<PAGE>
As filed with the Securities and Exchange Commission on January 13, 1997
Registration No. 33-59789
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
___________________
A. Exact Name of Trust:
NATIONAL MUNICIPAL TRUST,
Series 180
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 address 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
It is proposed that this filing will become effective (check appropriate
box.)
___
/ / immediately upon filing on (date) pursuant to paragraph (b);
___
/X / on January 31, 1997 pursuant to paragraph (b);
___
/__/ 60 days after filing pursuant to paragraph (a);
___
/__/ on (date) pursuant to paragraph (a) of rule 485.
<PAGE>
CUSIP: 63701J660R MAIL CODE A
Prospectus--PART A
NOTE: PART A of this Prospectus may not be distributed unless accompanied by
Part B.
- --------------------------------------------------------------------------------
NATIONAL MUNICIPAL TRUST
Series 180
NMT
- --------------------------------------------------------------------------------
The initial public offering of Units in the Trust has been completed. The Units
offered hereby are issued and outstanding Units which have been acquired by the
Sponsor either by purchase from the Trustee of Units tendered for redemption or
in the secondary market.
97.8% of the aggregate principal amount of the Securities consists of investment
grade state, municipal and public authority debt obligations (``Long-Term
Securities'') and 2.2% of the aggregate principal amount of the Securities
consists of short term municipal securities (the ``DSC Payment Securities''),
the principal and interest from which will be used in payment of the deferred
sales charge (``DSC'').
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
long-term debt obligations issued on behalf of states, counties, municipalities,
authorities and political subdivisions thereof, and territories, or possessions
of the United States, 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. 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.''
Minimum Purchase : 1 Unit.
PUBLIC OFFERING PRICE of the Units of the Trust is equal to the aggregate bid
side evaluation of the underlying Securities in the Trust's Portfolio divided by
the number of Units outstanding in such Trust, plus a sales charge as set forth
in the table herein. (See Part B--``Public Offering of Units--Volume
Discount.'') Units are offered at the Public Offering Price plus accrued
interest. (See Part B--``Public Offering of Units.'')
- --------------------------------------------------------------------------------
Sponsor:
Prudential Securities (LOGO)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Please read and retain Prospectus dated
this Prospectus for future reference January 31, 1997
<PAGE>
NATIONAL MUNICIPAL TRUST
Series 180
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Summary.................................................................................. Part A A-i
Summary of Essential Information......................................................... A-iii
Independent Auditors' Report............................................................. A-1
Statement of Financial Condition......................................................... A-2
Schedule of Portfolio Securities......................................................... A-7
The Trust................................................................................ Part B 1
Portfolio Summary................................................................... 2
Insurance on the Securities in the Portfolio of an Insured Trust--General........... 9
Insurance on the Securities in the Portfolio of an Insured Trust--Insurers.......... 9
Objectives and Securities Selection................................................. 14
Estimated Annual Income Per Unit.................................................... 14
Tax Status............................................................................... 15
Public Offering of Units................................................................. 18
Public Offering Price............................................................... 18
Public Distribution................................................................. 19
Secondary Market.................................................................... 20
Sponsor's and Underwriters' Profits................................................. 20
Secondary Market Sales Charge....................................................... 20
Volume Discount..................................................................... 21
Employee Discount................................................................... 21
Exchange Option.......................................................................... 21
Tax Consequences.................................................................... 23
Reinvestment Program..................................................................... 23
Expenses and Charges..................................................................... 23
Expenses............................................................................ 23
Fees................................................................................ 23
Other Charges....................................................................... 25
Rights of Unit Holders................................................................... 25
Certificates........................................................................ 25
Distribution of Interest and Principal.............................................. 25
Reports and Records................................................................. 27
Redemption.......................................................................... 27
Sponsor.................................................................................. 28
Limitations on Liability............................................................ 29
Responsibility...................................................................... 30
Resignation......................................................................... 30
Trustee.................................................................................. 30
Limitations on Liability............................................................ 31
Responsibility...................................................................... 31
Resignation......................................................................... 31
Evaluator................................................................................ 31
Limitations on Liability............................................................ 31
Responsibility...................................................................... 31
Resignation......................................................................... 31
Amendment and Termination of the Indenture............................................... 32
Amendment........................................................................... 32
Termination......................................................................... 32
Legal Opinions........................................................................... 32
Auditors................................................................................. 32
Bond Ratings............................................................................. 32
</TABLE>
<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.
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
SUMMARY
NATIONAL MUNICIPAL TRUST, Series 180 (the ``National Trust'' or the
``Trust'' as the context requires) is composed of interest-bearing municipal
bonds (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 Securities in the Trust were, as of
the Date of Deposit rated in the category of ``A'' or better by Standard &
Poor's Corporation or by Moody's Investors Service. (See Part B--``Bond
Ratings.'')
