Rule 497(b)
Registratio No. 33-02389
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
17TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)
The Trust is a unit investment trust designated 17th Discount Series
("Insured Municipal Discount Trust") with an underlying portfolio of long-
term insured tax-exempt bonds issued by or on behalf of states,
municipalities and public authorities and was formed to preserve capital
and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from
regular federal income tax under existing law but may be subject to state
and local taxes. Capital gains are subject to tax. (See "Tax Status" and
"The Trust--Portfolio" in Part B of this Prospectus.) The Sponsor is
Bear, Stearns & Co. Inc. The value of the Units of the Trust will
fluctuate with the value of the underlying bonds. Minimum purchase: 1
Unit.
This Prospectus consists of two parts. Part A contains the Summary
of Essential Information as of December 31, 1993 (the "Evaluation Date"),
a summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of
the Evaluation Date. Part B of this Prospectus contains a general summary
of the Trust.
Investors should retain both parts of this
Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 29, 1994
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable,
earned original issue discount) which, in the opinions of bond counsel to
the respective issuers, is, with certain exceptions, currently exempt from
regular federal income tax under existing law through investment in a
fixed, diversified portfolio of long-term insured bonds (the "Bonds")
issued by or on behalf of states, municipalities and public authorities
which, because of irrevocable insurance, are rated "AAA" by Standard &
Poor's Corporation. Although the Supreme Court has determined that
Congress has the authority to subject interest on bonds such as the Bonds
in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and
to state and local taxes. (See "Tax Status" in Part B of this
Prospectus.) For a list of ratings on the Evaluation Date, see
"Portfolio." The Bonds were acquired at prices which resulted in the
portfolio as a whole being purchased at a deep discount from par value.
The portfolio may also include bonds issued at an original issue discount.
Additionally, some of the Bonds in the portfolio may be "Zero Coupon
Bonds," which are original issue discount bonds that provide for payment
at maturity at par value, but do not provide for the payment of any
current interest. Some of the Bonds in the Trust have been issued with
optional refunding or refinancing provisions ("Refunded Bonds") whereby
the issuer of the Bond has the right to call such Bond prior to its stated
maturity date (and other than pursuant to sinking fund provisions) and to
issue new bonds ("Refunding Bonds") in order to finance the redemption.
Issuers typically utilize refunding calls in order to take advantage of
lower interest rates in the marketplace. Some of these Refunded Bonds may
be called for redemption pursuant to pre-refunding provisions ("Pre-
Refunded Bonds") whereby the proceeds from the issue of the Refunding
Bonds are typically invested in government securities in escrow for the
benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of
this escrow. The issuers of Pre-Refunded Bonds must call such Bonds on
their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest
income with respect to them. For a list of those Bonds which are Pre-
Refunded Bonds, if any, as of the Evaluation Date, see "Notes to Financial
Statements" in this Part A. Some of the Bonds in the portfolio may have
been purchased at an aggregate premium over par. All of the Bonds in the
Trust were rated "AAA" by Standard & Poor's Corporation at the time
originally deposited in the Trust. This rating results from insurance
relating only to the Bonds in the Trust and not to the Units of the Trust.
The insurance does not remove market risk, as it does not guarantee the
market value of the Units. For a discussion of the significance of such
ratings, see "Description of Bond Ratings" in Part B of this Prospectus,
and for a list of ratings on the Evaluation Date see the "Portfolio." The
payment of interest and preservation of capital are, of course, dependent
upon the continuing ability of issuers of the Bonds or the insurers
thereof to meet their obligations. There can be no assurance that the
Trust's investment objectives will be achieved. Investment in the Trust
should be made with an understanding of the risks which an investment in
long-term fixed rate debt obligations may entail, including the risk that
the value of the underlying portfolio will decline with increases in
interest rates, and that the value of Zero Coupon Bonds is subject to
greater fluctuation than coupon bonds in response to changes in interest
rates. Each Unit in the Trust represents a 1/12000th undivided interest
in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of
Essential Information. (See "Organization" in Part B of this Prospectus.)
The Units being offered hereby are issued and outstanding Units which have
been purchased by the Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal
bond guaranty insurance policy obtained by either the Sponsor ("Sponsor-
Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"),
described under "Insurance on the Bonds" in Part B of this Prospectus,
covering scheduled payment of principal thereof and interest thereon when
such amounts shall become due for payment but shall not have been paid by
the issuer or any other insurer thereof. The insurance, unless obtained
by Municipal Bond Investors Assurance Corporation ("MBIA Corp."), will
also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption
of the Bonds if interest on any Bonds is ultimately deemed to be subject
to regular federal income tax. Insurance obtained from MBIA Corp. only
guarantees the accelerated payments required to be made by or on behalf of
an issuer of small industrial revenue bonds and pollution control bonds if
there is an event which results in the loss of tax-exempt status of the
interest on such Bonds, including principal, interest or premium payments,
if any, as and when required. To the extent, therefore, that Bonds are
only covered by insurance obtained from MBIA Corp., such Bonds will not be
covered for the accelerated payments required to be made by or on behalf
of an issuer of other than small industrial revenue bonds or pollution
control revenue bonds if there occurs an event which results in the loss
of tax-exempt status of the interest on such Bonds. None of the insurance
will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee
payment of principal and interest in such amounts and at such times as
such amounts would have been due absent such acceleration). The insurance
relates only to the prompt payment of principal of and interest on the
securities in the portfolio, and does not remove market risks or guarantee
the market value of the Units in the Trust. The terms of the insurance
are more fully described under "Insurance on the Bonds" in Part B of this
Prospectus. For a discussion of the effect of an occurrence of nonpayment
of principal or interest on any Bonds in the Trust, see "Portfolio
Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a
policy of insurance relating to any of the Bonds. In addition, investors
should be aware that, subsequent to the Date of Deposit, the rating of the
claims-paying ability of the insurer of an underlying Bond may be
downgraded, which may result in a downgrading of the rating of the Units
in the Trust. The approximate percentage of the aggregate principal
amount of the portfolio that is insured by each Insurance Company is as
follows: AMBAC Indemnity Corp. ("AMBAC"), 6.3%; Bond Investors Guaranty
("BIG"), 5.3%; Financial Guaranty Insurance Company ("Financial
Guaranty"), 16.4%, Firemen's Fund Insurance ("Firemen's"), 4.6% and
Municipal Bond Insurance Association ("MBIA"), 67.4%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 5.5% of
the Public Offering Price, or 5.820% of the net amount invested in Bonds
per Unit. In addition, accrued interest to the expected date of
settlement, including earned original issue discount, is added to the
Public Offering Price. If Units had been available for sale on the
Evaluation Date, the Public Offering Price per Unit would have been
$507.92 plus accrued interest of $7.39 under the monthly distribution
plan, $10.47 under the semi-annual distribution plan and $10.49 under the
annual distribution plan, for a total of $515.31, $518.39 and $518.41,
respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the aggregate bid price of the
Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. The rate
of return on an investment in Units of the Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted
bond practices, which practices take into account not only the interest
payable on the Bond but also the amortization of premiums or accretion of
discounts, if any; (2) calculating the average of the yields for the Bonds
in the Trust's portfolio by weighing each Bond's yield by the market value
of the Bond and by the amount of time remaining to the date to which the
Bond is priced (thus creating an average yield for the portfolio of the
Trust); and (3) reducing the average yield for the portfolio of the Trust
in order to reflect estimated fees and expenses of the Trust and the
maximum sales charge paid by investors. The resulting Estimated Long Term
Return represents a measure of the return to investors earned over the
estimated life of the Trust. (For the Estimated Long Term Return to
Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return
does not take into account the amortization of premium or accretion of
discount, if any, on the Bonds in the portfolio of the Trust. Moreover,
because interest rates on Bonds purchased at a premium are generally
higher than current interest rates on newly issued bonds of a similar type
with comparable rating, the Estimated Current Return per Unit may be
affected adversely if such Bonds are redeemed prior to their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to the Trust and with the redemption, maturity, sale
or other disposition of the Bonds in the Trust. The Public Offering Price
will vary with changes in the bid prices of the Bonds. Therefore, there
is no assurance that the present Estimated Current Return or Estimated
Long Term Return will be realized in the future. (For the Estimated
Current Return to Certificateholders under the monthly, semi-annual and
annual distribution plans, see "Summary of Essential Information". See
"Estimated Long Term Return and Estimated Current Return" in Part B of
this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses,
will be made by the Trust either monthly, semi-annually or annually
depending upon the plan of distribution applicable to the Unit purchased.
A purchaser of a Unit in the secondary market will initially receive
distributions in accordance with the distribution plan chosen by the prior
owner of such Unit and may thereafter change the plan as provided under
"Interest and Principal Distributions" in Part B of this Prospectus.
Distributions of principal, if any, will be made semi-annually on June 15
and December 15 of each year. (See "Rights of Certificateholders--
Interest and Principal Distributions" in Part B of this Prospectus. For
estimated monthly, semi-annual and annual interest distributions, see
"Summary of Essential Information.")
MARKET FOR UNITS. The Sponsor, although not obligated to do so,
presently maintains and intends to continue to maintain a secondary market
for the Units at prices based on the aggregate bid price of the Bonds in
the Trust portfolio. The reoffer price will be based on the aggregate bid
price of the Bonds plus a sales charge of 5.5% of the Public Offering
Price (5.820% of the net amount invested), plus net accrued interest. If
a market is not maintained a Certificateholder will be able to redeem his
Units with the Trustee at a price also based on the aggregate bid price of
the Bonds. (See "Liquidity--Sponsor Repurchase" and "Public Offering--
Offering Price" in Part B of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their
regular interest distributions, and principal distributions, if any,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of
this Prospectus. Residents of Texas see "Total Reinvestment Plan for
Texas Residents" in Part B of this Prospectus.) The Plan is not designed
to be a complete investment program.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
17TH DISCOUNT SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1993
Date of Deposit: January 30, 1986 Minimum Principal Distribution:
Principal Amount of Bonds ...$10,875,000 $1.00 per Unit.
Number of Units .............12,000 Weighted Average Life to
Fractional Undivided Inter- Maturity:
est in Trust per Unit .....1/12000 17.1 Years.
Principal Amount of Minimum Value of Trust:
Bonds per Unit ............$906.25 Trust may be terminated if
Secondary Market Public value of Trust is less than
Offering Price** $4,800,000 in principal amount
Aggregate Bid Price of Bonds.
of Bonds in Trust .......$5,759,735+++ Mandatory Termination Date:
Divided by 12,000 Units ...$479.98 The earlier of December 31,
Plus Sales Charge of 5.5% 2035 or the disposition of the
of Public Offering Price $27.94 last Bond in the Trust.
Public Offering Price Trustee***: United States Trust
per Unit ................$507.92+ Company of New York.
Redemption and Sponsor's Trustee's Annual Fee: Monthly
Repurchase Price plan $1.03 per $1,000; semi-
per Unit ..................$479.98+ annual plan $.55 per $1,000;
+++ and annual plan is $.36 per
++++ $1,000.
Excess of Secondary Market Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
over Redemption and Evaluator's Fee for Each
Sponsor's Repurchase Evaluation: Minimum of $12
Price per Unit ............$27.94++++ plus $.25 per each issue of
Difference between Public Bonds in excess of 50 issues
Offering Price per Unit (treating separate maturities
and Principal Amount per as separate issues).
Unit Premium/(Discount) ...$(398.33) Sponsor: Bear, Stearns & Co.
Evaluation Time: 4:00 p.m. Inc.
New York Time. Sponsor's Annual Fee: Maximum of
$.15 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in Part B
of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# .........$38.51 $38.51 $38.51
Less estimated annual fees and
expenses ............................ 1.62 1.03 .83
Estimated net annual interest ______ ______ ______
income (cash)# ......................$36.89 $37.48 $37.68
Estimated interest distribution# ...... 3.07 18.74 37.68
Estimated daily interest accrual# ..... .1024 .1041 .1046
Estimated current return#++ ........... 7.26% 7.38% 7.42%
Estimated long term return++ .......... 3.28% 3.40% 3.44%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
<PAGE>
* The Date of Deposit is the date on which the Trust Agreement was
signed and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable
sales charge under the Total Reinvestment Plan, see "Total
Reinvestment Plan" in Part B of this Prospectus.
*** The Trustee maintains its corporate trust office at 770 Broadway,
New York, New York 10003 (tel. no. 1-800-428-8890). For information
regarding redemption by the trustee, see "Trustee Redemption" in
Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement
(approximately five business days after purchase) of $7.39 monthly,
$10.47 semi-annually and $10.49 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds,
if any.
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1993
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 15 issues representing
obligations of issuers located in 12 states and the District of Columbia.
The Sponsor has not participated as a sole underwriter or manager, co-
manager or member of an underwriting syndicate from which any of the
initial aggregate principal amount of the Bonds were acquired.
Approximately 54.8% of the Bonds are obligations of state and local
housing authorities; approximately 17.7% are hospital revenue bonds;
approximately 11.8% were issued in connection with the financing of
nuclear generating facilities; and none are "mortgage subsidy" bonds. All
of the Bonds in the Trust are subject to redemption prior to their stated
maturity dates pursuant to sinking fund or optional call provisions. The
Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues). None of the Bonds are general obligation bonds.
Fifteen issues representing $10,875,000 of the principal amount of the
Bonds are payable from the income of a specific project or authority and
are not supported by the issuer's power to levy taxes. The portfolio is
divided for purpose of issue as follows: Coal Power 1, Federally Insured
Mortgage 2, Hospital 4, Industrial Development 1, Levee District 1, Multi-
Family Housing 1, Nuclear Power 3, Waste Water 1 and Water 1. For an
explanation of the significance of these factors see "The Trust--
Portfolio" in Part B of this Prospectus.
* Changes in the Trust Portfolio: From January 1, 1994 to March 24,
1994, the entire principal amount of the Bonds in portfolio no. 15
has been called and is no longer contained in the Trust. 35 Units
have been redeemed from the Trust.
<PAGE>
As of December 31, 1993, $5,935,000 (approximately 54.8% of the
aggregate principal amount of the Bonds) were original issue discount
bonds. Of these original issue discount bonds, $5,935,000 (approximately
54.8% of the aggregate principal amount of the Bonds) were Zero Coupon
Bonds. Zero Coupon Bonds do not provide for the payment of any current
interest and provide for payment at maturity at par value unless sooner
sold or redeemed. The market value of Zero Coupon Bonds is subject to
greater fluctuations than coupon bonds in response to changes in interest
rates. None of the aggregate principal amount of the Bonds in the Trust
were purchased at a "market" discount from par value at maturity,
approximately 45.2% were purchased at a premium and none were purchased at
par. For an explanation of the significance of these factors see
"Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal individual
alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset * Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1991 12,000 $510.21 $37.39 $37.95 $38.16 $1.25
December 31, 1992 12,000 503.81 37.32 37.96 38.16 -0-
December 31, 1993 12,000 490.66 37.06 37.71 37.91 5.42
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See
Note 5 of Notes to Financial Statements for a description of the
components of Net Assets.
