INSURED MUNICIPAL SECURITIES TRUST 22ND DISCOUNT SERIES, 485BPOS, 1995-10-26

INSURED MUNICIPAL SECURITIES TRUST 22ND DISCOUNT SERIES
485BPOS, 1995-10-26

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As filed with the Securities and Exchange Commission on October 26, 1995

Registration No. 33-07253*

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------

POST-EFFECTIVE AMENDMENT NO. 9
To
FORM S-6
----------

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2

A. Exact name of trust:

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT
SERIES, 23RD DISCOUNT SERIES, 24TH DISCOUNT SERIES,
25TH DISCOUNT SERIES AND 26TH DISCOUNT SERIES

B. Name of depositor:

REICH & TANG DISTRIBUTORS L.P.

C. Complete address of depositor's principal executive office:

600 Fifth Avenue
New York, New York 10020

D. Name and complete address of agent for service:

PETER J. DeMARCO Copy of comments to:
Executive Senior MICHAEL R. ROSELLA, ESQ.
Vice President Battle Fowler LLP
Reich & Tang Distributors L.P. 75 East 55th Street
600 Fifth Avenue New York, NY 10022
New York, NY 10020 (212) 856-6858

It is proposed that this filing become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b) of Rule 485.

/x/ on (October 31, 1995) pursuant to paragraph (b) of Rule 485.

/ / 60 days after filing pursuant to paragraph (a) of Rule 485.

/ / on ( date ) pursuant to paragraph (a) of Rule 485.

* The Prospectus included in this Registration constitutes a combined
Prospectus as permitted by the Provisions of Rule 429 of the General
Rules and Regulations under the Securities Act of 1933. Said Prospectus
covers units of undivided interest in Insured Municipal Securities
Trust, 22nd Discount Series, 23rd Discount Series, 24th Discount Series,
25th Discount Series and 26th Discount Series covered by prospectuses
heretofore filed as part of separate registration statements on Form S-6
(Registration Nos. 33-07253, 33-07769, 33-08700, 33-09512 and 33-10166,
respectively) under the Securities Act. This filing constitutes Post-
Effective Amendment No. 9 for all of the aforementioned Series.

1706.1

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
22ND DISCOUNT SERIES, 23RD DISCOUNT SERIES,
24TH DISCOUNT SERIES, 25TH DISCOUNT SERIES, 26TH DISCOUNT SERIES

CROSS-REFERENCE SHEET

Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933

(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)

Form N-8B-2 Form S-6
Item Number Heading in Prospectus

I. Organization and General Information

1. (a) Name of trust................... Front Cover of Prospectus
(b) Title of securities issued...... "
2. Name and address of each depositor.. The Sponsor
3. Name and address of trustee......... The Trustee
4. Name and address of principal
underwriters...................... The Sponsor
5. State of organization of trust...... Organization
6. Execution and termination of
trust agreement................... Trust Agreement, Amendment and
Termination
7. Changes of name..................... Not Applicable
8. Fiscal year......................... "
9. Litigation.......................... None

II. General Description of the Trust and Securities of the Trust

10. (a) Registered or bearer
securities...................... Certificates
(b) Cumulative or distributive
securities...................... Interest and Principal Distributions
(c) Redemption...................... Trustee Redemption
(d) Conversion, transfer, etc....... Certificates, Sponsor Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan........... Not Applicable
(f) Voting rights................... Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders.... Records, Portfolio, Trust Agreement,
Amendment and Termination, The
Sponsor, The Trustee
(h) Consents required............... Trust Agreement, Amendment and
Termination
(i) Other provisions................ Tax Status
11. Type of securities
comprising units.................. Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
13. (a) Load, fees, expenses, etc....... Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsor's and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges

-i-
986.1

<PAGE>

Form N-8B-2 Form S-6
Item Number Heading in Prospectus

(b) Certain information regarding
periodic payment certificates... Not Applicable
(c) Certain percentages............. Summary of Essential Information,
Offering Price, Total Reinvestment
Plan
(d) Price differences............... Volume and Other Discounts
(e) Other loads, fees, expenses..... Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons.............. Sponsor's and Underwriters' Profits
(g) Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities...... Organization, Certificates
15. Receipt and handling of payments
from purchasers................... Organization
16. Acquisition and disposition of
underlying securities............. Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............ Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income........... Distribution Elections, Interest and
Principal Distributions, Records,
Total Reinvestment Plan
(b) Reinvestment of distributions... Total Reinvestment Plan
(c) Reserves or special funds....... Interest and Principal Distributions
(d) Schedule of distributions....... Not Applicable
19. Records, accounts and reports....... Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................ Trust Agreement, Amendment and
Termination
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... The Trustee
(e) and (f) Depositor, removal
and successor................... The Sponsor
21. Loans to security holders........... Not Applicable
22. Limitations on liability............ The Sponsor, The Trustee,
The Evaluator
23. Bonding arrangements................ Part II--Item A
24. Other material provisions
of trust agreement................ Not Applicable

III. Organization, Personnel and Affiliated Persons of Depositor

25. Organization of depositor........... The Sponsor
26. Fees received by depositor.......... Not Applicable
27. Business of depositor............... The Sponsor
28. Certain information as to
officials and affiliated
persons of depositor.............. Part II--Item C
29. Voting securities of depositor...... Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "

-ii-
986.1

<PAGE>

Form N-8B-2 Form S-6
Item Number Heading in Prospectus

32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "

IV. Distribution and Redemption of Securities

35. Distribution of trust's
securities by states.............. Distribution of Units
36. Suspension of sales of
trust's securities................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution.......... Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters.................... The Sponsor
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a) Business of principal
underwriters.................... The Sponsor
(b) Branch offices of principal
underwriters.................... Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation............. Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price... Not Applicable
(c) Variation in offering price
to certain persons.............. Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights..... Trustee Redemption
46. (a) Redemption valuation............ Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Trustee
Redemption
(b) Schedule as to
redemption price................ Not Applicable
47. Maintenance of position in
underlying securities............. Comparison of Public Offering Price,
Sponsor's Repurchase Price and
Redemption Price, Sponsor
Repurchase, Trustee Redemption

-iii-
986.1

<PAGE>

Form N-8B-2 Form S-6
Item Number Heading in Prospectus

V. Information Concerning the Trustee or Custodian

48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........ Trust Expenses and Charges
50. Trustee's lien...................... "

VI. Information Concerning Insurance of Holders of Securities

51. Insurance of holders of
trust's securities................ Not Applicable

VII. Policy of Registrant

52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision, Substitution of Bonds
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Tax Status

VIII. Financial and Statistical Information

54. Trust's securities during
last ten years.................... Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6)...... Statement of Financial Condition

-iv-
986.1

<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

INSURED MUNICIPAL SECURITIES TRUST

22ND DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)

The Trust is a unit investment trust designated 22nd 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 Reich & Tang Distributors L.P. (successor
Sponsor to 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 June 30, 1995 (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 October 31, 1995

82251.1

<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, were rated "AAA" by Standard & Poor's Corporation at
the time originally deposited in the Trust. The "AAA" 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." A Trust
designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. 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.) 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. 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
1/13674th undivided interest in the principal and net income of the Trust.

A-2

82251.1

<PAGE>

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 MBIA
Insurance 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"), 5.9%; Bond Investors Guaranty
("BIG"), 2.3%; Financial Guaranty Insurance Company ("Financial Guaranty"),
21.1%, and Municipal Bond Insurance Association ("MBIA"), 70.7%.

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 2.19% of
the Public Offering Price, or 2.239% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) 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 purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $273.80
plus accrued interest of $7.62 under the monthly distribution plan, $8.98
under the semi-annual distribution plan and $21.09 under the annual

A-3

82251.1

<PAGE>

distribution plan, for a total of $281.42, $282.78 and $294.89, 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. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or
to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured
in terms of "Estimated Current Return" and "Estimated Long Term Return".

Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
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

A-4

82251.1

<PAGE>

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,
intends 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
2.19% of the Public Offering Price (2.239% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will
be able to redeem his or her 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.

A-5

82251.1

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST
22ND DISCOUNT SERIES

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1995

Date of Deposit: August 7, 1986 Weighted Average Life to
Principal Amount of Bonds ... $8,545,000 Maturity:
Number of Units ............. 13,674 21.2 Years.
Fractional Undivided Inter- Minimum Value of Trust:
est in Trust per Unit ..... 1/13674 Trust may be terminated if
Principal Amount of value of Trust is less than
Bonds per Unit ............ $624.91 $5,600,000 in principal amount
Secondary Market Public of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31,
of Bonds in Trust ....... $3,663,650+++ 2035 or the disposition of the
Divided by 13,674 Units ... $267.93 last Bond in the Trust.
Plus Sales Charge of 2.19% Trustee***: Chase Manhattan
of Public Offering Price $5.87 Bank, N.A.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $273.80+ plan $1.02 per $1,000; semi-
Redemption and Sponsor's annual plan $.54 per $1,000;
Repurchase Price and annual plan is $.35 per
per Unit .................. $267.93+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $12
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $5.87++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Reich & Tang
and Principal Amount per Distributors L.P.
Unit Premium/(Discount) ... $(351.11) Sponsor's Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.15 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in Part B
$1.00 per Unit. of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $21.69 $21.69 $21.69
Less estimated annual fees and
expenses ............................ 1.32 .87 .73
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $20.37 $20.82 $20.96
Estimated interest distribution# ...... 1.69 10.41 20.96
Estimated daily interest accrual# ..... .0565 .0578 .0582
Estimated current return#++ ........... 7.44% 7.60% 7.66%
Estimated long term return++ .......... 5.21% 5.37% 5.42%
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

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82251.1

<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.

Certain amounts distributable as of June 30, 1995 are reported in the
summary of essential information as if they had been distributed at
year-end.

*** The Trustee maintains its corporate trust office at 770 Broadway, New
York, New York 10003 (tel. no. 1-800-882-9898). For information
regarding redemption by the trustee, see "Trustee Redemption" in Part B
of this Prospectus.

+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $7.62 monthly, $8.98 semi-annually
and $21.09 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.

A-7

82251.1

<PAGE>

INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1995

DESCRIPTION OF PORTFOLIO*

The portfolio of the Trust consists of 11 issues representing
obligations of issuers located in 10 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 62% of the Bonds
are obligations of state and local housing authorities; approximately 12.3%
are hospital revenue bonds; approximately 8.2% 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 call provisions.
The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). None of the Bonds are general obligation bonds. Eleven issues
representing $8,545,000 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 2, Federally Insured Mortgage 2, Hospital 2, Hydro
Electric 1, Nuclear Power 1, University 1, Wastewater 1 and Water 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.

As of June 30, 1995, $5,295,000 (approximately 62% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $5,295,000 (approximately 62% 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 38% were purchased at a
premium and none were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.

None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.

- --------
* Changes in the Trust Portfolio: From July 1, 1995 to September 15,
1995, the entire principal amount of the Bond in portfolio no. 9 has
been called for redemption pursuant to pre-refunding provisions and is
no longer contained in the Trust. 56 Units have been redeemed.

A-8

82251.1

<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)

June 30, 1993 13,977 $577.57 $44.78 $45.48 $46.06 $7.29
June 30, 1994 13,947 451.99 39.55 40.11 43.85 97.77
June 30, 1995 13,674 301.66 27.95 28.47 35.80 138.54

- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.

A-9

82251.1

<PAGE>
Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 22nd Discount Series:

We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 22nd Discount Series as of
June 30, 1995, 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.

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 22nd Discount Series:

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 June 30, 1995, 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, 22nd Discount Series as of June 30, 1995, 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 LLP

New York, New York
September 15, 1995
except as to Note 7 as to
which the date is
September 28, 1995

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Statement of Net Assets

June 30, 1995

Investments in marketable securities,
at market value (cost $3,835,121) $ 3,663,556

Accrued interest 62,231
Cash 401,205
----------
Other assets 463,436
----------

Accrued expenses 2,128
----------
Other liabilities 2,128
----------

Excess of other assets over total liabilities 461,308
----------

Net assets 13,674 units of fractional undivided
interest outstanding, $301.66 per unit) $ 4,124,864
==========

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Statements of Operations

<CAPTION>
Years ended June 30,
---------- ---- ---------- ---- ----------
---------- ---------- ----------
1995 1994 1993
---------- ---------- ----------

<S> <C> <C> <C>
Investment income - interest $ 412,868 585,510 674,815
---------- ---------- ----------

Expenses:
Trustee's fees 13,251 12,619 14,955
Evaluator's fees 3,286 3,309 3,412
1,678 2,054 2,069
---------- ---------- ----------

Total expenses 18,215 17,982 20,436
---------- ---------- ----------

Net investment income 394,653 567,528 654,379
---------- ---------- ----------

Realized and unrealized gain (loss) on investments:
Net realized loss
on bonds sold or called (347,072) (84,460) (4,852)
Unrealized appreciation
(depreciation) for the year 181,361 (315,443) (157,925)
---------- ---------- ----------

Net loss on
investments (165,711) (399,903) (162,777)
---------- ---------- ----------

Net increase in net
assets resulting
from operations $ 228,942 167,625 491,602
========== ========== ==========

</TABLE>
See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Statements of Changes in Net Assets

<CAPTION>
Years ended June 30,
----------- - ----------- -- ----------
----------- ----------- ----------
1995 1994 1993
----------- ----------- ----------

<S> <C> <C> <C>
Operations:
Net investment income $ 394,653 567,528 654,379
Net realized loss on
bonds sold or called (347,072) (84,460) (4,852)
Unrealized appreciation
(depreciation) for the year 181,361 (315,443) (157,925)
----------- ----------- ----------

Net increase in net
assets resulting
from operations 228,942 167,625 491,602
----------- ----------- ----------

Distributions to Certificateholders:
Investment income 393,233 556,037 630,662
Principal 1,932,217 1,365,228 102,060

Redemptions:
Interest 2,855 249 250
Principal 79,693 14,839 13,011
----------- ----------- ----------

Total distributions
and redemptions 2,407,998 1,936,353 745,983
----------- ----------- ----------

Total decrease (2,179,056) (1,768,728) (254,381)

Net assets at beginning of year 6,303,920 8,072,648 8,327,029
----------- ----------- ----------

Net assets at end of year (including
undistributed net investment
income of $271,083, $272,518 and
$266,035, respectively) $ 4,124,864 6,303,920 8,072,648
=========== =========== ==========

</TABLE>
See accompanying notes to financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Notes to Financial Statements

June 30, 1995, 1994 and 1993

(1) Organization and Financial and Statistical Information

Insured Municipal Securities Trust, 22nd Discount Series (Trust) was organized
on August 7, 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 Kenny S & P
Evaluation Services (Evaluator). The market value of the investments is based
upon the bid prices for the bonds at the end of the year, 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.

(Continued)

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Notes to Financial Statements

(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 June 30, 1995,
1994 and 1993.

The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 273, 30 and 23 units were redeemed during the years ended June 30
1995, 1994 and 1993.

(5) Net Assets

At June 30, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:

Original cost to Certificateholders $ 8,582,728
Less initial gross underwriting commission (472,080)

8,110,648

Cost of securities sold or called (4,413,709)
Net unrealized depreciation (171,565)
Undistributed net investment income 271,083
Undistributed proceeds from bonds sold or called 328,407

Total $ 4,124,864

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 14,000 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 $138,182.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Notes to Financial Statements

(6) Successor Trustee

Effective September 2, 1995, United States Trust Company of New
York was merged into Chase Manhatten Bank (National Association) ("Chase").
Accordingly, Chase is the successor trustee of the unit investment trusts
sponsored by Bear Stearns and Co.

(7) Successor Sponsor

Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich & Tang")
has become the successor sponsor (the "Sponsor") to certain of the unit
investments trusts previously sponsored by Bear, Stearns & Co. Inc. As
successor Sponsor, Reich & Tang has assumed all of the obligations and rights
of Bear Stearns & Co. Inc., the previous sponsor.

<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES
Portfolio
June 30, 1995

<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 $ 700,000 Hillsboro County, Florida AAA 9.000% 12/01/09 @ 100 S.F. $ 829,241
Refunding and Improvement Utility 12/01/2015 12/01/99 @ 100 Ref.
Revenue Bonds Series 1985 (MBIA)
(5)

2 100,000 Private Colleges and Universities AAA 9.200 11/01/06 @ 100 S.F. 103,821
(Georgia) Authority Revenue Bonds 11/01/2015 11/01/95 @ 102 Ref.
(Mercer University Project) Series
1985 (BIG) (5)

3 500,000 County of Monroe, Michigan AAA 9.625 12/01/96 @ 100 S.F. 526,295
Pollution Control Revenue Bonds 12/01/2015 12/01/95 @ 103 Ref.
(Detroit Edison Company Project)
Series A-1985 (AMBAC)

4 800,000 Health and Educational Facilities AAA 9.000 12/01/06 @ 100 S.F. 833,560
Authority of the State of Missouri 12/01/2016 12/01/95 @ 102 Ref.
Insured Health Facilities Revenue
Bonds (St. Luke's
Episcopal-Presbyterian Hospitals
Project) 1985 A (Financial
Guaranty) (5)

5 700,000 Ocean County Utilities Authority AAA 8.700 1/01/07 @ 100 S.F. 730,513
New Jersey Wastewater Revenue 1/01/2011 1/01/96 @ 102 Ref.
Refunding Bonds, Series 1985
(Financial Guaranty) (5)

6 50,000 City of Farmington, New Mexico AAA 9.750 5/15/06 @ 100 S.F. 53,473
Utility System Revenue Bonds 5/15/2013 5/15/96 @ 102 Ref.
Series 1985 (Financial Guaranty)
(5)

7 50,000 Oklahoma Municipal Power Authority AAA 9.250 No Sinking Fund 52,314
Power Supply System Revenue Bonds, 1/01/2015 1/01/96 @ 102 Ref.
Series 1985C (MBIA) (5)

8 100,000 Lower Colorado River Authority AAA 9.500 1/01/06 @ 100 S.F. 104,748
Texas Priority Revenue Bonds 1/01/2013 1/01/96 @ 102 Ref.
Series 1985 (BIG) (5)

9 250,000 Tarrant County (Texas) Health AAA 9.750 9/01/03 @ 100 S.F. 257,505
Facilities Development Corporation 9/01/2015 9/01/95 @ 102 Ref.
Health System Revenue Bonds Harris
Methodist Health System Series
1985 (Financial Guaranty) (5)

10 295,000 Housing Authority of the County of AAA 0.000% 4/01/07 @ 13.074 S.F. 11,136
Santa Clara (California) 4/01/2026 10/01/03 @8.987 Ref.
Multifamily Housing Revenue Bonds
Series 1984A (FHA Insured Mortgage
Loan-Cedar Glen Apartments
Project) (MBIA)

11 5,000,000 District of Columbia Housing AAA 0.000 2/01/09 @ 13.943 S.F. 160,950
Finance Agency Multi-Family 2/01/2027 2/01/04 @ 8.067 Ref.
Mortgage Revenue Bonds, Series
1984 (FHA Insured Mortgage
Loan-Benning Heights Project -
Section 8 Assisted) (MBIA)
------------- -----------

$ 8,545,000 $ 3,663,556
============= ===========
</TABLE>

See accompanying footnotes to portfolio and notes to financial statements.

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT SERIES

Footnotes to Portfolio

June 30, 1995

(1) All ratings are by Standard and Poor's Corporation (Evaluator). 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 June 30, 1995, the net unrealized depreciation of all the
bonds was comprised of the following:

Gross unrealized appreciation $ 57,792
Gross unrealized depreciation (229,357)

Net unrealized depreciation $ (171,565)

(4) The annual interest income, based upon bonds held at June 30, 1995
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $ 296,600.

(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.

(6) Bonds sold or called after June 30, 1995 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
equired by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues).

<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

INSURED MUNICIPAL SECURITIES TRUST

23RD DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)

The Trust is a unit investment trust designated 23rd 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 Reich & Tang Distributors L.P. (successor
Sponsor to 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.

Investors should retain both parts of this Prospectus for
future reference.

Prospectus Part A Dated October 31, 1995

82252.1

<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, were rated "AAA" by Standard & Poor's Corporation at
the time originally deposited in the Trust. The "AAA" 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." A Trust
designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. 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.) 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. 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
1/12646th undivided interest in the principal and net income of the Trust.

A-2

82252.1

<PAGE>

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 MBIA
Insurance 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"), 7.5%; Bond Investors Guaranty
("BIG"), .80%; Financial Guaranty Insurance Company ("Financial Guaranty"),
20.6%; and Municipal Bond Insurance Association ("MBIA"), 71.1%.

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 1.32% of
the Public Offering Price, or 1.337% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) 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 purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $251.60
plus accrued interest of $6.91 under the monthly distribution plan, $8.20
under the semi-annual distribution plan and $20.71 under the annual

A-3

82252.1

<PAGE>

distribution plan, for a total of $258.51, $259.80 and $272.31, 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.)

A schedule of cash flow projections is available from the Sponsor
upon request.

A-4

82252.1

<PAGE>

MARKET FOR UNITS. The Sponsor, although not obligated to do so,
intends 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
1.32% of the Public Offering Price (1.337% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will
be able to redeem his or her 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.)

