Board of Directors of Prudential
Securities Incorporated
ALAN D. HOGAN
GEORGE A. MURRAY
LELAND B. PATON
VINCENT T. PICA
RICHARD A. REDEKER
HARDWICK SIMMONS
LEE B. SPENCER, JR.
By ________/s/__KENNETH SWANKIE_______
(KENNETH SWANKIE, SENIOR VICE
PRESIDENT,
MANAGER--UNIT INVESTMENT TRUST
DEPARTMENT,
AS AUTHORIZED SIGNATORY FOR
PRUDENTIAL
SECURITIES INCORPORATED AND
ATTORNEY-IN-FACT FOR THE PERSONS
LISTED ABOVE)
_______________
* Pursuant to Powers of Attorney previously filed.
II-1
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the
Prospectus included in this Registration Statement will be
contained in its opinion to be filed as Exhibit 5 to this
Registration Statement.
____________________________
CONSENT OF INDEPENDENT AUDITORS
[TO BE FILED BY AMENDMENT]
II-2
<PAGE>
<PAGE>
Exhibit 4.b
Executed in 8 Parts
Counterpart No. ( )
NATIONAL MUNICIPAL TRUST
MDSC Series
REFERENCE TRUST AGREEMENT
This reference Trust Agreement dated , 19 among
Prudential Securities Incorporated as Depositor, United States Trust
Company of New York, as Trustee, and Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc., as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to
the document entitled "National Municipal Trust, Trust Indenture and
Agreement" (the "Basic Agreement") dated September 6, 1989 as amended.
Such provisions as are incorporated by reference constitute a single
instrument (the "Indenture").
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements
herein contained, the Depositor, the Trustee, and the Evaluator agree as
follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Basic Agreement are herein incorporated by reference in
their entirety and shall be deemed to be a part of this instrument as fully
and to the same extent as though said provisions had been set forth in full
in this instrument except that the Basic Agreement is hereby amended in the
following manner:
(a) Article I, entitled "Definitions" shall be amended to add the
following numbered paragraphs and renumber the succeeding
paragraphs accordingly:
"(1) "Additional Bonds" shall mean such Bonds (as defined
herein) as are listed in schedules of a Supplemental Reference
Trust Agreement and which are deposited in connection with an
increase in the number of Units initially specified in a
Reference Trust Agreement."
"(2) "Additional Deposited Units" shall mean such
Deposited Units (as defined herein) as are listed in schedules
of a Supplemental Reference Trust Agreement and which are
deposited in connection with an increase in the number of
Units initially specified in a Reference Trust Agreement."
"(3) "Additional Securities" shall mean such Securities
(as defined herein) as are listed in schedules of a
Supplemental Reference Trust Agreement and which are deposited
in connection with an increase in the number of Units
initially specified in a Reference Trust Agreement.
"Additional Securities" may consist of "Additional Bonds"
and/or "Additional Deposited Units."
"(4) "Additional Units" shall mean such Units (as defined
herein) as are issued in respect of Additional Securities."
"(31) "Supplemental Reference Trust Agreement" shall mean a
document pursuant to which Additional Units are deposited in
connection with an increase in the number of Units initially
specified in a Reference Trust Agreement."
and to insert the following language in renumbered paragraph (6)
defining "Bonds" after each reference to Reference Trust
Agreement:
"and Supplemental Reference Trust Agreements"
and to replace the last word in renumbered paragraph (6) defining
"Bonds" with the word "relate"
and to insert the following language in renumbered paragraph (10)
defining "Contract Bonds" after the reference to Reference Trust
Agreement and redesignate the subsequent clause accordingly:
"(ii) Bonds listed in schedules of Supplemental
Reference Trust Agreements"
and to add the following language to the end of renumbered
paragraph (27) defining "Securities":
"deposited in trust and listed on a schedule
attached to the Reference Trust Agreement or on any
schedule of a Supplemental Reference Trust
Agreement."
and to add the following language to the end of renumbered
paragraph (35) defining "Unit":
"hereof and increased by the number of Additional
Units created pursuant to Section 2.05 hereof."
(b) Article II, entitled "Deposit of Securities; Acceptance of Trust;
Issuance of Units; Form of Certificates", shall be amended to add
a new Section 2.05 entitled "Deposit of Additional Securities" to
read as follows:
"From time to time and in the discretion of the
Depositor, the Depositor may make deposits of
Additional Securities duly endorsed in blank or
accompanied by all necessary instruments of
assignment and transfer in proper form (or contracts
to purchase Additional Securities and cash or an
irrevocable letter of credit in an amount necessary
to consummate the purchase of any Additional
Securities pursuant to such contracts ("Additional
Contract Securities")) and Cash (as defined below),
if Cash is an asset of the Trust immediately prior
to the supplemental deposit, provided that each
deposit of Additional Securities and Cash, if any,
deposited during the 90-day period following the
first deposit of Securities in the Trust shall
replicate, to the extent practicable as hereinafter
provided, the Securities (including Contract Bonds)
and shall exactly replicate Cash (other than Cash to
be distributed only to the Sponsor or in respect of
Units issued and outstanding prior to the deposit)
held in the Trust immediately prior to each such
deposit; and, provided further that each deposit of
Additional Securities and Cash, if any, subsequent
to such 90-day period shall exactly replicate the
Securities (including Contract Bonds) and Cash
(other than Cash to be distributed only to the
Sponsor or in respect of Units issued and
outstanding prior to the deposit) held in the Trust
immediately prior to each such deposit. For
purposes of this Section 2.05 Cash means cash on
hand in the Trust and/or cash receivable by the
Trust as of the date of the supplemental deposit in
respect of a coupon date which has occurred on or
before the date of such supplemental deposit,
reduced by payables and accrued expenses on such
date, but shall not include cash received on any
Security which is allocable to the amount paid to
the Unit Holders of record on the first settlement
date for the Trust.