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 17th Discount Series:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 17th Discount Series as
of December 31, 1993, and the related statements of operations, and
changes in net assets for each of the years in the three year period then
ended. These financial statements are the responsibility of the Trustee
(see note 2). Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of December 31, 1993, by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Insured Municipal
Securities Trust, 17th Discount Series as of December 31, 1993, and the
results of its operations and the changes in its net assets for each of
the years in the three year period then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick
New York, New York
March 31, 1994
<PAGE>
Statement of Net Assets
December 31, 1993
Investments in marketable securities,
at market value (cost $5,693,117) $ 5,759,736
Excess of other assets over total liabilities 128,209
-------------
Net assets 12,000 units of fractional undivided
interest outstanding, $490.66 per unit) $ 5,887,945
=============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
--------- --- --------- --- --------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Investment income - interest $ 486,620 487,846 486,289
--------- --------- --------
Expenses:
Trustee's fees 13,111 12,069 10,938
Evaluator's fees 2,669 2,466 2,079
Sponsor's advisory fee 1,641 1,642 1,642
--------- --------- --------
Total expenses 17,421 16,177 14,659
--------- --------- --------
Investment income, net 469,199 471,669 471,630
--------- --------- --------
Realized and unrealized gain
(loss) on investments:
Net realized loss on
bonds sold or called (4,435) - (841)
Unrealized appreciation
(depreciation) for the year (110,199) (97,885) 128,061
--------- --------- --------
Net gain (loss)
on investments (114,634) (97,885) 127,220
--------- --------- --------
Net increase in net
assets resulting
from operations $ 354,565 373,784 598,850
========= ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ --- ------------ --- ----------
1993 1992 1991
------------ ------------ ----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 469,199 471,669 471,630
Net realized loss on
bonds sold or called (4,435) - (841)
Unrealized appreciation
(depreciation) for the year (110,199) (97,885) 128,061
------------ ------------ ----------
Net increase in net
assets resulting
from operations 354,565 373,784 598,850
------------ ------------ ----------
Distributions to Certificateholders:
Investment income 447,340 450,520 451,075
Principal 65,040 - 15,000
------------ ------------ ----------
Total distributions 512,380 450,520 466,075
------------ ------------ ----------
Total increase (decrease) (157,815) (76,736) 132,775
Net assets at beginning of year 6,045,760 6,122,496 5,989,721
------------ ------------ ----------
Net assets at end of year (including
undistributed net investment
income of $253,725, $231,866 and
$210,717 respectively) $ 5,887,945 6,045,760 6,122,496
============ ============ ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 17TH DISCOUNT SERIES
Notes to Financial Statements
December 31, 1993, 1992 and 1991
(1) Organization
Insured Municipal Securities Trust, 17th Discount Series (Trust) was
organized on January 30, 1986 by Bear, Stearns & Co. Inc. (Sponsor)
under the laws of the State of New York by a Trust Indenture and
Agreement, and is registered under the Investment Company Act
of 1940.
(2) Summary of Significant Accounting Policies
United States Trust Company of New York (Trustee) has custody of and
responsibility for the accounting records and financial statements of
the Trust and is responsible for establishing and maintaining a
system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The
accompanying financial statements have been adjusted to record the
unrealized appreciation (depreciation) of investments and to record
interest income and expenses on the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest
method over the respective lives of the bonds. The accretion of such
discount is included in interest income; however, it is not
distributed until realized in cash upon maturity or sale of the
respective bonds.
Investments are carried at market value which is determined by either
Standard & Poor's Corporation or Moody's Investors Service, Inc.
(Evaluator) as discussed in Footnotes to Portfolio. The market value
of the investments is based upon the bid prices for the bonds at the
end of the period, except that the market value on the date of
deposit represents the cost to the Trust based on the offering prices
for investments at that date. The difference between cost (including
accumulated accretion of original issue discount on zero-coupon
bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded
on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by
the Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis
set forth under "Trust Expenses and Charges" in Part B of this
Prospectus.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the
Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold
in connection with the redemption of units, be distributed to
Certificateholders.
See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the years
ended December 31, 1993, 1992, and 1991.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. No units have been redeemed since the inception of
the Trust.
(5) Net Assets
At December 31, 1993, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 7,160,529
Less initial gross underwriting commission (393,840)
6,766,689
Cost of securities sold or called (1,199,087)
Net unrealized appreciation 66,619
Undistributed net investment income 253,725
Distribution in excess of proceeds from
bonds sold or called (1)
Total $ 5,887,945
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering
price net of the applicable sales charge on 12,000 units of fractional
undivided interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $125,515.
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 17TH DISCOUNT SERIES
Portfolio
December 31, 1993
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- --- ----------- --------------------- ---- ----------- ---------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $ 150,000 Municipal Electric AAA 9.000% 1/01/08 @ 100 S.F. $ 160,863
Authority of Georgia 1/01/2020 1/01/95 @ 102 Ref.
Power Revenue Bonds
Series K (AMBAC)
2 525,000 The Hospital AAA 9.250 10/01/06 @ 100 S.F. 589,297
Authority of Walker 10/01/2010 10/01/95 @ 102 Ref.
Dade and Catoosa
Counties (Georgia)
Refunding Revenue
Anticipation
Certificates, 1985
Series (Financial
Guaranty) (5)
3 500,000 Hospital Authority of AAA 9.250 11/01/06 @ 100 S.F. 563,610
St. Joseph County 11/01/2015 11/01/95 @ 102 Ref.
(Indiana) Insured
Hospital Revenue
Bonds, 1985 Series
(Memorial Hospital of
South Bend Project)
(MBIA) (5)
4 20,000 Kentucky Housing AAA 8.875 1/01/06 @ 100 S.F. 20,692
Corporation 7/01/2019 1/01/96 @ 102 Ref.
Multi-Family Mortgage
Revenue Bonds, 1985
Series A (BIG)
5 500,000 Orleans Louisiana AAA 9.350 11/01/06 @ 100 S.F. 549,925
Levee District Marina 11/01/2015 5/01/95 @ 102 Ref.
Revenue Bonds, 1985
Series (Financial
Guaranty) (5)
6 550,000 Southern Minnesota, AAA 9.500 No Sinking Fund 624,971
Municipal Power 1/01/2017 1/01/96 @ 102 Ref.
Agency Supply System
Revenue Bonds, 1985
Series A (BIG) (5)
7 40,000 Ocean County AAA 8.700 1/01/07 @ 100 S.F. 44,829
Utilities Authority 1/01/2011 1/01/96 @ 102 Ref.
New Jersey Wastewater
Revenue Refunding
Bonds, 1985 Series
(Financial Guaranty)
(5)
8 500,000 Albuquerque, New AA- 9.375 12/01/96 @ 100 S.F. 538,880
Mexico Industrial 12/01/2005 12/01/94 @ 102 Ref.
Development Bonds for
Capital Glass and
Aluminum Corporation
1985 Series
(Firemen's Fund
Insurance)
9 600,000 City of Farmington, AAA 9.750 5/15/06 @ 100 S.F. 697,608
New Mexico Utility 5/15/2013 5/15/96 @ 102 Ref.
System Revenue Bonds,
1985 Series
(Financial Guaranty)
(5)
10 535,000 Piedmont Municipal AAA 9.250 1/01/16 @ 100 S.F. 610,360
Power Agency (South 1/01/2019 1/01/96 @ 103 Ref.
Carolina) Electric
Revenue Bonds, 1985
Series (AMBAC) (5)
11 $ 400,000 Waco (Texas) Health AAA 9.200% 9/01/06 @ 100 S.F. $ 446,416
Facilities 9/01/2014 9/01/95 @ 102 Ref.
Development
Corporation Hospital
Refunding Revenue
Bonds, 1985 Series
(Hillcrest Baptist
Medical Center
Project) (MBIA) (5)
12 120,000 Burlington, Vermont AAA 9.750 7/01/01 @ 100 S.F. 135,007
Waterworks System 7/01/2005 7/01/95 @ 103 Ref.
Revenue Bonds, 1985
Series A (Financial
Guaranty) (5)
13 500,000 Wisconsin Health AAA 9.250 7/01/06 @ 100 S.F. 550,670
Facility Authority 7/01/2012 7/01/95 @ 102 Ref.
Hospital Revenue
Bonds, Sisters
Services Incorporated
- St. Mary's Hospital
1985 Series (MBIA)
14 3,955,000 The District of AAA 0.000 5/01/05 @ 11.975 S.F. 159,110
Columbia Multi-Unit 11/01/2025 11/01/98 @ 6.415 Ref.
Housing Finance
Corporation Mortgage
Revenue Bonds, Series
1983 (FHA Insured
Mortgage
Loan-Congress Park II
Apartments Section 8
Assisted Project)
(MBIA)
15 1,980,000 Anne Arundel County, AAA 0.000 6/01/21 @ 54.504 S.F. 67,498
Maryland Economic 6/01/2027 1/06/94 @ 3.409 Ref.
Development Revenue
Bonds, Series 1985
(FHA Insured Mortgage
Loan-The Regency Club
II Facility) (MBIA)
(5)
----------- ---------
$ 10,875,000 $ 5,759,736
=========== =========
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 17TH DISCOUNT SERIES
Footnotes to Portfolio
December 31, 1993
(1) All ratings are by Standard & Poor's Corporation. A brief description
of the ratings symbols and their meanings is set forth under
"Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of
this Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At December 31, 1993, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross unrealized appreciation $ 85,062
Gross unrealized depreciation (18,443)
Net unrealized appreciation $ 66,619
(4) The annual interest income, based upon bonds held at December 31, 1993,
(excluding accretion of original issue discount on zero-coupon bonds)
to the Trust is $462,180.
(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.
(6) Bonds sold or called after December 31, 1993 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as
destruction, condemnation, termination of a contract, or receipt of
excess or unanticipated revenues).
Note: Part B of This Prospectus May Not Be Distributed
Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus For Future Reference.
INSURED MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: April 29, 1994
THE TRUST
Organization
"Insured Municipal Securities Trust" (the "Trust") consists of
the "unit investment trust" designated as set forth in Part A.* The
Trust was created under the laws of the State of New York pursuant to a
Trust Indenture and Agreement** (collectively, the "Trust Agreement"),
dated the Date of Deposit, among Bear, Stearns & Co. Inc., as Sponsor,
Kenny S&P Evaluation Services, as Evaluator, and, depending on the
particular Trust, either The Bank of New York or United States Trust
Company of New York, as Trustee. The name of the Trustee for the Trust is
contained in the "Summary of Essential Information" in Part A. For a
description of the Trustee for a particular Trust, see "Trust
Administration--The Trustee."
* This Part B relates to the outstanding series of Insured Municipal
Securities Trust or Insured Municipal Securities Discount Trust as
reflected in Part A attached hereto.
** References in this Prospectus to the Trust Agreement are qualified
in their entirety by the Trust Indenture and Agreement which is
incorporated herein.
<PAGE>
On the Date of Deposit the Sponsor deposited with the Trustee
long-term insured bonds, and/or delivery statements relating to contracts
for the purchase of certain such bonds (the "Bonds") and cash or an
irrevocable letter of credit issued by a major commercial bank in the
amount required for such purchases. Thereafter, the Trustee, in exchange
for the Bonds so deposited delivered to the Sponsor the Certificates
evidencing the ownership of all Units of the Trust. The Trust consists of
the Bonds described under "The Trust" in Part A, the interest (including,
where applicable, earned original issue discount) on which, in the
opinions of bond counsel to the respective issuers given at the time of
original delivery of the Bonds, is exempt from regular federal income tax
under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the
Trust in the ratio of one Unit to the principal amount of Bonds in the
Trust on such date as specified in Part A of this Prospectus. To the
extent that any Units are redeemed by the Trustee, the fractional
undivided interest or pro rata share in the Trust represented by each
unredeemed Unit will increase, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Certificate-
holders, which may include the Sponsor or the Underwriters, or until the
termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit
investment trusts formed by the Sponsor, offers investors the opportunity
to participate in a portfolio of long-term insured tax-exempt bonds with a
greater diversification than they might be able to acquire themselves.
The objectives of the Trust are to preserve capital and to provide
interest income (including, where applicable, earned original issue
discount) which, in the opinions of bond counsel given at the time of
original delivery of the Bonds, is exempt from regular federal income tax
under existing law. Such interest income may, however, be subject to the
federal, individual and corporate alternative minimum taxes and to state
and local taxes. (See "Description of Portfolio" in Part A for a list of
those Bonds which pay interest income subject to federal individual
alternative minimum tax. See also "Tax Status".) Consistent with such
objectives, the Sponsor has obtained bond insurance guaranteeing the
scheduled payment of principal and interest on certain of the Bonds and
has purchased, as to the remainder of each Trust Portfolio, Bonds which
are already covered by insurance. (See "Insurance on the Bonds".) An
investor will realize taxable income upon maturity or early redemption of
the market discount bonds in a Trust portfolio and will realize, where
applicable, tax-exempt income to the extent of the earned portion of
interest, including original issue discount earned on the Bonds in a Trust
portfolio. Investors should be aware that there is no assurance the
Trust's objectives will be achieved as these objectives are dependent on
the continuing ability of the issuers of the Bonds to meet their interest
and principal payment requirements, on the abilities of the Insurance
Companies to meet their obligations under the policies of insurance issued
on the Bonds, on the continuing satisfaction of the Bonds of the
conditions required for the exemption of interest thereon from regular
federal income tax and on the market value of the Bonds, which can be
affected by fluctuations in interest rates and other factors.
Since disposition of Units prior to final liquidation of each
Trust may result in an investor receiving less than the amount paid for
such Units (see "Comparison of Public Offering Price, Sponsor's Repurchase
Price and Redemption Price"), the purchase of a Unit should be looked upon
as a long-term investment. Neither the Trust nor the Total Reinvestment
Plan are designed to be complete investment programs.
Portfolio
All of the Bonds in the Trust were rated "AAA" by Standard &
Poor's Corporation at the time originally deposited in the Trust. (See
"Insurance on the Bonds".) The "AAA" rating was assigned to the Bonds by
Standard & Poor's because each Bond was insured by a municipal bond
guaranty insurance policy issued by a company whose claims-paying ability
was rated "AAA" by Standard & Poor's at that time. Due to a downgrading
of the claims-paying ability of one of the insurers, as of the Evaluation
Date, the Bonds in the Trusts which are insured by that company are no
longer rated "AAA" by Standard & Poor's. Therefore, the Units of those
Trusts containing the downgraded bonds are no longer rated.
For information regarding (i) the number of issues in the
Trust, (ii) the range of fixed maturities of the Bonds, (iii) the number
of issues payable from the income of a specific project or authority and
(iv) the number of issues constituting general obligations of a government
entity, see "The Trust" and "Description of Portfolio" in Part A of this
Prospectus.
When selecting Bonds for a Trust, the following factors, among
others, were considered by the Sponsor: (a) the quality of the Bonds and
whether such Bonds, whether Sponsor-Insured or Pre-Insured, were rated
"AAA" by Standard & Poor's Corporation, (b) the yield and price of the
Bonds relative to other tax-exempt securities of comparable quality and
maturity, (c) income to the Certificateholders of the Trust, (d) whether a
bond was insured, or insurance was available for the Bonds at a reasonable
cost, (e) in connection with Bonds for which bond insurance was obtained
by the Sponsor, the quality of the Bonds and whether they were rated,
without regard to such bond insurance, "A" or better by either Standard &
Poor's Corporation or Moody's Investors Service, and (f) the
diversification of the Trust portfolio, as to purpose of issue and
location of issuer, taking into account the availability in the market of
issues which meet the Trust's quality, rating, yield and price criteria.
Subsequent to the Date of Deposit, a Bond may cease to be rated or its
rating may be reduced below that specified above. Neither event requires
an elimination of such Bond from a Trust but may be considered in the
Sponsor's determination to direct the Trustee to dispose of the Bond. See
"Portfolio Supervision." For an interpretation of the bond ratings see
"Description of Bond Ratings."
Housing Bonds. Some of the aggregate principal amount of the
Bonds may consist of obligations of state and local housing authorities
whose revenues are primarily derived from mortgage loans to rental housing
projects for low to moderate income families. Since such obligations are
usually not general obligations of a particular state or municipality and
are generally payable primarily or solely from rents and other fees,
adverse economic developments including failure or inability to increase
rentals, fluctuations of interest rates and increasing construction and
operating costs may reduce revenues available to pay existing obligations.