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 as of the immediately preceding Record Date. In some
cases, distribution on a semi-annual 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.'')
RISK CONSIDERATIONS. 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. (See Part B--``The
Trust--Portfolio Summary.'') In the event of 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. 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.
Note: In Part B ``Trustee'' the location of the unit investment trust office
of The Chase Manhattan Bank is amended to read 4 New York Plaza, New York, New
York 10004.
A-i
<PAGE>
Portfolio Summary
National Trust
The Portfolio contains 14 issues of Securities of issuers located in 12
states. Two of the issues (2.2%* of the Trust) are general obligations of a
governmental entity and are backed by the general taxing power of the entity.
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. 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: 30.8%* of the
Trust; housing facilities: 30.6%* of the Trust; resource recovery facilities:
10.2%* of the Trust; education facilities: 11.3%* of the Trust; transportation
facilities: 10.0%* of the Trust; power facilities: 4.9%* of the Trust. The Trust
is concentrated in health and hospital and housing facilities Securities.
The Portfolio also contains Securities representing 10.3%* of the Trust
(single-family housing securities) which are subject to the requirements of
Section 103A of the Internal Revenue Code of 1954 or Section 143 of the Internal
Revenue Code of 1986, as amended.
Approximately 10.3% 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.
64.4%* of the Securities in the Trust are rated by Standard & Poor's
Corporation (23.7%* being rated AAA, 10.3%* being rated AA and 30.4%* being
rated A) and 35.6%* of the Securities in the Trust are rated A by Moody's
Investors Service. 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.
Ten Securities in the Trust have been issued with an ``original issue
discount''. (See Part B--``Tax Status.'')
Of these original issue discount bonds, approximately 4.9% of the aggregate
principal amount of the Securities in the Trust (although only 1.1%* of the
aggregate bid price of all Securities in the Trust) 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 63.1% of the estimated net 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.'')
- ------------
* Percentages computed on the basis of the aggregate bid price of the
Securities in the Trust on December 10, 1996.
A-ii
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
NATIONAL MUNICIPAL TRUST
Series 180
As of December 10, 1996
<TABLE>
<S> <C>
FACE AMOUNT OF SECURITIES......................... $10,175,000.00
NUMBER OF UNITS................................... 10,000
FRACTIONAL UNDIVIDED INTEREST IN THE TRUST
REPRESENTED BY EACH UNIT........................ 1/10,000th
PUBLIC OFFERING PRICE(2)
Aggregate bid side evaluation of Securities in
the Trust..................................... $10,009,503.82
Bid side evaluation per Unit of Securities
subject to a sales charge (excludes DSC
Payment Securities)........................... $ 978.87
Sales charge of 5.470% (5.794% of Securities
subject to a sales charge)(3)................. $ 56.72
Bid side evaluation per Unit of DSC Payment
Securities.................................... $ 22.08
--------------
Aggregate of bid side evaluation plus the total
sales charge(2)............................... $ 1,057.67
--------------
Deferred sales charge........................... $ 20.69
Up-front sales charge........................... $ 36.03
--------------
Public Offering Price per Unit (bid side
evaluation of Securities plus Up-front sales
charge)(2)(3)(4).............................. $ 1,036.98
--------------
--------------
REDEMPTION AND SPONSOR'S REPURCHASE PRICE PER UNIT
(based on bid side evaluation of underlying
Securities less the DSC, $56.72 less than Public
Offering Price per Unit)(4)..................... $ 980.26
--------------
--------------
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 bid side evaluation:
over par--80.0%; at par--.4%; at a discount from par--19.6%
EVALUATOR'S FEE FOR EACH EVALUATION: $10 per evaluation of the
portfolio.
EVALUATION TIME: 3:30 P.M. New York time.
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 4,000,000
DATE OF DEPOSIT: September 27, 1995(1)
</TABLE>
<TABLE>
<CAPTION>
Monthly
-------
<S> <C>
CALCULATION OF ESTIMATED NET ANNUAL INCOME PER UNIT(4)(9)
Estimated Annual Income per Unit............................................................... $60.93
Less estimated annual expenses per Unit(5)..................................................... $ 2.62
-------
Estimated Net Annual Income per Unit........................................................... $58.31
-------
-------
Trustee's Annual Fee (including estimated expenses and Evaluator's fee)
per $1,000 principal amount of Securities...................................................... $ 1.97
Estimated Organizational Expenses per $1,000 principal amount of Securities...................... $ .40
Daily Rate of Income Accrual per Unit(8)......................................................... $.1620
Estimated Current Return(6)(7)(9)................................................................ 5.88%
Estimated Long-Term Return(7).................................................................... 5.43%
INTEREST DISTRIBUTION
Estimated Net Annual Income per Unit / 12...................................................... $ 4.85
Record Dates--tenth day of each month
Distribution Dates--twenty-fifth day of each month
Deferred Sales Charge Deduction Dates: The first day of each quarter, commencing December 1, 1995
and ending on September 1, 1998
- ------------------
Footnotes: See Page A-iv
</TABLE>
A-iii
<PAGE>
- ------------
(1) The Date of Deposit is the date on which the Indenture was signed and
the deposit of Securities with the Trustee was made.