A-5

82252.1

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST
23RD DISCOUNT SERIES

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1995

Date of Deposit: September 4, 1986 Minimum Principal Distribution:
Principal Amount of Bonds ... $7,305,000 $1.00 per Unit.
Number of Units ............. 12,646 Weighted Average Life to
Fractional Undivided Inter- Maturity: 22.4 Years.
est in Trust per Unit ..... 1/12646 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $577.65 value of Trust is less than
Secondary Market Public $5,200,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $3,140,297+++ The earlier of December 31,
Divided by 12,646 Units ... $248.32 2035 or the disposition of the
Plus Sales Charge of 1.32% last Bond in the Trust.
of Public Offering Price $3.28 Trustee***: Chase Manhattan
Public Offering Price Bank, N.A.
per Unit ................ $251.60+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.03 per $1,000; semi-
Repurchase Price annual plan $.55 per $1,000;
per Unit .................. $248.32+ and annual plan is $.36 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $12
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............ $3.28++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Reich & Tang
Unit Premium/(Discount) ... $(326.05) Distributors L.P.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.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# ......... $15.39 $15.39 $15.39
Less estimated annual fees and
expenses ............................ 1.30 .87 .74
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $14.09 $14.52 $14.65
Estimated interest distribution# ...... 1.17 7.26 14.65
Estimated daily interest accrual# ..... .0391 .0403 .0406
Estimated current return#++ ........... 5.60% 5.77% 5.82%
Estimated long term return++ .......... 6.30% 6.51% 6.58%
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

A-6

82252.1

<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 proceeds from securities called July 1, 1995 and certain amounts
distributable as of June 30, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.

*** The Trustee maintains its corporate trust office at 770 Broadway, New
York, New York 10003 (tel. no.: 1-800-882-9898). For information
regarding redemption by the trustee, see "Trustee Redemption" in Part B
of this Prospectus.

+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $6.91 monthly, $8.20 semi-annually
and $20.71 annually.

++++ 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.

A-7

82252.1

<PAGE>

INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1995

DESCRIPTION OF PORTFOLIO*

The portfolio of the Trust consists of 13 issues representing
obligations of issuers located in 7 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 64.2% of the Bonds
are obligations of state and local housing authorities; approximately 2.5% are
hospital revenue bonds; approximately .80% 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 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).
One issue representing $500,000 of the principal amount of the Bonds is a
general obligation bond. All twelve of the remaining issues representing
$7,455,000 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 3, Federally Insured Mortgage 3, Hospital 1, Nuclear Power 1, Sales Tax
1, Sewer 1, 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.

As of June 30, 1995, $5,105,000 (approximately 64.2% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $5,105,000 (approximately 64.2% 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 35.8% were purchased at a
premium and none were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.

None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.

- --------
* Changes in the Trust Portfolio: From July 1, 1995 to September 15,
1995, the entire principal amounts of the Bonds in portfolio nos. 8, 9
and 10 have been called for redemption pursuant to pre-refunding
provisions and are no longer contained in the Trust. The entire
principal amount of the Bond in portfolio no. 2 has been called and is
no longer contained in the Trust. 146 Units have been redeemed from the
Trust.

A-8

82252.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

June 30, 1993 13,000 $532.06 $40.76 $41.43 $42.64 $39.04
June 30, 1994 12,985 423.29 37.66 38.26 40.13 83.83
June 30, 1995 12,646 290.77 27.48 28.05 34.27 85.02

A-9

82252.1

<PAGE>
Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 23rd Discount Series:

We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 23rd Discount Series as of
June 30, 1995, 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 June 30, 1995 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, 23rd Discount Series as of June 30, 1995, 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 LLP

New York, New York
September 15, 1995
except as to Note 7 as to
which the date is
September 28, 1995

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Statement of Net Assets

June 30, 1995

Investments in marketable securities,
at market value (cost $3,439,089) $ 3,140,239

Accrued interest 80,118
Cash 457,522
----------
----------
Other assets 537,640
----------

Accrued expenses 769
----------
----------
Other liabilities 769
----------

Excess of other assets over total liabilities 536,871
-----------

Net assets 12,646 units of fractional undivided
interest outstanding, $290.77 per unit) $ 3,677,110
===========

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Statements of Operations
<CAPTION>

Years ended June 30,
----------- ---- ---------- ---- --------
----------- ---------- --------
1995 1994 1993
----------- ---------- --------

<S> <C> <C> <C>
Investment income - interest $ 383,612 524,058 572,465
----------- ---------- --------

Expenses:
Trustee's fees 10,928 11,832 13,629
Evaluator's fees 3,572 3,309 3,412
Sponsor's fee 1,652 1,920 1,920
----------- ---------- --------

Total expenses 16,152 17,061 18,961
----------- ---------- --------

Net investment income 367,460 506,997 553,504
----------- ---------- --------

Realized and unrealized gain (loss) on investments:
Net realized loss on bonds
sold or called (202,077) (112,297) (25,821)
Unrealized appreciation
(depreciation) for the year 37,738 (225,914) (63,870)
----------- ---------- --------

Net loss on
investments (164,339) (338,211) (89,691)
----------- ---------- --------

Net increase in net
assets resulting
from operations $ 203,121 168,786 463,813
=========== ========== ========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Statements of Changes in Net Assets

<CAPTION>
Years ended June 30,
------------ -- ------------ -- ------------
------------ ------------ ------------
1995 1994 1993
------------ ------------ ------------

<S> <C> <C> <C>
Operations:
Net investment income $ 367,460 506,997 553,504
Net realized loss on bonds
sold or called (202,077) (112,297) (25,821)
Unrealized appreciation
(depreciation) for the year 37,738 (225,914) (63,870)
------------ ------------ ------------

Net increase in net
assets resulting
from operations 203,121 168,786 463,813
------------ ------------ ------------

Distributions to Certificateholders:
Investment income 358,886 492,927 533,669
Principal 1,560,357 1,088,903 507,520

Redemptions:
Interest 3,348 134 -
Principal 99,898 7,152 -
------------ ------------ ------------

Total distributions and redemptions 2,022,489 1,589,116 1,041,189
------------ ------------ ------------

Total decrease (1,819,368) (1,420,330) (577,376)

Net assets at beginning of year 5,496,478 6,916,808 7,494,184
------------ ------------ ------------

Net assets at end of year (including
undistributed net investment
income of $249,347, $244,121 and
$235,312, respectively) $ 3,677,110 5,496,478 6,916,808
============ ============ ============
</TABLE>

See accompanying notes to financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Notes to Financial Statements

June 30, 1995, 1994 and 1993

(1) Organization and Financial and Statistical Information

Insured Municipal Securities Trust, 23rd Discount Series (Trust) was organized
on September 4, 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

Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the investments is based
upon the bid prices for the bonds at the end of the year, 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.

(Continued)

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Notes to Financial Statements

(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).

See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended June 30, 1995,
1994 and 1993.

The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 339 units were redeemed during the year ended June 30, 1995. 15
units were redeemed during the year ended June 30, 1994. No units were
redeemed during the years ended June 30, 1993 and 1992.

(5) Net Assets

At June 30, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:

Original cost to Certificateholders $ 7,961,708
Less initial gross underwriting commission (437,840)

7,523,868

Cost of securities sold or called (4,222,977)
Net unrealized depreciation (298,850)
Undistributed net investment income 249,347
Undistributed proceeds from bonds sold or called 425,722

Total $ 3,677,110

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 13,000 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 $138,198.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Notes to Financial Statements

(6) Successor Trustee

Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) ("Chase").
Accordingly, Chase is the successor trustee of the unit investment trusts
sponsored by Bear Stearns and Co.

(7) Successor SponsorEffective September 28, 1995, Reich & Tang Distributors
L.P. ("Reich & Tang") has become the successor sponsor (the "Sponsor") to
certain of the unit investments trusts previously sponsored by Bear, Stearns &
Co. Inc. As successor Sponsor, Reich & Tang has assumed all of the obligations
and rights of Bear Stearns & Co. Inc., the previous sponsor.

<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES
Portfolio
June 30, 1995

<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 $ 500,000 Municipality of Anchorage, Alaska AAA 8.125% 6/01/02 @ 100 S.F. $ 528,805
1986 General Obligation Water 6/01/2011 6/01/96 @ 102 Ref.
Bonds (Financial Guaranty) (5)

2 65,000 City of Rockport, Indiana AAA 9.250 No Sinking Fund 66,665
Pollution Control Revenue Bonds 8/01/2014 8/01/95 @ 102 Ref.
(Indiana and Michigan Electric
Company Project) Series 1985A
(BIG)

3 200,000 Sulphur, Louisiana Public AAA 9.500 No Sinking Fund 204,894
Improvement Sales and Use Tax 10/01/2000 10/01/95 @ 101 Ref.
Revenue Bonds, State Series 1985B
(Financial Guaranty) (5)

4 235,000 Ocean County Utilities Authority AAA 8.700 1/01/07 @ 100 S.F. 245,244
New Jersey Wastewater Revenue 1/01/2011 1/01/96 @ 102 Ref.
Refunding Bonds, Series 1985
(Financial Guaranty) (5)

5 200,000 Texas Health Facilities AAA 8.375 2/15/02 @ 100 S.F. 217,270
Development Corporation Hospital 2/15/2006 2/15/97 @ 102 Ref.
System Revenue Bonds, Series 1986
(All Saints Southwest Hospital,
Inc. Project) (Financial
Guaranty) (5)

6 500,000 Galveston County Water Authority AAA 9.000 7/10/06 @ 100 S.F. 525,745
(a political subdivision of the 7/10/2009 7/10/96 @ 100 Ref.
State of Texas with boundaries
coterminous with those of
Galveston County, Texas) Water
System Contract Revenue Refunding
Bonds, Mainland Project, Series
1985 (AMBAC) (5)

7 430,000 City of Houston, Texas Sewer AAA 9.375 12/01/06 @ 100 S.F. 448,701
System Junior Lien Revenue 12/01/2013 12/01/95 @ 102 Ref.
Refunding Bonds, Series 1985
(Financial Guaranty) (5)

7a 70,000 City of Houston, Texas Sewer AAA 9.375 12/01/06 @ 100 S.F. 73,044
System Junior Lien Revenue 12/01/2013 12/01/95 @ 102 Ref.
Refunding Bonds, Series 1985
(Financial Guaranty) (5)

8 100,000 Intermountain Power Agency (a AAA 9.125% 7/01/13 @ 100 S.F. 102,000
political subdivision of the 7/01/2018 7/01/95 @ 102 Ref.
State of Utah) Power Supply
Revenue Refunding Bonds, 1985
Series D (AMBAC) (5)

9 450,000 Intermountain Power Agency (a AAA 8.625 7/01/02 @ 100 S.F. 459,000
political subdivision of the 7/01/2005 7/01/95 @ 102 Ref.
State of Utah) Power Supply
System Revenue Refunding Bonds,
1985 Series J (MBIA) (5)

10 100,000 Intermountain Power Agency (a AAA 8.750 7/01/06 @ 100 S.F. 102,000
political subdivision of the 7/01/2012 7/01/95 @ 102 Ref.
State of Utah) Power Supply
System Revenue Refunding Bonds,
1985 Series J (MBIA) (5)

11 215,000 Housing Authority of the County AAA 0.000 4/01/07 @ 13.074 S.F. 8,116
of Santa Clara (California) 4/01/2026 10/01/03 @ 8.987 Ref.
Multifamily Housing Revenue
Bonds, Series 1984A (FHA-Insured
Mortgage Loan - Cedar Glen
Apartments Project) (MBIA)

12 100,000 The District of Columbia AAA 0.000 5/01/05 @ 11.975 S.F. 4,565
Multi-Unit Housing Finance 11/01/2025 11/01/08 @ 17.206 Ref.
Corporation Mortgage Revenue
Bonds, Series 1983 (FHA-Insured
Mortgage Loan - Congress Park II
Apartments Section 8 Assisted
Project) (MBIA)

13 4,790,000 District of Columbia Housing AAA 0.000 2/01/09 @ 13.943 S.F. 154,190
Finance Agency Multi-Family 2/01/2027 2/01/04 @ 8.067 Ref.
Mortgage Revenue Bonds, Series
1984 (FHA-Insured Mortgage Loan -
Benning Heights Project - 100%
Section 8 Assisted) (MBIA)
------------ -------------

$ 7,955,000 $ 3,140,239
============ =========
</TABLE>

See accompanying footnotes to portfolio and notes to financial statements.

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 23RD DISCOUNT SERIES

Footnotes to Portfolio

June 30, 1995

(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.

(3) At June 30, 1995, the net unrealized depreciation of all the bonds was
$298,850.

(4) The annual interest income, based upon bonds held at June 30, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $251,394.

(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.

(6) Bonds sold or called after June 30, 1995 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).
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

INSURED MUNICIPAL SECURITIES TRUST

24TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)

The Trust is a unit investment trust designated 24th 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 Reich & Tang Distributors L.P. (successor
Sponsor to 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.

Investors should retain both parts of this
Prospectus for future reference.

Prospectus Part A Dated October 31, 1995

82963.1

<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, were rated "AAA" by Standard & Poor's Corporation at
the time originally deposited in the Trust. The "AAA" 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." A Trust
designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. 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.) 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. 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
1/12482nd undivided interest in the principal and net income of the Trust.

A-2

82963.1

<PAGE>

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 MBIA
Insurance 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"), 29.1%; Bond Investors Guaranty
("BIG"), 5.1%; Financial Guaranty Insurance Company ("Financial Guaranty"),
47% and Municipal Bond Insurance Association ("MBIA"), 18.8%.

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 2.067% of
the Public Offering Price, or 2.110% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) 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 purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $454.03
plus accrued interest of $7.22 under the monthly distribution plan, $9.92
under the semi-annual distribution plan and $30.35 under the annual

A-3

82963.1

<PAGE>

distribution plan, for a total of $461.25, $463.95 and $484.38, 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.)

A schedule of cash flow projections is available from the Sponsor
upon request.

A-4

82963.1

<PAGE>

MARKET FOR UNITS. The Sponsor, although not obligated to do so,
intends 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
2.067% of the Public Offering Price (2.110% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will
be able to redeem his or her 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.)

A-5

82963.1

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST
24TH DISCOUNT SERIES

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1995

Date of Deposit: October 2, 1986 Weighted Average Life to
Principal Amount of Bonds ... $3,920,000 Maturity: 3 Years.
Number of Units ............. 12,482 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/12482 value of Trust is less than
Principal Amount of $5,600,000 in principal amount
Bonds per Unit ............ $314.05 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2035 or the disposition of the
of Bonds in Trust ....... $5,552,505+++ last Bond in the Trust.
Divided by 12,482 Units ... $444.84 Trustee***: Chase Manhattan
Plus Sales Charge of 2.067% Bank, N.A.
of Public Offering Price $9.19 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.04 per $1,000; semi-
per Unit ................ $454.03+ annual plan $.56 per $1,000;
Redemption and Sponsor's and annual plan is $.37 per
Repurchase Price $1,000.
per Unit .................. $444.84+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $12
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsor's Repurchase (treating separate maturities
Price per Unit ............ $9.19++++ as separate issues).
Difference between Public Sponsor: Reich & Tang
Offering Price per Unit Distributors L.P.
and Principal Amount per Sponsor's Annual Fee: Maximum of
Unit Premium/(Discount) ... $139.98 $.15 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. Expenses and Charges" in Part B
Minimum Principal Distribution: of this Prospectus).
$1.00 per Unit.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $27.28 $27.28 $27.28
Less estimated annual fees and
expenses ............................ .93 .63 .56
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $26.35 $26.65 $26.72
Estimated interest distribution# ...... 2.19 13.32 26.72
Estimated daily interest accrual# ..... .0731 .0740 .0742
Estimated current return#++ ........... 5.80% 5.87% 5.89%
Estimated long term return++ .......... 3.79% 3.88% 3.90%
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

A-6

82963.1

<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.

+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $7.22 monthly, $9.92 semi-annually
and $30.35 annually.

++++ 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.

A-7

82963.1

<PAGE>

INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1995

DESCRIPTION OF PORTFOLIO*

The portfolio of the Trust consists of 14 issues representing
obligations of issuers located in 9 states. 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. None of the Bonds are obligations of state and local
housing authorities; approximately 20.7% are hospital revenue bonds;
approximately 13.2% 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 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 issues of the
principal amount of the Bonds are general obligation bonds. Fourteen issues
representing $5,315,000 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: Airport 1, Coal Power 2, College 1, Hospital 3, Nuclear Power 1,
Parking System 1, Sales Tax 1, Sewer System 1, Tourist 1, Utility and
Reclamation 1 and Waste Water 1. For an explanation of the significance of
these factors see "The Trust--Portfolio" in Part B of this Prospectus.

As of June 30, 1995, none of the Bonds were original issue
discount bonds. None of the aggregate principal amount of the Bonds in the
Trust were purchased at a "market" discount from par value at maturity,
approximately 100% were purchased at a premium and none were purchased at par.
For an explanation of the significance of these factors see "Discount and Zero
Coupon Bonds" in Part B of this Prospectus.

None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.

- --------
* Changes in the Trust Portfolio: From July 1, 1995 to September 15,
1995, the entire principal amounts of the Bonds in portfolio nos. 9, 11,
12 and 13 have been called for redemption pursuant to pre-refunding
provisions and are no longer contained in the Trust. The entire
principal amount of the Bond in portfolio no. 8 has been called and is
no longer contained in the Trust. 168 Units have been redeemed.

A-8

82963.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

June 30, 1993 13,786 $602.45 $44.88 $45.38 $45.50 -0-
June 30, 1994 13,085 571.18 44.95 45.45 45.50 -0-
June 30, 1995 12,482 487.54 42.79 43.23 45.71 $64.17

A-9

82963.1

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 24th Discount
Series:

We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 24th Discount Series as of
June 30, 1995, 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, 24th Discount Series as of June 30, 1995, 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 LLP

New York, New York
September 30, 1995
except as to Note 7 as to
which the date is
September 28, 1995

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES

Statement of Net Assets

June 30, 1995

Investments in marketable securities,
at market value (cost $5,890,580) $ 5,552,410

Accrued interest 160,837
Cash 372,799
----------
----------
Other assets 533,636
----------

Accrued expenses 612
----------
----------
Other liabilities 612
----------

Excess of other assets over total
liabilities 533,024
----------

Net assets 12,482 units of fractional undivided
interest outstanding, $487.54 per unit) $ 6,085,434
==========

See accompanying notes to financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES

Statements of Operations

Years ended June 30,
-------- ---- ---------- ---- --------
1995 1994 1993
-------- ---------- --------

Investment income - interest $ 558,198 639,430 639,551
-------- ---------- --------

Expenses:
Trustee's fees 8,346 8,506 9,201
Evaluator's fees 3,703 3,582 3,412
Sponsor's fees 1,071 1,163 1,163
-------- ---------- --------

Total expenses 13,120 13,251 13,776
-------- ---------- --------

Net investment income 545,078 626,179 625,775
-------- ---------- --------

Realized and unrealized loss on investments:
Net realized loss on bonds
sold or called (169,272) (3,608) -
Unrealized depreciation
for the year (74,807) (431,263) (7,720)
-------- ---------- --------

Net loss on
investments (244,079) (434,871) (7,720)
-------- ---------- --------

Net increase in net
assets resulting
from operations $ 300,999 191,308 618,055
======== ========== ========

See accompanying notes to financial statements.

<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES

Statements of Changes in Net Assets

<CAPTION>
Years ended June 30,
---------- -- ---------- -- ----------
---------- ---------- ----------
1995 1994 1993
---------- ---------- ----------

<S> <C> <C> <C>
Operations:
Net investment income $ 545,078 626,179 625,775
Net realized loss on bonds sold
or called (169,272) (3,608) -
Unrealized depreciation
for the year (74,807) (431,263) (7,720)
---------- ---------- ----------

Net increase in net
assets resulting
from operations 300,999 191,308 618,055
---------- ---------- ----------

Distributions to Certificateholders:
Investment income 552,218 622,000 621,711
Principal 821,697 - -

Redemptions:
Interest 8,540 7,255 -
Principal 306,976 393,525 -
---------- ---------- ----------

Total distributions and
redemptions 1,689,431 1,022,780 621,711
---------- ---------- ----------

Total decrease (1,388,432) (831,472) (3,656)

Net assets at beginning of year 7,473,866 8,305,338 8,308,994
---------- ---------- ----------

Net assets at end of year (including
undistributed net investment
income of $148,107, $163,787 and
$185,002, respectively) $ 6,085,434 7,473,866 8,305,338
========== ========== ==========

</TABLE>
See accompanying notes to financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT
SERIES

Notes to Financial Statements

June 30, 1995, 1994 and 1993

(1) Organization and Financial and
Statistical Information

Insured Municipal Securities Trust, 24th Discount Series (Trust) was organized
on October 2, 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

Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the investments is based
upon the bid prices for the bonds at tHe end of the year, 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
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.

(Continued)

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES

Notes to Financial Statements

(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).

See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended June 30, 1995,
1994 and 1993.

The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 603,701 and 0 units were redeemed during the years ended June 30,
1995, 1994 and 1993, respectively.