See "Description of Portfolio" in Part A for the amount of rental housing
bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount
of the Bonds may consist of hospital revenue bonds. Ratings of hospital
bonds are often initially based on feasibility studies which contain
projections of occupancy levels, revenues and expenses. Actual experience
may vary considerably from such projections. A hospital's gross receipts
and net income will be affected by future events and conditions including,
among other things, demand for hospital services and the ability of the
hospital to provide them, physicians' confidence in hospital management
capability, economic developments in the service area, competition,
actions by insurers and governmental agencies and the increased cost and
possible unavailability of malpractice insurance. Additionally, a major
portion of hospital revenue typically is derived from federal or state
programs such as Medicare and Medicaid which have been revised
substantially in recent years and which are undergoing further review at
the state and federal level.
Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are
under consideration in Congress and many states. Future legislation or
changes in the areas noted above, among other things, would affect all
hospitals to varying degrees and, accordingly, any adverse change in these
areas may affect the ability of such issuers to make payment of principal
and interest on such bonds. See "Description of Portfolio" in Part A for
the amount of hospital revenue bonds contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been
issued in connection with the financing of nuclear generating facilities.
In view of recent developments in connection with such facilities,
legislative and administrative actions have been taken and proposed
relating to the development and operation of nuclear generating
facilities. The Sponsor is unable to predict whether any such actions or
whether any such proposals or litigation, if enacted or instituted, will
have an adverse impact on the revenues available to pay the debt service
on the Bonds in the portfolio issued to finance such nuclear projects.
See "Description of Portfolio" in Part A for the amount of bonds issued to
finance nuclear generating facilities contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-
occupied residences. Section 103A of the Internal Revenue Code of 1954,
as amended, provided as a general rule that interest on "mortgage subsidy
bonds" will not be exempt from Federal income tax. An exception is
provided for certain "qualified mortgage bonds." Qualified mortgage bonds
are bonds that are used to finance owner-occupied residences and that meet
numerous statutory requirements. These requirements include certain
residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions and (for bonds
issued after December 31, 1984) certain information reporting,
certification, public hearing and policy statement requirements. In the
opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds"
will be exempt from Federal income tax when issued. See "Description of
Portfolio" in Part A for the amount of mortgage subsidy Bonds contained
therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code")
(and under similar provisions of the prior tax law) "mortgage revenue
bonds" are obligations the proceeds of which are used to finance owner-
occupied residences under programs which meet numerous statutory
requirements relating to residency, ownership, purchase price and target
area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions, and certain information reporting certification, and public
hearing requirements. There can be no assurance that additional federal
legislation will not be introduced or that existing legislation will not
be further amended, revised, or enacted after delivery of these Bonds or
that certain required future actions will be taken by the issuing
governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion
of the Bonds proceeds are not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at
par, including issues of Zero Coupon Bonds (see "Discount and Zero Coupon
Bonds"). See "Description of Portfolio" in Part A for the amount of
mortgage revenue bonds contained therein.
Private Activity Bonds. The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial
Revenue Bonds ("IRBs") if issued prior to 1987) which would be primarily
of two types: (1) Bonds for a publicly owned facility which a private
entity may have a right to use or manage to some degree, such as an
airport, seaport facility or water system and (2) facilities deemed owned
or beneficially owned by a private entity but which were financed with
tax-exempt bonds of a public issuer, such as a manufacturing facility or a
pollution control facility. In the case of the first type, bonds are
generally payable from a designated source of revenues derived from the
facility and may further receive the benefit of the legal or moral
obligation of one or more political subdivisions or taxing jurisdictions.
In most cases of project financing of the first type, receipts or revenues
of the Issuer are derived from the project or the operator or from the
unexpended proceeds of the bonds. Such revenues include user fees,
service charges, rental and lease payments, and mortgage and other loan
payments.
The second type of issue will generally finance projects which
are owned by or for the benefit of, and are operated by, corporate
entities. Ordinarily, such private activity bonds are not general
obligations of governmental entities and are not backed by the taxing
power of such entities, and are solely dependent upon the creditworthiness
of the corporate user of the project or corporate guarantor.
The private activity bonds in the Trust have generally been
issued under bond resolutions, agreements or trust indentures pursuant to
which the revenues and receipts payable under the issuer's arrangements
with the users or the corporate operator of a particular project have been
assigned and pledged to the holders of the private activity bonds. In
certain cases a mortgage on the underlying project has been assigned to
the holders of the private activity bonds or a trustee as additional
security. In addition, private activity bonds are frequently directly
guaranteed by the corporate operator of the project or by another
affiliated company. See "Description of Portfolio" in Part A for the
amount of private activity bonds contained therein.
Litigation. Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been
reached holding such school financing in violation of state constitutions.
In addition, legislation to effect changes in public school financing has
been introduced in a number of states. The Sponsor is unable to predict
the outcome of the pending litigation and legislation in this area and
what effect, if any, resulting changes in the sources of funds, including
proceeds from property taxes applied to the support of public schools, may
have on the school bonds in a Trust.
To the Sponsor's knowledge, there is no litigation pending as
of the Date of Deposit with respect to any Bonds which might reasonably be
expected to have a material adverse effect on a Trust. Subsequent to the
Date of Deposit, litigation may be initiated on a variety of grounds with
respect to Bonds in a Trust. Such litigation, as, for example, suits
challenging the issuance of pollution control revenue bonds under
recently-enacted environmental protection statutes, may affect the
validity of such Bonds or the tax-free nature of the interest thereon.
The Sponsor is unable to predict whether any such litigation may be
instituted or, if instituted, whether it might have a material adverse
effect on a Trust.
Other Factors. The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 years
after the original issuance dates of such bonds (often referred to as "ten
year call protection"), do contain provisions which require the issuer to
redeem such obligations at par from unused proceeds of the issue within a
stated period. In recent periods of declining interest rates there have
been increased redemptions of bonds, particularly housing bonds, pursuant
to such redemption provisions. In addition, the Bonds in the Trusts are
also subject to mandatory redemption in whole or in part at par at any
time that voluntary or involuntary prepayments of principal on the
underlying collateral are made to the trustee for such bonds or that the
collateral is sold by the bond issuer. Prepayments of principal tend to
be greater in periods of declining interest rates; it is possible that
such prepayments could be sufficient to cause a bond to be redeemed
substantially prior to its stated maturity date, earliest call date or
sinking fund redemption date.
The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as
destruction, condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court
protection to assist in reorganizing its debts so long as certain
requirements were met. Historically, very few financially troubled
municipalities have sought court assistance for reorganizing their debts;
notwithstanding, the Sponsors are unable to predict to what extent
financially troubled municipalities may seek court assistance in
reorganizing their debts in the future and, therefore, what effect, if
any, the applicable federal bankruptcy law provisions will have on the
Trusts.
The Trust may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if any issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but
not a legal obligation of the state or municipality in question. See
"Portfolio" and "Information Regarding the Trust" in Part A of this
Prospectus for the amount of moral obligation bonds contained in each
Trust.
Certain of the Bonds in the Trust are subject to redemption
prior to their stated maturity dates pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund appropriated specifically
toward the retirement of a debt. A callable bond is one which is subject
to redemption or refunding prior to maturity at the option of the issuer.
A refunding is a method by which a bond is redeemed at or before maturity
from the proceeds of a new issue of bonds. In general, call provisions
are more likely to be exercised when the offering side evaluation of a
bond is at a premium over par than when it is at a discount from par. A
listing of the sinking fund and call provisions, if any, with respect to
each of the Bonds is contained under "Portfolio". Certificateholders will
realize a gain or loss on the early redemption of such Bonds, depending
upon whether the price of such Bonds is at a discount from or at a premium
over par at the time Certificateholders purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds. Because certain
of the Bonds from time to time may be redeemed or will mature in
accordance with their terms or may be sold under certain circumstances, no
assurance can be given that a Trust will retain its present size and
composition for any length of time. The proceeds from the sale of a Bond
or the exercise of any redemption or call provision will be distributed to
Certificateholders on the next distribution date, except to the extent
such proceeds are applied to meet redemptions of Units. See "Trustee
Redemption."
Discount And Zero Coupon Bonds
Some of the Bonds in a Trust may be original issue discount
bonds. The original issue discount, which is the difference between the
initial purchase price of the Bonds and the face value, is deemed to
accrue on a daily basis and the accrued portion will be treated as tax-
exempt interest income for regular federal income tax purposes. Upon sale
or redemption, any gain realized that is in excess of the earned portion
of original issue discount will be taxable as capital gain. (See "Tax
Status".) The current value of an original issue discount bond reflects
the present value of its face amount at maturity. The market value tends
to increase more slowly in early years and in greater increments as the
Bonds approach maturity. Of these original issue discount bonds, some of
the aggregate principal amount of the Bonds in the Trust may be Zero
Coupon Bonds. (See "Description of Portfolios" in Part A.) Zero Coupon
Bonds do not provide for the payment of any current interest and provide
for payment at maturity at face value unless sooner sold or redeemed. The
market value of Zero Coupon Bonds is subject to greater fluctuations than
coupon bonds in response to changes in interest rates. Zero Coupon Bonds
generally are subject to redemption at compound accreted value based on
par value at maturity. Because the issuer is not obligated to make
current interest payments, Zero Coupon Bonds may be less likely to be
redeemed than coupon bonds issued at a similar interest rate, although
certain zero coupon housing bonds may be subject to mandatory call
provisions.
Some of the Bonds in the Trust may have been purchased at a
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in each Trust were lower than the current market interest rates
for newly issued bonds of comparable rating and type. At the time of
issuance the discount bonds were for the most part issued at then current
coupon interest rates. The current returns (coupon interest income as a
percentage of market price) of discount bonds will be lower than the
current returns of comparably rated bonds of similar type newly issued at
current interest rates because discount bonds tend to increase in market
value as they approach maturity and the full principal amount becomes
payable. Gain on the disposition of a Bond purchased at a market discount
generally will be treated as ordinary income, rather than capital gain, to
the extent of accrued market discount. A discount 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 interest income than a comparable bond
newly issued at current return, and a lower current market value than
otherwise comparable bonds with a shorter term of maturity. If interest
rates rise, the value of discount bonds will decrease; and if interest
rates decline, the value of discount bonds will increase. The discount
does not necessarily indicate a lack of market confidence in the issuer.
Insurance On The Bonds
Each Bond in the Trust is insured by a municipal bond guaranty
insurance policy, or in the case of Firemen's by a financial guaranty
insurance policy, covering scheduled payment of principal and interest on
such Bond. See "Insurance" in Part A. This insurance has been obtained
either by the issuer of the Bond ("Pre-Insured Bonds"), or by the Sponsor
("Sponsor-Insured Bonds") with respect to Bonds which were not insured
prior to their deposit in the Trusts. The insurance policies on the Bonds
are non-cancelable and will continue in force so long as the Bonds are
outstanding and the insurers remain in business. The insurance policies
guarantee the timely payment of principal and interest on the Bonds but do
not guarantee the market value of the Bonds or the value of the Units. No
representation is made herein as to any Bond insurer's ability to meet its
obligations under a policy of insurance relating to any of the Bonds. An
insurance company that is required to pay interest and/or principal in
respect of any Bond will succeed and be subrogated to the Trustee's right
to collect such interest and/or principal from the issuer and to other
related rights of the Trustee with respect to any such Bond.
Sponsor-Insured Bonds. For those Bonds which are not covered
by an insurance policy obtained by the issuers of such Bonds, the Sponsor
has obtained bond insurance from either Bond Investors Guaranty ("BIG"),
Financial Guaranty Insurance Company ("Financial Guaranty"), Municipal
Bond Insurance Association ("MBIA") or Municipal Bond Investors Assurance
Corporation ("MBIA Corp.") in an effort to protect Certificateholders
against nonpayment of principal and interest in respect of such Bonds (the
"Sponsor-Insured Bonds"). The bond insurance on the Sponsor-Insured Bonds
covers the Sponsor-Insured Bonds deposited in a Trust at the time that
they are physically delivered to the Trustee (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 bonds held in book-
entry form). Accordingly, although contracts to purchase Sponsor-Insured
Bonds are not covered by the bond insurance obtained by the Sponsor, such
Bonds will be insured when they are deposited in the Trust. When
selecting Bonds for a Trust prior to obtaining insurance thereon, the
Sponsor considers the factors listed under "Portfolio", among others. The
insurers of the Sponsor-Insured Bonds apply their own standards in
determining whether to insure the Sponsor-Insured Bonds. To the extent
that the standards of such insurers are more restrictive than those of the
Sponsor, the Sponsor's investment criteria have been limited to the more
restrictive standards.
Pre-Insured Bonds. The Bonds which are insured under policies
obtained by the Bond issuers are insured by AMBAC Indemnity Corporation
("AMBAC"), BIG, Financial Guaranty, Financial Security Insurance, Inc.
("Financial Security"), Firemen's Insurance Company of Newark, New Jersey
("Firemen's"), Industrial Indemnity Company ("IIC") (which operates the
Health Industry Board Insurance Program ("HIBI Program")), MBIA, MBIA
Corp., or United States Fidelity and Guaranty Company ("USF&G")
(collectively, the "Insurance Companies"). The cost of this insurance is
borne by the respective issuers of the Pre-Insured Bonds. The percentage
of the Portfolio insured by each Insurance Company, if any, is set forth
under "Insurance" in Part A.
AMBAC is a Wisconsin-domiciled stock insurance company,
regulated by the Insurance Department of the State of Wisconsin, and
licensed to do business in 50 states, the District of Columbia and the
Commonwealth of Puerto Rico, with admitted assets (unaudited) of
approximately $1,936,000,000 and statutory capital (unaudited) of
approximately $1,096,000,000 as of September 30, 1993. Statutory capital
consists of the statutory contingency reserve and policyholders' surplus
of the insurance company. AMBAC is a wholly owned subsidiary of AMBAC,
Inc., a 100% publicly-held company.
As of the Evaluation Date, the claims-paying ability of AMBAC
has been rated "AAA" by Standard & Poor's.
Financial Guaranty, a New York stock insurance corporation, is
a wholly-owned subsidiary of FGIC Corporation ("FGIC"), a Delaware holding
company. FGIC is a wholly-owned subsidiary of General Electric Capital
Corporation ("GECC"). Neither FGIC nor GECC is obligated to pay the debts
of or the claims against Financial Guaranty. Financial Guaranty is
domiciled in the State of New York and is subject to regulation by the
State of New York Insurance Department. As of December 31, 1993, the
total capital and surplus of Financial Guaranty was approximately
$777,000,000. Financial Guaranty is currently authorized to write
insurance in all 50 states and the District of Columbia.
As of the Evaluation Date, the claims-paying ability of
Financial Guaranty has been rated "AAA" by Standard & Poor's.
Firemen's, which was incorporated in New Jersey in 1855, is a
wholly-owned subsidiary of The Continental Corporation ("Continental") and
a member of The Continental Insurance Companies, a group of property and
casualty insurance companies. It provides unconditional and non-
cancelable insurance on industrial development revenue bonds. As of
September 30, 1993, the total net admitted assets (unaudited) of Firemen's
were $2,226,579,000 and its statutory surplus (unaudited) was
$495,752,845.
As of the Evaluation Date, the claims-paying ability of
Continental, Firemen's parent, has been rated "AA-" by Standard & Poor's.
As a result of this rating, the ratings of all Bonds insured by Firemen's,
except pre-refunded bonds, are rated AA-. Consequently, the Units of the
Trusts containing Bonds insured by Firemen's are no longer rated.
Financial Security is a monoline insurance company incorporated
under the laws of the State of New York and is licensed, along with its
two subsidiaries, to engage in the financial guaranty insurance business
in 49 states, the District of Columbia and Puerto Rico. Financial
Security is an indirect wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd., which is in turn approximately 92.5% owned by
U.S. WEST Capital Corporation ("U.S. WEST"). U.S. WEST is a subsidiary of
U.S. WEST, Inc., which operates businesses involved in communications,
data solutions, marketing services and capital assets.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or either of its two
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, Financial Security 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 does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy. As of
September 30, 1993, total shareholder equity of Financial Security and its
wholly-owned subsidiaries was (unaudited) $585,935,000 and total unearned
premium reserves was (unaudited) $216,434,000.