(2) This Public Offering Price is computed as of December 10, 1996 and may
vary from the Public Offering Price on the date of this Prospectus or any
subsequent date.
(3) The total sales charge consists of an Upfront Sales charge and a
Deferred Sales Charge, the total of which equals 5.470% of the aggregate of the
bid side evaluation of the Securities subject to a sales charge plus the total
sales charge (5.794% of the bid side evaluation of the Securities other than the
DSC Payment Securities). The Upfront Sales Charge is computed by deducting any
remaining unpaid Deferred Sales Charge from the total sales charge; thus, on the
date of the Summary Essential Information, the Upfront Sales charge is $36.03
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 100
Units or more. See Part B--Public Offering of Units--Volume Discount. The
Deferred Sales charge is paid through reduction of the net asset value of the
Trust by $2.95 per Unit quarterly on each Deferred Sales charge Deduction Date.
See Part B--Public Offering of Units--Secondary Market Sales Charge. 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.
(4) Exclusive of accrued interest (other than on the DSC Payment Securities)
which to December 13, 1996, the expected date of settlement for the purchase of
Units on December 10, 1996 was $.45.
(5) Includes Trustee's fee, Sponsor's Portfolio supervision fee, estimated
expenses and Evaluator's fees.
(6) The estimated current return is increased for transactions entitled to a
reduced sales charge. (See Part B--``The Trust''--``Estimated Annual Income and
Current Return per Unit.'')
(7) The Estimated Current Return is calculated by dividing the Estimated Net
Annual Income per Unit (which does not include the income on the DSC Payment
Securities) by the Public Offering Price per Unit. The Estimated Net Annual
Income per Unit will vary with changes in fees and expenses of the Trustee and
the Evaluator and with the principal prepayment, redemption, maturity, exchange
or sale of Securities while the Public Offering Price will vary with changes in
the bid 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 takes into consideration, and factors in the relative
weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Securities in the Trust (including the DSC Payment
Securities) and 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 above indicated calculation
date of the Summary of Essential Information.
(8) In calculating these figures the interest income on the DSC Payment
Securities has not been included.
(9) Does not include discount accretion on original issue discount or zero
coupon bonds.
A-iv
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
NATIONAL MUNICIPAL TRUST
SERIES 180
We have audited the accompanying statement of financial condition and
schedule of portfolio securities of the National Municipal Trust Series 180
as of August 31, 1996, and the related statements of operations and changes
in net assets for the period from September 27, 1995 (date of deposit) to
August 31, 1996. These financial statements are the responsibility of the
Trustee (see Footnote (a)(1)). 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 the securities owned as of
August 31, 1996 as shown in the statement of financial condition and
schedule of portfolio securities by correspondence with The Chase Manhattan
Bank, the Trustee. An audit also includes assessing the accounting
principles used and the significant estimates made by the Trustee, as well
as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the National Municipal
Trust Series 180 as of August 31, 1996 and the results of its operations and
the changes in its net assets for the period from September 27, 1995 (date
of deposit) to August 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
December 10, 1996
New York, New York
</AUDIT-REPORT>
A-1
<PAGE>
STATEMENT OF FINANCIAL CONDITION
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
<TABLE>
TRUST PROPERTY
<S> <C>
Investments in municipal bonds at market value
(amortized cost $9,793,667) (Note (a) and
Schedule of Portfolio Securities Notes (4) and (5)) $9,768,527
Accrued interest receivable 132,820
Deferred organizational costs 16,795
Total 9,918,142
LIABILITIES AND NET ASSETS
Less Liabilities:
Deferred sales charge payable (Note(e)) 265,900
Organizational costs payable 16,795
Cash overdraft 58,726
Accrued Trust fees and expenses 12,722
Total liabilities 354,143
Net Assets:
Balance applicable to 10,000 Units of fractional
undivided interest outstanding (Note (c)):
Capital, less net unrealized market depreciation
of $25,140 $9,502,627
Undistributed principal and net investment
income (Note (b)) 61,372
Net assets $9,563,999
Net asset value per Unit ($9,563,999 divided by 10,000 Units) $ 956.40
See notes to financial statements
</TABLE>
A-2
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
NATIONAL MUNICIPAL TRUST
SERIES 180
<CAPTION>
For the period from
September 27, 1995
(date of deposit)
to August 31, 1996
<S> <C>
Investment income - interest $574,790
Less Expenses:
Trust fees and expenses 27,010
Amortization of organizational costs 3,205
Total expenses 30,215
Investment income - net 544,575
Net loss on investments:
Realized loss on securities sold or redeemed (2,071)
Net unrealized market depreciation (25,140)
Net loss on investments (27,211)
Net increase in net assets resulting from operations $517,364
See notes to financial statements
</TABLE>
A-3
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
NATIONAL MUNICIPAL TRUST
SERIES 180
<CAPTION>
For the period from
September 27, 1995
(date of deposit)
to August 31, 1996
<S> <C>
Operations:
Investment income - net $ 544,575
Realized loss on securities sold or redeemed (2,071)
Net unrealized market depreciation (25,140)
Net increase in net assets resulting from operations 517,364
Less Distributions to Unit Holders:
Principal (45,000)
Investment income - net (498,900)
Total distributions (543,900)
Net decrease in net assets (26,536)
Net assets:
Beginning of period (Note (c)) 9,590,535
End of period (including undistributed principal
and net investment income of $61,372) $9,563,999
See notes to financial statements
</TABLE>
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
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 controls 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 of this
Prospectus, "Public Offering of Units - Public Offering Price".