(5) Net Assets

At June 30, 1995, the net assets of the Trust represented the interest of
Certificateholders as follows:

Original cost to Certificateholders $ 8,612,251
Less initial gross underwriting commission (473,620)

8,138,631

Cost of securities sold or called (2,248,051)
Net unrealized depreciation (338,170)
Undistributed net investment income 148,107
Undistributed proceeds from
bonds sold or called 384,917

Total $ 6,085,434

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 14,000 units of fractional undivided interest of
the Trust as of the date of deposit.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES

Notes to Financial Statements

(6) Successor Trustee

Effective September 2, 1995, United States
Trust Company of New York was merged into Chase
Manhattan Bank (National Association) ("Chase").
Accordingly, Chase is the successor trustee of the
unit investment trusts sponsored by Bear Stearns and
Co.
(7) Successor Sponsor

<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT SERIES
Portfolio
June 30, 1995

<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 $ 500,000 City and County of Denver, AAA 8.000% Currently @ 100 S.F. $ 529,925
Colorado Children's Hospital 10/01/2015 10/01/96 @ 101 Ref.
Revenue Refunding Bonds 1985
Series B (Financial Guaranty)
(5)

2 500,000 Orange County, Florida Tourist AAA 7.750 10/01/05 @ 100 S.F. 533,690
Development Tax Revenue Bonds, 10/01/2013 10/01/96 @ 102 Ref.
Series 1986 (AMBAC) (5)

3 50,000 City of Orlando, Florida Waste AAA 8.875 10/01/01 @ 100 S.F. 51,652
Water System Revenue Bonds, 10/01/2014 10/01/95 @ 102 Ref.
1985 Series A (AMBAC) (5)

4 270,000 Jefferson Sales Tax District, AAA 8.000 7/01/92 @ 100 S.F. 305,211
Jefferson Parish, Louisiana 7/01/2005 7/01/99 @ 100 Ref.
Special Sales Tax Revenue
Bonds, Series 1986 A (BIG) (5)

5 500,000 Little Blue Valley, Missouri AAA 8.600 10/01/97 @ 100 S.F. 505,390
Sewer District (Jackson and 10/01/2000 10/01/95 @ 100 Ref.
Cass Counties) Sewer System
Revenue Refunding Bonds 1985
(AMBAC)

6 700,000 City of Farmington, New Mexico AAA 9.750 5/15/06 @ 100 S.F. 748,615
Utility System Revenue Bonds 5/15/2013 5/15/96 @ 102 Ref.
Series 1985 (Financial
Guaranty) (5)

7 450,000 Central Oklahoma AAA 8.000 7/01/01 @ 100 S.F. 472,684
Transportation and Parking 7/01/2006 7/01/96 @ 102 Ref.
Authority (Oklahoma City,
Oklahoma) Parking System
Revenue Bonds Refunding Series
1986 (AMBAC)

8 700,000 Metropolitan Nashville Airport AAA 9.750 7/01/05 @ 100 S.F. 714,000
Authority (Tennessee) Revenue 7/01/2015 7/01/95 @ 102 Ref.
Bonds, Series 1985 (Financial
Guaranty)

9 100,000 Albilene (Texas) Health AAA 9.500 9/01/06 @ 100 S.F. 102,962
Facilities Development 9/01/2013 9/01/95 @ 102 Ref.
Corporation Hospital Refunding
and Revenue Bonds (Hendrick
Medical Center Project) Series
1985 (Financial Guaranty)(5)

10 150,000 Dallas County (Texas) Utility AAA 7.750 2/15/09 @ 100 S.F. 156,387
and Reclamation District 2/15/2011 8/15/96 @ 100 Ref.
Unlimited Ad Valorem Tax
Refunding Bonds Series 1986A
(MBIA) (5)

11 500,000 Tarrant County (Texas) Health AAA 9.750% 9/01/03 @ 100 S.F. 515,010
Facilities Development 9/01/2015 9/01/95 @ 102 Ref.
Corporation Health System
Revenue Bonds Harris Methodist
Health System Series 1985
(Financial Guaranty) (5)

12 650,000 Intermountain Power Agency (a AAA 8.750 7/01/06 @ 100 S.F. 663,000
political subdivision of the 7/01/2012 7/01/95 @ 102 Ref.
State of Utah) Power Supply
System Revenue Refunding Bonds
1985 Series J (MBIA) (5)

13 45,000 Intermountain Power Agency (a AAA 9.125 7/01/13 @ 100 S.F. 45,900
political subdivision of the 7/01/2018 7/01/95 @ 102 Ref.
State of Utah) Power Supply
System Revenue Refunding
Bonds, 1985 Series D (AMBAC)
(5)

14 200,000 Weber State College, Utah AAA 9.300 No Sinking Fund 207,984
Revenue Refunding Bonds 1985 4/01/2001 4/01/96 @ 101 Ref.
(MBIA)
-----------
-----------

$ 5,315,000 $ 5,552,410
=========== ===========

</TABLE>

See accompanying footnotes to portfolio and notes to the financial statements.

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 24TH DISCOUNT
SERIES

Footnotes to Portfolio

June 30, 1995

(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.

(3) At June 30, 1995, the net unrealized
depreciation of all the bonds was comprised
of the following:

Gross unrealized appreciation $ 43,764
Gross unrealized depreciation (381,934)

Net unrealized depreciation $ (338,170)

(4) The annual interest income, based upon bonds held at June 30, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $ 469,744.

(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.

(6) Bonds sold or called after June 30, 1995 are noted in a footnote "Changes
in Trust Portfolio" under "Description of Portfolio" in Part A of this
Prospectus.

NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.

INSURED MUNICIPAL SECURITIES TRUST

25TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)

The Trust is a unit investment trust designated 25th 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 Reich & Tang Distributors L.P. (successor
Sponsor to 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.

Investors should retain both parts of this Prospectus for
future reference.

Prospectus Part A Dated October 31, 1995

82228.1

<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, were rated "AAA" by Standard & Poor's Corporation at
the time originally deposited in the Trust. The "AAA" 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." A Trust
designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. 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.) 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. 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
1/13668th undivided interest in the principal and net income of the Trust.

A-2

82228.1

<PAGE>

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 MBIA
Insurance 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"), 11.6%; Bond Investors Guaranty
("BIG"), 15%; Financial Guaranty Insurance Company ("Financial Guaranty"),
29.1%; and Municipal Bond Insurance Association ("MBIA"), 44.3%.

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 1.918% of
the Public Offering Price, or 1.955% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) 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 purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $506.22
plus accrued interest of $7.00 under the monthly distribution plan, $9.92
under the semi-annual distribution plan and $29.40 under the annual

A-3

82228.1

<PAGE>

distribution plan, for a total of $513.22, $516.14 and $535.62, 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.)

A schedule of cash flow projections is available from the Sponsor
upon request.

A-4

82228.1

<PAGE>

MARKET FOR UNITS. The Sponsor, although not obligated to do so,
intends 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
1.918% of the Public Offering Price (1.955% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will
be able to redeem his or her 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.)

A-5

82228.1

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST
25TH DISCOUNT SERIES

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1995

Date of Deposit: November 6, 1986 Minimum Principal Distribution:
Principal Amount of Bonds ... $7,085,000 $1.00 per Unit.
Number of Units ............. 13,668 Weighted Average Life to
Fractional Undivided Inter- Maturity: 10.8 Years.
est in Trust per Unit ..... 1/13668 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $518.36 value of Trust is less than
Secondary Market Public $5,600,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $6,788,731+++ The earlier of December 31,
Divided by 13,668 Units ... $496.69 2035 or the disposition of the
Plus Sales Charge of 1.918% last Bond in the Trust.
of Public Offering Price $9.53 Trustee***: Chase Manhattan
Public Offering Price Bank, N.A.
per Unit ................ $506.22+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.04 per $1,000; semi-
Repurchase Price annual plan $.56 per $1,000;
per Unit .................. $496.69+ and annual plan is $.37 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $12
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ............ $9.53++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Reich & Tang
Unit Premium/(Discount) ... $(12.14) Distributors L.P.
Evaluation Time: 4:00 p.m. Sponsor's Annual Fee: Maximum of
New York Time. $.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# ......... $30.78 $30.78 $30.78
Less estimated annual fees and
expenses ............................ 1.19 .78 .66
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $29.59 $30.00 $30.12
Estimated interest distribution# ...... 2.46 15.00 30.12
Estimated daily interest accrual# ..... .0821 .0833 .0836
Estimated current return#++ ........... 5.85% 5.93% 5.95%
Estimated long term return++ .......... 4.69% 4.80% 4.83%
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

A-6

82228.1

<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.

+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $7.00 monthly, $9.92 semi-annually
and $29.40 annually.

++++ 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.

A-7

82228.1

<PAGE>

INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1995

DESCRIPTION OF PORTFOLIO*

The portfolio of the Trust consists of 19 issues representing
obligations of issuers located in 11 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 25.6% of the Bonds
are obligations of state and local housing authorities; approximately 21.4%
are hospital revenue bonds; none 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 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). Two of the issues
representing $1,090,000 of the principal amount of the Bonds are general
obligation bonds. All seventeen of the remaining issues representing
$7,240,000 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 3, Convention Center 1, Hospital 7, Insured Multi-Family Housing 1,
Pollution Control 1, Sales Tax 1, Sewer 1, and Water and Sewer 2. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.

As of June 30, 1995, $2,135,000 (approximately 25.6% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $2,135,000 (approximately 25.6% 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 74.4% were purchased at a
premium and none were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.

None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.

- --------
* Changes in the Trust Portfolio: From July 1, 1995 to September 15, 1995,
the entire principal amounts of the Bonds in portfolio nos. 6, 8, 12,
15, 16 and 17 have been called for redemption pursuant to pre-refunding
provisions and are no longer contained in the Trust. The entire
principal amount of the Bond in portfolio no. 9 has been called and is
no longer contained in the Trust. 108 Units have been redeemed.

A-8

82228.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

June 30, 1993 13,917 $567.32 $39.84 $40.38 $40.80 -0-
June 30, 1994 13,850 536.38 39.82 40.33 40.53 $ 2.99
June 30, 1995 13,668 507.91 39.05 39.56 40.42 15.25

A-9

82228.1

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 25th Discount Series:

We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 25th Discount Series as of
June 30, 1995, 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, 25th Discount Series as of June 30, 1995, 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 LLP

New York, New York
September 15, 1995
except as to Note 7 as to
which the date is
September 28, 1995

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Statement of Net Assets

June 30, 1995

Investments in marketable securities,
at market value (cost $7,021,008) $ 6,657,326

Excess of other assets over total liabilities 284,838
-------------

Net assets ( 13,668 units of fractional undivided
interest outstanding, $507.91 per unit) $ 6,942,164
=============

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Statements of Operations

<CAPTION>
Years ended June 30,
---------- ---- ----------- ---- ----------
---------- ----------- ----------
1995 1994 1993
---------- ----------- ----------

<S> <C> <C> <C>
Investment income - interest $ 567,188 584,319 586,792
---------- ----------- ----------

Expenses:
Trustee's fees 11,915 10,158 11,026
Evaluator's fees 3,299 3,584 3,412
Sponsor's fees 1,313 1,434 1,434
---------- ----------- ----------

Total expenses 16,527 15,176 15,872
---------- ----------- ----------

Net investment income 550,661 569,143 570,920
---------- ----------- ----------

Realized and unrealized gain (loss) on investments:
Net realized loss on bonds
sold or called (50,563) (21,344) -
Unrealized appreciation
(depreciation) for the year (139,429) (380,023) 68,548
---------- ----------- ----------

Net gain (loss) on
investments (189,992) (401,367) 68,548
---------- ----------- ----------

Net increase in net
assets resulting
from operations $ 360,669 167,776 639,468
========== =========== ==========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Statements of Changes in Net Assets

<CAPTION>
Years ended June 30,
----------- -- ---------- -- ----------
----------- ---------- ----------
1995 1994 1993
----------- ---------- ----------

<S> <C> <C> <C>
Operations:
Investment income, net $ 550,661 569,143 570,920
Net realized loss on bonds
sold or called (50,563) (21,344) -
Unrealized appreciation
(depreciation) for the year (139,429) (380,023) 68,548
----------- ---------- ----------

Net increase in net
assets resulting
from operations 360,669 167,776 639,468
----------- ---------- ----------

Distributions to Certificateholders:
Investment income 541,701 555,930 557,652
Principal 210,955 41,541 -

Redemptions:
Interest 3,908 598 -
Principal 90,765 36,304 -
----------- ---------- ----------

Total distributions and
redemptions 847,329 634,373 557,652
----------- ---------- ----------

Total increase (decrease) (486,660) (466,597) 81,816

Net assets at beginning of year 7,428,824 7,895,421 7,813,605
----------- ---------- ----------

Net assets at end of year (including
undistributed net investment
income of $219,252, $214,200 and
$222,402, respectively) $ 6,942,164 7,428,824 7,895,421
=========== ========== ==========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Notes to Financial Statements

June 30, 1995, 1994 and 1993

(1) Organization and Financial and Statistical Information

Insured Municipal Securities Trust, 25th Discount Series (Trust) was organized
on November 6, 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

(3) Income Taxes

The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.

(Continued)

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Notes to Financial Statements

(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).

See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended June 30, 1995,
1994 and 1993.

The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 182 and 67 units were redeemed by the Trust during the years ended
June 30, 1995 and 1994, respectively. No units were redeemed during the year
ended June 30, 1993.

(5) Net Assets

At June 30, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:

Original cost to Certificateholders $ 8,705,412
Less initial gross underwriting commission (478,800)

8,226,612

Cost of securities sold or called (1,271,424)
Net unrealized depreciation (363,682)
Undistributed net investment income 219,252
Undistributed proceeds from bonds sold or called 131,406

Total $ 6,942,164

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 14,000 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 $65,820.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Notes to Financial Statements

(6) Successor Trustee

(7) Successor Sponsor

<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES
Portfolio
June 30, 1995

<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 $ 650,000 Municipality of Anchorage, AAA 8.125% 6/01/02 @ 100 S.F. $ 687,447
Alaska 1986 General Obligation 6/01/2011 6/01/96 @ 102 Ref.
Water Bonds (Financial Guaranty)
(5)

2 300,000 Municipality of Anchorage, AAA 7.625 12/01/07 @ 100 S.F. 315,940
Alaska Senior Lien Refunding 12/01/2015 6/01/96 @ 102 Ref.
Electric Revenue Bonds, 1986
Series A (MBIA) (5)

3 440,000 Kenai Peninsula Borough, Alaska AAA 8.400 No Sinking Fund 504,416
General Obligation Bonds, 1986 1/01/2000 None
Series (AMBAC)

4 120,000 Little Rock, Arkansas Hotel and AAA 7.750 1/01/06 @ 100 S.F. 125,845
Restaurant Gross Receipt Tax 1/01/2015 1/01/96 @ 103 Ref.
Little Rock Arkansas Convention
Center Refunding Revenue Bonds
1986 (Financial Guaranty) (5)

5 25,000 Jacksonville, Florida Health AAA 9.100 12/01/01 @ 100 S.F. 27,936
Facilities Authority, Health 12/01/2015 12/01/97 @ 100 Ref.
Facility Revenue Refunding Bonds
1985 (St. Vincent DePaul Health
System) (AMBAC) (5)

6 60,000 Manatee County, Florida AAA 9.750 9/01/05 @ 100 S.F. 61,777
Industrial Development Revenue 9/01/2010 9/01/95 @ 102 Ref.
Refunding Bonds, 1985 Series
(Manatee Hospitals and Health
Systems, Inc.) (MBIA)

7 500,000 Tamarac, Florida Water and AAA 8.250 No Sinking Fund 536,715
Sewerage Revenue Bonds 1986 10/01/2011 10/01/96 @ 102 Ref.
Series (AMBAC) (5)

8 450,000 The Hospital Authority of the AAA 9.125 7/01/01 @ 100 S.F. 459,000
City of Fort Wayne, Indiana 7/01/2015 7/01/95 @ 102 Ref.
Hospital Revenue Refunding Bonds
(Ancilla Systems Incorporated)
Series 1985A (BIG) (5)

9 200,000 City of Rockport, Indiana AAA 9.250 No Sinking Fund 205,122
Pollution Control Revenue Bonds 8/01/2014 8/01/95 @ 102 Ref.
(Indiana and Michigan Electric
Company Project) Series 1985A
(BIG)

10 400,000 Jefferson Parish, Louisiana AAA 7.875% No Sinking Fund 423,428
Hospital Service District #2 7/01/2006 7/01/96 @ 102 Ref.
Hospital Revenue Refunding Bonds
1986 (MBIA) (5)

11 600,000 Jefferson Sales Tax District, AAA 8.000 Currently @ 100 S.F. 678,246
Jefferson Parish, Louisiana 7/01/2005 7/01/99 @ 100 Ref.
Special Sales Tax Revenue Bonds,
Series 1986 A (BIG) (5)

12 60,000 Michigan State Hospital Finance AAA 9.250 7/01/05 @ 100 S.F. 61,200
Authority Revenue Bonds (Sisters 7/01/2015 7/01/95 @ 102 Ref.
of Mercy Health Corporation)
Series 1985 F (MBIA) (5)

13 300,000 City of Farmington, New Mexico AAA 9.750 5/15/06 @ 100 S.F. 320,835
Utility System Revenue Bonds 5/15/2013 5/15/96 @ 102 Ref.
Series 1985 (Financial Guaranty)
(5)

14 25,000 Mount Lebanon, Pennsylvania AAA 9.125 1/01/96 @ 100 S.F. 26,142
Hospital Authority Hospital 7/01/2006 1/01/96 @ 102 Ref.
Revenue Refunding Series 1985
(St. Clair Memorial Hospital)
(Financial Guaranty) (5)

15 700,000 Tarrant County (Texas) Health AAA 9.750 9/01/03 @ 100 S.F. 721,014
Facilities Development 9/01/2015 9/01/95 @ 102 Ref.
Corporation Health System
Revenue Bonds Harris Methodist
Health System Series 1985
(Financial Guaranty) (5)

16 65,000 Tarrant County (Texas) Health AAA 9.500% No Sinking Fund 66,924
Facilities Development 9/01/2002 9/01/95 @ 102 Ref.
Corporation Health System
Revenue Bonds Harris Methodist
Health System Series 1985
(Financial Guaranty) (5)

17 735,000 Intermountain Power Agency (a AAA 8.750 7/01/06 @ 100 S.F. 749,700
political subdivision of the 7/01/2012 7/01/95 @ 102 Ref.
State of Utah) Power Supply
System Revenue Refunding Bonds
1985 Series J (MBIA) (5)

18 565,000 Mount Vernon, Washington Sewer AAA 8.050% 7/01/02 @ 100 S.F. 588,176
Revenue Authority Bonds, 1986 7/01/2006 7/01/96 @ 100 Ref.
Series (Financial Guaranty) (5)

19 2,135,000 The District of Columbia AAA 0.000 5/01/05 @ 11.975 S.F. 97,463
Multi-Unit Housing Finance 11/01/2025 11/01/08 @ 17.206
Corporation Mortage Revenue Ref.
Bonds, Series 1983 (FHA Insured
Mortgage Loan -- Congress Park
II Apartments Section 8 Assisted
Project) (MBIA)
----------- -----------

$ 8,330,000 $ 6,657,326
=========== ===========

</TABLE>

See accompanying footnotes to portfolio and notes to the financial statements.
<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 25TH DISCOUNT SERIES

Footnotes to Portfolio

June 30, 1995

(3) At June 30, 1995, the net unrealized depreciation of all the bonds was
comprised of the following:

Gross unrealized appreciation $ 39,916
Gross unrealized depreciation (403,598)

Net unrealized depreciation $ (363,682)

(4) The annual interest income, based upon bonds held at June 30, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $ 531,686.

(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.

(6) Bonds sold or called after June 30, 1995 are noted in a footnote "Changes
in Trust Portfolio" under "Description of Portfolio" in Part A of this
Prospectus.

INSURED MUNICIPAL SECURITIES TRUST

26TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)

The Trust is a unit investment trust designated 26th 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 Reich & Tang Distributors L.P. (successor
Sponsor to 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.

Investors should retain both parts of this
Prospectus for future reference.

Prospectus Part A Dated October 31, 1995

82491.1

<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, were rated "AAA" by Standard & Poor's Corporation at
the time originally deposited in the Trust. The "AAA" 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." A Trust
designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less
than fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. 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.) 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. 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
1/10853rd undivided interest in the principal and net income of the Trust.

A-2

82491.1

<PAGE>

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 MBIA
Insurance 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"), 10.4%; Bond Investors Guaranty
("BIG"), 11.8%; Financial Guaranty Insurance Company ("Financial Guaranty"),
3.8%; and Municipal Bond Insurance Association ("MBIA"), 74%.

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 2.16% of
the Public Offering Price, or 2.207% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) 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 purchased on the
Evaluation Date, the Public Offering Price per Unit would have been $380.55
plus accrued interest of $7.17 under the monthly distribution plan, $9.22
under the semi-annual distribution plan and $26.45 under the annual

A-3

82491.1

<PAGE>

distribution plan, for a total of $387.72, $389.70 and $407.00, 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.)

A schedule of cash flow projections is available from the Sponsor
upon request.

A-4

82491.1

<PAGE>

MARKET FOR UNITS. The Sponsor, although not obligated to do so,
intends 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
2.16% of the Public Offering Price (2.207% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will
be able to redeem his or her 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.)

A-5

82491.1

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST
26TH DISCOUNT SERIES

SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1995

Date of Deposit: December 18, 1986 Weighted Average Life to
Principal Amount of Bonds ... $6,340,000 Maturity:
Number of Units ............. 10,853 16.2 Years.
Fractional Undivided Inter- Minimum Value of Trust:
est in Trust per Unit ..... 1/10853 Trust may be terminated if
Principal Amount of value of Trust is less than
Bonds per Unit ............ $584.17 $4,800,000 in principal amount
Secondary Market Public of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31,
of Bonds in Trust ....... $4,042,808+++ 2035 or the disposition of the
Divided by 10,853 Units ... $372.51 last Bond in the Trust.
Plus Sales Charge of 2.16% Trustee***: Chase Manhattan
of Public Offering Price $8.04 Bank, N.A.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $380.55+ plan $1.03 per $1,000; semi-
Redemption and Sponsor's annual plan $.55 per $1,000;
Repurchase Price and annual plan is $.36 per
per Unit .................. $372.51+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $12
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $8.04++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Reich & Tang
and Principal Amount per Distributors L.P.
Unit Premium/(Discount) ... $(203.62) Sponsor's Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.15 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in Part B
$1.00 per Unit. of this Prospectus).

PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED

Monthly Semi-Annual Annual
Option Option Option

Gross annual interest income# ......... $27.40 $27.40 $27.40
Less estimated annual fees and
expenses ............................ 1.34 .90 .77
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $26.06 $26.50 $26.63
Estimated interest distribution# ...... 2.17 13.25 26.63
Estimated daily interest accrual# ..... .0723 .0736 .0739
Estimated current return#++ ........... 6.85% 6.96% 7.00%
Estimated long term return++ .......... 5.54% 5.66% 5.70%
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

A-6

82491.1

<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.

+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $7.17 monthly, $9.22 semi-annually
and $26.45 annually.

++++ 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.

A-7

82491.1

<PAGE>

INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1995

DESCRIPTION OF PORTFOLIO*

The portfolio of the Trust consists of 13 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 43.5% of the Bonds
are obligations of state and local housing authorities; approximately 14.6%
are hospital revenue bonds; none 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 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). Two of the issues
representing $1,000,000 of the principal amount of the Bonds are general
obligation bonds. All eleven of the remaining issues representing $5,590,000
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: Airport 2,
Electric 1, Federally Insured Mortgage 1, Hospital 4, Utility 1, 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.

As of June 30, 1995, $2,865,000 (approximately 43.5% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
Of these original issue discount bonds, $2,865,000 (approximately 43.5% 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 56.5% were purchased at a
premium and none were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.

None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.

- --------
* Changes in the Trust Portfolio: From July 1, 1995 to September 15,
1995, the entire principal amounts of the Bonds in portfolio nos. 6 and
12 have been called for redemption pursuant to pre-refunding provisions
and are no longer contained in the Trust. The entire principal amounts
of the Bonds in portfolio nos. 7 and 9 have been called and are no
longer contained in the Trust. 53 Units have been redeemed.

A-8

82491.1

<PAGE>

FINANCIAL AND STATISTICAL INFORMATION

Selected data for each Unit outstanding for the periods listed below:

June 30, 1993 12,000 $597.04 $43.05 $43.77 $44.08 $ 1.67
June 30, 1994 11,886 538.92 41.89 42.58 43.77 29.49
June 30, 1995 10,853 421.00 36.42 37.05 41.09 102.50

A-9

82491.1

<PAGE>

Independent Auditors' Report

The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 26th Discount Series:

We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 26th Discount Series as of
June 30, 1995, 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, 26th Discount Series as of June 30, 1995, 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 LLP

New York, New York
September 15, 1995
except as to Note 7 as to
which the date is
September 28, 1995

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Statement of Net Assets

June 30, 1995

Investments in marketable securities,
at market value (cost $4,306,515) $ 4,042,728

Accrued interest 92,433
Cash 449,362
---------
Other assets 541,795
---------

Accrued expenses 29,202
Advance from trustee 0
Other liabilities 29,202
---------

Excess of other assets over total liabilities 512,593
----------

Net assets 10,853 units of fractional undivided
interest outstanding, $419.73 per unit) $ 4,555,321
==========

See accompanying notes to financial statements.
<PAGE>

<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Statements of Operations

<CAPTION>
Years ended June 30,
-------- ---- --------- ---- --------
-------- --------- --------
1995 1994 1993
-------- --------- --------

<S> <C> <C> <C>
Investment income - interest $ 459,530 544,690 561,047
-------- --------- --------

Expenses:
Trustee's fees 12,069 13,278 13,725
Evaluator's fees 31,679 3,584 3,412
Sponsor's fees 1,769 1,795 1,798
-------- --------- --------

Total expenses 45,517 18,657 18,935
-------- --------- --------

Investment income, net 414,013 526,033 542,112
-------- --------- --------

Realized and unrealized gain (loss) on investments:
Net realized loss on bonds
sold or called (257,057) (57,266) (3,435)
Unrealized appreciation
(depreciation) for the year 79,010 (307,726) (4,966)
-------- --------- --------

Net loss on
investments (178,047) (364,992) (8,401)
-------- --------- --------

Net increase in net
assets resulting
from operations $ 235,966 161,041 533,711
======== ========= ========

</TABLE>
See accompanying notes to financial statements.

<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Statements of Changes in Net Assets

<CAPTION>
Years ended June 30,
---------- -- --------- - ----------
---------- --------- ----------
1995 1994 1993
---------- --------- ----------

<S> <C> <C> <C>
Operations:
Investment income, net $ 414,013 526,033 542,112
Net realized loss on bonds
sold or called (257,057) (57,266) (3,435)
Unrealized appreciation
(depreciation) for the year 79,010 (307,726) (4,966)
---------- --------- ----------

Net increase in net
assets resulting
from operations 235,966 161,041 533,711
---------- --------- ----------

Distributions to Certificateholders:
Investment income 431,820 502,852 518,572
Principal 1,216,634 351,421 20,040

Redemptions:
Interest 9,870 1,787 -
Principal 427,872 63,927 -
---------- --------- ----------

Total distributions
and redemptions 2,086,196 919,987 538,612
---------- --------- ----------

Total decrease (1,850,230) (758,946) (4,901)

Net assets at beginning of year 6,405,551 7,164,497 7,169,398
---------- --------- ----------

Net assets at end of year (including
undistributed net investment
income of$173,146, $269,022 and
$247,628, respectively) $ 4,555,321 6,405,551 7,164,497
========== ========= ==========

</TABLE>
See accompanying notes to financial statements.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Notes to Financial Statements

June 30, 1995, 1994 and 1993

(1) Organization and Financial and Statistical Information

Insured Municipal Securities Trust, 26th Discount Series (Trust) was organized
on December 18, 1986 (date of deposit) 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

Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the investments based
upon the bid prices for the bonds at the end of the year, 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.

(Continued)

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Notes to Financial Statements

(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).

See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended June 30, 1995,
1994 and 1993.

The Trust Indenture and Agreement also requires the Trust to redeem units
tendered. 1,033 units were redeemed during the year ended June 30, 1995. 114
units were redeemed during the year ended June 30, 1994. No units were
redeemed during the year ended June 30, 1993.

(5) Net Assets

At June 30, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:

Original cost to Certificateholders $ 7,424,707
Less initial gross underwriting commission (408,360)

7,016,347

Cost of securities sold or called (2,799,158)
Net unrealized depreciation (263,787)
Undistributed net investment income 173,146
Undistributed proceeds
from bonds sold or called 428,773

Total $ 4,555,321

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 $89,326.

<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Notes to Financial Statements

(6) Successor Trustee

Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) ("Chase").
Accordingly, Chase is the successor of the unit investment trusts sponsored by
Bear Stearns and Co.

(7) Successor Sponsor

INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES
Portfolio
June 30, 1995

<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 $ 600,000 Municipality of Anchorage, AAA 7.625% 12/01/07 @ 100 S.F. $ 631,878
Alaska Senior Lien Refunding 12/01/2015 6/01/96 @ 102 Ref.
Electric Revenue Bonds, 1986
Series A (MBIA) (5)

2 75,000 Halifax Hospital Medical AAA 9.625 12/01/02 @ 100 S.F. 79,098
Center, Volusia County, 12/01/2014 12/01/95 @ 103 Ref.
Florida Refunding Hospital
Revenue Bonds, Series 1985 A
(MBIA) (5)

3 300,000 Hillsborough County, Florida AAA 8.750 12/01/04 @ 100 S.F. 352,668
Refunding and Improvement 12/01/2006 12/01/99 @ 100 Ref.
Utility Revenue Bonds,
Series 1985 (MBIA) (5)

4 40,000 Fayette County, Georgia AAA 8.000 10/01/00 @ 100 S.F. 42,316
Water Revenue Bonds, Series 10/01/2011 10/01/96 @ 102 Ref.
1986 (MBIA)

5 275,000 Illinois Health Facility AAA 9.375 11/01/05 @ 100 S.F. 285,667
Authority Revenue Bonds 11/01/2013 11/01/95 @ 102 Ref.
(Children's Memorial
Hospital), 1985 Series A
(BIG) (5)

6 500,000 The City of New Orleans AAA 9.000 8/01/06 @ 100 S.F. 517,215
(Louisiana) International 8/01/2015 8/01/95 @ 103 Ref.
Airport General Purpose
Revenue Bonds, Series 1985
(MBIA) (5)

7 250,000 Metropolitan Nashville AAA 9.750 7/01/05 @ 100 S.F. 255,000
Airport Authority 7/01/2015 7/01/95 @ 102 Ref.
(Tennessee) Revenue Bonds,
Series 1985 (Financial
Guaranty)

8 500,000 Brownsville, Texas AAA 7.750 No Sinking Fund 521,290
Independent School District 8/15/2000 8/15/96 @ 100 Ref.
Unlimited Tax School
Building Bonds, Series 1986
A (AMBAC) (5)

9 110,000 Denton, Texas Health AAA 9.500 8/01/01 @ 100 S.F. 112,817
Facilities Development 8/01/2011 8/01/95 @ 102 Ref.
Corporation Health Facility
Revenue Bonds (The
Evangelical-Lutheran-Good
Samaritan Society Project),
Series 1985 A (AMBAC)

10 500,000 North Central Texas Health AAA 9.500 10/01/11 @ 100 S.F. 516,695
Facilities Development 10/01/2015 10/01/95 @ 102 Ref.
Corporation Hospital
Refunding Revenue Bonds,
Series 1985 A (Methodist
Hospitals of Dallas (BIG)

11 500,000 Pflugerville, Texas AAA 8.000% No Sinking Fund 521,890
Independent School District, 8/01/2002 8/01/96 @ 100 Ref.
School Building Unlimited
Tax Bonds, Series 1986
(MBIA) (5)

12 75,000 Trinity River Authority of AAA 10.100 No Sinking Fund 75,407
Texas (Ten Mile Creek 8/01/2007 8/01/95 @ 100 Ref.
System) Revenue Bonds,
Series 1984 (AMBAC) (5)

13 2,865,000 The District of Columbia AAA 0.000 5/01/05 @ 11.975 S.F. 130,787
Finance Corporation Mortgage 11/01/2025 11/01/08 @ 17.206 Ref.
Revenue Bonds, Series 1983
(FHA Insured Mortgage Loan -
Congress Park II Apartments,
Section 8 Assisted Project)
(MBIA)
------------ -----------

$ 6,590,000 $ 4,042,728
============ ===========

</TABLE>

See accompanying footnotes to the portfolio and notes to the financial
statements.

<PAGE>

INSURED MUNICIPAL SECURITIES TRUST, 26TH DISCOUNT SERIES

Footnotes to Portfolio

June 30, 1995

(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.

(3) At June 30, 1995, the net unrealized depreciation of all the bonds was
comprised of the following:

Gross unrealized appreciation $ 24,825
Gross unrealized depreciation (288,612)

Net unrealized depreciation $ (263,787)

(4) The annual interest income, based upon the bonds held at June 30, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $ 321,850.

(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.

(6) Bonds sold or called after June 30, 1995 are noted in a footnote "Changes
in Trust Portfolio" under "Description of Portfolio" in Part A of this
Prospectus.

<PAGE>

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: October 31, 1995

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 the Trust
Indenture and Agreement** (collectively, the "Trust Agreement"), dated the
Date of Deposit, among Reich & Tang Distributors L.P., as successor Sponsor to
Bear Stearns & Co. Inc., or depending on the particular Trust, among Reich &
Tang Distributors L.P. and Gruntal & Co., Incorporated, as Co-Sponsors (the
Sponsor or Co-Sponsors, if applicable, are referred to herein as the
"Sponsor"), Kenny S&P Evaluation Services, a division of J.J. Kenny Co. Inc.,
as Evaluator and Chase Manhattan Bank, N.A., as Trustee. The name of the
Sponsor for a particular Trust is contained in the "Summary of Additional
Information" in Part A.

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

- --------
* This Part B relates to the outstanding series of Insured Municipal
Securities Trust, Insured Municipal Securities Discount Trust, Insured
Municipal Securities New York Navigator Insured Trust, Insured Municipal
Securities New Jersey Navigator Insured Trust and/or Insured
Pennsylvania Navigator 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 incorpo-
rated herein.

112677.2

<PAGE>

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 Certificateholders, which may include the Sponsor or the Under-
writers, 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 and exempt from
state and local income tax to the extent indicated herein when received by
persons subject to state and local taxation in a state in which the issuers of
the Bonds are located. Such interest income may, however, be subject to the
federal 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 have 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. In the event of a downgrading of the
claims-paying ability of one of the insurers, as of the Evaluation Date, the
Bonds in the Trust which are insured by that company would no longer be rated
"AAA" by Standard & Poor's. The Units of Trusts containing the downgraded
bonds are no longer rated "AAA."

-2-
112677.2

<PAGE>

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
"Information Regarding the Trust" and "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.

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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 Bond 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

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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 was no litigation pending as of
the initial 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.

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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 Sponsor is
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 "Description
of Portfolio" in Part A of this Prospectus for the amount of moral obligation
bonds contained therein.

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".)

Puerto Rico Bonds. Certain of the Bonds in the Trust may be
general obligations and/or revenue bonds of issuers located in Puerto Rico
which will be affected by general economic conditions in Puerto Rico. The
economy of Puerto Rico is closely integrated with that of the mainland United
States. During fiscal year 1994, approximately 87% of Puerto Rico's exports
went to the United States mainland, which was also the source of approximately
67% of Puerto Rico's imports. In fiscal 1994, Puerto Rico experienced a $4.3
billion positive adjusted merchandise trade balance. The economy of Puerto
Rico is dominated by the manufacturing and service sectors. The manufacturing
sector has experienced a basic change over the years as a result of increased
emphasis on higher wage, high technology industries such as pharmaceuticals,
electronics, computers, microprocessors, professional and scientific
instruments, and certain high technology machinery and equipment. The service
sector, including finance, insurance and real estate, also plays a major role
in the economy. It ranks second only to manufacturing in contribution to the
gross domestic product and leads all sectors in providing employment. In

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<PAGE>

recent years, the service sector has experienced significant growth in
response to the expansion of the manufacturing sector. Since fiscal 1985,
personal income, both aggregate and per capita, has increased consistently
each fiscal year. In fiscal 1994, aggregate personal income was $25.7 billion
($21.6 billion in 1987 prices) and personal income per capita was $7,047
($5,902 in 1987 prices). Personal income includes transfer payments to
individuals in Puerto Rico under various social programs. Total federal
payments to Puerto Rico, which include transfers to Commonwealth government
entities and expenditures of federal agencies in Puerto Rico, in addition to
federal transfer payments to individuals, are lower on a per capita basis in
Puerto Rico than in any state. Transfer payments to individuals in fiscal
1994 were $5.7 billion, of which $3.9 billion, or 68.9%, represent
entitlements to individuals who had previously performed services or made
contributions under programs such as Social Security, Veterans' Benefits and
Medicare. The number of persons employed in Puerto Rico during fiscal 1994
averaged 1,011,000. Unemployment, although at a low level compared to the
late 1970s, remains above the average for the United States. In fiscal year
end June 30, 1994, the unemployment rate in Puerto Rico was 16.0%. Puerto
Rico's decade-long economic expansion continued throughout the five-year
period from fiscal 1990 through fiscal 1994. Almost every sector of its
economy was affected and record levels of employment were achieved. Factors
behind this expansion include Commonwealth sponsored economic development
programs, the relatively stable prices of oil imports, the continued growth of
the United States economy, periodic declines in exchange value of the United
States dollar and the relatively low cost of borrowing during the period. The
Planning Board's most recent Gross Product forecast for fiscal 1995 and fiscal
1996, made in February 1995, shows increases of 2.9% and 2.7%, respectively.
The Puerto Rico Planning Board's economic activity index, a composite index
for thirteen economic indicators, increased 2.7% for the first seven months of
fiscal 1995 compared to the same period of fiscal 1994, which period showed an
increase of 1.3% over the same period of fiscal 1993. Growth in the Puerto
Rico economy in fiscal 1996 depends on several factors, including the state of
the United States economy and the relative stability in the price of oil
imports, the exchange value of the U.S. dollar and the cost of borrowing.

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 Portfolio" 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 accredit 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

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<PAGE>

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 yields (coupon interest income as a percentage of market
price) of discount bonds will be lower than the current yields 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 market rates. Discount Bonds
with a large term to maturity tend to have a higher current yield and a lower
current market value than otherwise comparable bonds with a shorter term to
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 of the Bonds in the Trust is insured by a municipal bond
guaranty insurance policy obtained by either the Sponsor with respect to Bonds
which were not insured prior to their deposit in the Trust ("Sponsor-Insured
Bonds") or the issuer, underwriter or prior owner of the Bonds ("Pre-Insured
Bonds"), and issued by one of the insurance companies described under
"Insurance on the Bonds" in Part B (the "Insurance Companies"). The insurance
policies 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.

Such insurance covers the 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 MBIA Insurance Corporation ("MBIA Corp."), will also cover
any accelerated payments of principal and any 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 full and complete
payments required to be made by or on behalf of an issuer of small industrial
revenue bonds and pollution control revenue bonds if there occurs an event
which results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premiums 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 full and
complete 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. The insurance relates only to the prompt payment of
principal of and interest on the securities in the portfolios, and does not
remove market risks nor does it guarantee the market value of Units in the
Trusts. The terms of the insurance are more fully described herein. No

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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 Pre-Insured
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 Pre-Insured Bond may be down-graded.

Navigator Insured Trusts

Sponsor-Insured Bonds. Each of the Bonds in the Navigator Trusts
is insured by a financial guaranty insurance policy obtained by the Sponsor
(the "Navigator Sponsor-Insured Bonds") from MBIA Corp. covering regularly
scheduled payments of principal thereof and interest thereon when such amounts
become due for payment but have not been paid. Such amounts shall be reduced
by any amounts received by the holders or the owners of the Bonds from any
trustee for the Bond issuers, any other Bond insurers or any other source
other than MBIA Corp. MBIA Corp. has issued such policy or policies covering
each of the Bonds in the Navigator Trusts and each such policy will remain in
force until the payment in full of such Bonds, whether or not such Bonds
continue to be held in the Navigator Trusts. The insurer's policies relating
to small industrial development bonds and pollution control revenue bonds also
guarantee any accelerated payments required to be made by or on behalf of an
issuer of Bonds pursuant to the terms of the Bonds if there occurs an event
which results in the loss of the tax-exempt status of the interest on such
Bonds, including principal, interest or premium payments, if any, as and when
required. Such insurance does not cover for any 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 the tax exempt status of the interest on such Bonds nor
will the insurance cover accelerated payments of principal or penalty interest
or premiums unrelated to taxability of interest on any of the Bonds, including
pollution control revenue bonds or small industrial development bonds. In the
event of such an acceleration, the payments guaranteed by MBIA Corp. shall be
made in such amounts and at such times as such payments would have been made
absent any such acceleration. The insurance relates only to the prompt
payment of principal of and interest on the securities in the Navigator
Portfolios and does not remove market risk nor does it guarantee the market
value of Units in the Navigator Trusts. The terms of the insurance are more
fully described herein. For discussion of the effect of an occurrence of non-
payment of principal or interest on any Bonds in the Navigator Trusts see
"Portfolio Supervision" in Part B. 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 the Navigator Trusts. In addition, investors
should be aware that subsequent to the Date of Deposit the rating of the
claims-paying ability of MBIA Corp. may be downgraded, which may result in a
downgrading of the rating of the Units in the Navigator Trusts. The premiums
for the Navigator Sponsor-Insured Bonds are obligations of the Sponsor.
Additionally, some of the Bonds in the Navigator Trusts may be Pre-Insured
Bonds (as described below). The premium for the Pre-Insured Bonds is an
obligation of the issuers, underwriters or prior owners of those Bonds. The
insurance policy or policies relating to the Navigator Sponsor-Insured Bonds
provides that, to the extent that Bonds are both Pre-Insured Bonds and
Navigator Sponsor-Insured Bonds, coverage is effective after a claim has been
made upon the insurer of the Pre-Insured Bonds.

Upon notification from the trustee for any bond issuer or any
holder or owner of the Bonds that such trustee or paying agent has
insufficient funds to pay any principal or interest in full when due, MBIA
Corp. will be obligated to deposit funds promptly with Citibank, N.A., New
York, New York, as fiscal agent for MBIA Corp., sufficient to fully cover the
deficit. If notice of nonpayment is received on or after the due date, MBIA
Corp. will provide for payment within one business day following receipt of
the notice. Upon payment by MBIA Corp. of any Bonds, coupons, or interest

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payments, MBIA Corp. shall succeed to the rights of the owner of such Bonds,
coupons or interest payments with respect thereto.