As of the Evaluation Date, Financial Security's claims-paying
ability has been rated "AAA" by Standard & Poor's.
IIC is a wholly-owned subsidiary of Industrial Indemnity
Holdings, Inc. Industrial Indemnity Holdings, Inc. is a wholly owned
subsidiary of Talegen Holdings, Inc. (formerly Crum and Forster, Inc.)
The address of the Insurer is 255 California Street, San Francisco,
California 94111. The following table sets forth summary statutory
financial information with respect to Industrial Indemnity Company for the
nine months ending September 1993, and for the years 1991 and 1992. For
the fiscal years ending December 31, 1991 and December 31, 1992,
Industrial Indemnity Company participated in a Reinsurance Participation
Agreement with certain other Crum and Forster, Inc. companies. For 1991
and 1992 the statutory financial information set forth is that of
Industrial Indemnity Company only, as reported to the California
Department of Insurance, and is not the combined financial information of
the companies participating in the Reinsurance Participation Agreement.
As of January 1, 1993, Industrial Indemnity Company was not a participant
in the Reinsurance Participation Agreement. Additional information
regarding the Industrial Indemnity Company can be obtained from the
California Department of Insurance.
Nine Months Ended Year Ended
September 30, Year Ended December 31,
1993 1991 1991
Net Income (Loss) 102,986,582 <60,580,522> 27,489,374
Total assets 1,996,780,555 1,732,927,506 1,602,412,749
Total liabilities 1,748,037,431 1,517,825,778 1,379,857,700
Policyholders'
surplus 248,743,124 215,101,728 222,555,049
As of the Evaluation Date, the claims-paying ability of IIC has
been rated "A" by Standard & Poor's. As a result of this rating, the
ratings of all Bonds in the Trusts insured by IIC, except pre-refunded
bonds, are rated A. Consequently, the Units of the Trusts containing
Bonds insured by IIC are no longer rated.
Each insurance company comprising Municipal Bond Insurance
Association ("MBIA", also known as the "Association") will be severally
and not jointly obligated under the MBIA policy in the following
respective percentages: The Aetna Casualty and Surety Company, 33%;
Fireman's Fund Insurance Company, 30%; The Travelers Indemnity Company,
15%; Aetna Insurance Company*, 12%; and The Continental Insurance
Company, 10%. As a several obligor, each such insurance company will be
obligated only to the extent of its percentage of any claim under the MBIA
policy and will not be obligated to pay any unpaid obligation of any other
member of MBIA. Each insurance company's participation is backed by all
of its assets. However, each insurance company is a multiline insurer
involved in several lines of insurance other than municipal bond
insurance, and the assets of each insurance company also secure all of its
other insurance policy and surety bond obligations.
* now known as Cigna Property and Casualty Company
<PAGE>
The following table sets forth certain financial information
with respect to the five insurance companies comprising MBIA. The
statistics, which have been furnished by MBIA, are as reported by the
insurance companies to the New York State Insurance Department and are
determined in accordance with statutory accounting principals. 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. In addition, these numbers
are subject to revision by the New York State Insurance Department which,
if revised, could either increase or decrease the amounts.
MUNICIPAL BOND INSURANCE ASSOCIATION
FIVE MEMBER COMPANIES' ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF JUNE 30, 1993
(000's omitted)
New York New York New York
Statutory Statutory Policyholders'
Assets Liabilities Surplus
The Aetna Casualty & Surety Company $ 9,670,645 $ 8,278,113 $1,392,532
Fireman's Fund Insurance Company 6,571,313 4,880,776 1,690,537
The Travelers Indemnity Company 10,194,126 8,280,211 1,913,915
Cigna Property and Casualty Company 6,198,088 5,634,331 563,757
(Formerly Aetna Insurance Company)
The Continental Insurance Company 2,574,504 2,223,194 351,310
TOTAL $35,208,676 $29,296,625 $5,912,051
Some of the members of the Association are among the
shareholders of MBIA, Inc., a New York Stock Exchange listed company.
MBIA, Inc. is the parent of MBIA Corp. MBIA Corp. commenced municipal
bond insurance operations on January 5, 1987. MBIA Corp. is a separate
and distinct entity from the Association. MBIA Corp. has no liability to
the bondholders for the obligations of the Association under the Policy.
MBIA Corp. is the principal operating subsidiary of MBIA Inc.
MBIA Inc. is not obligated to pay the debts of or claims against the
Insurer. MBIA Corp. is a limited liability corporation rather than a
several liability association. MBIA Corp. 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 December 31, 1992 MBIA Corp. had admitted assets of $2.6
billion (unaudited), total liabilities of $1.7 billion (audited), and
total capital and surplus of $896 million (audited) determined in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of December 31, 1993, MBIA Corp. had
admitted assets of $3.1 billion (audited), total liabilities of $2.1
billion (audited), and total capital and surplus of $978 million
(unaudited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. The address
of MBIA Corp. is 113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors
Group, Inc. On January 5, 1990, MBIA acquired all of the outstanding
stock of Bond Investors Group, Inc., the parent corporation of Bond
Investors Guaranty Insurance Co. ("BIG"). Through a Reinsurance
Agreement, BIG has ceded all of its net insured risks, as well as its
unearned premium and contingency reserves, to MBIA and MBIA has reinsured
BIG's net outstanding exposure.
As of the Evaluation Date, the claims-paying ability of MBIA
and MBIA Corp., have been rated "AAA" by Standard & Poor's.
Capital Guaranty is a monoline stock insurance company
incorporated in Maryland, and is a wholly owned subsidiary of Capital
Guaranty Corporation, a Maryland insurance holding company. Capital
Guaranty Corporation is a publicly owned company whose shares are traded
on the New York Stock Exchange. Other than their capital commitment to
Capital Guaranty Corporation, the shareholders of Capital Guaranty
Corporation are not obligated to pay the debts of, or the claims against,
Capital Guaranty Insurance Company. Capital Guaranty is authorized to
provide insurance in 49 states, the District of Columbia and three U.S.
territories. As of December 31, 1993, the total statutory policyholders'
surplus and contingency reserves of Capital Guaranty Insurance Company was
approximately $190,986,527 (unaudited) and total admitted assets were
approximately $284,503,855 (unaudited) as reported to the Insurance
Department of the State of Maryland.
As of the Evaluation Date, the claims-paying ability of
Capital Guaranty has been rated "AAA" by Standard & Poor's.
As of the Date of Deposit, Standard & Poor's had rated the
claims-paying ability of each of the above insurance companies "AAA" and
had rated each of the Bonds in the Portfolio "AAA" because the insurance
companies had insured the Bonds. The assignment of such "AAA" ratings was
due to Standard & Poor's assessment of the creditworthiness of the
insurance companies and their ability to pay claims on their policies of
insurance. Subsequently, the rating of the claims-paying ability of the
insurer of an underlying Bond may cease to be rated or may be downgraded
which may result in a downgrading of the rating of the Units in the Trust.
For a discussion of the rating of the claims-paying ability of each of the
Bond insurers see "Insurance On The Bonds". For a list of Bond Ratings as
of the Evaluation Date see the "Portfolio" in Part A of this Prospectus.
For a discussion of the rating assigned to the Units of the Trusts, see
"the Trust" in Part A of this Prospectus. The percentage of each Trust
portfolio insured by each insurance company, if any, is set forth under
"Insurance" in Part A.
The foregoing information relating to the above insurance
companies is from published documents and other public sources and/or
information provided by such insurance companies. 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 dates thereof, but the Sponsor is not aware that the information
herein is inaccurate or incomplete.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is
computed by adding to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, an amount based on the
applicable sales charge times the aggregate offering price of the Bonds
(see "Public Offering Price" in Part A for the applicable sales charge for
the Trust). A proportionate share of accrued interest on the Bonds to the
expected date of settlement for the Units is added to the Public Offering
Price. Accrued interest is the accumulated and unpaid interest on a Bond
from the last day on which interest was paid and is accounted for daily by
the Trust at the initial daily rate set forth under "Summary of Essential
Information" in Part A of this Prospectus. This daily rate is net of
estimated fees and expenses. The Public Offering Price can vary on a
daily basis from the amount stated in Part A in accordance with
fluctuations in the prices of the Bonds and the price to be paid by each
investor will be computed as of the date the Units are purchased. The
aggregate bid price evaluation of the Bonds is determined in the manner
set forth under "Trustee Redemption."
The Evaluator may obtain current bid or offering prices for
the Bonds from investment dealers or brokers (including the Sponsor) that
customarily deal in tax-exempt obligations or from any other reporting
service or source of information which the Evaluator deems appropriate.
Accrued Interest
An amount of accrued interest which represents accumulated
unpaid or uncollected interest on a Bond from the last day on which
interest was paid thereon will be added to the Public Offering Price and
paid by the Certificateholder at the time Units are purchased. Since the
Trust normally receives the interest on Bonds twice a year and the
interest on the Bonds in the Trust is accrued on a daily basis (net of
estimated fees and expenses), the Trust will always have an amount of
interest accrued but not actually received and distributed to Certificate-
holders. A Certificateholder will not recover his proportionate share of
accrued interest until the Units are sold or redeemed, or the Trust is
terminated. At that time, the Certificateholder will receive his
proportionate share of the accrued interest computed to the settlement
date in the case of a sale or termination and to the date of tender in the
case of redemption.
Employee Discounts
Employees and their immediate families of Bear, Stearns & Co.
Inc. and of any underwriter of a Trust, pursuant to employee benefit
arrangements, may purchase Units of a Trust at a price equal to the
offering side evaluation of the underlying securities in a Trust during
the initial offering period and at the bid side thereafter, divided by the
number of Units outstanding plus a reduced charge of $10.00 per Unit.
Such arrangements result in less selling effort and selling expenses than
sales to employee groups of other companies. Resales or transfers of
Units purchased under the employee benefit arrangements may only be made
through the Sponsor's secondary market, so long as it is being maintained.
Distribution Of Units
Certain banks and thrifts will make Units of the Trust
available to their customers on an agency basis. A portion of the sales
charge paid by their customers is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have indicated that these
particular agency transactions are permitted under such Act. In addition,
state securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.
The Sponsor intends to qualify the Units for sale in
substantially all States through the Underwriters and through dealers who
are members of the National Association of Securities Dealers, Inc. Units
may be sold to dealers at prices which represent a concession of up to (a)
4% of the Public Offering Price for the Insured Municipal Securities Trust
Series or (b) $25.00 per unit for the Insured Municipal Securities Trust
Discount Series, subject to the Sponsor's right to change the dealers'
concession from time to time. In addition, for transactions of 1,000,000
Units or more, the Sponsor intends to negotiate the applicable sales
charge and such charge will be disclosed to any such purchaser. Such
Units may then be distributed to the public by the dealers at the Public
Offering Price then in effect. The Sponsor reserves the right to reject,
in whole or in part, any order for the purchase of Units. The Sponsor
reserves the right to change the discounts from time to time.
Sponsor's Profits
The Sponsor will receive a gross commission on all Units sold
in the secondary market equal to the applicable sales charge on each
transaction. (See "Offering Price".) In addition, in maintaining a
market for the Units (see "Sponsor Repurchase") the Sponsor will realize
profits or sustain losses in the amount of any difference between the
price at which it buys Units and the price at which it resells such Units.
Participants in the Total Reinvestment Plan can designate a
broker as the recipient of a dealer concession (see "Total Reinvestment
Plan").
Comparison of Public Offering Price, Sponsor's
Repurchase Price And Redemption Price
The secondary market Public Offering Price of Units will be
determined on the basis of the current bid prices of the Bonds in the
Trust, plus the applicable sales charge. The value at which Units may be
resold in the Secondary Market or redeemed will be determined on the basis
of the current bid prices of the Bonds without any sales charge. On the
Evaluation Date, the Public Offering Price and the Sponsor's initial
Repurchase Price per Unit (each based on the bid side evaluation of the
Bonds in the Trust) each exceeded the Redemption Price and the Sponsor's
secondary market Repurchase Price per Unit (based upon the current bid
side evaluation of the Bonds in the Trust) by the amounts shown under
"Summary of Essential Information" in Part A of this Prospectus. For this
reason, among others (including fluctuations in the market prices of such
Bonds and the fact that the Public Offering Price includes the applicable
sales charge), the amount realized by a Certificateholder upon any
redemption of Sponsor repurchase of Units may be less than the price paid
for such Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing
the yield to maturity or to an earlier call date (whichever results in a
lower yield) for each Bond in a Trust's portfolio in accordance with
accepted bond practices, which practices take into account not only the
interest payable on the Bond but also the amortization of premiums or
accretion of discounts, if any; (2) calculating the average of the yields
for the Bonds in each Trust's portfolio by weighing each Bond's yield by
the market value of the Bond and by the amount of time remaining to the
date to which the Bond is priced (thus creating an average yield for the
portfolio of each Trust); and (3) reducing the average yield for the
portfolio of each Trust in order to reflect estimated fees and expenses of
that Trust and the maximum sales charge paid by Unitholders. The
resulting Estimated Long Term Return represents a measure of the return to
Unitholders earned over the estimated life of each Trust. The Estimated
Long Term Return as of the day prior to the Evaluation Date is stated for
the Trust under "Summary of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price per Unit.
In contrast to the Estimated Long Term Return, the Estimated Current
Return does not take into account the amortization of premium or accretion
of discount, if any, on the Bonds in the portfolios of each Trust.
Moreover, because interest rates on Bonds purchased at a premium are
generally higher than current interest rates on newly issued bonds of a
similar type with comparable rating, the Estimated Current Return per Unit
may be affected adversely if such Bonds are redeemed prior to their
maturity. On the day prior to the Evaluation Date, the Estimated Net
Annual Interest Income per Unit divided by the Public Offering Price
resulted in the Estimated Current Return stated for each Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each
Trust will vary with changes in the fees and expenses of the Trustee and
the Evaluator applicable to each Trust and with the redemption, maturity,
sale or other disposition of the Bonds in each Trust. The Public Offering
Price will vary with changes in the bid prices of the Bonds. Therefore,
there is no assurance that the present Estimated Current Return or
Estimated Long Term Return will be realized in the future.
A schedule of cash flow projections is available from the
Sponsor upon request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been
selected by the Certificateholder. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed and/or
accompanied by a written instrument or instruments of transfer. Although
no such charge is presently made or contemplated, the Trustee may require
a Certificateholder to pay $2.00 for each Certificate reissued or
transferred and any governmental charge that may be imposed in connection
with each such transfer or interchange. Mutilated, destroyed, stolen or
lost Certificates will be replaced upon delivery of satisfactory indemnity
and payment of expenses incurred.
Interest And Principal Distributions
Interest received by the Trust is credited by the Trustee to
an Interest Account and a deduction is made to reimburse the Trustee
without interest for any amounts previously advanced. Proceeds
representing principal received from the maturity, redemption, sale or
other disposition of the Bonds are credited to a Principal Account.