Under the Securities Act of 1933 ("the Act"), as amended, the
Sponsor is deemed to be an issuer of the Trust 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.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations on the last day of
trading during the period, except that value on the date of
deposit (September 27, 1995) represents the cost of investments to
the Trust based on the offering side evaluations as of the date of
deposit.
(3) Income Taxes
The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays an annual Trustee's fee, estimated expenses,
Evaluator's fees, and an annual Sponsor's portfolio supervision
fee and may incur additional charges as explained under "Expenses
and Charges" in Part B of this Prospectus. A portion of the
Trust's organizational costs will be paid by the Trust and is
being deferred and amortized over a period of five years.
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unit Holders on or
shortly after the twenty-fifth day of the month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Rights of Units Holders - Distribution of Interest and
Principal" in Part B of this Prospectus.
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial public
offering price as of the date of initial deposit (September 27, 1995)
exclusive of accrued interest.
<TABLE>
A reconciliation of the original cost of Units to investors to the net
amount applicable to investors as of August 31, 1996 follows:
<S> <C>
Original cost to investors $10,085,900
Less: Gross underwriting commissions (sales charge) (495,365)
Net cost to investors 9,590,535
Principal cash reserved for the payment of
deferred sales charge (21,500)
Cost of securities sold or redeemed (47,070)
Net unrealized market depreciation (25,140)
Accumulated interest accretion 5,802
Net amount applicable to investors $ 9,502,627
</TABLE>
(d) OTHER INFORMATION
<TABLE>
<CAPTION>
Selected data for a Unit of the Trust during the period:
<S> <C>
Interest income $ 57.48
Expenses (3.02)
Investment income - net 54.46
Income distributions (49.89)
4.57
Principal distributions (4.50)
Realized loss on securities sold or redeemed (.21)
Net unrealized market depreciation (2.51)
Net decrease in net asset value (2.65)
Net asset value - beginning of period 959.05
Net asset value - end of period $956.40
</TABLE>
A-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
(e) DEFERRED SALES CHARGE
Represents the remaining unpaid amount of mandatory distributions of
$2.95 per Unit per quarter payable the first day of each quarter
through September 1, 1998. Distributions will be made to an account
maintained by the Trustee from which the deferred sales charge
obligation of the investors to the Sponsor will be satisfied. If Units
are redeemed prior to September 1, 1998, the remaining portion of the
distribution applicable to such Units will be transferred to such
account on the redemption date.
A-7
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
<CAPTION>
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F1> Amount Rate Date Redemptions<F3> Redemptions<F2> Value<F4><F5>
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1. Certificates of Participa-
tion, City of West Covina,
from Purchase Payments to be
Received from Queen of the
Valley Hospital. A $ 1,000,000 6.500% 08/15/19 08/15/15@100 08/15/04@102 $1,030,240
2. Northeast Maryland Waste
Disposal Authority, Solid
Waste Revenue Bonds, (Mont-
gomery County Resource
Recovery Project), Series
1993A. <F7> A<F6> 1,000,000 6.300 07/01/16 07/01/11@100 07/01/03@102 990,960
3. North Carolina Municipal
Power Agency No. 1, Catawba
Electric Revenue Bonds,
Series 1992. A<F6> 500,000 5.750 01/01/15 01/01/13@100 01/01/03@100 478,670
4. New York City Industrial
Development Agency, Special
Facility Revenue Bonds,
Series 1994 (Terminal One
Group Association, L.P.