Pre-Insured Bonds. Some of the Bonds in the Trusts which are
insured under policies obtained by the Bond issuers, underwriters or prior
owners of the Bonds ("Pre-Insured Bonds") are insured either by AMBAC
Indemnity Corporation ("AMBAC"), Bond Investors Guaranty ("BIG"), Capital
Guaranty Insurance Company ("Capital Guaranty"), Connie Lee Insurance Company
("Connie Lee"), Financial Guaranty Insurance Company ("Financial Guaranty"),
Financial Security Assurance, Inc. ("Financial Security"), Firemen's Insurance
Co. ("Firemen's"), Industrial Indemnity Company ("IIC") (which operates the
Health Industry Board Insurance Program ("HIBI Program"), Municipal Bond
Insurance Association ("MBIA"), MBIA Corp. or United States Fidelity and
Guaranty Company ("USF&G Company") (collectively the "Insurance Companies").
The cost of this insurance is borne by the respective issuers, underwriters or
prior owners of the Pre-Insured Bonds. The percentage of each Portfolio
insured by each insurance company, if any, is set forth under "Insurance" in
Part A of this Prospectus.

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 $2,230,000,000, and
statutory capital (unaudited) of approximately $1,260,000,000 as of June 30,
1995. 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.

AMBAC has entered into pro rata reinsurance agreements under which
a percentage of the insurance underwritten pursuant to certain municipal bond
insurance programs of AMBAC has been and will be assumed by a number of
foreign and domestic unaffiliated reinsurers.

AMBAC has obtained a ruling from the Internal Revenue Service to
the effect that the insuring of an obligation by AMBAC will not affect the
treatment for federal income tax purposes of interest on such obligation and
that insurance proceeds representing maturing interest paid by AMBAC under
policy provisions substantially identical to those contained in its municipal
bond insurance policy shall be treated for federal income tax purposes in the
same manner as if such payments were made by issuer of the Bonds.

As of the Evaluation Date the claims-paying ability of AMBAC has
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 publicly owned and its 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 50
States, the District of Columbia and three U.S. territories. As of June 30,
1995, Capital Guaranty had more than $18.0 billion in net exposure outstanding
(excluding defeased issues). The total statutory policyholders' surplus and
contingency reserves of Capital Guaranty Insurance Company was approximately
$201,131,000 (unaudited) and total admitted assets were approximately
$316,110,400 (unaudited) as reported to the Insurance Department of the State
of Maryland as of June 30, 1995.

As of the Evaluation Date, the claims-paying ability of Capital
Guaranty has been rated "AAA" by Standard & Poor's.

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Connie Lee, a stock insurance company incorporated in Wisconsin,
is a wholly-owned subsidiary of College Construction Loan Insurance
Association, a stockholder-owned District of Columbia insurance holding
company whose creation was authorized by the 1986 amendments to the Higher
Education Act. The United States Department of Education and Student Loan
Marketing Association are founding shareholders of College Construction Loan
Insurance Association. As a federally authorized company, Connie Lee's
structure and operational authorities are subject to revision by amendments to
the Higher Education Act or other federal enactments. CONNIE LEE IS NOT AN
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES GOVERNMENT, ALTHOUGH THE UNITED
STATES GOVERNMENT IS A STOCKHOLDER OF COLLEGE CONSTRUCTION LOAN INSURANCE
ASSOCIATION. THE OBLIGATIONS OF CONNIE LEE ARE NOT OBLIGATIONS OF THE UNITED
STATES GOVERNMENT.

As of June 30, 1995, the total policyholders' surplus of Connie
Lee was $108,457,303 (unaudited) and total admitted assets were $202,320,447
(unaudited), as reported to the Commissioner of Insurance of the State of
Wisconsin.

As of the Evaluation Date, the claims-paying ability of Connie Lee
has been rated "AAA" by Standard & Poor's.

Financial Guaranty 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
June 30, 1995, the total capital and surplus of Financial Guaranty was
approximately $978,500,000. In addition, Financial Guaranty is currently
licensed to write insurance in 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 ("CIC") and a member of
The Continental Insurance Companies, a group of property and casualty
insurance companies. On May 10, 1995, CNA Financial Corporation purchased the
outstanding shares of CIC. Firemen's, among other policy types, provides
unconditional and non-cancelable insurance on industrial development revenue
bonds. As of December 31, 1994, Firemen's statutory surplus (audited) was
$360,170,004.

As of the Evaluation Date, the claims-paying ability of Firemen's
has been rated "A-" by Standard & Poor's (see "Ratings" under "Insurance on
the Bonds" in this Part B).

Financial Security is a monoline insurance company incorporated on
March 16, 1984 under the laws of the State of New York and is licensed,
directly or through its subsidiaries, to engage in the financial guaranty
insurance business in all 50 states, the District of Columbia, Puerto Rico and
the United Kingdom. Financial Security and its subsidiaries are engaged in
the business of writing financial guaranty insurance, principally in respect
of securities offered in domestic and foreign markets.

Financial Security is a wholly owned subsidiary of Financial
Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange
listed company. Holdings is owned approximately 61.6% by US WEST Capital
Corporation ("US WEST"), 9.6% by Fund American Enterprises Holdings, Inc.
("Fund American"), and 7.5% by The Tokio Marine and Fire Insurance Co., Ltd.
("Tokio Marine"). US WEST is a subsidiary of US WEST, Inc., which operates

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businesses involved in communications, data solutions, marketing services and
capital assets, including the provision of telephone services in 14 states in
the western and midwestern United States. Fund American is a financial
services holding company whose principal operating subsidiary is one of the
nation's largest mortgage servicers. Tokio Marine is a major Japanese
property and casualty insurance company. US WEST has announced its intention
to dispose of its remaining interest in Holdings as part of its strategic plan
to withdraw from businesses not directly involved in telecommunications. Fund
American has certain rights to acquire and vote additional shares of Holdings
from US WEST and Holdings. No shareholder of Holdings is obligated to pay any
debt of Financial Security or any claim under any insurance policy issued by
Financial Security or to make any additional contribution to the capital of
Financial Security.

On August 18, 1995, Holdings entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Capital Guaranty Corporation ("CGC")
pursuant to which CGC will be merged with a subsidiary of Holdings (the
"Merger"), subject to receipt of regulatory approvals and satisfaction of
other customary closing conditions, including the maintenance by Financial
Security of its claims-paying ability rating of "AAA" by Standard & Poors.
The principal operating subsidiary of CGC is Capital Guaranty Insurance
Company ("CGIC"), a financial guaranty insurer with a claims-paying ability
rating of "AAA" by Standard & Poor's. The Merger is expected to be completed
in late-1995 or early-1996. Following the Merger, CGIC will become a wholly-
owned subsidiary of Financial Security and a party to the intercompany
reinsurance agreement referred to below.

Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or any of its subsidiaries
are reinsured among such companies on an agreed upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, 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 is utilized by
Financial Security as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit Financial
Security's obligations under any financial guaranty insurance policy. As of
June 30, 1995, total shareholder equity of Financial Security and its wholly-
owned subsidiaries was (unaudited) $576,462,000 and total unearned premium
reserves was (unaudited) $798,964,000.

As of the Evaluation Date, Financial Security's claims-paying
ability has been rated "AAA" by Standard & Poor's Corporation.

On the original date of deposit, some of the Bonds in the Trusts
may have been pre-insured pursuant to the HIBI Program operated by IIC. Under
the HIBI Program, all insurance written was pooled pursuant to a Reinsurance
Participation Agreement among United States Fire Insurance Company, The North
River Insurance Company, Westchester Fire Insurance Company, International
Insurance Company and Industrial Indemnity Company (collectively, including
IIC, the "Companies"). Under the Reinsurance Participation Agreement, each
Company shared in the business produced by each participant in the pool on the
following basis: United States Fire Insurance Company--41%, IIC--18%, The
North River Insurance Company--18%, Westchester Fire Insurance Company--18%
and International Insurance Company--5%. As of December 31, 1992, the
Reinsurance Participation Agreement terminated. As of January 1, 1993, each
party to the HIBI Program remains liable on risks in force until their
expiration.

As of the Evaluation Date, the claims-paying ability of each of
the Companies has been rated by Standard & Poor's as follows: IIC has been

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rated A+; United States Fire Insurance Company, North River Insurance Company
and Westchester Fire Insurance Company have each been rated A; and
International Insurance Company has not been rated (see "Ratings" under
"Insurance on the Bonds" in this Part B).

IIC is a wholly-owned subsidiary of Industrial Indemnity Holdings,
Inc. Industrial Indemnity Holdings, Inc. is a wholly owned subsidiary of
Talegen Holdings, Inc. ICC is a California domestic stock property and
casualty insurance company that specializes in workers' compensation. For the
six months ending June 30, 1995, policy holders' surplus was $301,786,389.
For the year ending December 31, 1994, total policyholders' surplus of IIC was
$305,487,051.

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 (see "Ratings" under "Insurance on the Bonds" in this Part B).

MBIA is an association of five insurance companies which joined
together to insure severally (and not jointly) new issues of municipal bonds.
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.

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.

- --------
* Now known as Cigna Property and Casualty Company.

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MUNICIPAL BOND INSURANCE ASSOCIATION ("MBIA")
FIVE MEMBER COMPANIES ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF MARCH 31, 1995
(000's omitted)

New York New York New York
Statutory Statutory Policyholder's
Assets Liabilities Surplus

The Aetna Casualty & Surety Company $10,225,604 $ 8,312,158 $1,913,446
Fireman's Fund Insurance Company 7,126,217 5,116,059 2,010,158
The Travelers Indemnity Company 10,461,356 8,654,130 1,807,226
Cigna Property and Casualty Company 4,260,177 3,637,513 622,664
(Formerly Aetna Insurance Company)
The Continental Insurance Company 3,060,583 2,380,723 679,860

TOTAL $35,133,937 $28,100,583 $7,033,354

MBIA Insurance Corporation (formerly known as Municipal Bond
Investors Assurance Corporation) ("MBIA Corp.") is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Corp.
commenced municipal bond insurance operations on January 5, 1987. Some of the
members of the Association are among the shareholders 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. 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.

As of March 31, 1995, MBIA Corp. had admitted assets of $3.5
billion (unaudited), total liabilities of $2.4 billion (unaudited), and total
capital and surplus of $1.1 billion (unaudited) prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIA Corp. had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited).

As of the Evaluation Date, the claims-paying ability of MBIA and
MBIA Corp. has been rated "AAA" by Standard & Poor's.

USF&G Company is the principal subsidiary of USF&G Corporation, a
holding company engaged primarily in the insurance business. USF&G Company,
founded in 1896, is the twenty-fifth largest property/casualty insurer in the
United States, based on net premiums written for the year ended December 31,
1994. USF&G Company markets commercial and personal insurance products,
concentrating on targeted market segments, through a distribution network of
approximately 3,800 independent agents. USF&G Corporation's life insurance
subsidiary, F&G Life, markets life insurance and annuity products through a
network of wholesalers, brokers and specialty marketing organizations. USF&G
Company accounted for $2.3 billion (or 94%) of USF&G Corporation's
approximately $2.4 billion total premiums earned for the year ended
December 31, 1994. As of the Evaluation Date, the claims-paying ability of
USF&G Company has been rated A- by Standard and Poor's (see "Ratings" under
"Insurance on the Bonds" in this Part B).

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Insured Municipal Securities Trust

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 BIG, Financial Guaranty, MBIA or 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, BIG, Financial Guaranty,
Firemen's, MBIA, or MBIA Corp. (collectively, the "Insurance Companies") on
the date the Bonds were originally deposited in the Trust. 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.

Ratings. As of the Date of Deposit for each of the respective
Trusts, 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.

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RISK CONSIDERATIONS

Special Factors Affecting the Navigator Trusts

The Sponsor believes the information summarized below describes
some of the more significant events relating to the Navigator Trusts. Sources
of such information are the official statements of issuers located in the
states of the Navigator Trusts which have been issued in connection with the
debt offerings of such states, as well as other publicly available documents
and information. While the Sponsor has not independently verified such
information, they have no reason to believe it is not correct in all material
respects.

New York Navigator Trust

New York Risk Factors

This summary is included for the purpose of providing a general
description of New York State's (the "State") and New York City's (the "City")
credit and financial condition. The information set forth below is derived
from the official statements and/or preliminary drafts of official statements
prepared in connection with the issuance of State and City municipal bonds.
The Fund has not independently verified this information.

State Economic Trends. Over the long term, the State of New York
(the "State") and the City of New York (the "City") face serious potential
economic problems. The City accounts for approximately 41% of the State's
population and personal income, and the City's financial health affects the
State in numerous ways. The State historically has been one of the wealthiest
states in the nation. For decades, however, the State has grown more slowly
than the nation as a whole, gradually eroding its relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City. In recent years the
State's economic position has improved in a manner consistent with that for
the Northeast as a whole.

The State has for many years had a very high State and local tax
burden relative to other states. The State and its localities have used these
taxes to develop and maintain their transportation networks, public schools
and colleges, public health systems, other social services and recreational
facilities. Despite these benefits, the burden of State and local taxation,
in combination with the many other causes of regional economic dislocation,
has contributed to the decisions of some businesses and individuals to
relocate outside, or not locate within, the State.

Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced budgets,
reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State and its localities.

New York City.

General. The City, with a population of approximately 7.3
million, is an international center of business and culture. Its non-
manufacturing economy is broadly based, with the banking and securities, life
insurance, communications, publishing, fashion design, retailing and

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construction industries accounting for a significant portion of the City's
total employment earnings. Additionally, the City is the nation's leading
tourist destination. The City's manufacturing activity is conducted primarily
in apparel and publishing.

The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product (GCP) fell in those two years. For the 1992 fiscal year, the City
closed a projected budget gap of $3.3 billion in order to achieve a balanced
budget as required by the laws of the State of New York (the "State").
Beginning in calendar year 1992, the improvement in the national economy
helped stabilize conditions in the City. Employment losses moderated toward
year-end and real GCP increased, boosted by strong wage gains. The City's
current four-year financial plan assumes that, after noticeable improvements
in the City's economy during calendar year 1994, economic growth will slow in
calendar years 1995 and 1996 with local employment increasing modestly.
During the 1995 fiscal year, the City experienced substantial shortfalls in
payments of non-property tax revenues from those forecasted.

For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP"), and the City's 1995 fiscal year results are
projected to be balanced in accordance with GAAP. The City was required to
close substantial budget gaps in recent years in order to maintain balanced
operating results. For fiscal year 1995, the City adopted a budget which
halted the trend in recent years of substantial increases in City spending
from one year to the next. The adopted budget for fiscal year 1996 reduces
City-funded spending for the second consecutive year. There can be no
assurance that the City will continue to maintain a balanced budget as
required by State law without additional tax or other revenue increases or
reductions in City services, which could adversely affect the City's economic
base.

Pursuant to the laws of the State, the City prepares an annual
four-year financial plan, which is reviewed and revised on a quarterly basis
and which includes the City's capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps.
The City is required to submit its financial plans to review bodies, including
the New York State Financial Control Board ("Control Board"). If the City
were to experience certain adverse financial circumstances, including the
occurrence or the substantial likelihood and imminence of the occurrence of an
annual operating deficit of more than $100 million or the loss of access to
the public credit markets to satisfy the City's capital and seasonal financing
requirements, the Control Board would be required by State law to exercise
powers, among others, of prior approval of City financial plans, proposed
borrowings and certain contracts.

The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements. There can be no
assurance that there will not be reductions in State aid to the City from
amounts currently projected or that State budgets in future fiscal years will
be adopted by the April 1 statutory deadline and that such reductions or
delays will not have adverse effects on the City's cash flow or expenditures.

The Mayor is responsible for preparing the City's four-year
financial plan, including the City's current financial plan for the 1996
through 1999 fiscal years (the "1996-1999 Financial Plan" or "Financial
Plan"). The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its

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annual cash flow and financing requirements. Such assumptions and
contingencies include the condition of the regional and local economies, the
impact on real estate tax revenues of the real estate market, wage increases
for City employees consistent with those assumed in the Financial Plan,
employment growth, the results of a pending actuarial audit of the City's
pension system which is expected to significantly increase the City's annual
pension costs, the ability to implement proposed reductions in City personnel
and other cost reduction initiatives, which may require in certain cases the
cooperation of the City's municipal unions, revenue generating transactions
and provision of State and Federal aid and mandate relief.

Implementation of the Financial Plan is also dependent upon the
City's ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1996 through 1999
contemplates the issuance of $9.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. In addition, the City
issues revenue and tax anticipation notes to finance its seasonal working
capital requirements. The City expects to issue $1.5 billion of revenue and
tax anticipation notes on or about August 2, 1995 to finance a portion of its
seasonal working capital requirements for the 1996 fiscal year and expects to
issue approximately $900 million of additional revenue anticipation notes in
October, 1995 to finance the remainder of its seasonal working capital
requirements for the 1996 fiscal year. The success of projected public sales
of City bonds and notes will be subject to prevailing market conditions, and
no assurance can be given that such sales will be completed. If the City were
unable to sell its general obligation bonds and notes, it would be prevented
from meeting its planned capital and operating expenditures.

The City submitted to the Control Board on July 21, 1995 a fourth
quarter modification to the City's financial plan for the 1995 fiscal year,
which projects a balanced budget in accordance with GAAP for the 1995 fiscal
year, after taking into account a discretionary transfer of $75 million. On
July 11, 1995, the City submitted to the Control Board the Financial Plan for
the 1996 through 1999 fiscal years, which relates to the City, the Board of
Education ("BOE") and the City University of New York ("CUNY"). The Financial
Plan is based on the City's expense and capital budgets for the City's 1996
fiscal year, which were adopted on June 14, 1995, and sets forth proposed
actions by the City for the 1996 fiscal year to close substantial projected
budget gaps resulting from lower than projected tax receipts and other
revenues and greater than projected expenditures. In addition to substantial
proposed agency expenditure reductions and productivity, efficiency and labor
initiatives negotiated with the City's labor unions, the Financial Plan
reflects a strategy to substantially reduce spending for entitlements for the
1996 and subsequent fiscal years.

1996-1999 Financial Plan. The 1996-1999 Financial Plan projects
revenues and expenditures for the 1996 fiscal year balanced in accordance with
GAAP. The projections for the 1996 fiscal year reflect proposed actions to
close a previously projected gap of approximately $3.1 billion for the 1996
fiscal year. The proposed actions in the Financial Plan for the 1996 fiscal
year include (i) a reduction in spending of $400 million, primarily affecting
public assistance and Medicaid payments by the City; (ii) expenditure
reductions in agencies, totalling $1.2 billion; (iii) transitional labor
savings, totalling $600 million; and (iv) the phase-in of the increased annual
pension funding cost due to revisions resulting from an actuarial audit of the
City pension systems, which would reduce such costs in the 1996 fiscal year.
Other proposed actions include (i) welfare savings of $100 million from
increased fraud detection; (ii) $170 million of additional expenditure
reductions in agencies and HHC; (iii) a delay in the proposed reduction in the
commercial rent tax, which would increase projected revenues by $62 million in
the 1996 fiscal year; (iv) an increase of $75 million in projected tax

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collections for the 1996 fiscal year; (v) $50 million of proposed additional
State aid not included in the adopted State budget and $75 million of proposed
additional Federal aid; (vi) certain revenue initiatives, including the
proposed sale of delinquent tax liens and the U.N. Plaza Hotel for $104
million; and (vii) savings from the proposed refunding of outstanding debt,
totalling $50 million.

The Financial Plan also includes $600 million in the 1996 fiscal
year, $400 million in the 1997 fiscal year and $200 million in the 1998 fiscal
year for transitional savings initiatives developed in conjunction with the
municipal labor unions. On June 30, 1995, the City and union leadership
announced agreement on $440 million in such savings in the 1996 fiscal year,
$400 million in the 1997 fiscal year and $200 million in savings in the 1998
fiscal year. Most of the remaining savings for the 1996 fiscal year have been
committed to and are to be identified by October 1, 1995. Of the $440 million
that has been identified, $200 million will result from health program
savings, $150 million from reduced pension contributions, $50 million from a
one-time reduction of welfare fund contributions which will be paid by the
City in fiscal year 2000 and $40 million from payroll and fringe benefit
savings associated with early retirement.

The proposed agency spending reductions include the reduction of
City personnel through attrition, government efficiency initiatives,
procurement initiatives and labor productivity initiatives. The substantial
agency expenditure reductions proposed in the Financial Plan may be difficult
to implement, and the Financial Plan is subject to the ability of the City to
implement proposed reductions in City personnel and other cost reduction
initiatives. In addition, certain initiatives are subject to negotiation with
the City's municipal unions, and various actions, including proposed
anticipated State aid totalling $50 million are subject to approval by the
Governor and State Legislature.

The City annually prepares a modification to its financial plan in
October or November which amends the financial plan to accommodate any
revisions to forecast revenues and expenditures and to specify any additional
gap-closing initiatives to the extent required to offset decreases in
projected revenues or increases in projected expenditures (the "First Quarter
Modification"). Subsequent to the preparation of the Financial Plan, the City
has agreed to pay for a portion of the cost of student transit passes, which
will result in a $45 million increase in expenditures for the 1996 fiscal
year. In addition, the City is in the process of identifying any additional
spending requirements or revenue losses affecting the 1996 fiscal year. In
October or November, 1995, the Mayor is expected to publish the First Quarter
Modification for the 1996 fiscal year.

The Financial Plan also sets forth projections for the 1997
through 1999 fiscal years and outlines a proposed gap-closing program to
eliminate projected gaps of $888 million, $1.5 billion and $1.4 billion for
the 1997, 1998 and 1999 fiscal years, respectively, after successful
implementation of the $3.1 billion gap-closing program for the 1996 fiscal
year.

The projections and assumptions contained in the 1996-1999
Financial Plan are subject to revision which may involve substantial change,
and no assurance can be given that these estimates and projections, which
include actions which the City expects will be taken but which are not within
the City's control, will be realized.