Distributions to each Certificateholder from the Interest
Account are computed as of the close of business on each Record Date for
the following Payment Date and consist of an amount substantially equal to
one-twelfth, one-half or all of such Certificateholder's pro rata share of
the Estimated Net Annual Interest Income in the Interest Account,
depending upon the applicable plan of distribution. Distributions from
the Principal Account (other than amounts representing failed contracts,
as previously discussed) will be computed as of each semi-annual Record
Date, and will be made to the Certificateholders on or shortly after the
next semi-annual Payment Date. Proceeds representing principal received
from the disposition of any of the Bonds between a Record Date and a
Payment Date which are not used for redemptions of Units will be held in
the Principal Account and not distributed until the second succeeding
semi-annual Payment Date. No distributions will be made to Certificate-
holders electing to participate in the Total Reinvestment Plan. Persons
who purchase Units between a Record Date and a Payment Date will receive
their first distribution on the second Payment Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or
less than the amount credited to the Interest Account as of a given Record
Date. For the purpose of minimizing fluctuations in the distributions
from the Interest Account, the Trustee will advance sufficient funds,
without interest, as may be necessary to provide interest distributions of
approximately equal amounts. All funds in respect of the Bonds received
and held by the Trustee prior to distribution to Certificateholders may be
of benefit to the Trustee and do not bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct
from the Interest Account, and, to the extent funds are not sufficient
therein, from the Principal Account, amounts necessary to pay the expenses
of the Trust (as determined on the basis set forth under "Trust Expenses
and Charges"). The Trustee also may withdraw from said accounts such
amounts, if any, as it deems necessary to establish a reserve for any
applicable taxes or other governmental charges that may be payable out of
the Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any part
of such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Interest and Principal Accounts such amounts as may be
necessary to cover purchases of Replacement Bonds and redemptions of Units
by the Trustee.
The estimated monthly, semi-annual or annual interest
distribution per Unit will initially be in the amount shown under Summary
of Essential Information and will change and may be reduced as Bonds
mature or are redeemed, exchanged or sold, or as expenses of the Trust
fluctuate. No distribution need be made from the Principal Account until
the balance therein is an amount sufficient to distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually,
depending upon the distribution plan applicable to the Unit purchased.
Record Dates are the first day of each month for monthly distributions,
the first day of each June and December for semi-annual distributions and
the first day of each December for annual distributions. Payment Dates
will be the fifteenth day of each month following the respective Record
Dates.
Certificateholders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Every October each Certificateholder may change his
distribution election by notifying the Trustee in writing of such change
between October 1 and November 1 of each year. (Certificateholders
deciding to change their election should contact the Trustee by calling
the number listed on the back cover hereof for information regarding the
procedures that must be followed in connection with this written
notification of the change of election.) Failure to notify the Trustee on
or before November 1 of each year will result in a continuation of the
plan for the following 12 months.
Records
The Trustee shall furnish Certificateholders in connection
with each distribution a statement of the amount of interest, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit. Within a reasonable
time after the end of each calendar year the Trustee will furnish to each
person who at any time during the calendar year was a Certificateholder of
record, a statement showing (a) as to the Interest Account: interest
received (including amounts representing interest received upon any
disposition of Bonds and earned original issue discount, if any), amounts
paid for purchases of Replacement Bonds and redemptions of Units, if any,
deductions for applicable taxes and fees and expenses of the Trust, and
the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing the pro
rata share of each Unit outstanding on the last business day of such
calendar year; (b) as to the Principal Account: the dates of disposition
of any Bonds and the net proceeds received therefrom (including any
unearned original issue discount but excluding any portion representing
accrued interest), deductions for payments of applicable taxes and fees
and expenses of the Trust, amounts paid for purchases of Replacement Bonds
and redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and
as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (c) a list of
the Bonds held and the number of Units outstanding on the last business
day of such calendar year; (d) the Redemption Price per Unit based upon
the last computation thereof made such calendar year; and (e) amounts
actually distributed to Certificateholders during such calendar year from
the Interest and Principal Accounts, separately stated, expressed both as
total dollar amounts representing the pro rata share of each Unit
outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certifi-
cateholders 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 Certificateholders, Certificates issued or
held, a current list of Bonds in the portfolio and a copy of the Trust
Agreement.
TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at
the time of original delivery of the Bonds to the effect that the interest
thereon is exempt from regular federal income tax. Such interest may,
however, be subject to the federal corporate alternative minimum tax and
to state and local taxes. Neither the Sponsor nor the Trustee nor their
respective counsel has made any review of the proceedings relating to the
issuance of the Bonds or the bases for such opinion and express no opinion
as to these matters, and neither the Trustee nor the Sponsor nor their
respective counsel has made an independent examination or verification
that the federal income tax status of the Bonds has not been altered since
the time of the original delivery of those opinions.
The Revenue Reconciliation Act of 1993 ("P.L. 103-66") was
recently enacted. P.L. 103-66 increases maximum marginal income tax rates
for individuals and corporations (generally effective for taxable years
beginning after December 31, 1992), extends the authority to issue certain
categories of tax-exempt bonds (qualified small issue bonds and qualified
mortgage bonds), limits the availability of capital gain treatment for
tax-exempt bonds purchased at a market discount, increases the amount of
Social Security benefits subject to tax (effective for taxable years
beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to
the effect of P.L. 103-66 on an investment in Units.
In rendering the opinion set forth below, counsel has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness
of the facts set forth therein.
In the opinion of Battle Fowler, counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for federal
income tax purposes under the Internal Revenue Code of 1986 (the "Code"),
and income received by the Trust that consists of interest excludable from
federal gross income under the Code will be excludable from the federal
gross income of the Certificateholders of the Trust.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer-
tificateholder will be considered to have received his pro rata share of
Bond interest when it is received by the Trust, and the net income
distributable to Certificateholders that is exempt from federal income tax
when received by the Trust will constitute tax-exempt income when received
by the Certificateholders.
Gain (other than any earned original issue discount) realized on a
sale or redemption of the Bonds or on a sale of a Unit is, however,
includable in gross income for federal income tax purposes, generally as
capital gain, although gain on the disposition of a Bond or a Unit
purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market
discount. (It should be noted in this connection that such gain does not
include any amounts received in respect of accrued interest.) Such gain
may be long or short-term depending on the facts and circumstances.
Capital losses are deductible to the extent of capital gains; in addition,
up to $3,000 of capital losses of non-corporate Certificateholders may be
deducted against ordinary income. Capital assets acquired on or after
January 1, 1988 must be held for more than one year to qualify for long-
term capital gain treatment.
Each Certificateholder will realize taxable gain or loss when the
Trust disposes of a Bond (whether by sale, exchange, redemption or payment
at maturity), as if the Certificateholder had directly disposed of his pro
rata share of such Bond. The gain or loss is measured by the difference
between (i) the tax cost of such pro rata share and (ii) the amount
received therefor. For this purpose, a Certificateholder's per Unit tax
cost for each Bond is determined by allocating the total tax cost of each
Unit among all the Bonds held in the Trust (in accordance with the portion
of the Trust comprised by each Bond). In order to determine the amount of
taxable gain or loss, the Certificateholder's amount received is similarly
allocated at that time. The Certificateholder may exclude from the amount
received any amounts that represent accrued interest or the earned portion
of any original issue discount but may not exclude amounts attributable to
market discount. Thus, when a Bond is disposed of by the Trust at a gain,
taxable gain will equal the difference between (i) the amount received and
(ii) the amount paid plus any original issue discount (limited, in the
case of Bonds issued after June 8, 1980, to the portion earned from the
date of acquisition to the date of disposition). Gain on the disposition
of a Bond purchased at a market discount generally will be treated as
ordinary income, rather than capital gain, to the extent of accrued market
discount. No deduction is allowed for the amortization of bond premium on
tax-exempt bonds such as the Bonds in computing regular federal income
tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis
of a discount bond is increased by the amount of accrued, tax-exempt
original issue discount thus determined. This method of calculation will
produce higher capital gains (or lower losses) to a Certificateholder, as
compared to the results produced by the straight-line method of accounting
for original issue discount, upon an early disposition of a Bond by the
Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable income or loss when a
Unit is sold or redeemed. The amount received is allocated among all the
Bonds in the Trust in the same manner as when the Trust disposes of Bonds
and the Certificateholder may exclude accrued interest and the earned
portion of any original issue discount (but not amounts attributable to
market discount). The return of a Certificateholder's tax cost is
otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross income
for taxpayers whose "modified adjusted gross income" combined with a
portion of their benefits exceeds a base amount. The base amount is
$25,000 for an individual, $32,000 for a married couple filing a joint
return and zero for married persons filing separate returns. Interest on
tax-exempt bonds is to be added to adjusted gross income for purposes of
computing the amount of Social Security benefits that are includable in
gross income and determining whether an individual's income exceeds the
base amount above which a portion of the benefits would be subject to tax.
For taxable years beginning after December 31, 1993, the amount of Social
Security benefits subject to tax will be increased.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount by
which the adjusted current earnings (which will include tax-exempt
interest) of the corporation exceeds the alternative minimum taxable
income (determined without this item). Further, interest on the Bonds is
includable in a 0.12% additional corporate minimum tax imposed by the
Superfund Amendments and Reauthorization Act of 1986 for taxable years
beginning before January 1, 1996. In addition, in certain cases, Subchap-
ter S corporations with accumulated earnings and profits from Subchapter C
years will be subject to a minimum tax on excess "passive investment
income" which includes tax-exempt interest.
Any proceeds received pursuant to the terms of the insurance on the
Bonds that represent maturing interest on defaulted obligations will be
excludable from federal gross income if, and to the same extent that, such
interest would have been so excludable if paid by the issuers of such
defaulted obligations.
The Trust is not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. For a
Certificateholder who is a New York resident, however, a pro rata portion
of all or part of the income of the Trust will be treated as the income of
the Certificateholder under the income tax laws of the State and City of
New York. Similar treatment may apply in other states.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the
income tax laws of any state or political subdivision. In general,
municipal bond interest exempt from federal income tax is taxable income
to residents of the State or City of New York under the tax laws of those
jurisdictions unless the bonds are issued by the State of New York or one
of its political subdivisions or by the Commonwealth of Puerto Rico or one
of its political subdivisions. For corporations doing business in New
York State, interest earned on state and municipal obligations that are
exempt from federal income tax, including obligations of New York State,
its political subdivisions and instrumentalities, must be included in
calculating New York State and New York City entire net income for
purposes of calculating New York State and New York City franchise
(income) tax. The laws of the several states and local taxing authorities
vary with respect to the taxation of such obligations and each Certifi-
cateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.
In the case of Bonds that are industrial revenue bonds
("IRBs") or certain types of private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on
such Bonds is exempt from regular federal income tax. However, interest
on such Bonds will not be exempt from regular federal income tax for any
period during which such Bonds are held by a "substantial user" of the
facilities financed by the proceeds of such Bonds or by a "related person"
thereof within the meaning of the Code. Therefore, interest on any such
Bonds allocable to a Certificateholder who is such a "substantial user" or
"related person" thereof will not be tax-exempt. Furthermore, in the case
of IRBs that qualify for the "small issue" exemption, the "small issue"
exemption will not be available or will be lost if, at any time during the
three-year period beginning on the later of the date the facilities are
placed in service or the date of issue, all outstanding tax-exempt IRBs,
together with a proportionate share of any present issue, of an owner or
principal user (or related person) of the facilities exceeds $40,000,000.
In the case of IRBs issued under the $10,000,000 "small issue" exemption,
interest on such IRBs will become taxable if the face amount of the IRBs
plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result
of other subsequent but unforeseeable events such as prohibited
"arbitrage" activities by the issuer of the Bond or the failure of the
Bond to continue to satisfy the conditions required for the exemption of
interest thereon from regular federal income tax. No investigation has
been made as to the current or future owners or users of the facilities
financed by the Bonds, the amount of such persons' outstanding tax-exempt
IRBs, or the facilities themselves, and no assurance can be given that
future events will not affect the tax-exempt status of the Bonds.
Investors should consult their tax advisors for advice with respect to the
effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for regular federal income tax purposes.
However, such interest is deductible for New York State and New York City
income tax purposes by corporations that are required to include interest
on the Bonds in New York State and New York City entire net income for
purposes of calculating the New York State and New York City franchise
(income) taxes. In addition, under rules used by the Internal Revenue
Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units
may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of Units. Also,
in the case of certain financial institutions that acquire Units, in
general no deduction is allowed for interest expense allocable to the
Units.
From time to time proposals have been introduced before
Congress to restrict or eliminate the federal income tax exemption for
interest on debt obligations similar to the Bonds in the Trust, and it can
be expected that similar proposals may be introduced in the future.
In a 1988 decision (South Carolina v. Baker), the U.S. Supreme
Court held that the federal government may constitutionally require states
to register bonds they issue and subject the interest on such bonds to
federal income tax if not registered, and that there is no constitutional
prohibition against the federal government's taxing the interest earned on
state or other municipal bonds. The Supreme Court decision affirms the
authority of the federal government to regulate and control bonds such as
the Bonds in the Trust and to tax interest on such bonds in the future.
The decision does not, however, affect the current exemption from taxation
of the interest earned on the Bonds in the Trust in accordance with Sec-
tion 103 of the Code.
The opinions of bond counsel or special tax counsel to the
issuing governmental authorities to the effect that interest on the Bonds
is exempt from regular federal income tax may be limited to law existing
at the time the Bonds were issued, and may not apply to the extent that
future changes in law, regulations or interpretations affect such Bonds.
Investors are advised to consult their own tax advisors for advice with
respect to the effect of any legislative changes.
LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intends to
maintain a secondary market for the Units and continuously to offer to
repurchase the Units. The Sponsor's secondary market repurchase price,
after the initial public offering is completed, will be based on the
aggregate bid price of the Bonds in the Trust portfolio, determined by the
Evaluator on a daily basis, and will be the same as the redemption price.
The aggregate bid price is determined by the Evaluator on a daily basis
and completed on the basis set forth under "Trustee Redemption". Certifi-
cateholders who wish to dispose of their Units should inquire of the
Sponsor as to current market prices prior to making a tender for
redemption. The Sponsor may discontinue repurchase of Units if the supply
of Units exceeds demand, or for other business reasons. The date of
repurchase is deemed to be the date on which Certificates representing
Units are physically received in proper form by Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, NY 10167. Units received after 4 P.M., New
York Time, will be deemed to have been repurchased on the next business
day. In the event a market is not maintained for the Units, a Certifi-
cateholder may be able to dispose of Units only by tendering them to the
Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsor, subject to change, to repurchase
units on the basis of a price higher than the bid prices of the bonds in
the trusts. Consequently, depending on the prices actually paid, the
secondary market repurchase price of other trusts may be computed on a
somewhat more favorable basis than the repurchase price offered by the
Sponsor for units of this Trust, although in all bond trusts, the purchase
price of a unit depends primarily on the value of the bonds in the trust
portfolio.
Units purchased by the Sponsor in the secondary market may be
re-offered for sale by the Sponsor at a price based on the aggregate bid
price of the Bonds in the Trust plus the applicable sales charge (see
"Public Offering Price" in Part A) plus net accrued interest. Any Units
that are purchased by the Sponsor in the secondary market also may be
redeemed by the Sponsor if it determines such redemption to be in its best
interest.
The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee
for redemption (see "Trustee Redemption"). Factors which the Sponsor will
consider in making a determination will include the number of Units of all
Trusts which it has in inventory, its estimate of the salability and the
time required to sell such Units and general market conditions. For
example, if in order to meet redemptions of Units the Trustee must dispose
of Bonds, and if such disposition cannot be made by the redemption date
(seven calendar days after tender), the Sponsor may elect to purchase such
Units. Such purchase shall be made by payment to the Certificateholder
not later than the close of business on the redemption date of an amount
equal to the Redemption Price on the date of tender.
Trustee Redemption
Units may also be tendered to the Trustee for redemption at
its corporate trust office as set forth in Part A of this Prospectus, upon
proper delivery of Certificates representing such Units and payment of any
relevant tax. At the present time there are no specific taxes related to
the redemption of Units. No redemption fee will be charged by the Sponsor
or the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates representing Units to be redeemed must be
delivered to the Trustee and must be properly endorsed or accompanied by
proper instruments of transfer with signature guaranteed (or by providing
satisfactory indemnity, as in the case of lost, stolen or mutilated
Certificates). Thus, redemptions of Units cannot be effected until
Certificates representing such Units have been delivered by the person
seeking redemption. (See "Certificates".) Certificateholders must sign
exactly as their names appear on the faces of their Certificates. In
certain instances the Trustee may require additional documents such as,
but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
Within seven calendar days following a tender for redemption,
or, if such seventh day is not a business day, on the first business day
prior thereto, the Certificateholder will be entitled to receive in cash
an amount for each Unit tendered equal to the Redemption Price per Unit
computed as of the Evaluation Time set forth under "Summary of Essential
Information" in Part A on the date of tender. The "date of tender" is
deemed to be the date on which Units are received by the Trustee, except
that with respect to Units received after the close of trading on the New
York Stock Exchange, the date of tender is the next day on which such
Exchange is open for trading, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day.