Project). <F7> A 1,000,000 6.125 01/01/24 01/01/20@100 01/01/04@102 965,850
5. Hazelton Area School Dis-
trict, Luzerne, Carbon and
Schuylkill Counties, Penn-
sylvania, General Obligation
Bonds, Series B of 1995. AAA 500,000 0.000 03/01/23 NONE NONE 101,970
6. Rhode Island Student Loan
Authority, Student Loan Pro-
gram Revenue Bonds consist-
ing of 1995 Subordinate
Series III Bonds. <F7> A<F6> 1,000,000 6.450 12/01/25 NONE 12/01/05@102 980,450
7. South Dakota Development
Authority, Homeownership
Mortgage Bonds, 1991 Series
D (Subseries 1). <F7> AAA 1,000,000 6.850 05/01/26 05/01/13@100 05/01/03@102 1,025,460
8. Brazos County Health
Facilities Development
Corporation, Franciscan
Services Corporation, Reve-
nue Refunding Bonds, Series
1993 B (St. Joseph Hospital
and Health Center). A- 1,000,000 6.000 01/01/19 01/01/14@100 01/01/04@102 947,030
9. Utah Housing Finance
Agency, Single-Family Mort-
gage Bonds, 1994 Issue F
(Federally Insured or Gua-
ranteed Mortgage Loans).
<F7> AAA 955,000 7.000 07/01/27 01/01/17@100 07/01/04@102 996,237
10. City of Everett, Washing-
ton, Limited Tax General
Obligation Refunding Bonds,
1995. <F8> AAA 110,000 4.000 08/01/97 NONE NONE 110,004
11. City of Everett, Washing-
ton, Limited Tax General
Obligation Refunding Bonds,
1995. <F8> AAA 110,000 4.150 08/01/98 NONE NONE 109,756
12. Wisconsin Housing and Eco-
nomic Development Authority,
Home Ownership Revenue
Bonds, Series D. <F7> AA 1,000,000 6.650 07/01/25 01/01/18@100 08/01/04@102 1,016,610
A-8
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL MUNICIPAL TRUST
SERIES 180
(CONTINUED)
August 31, 1996
<CAPTION>
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F1> Amount Rate Date Redemptions<F3> Redemptions<F2> Value<F4><F5>
<C> <S> <C> <C> <C> <C> <C> <C> <C>
13. West Virginia Hospital
Finance Authority, Hospital
Revenue Bonds, (Charleston
Area Medical Center, Inc.),
1993 Series A. A<F6> $ 1,000,000 6.500% 09/01/23 09/01/17@100 01/01/03@102 $1,015,290
$10,175,000 $9,768,527
See notes to schedule of portfolio securities
A-9
</TABLE>
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
NATIONAL MUNICIPAL TRUST
SERIES 180
August 31, 1996
<F1> All ratings are provided by Standard & Poor's Corporation, unless
otherwise indicated. A brief description of applicable Security
ratings is given under "Bond Ratings" in Part B of this
Prospectus.
<F2> There is shown under this heading the date on which each issue of
Securities is redeemable by the operation of optional call
provisions and the redemption price for that date; 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.
<F3> There is shown under this heading the date on which an issue of
Securities is subject to scheduled sinking fund redemption and the
redemption price on such date.
<F4> The market value of the Securities as of August 31, 1996 was
determined by the Evaluator on the basis of bid side evaluations
for the Securities on the last trading date during the period
(August 30, 1996).
<F5> At August 31, 1996, the net unrealized market depreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ 37,167
Gross unrealized market depreciation (62,307)
Net unrealized market depreciation $(25,140)
The amortized cost of the Securities for Federal income tax
purposes was $9,793,667 at August 31, 1996.
<F6> Moody's Investors Service, Inc. rating.
<F7> In the opinion of bond counsel to the issuing governmental
authorities, interest payments on these bonds will be a tax
preference item for individuals 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" in Part B of this Prospectus.
<F8> 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.
A-10
<PAGE>
<PAGE>
PROSPECTUS--Part B:
- --------------------------------------------------------------------------------
Note that Part B of this Prospectus may not be distributed unless accompanied by
Part A.
- --------------------------------------------------------------------------------
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''), The Chase Manhattan Bank (the ``Trustee'') (successor to
United States Trust Company of New York) 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 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.''
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 a recent date, 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 outstanding until
- ------------
* 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>
<PAGE>
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.) 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.) 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 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. 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
B-2
<PAGE>
<PAGE>
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. 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 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. 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 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
B-3
<PAGE>
<PAGE>
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, 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. 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. 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 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
B-4
<PAGE>
<PAGE>
power agencies using hydro-electric, nuclear, fossil or other power sources. 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 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. 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. 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. 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.
The Portfolio of the Trust may contain Securities in the pollution control
facilities category. 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, 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. 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
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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. 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 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. 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 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. 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
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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. 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. 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. 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). 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.
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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.
Each Trust consists of the Securities 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.