Assumptions. The projections for the 1996 through 1999 fiscal
years assume (i) agreement with the City's unions with respect to
approximately $100 million of savings to be derived from efficiencies in
management of employee health insurance programs and other health benefit

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related savings for each of the 1996 through 1999 fiscal years to be
negotiated with the City's unions; (ii) $200 million of additional anticipated
State aid and $75 million of additional anticipated Federal aid in each of the
1997 through 1999 fiscal years; (iii) that HHC and BOE will each be able to
identify actions to offset substantial revenue shortfalls reflected in the
Financial Plan, including approximately $254 million annual reduction in
revenues for HHC, which results from the reduction in Medicaid payments
proposed by the State and the City, without any increase in City subsidy
payments to HHC; (iv) the continuation of the current assumption of no wage
increases after fiscal year 1995 for City employees unless offset by
productivity increases; (v) $130 million of additional revenues as a result of
increased rent payments for the City's airports proposed by the City, which is
subject to further discussion with the Port Authority; and (vi) savings of $45
million in each of the 1997 through 1999 fiscal years which would result from
the State Legislature's enactment of proposed tort reform legislation. In
addition, the 1996-1999 Financial Plan anticipates the receipt of substantial
amounts of Federal aid. Certain Federal legislative proposals contemplate
significant reductions in Federal spending, including proposed Federal welfare
reform, which could result in caps on, or block grants of, Federal programs.

Actions to Close the Gaps. The proposed gap-closing actions, a
substantial number of which are not specified in detail, include additional
agency expenditure reductions, primarily resulting from a partial hiring
freeze, totalling between $388 million and $684 million in each of the 1997
through 1999 fiscal years; reductions in expenditures resulting from proposed
procurement initiatives totalling between $50 million and $100 million in each
of the 1997 through 1999 fiscal years; revenue initiatives totalling between
$100 million and $200 million in each of the 1997 through 1999 fiscal years;
the availability in each of the 1997, 1998 and 1999 fiscal years of $100
million of the general reserve appropriated in the prior year; and additional
reduced expenditures resulting from further revisions in entitlement programs
to reduce City expenditures by $250 million, $400 million and $400 million in
the 1997, 1998 and 1999 fiscal years, respectively, which may be subject to
State or Federal approval.

On July 10, 1995, Standard & Poor's revised downward its rating on
City general obligation bonds from A- to BBB+ and removed City bonds from
CreditWatch. Standard & Poor's stated that "structural budgetary balance
remains elusive because of persistent softness in the City's economy,
highlighted by weak job growth and a growing dependence on the historically
volatile financial services sector". Other factors identified by Standard &
Poor's in lowering its rating on City bonds included a trend of using one-time
measures, including debt refinancings, to close projected budget gaps,
dependence on unratified labor savings to help balance the Financial Plan,
optimistic projections of additional federal and State aid or mandate relief,
a history of cash flow difficulties caused by State budget delays and
continued high debt levels. Fitch Investors Service, Inc. ("Fitch") continues
to rate the City general obligation bonds A-. Moody's rating for City general
obligation bonds is Baa1.

Collective Bargaining Agreements. In January 1993, the City
announced a settlement with a coalition of 19 municipal unions for a 39-month
period that extends into fiscal year 1995. The settlement which was ratified
by the Unions, resulted in a total net expenditure increase of 8.25% of
covered employee payroll over a 39-month period, ending March 31, 1995, for
most of these employees. Subsequently, the City reached agreement with all of
its major bargaining units on terms which are generally consistent with the
coalition agreement.

Contracts with all of the City's municipal unions either expired
in the 1995 fiscal year or will expire in the 1996 fiscal year. The Financial
Plan provides no additional wage increases for City employees after the 1995

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fiscal year. Each 1% wage increase for all union contracts commencing in the
1995 or 1996 fiscal year would cost the City an additional $141 million for
the 1996 fiscal year and $161 million each year thereafter above the amounts
provided for in the Financial Plan. The terms of wage settlements could be
determined through the impasse procedure in the New York City Collective
Bargaining Law, which can impose a binding settlement.

Certain Reports. From time to time, the Control Board staff, the
Municipal Assistance Corporation for the City of New York ("MAC"), Office of
the State Deputy Comptroller ("OSDC"), the City Comptroller and others issue
reports and make public statements regarding the City's financial condition,
commencing on, among other matters, the City's financial plans, projected
revenues and expenditures and actions by the City to eliminate projected
operating deficits. Some of these reports and statements have warned that the
City may have underestimated certain expenditures and overestimated certain
revenues and have suggested that the City may not have adequately provided for
future contingencies. Certain of these reports have analyzed the City's
future economic and social conditions and have questioned whether the City has
the capacity to generate sufficient revenues in the future to meet the costs
of its expenditure increases and to provide necessary services. It is
reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.

On July 24, 1995, the City Comptroller issued a report on the
Financial Plan. The report concluded that the Financial Plan includes total
risks of $749 million to $1.034 billion for the 1996 fiscal year. These risks
include (i) possible tax revenue shortfalls of $53 million; (ii) a possible
$20 million to $60 million shortfall in savings resulting from unspecified
improvements in the City's health benefits system; (iii) a potential shortfall
of up to $40 million in projected savings from an early retirement program;
(iv) the receipt of $125 million of unspecified additional Federal and State
assistance; (v) up to $203 million of projected savings from the public
assistance eligibility review and electronic signature program for public
assistance recipients; (vi) $93 million of greater than projected expenditures
for overtime; (vii) $284 million of greater than projected expenditures and
lower than projected revenues at BOE; and (viii) the receipt of $130 million
of lease payments from the Port Authority. Other potential uncertainties
identified in the report include the projected $253.6 million deficit for the
Health and Hospitals Corporation ("HHC"), $160 million of the $600 million in
labor savings for the 1996 fiscal year which are yet to be identified, and the
impact on the City of a possible reduction in Federal entitlement programs.
Subsequently, the City Comptroller stated that an additional $129 million of
anticipated State and Federal assistance for BOE might not be received by BOE.

With respect to the 1997 through 1999 fiscal years, the report
noted that the gap-closing program in the Financial Plan does not include
information about how the City will implement the various gap-closing
programs, and that the entitlement cost containment and revenue initiatives
will require approval of the State legislature. Taking into account the same
categories of risks for the 1997 through 1999 fiscal years as the report
identified for the 1996 fiscal year and the uncertainty concerning the gap-
closing program, the report estimated that the Financial Plan includes total
risks of $2.0 billion to $2.5 billion in the 1997 fiscal year, $2.8 billion to
$3.3 billion in the 1998 fiscal year and $2.9 billion to $3.4 billion in the
1999 fiscal year. The report further noted that the City Comptroller
continues to oppose the proposed sale of the water system, primarily because
of the unwillingness of the City to guarantee that $1 billion from the $2.3
billion in proceeds of the sale will be used only to fund capital and not
operating expenses, and concerns about the jurisdiction and composition of the
Water Board once title to the Water Board has been transferred.

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In early December, 1994, the City Comptroller issued a report
which noted that the City is currently seeking to develop and implement plans
which will satisfy the Federal Environmental Protection Agency that the water
supplied by the City watershed areas does not need to be filtered. The City
Comptroller noted that, if the City is ordered to build filtration plants,
they could cost as much as $4.57 billion to construct, with annual debt
service and operating costs of more than $500 million, leading to a water rate
increase of 45%.

On December 16, 1994, the City Comptroller issued a report noting
that the capacity of the City to issue general obligation debt could be
greatly reduced in future years due to the decline in value of taxable real
property. The report noted that, under the State constitution, the City is
permitted to issue debt in an amount not greater than 10% of the average full
value of taxable real estate for the current year and preceding four years,
that the latest estimates produced by the State Board of Equalization and
Assessment relating to the full value of real property, using data from a 1992
survey, indicate a 19% decline in the market value of taxable real property
from the previous survey in 1990, and that the State Board has decided to use
a projected annual growth rate of 8.84%, as compared to its previous
projection of 14% for estimating full value after 1992. The report concludes
that the City will be within the projected legal debt incurring limit in the
1996 fiscal year. However, the report concluded that, based on the most
likely forecast of full value of real property, the debt incurring power of
the City would be curtailed in the 1997 and 1998 fiscal years substantially.
The City Comptroller recommended, among other things, prioritization of
capital projects to determine which can be delayed or cancelled, and better
maintenance of the City's physical plant and infrastructure, which would
result in less capital spending for repair and replacement of capital
structures.

On July 21, 1995, the staff of the Control Board issued a report
on the Financial Plan which identified risks of $873 million, $2.1 billion,
$2.8 billion and $2.8 billion for the 1996 through 1999 fiscal years,
respectively. With respect to the 1996 fiscal year, the principal risks
included (i) possible shortfalls in projected tax revenues totalling $50
million, (ii) the possibility that revenue actions and expenditure reduction
initiatives for BOE totalling $266 million might not be successfully
implemented, (iii) possible shortfalls totalling $172 million in proposed
welfare savings from increased fraud detection, and (iv) uncertainty
concerning the $50 million of proposed additional State aid and $75 million of
proposed additional Federal aid, the proposed receipt of $130 million of
increased rent payments for the City's airports and the $100 million of
savings to be derived from health benefit-related savings, which are subject
to negotiations with or approvals by other parties. Additional risks
identified for the 1997 through 1999 fiscal years include the possibility of
additional tax revenue shortfalls, uncertainty concerning the ability of the
City to implement the gap-closing actions for such years and uncertainty
concerning the projected receipt of additional anticipated State aid. Other
areas of concern identified in the report included the projected deficit at
HHC of approximately $400 million, reflecting the impact on HHC of the
entitlement reductions contained in the State budget and the City's reduction
in the subsidy provided to HHC, and the assumption in the Financial Plan that
the City will realize the full $400 million of projected savings in public
assistance and Medicaid payments enacted at the State level. The report noted
that substantially more information is needed concerning the proposed gap-
closing actions for the 1997-1999 fiscal years.

On June 14, 1995, the staff of the OSDC issued a report on the
Financial Plan with respect to the 1995 fiscal year. The report noted that,
during the 1995 fiscal year, the City faced adverse financial developments
totalling over $2 billion resulting from the inability to initiate

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approximately 35% of the City's gap-closing program, as well as newly-
identified spending needs and revenue shortfalls resulting from the adverse
impact on the City's personal income, general corporation and other tax
revenues of the policy of the Federal Reserve of increasing short-term
interest rates and the related downturn in the bond market and profits and
bonus income on Wall Street. The report noted that the City relied heavily on
one-time actions to offset these adverse developments, using $2 billion in
one-time resources in the 1995 fiscal year, or nearly double the 1994 amount.

On July 24, 1995, the staff of the OSDC issued a report on the
Financial Plan. The report concluded that there remains a budget gap for the
1996 fiscal year of $392 million, largely because the City and its unions have
yet to reach an agreement on how to achieve $160 million in unspecified labor
savings and the remaining $100 million in recurring health insurance savings
from last year's agreement. The report also identified a number of issues
that present a net potential risk of $409 million to the City's revenue and
expenditure forecasts for the 1996 fiscal year, including risks of (i) $160
million associated with anticipated increases in Federal and State assistance,
(ii) $130 million relating to projected Port Authority airport lease payments,
and (iii) $100 million with respect to unfunded BOE mandates. The report also
identified several other concerns regarding the 1996 fiscal year, including
concerns that (i) detailed programs have not yet been fully developed to meet
the $564 million and $400 million cost-reduction targets established for BOE
and HHC, respectively; (ii) State and City initiatives to reduce public
assistance and Medicaid costs, which are expected to reduce City costs by $745
million in the 1996 fiscal year, will require close monitoring to ensure that
financial targets are met; (iii) the City has not provided sufficient
assurances that the bond proceeds from its proposed sale of the water and
sewer system would be used strictly for capital spending purposes; and (iv)
the Financial Plan makes no provision for wage increases in the collective
bargaining agreements between the City and its unions, which generally will
expire by October, 1995. The report further noted that growth in City
revenues is being constrained by the weak economy in the City, which is likely
to be compounded by the slowing national economy, and that there is a
likelihood of a national recession during the course of the Financial Plan.
Moreover, the report noted that State and Federal budgets are undergoing
tumultuous changes, and that the potential for far-reaching reductions in
intergovernmental assistance is clearly on the horizon, with greater
uncertainty about the impact on City finances and services.

A substantial portion of the capital improvements in the City are
financed by indebtedness issued by MAC. MAC was organized in 1975 to provide
financing assistance for the City and also to exercise certain review
functions with respect to the City's finances. MAC bonds are payable out of
certain State sales and compensating use taxes imposed within the City, State
stock transfer taxes and per capita State aid to the City. Any balance from
these sources after meeting MAC debt service and reserve fund requirements and
paying MAC's operating expenses is remitted to the City or, in the case of the
stock transfer taxes, rebated to the taxpayers. The State is not, however,
obligated to continue the imposition of such taxes or to continue
appropriation of the revenues therefrom to MAC, nor is the State obligated to
continue to appropriate the State per capita aid to the City, which would be
required to pay the debt service on certain MAC obligations. MAC has no
taxing power and MAC bonds do not create an enforceable obligation of either
the State or the City. As of June 30, 1995, MAC had outstanding an aggregate
of approximately $4.882 billion of its bonds.

New York State and Its Authorities.

New York State's (the "State") current fiscal year commenced on
April 1, 1995, and ends on March 31, 1996, and is referred to herein as the
State's 1995-96 fiscal year. The prior fiscal year, which commenced on

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April 1, 1994 and ended on March 31, 1995, is referred to herein as the
State's 1994-95 fiscal year.

The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The State Financial Plan for the 1995-96 fiscal year was formulated
on June 20, 1995 and is based on the State's budget as enacted by the
Legislature and signed into law by the Governor. The State Financial Plan
will be updated quarterly pursuant to law in July, October and January.

The 1995-96 budget is the first to be enacted in the
administration of the Governor, who assumed office on January 1. It is the
first budget in over half a century which proposed and, as enacted, projects
an absolute year-over-year decline in General Fund disbursements. Spending
for State operations is projected to drop even more sharply, by 4.6 percent.
Nominal spending from all State funding sources (i.e., excluding Federal aid)
is proposed to increase by only 2.5 percent from the prior fiscal year, in
contrast to the prior decade when such spending growth averaged more than 6.0
percent annually.

In his Executive Budget, the Governor indicated that in the
1995-96 fiscal year, the State Financial Plan, based on then-current law
governing spending and revenues, would be out of balance by almost $4.7
billion, as a result of the projected structural deficit resulting from the
ongoing disparity between sluggish growth in receipts, the effect of prior-
year tax changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the use of
one-time solutions, primarily surplus funds from the prior year, to fund
recurring spending in the 1994-95 budget. The Governor proposed additional
tax cuts, to spur economic growth and provide relief for low and middle-income
tax payers, which were larger than those ultimately adopted, and which added
$240 million to the then projected imbalance or budget gap, bringing the total
to approximately $5 billion.

This gap is projected to be closed in the 1995-96 State Financial
Plan based on the enacted budget, through a series of actions, mainly spending
reductions and cost containment measures and certain reestimates that are
expected to be recurring, but also through the use of one-time solutions. The
State Financial Plan projects (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in social welfare
programs, including Medicaid, income maintenance and various child and family
care program; (ii) $2.2 billion in savings from State agency actions to reduce
spending on the State workforce, State University of New York ("SUNY") and
City University of New York ("CUNY"), mental hygiene programs, capital
projects, the prison system and fringe benefits; (iii) $300 million in savings
from local assistance reforms, including actions affecting school aid and
revenue sharing while proposing program legislation to provide relief from
certain mandates that increase local spending; (iv) over $400 million in
revenue measures, primarily a new Quick Draw Lottery game, changes to tax
payment schedules, and the sale of assets; and (v) $300 million from
reestimates in receipts.

There are risks and uncertainties concerning the future-year
impact of tax reductions and other measures in 1995-96 budget.

State Financial Plan Background. The economic and financial
condition of the State may be affected by various financial, social, economic
and political factors. Those factors can be very complex, may vary from
fiscal year to fiscal year, and are frequently the result of actions taken not

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only by the State and its agencies and instrumentalities, but also by
entities, such as the Federal government, that are not under the control of
the State. For example, various proposals relating to Federal tax and
spending policies that are currently being publicly discussed and debated
could, if enacted, have a significant impact on the State's financial
condition in the current and future fiscal years. Because of the uncertainty
and unpredictability of the changes, their impact cannot, as a practical
matter, be included in the assumptions underlying the State's projections at
this time.

The State Financial Plan is based upon forecasts of national and
State economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economies. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, Federal fiscal and monetary
policies, the level of interest rates, and the condition of the world economy,
which could have an adverse effect on the State. There can be no assurance
that the State economy will not experience results in the current fiscal year
that are worse than predicted, with corresponding material and adverse effects
on the State's projections of receipts and disbursements.

Projections of total State receipts in the State Financial Plan
are based on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. In preparing projections of State
receipts, economic forecasts relating to personal income, wages and employment
have been particularly important. The projection of receipts from most tax or
revenue sources is generally made by estimating the change in yield of such
tax or revenue source caused by economic and other factors, rather than by
estimating the total yield of such tax or revenue source from its estimated
tax base. The forecasting methodology, however, ensures that State fiscal
year estimates for taxes that are based on a computation of annual liability,
such as the business and personal income taxes, are consistent with estimates
of total liability under such taxes.

Projections of total State disbursements are based on assumptions
relating to economic and demographic factors, levels of disbursements for
various services provided by local governments (where the cost is partially
reimbursed by the State), and the results of various administrative and
statutory mechanisms in controlling disbursements for State operations.
Factors that may affect the level of disbursements in the fiscal year include
uncertainties relating to the economy of the nation and the State, the
policies of the Federal government, and changes in the demand for and use of
State services.

The State Division of the Budget ("DOB") believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth below, and those projections may be changed materially
and adversely from time to time.

Current Economic Outlook. The national economy began the current
expansion in 1991 and has added over 7 million jobs since early 1992.
However, the recession lasted longer in the State and the State's economic
recovery has lagged behind the nation's. Although the State has added
approximately 185,000 jobs since November 1992, employment growth in the State
has been hindered during recent years by significant cutbacks in the computer
and instrument manufacturing, utility, defense, and banking industries.

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The State Financial Plan is based on a projection by DOB of
national and State economic activity. DOB forecasts that national economic
growth will weaken, but not turn negative, during the course of 1995 before
beginning to rebound by the end of the year. This dynamic is often described
as a "soft landing". The overall rate of growth of the national economy
during calendar year 1995 will be slightly below the "consensus" of a widely
followed survey of national economic forecasters. Growth in the real gross
domestic product during 1995 is projected to be moderate (3.0 percent), with
declines in defense spending and net exports more than offset by increases in
consumption and investment. Continuing efforts by business and government to
reduce costs are expected to exert a drag on economic growth. Inflation, as
measured by the Consumer Price Index, is projected to remain about 3 percent
due to moderate wage growth and foreign competition. Personal income and
wages are projected to increase by about 6 percent or more.

New York's economy is expected to continue to expand modestly
during 1995, but there will be a pronounced slow-down during the course of the
year. Although industries that export goods and services abroad are expected
to benefit from the lower dollar, growth will be slowed by government cutbacks
at all levels. On an average annual basis, employment growth will be about
the same as 1994. Both personal income and wages are expected to record
moderate gains in 1995. Bonus payments in the securities industry are
expected to increase from last year's depressed level.

1995-96 State Financial Plan. The four governmental fund types
that comprise the State Financial Plan are the General Fund, the Special
Revenue Funds, the Capital Projects Funds, and the Debt Service Funds.

General Fund

The General Fund is the principal operating fund of the State and
is used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. In the State's 1995-96 fiscal year, the General Fund is expected to
account for approximately 49 percent of total governmental-fund disbursements
and 71 percent of total State-funded disbursements. General Fund moneys are
also transferred to other funds, primarily to support certain capital projects
and debt service payments in other fund types.

The General Fund is projected to be balanced on a cash basis for
the 1995-96 fiscal year. Total receipts and transfers from other funds are
projected to be $33.110 billion, a decrease of $48 million from total receipts
in the prior fiscal year. Total General Fund disbursements and transfers to
other funds are projected to be $33.055 billion, a decrease of $344 million
from the total amount disbursed in the prior fiscal year.

Special Considerations

In recent years, State actions affecting the level of receipts and
disbursements, as well as the relative strength of the State and regional
economy, actions of the Federal government and other factors, have created
structural budget gaps for the State. These gaps resulted from a significant
disparity between recurring revenues and the costs of maintaining or
increasing the level of support for State programs. The 1995-96 enacted
budget combines significant tax and program reductions which will, in the
current and future years, lower both the recurring receipts base (before the
effect of any economic stimulus from such tax reductions) and the historical
annual growth in State program spending. Notwithstanding these changes, the
State can expect to continue to confront structural deficits in future years.

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The 1995-96 State Financial Plan includes actions that will have
an effect on the budget outlook for State fiscal year 1996-97 and beyond. The
Division of the Budget estimates that the 1995-96 State Financial Plan
contains actions that provide nonrecurring resources or savings totalling
approximately $900 million. These include the use of balances set aside
originally for mass transportation aid ($220 million), the use of a reserve
established to fund pension supplementation costs ($110 million) and the use
of lottery balances ($62 million). The Comptroller believes that the amount
of nonrecurring resources or savings exceeds $1.0 billion. The Division of
the Budget also estimates that the 1995-96 State Financial Plan contains
nonrecurring expenditures totalling nearly $250 million. These include the
payment of social services litigation ($65 million), the deposit to the
Contingency Reserve Fund ($40 million), the payment of 1993-94 pension charges
($56 million) and aid for maintenance costs of local schools ($45 million).
The net amount of nonrecurring resources used in the 1995-96 State Financial
Plan, accordingly, is estimated by the Division of the Budget at over $600
million.