Accordingly, for a deposit subsequent to the
90-day period following the first deposit of
Securities:
(l) Any Additional Bonds included in a deposit
shall be identical to Bonds held in the Trust
immediately prior to the deposit and in face amounts
such that (i) the face amount of Additional Bonds of
a particular issue included in a deposit divided by
(ii) the aggregate of the face amounts of all
Additional Bonds included in the deposit results in
a fraction which is the same as the fraction
resulting from division of (iii) the aggregate face
amount of the Bonds of the same issue held in the
Trust divided by (iv) the aggregate face amount of
all Bonds held in the Trust immediately prior to the
deposit;
(2) Any deposit of Additional Securities shall
be accompanied by Cash in an amount bearing the same
ratio to the aggregate face amount of all Additional
Bonds in the deposit as the Cash held in the Trust
immediately prior to the deposit bears to the
aggregate face amount of all Bonds held in the Trust
immediately prior to the deposit, exclusive of Cash
held in the Trust and designated for distribution
only to the Sponsor or with respect to Units issued
and outstanding prior to the deposit; and
(3) Any Additional Deposited Units included in
a deposit shall be identical with Deposited Units
then held in the Trust and shall be in numbers
determined by multiplying the number of Deposited
Units with respect to a particular prior series of
the National Municipal Trust held in the Trust
immediately prior to the deposit by the fraction
obtained by dividing the face amount of all
Additional Bonds included in the deposit by the face
amount of all Bonds included in the Trust
immediately prior to the deposit;
and for a deposit during the 90-day period following
the first deposit of Securities in the Trust, the
rules stated in paragraphs (1), (2) and (3) of this
Section 2.05 shall apply except that any Additional
Securities (including Additional Contract
Securities) need be only substantially similar
(rather than identical to) Securities held in the
Trust immediately prior to the deposit and the
proportionality requirements need be met only to the
extent practicable. Without limiting the generality
of the phrase "to the extent practicable", if the
Depositor specifies a minimum face amount of a Bond
or minimum number of Deposited Units with respect to
a particular trust to be included in a deposit and
such minimum requirement cannot be met or if a
Security identical to a Security held in the Trust
is not readily obtainable, substitution of other
substantially similar Securities (including
Securities of an issue originally deposited) in
order to meet the foregoing proportionality
requirements shall be considered as a meeting of
such requirements "to the extent practicable".
Each deposit of Additional Securities shall be
listed in and made in accordance with a
Supplementary Schedule to the Reference Trust
Agreement stating the date of such deposit and the
number of Additional Units being issued therefor.
The execution by the Depositor in connection with
the deposit of Additional Securities of a
Supplementary Schedule to the Reference Trust
Agreement shall constitute the approval by the
Depositor as satisfactory in form and substance of
the contracts to be entered into or assumed by the
Trustee with regard to any Additional Securities
listed on such Supplementary Schedule and
authorization to the Trustee on behalf of the Trust
to enter into or assume such contracts and otherwise
to carry out the terms and provisions thereof or to
take other appropriate action in order to complete
the deposit of the Additional Securities covered
thereby into the Trust."
(c) Article III, entitled "Administration of Trust", shall be amended
as follows:
(i) section 3.05 Distribution shall be amended by
replacing "$1.00" with "$5.00" in the first and last
sentences of the third paragraph; and
(ii) section 3.14 Replacement Bond shall be amended by
deleting from part (vi) of the second sentence the
words "in the category A or better" and inserting
after the word "organization" the words "in the same
category as the Contract Bond which it replaces".