Accrued interest paid on redemption shall be withdrawn from
the Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be
withdrawn from the Principal Account. The Trustee is empowered to sell
Bonds in order to make funds available for redemptions. Such sales, if
required, could result in a sale of Bonds by the Trustee at a loss. To
the extent Bonds are sold, the size and diversity of the Trust will be
reduced.
The Redemption Price per Unit is the pro rata share of each
Unit in the Trust determined by the Trustee on the basis of (i) the cash
on hand in the Trust or moneys in the process of being collected, (ii) the
value of the Bonds in the Trust based on the bid prices of such Bonds and
(iii) interest accrued thereon, less (a) amounts representing taxes or
other governmental charges payable out of the Trust, (b) the accrued
expenses of the Trust and (c) cash allocated for the distribution to Cer-
tificateholders of record as of the business day prior to the evaluation
being made. The Evaluator may determine the value of the Bonds in the
Trust (1) on the basis of current bid prices of the Bonds obtained from
dealers or brokers who customarily deal in bonds comparable to those held
by the Trust, (2) on the basis of bid prices for bonds comparable to any
Bonds for which bid prices are not available, (3) by determining the value
of the Bonds by appraisal, or (4) by any combination of the above. The
Evaluator will determine the aggregate current bid price evaluation of the
Bonds in the Trust, taking into account the market value of the Bonds
insured under the Bond Insurance Policy, in the manner described as set
forth under "Public Offering--Offering Price". Insurance does not
guarantee the market value of the Bonds or the Units, and while Bond
insurance represents an element of market value in regard to insured
Bonds, its exact effect, if any, on market value cannot be predicted.
The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to purchase a Unit tendered for redemption or
if the Sponsor tenders a Unit for redemption, in lieu of redeeming such
Unit, to sell such Unit in the over-the-counter market for the account of
the tendering Certificateholder at prices which will return to the Cer-
tificateholder an amount in cash, net after deducting brokerage
commissions, transfer taxes and other charges, equal to or in excess of
the Redemption Price for such Unit. The Trustee will pay the net proceeds
of any such sale to the Certificateholder on the day he would otherwise be
entitled to receive payment of the Redemption Price.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per
Unit for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or trading on that
Exchange is restricted or during which (as determined by the Securities
and Exchange Commission) an emergency exists as a result of which disposal
or evaluation of the Bonds is not reasonably practicable, or for such
other periods as the Securities and Exchange Commission may by order
permit. The Trustee and the Sponsor is not liable to any person or in any
way for any loss or damage which may result from any such suspension or
postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual
and annual Certificateholders (except Texas residents*) may elect to have
all interest and principal distributions, if any, with respect to their
Units reinvested either in units of various series of "Insured Municipal
Securities Trust" or "Municipal Securities Trust" which will have been
created shortly before each semi-annual or annual Payment Date (a "Primary
Series") or, if units of a Primary Series are not available, in units of a
previously formed series of the Trust which have been repurchased by the
Sponsor in the secondary market or which constitute a portion of the Units
of the Trust not sold by the Sponsor prior to such Payment Date (a
"Secondary Series") (Primary Series and Secondary Series are hereafter
collectively referred to as "Available Series"). Series of "Municipal
Securities Trustee" do not have insurance. The first interest
distribution to Certificateholders cannot be reinvested unless such
distribution is scheduled for June 15 or December 15 in the case of semi-
annual Certificateholders or December 15 in the case of annual Certifi-
cateholders (each such date being referred to herein as the "Plan
Reinvestment Date").
* Texas residents may elect to participate in the "Total Reinvestment
Plan for Texas Residents" hereinafter described.
<PAGE>
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor
at a price equal to the aggregate offering price per Unit of the bonds in
the Available Series portfolio during the initial offering of the
Available Series or at the aggregate bid price per Unit of the Available
Series if its initial offering has been completed, plus a sales charge
equal to 3.627% of the net amount invested in such bonds or 3-1/2% of the
Reinvestment Price per Plan Unit, plus accrued interest, divided by one
hundred (the "Reinvestment Price per Plan Unit"). All Plan Units will be
sold at this reduced sales charge of 3-1/2% in comparison to the regular
sales charge on primary and secondary market sales of Units in any series
of "Municipal Securities Trust". Participants in the Plan will have the
opportunity to designate, in the Authorization Form for the Plan, the name
of a broker to whom the Sponsor will allocate a sales commission of 1-1/2%
of the Reinvestment Price per Plan Unit, payable out of the 3-1/2% sales
charge. If no such designation is made, the Sponsor will retain the sales
commission.
Under the Plan, the entire amount of a participant's income
and principal distributions will be reinvested. For example, a Certifi-
cateholder who is entitled to receive $130.50 interest income from the
Trust would acquire 13.05 Plan Units assuming that the Reinvestment Price
per Plan Unit, plus accrued interest, approximated $10 (Ten Dollars).
A semi-annual or annual Certificateholder may join the Plan at
the time he invests in Units of the Trust or any time thereafter by
delivering to the Trustee an Authorization Form which is available from
brokers, any Underwriter of the Units or the Sponsor. In order that
distributions may be reinvested on a particular Plan Reinvestment Date,
the Authorization Form must be received by the Trustee not later than the
15th day of the month preceding such Date. Authorization Forms not
received in time for a particular Plan Reinvestment Date will be valid
only for the second succeeding Plan Reinvestment Date. Similarly, a
participant may withdraw from the program at any time by notifying the
Trustee (see below). However, if written confirmation of withdrawal is
not given to the Trustee prior to a particular distribution, the
participant will be deemed to have elected to participate in the Plan with
respect to that particular distribution and his withdrawal would become
effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to
Units purchased in the Trust (and with respect to Plan Units purchased
with the distributions from the Units purchased in the Trust) for each
subsequent distribution so long as the Certificateholder continues to
participate in the Plan. However, if an Available Series should
materially differ from the Trust in the opinion of the Sponsor, the
authorization will be voided and participants will be provided with both a
notice of the material change and a new Authorization Form which would
have to be returned to the Trustee before the Certificateholder would
again be able to participate in the Plan. The Sponsor anticipates that a
material difference which would result in a voided authorization would
include such facts as the inclusion of bonds in the Available Series
portfolio the interest income on which was not exempt from all federal
income tax, or the inclusion of bonds which were not rated "A" or better
by Standard & Poor's Corporation or Moody's Investors Service, Inc. on the
date such bonds were initially deposited in the Available Series
portfolio.
The Sponsor has the option at any time to use units of a
Secondary Series to fulfill the requirements of the Plan in the event
units of a Primary Series are not available either because a Primary
Series is not then in existence or because the registration statement
relating thereto is not declared effective in sufficient time to
distribute final prospectuses to Plan participants (see below). It should
be noted that there is no assurance that the quality and diversification
of the Bonds in any Available Series or the estimated current return
thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered
on or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such
Record Dates are June 1 and December 1 of each year for semi-annual Cer-
tificateholders, and December 1 of each year for annual Certificate-
holders. On each Record Date the Sponsor will send a current Prospectus
relating to the Available Series being offered for the next Plan
Reinvestment Date along with a letter which reminds each participant that
Plan Units are being purchased for him as part of the Plan unless he
notifies the Trustee in writing by that Plan Reinvestment Date that he no
longer wishes to participate in the Plan. In the event a Primary Series
has not been declared effective in sufficient time to distribute a final
Prospectus relating thereto and there is no Secondary Series as to which a
registration statement is currently effective, it is the Sponsor's
intention to suspend the Plan and distribute to each participant his
regular semi-annual or annual distribution. If the Plan is so suspended,
it will resume in effect with the next Plan Reinvestment Date assuming
units of an Available Series are then being offered.
To aid a participant who might desire to withdraw either from
the Plan or from a particular distribution, the Trustee has established a
toll free number (see "Summary of Essential Information" in Part A) for
participants to use for notification of withdrawal, which must be
confirmed in writing prior to the Plan Reinvestment Date. Should the
Trustee be so notified, it will make the appropriate cash disbursement.
Unless the withdrawing participant specifically indicates in his written
confirmation that (a) he wishes to withdraw from the Plan for that
particular distribution only, or (b) he wishes to withdraw from the Plan
for less than all units of each series of "Municipal Securities Trust" or
"Insured Municipal Securities Trust" which he might then own (and
specifically identifies which series are to continue in the Plan), he will
be deemed to have withdrawn completely from the Plan in all respects.
Once a participant withdraws completely, he will only be allowed to again
participate in the Plan by submitting a new Authorization Form. A sale or
redemption of a portion of a participant's Plan Units will not constitute
a withdrawal from the Plan with respect to the remaining Plan Units owned
by such participant.
Unless a Certificateholder notifies the Trustee in writing to
the contrary, each semi-annual and annual Certificateholder who has
acquired Plan Units will be deemed to have elected the semi-annual and
annual plan of distribution, respectively, and to participate in the Plan
with respect to distributions made in connection with such Plan Units.
(Should the Available Series from which Plan Units are purchased for the
account of an annual Certificateholder fail to have an annual distribution
plan, such Certificateholder will be deemed to have elected the semi-
annual plan of distribution, and to participate in the Plan with respect
to distributions made, in connection with such Plan Units.) A participant
who subsequently desires to have distributions made with respect to Plan
Units delivered to him in cash may withdraw from the Plan with respect to
such Plan Units and remain in the Plan with respect to units acquired
other than through the Plan. Assuming a participant has his distributions
made with respect to Plan Units reinvested, all such distributions will be
accumulated with distributions generated from the Units of the Trust used
to purchase such additional Plan Units. However, distributions related to
units in other series of "Municipal Securities Trust" will not be
accumulated with the foregoing distributions for Plan purchases. Thus, if
a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan),
distributions with respect thereto will not be aggregated for purchases
under the Plan.
Although not obligated to do so, the Sponsor intends to
maintain a market for the Plan Units and continuously to offer to purchase
Plan Units at prices based upon the aggregate offering price of the Bonds
in the Available Series portfolio during the initial offering of the
Available Series, or at the aggregate bid price of the Bonds of the
Available Series after its initial offering has been completed. The
Sponsor may discontinue such purchases at any time. The aggregate bid
price of the underlying bonds may be expected to be less than the
aggregate offering price. In the event that a market is not maintained
for Plan Units, a participant desiring to dispose of his Plan Units may be
able to do so only by tendering such Plan Units to the Trustee for
redemption at the Redemption Price of the full units in the Available
Series corresponding to such Plan Units, which is based upon the aggregate
bid price of the underlying bonds as described in the "Insured Municipal
Securities Trust" Prospectus for the Available Series in question. If a
participant wishes to dispose of his Plan Units, he should inquire of the
Sponsor as to current market prices prior to making a tender for
redemption to the Trustee.
Any participant may tender his Plan Units for redemption to
the Available Series Trust. Participants may redeem Plan Units by making
a written request to the Trustee, at the address listed in the "Summary of
Essential Information" in Part A, on the Redemption Form supplied by the
Trustee. The redemption price per Plan Unit will be determined as set
forth in the "Insured Municipal Securities Trust" Prospectus of the
Available Series from which such Plan Unit was purchased following receipt
of the request and adjusted to reflect the fact that it relates to a Plan
Unit. There is no charge for the redemption of Plan Units.
The Trust Agreement requires that the Trustee notify the
Sponsor of any tender of Plan Units for redemption. So long as the
Sponsor is maintaining a bid in the secondary market, the Sponsor will
purchase any Plan Units tendered to the Trustee for redemption by making
payment therefor to the Certificateholder in an amount not less than the
redemption price for such Plan Units on the date of tender not later than
the day on which such Plan Units otherwise would have been redeemed by the
Trustee.
Participants in the Plan will not receive individual
certificates for their Plan Units unless the amount of Plan Units
accumulated represents $1,000 principal amount of bonds underlying such
Units and, in such case, a written request for certificates is made to the
Trustee. All Plan Units will be accounted for by the Trustee on a book
entry system. Each time Plan Units are purchased under the Plan, a
participant will receive a confirmation stating his cost, number of Units
purchased and estimated current return. Questions regarding a
participant's statements should be directed to the Trustee by calling the
Trustee at the number set forth under "Summary of Essential Information"
in Part A of this Prospectus.
All expenses relating to the operation of the Plan will be
borne by the Sponsor. The Sponsor and the Trustee reserve the right to
suspend, modify or terminate the Plan at any time for any reason,
including the right to suspend the Plan if the Sponsor is unable or
unwilling to establish a Primary Series or is unable to provide Secondary
Series Units. All participants will receive notice of any such
suspension, modification or termination.
Total Reinvestment Plan For Texas Residents
Except as specifically provided under this section, and unless
the context otherwise requires, all provisions and definitions contained
under the heading "Total Reinvestment Plan" shall be applicable to the
Total Reinvestment Plan for Texas Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are
residents of Texas have the option prior to any semi-annual or annual
distribution to affirmatively elect to reinvest that distribution,
including both interest and principal, if any, in an Available Series.
A resident of Texas who is a semi-annual or annual Certifi-
cateholder may join the Texas Plan for any particular semi-annual or
annual distribution by delivering to the Trustee an Authorization Form For
Texas Residents ("Texas Authorization Form") specifically mentioning the
date of the particular semi-annual or annual distribution he wishes to
reinvest. On or about each semi-annual or annual Record Date, Texas
Authorization Forms shall be sent by the Trustee to every Certificate-
holder who, according to the Trustee's records, is a resident of Texas.
In the event that the Sponsor suspends the Plan or the Texas Plan no Texas
Authorization Forms shall be sent. In order that distributions may be
reinvested on a particular Plan Reinvestment Date, the Texas Authorization
Form must be received by the Trustee on or before such Date. Texas
Authorization Forms not received in time for the Plan Reinvestment Date
will be deemed void. A participant who delivers a Texas Authorization
Form to the Trustee may thereafter withdraw said authorization by
notifying the Trustee at its toll free telephone number prior to a Plan
Reinvestment Date. Such notification of withdrawal must be confirmed in
writing prior to the Plan Reinvestment Date. Under no circumstances shall
a Texas Authorization Form be provided or accepted by the Trustee which
provides for the reinvestment of distributions for more than one Plan
Reinvestment Date.
On or about each semi-annual and annual Record Date, the
Sponsor will send a current Prospectus relating to the Available Series
being offered on the next Plan Reinvestment Date along with a letter
incorporating a Texas Authorization Form which specifies the funds
available for reinvestment, reminds each participant that no Plan Units
will be purchased for him unless the Texas Authorization Form is received
by the Trustee on or before that particular Plan Reinvestment Date, and
states that the Texas Authorization Form is valid only for that particular
semi-annual or annual distribution. If the Available Series should
materially differ from the Trust, the participant will be provided with a
notice of the material change and a new Texas Authorization Form which
would have to be returned to the Trustee before the Certificateholder
would again be able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan
of distribution, respectively, with respect to such Units, but such Cer-
tificateholder will not be deemed to participate in the Plan for any
particular distribution unless and until he delivers to the Trustee a
Texas Authorization Form pertaining to those Plan Units. (Should the
Available Series from which Plan Units are purchased for the account of an
annual Certificateholder fail to have an annual distribution plan, such
Certificateholder will be deemed to have elected the semi-annual plan of
distribution, and to participate in the Plan with respect to distributions
made in connection with such Plan Units.)