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 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
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 were evaluated 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
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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, FSA, MBIA, MBIAC, BIGID 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, 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 the Securities 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
$2,440,000,000 (unaudited) and statutory capital of approximately $1,387,000,000
(unaudited) as of March 31, 1996. 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., Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and Fitch Investors Service, LP
have each 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. CapMAC is wholly owned by CapMAC Holdings Inc.
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D Securities originally insured by BIGI have been reinsured by MBIAC pursuant to
reinsurance agreements.
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(``Holdings''). 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. As of June 30, 1996 and
December 31, 1995, CapMAC had statutory capital (policy holders surplus and
contingency reserve) of $250.2 million and $239.9 million, respectively.
CapMAC's claims-paying ability is rated triple-A by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services, A Division of The McGraw-Hill
Companies, Inc., and Duff & Phelps Credit Rating Co., and Nippon Investors
Service, Inc., a Japanese rating agency. Such ratings reflect only the views of
the respective ratings agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by such rating
agencies. 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 March 31, 1996
policyholders' surplus (unaudited) was $111,462,000, stockholders' equity
(unaudited) was $161,352,000 and total assets (unaudited) were $258,462,000.
Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies,
Inc., has rated the claims-paying ability of ConnieLee ``AAA.'' The address of
ConnieLee is 2445 M Street, N.W., Washington, D.C. 20037.
Financial Security Assurance
Financial Security Assurance (``FSA'') is a monoline insurance company
incorporated in 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. Major shareholders of
Holdings include Fund American Enterprises Holdings, Inc., US West Capital
Corporation and The Tokio Marine and Fire Insurance Co., Ltd. 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 is licensed to engage in financial guaranty insurance business in all
50 states, the District of Columbia and Puerto Rico.
FSA and its subsidiaries are engaged 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 or reinsured from third parties 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.
On December 20, 1995, Capital Guaranty Corporation merged with a subsidiary
of Financial Security Assurance Holdings Ltd. In connection with such merger,
(i) CGIC, the principal operating subsidiary of Capital Guaranty Corporation,
became a wholly-owned subsidiary of FSA, the principal operating subsidiary of
Financial Security Assurance Holdings Ltd., and (ii) the corporate name of CGIC
was changed to Financial Security Assurance of Maryland Inc.
As of June 30, 1996, the unearned premium reserve of FSA was $351,180,000
(unaudited) and its total shareholder's equity was $785,072,000 (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, (33%);
Fireman's Fund Insurance Company, (30%); The Travelers Indemnity Company, (15%);
Cigna Property and Casualty Company, (12%); and The Continental Insurance
Company, (10%). As a several
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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 March 31, 1995 was
$35,133,937,000, the statutory liabilities were $28,100,583,000 and
policyholder's surplus was $7,033,354,000. 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 (MBIA Insurance Corporation ``MBIAC'') 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 March 31, 1996, MBIAC had admitted assets (unaudited) of $4.0 billion,
total liabilities (unaudited) of $2.7 billion, and total capital and surplus
(unaudited) of $1.3 billion, determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Standard
& Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. 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 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 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
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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 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
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.
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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.
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 March 31, 1996, the total capital and surplus of Financial
Guaranty was approximately $1,032,675,000 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 all 50 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 Ratings Services, A
Division of The McGraw-Hill Companies, Inc. 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'' 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
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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 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 a recent date 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 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.
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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 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 will equal the cost
of Units (including the up-front sales charge) plus the amount of
organizational expenses borne by the Unit Holder and the portion of the
deferred sales charge paid from interest on the DSC Payment Securities. 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 the principal of DSC Payment Securities used to pay a portion of
the 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 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
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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
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 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.
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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 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.'')
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 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
Clinton Administration has proposed to extend the environmental tax, most
recently in the Revenue Reconciliation Bill of 1996, which was released on March
19, 1996, to taxable years after December 31, 1995 and before January 1, 2007.
The bill has not been introduced in either house of Congress. The environmental
tax is an excise tax and is deductible for United States Federal income tax
purposes (but not
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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 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.
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.
New York Trust
In the opinion of Messrs. Cahill Gordon & Reindel, special New York counsel
on New York tax matters, under existing law:
Under the income tax laws of the State and City of New York, the income
of each Trust will be treated as the income of its Unit Holders.
Interest on the underlying debt obligations which is exempt from tax
under the laws of the State and City of New York when received by the New
York Trust will retain its status as tax-exempt interest to its Unit
Holders. (Interest on the underlying obligations in the New York Trust is,
however, not excludable from income in determining the amount of the
income-based (i) New York State franchise taxes on business and financial
corporations or (ii) the New York City general corporation tax and the New
York City financial corporation tax.) The minimum income taxes imposed by
New York State and New York City on individuals, estates and trusts exclude
from their taxable bases the Federal tax preference item with respect to
tax-exempt interest.