In addition to this use of nonrecurring resources, the 1995-96
State Financial Plan reflects actions that will directly affect the State's
1996-97 fiscal year baseline receipts and disbursements. The three-year plan
to reduce State personal income taxes will decrease State tax receipts by an
estimated $1.7 billion in State fiscal year 1996-97, in addition to the amount
of reduction in State fiscal year 1995-96. Further significant reductions in
the personal income tax are scheduled for the 1997-98 State fiscal year.
Other tax reductions enacted in 1994 and 1995 are estimated to cause an
additional reduction in receipts of over $500 million in 1996-97, as compared
to the level of receipts in 1995-96. Similarly, many actions taken to reduce
disbursements in the State's 1995-96 fiscal year are expected to provide
greater reductions in State fiscal year 1996-97. These include actions to
reduce the State workforce, reduce Medicaid and welfare expenditures and slow
community mental hygiene program development.

The net impact of these and other factors is expected to produce a
potential imbalance in receipts and disbursements in State fiscal year
1996-97. The Governor has indicated that in the 1996-97 Executive Budget he
will propose to close this potential imbalance primarily through General Fund
expenditure reductions and without increases in taxes or deferrals of
scheduled tax reductions.

To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
To correct recurring budgetary imbalances, the State would need to take
significant actions to align recurring receipts and disbursement in future
fiscal years. There can be no assurance, however that the Legislature will
enact the Governor's proposals or that the State's actions will be sufficient
to preserve budgetary balance in a given fiscal year or to align recurring
receipts and disbursements in future fiscal years.

Special Revenue Funds

Special Revenue Funds are used to account for the proceeds of
specific revenue sources such as Federal grants that are legally restricted,
either by the Legislature or outside parties, to expenditures for specified
purposes. Although activity in this fund type is expected to comprise more
than 40 percent of total government funds receipts and disbursements in the
1995-96 fiscal year, about three-quarters of that activity relates to
Federally-funded programs. Projected receipts in this fund type total $25.547
billion, an increase of $1.316 billion over the prior year. Projected
disbursements in this fund type total $26.002 billion, an increase of $1.641

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billion over 1994-95 levels. Disbursements from Federal funds, primarily the
Federal share of Medicaid and other social services programs, are projected to
total $19.209 billion in the 1995-96 fiscal year. Remaining projected
spending of $6.793 billion primarily reflects aid to SUNY supported by tuition
and dormitory fees, education aid funded from lottery receipts, operating aid
payments to the Metropolitan Transportation Authority funded from the proceeds
of dedicated transportation taxes, and costs of a variety of self-supporting
programs which deliver services financed by user fees.

Capital Projects Funds

Capital Projects Funds are used to account for the financial
resources used for the acquisition, construction, or rehabilitation of major
State capital facilities and for capital assistance grants to certain local
governments or public authorities. This fund type consists of the Capital
Projects Fund, which is supported by tax dollars transferred from the General
Fund, and 37 other capital funds established to distinguish specific capital
construction purposes supported by other revenues. In the 1995-96 fiscal
year, activity in these funds is expected to comprise 7 percent of total
governmental receipts and disbursements. Disbursements from this fund type
are projected to increase by $541 million over prior-year levels, primarily
reflecting higher spending for transportation and mental hygiene projects.
The Dedicated Highway and Bridge Trust Fund is projected to comprise 23
percent of the activity in this fund type -- $936 million in 1995-96 -- and is
the single largest dedicated fund. Projected disbursements from this
dedicated fund reflect an increase of $80 million over 1994-95 levels.
Spending for capital projects will be financed through a combination of
sources: Federal grants (25 percent), public authority bond proceeds (38
percent), general obligation bond proceeds (9 percent), and current revenues
(28 percent). Total receipts in this fund type are projected at $4.170
billion, not including $364 million expected to be available from the proceeds
of general obligation bonds.

Debt Service Funds

Debt Service Funds are used to account for the payment of
principal of, and interest on, long-term debt of the State and to meet
commitments under lease-purchase and other contractual-obligation financing
arrangements. This fund is expected to comprise 4 percent of total
governmental fund receipts and disbursements in the 1995-96 fiscal year.
Receipts in these funds in excess of debt service requirements are transferred
to the General Fund and Special Revenue Funds, pursuant to law. The Debt
Service fund type consists of the General Debt Service Fund, which is
supported primarily by tax dollars transferred from the General Fund, and
seven other funds. In the 1995-96 fiscal year, total disbursements in this
fund type are projected at $2.506 billion, an increase of $303 million or 13.8
percent. The transfer from the General Fund of $1.583 billion is expected to
finance 63 percent of these payments. The remaining payments are expected to
be financed by pledged revenues, including $1.794 billion in taxes, $228
million in dedicated fees, and $2.200 billion in patient revenues, including
transfers of Federal reimbursements.

Discussion and Analysis. New York State's financial operations
have improved during recent fiscal years. During the period 1989-90 through
1991-92, the State incurred General Fund operating deficits that were closed
with receipts from the issuance of tax and revenue anticipation notes
("TRANs"). First, the national recession, and then the lingering economic
slowdown in the New York and regional economy, resulted in repeated shortfalls
in receipts and three budget deficits. For its 1992-93, 1993-94 and 1994-95
fiscal years, the State recorded balanced budgets on a cash basis, with
substantial fund balances in 1992-93 and 1993-94, and a smaller fund balance
in 1994-95 as described below.

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1994-95 Fiscal Year. New York State ended its 1994-95 fiscal year
with the General Fund in balance. The closing fund balance of $158 million
reflects $157 million in the Tax Stabilization Reserve Fund and $1 million in
the Contingency Reserve Fund ("CRF"). The CRF was established in State Fiscal
year 1993-94, funded partly with surplus moneys, to assist the State in
financing the 1994-95 fiscal year costs of extraordinary litigation known or
anticipated at that time; the opening fund balance in State fiscal year
1994-95 was $265 million. The $241 million change in the fund balance
reflects the use of $264 million in the CRF as planned, as well as the
required deposit of $23 million to the Tax Stabilization Reserve Fund. In
addition, $278 million was on deposit in the tax refund reserve account, $250
million of which was deposited at the end of the State's 1994-95 fiscal year
to continue the process of restructuring the State's cash flow as part of the
Local Government Assistance Corporation ("LGAC") program.

Compared to the State Financial Plan for 1994-95 as formulated on
June 16, 1994, reported receipts fell short of original projections by $1.163
billion, primarily in the categories of personal income and business taxes.
Of this amount, the personal income tax accounts for $800 million, reflecting
weak estimated tax collections and lower withholding due to reduced wage and
salary growth, more severe reductions in brokerage industry bonuses than
projected earlier, and deferral of capital gains realizations in anticipation
of potential Federal tax changes. Business taxes fell short by $373 million,
primarily reflecting lower payments from banks as substantial overpayments of
1993 liability depressed net collections in the 1994-95 fiscal year. These
shortfalls were offset by better performance in the remaining taxes,
particularly the user taxes and fees, which exceeded projections by $210
million. Of this amount, $227 million was attributable to certain
restatements for accounting treatment purposes pertaining to the CRF and LGAC;
these restatements had no impact on balance in the General Fund.

Disbursements were also reduced from original projections by $848
million. After adjusting for the net impact of restatements relating to the
CRF and LGAC which raised disbursements by $38 million, the variance is $886
million. Well over two-thirds of this variance is in the category of grants
to local governments, primarily reflecting the conservative nature of the
original estimates of projected costs for social services and other programs.
Lower education costs are attributable to the availability of $110 million in
additional lottery proceeds and the use of LGAC bond proceeds.

The spending reductions also reflect $188 million in actions
initiated in January 1995 by the Governor to reduce spending to avert a
potential gap in the 1994-95 State Financial Plan. These actions included
savings from a hiring freeze, halting the development of certain services, and
the suspension of non-essential capital projects. These actions, together
with $71 million in other measures comprised the Governor's $259 million gap-
closing plan, submitted to the Legislature in connection with the 1995-96
Executive Budget.

1993-94 Fiscal Year. The State ended its 1993-94 fiscal year with
a balance of $1.140 billion in the tax refund reserve account, $265 million in
the CRF and $134 million in its Tax Stabilization Reserve Fund. These fund
balances were primarily the result of an improving national economy, State
employment growth, tax collections that exceeded earlier projections and
disbursements that were below expectations. Deposits to the personal income
tax refund reserve have the effect of reducing reported personal income tax
receipts in the fiscal year when made and withdrawals from such reserve
increase receipts in the fiscal year when made. The balance in the tax refund
reserve account was used to pay taxpayer refunds.

Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-95

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fiscal year. The remaining $114 million was redeposited in the tax refund
reserve account at the end of the State's 1994-95 fiscal year to continue the
process of restructuring the State's cash flow as part of the LGAC program.
The balance in the CRF was reserved to meet the cost of litigation facing the
State in its 1994-95 fiscal year.

Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally projected
when the State Financial Plan for that year was formulated on April 16, 1993
by $1.002 billion. Greater-than-expected receipts in the personal income tax,
the bank tax, the corporation franchise tax and the estate tax accounted for
most of this variance, and more than offset weaker-than-projected collections
from the sales and use tax and miscellaneous receipts. Collections from
individual taxes were affected by various factors including changes in Federal
business laws, sustained profitability of banks, strong performance of
securities firms, and higher-than-expected consumption of tobacco products
following price cuts.

The higher receipts resulted, in part, because the New York
economy performed better than forecasted. Employment growth started in the
first quarter of the State's 1993-94 fiscal year, and, although this lagged
behind the national economic recovery, the growth in New York began earlier
than forecasted. The New York economy exhibited signs of strength in the
service sector, in construction, and in trade. Long Island and the Mid-Hudson
Valley continued to lag behind the rest of the State in economic growth. The
DOB believes that approximately 100,000 jobs were added during the 1993-94
fiscal year.

Disbursements and transfers from the General Fund were $303
million below the level projected in April 1993, an amount that would have
been $423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included in
the State Financial Plan formulated in April 1993, lower disbursements
resulted from lower spending for Medicaid, capital projects, and debt service
(due to refundings) and $114 million used to restructure the State's cash flow
as part of the LGAC program. Disbursements were higher than expected for
general support for public schools, the State share of income maintenance,
overtime for prison guards, and highway snow and ice removal. The State also
made the first of six required payments to the State of Delaware related to
the settlement of Delaware's litigation against the State regarding the
disposition of abandoned property receipts.

During the 1993-94 fiscal year, the State also established and
funded the CRF as a way to assist the State in financing the cost of
litigation affecting the State. The CRF was initially funded with a transfer
of $100 million attributable to the positive margin recorded in the 1992-93
fiscal year. In addition, the State augmented this initial deposit with $132
million in debt service savings attributable to the refinancing of State and
public authority bonds during 1993-94. A year-end transfer of $36 million was
also made to the CRF, which, after a disbursement for authorized fund
purposes, brought the CRF balance at the end of 1993-94 to $265 million. This
amount was $165 million higher than the amount originally targeted for this
reserve fund.

Litigation. A number of court actions have been brought involving
State finances. The court actions in which the State is a defendant generally
involve state programs and miscellaneous tort, real property, and contract
claims and the monetary damages sought are substantial. Adverse development
in these proceedings or the initiation of new proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the
current fiscal year or thereafter.

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In addition to the proceedings noted below, the State is party to
other claims and litigation which its legal counsel has advised are not
probable of adverse court decisions. Although the amounts of potential
losses, if any, are not presently determinable, it is the State's opinion that
its ultimate liability in these cases is not expected to have a material
adverse effect on the State's financial position in the current fiscal year or
thereafter.

On May 31, 1988, the United States Court took jurisdiction of a
claim of the State of Delaware that certain unclaimed dividends, interest and
other distributions made by issuers of securities and held by New York-based
brokers incorporated in Delaware for beneficial owners who cannot be
identified or located, had been, and were being, wrongfully taken by the State
of New York pursuant to New York's Abandoned Property Law (State of Delaware
v. State of New York, United States Supreme Court). All 50 states and the
District of Columbia moved to intervene, claiming a portion of such
distributions and similar property taken by the State of New York from New
York-based banks and depositories incorporated in Delaware. In a decision
dated March 30, 1993, the Court granted all pending motions of the states and
the District of Columbia to intervene and remanded the case to a Special
Master for further proceedings consistent with the Court's decision. The
Court determined that the abandoned property should be remitted first to the
state of the beneficial owner's last known address, if ascertainable and, if
not, then to the states of incorporation of the intermediary bank, broker or
depository. New York and Delaware have executed a settlement agreement which
provides for payment by New York to Delaware of $35 million in the State's
1993-94 fiscal year and five annual payments thereafter of $33 million. New
York and Massachusetts have executed a settlement agreement which provided for
aggregate payments by New York of $23 million, payable over consecutive years.
The claims of the other states and the District of Columbia remain.

Among the more significant of these claims still pending against
the State at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes transferred
title to the State of certain land in central New York; (2) certain aspects of
the State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; 3) contamination in the
Love Canal area of Niagara Falls; (4) an action against State and New York
City officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain
proper housing; (5) challenges to the practice of reimbursing certain Office
of Mental Health patient care expenses from the client's Social Security
benefits; (6) a challenge to the methods by which the state reimburses
localities for the administrative costs of food stamp programs; (7) alleged
responsibility of State officials to assist in remedying racial segregation in
the City of Yonkers; (8) an action in which the State is a third party
defendant, for injunctive or other appropriate relief, concerning liability
for the maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) an action challenging legislation enacted in 1990
which had the effect of deferring certain employer contributions to the State
Teachers' Retirement System and reducing State aid to school districts by a
like amount; (10) a challenge to the constitutionality of financing programs
of the Thruway Authority authorized by Chapters 166 and 410 of the Laws of
1991; (11) a challenge to the constitutionality of financing programs of the
MTA and the Thruway Authority authorized by Chapter 56 of the laws of 1993;
(12) challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on inpatient hospital bills paid by commercial insurers
and employee welfare benefit plans and portions of Chapter 55 of The Laws of
1992 which require hospitals to impose and remit to the State an 11% surcharge
on hospital bills paid by commercial insurers; (14) challenges to the

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promulgation of the State's proposed procedure to determine the eligibility
for and nature of home care services for Medicaid recipients; (15) a challenge
to State implementation of a program which reduces Medicaid benefits to
certain home-relief recipients; (16) challenges to the rationality and
retroactive application of State regulations recalibrating nursing home
Medicaid rates; and (17) a challenge by AT&T to New York Tax Law Section 186-a
(2-a) as violative of the Commerce Clause of the U.S. Constitution.

New Jersey Navigator Trust

New Jersey Risk Factors

State Finance. New Jersey is the ninth largest state in population and
the fifth smallest in land area. With an average of 1,062 people per square
mile, it is the most densely populated of all the states. The State's
economic base is diversified, consisting of a variety of manufacturing,
construction and service industries, supplemented by rural areas with
selective commercial agriculture. Historically, New Jersey's average per
capita income has been well above the national average, and in 1993 the State
ranked second among the states in per capital personal income ($26,732).

The Trust is susceptible to political, economic or regulatory factors
affecting issuers of the New Jersey securities. The following information
provides only a brief summary of some of the complex factors affecting the
financial situation in New Jersey (the "State") and is derived from sources
that are generally available to investors and is believed to be accurate. It
is based in part on information obtained from various State and local agencies
in New Jersey. No independent verification has been made of any of the
following information.

The New Jersey Economic Policy Council, a statutory arm of the New
Jersey Department of Commerce and Economic Development, has reported in New
Jersey Economic Indicators, a monthly publication of the New Jersey Department
of Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from
the export boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost momentum.
In the meantime, the prolonged fast growth in the State in the mid 1980s
resulted in a tight labor market situation, which has led to relatively high
wages and housing prices. This means that, while the incomes of New Jersey
residents are relatively high, the State's business sector has become more
vulnerable to competitive pressures.

The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition,
the national recession caused an employment downturn in such previously
growing sectors as wholesale trade, retail trade, finance, utilities and
trucking and warehousing. Reflecting the downturn, the rate of unemployment
in the State rose from a low of 3.6% during the first quarter of 1989 to an
estimated 6.8% in July 1995, which is above the national average of 5.7% in
July 1995. Economic recovery is likely to be slow and uneven in New Jersey,
with unemployment receding at a correspondingly slow pace, due to the fact
that some sectors may lag as a result of continued excess capacity. In
addition, employers even in rebounding sectors can be expected to remain
cautious about hiring until they become convinced that improved business will
be sustained. Also, certain firms will continue to merge or downsize to
increase profitability.

Debt Service. The primary method for State financing of capital
projects is through the sale of the general obligation bonds of the State.

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These bonds are backed by the full faith and credit of the State tax revenues
and certain other fees are pledged to meet the principal and interest payments
and, if provided, redemption premium payments, if any, required to repay the
bonds. As of June 30, 1994, there was a total authorized bond indebtedness of
approximately $9.14 billion, of which $3.65 billion was issued and
outstanding, $4.0 billion was retired (including bonds for which provisions
for payment have been made through the sale and issuance of refunding bonds)
and $1.49 billion was unissued. The debt service obligation of such
outstanding indebtedness is $446.3 million for Fiscal Year 1996.

New Jersey Budget and Appropriation System. The State operates on a
fiscal year beginning July 1 and ending June 30. At the end of Fiscal Year
1989, there was a surplus in the State's general fund (the fund into which all
State revenues not otherwise restricted by statute are deposited and from
which appropriations are made) of $411.2 million. At the end of Fiscal Year
1990, there was a surplus in the general funds of $1 million. At the end of
Fiscal Year 1991, there was a surplus in the general fund of $1.4 million.
New Jersey closed its Fiscal Year 1992 with a surplus of $760.8 million and
fiscal year 1993 with a surplus of $937.4 million. It is estimated that New
Jersey closed its fiscal year 1994 with a surplus of $926.0 million and fiscal
year 1995 with a surplus of $563 million. It is estimated that New Jersey
closed its Fiscal Year 1993 with a surplus of $937.4 million.

In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, former Governor Florio signed into law legislation which
was estimated to raise approximately $2.8 billion in additional taxes
(consisting of $1.5 billion in sales and use taxes and $1.3 billion in income
taxes), the biggest tax hike in New Jersey history. There can be no assurance
that receipts and collections of such taxes will meet such estimates.

The first part of the tax hike took effect on July 1, 1990, with the
increase in the State's sales and use tax rate from 6% to 7% and the
elimination of exemptions for certain products and services not previously
subject to the tax, such as telephone calls, paper products (which has since
been reinstated), soaps and detergents, janitorial services, alcoholic
beverages and cigarettes. At the time of enactment, it was projected that
these taxes would raise approximately $1.5 billion in additional revenue.
Projections and estimates and receipts from sales and use taxes, however, have
been subject to variance in recent fiscal years.

The second part of the tax hike took effect on January 1, 1991, in the
form of an increased state income tax on individuals. At the time of
enactment, it was projected that this increase would raise approximately $1.3
billion in additional income taxes to fund a new school aid formula, a new
homestead rebate program and state assumption of welfare and social services
costs. Projections and estimates of receipts from income taxes, however, have
also been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to 3.5% to a new
range of 2% to 7%, with the higher rates applying to married couples with
incomes exceeding $70,000 who file joint returns, and to individuals filing
single returns with incomes of more than $35,000.

The Florio administration had contended that the income tax package
would help reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation, the State would assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion was
proposed to be sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education programs.

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Effective July 1, 1992, the State's sales and use tax rate decreased
from 7% to 6%. Effective January 1, 1994, an across-the-board 5% reduction in
the income tax rates was enacted and effective January 1, 1995, further
reductions ranging from 1% to 10% in income tax rates took effect. Governor
Whitman recently signed into law further reductions up to 15% for some
taxpayers effective January 1, 1996, thus reducing income taxes by up to 30%
for most taxpayers within three years.

On June 30, 1995, Governor Whitman signed the New Jersey Legislature's
$16.0 billion budget for Fiscal Year 1996. The balanced budget, which
includes $541 million in surplus, is $300 million more than the 1995 budget.
Whether the State can achieve a balanced budget depends on its ability to
enact and implement expenditure reductions and to collect estimated tax
revenues. The Fiscal Year 1995 Appropriations Act forecasts sales and use tax
collections of $3.98 billion, a 5.3% increase from receipts estimated in the
Revised Revenue Estimates for Fiscal Year 1994. It also forecasts gross
income tax collections of $4.582 billion, a 1.2% increase from receipts,
estimated for Fiscal Year 1994, and corporation business tax collections of
$915 million, a 12% decrease from receipts estimated for Fiscal Year 1994.
However, projections and estimates of receipts from taxes have been subject to
variance in recent years as a result of several factors, most recently a
significant slowdown in the national, regional and State economies, sluggish
employment and uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax laws.