TRUST ADMINISTRATION
Portfolio Supervision
Except for the purchase of Replacement Bonds or as discussed
herein, the acquisition of any Bonds for the Trust other than Bonds
initially deposited by the Sponsor is prohibited. Although it is the
Sponsor's and Trustee's intention not to dispose of Bonds insured pursuant
to the Bond Insurance in the event of default, nevertheless, the Sponsor
may direct the Trustee to dispose of Bonds upon (i) default in payment of
principal or interest on such Bonds, (ii) institution of certain legal
proceedings with respect to the issuers of such Bonds, (iii) default under
other documents adversely affecting debt service on such Bonds,
(iv) default in payment of principal or interest on other obligations of
the same issuer or guarantor, (v) with respect to revenue Bonds, decline
in revenues and income of any facility or project below the estimated
levels calculated by proper officials charged with the construction or
operation of such facility or project or (vi) decline in price or the
occurrence of other market or credit factors that in the opinion of the
Sponsor would make the retention of such Bonds in the Trust detrimental to
the interests of the Certificateholders. If a default in the payment of
principal or interest on any of the Bonds occurs and if the Sponsor fails
to instruct the Trustee to sell or hold such Bonds, the Trust Agreement
provides that the Trustee may sell such Bonds. The Trustee shall not be
liable for any depreciation or loss by reason of any sale of bonds or by
reason of the failure of the Sponsor to give directions to the Trustee.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing
of any of the Bonds. Any bonds received in exchange or substitution will
be held by the Trustee subject to the terms and conditions of the
Agreement to the same extent as the Bonds originally deposited. Within
five days after such deposit, notice of such exchange and deposit shall be
given by the Trustee to each Certificateholder registered on the books of
the Trustee, including an identification of the Bonds eliminated and the
Bonds substituted therefor.
Trust Agreement, Amendment And Termination
The Trust Agreement may be amended by the Trustee, the Sponsor
and the Evaluator without the consent of any of the Certificateholders:
(1) to cure any ambiguity or to correct or supplement any provision which
may be defective or inconsistent; (2) to change any provision thereof as
may be required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to
matters arising thereunder as shall not adversely affect the interests of
the Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the
consent of the holders of Certificates evidencing 66-2/3% of the Units
then outstanding for the purpose of modifying the rights of Certificate-
holders; provided that no such amendment or waiver shall reduce any Cer-
tificateholder's interest in the Trust without his consent or reduce the
percentage of Units required to consent to any such amendment or waiver
without the consent of the holders of all Certificates. The Trust
Agreement may not be amended, without the consent of the holders of all
Certificates then outstanding, to increase the number of Units issuable or
to permit the acquisition of any bonds in addition to or in substitution
for those initially deposited in the Trust, except in accordance with the
provisions of the Trust Agreement. The Trustee shall promptly notify Cer-
tificateholders, in writing, of the substance of any such amendment.
The Trust Agreement provides that the Trust shall terminate
upon the maturity, redemption or other disposition, as the case may be, of
the last of the Bonds held in the Trust but in no event is it to continue
beyond the end of the calendar year preceding the fiftieth anniversary of
the execution of the Trust Agreement. If the value of the Trust shall be
less than the minimum amount set forth under "Summary of Essential
Information" in Part A, the Trustee may, in its discretion, and shall when
so directed by the Sponsor, terminate the Trust. The Trust may also be
terminated at any time with the consent of the holders of Certificates
representing 100% of the Units then outstanding. In the event of
termination, written notice thereof will be sent by the Trustee to all
Certificateholders. Within a reasonable period after termination, the
Trustee must sell any Bond remaining in the Trust, and, after paying all
expenses and charges incurred by the Trust, distribute to each Certifi-
cateholder, upon surrender for cancellation of his Certificate for Units,
his pro rata share of the Interest and Principal Accounts.
The Sponsor
The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation,
is engaged in the underwriting, investment banking and brokerage business
and is a member of the National Association of Securities Dealers, Inc.
and all principal securities and commodities exchanges, including the New
York Stock Exchange, the American Stock Exchange, the Midwest Stock
Exchange and the Pacific Stock Exchange. Bear Stearns maintains its
principal business offices at 245 Park Avenue, New York, New York 10167
and, since its reorganization from a partnership to a corporation in
October, 1985 has been a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Bear Stearns, through its predecessor entities, has been
engaged in the investment banking and brokerage business since 1923. Bear
Stearns is the sponsor for numerous series of unit investment trusts,
including: A Corporate Trust, Series 1 (and Subsequent Series); New York
Municipal Trust, Series 1 (and Subsequent Series), Discount and Zero
Coupon Fund, 1st Series (and Subsequent Series); Municipal Securities
Trust, Series 1 (and Subsequent Series), 1st Discount Series (and
Subsequent Series); High Income Series 1 (and Subsequent Series); Multi-
State Series 1 (and Subsequent Series); Insured Municipal Securities
Trust, Series 1-4 (Multiplier Portfolio), Series 1 (and Subsequent
Series), 5th Discount Series (and Subsequent Series), Navigator Series
(and Subsequent Series); Mortgage Securities Trust, CMO Series 1 (and
Subsequent Series) and Equity Securities Trust, Series 1, Signature
Series, Gabelli Communications Income Trust (and Subsequent Series). The
information included herein is only for the purpose of informing investors
as to the financial responsibility of the Sponsor and its ability to carry
out its contractual obligations.
The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be
under no liability to Certificateholders for taking any action, or
refraining from taking any action, in good faith pursuant to the Trust
Agreement, or for errors in judgment except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The Sponsor may resign at any time by delivering to the
Trustee an instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any
of its duties under the Trust Agreement or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, then
the Trustee may either (a) appoint a successor Sponsor; (b) terminate the
Trust Agreement and liquidate the Trust; or (c) continue to act as Trustee
without terminating the Trust Agreement. Any successor Sponsor appointed
by the Trustee shall be satisfactory to the Trustee and, at the time of
appointment, shall have a net worth of at least $1,000,000.
The Trustee
For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is United States Trust
Company of New York, with its principal place of business at 45 Wall
Street, New York, New York 10005 and a corporate trust office at 770
Broadway, New York, New York 10003. United States Trust Company of New
York has, since its establishment in 1853, engaged primarily in the
management of trust and agency accounts for individuals and corporations.
The Trustee is a member of the New York Clearing House Association and is
subject to supervision and examination by the Superintendent of Banks of
the State of New York, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System.
For certain other Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is The Bank of New York, a
trust company organized under the laws of New York, having its offices at
101 Barclay Street, New York, New York 10286 (1-800-431-8002). The Bank
of New York is subject to supervision and examination by the
Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by
the Federal Deposit Insurance Corporation to the extent permitted by law.
The Trustee must be a banking corporation organized under the laws of the
United States or any state which is authorized under such laws to exercise
corporate trust powers and must have at all times an aggregate capital,
surplus and undivided profits of not less than $5,000,000. The duties of
the Trustee are primarily ministerial in nature. The Trustee did not
participate in the selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for
taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, bonds or Certificates in accordance with the
Trust Agreement, except in cases of its own willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and
duties; provided, however, that the Trustee shall not in any event be
liable or responsible for any evaluation made by the Evaluator. In
addition, the Trustee shall not be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or the Trust
which it may be required to pay under current or future law of the United
States or any other taxing authority having jurisdiction. The Trustee
shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of
the Trustee under the Trust Agreement, reference is made to the material
set forth under "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In
addition, if the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Trust
Agreement. Notice of such removal and appointment shall be mailed to each
Certificateholder by the Sponsor. If upon resignation of the Trustee no
successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court
of competent jurisdiction for the appointment of a successor. The
resignation or removal of the Trustee becomes effective only when the
successor Trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor Trustee. Upon execution of a
written acceptance of such appointment by such successor Trustee, all the
rights, powers, duties and obligations of the original Trustee shall vest
in the successor.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Trustee shall be a party, shall be the
successor Trustee. The Trustee must always be a banking corporation
organized under the laws of the United States or any State and have at all
times an aggregate capital, surplus and undivided profits of not less than
$2,500,000.
The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a division of
Kenny Information Systems, Inc. with main offices located at 65 Broadway,
New York, New York 10006. The Evaluator is a wholly-owned subsidiary of
McGraw-Hill Inc. The Evaluator is a registered investment advisor and
also provides financial information services.
The Trustee, the Sponsor and the Certificateholders may rely
on any evaluation furnished by the Evaluator and shall have no
responsibility for the accuracy thereof. Determinations by the Evaluator
under the Trust Agreement shall be made in good faith upon the basis of
the best information available to it, provided, however, that the
Evaluator shall be under no liability to the Trustee, the Sponsor or Cer-
tificateholders for errors in judgment, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator.
If upon resignation of the Evaluator no successor has accepted appointment
within thirty days after notice of resignation, the Evaluator may apply to
a court of competent jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne all the
expenses of creating and establishing the Trust, including the cost of
initial preparation and execution of the Trust Agreement, registration of
the Trust and the Units under the Investment Company Act of 1940 and the
Securities Act of 1933, the premiums on the Sponsor-Insured Bonds, initial
preparation and printing of the Certificates, the fees of the Evaluator
during the initial public offering, legal expenses, advertising and
selling expenses, expenses of the Trustee including, but not limited to,
an amount equal to interest accrued on certain "when issued" bonds since
the date of settlement for the Units, initial fees and other out-of-pocket
expenses.
The Sponsor will not charge the Trust a fee for its services
as such. (See "Sponsor's Profits".)
The Sponsor will receive for portfolio supervisory services to
the Trust an Annual Fee in the amount set forth under "Summary of
Essential Information" in Part A of this Prospectus. The Sponsor's fee
may exceed the actual cost of providing portfolio supervisory services for
this Trust, but at no time will the total amount received for portfolio
supervisory services rendered to all series of the Municipal Securities
Trust in any calendar year exceed the aggregate cost to the Sponsor of
supplying such services in such year. (See "Portfolio Supervision".)
The Trustee will receive for its ordinary recurring services
to the Trust an annual fee in the amount set forth under "Summary of
Essential Information" in Part A of this Prospectus. For a discussion of
the services performed by the Trustee pursuant to its obligations under
the Trust Agreement, see "Trust Administration" and "Rights of Certifi-
cateholders".
The Evaluator will receive, for each daily evaluation of the
Bonds in the Trust after the initial public offering is completed, a fee
in the amount set forth under "Summary of Essential Information" in Part A
of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of
the Record Date from the Interest Account to the extent funds are
available and then from the Principal Account. Both fees may be increased
without approval of the Certificateholders by amounts not exceeding
proportionate increases in consumer prices for services as measured by the
United States Department of Labor's Consumer Price Index entitled "All
Services Less Rent".
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel fees) of the Trustee incurred and
advances made in connection with its activities under the Trust Agreement,
including the expenses and costs of any action undertaken by the Trustee
to protect the Trust and the rights and interests of the Certificate-
holders; fees of the Trustee for any extraordinary services performed
under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without gross negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its
acceptance or administration of the Trust; indemnification of the Sponsor
for any losses, liabilities and expenses incurred in acting as Sponsor of
the Trust without gross negligence, bad faith or willful misconduct on its
part; and all taxes and other governmental charges imposed upon the Bonds
or any part of the Trust (no such taxes or charges are being levied, made
or, to the knowledge of the Sponsor, contemplated). The above expenses,
including the Trustee's fees, when paid by or owing to the Trustee are
secured by a first lien on the Trust. In addition, the Trustee is
empowered to sell Bonds in order to make funds available to pay all
expenses.
The accounts of the Trust shall be audited not less than
annually by independent public accountants selected by the Sponsor. So
long as the Sponsor maintains a secondary market, the Sponsor will bear
any audit expense which exceeds 50 cents per Unit. Certificateholders
covered by the audit during the year may receive a copy of the audited
financial upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their
Units of these Trusts for Units of one or more of any available series of
Insured Municipal Securities Trust, Municipal Securities Trust, New York
Municipal Trust, Mortgage Securities Trust, A Corporate Trust or Equity
Securities Trust (upon receipt by the Equity Securities Trust of an
appropriate exemptive order from the Securities & Exchange Commission)
(the "Exchange Trusts") at a reduced sales charge as set forth below.
Under the Exchange Privilege, the Sponsor's repurchase price of the Units
being surrendered, and only after the initial offering period has been
completed, will be based on the aggregate bid price of the Bonds in the
particular Trust portfolio. Units in an Exchange Trust then will be sold
to the Certificateholder at a price based on the aggregate offer price of
the Bonds in the Exchange Trust portfolio (or for Units of Equity
Securities Trust, based on the market value of the underlying securities
in the Equity Trust portfolio) during the initial public offering period
of the Exchange Trust; or, based on the aggregate bid price of the Bonds
in the Exchange Trust portfolio if its initial public offering has been
completed, plus accrued interest (or for Units of Equity Securities Trust,
based on the market value of the underlying securities in the Equity Trust
portfolio) and a reduced sales charge as set forth below.
Except for unitholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of
Trust, the sales charge applicable to the purchase of units of an Exchange
Trust shall be $15 per unit (or per 1,000 units for the Mortgage
Securities Trust or per 100 Units for the Equity Securities Trust)
(approximately 1.5% of the price of each Exchange Trust unit (or 1,000
Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust)). For unitholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of
Trust, the sales charge applicable to the purchase of units of an Exchange
Trust shall be the greater of (i) $15 per unit (or per 1,000 Units for the
Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust), or (ii) an amount which when coupled with the sales charge paid by
the unitholder upon his original purchase of Units of the Trust at least
equals the sales charge applicable in the direct purchase of units of an
Exchange Trust. The Exchange Privilege is subject to the following
conditions:
(1) The Sponsor must be maintaining a secondary market in
both the Units of the Trust held by the Certificateholder and the
Units of the available Exchange Trust. While the Sponsor has
indicated its intention to maintain a market in the Units of all
Trusts sponsored by it, the Sponsor is under no obligation to
continue to maintain a secondary market and therefore there is no
assurance that the Exchange Privilege will be available to a
Certificateholder at any specific time in the future. At the time
of the Certificateholder's election to participate in the Exchange
Privilege, there also must be Units of the Exchange Trust available
for sale, either under the initial primary distribution or in the
Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any
excess proceeds from the Units surrendered for exchange will be
remitted and the selling Certificateholder will not be permitted to
advance any new funds in order to complete an exchange. Units of
the Mortgage Securities Trust may only be acquired in blocks of
1,000 Units. Units of the Equity Securities Trust may only be
acquired in blocks of 100 Units.
(3) The Sponsor reserves the right to suspend, modify or
terminate the Exchange Privilege. The Sponsor will provide
unitholders of the Trust with 60 days' prior written notice of any
termination or material amendment to the Exchange Privilege,
provided that, no notice need be given if (i) the only material
effect of an amendment is to reduce or eliminate the sales charge
payable at the time of the exchange, to add one or more series of
the Trust eligible for the Exchange Privilege or to delete a series
which has been terminated from eligibility for the Exchange
Privilege, (ii) there is a suspension of the redemption of units of
an Exchange Trust under Section 22(e) of the Investment Company Act
of 1940, or (iii) an Exchange Trust temporarily delays or ceases the
sale of its units because it is unable to invest amounts effectively
in accordance with its investment objectives, policies and
restrictions. During the 60 day notice period prior to the
termination or material amendment of the Exchange Privilege
described above, the Sponsor will continue to maintain a secondary
market in the units of all Exchange Trusts that could be acquired by
the affected unitholders. Unitholders may, during this 60 day
period, exercise the Exchange Privilege in accordance with its terms
then in effect. In the event the Exchange Privilege is not
available to a Certificateholder at the time he wishes to exercise
it, the Certificateholder will immediately be notified and no action
will be taken with respect to his Units without further instructions
from the Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If
Units of a designated, outstanding series of an Exchange Trust are at the
time available for sale and such Units may lawfully be sold in the state
in which the Certificateholder is a resident, the Certificateholder will
be provided with a current prospectus or prospectuses relating to each
Exchange Trust in which he indicates an interest. He may then select the
Trust or Trusts into which he desires to invest the proceeds from his sale
of Units. The exchange transaction will operate in a manner essentially
identical to a secondary market transaction except that units may be
purchased at a reduced sales charge.