Non-residents of New York City will not be subject to the City personal
income tax on gains derived with respect to their Units. Non-residents of
the State will not be subject to New York State personal income tax on such
gains unless the Units are employed in a business, trade or occupation
carried on in New York State. A New York State or City resident should
determine his basis and holding period for his Units in the same manner for
New York State and City personal income tax purposes as for Federal income
tax purposes.
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
B-18
<PAGE>
<PAGE>
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
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. 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). 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.''
Public Distribution
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.
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 per Unit in the secondary market will generally be 65%
of the sales charge per Unit. Sales to dealers utilizing the service of Wexford
Clearing Services Corporation will be made at prices which include a concession
of 70% of the total 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 Trust and other
unit investment trusts underwritten by the Sponsor.
B-19
<PAGE>
<PAGE>
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'') 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 (less any unpaid DSC). 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.
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
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.)
In addition, the Sponsor may realize profits (or sustain losses) due to
daily fluctuations in the bid 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.
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.
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 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.
B-20
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(As Percent
(As Percent of Public
of Bid Side Offering
Time to Maturity Evaluation) Price)(1)
- -------------------------- ------------ ----------------
<S> <C> <C>
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%
</TABLE>
- ---------------
(1) 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.
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 at least 100 Units in the secondary
market.
<TABLE>
<CAPTION>
% of
Number of Units Sales Charge
------------------------------- ------------
<S> <C>
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%
</TABLE>
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 bid 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
B-21
<PAGE>
<PAGE>
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 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* 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)].
- ------------
* 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 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-22
<PAGE>
<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.
EXPENSES AND CHARGES
Expenses
For Trusts with a date of deposit after June 26, 1995, 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.''
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.''
B-23
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<PAGE>
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B-24
<PAGE>
<PAGE>
AUTHORIZATION FOR REINVESTMENT
NATIONAL MUNICIPAL TRUST
D I hereby elect to participate in the Reinvestment Program to the extent
E indicated below and do authorize The Chase Manhattan Bank, Trustee, to
T direct distributions as indicated below to the Prudential Tax Free Money
A Fund, Inc. where such amounts shall immediately be invested into shares
C of the fund.
H
The foregoing authorization is subject in all respects to the terms and
H conditions of participation set forth in the National Municipal Trust
E prospectus and shall remain in effect until such time as I notify The
R Chase Manhattan Bank to the contrary in writing.
E
(fold here)
A -----------------------------------------------------------------------
N Soc. Sec./Tax I.D. No.: ___________________________
D
Series / / Please reinvest all NMT series which I/we own
M / / Please list below the specific series I/we wish
A to reinvest
I
L ----------------------------------------------
----------------------------------------------
T
O ----------------------------------------------
Check One / / Reinvest Interest
A / / Reinvest Principal
D / / Reinvest Both Interest and Principal
D
R Exact registration as it
E appears on your Units: _______________________________________
S
S ---------------------------------------
O ---------------------------------------
N
Street address: _______________________________________
T City, State, Zip Code: _______________________________________
H Unit Holder Signature(s): ______________________ Date:________
E (all joint holders must sign)
R
E
V
E
R
S
E
<PAGE>
REINVESTMENT ADDRESS
The Chase Manhattan Bank
Attn: Dividend Reinvestment--Dept. A
P.O. Box 834
New York, N.Y. 10003
<PAGE>
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.
The cost of the Portfolio Insurance obtained by an Insured Trust is an
annual amount set forth in Part A--``Summary of Essential Information'' and is
payable so long as such Insured Trust retains the Securities thus insured.
Premiums for the Portfolio Insurance are payable monthly in advance by the
Trustee on behalf of an Insured Trust.
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 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.
Record dates for monthly distributions will be the tenth day of each month,
record dates for quarterly distributions will be the tenth day of January,
April, July and October, and record dates for semi-annual distributions will
be the tenth day of January and July. 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
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
B-25
<PAGE>
<PAGE>
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 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 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 The Chase Manhattan Bank 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
will be added to the value of the Units on any purchase. 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.'')
Unit Holders purchasing Units in the secondary market will initially receive
distributions in accordance with the monthly or semi-annual distribution
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 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.
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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, 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 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 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.
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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 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 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
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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(R) 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
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.
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.'')
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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
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 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 The Chase Manhattan Bank, a New York Bank with its principal
executive office located at 270 Park Avenue, New York, New York 10017 and its
unit investment trust office at 770 Broadway, New York, New York 10003. The
Trustee is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System. 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.
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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 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.
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.
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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 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.
BOND RATINGSD
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.
- ------------
D As described by the rating agencies.
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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.
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.
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 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.
B-33
<PAGE>
<PAGE>
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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 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.
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.
- ------------
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).
B-34
<PAGE>
This Post-Effective Amendment to the Registration Statement
on Form S-6 comprises the following papers and documents:
The facing sheet on Form S-6.
The Prospectus.
Signatures.