(iii) The following section shall be inserted following
section 3.14:
Section 3.15 Deferred Sales Charge. If the
Reference Trust Agreement and Prospectus for a Trust specifies
a Deferred Sales Charge, the Trustee shall, on the dates
specified in and as permitted by the prospectus, withdraw from
the Income Account if such account is designated in the
prospectus as the source of the payments of the Deferred Sales
Charge, or to the extent funds are not available in that
account or if such account is not so designated, from the
Principal Account, an amount per Unit specified in the
prospectus and credit such amount to a special, non-Trust
account maintained at the Trustee out of which the Deferred
Sales Charge will be distributed to the Depositor. If the
Income Account is not designated as the source of the Deferred
Sales Charge payment or if the balances in the Income and
Principal Accounts are insufficient to make any such
withdrawal, the Trustee, shall, as directed by the Depositor,
either advance funds in an amount equal to the proposed
withdrawal and be entitled to reimbursement of such advance
upon the deposit of additional monies in the Income Account or
the Principal Account, sell Securities and credit the proceeds
thereof to such special Depositor's account or credit
Securities in kind to such special Depositor's Account. Such
directions shall identify the Securities, if any, to be sold or
distributed in kind and shall contain, if the Trustee is
directed by the Depositor to sell a Security, instructions as
to execution of such sales. If a Unit Holder redeems Units
prior to full payment of the Deferred Sales Charge, the Trustee
shall, if so provided in the Reference Trust Agreement and
Prospectus, on the Redemption Date, withhold from the
Redemption Price payment to such Unit Holder an amount equal to
the unpaid portion of the Deferred Sales Charge as such amount
is certified by the Depositor to the Trustee prior to the
Redemption Date, upon which certification the Trustee shall be
entitled to rely, and distribute such amount to such special
Depositor's account or, if the Depositor shall purchase such
Unit pursuant to the terms of Section 5.02 hereof, the
Depositor shall pay the Redemption Price for such Unit less the
unpaid portion of the Deferred Sales Charge. The Depositor may
at any time instruct the Trustee to distribute to the Depositor
cash or Securities previously credited to the special
Depositor's account.
(d) Article VI, entitled "Trustee", section 6.01 General Definition
of Trustee's Liabilities, Rights and Duties shall be amended as
follows:
(i) Section 6.01(g) shall be amended by deleting the word
"originally"
(ii) Section 6.01(g) shall be amended by inserting the phrase
"including supplemental deposits, if any, of Securities in
the Trust" after the first reference to "Trust".
(e) Article IX, entitled Additional Covenants; Miscellaneous
Provisions", Section 9.01 Amendments shall be amended as follows:
(i) To add the following phrase after the word "Indenture" in
(1):
"except as the result of the deposit of Additional
Securities, as herein provided"
(ii) To add the following phrase after the word "Bonds" in (2):
"except in the manner permitted by the Indenture as
in effect on the first deposit of Securities".
(f) Reference to Standard & Poor's Corporation in their capacity as
Evaluator is replaced by Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc., throughout the Basic
Agreement.
(g) Reference to Prudential-Bache Securities Inc. in their capacity
as Sponsor is replaced by Prudential Securities Incorporated
throughout the Basic Agreement.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Trust is denominated National Municipal Trust, MDSC Series.
(b) The interest-bearing obligations listed in Schedule A hereto
are those which, subject to the terms of this Indenture, have
been or are to be deposited in trust under this Indenture.
(c) The term "Depositor" shall mean Prudential Securities
Incorporated.
(d) The aggregate number of Units referred to in Sections 2.03
and 9.01 of the Basic Agreement is .
(e) A Unit is hereby declared initially equal to 1/ th of
the Trust.
(f) The term "First Settlement Date" shall mean , 199 .
(g) The term "Computation Date" shall mean 10, 199 .
(h) The term first "Distribution Date" shall mean 25,
199 .
(i) The term "Monthly Record Date" shall mean the tenth day of
each month commencing 10, 199 .
(j) The term "Semi-annual Record Date" shall mean the tenth day
of July and January of each year commencing 10, 19 .
(k) The term "Monthly Distribution Date" shall mean the twenty-
fifth day of each month following a Monthly Record Date
commencing 25, 199 .
(l) The term "Semi-annual Distribution Date" shall mean the
twenty-fifth day of each month following each Semi-annual
Record Date commencing 25, 19 .
(m) The Trust will terminate on the date of maturity,
redemption, sale or other disposition of the last Security
held in the Trust.
(n) The first distribution to both monthly and semi-annual Unit
Holders will be a distribution in the amount of $ .
(o) The first distribution to Monthly Unit Holders will be a
full distribution in the amount of $ .
(p) For purposes of this Series -- National Municipal Trust,
MDSC Series -- the form of Certificate set forth in this
Indenture shall be appropriately modified to reflect the
title of this Series and such of the Special Terms and
Conditions of Trust set forth herein as may be appropriate.
(q) The Sponsor's Annual Portfolio Supervision Fee shall be a
maximum of $ per $1,000 principal amount of underlying
Bonds.
(r) The Trustee's Annual Fee as set forth in the Indenture in
Section 6.04 shall be $ per $1,000 principal amount of
Bonds under the monthly distribution option.
(s) The term "Insurer" may mean AMBAC Indemnity Corporation
("AMBAC"), Capital Markets Assurance Corporation ("CapMAC"),
Capital Guaranty Insurance Company ("Cap. Gty."), Connie Lee
Insurance Co. ("Connie Lee"), Financial Guaranty Insurance
Company ("FGIC"), Financial Security Assurance ("FSA") Municipal
Bond Insurance Association ("MBIA") and/or Municipal Bond
Investors Assurance Corporation ("MBIAC").
[Signatures and acknowledgments on separate pages]