Example: Assume that after the initial public offering has
been completed, a Certificateholder has five units of a Trust with a
current value of $700 per unit which he has held for more than 5 months
and the Certificateholder wishes to exchange the proceeds for units of a
secondary market Exchange Trust with a current price of $725 per unit.
The proceeds from the Certificateholder's original units will aggregate
$3,500. Since only whole units of an Exchange Trust may be purchased
under the Exchange Privilege, the Certificateholder would be able to
acquire four units (or 4,000 Units of the Mortgage Securities Trust or 400
Units of the Equity Securities Trust) for a total cost of $2,960 ($2,900
for unit and $60 for the sales charge). The remaining $540 would be
remitted to the Certificateholder in cash. If the Certificateholder
acquired the same number of units at the same time in a regular secondary
market transaction, the price would have been $3,068.80 ($2,900 for units
and $168.80 for the sales charge, assuming a 5 1/2% sales charge times the
public offering price).
The Conversion Offer
Unit owners of any registered unit investment trust for which
there is no active secondary market in the units of such trust (a
"Redemption Trust") may elect to redeem such units and apply the proceeds
of the redemption to the purchase of available Units of one or more series
of A Corporate Trust, Municipal Securities Trust, Insured Municipal
Securities Trust, Mortgage Securities Trust, New York Municipal Trust or
Equity Securities Trust (upon receipt by the Equity Securities Trust of an
appropriate exemptive order from the Securities and Exchange Commission)
sponsored by Bear, Stearns & Co. Inc. or the Sponsor (the "Conversion
Trusts") at the Public Offering Price for units of the Conversion Trust
based on a reduced sales charge as set forth below. Under the Conversion
Offer, units of the Redemption Trust must be tendered to the trustee of
such trust for redemption at the redemption price, which is based upon the
aggregate bid side evaluation of the underlying bonds in such trust and is
generally about 1-1.2% to 2% lower than the offering price for such bonds
(or for Units of Equity Securities Trust, based on the market value of the
underlying securities in the Equity Trust portfolio). The purchase price
of the Units will be based on the aggregate offer price of the Bonds in
the Conversion Trust portfolio (or for Units of Equity Securities Trust,
based on the market value of the underlying securities in the Equity Trust
portfolio) during the public offering of the Conversion Trust; or, based
on the aggregate bid price of the underlying bonds if the initial public
offering of the Conversion Trust has been completed, plus accrued interest
(or for Units of Equity Securities Trust, based on the market value of the
underlying securities in the Equity Trust portfolio) and a sales charge as
set forth below.
Except for unitholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of a
Redemption Trust, the sales charge applicable to the purchase of Units of
the Conversion Trust shall be $15 per Unit (or per 1,000 Units for the
Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust). For unitholders who wish to exercise the Conversion Offer within
the first five months of their purchase of units of a Redemption Trust,
the sales charge applicable to the purchase of Units of a Conversion Trust
shall be the greater of (i) $15 per Unit (or per 1,000 Units for the
Mortgage Securities Trust or per 100 Units for the Equity Securities
Trust) or (ii) an amount which when coupled with the sales charge paid by
the unitholder upon his original purchase of units of the Redemption Trust
at least equals the sales charge applicable in the direct purchase of
Units of a Conversion Trust. The Conversion Offer is subject to the
following limitations:
(1) The Conversion Offer is limited only to unit owners of
any Redemption Trust, defined as a unit investment trust for which
there is no active secondary market at the time the
Certificateholder elects to participate in the Conversion Offer. At
the time of the unit owner's election to participate in the
Conversion Offer, there also must be available units of a Conversion
Trust, either under a primary distribution or in the Sponsor's
secondary market.
(2) Exchanges under the Conversion Offer will be effected in
whole units only. Unit owners will not be permitted to advance any
new funds in order to complete an exchange under the Conversion
Offer. Any excess proceeds from units being redeemed will be
returned to the unit owner. Units of the Mortgage Securities Trust
may only be acquired in blocks of 1,000 Units. Units of the Equity
Securities Trust may only be acquired in blocks of 100 Units.
(3) The Sponsor reserves the right to modify, suspend or
terminate the Conversion Offer at any time without notice to unit
owners of Redemption Trusts. In the event the Conversion Offer is
not available to a unit owner at the time he wishes to exercise it,
the unit owner will be notified immediately and no action will be
taken with respect to his units without further instruction from the
unit owner. The Sponsor also reserves the right to raise the sales
charge based on actual increases in the Sponsor's costs and expenses
in connection with administering the program, up to a maximum sales
charge of $20 per unit (or per 1,000 units for the Mortgage
Securities Trust or per 100 units for the Equity Securities Trust).
To exercise the Conversion Offer, a unit owner of a Redemption
Trust should notify his retail broker of his desire to redeem his
Redemption Trust Units and use the proceeds from the redemption to
purchase Units of one or more of the Conversion Trusts. If Units of a
designated, outstanding series of a Conversion Trust are at that time
available for sale and if such Units may lawfully be sold in the state in
which the unit owner is a resident, the unit owner will be provided with a
current prospectus or prospectuses relating to each Conversion Trust in
which he indicates an interest. He then may select the Trust or Trusts
into which he decides to invest the proceeds from the sale of his Units.
The transaction will be handled entirely through the unit owner's retail
broker. The retail broker must tender the units to the trustee of the
Redemption Trust for redemption and then apply the proceeds to the
redemption toward the purchase of units of a Conversion Trust at a price
based on the aggregate offer or bid side evaluation per Unit of the
Conversion Trust, depending on which price is applicable, plus accrued
interest and the applicable sales charge. The certificates must be
surrendered to the broker at the time the redemption order is placed and
the broker must specify to the Sponsor that the purchase of Conversion
Trust Units is being made pursuant to the Conversion Offer. The unit
owner's broker will be entitled to retain $5 of the applicable sales
charge.
Example: Assume a unit owner has five units of a Redemption
Trust which has held for more than 5 months with a current redemption
price of $675 per unit based on the aggregate bid price of the underlying
bonds and the unit owner wishes to participate in the Conversion Offer and
exchange the proceeds for units of a secondary market Conversion Trust
with a current price of $750 per Unit. The proceeds from the unit owner's
redemption of units will aggregate $3,375. Since only whole units of a
Redemption Trust may be purchased under the Conversion Offer, the unit
owner will be able to acquire four units of the Conversion Trust (or 4,000
Units of the Mortgage Securities Trust or 400 Units of the Equity
Securities Trust) for a total cost of $2,860 ($2,800 for units and $60 for
the sales charge). The remaining $515 would be remitted to the unit owner
in cash. If the unit owner acquired the same number of Conversion Trust
units at the same time in a regular secondary market transaction, the
price would have been $2,962.96 ($2,800 for units and $162.96 sales
charge, assuming a 5 1/2% sales charge times the public offering price).
Description of the Exchange Trusts and the Conversion Trusts
A Corporate Trust may be an appropriate investment vehicle for
an investor who is more interested in a higher current return on his
investment (although taxable) than a tax-exempt return (resulting from the
fact that the current return from taxable fixed income securities is
normally higher than that available from tax-exempt fixed income
securities). Municipal Securities Trust and New York Municipal Trust may
be appropriate investment vehicles for an investor who is more interested
in tax-exempt income. The interest income from New York Municipal Trust
is, in general, also exempt from New York State and local New York income
taxes, while the interest income from Municipal Securities Trust is
subject to applicable New York State and local New York taxes, except for
that portion of the income which is attributable to New York obligations
in the Trust portfolio, if any. The interest income from each State Trust
of the Municipal Securities Trust, Multi-State Series is, in general,
exempt from state and local taxes when held by residents of the state
where the issuers of bonds in such State Trusts are located. The Insured
Municipal Securities Trust combines the advantages of providing interest
income free from regular federal income tax under existing law with the
added safety of irrevocable insurance on the underlying obligations.
Insured Navigator Series further combines the advantages of providing
interest income free from regular federal income tax and state and local
taxes when held by residents of the state where issuers of bonds in such
state trusts are located with the added safety of irrevocable insurance on
the underlying obligations. Mortgage Securities Trust offers an
investment vehicle for investors who are interested in obtaining safety of
capital and a high level of current distribution of interest income
through investment in a fixed portfolio of collateralized mortgage
obligations. Equity Securities Trust offers investors an opportunity to
achieve capital appreciation together with a high level of current income.
Tax Consequences of the Exchange Privilege and the Conversion Offer
A surrender of Units pursuant to the Exchange Privilege or the
Conversion Offer will constitute a "taxable event" to the Certificate-
holder under the Code. The Certificateholder will realize a tax gain or
loss that will be of a long- or short-term capital or ordinary income
nature depending on the length of time the Units have been held and other
factors. A Certificateholder's tax basis in the Units acquired pursuant
to the Exchange Privilege or Conversion Offer will be equal to the
purchase price of such Units. Investors should consult their own tax
advisors as to the tax consequences to them of exchanging or redeeming
units and participating in the Exchange Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions
The legality of the Units offered hereby and certain matters
relating to federal tax law have been passed upon by Messrs. Battle
Fowler, 280 Park Avenue, New York, New York 10017 as counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York,
New York 10005 have acted as counsel for United States Trust Company of
New York. On the initial date of deposit, Messrs. Booth & Baron, 122 East
42nd Street, New York, New York 10168 acted as counsel for The Bank of New
York.
Independent Auditors
The financial statements of the Trust included in Part A of
this Prospectus as of the dates set forth in Part A, have been examined by
KPMG Peat Marwick, independent certified public accountants, for the
periods indicated in its reports appearing herein. The financial
statements examined by KPMG Peat Marwick have been so included in reliance
on its report given upon the authority of said firm as experts in
accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Corporation
A brief description of the applicable Standard & Poor's
Corporation rating symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment of creditworthiness may take
into consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's from
other sources it considers reliable. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of,
such information.
* As described by the rating agencies.
<PAGE>
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II. Nature of and provisions of the obligation.
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 principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and
they differ from AAA issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in the A
category.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings (Prov.) following a rating indicates the
rating is provisional, which assumes the successful completion of the
project being financed by the issuance of the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion,
makes no comment on the likelihood of, or the risk of default upon failure
of, such completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's Investors
Service, Inc. rating symbols and their meanings are as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of the Baa-rated bonds is more
sensitive to changes in economic circumstances. Aside from occasional
speculative factors and the aforementioned economic circumstances applying
to some bonds of this Class, Baa market valuations move in parallel with
Aaa, Aa and A obligations during periods of economic normalcy, except in
instances of oversupply.
Those bonds in the A and Baa group which Moody's believes
possess the strongest investment attributes are designated by the symbol
A 1 and Baa 1. Other A bonds comprise the balance of the group. These
rankings (1) designate the bonds which offer the maximum in security
within their quality group, (2) designate bonds which can be bought for
possible upgrading in quality and (3) additionally afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the marketplace.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Con-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are debt obligations secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
DESCRIPTION OF RATING*
A Standard & Poor's Corporation's rating on the units of an
investment trust (hereinafter referred to collectively as "units" and
"fund") is a current assessment of creditworthiness with respect to the
investments held by such fund. This assessment takes into consideration
the financial capacity of the issuers and of any guarantors, insurers,
lessees, or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which fund expenses or
portfolio asset sales for less than the fund's purchase price will reduce
payment to the unit holder of the interest and principal required to be
paid on the portfolio assets. In addition, the rating is not a
recommendation to purchase, sell, or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a
particular investor.
* As described by Standard & Poor's Corporation.
<PAGE>
Funds rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard &
Poor's, credit characteristics comparable to assets that are rated "AAA",
or certain short-term investments. Standard & Poor's defines its AAA
rating for such assets as the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
very strong.
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
SERIES 1 - 4 (MULTIPLIER PORTFOLIO)
SERIES 1 - 2 AND 1ST - 8TH DISCOUNT SERIES
==========================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____
units ___ Discount Series/Series __________.
I hereby authorize The Bank of New York, Trustee to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to
such units to The Bank of New York, as TRP Plan Agent, who shall
immediately invest the distributions in units of the available series of
Insured Municipal Securities Trust above or, if unavailable, of other
available series of Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
___________________________________________
Registered Holder (Print) Registered Holder (Print)
___________________________________________
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name
Street Address
City, State and Zip Code
Salesman's Name ___________________________ Salesman's No.
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
==========================================================================
MAIL TO YOUR BROKER
OR
THE BANK OF NEW YORK
ATTN: UNIT INVESTMENT TRUST DIVISION
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
9TH - 46TH DISCOUNT SERIES
SERIES 3 - 19
==========================================================================
AUTHORIZATION FOR INVESTMENT IN INSURED MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____
units ___ Discount Series/Series _______.
I hereby authorize the United States Trust Company of New York, Trustee,
to pay all semi-annual or annual distributions of interest and principal
(if any) with respect to such units to the United States Trust Company of
New York, as TRP Plan Agent, who shall immediately invest the
distributions in units of the available series of Insured Municipal
Securities Trust above or, if unavailable, of other available series of
Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
___________________________________________
Registered Holder (Print) Registered Holder (Print)
___________________________________________
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name
Street Address
City, State and Zip Code
Salesman's Name ___________________________ Salesman's No.
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
==========================================================================
MAIL TO YOUR BROKER
OR
UNITED STATES TRUST COMPANY OF NEW YORK
ATTN: UNIT INVESTMENT DEPARTMENT, UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003
<PAGE>
INDEX INSURED
MUNICIPAL SECURITIES TRUST
Title Page (Unit Investment Trust)
Prospectus
Summary of Essential Information . . . A-5
Information Regarding the Trust . . . . A-7 Dated: April 29, 1994
Financial and Statistical Information . A-8
Audit and Financial Information Sponsor:
Report of Independent Accountants . . F-1 Bear, Stearns & Co. Inc.
Statement of Net Assets . . . . . . . F-2 245 Park Avenue
Statement of Operations . . . . . . . F-3 New York, New York 10167
Statement of Changes in Net Assets . F-4 212-272-2500
Notes to Financial Statements . . . . F-5
Portfolio . . . . . . . . . . . . . . F-6
The Trust . . . . . . . . . . . . . . . 1
Public Offering . . . . . . . . . . . . 12
Estimated Long Term Return and Trustee:
Estimated Current Return . . . . . . 14
Rights of Certificateholders . . . . . 14 United States Trust Company
Tax Status . . . . . . . . . . . . . . 17 of New York
Liquidity . . . . . . . . . . . . . . . 20 770 Broadway
Total Reinvestment Plan . . . . . . . . 23 New York, New York 10003
Trust Administration . . . . . . . . . 27 1-800-428-8890
Trust Expenses and Charges . . . . . . 30
Exchange Privilege and Conversion Offer 32 or
Other Matters . . . . . . . . . . . . . 36
Description of Bond Ratings . . . . . . 36 The Bank of New York
Description of Rating . . . . . . . . . 38 101 Barclay Street
New York, New York 10286
1-800-431-8002
Parts A and B of this Prospectus do not
contain all of the information set forth in
the registration statement and exhibits
relating thereto, filed with the Securities
and Exchange Commission, Washington, D.C., Evaluator:
under the Securities Act of 1933, and to
which reference is made. Kenny S&P Evaluation
Services
* * * 65 Broadway
New York, New York 10006
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to
whom it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon
as having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the
Trust or any of its Units have been guaranteed, sponsored, recommended or
approved by the United States or any state or any agency or officer
thereof.