Consent of independent public accountants and consent of evalu-
ator; all other consents were previously filed.
The following Exhibits:
****EX-3.(i) - Restated Certificate of Incorporation of Prudential
Securities Incorporated dated March 29, 1993.
*****EX-3.(ii) - Revised By-Laws of Prudential Securities Incorpo-
rated as amended through June 21, 1996.
+EX-4 - Trust Indenture and Agreement dated September 6,
1989.
*EX-23 - Consent of Kenny S&P Evaluation Services, a divi-
sion of J.J. Kenny Co., Inc. (as evaluator).
***EX-24 - Powers of Attorney executed by a majority of the
Board of Directors of Prudential Securities
Incorporated.
*Ex-27 - Financial Data Schedule.
Ex-99 - Information as to Officers and Directors of Pruden-
tial Securities Incorporated is incorporated by
reference to Schedules A and D of Form BD filed
by Prudential Securities Incorporated pursuant to
Rules l5b1-1 and l5b3-1 under the Securities
Exchange Act of 1934 (1934 Act File No. 8-16267).
**EX-99.2 - Affiliations of Sponsor with other investment com-
panies.
**EX-99.3 - Broker's Blanket Policies, Standard Form No. 39 in
the aggregate amount of $62,500,000.
+EX-99.4 - Investment Advisory Agreement.
II-1
<PAGE>
_________________________
* Filed herewith.
** Incorporated by reference to exhibit of same designation filed with
the Securities and Exchange Commission as an exhibit to the Registra-
tion 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 Registra-
tion Statement under the Securities Act of 1933 of National Municipal
Trust Series, Series 172, Registration No. 33-54681.
**** Incorporated by reference to exhibit of same designation filed with
the Securities and Exchange Commission as an exhibit to the Registra-
tion Statement under the Securities Act of 1933 of Government Securi-
ties 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 Registra-
tion Statement under the Securities Act of 1933 of National Municipal
Trust, Series 186, Registration No. 33-54697.
+ Incorporated by reference to exhibit of same designation filed with
the Securities and Exchange Commission as an exhibit to the Registra-
tion Statement under the Securities Act of 1933 of National Municipal
Trust, Insured Series 43, Registration No. 33-29314.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, National Municipal Trust, Series 180 certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and 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 10th day of January, 1997.
NATIONAL MUNICIPAL TRUST,
Series 180
(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
Leland B. Paton
Vincent T. Pica II
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-3
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the Prospectus
included in this Registration Statement is contained in its opinion filed
as Exhibit 5 to the Registration Statement.
II-4
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated December 10, 1996, accompanying
the financial statements of the National Municipal Trust Series 180 included
herein and to the reference to our Firm as experts under the heading
"Auditors" in the prospectus which is a part of this registration statement.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
January 9, 1997
New York, New York
II-5
<PAGE>
Exhibit 23
Letterhead of Kenny S&P Evaluation Services
(a division of J.J. Kenny Co., Inc.)
January 13, 1997
Prudential Securities Incorporated
1 New York Plaza
New York, NY 10292
Re: National Municipal Trust
Post-Effective Amendment No. 1
Series 180
Gentlemen:
We have examined the post-effective Amendment to the Registra-
tion Statement File No. 33-59789 for the above-captioned trust. We hereby
acknowledge that Kenny S&P Evaluation Services, a division of J.J. Kenny
Co., Inc., is currently acting as the evaluator for the trust. We hereby
consent to the use in the Registration Statement of the references to Kenny
S&P Evaluation Services, a division of J.J. Kenny Co., Inc., as evaluator.
In addition, we hereby confirm that the ratings indicated in
the Registration Statement for the respective bonds comprising the trust
portfolio are the ratings currently indicated in our KENNYBASE database as
of the date of the evaluation report.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
Frank A. Ciccotto
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR NATIONAL MUNICIPAL TRUST
TRUST SERIES 180 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000946046
<NAME> NATIONAL MNUICIPAL TRUST
SERIES 180
<SERIES>
<NAME> NATIONAL MNUICIPAL TRUST
SERIES
<NUMBER> 180
<MULTIPLIER> 1
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-27-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 9,793,667
<INVESTMENTS-AT-VALUE> 9,768,527
<RECEIVABLES> 132,820
<ASSETS-OTHER> 282,695
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,184,042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 354,143
<TOTAL-LIABILITIES> 354,143
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,824,846
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 30,193
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25,140)
<NET-ASSETS> 9,829,899
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 568,985
<OTHER-INCOME> 5,804
<EXPENSES-NET> 30,215
<NET-INVESTMENT-INCOME> 544,574
<REALIZED-GAINS-CURRENT> (2,070)
<APPREC-INCREASE-CURRENT> (25,140)
<NET-CHANGE-FROM-OPS> 517,364
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 498,900
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 45,000
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (115,036)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