Debt Ratings. For many years, prior to 1991, both Moody's Investors
Service, Inc., and Standard and Poor's Corporation have rated New Jersey
general obligation bonds "Aaa" and "AAA", respectively. Currently, Moody's
Investors Service, Inc. rates New Jersey general obligation bonds Aal. On
July 3, 1991, however, Standard and Poor's Corporation downgraded New Jersey
general obligation bonds to "AA+." On June 4, 1992 Standard & Poor's
Corporation placed New Jersey general obligation bonds on Credit Watch with
negative implications, citing as its principal reason for its caution the
unexpected denial by the Federal Government of New Jersey's request for $450
million in retroactive Medicaid payments for psychiatric hospitals. These
funds were critical to closing a $1 billion gap in the State's $15 billion
budget for fiscal year 1992 which ended on June 30, 1992. Under New Jersey
state law, the gap in the current budget must be closed before the new budget
year begins on July 1, 1992. Standard and Poor's Corporation suggested the
State could close fiscal 1992's budget gap and help fill fiscal 1993's hole by
a reversion of $700 million of pension contributions to its general fund under
a proposal to change the way the State calculates its pension liability. On
July 6, 1992, Standard and Poor's Corporation reaffirmed its "AA+" rating for
New Jersey general obligation bonds and removed the debt from its Credit Watch
list, although it stated that New Jersey's long-term financial outlook is
negative. Standard and Poor's Corporation was concerned that the State was
entering the 1993 fiscal year that began July 1, 1992 with a slim $26 million
surplus and remained concerned about whether the sagging State economy would
recover quickly enough to meet lawmakers' revenue projections. It also
remained concerned about the recent federal ruling leaving in doubt how much
the State was due in retroactive Medicaid reimbursements and a ruling by a
federal judge, now on appeal, of the State's method for paying for uninsured
hospital patients. However, on July 27, 1994, Standard and Poor's announced
that it was changing the State's outlook from negative to stable due to a
brightening of the State's prospects as a result of Governor Whitman's effort
to trim spending and cut taxes, coupled with an improving economy. Standard
and Poor's reaffirmed its "AA+" rating at the same time. There can be no
assurance that these ratings will continue or that particular bond issues may
not be adversely affected by changes in the State or local economic and
political conditions.

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On August 24, 1992, Moody's Investors Service, Inc. downgraded New
Jersey general obligation bonds to "Aal", stating that the reduction reflected
a developing pattern of reliance on nonrecurring measures to achieve budgetary
balance, four years of financial operations marked by revenue shortfalls and
operating deficits, and the likelihood that serious financial pressures would
persist. On August 5, 1994, Moody's reaffirmed its "Aal" rating, citing on
the positive side New Jersey's broad-based economy, high income levels,
history of maintaining a positive financial position and moderate (although
rising) debt ratios, and, on the negative side, a continued reliance on
one-time revenue and a dependence on pension-related savings to achieve
budgetary balance.

Capital Construction. In addition to payment from bond proceeds,
capital construction can also be funded by appropriation of current revenues
on a pay-as-you go basis. This amount represents 2.2% of the total Fiscal
Year 1993 Budget. In Fiscal Year 1993, the amount was $331.0 million and was
for transportation projects. This appropriation was credited to the
Transportation Trust Fund Account of the State General Fund.

All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning. This permanent commission was
established in November 1975, and is charged with the preparation of the State
Capital Improvement Plan, which contains proposals for State spending for
capital projects.

Lease Financing. The State has entered into a number of leases relating
to the financing of certain real property and equipment. The State leases the
State Tax Processing Building and the Richard J. Hughes Justice Complex in
Trenton, both from the Mercer County Improvement Authority (the "Authority").
On August 8, 1991 the Authority defeased outstanding bonds originally issued
to finance construction of the Richard J. Hughes Justice Complex through the
issuance of custody receipts (the "Custody Receipts") in the aggregate
principal amount of $95,760,000. The rental is sufficient to cover the debt
service on the Authority's Custody Receipts. Maximum annual rental payments
on these leases, including debt service, maintenance and payments in lieu of
taxes, will be approximately $11 million. The State's obligation to pay the
rentals is subject to appropriations being made by the State Legislature. The
Custody Receipts will mature in the years 1992 through 2018.

The State has also entered into a lease agreement, as lessee, with the
New Jersey Economic Development Authority, as lessor (the "EDA") to lease
(i) office buildings that are presently under construction and, when finished,
are expected to house the New Jersey Division of Motor Vehicles, New Jersey
Network (the State's public television station) and a branch of the United
States Postal Service and (ii) a parking facility that is also under
construction, all of which were financed by the EDA's $114,391,434.70 initial
aggregate principal amount of Trenton Office Complex Revenue Bonds, 1980
Series dated December 1, 1989. The State has also entered into a lease
agreement, as lessee, with the EDA to lease approximately 13 acres of real
property and certain infrastructure improvements thereon located in the City
of Newark. This property is in a geographical area generally bounded by
McCarter Highway, Mulberry Street and Saybrook Place and its purchase was
financed by $21,510,000 aggregate principal amount of New Jersey Economic
Development Authority Revenue Bonds, New Jersey Performing Arts Center Site
Acquisition Project, 1991 Series, issued on August 20, 1991. The rental
payments required to be made by the State under such lease agreements are
sufficient to cover debt service on such bonds and other amounts payable to
the EDA, including certain administrative expenses of the EDA, and such rental
payments are subject to annual appropriation by the State Legislature.
Maximum annual debt service on such bonds is approximately $12,200,000. All
of such bonds are still outstanding and mature in the years 1992 through 2012.

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The State has also entered into a sublease with the EDA to lease two
parking lots, certain infrastructure improvements and related elements located
at Liberty State Park in the City of Jersey City. These parking lots and
improvements have been financed by a $13,683,767.50 aggregate principal amount
of New Jersey Economic Development Authority Lease Rental Bonds, 1992 Series
(Liberty State Park Project) dated March 15, 1992. The rental payments that
will be required to be made by the State under such sublease agreement will be
sufficient to cover debt service on such bonds and other amounts payable to
the EDA, and such rental payments will be subject to appropriation by the
State Legislature.

In 1981, the Governor signed into law a bill creating the New Jersey
Building Authority (the "Building Authority") having the power to construct
facilities for leasing to the State (P.L. 1981, c. 120). The law provides for
leasing to the State on a basis similar to that described above. The Building
Authority is authorized to have not more than $250 million of its notes and
bonds outstanding exclusive of refunded bonds and notes, provided that if the
Building Authority issues bonds or notes to finance the total cost of a
project based on estimates prepared by an independent consultant and the
consultant determines later that the costs of the project as initially
approved have increased, the Building Authority may issue additional bonds or
notes to finance the increased cost notwithstanding the $250 million
limitation. In 1985 the Building Authority issued $129,635,000 of 1985 Series
Bonds for five office building projects in the Trenton area. During April
1987 the Building Authority issued $103,760,000 of the 1987 Series Bonds to
refund the outstanding term bonds of the 1985 issue. On April 6, 1989 the
Building Authority issued $49,752,390.30 of 1989 Series Bonds for the
renovation and historical restoration of portions of the State Capital Complex
in Trenton. On October 9, 1991 the Building Authority issued $74,999,815.75
of State Building Revenue Bonds, 1991 Series (Garden State Savings Bonds,
1991A), as capital appreciation bonds, under the Garden State Savings Act of
1991, for the continued renovation and historical restoration of portions of
the State Capital Complex in Trenton and for the construction of a structured
parking facility. As of December 31, 1991 the total amount of Building
Authority Bonds outstanding was $238,687,206.05. Outstanding Building
Authority bonds are secured by annual rentals from the State which are subject
to annual appropriations by the State Legislature. The State's combined
annual rental payment for all leases with the Building Authority will be
(i) approximately $17.5 million per year for the years ending June 15, 1992
through 1998, 2012 and 2013 and (ii) approximately $31.0 million per year for
the years ending June 15, 1999 through 2011.

Beginning in April 1984, the State, acting through the Director of the
Division of Purchase and Property, entered into a series of lease purchase
agreements which provide for the acquisition of equipment and real property to
be used by various departments and agencies of the State. To date, the State
has completed nine lease purchase agreements which have resulted in issuance
of Certificates of Participation totaling $541,085,000. A Certificate of
Participation evidences a proportionate interest of the owner thereof in the
lease payments to be made by the State under the terms of the agreement. As
of December 31, 1991, $305,400,000 Certificates of Participation remain
outstanding. The agreements relating to these transactions provide for
semiannual rental payments. The State's obligation to pay rentals due under
these leases is subject to annual appropriations being made by the State
Legislature. The final maturity of the outstanding Certificates of
Participation is December 15, 2013. The majority of proceeds from these
transactions have been or will be used to acquire equipment for the State and
its agencies. The rentals payable by the State will be made from monies
appropriated by the State Legislature. The State intends to continue to use
this financing technique for a substantial portion of its future equipment
requirements.

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"Moral Obligation" Financing. Aside from its general obligation bonds,
the State's "moral obligation" backs certain obligations issued by the New
Jersey Housing and Mortgage Finance Agency, the South Jersey Port Corporation
and the Higher Education Assistance Authority.

New Jersey Housing and Mortgage Finance Agency. Neither the New Jersey
Housing and Mortgage Finance Agency nor its predecessors, the New Jersey
Housing Finance Agency and the New Jersey Mortgage Finance Agency, have had a
deficiency in a debt service reserve fund which required the State to
appropriate funds to meet its "moral obligation". It is anticipated that this
agency's revenues will continue to be sufficient to cover debt service on its
bonds.

South Jersey Port Corporation. The State provides the South Jersey Port
Corporation (the "Corporation") with funds to cover all debt service and
property tax requirements, when earned revenues are anticipated to be
insufficient to cover these obligations.

Higher Education Assistance Authority. The Higher Education Assistance
Authority has issued $24,996,064 aggregate principal amount of revenue bonds,
the interest on which has been capitalized to but not including January 1,
1993. After the period of capitalized interest has ended, it is anticipated
that the authority's revenues will be sufficient to cover debt service on its
bonds.

Below are listed State appropriations made since 1986 which covered
deficiencies in revenues of the Corporation, for debt service and property tax
payments.

Appropriation for Appropriation for
Calendar Year Debt Service Property Tax

1986........................... $0 $1,647,216.00

1987........................... 0 1,647,216.00

1988........................... 0 1,647,216.00

1989........................... 1,281,793.58 1,745,917.00

1990........................... 2,362,850.67 1,850,000.00

1991........................... 2,770,851.00 1,850,000.00

On April 2, 1987, the Corporation issued $31,580,000 aggregate principal
amount of Revenue Bonds, 1987 Series C (the "Series C Bonds"), a portion of
the proceeds of which will be used (i) on January 1, 1995, to refund all of
the Corporation's Marine Terminal Revenue Bonds, 1985 Refunding Series and
(ii) to pay interest on the Series C Bonds until January 1, 1995. Because of
the funded escrow, it is expected that there will not be any need for the
State to provide funds to pay debt service on the Series C Bonds through
January 1, 1995. Also, in addition to the bonded indebtedness of the
Corporation set forth above, on April 2, 1987, the Corporation issued
$10,295,000 Marine Terminal Revenue Bonds, 1987 Series D, to provide funds for
financing a portion of the costs of various capital improvements. On
February 10, 1989, the Corporation issued $4,085,000 Marine Terminal Revenue
Bonds, 1989 Series E, to provide funds for financing a portion of the costs of
various capital improvements and additions to the Corporation's marine
terminal facilities. On November 21, 1989, the Corporation issued $3,655,000
Marine Terminal Revenue Bonds, 1989 Series F, to provide for the costs of
acquiring land in the City of Camden, for the purpose of expanding the
Corporation's marine terminal facilities.

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Municipal Finance. New Jersey's local finance system is regulated by
various statutes designed to assure that all local governments and their
issuing authorities remain on a sound financial basis. Regulatory and
remedial statutes are enforced by the Division of Local Government Services
(the "Division") in the State Department of Community Affairs.

Counties and Municipalities. The Local Budget Law (N.J.S.A. 40A:4-1 et
seq.) imposes specific budgetary procedures upon counties and municipalities
("local units"). Every local unit must adopt an operating budget which is
balanced on a cash basis, and items of revenue and appropriation must be
examined by the Director of the Division (the "Director"). The accounts of
each local unit must be independently audited by a registered municipal
accountant. State law provides that budgets must be submitted in a form
promulgated by the Division and further provides for limitations on estimates
of tax collection and for reserves in the event of any shortfalls in
collections by the local unit. The Division reviews all municipal and county
annual budgets prior to adoption for compliance with the Local Budget Law.
The Director is empowered to require changes for compliance with law as a
condition of approval; to disapprove budgets not in accordance with law; and
to prepare the budget of a local unit, within the limits of the adopted budget
of the previous year with suitable adjustments for legal compliance, if the
local unit is unwilling to prepare a budget in accordance with law. This
process insures that every municipality and county annually adopts a budget
balanced on a cash basis, within limitations on appropriations or tax levies,
respectively, and making adequate provision for principal of and interest on
indebtedness falling due in the fiscal year, deferred charges and other
statutory expenditure requirements. The Director also oversees changes to
local budgets after adoption as permitted by law, and enforces regulations
pertaining to execution of adopted budgets and financial administration. In
addition to the exercise of regulatory and oversight functions, the Division
offers expert technical assistance to local units in all aspects of financial
administration, including revenue collection and cash management procedures,
contracting procedures, debt management and administrative analysis.

The local Government Cap Law (N.J.S.A. 40A:4-45.1 et seq.) (the "Cap
Law") generally limits the year-to-year increase of the total appropriations
of any municipality and the tax levy of any county to either 5 percent or an
index rate determined annually by the Director, whichever is less. However,
where the index percentage rate exceeds 5 percent, the Cap law permits the
governing body of any municipality or county to approve the use of a higher
percentage rate up to the index rate. Further, where the index percentage
rate is less than 5 percent, the Cap Law also permits the governing body of
any municipality or county to approve the use of a higher percentage rate up
to 5 percent. Regardless of the rate utilized, certain exceptions exist to
the Cap Law's limitation on increases in appropriations. The principal
exceptions to these limitations are municipal and county appropriations to pay
debt service requirements; to comply with certain other State or federal
mandates; amounts approved by referendum; and, in the case of municipalities
only, to fund the preceding year's cash deficit or to reserve for shortfalls
in tax collections. The Cap Law, scheduled to expire on December 31, 1990,
was re-enacted with amendments and made a permanent part of the Municipal
Finance System.

State law also regulates the issuance of debt by local units. The Local
Budget Law limits the amount of tax anticipation notes that may be issued by
local units and requires the repayment of such notes within three months of
the end of the fiscal year (six months in the case of the counties) in which
issued. The local Bond Law (N.J.S.A. 40A:2-1 et seq.) governs the issuance of
bonds and notes by the local units. No local unit is permitted to issue bonds
for the payment of current expenses (other than Fiscal Year Adjustment Bonds
described more fully below). Local units may not issue bonds to pay
outstanding bonds, except for reflecting purposes, and then only with the

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approval of the Local Finance Board. Local units may issue bond anticipation
notes for temporary periods not exceeding in the aggregate approximately ten
years from the date of first issue. The debt that any local unit may
authorize is limited to a percentage of its equalized valuation basis, which
is the average of the equalized value of all taxable real property and
improvements within the geographic boundaries of the local unit, as annually
determined by the Director of the Division of Taxation, for each of the three
most recent years. In the calculation of debt capacity, the local Bond Law
and certain other statutes permit the deduction of certain classes of debt
("statutory deductions") from all authorized debt of the local unit ("gross
capital debt") in computing whether a local unit has exceeded its statutory
debt limit. Statutory deductions from gross capital debt consist of bonds or
notes (i) authorized for school purposes by a regional school district or by a
municipality or a school district with boundaries coextensive with such
municipality to the extent permitted under certain percentage limitations set
forth in the School Bond Law (as hereinafter defined); (ii) authorized for
purposes which are self-liquidating, but only to the extent permitted by the
Local Bond Law; (iii) authorized by a public body other than local unit the
principal of and interest on which is guaranteed by the local unit, but only
to the extent permitted by law; (iv) that are bond anticipation notes; (v) for
which provision for payment has been made; or (vi) authorized for any other
purpose for which a deduction is permitted by law. Authorized net capital
debt (gross capital debt minus statutory deductions) is limited to 3.5 percent
of the equalized valuation basis in the case of municipalities and 2 percent
of the equalized valuation basis in the case of counties. The debt limit of a
county or municipality, with certain exemptions, may be exceeded only with the
approval of the Local Finance Board.

Chapter 75 of the Pamphlet Laws of 1991 signed into law on March 28,
1991 requires certain municipalities and permits all other municipalities to
adopt the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition
budget for January to June. Since expenditures would be expected to exceed
revenues primarily because state aid for the calendar year would not be
received by the municipality until after the end of the transition year
budget, the act authorizes the issuance of Fiscal Year Adjustment Bonds to
fund the one time deficit for the six month transition budget. The act
provides that the deficit in the six month transition budget may be funded
initially with bond anticipation notes based on the estimated deficit in the
six month transition budget. Notes issued in anticipation of Fiscal Year
Adjustment Bonds, including renewals, can only be issued for up to one year
unless the Local Finance Board permits the municipality to renew them for a
further period of time. The Local Finance Board must confirm the actual
deficit experienced by the municipality. The municipality then may issue
Fiscal Year Adjustment Bonds to finance the deficit on a permanent basis. The
purpose of the Act is to assist municipalities that are heavily dependent on
state aid and that have had to issue tax anticipation notes to fund operating
cash flow deficits each year. While the act does not authorize counties to
change their fiscal years, it does provide that counties with cash flow
deficits may issue Fiscal Year Adjustment Bonds as well.

State law authorizes State officials to supervise fiscal administration
in any municipality which is in default on its obligations; which experiences
severe tax collection problems for two successive years; which has a deficit
greater than 4 percent of its tax levy for two successive years; which has
failed to make payments due and owing to the State, county, school district or
special district for two consecutive years; which has an appropriation in its
annual budget for the liquidation of debt which exceeds 25 percent of its
total operating appropriations (except dedicated revenue appropriations) for
the previous budget year; or which has been subject to a judicial
determination of gross failure to comply with the Local Bond Law, the Local
Budget Law or the Local Fiscal Affairs Law which substantially jeopardizes its

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fiscal integrity. State officials are authorized to continue such supervision
for as long as any of the conditions exist and until the municipality operates
for a fiscal year without incurring a cash deficit.

There are 567 municipalities and 21 counties in New Jersey. During
1987, 1988, and 1989 no county exceeded its statutory debt limitations or
incurred a cash deficit in excess of 4 percent of its tax levy. The number of
municipalities which have a cash deficit greater than 4 percent of their tax
levies was five for 1987, zero for 1988, and six for 1989. The number of
municipalities which exceeded statutory debt limits was six, five, and one as
of December 31, 1987, 1988, and 1989, respectively. No New Jersey
municipality or county has defaulted on the payment of interest or principal
on any outstanding debt obligation since the 1930's.

School Districts. All New Jersey school districts are coterminous with
the boundaries of one or more municipalities. They are characterized by the
manner in which the board of education, the governing body of the school
district, takes office. Type I school districts, most commonly found in
cities, have a board of education appointed by the mayor or the chief
executive officer of the municipality constituting the school district. In a
Type II school district, the board of education is elected by the voters of
the district. Nearly all regional and consolidated school districts are
Type II school districts.

School Budgets. In every school district having a board of school
estimate, the board of school estimate examines the budget request and fixes
the appropriation amounts for the next year's operating budget after a public
hearing at which the taxpayers and other interested persons shall have an
opportunity to raise objections and to be heard with respect to the budget.
This board, whose composition is fixed by statute, certifies the budget to the
municipal governing bodies and to the local board of education. If either
disagrees, they must appeal to the State Commissioner of Education (the
"Commissioner") to request changes.

The Quality Education Act of 1990 (N.J.S.A. 18A:7D-1 et seq.) limits the
annual increase of a school district's net current expense budget. The
Commissioner certifies the allowable amount of increase for each school
district but may grant a higher level of increase in certain limited
instances. A school district may also submit a proposal to the voters to
raise amounts above the allowable amount of increase. If defeated, such a
proposal is subject to further review or appeal only if the Commissioner
determines that additional funds are required to provide a thorough and
efficient education.

In Type I or Type II school districts which have failed monitoring
over a period of time by the State because of continued educational
deficiencies, and are implementing an approved corrective action plan, the
Commissioner is required to determine the cost to the school district of the
implementation of those portions of the corrective action plan which are
directly responsive to the district's deficiencies as identified in the
monitoring process. Where appropriate, the Commissioner is required to
reallocate funds within the district's budget to support the corrective action
plan. The Commissioner is also required to determine the amount of additional
revenue needed to implement the corrective action plan, and to recertify the
budget for the district.

In State operated school districts the State District Superintendent has
the responsibility for the development of the budget subject to appeal by the
governing body of the municipality to the Commissioner and the Director of the
Division of Local Government Services in the State Department of Community
Affairs. Based upon his review, the Director is required to certify the
amount of revenues which can be raised locally to support the budget of the

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State operated district. Any difference between the amount which the Director
certifies, and the total amount of local revenues required by the budget
approved by the Commissioner, is to be paid by the State in the fiscal year in
which the expenditures are made subject to the availability of appropriations.

School District Bonds. School district bonds and temporary notes are
issued in conformity with N.J.S.A 18A:24-1 et seq. (the "School Bond Law"),
which closely parallels the Local Bond Law. Although school districts are
exempted from the 5 percent down payment provision generally applied to bonds
issued by municipalities and counties, they are subject to debt limits (which
vary depending on the type of school system provided) and to State regulation
of their borrowing. The debt limitation on school district bonds depends upon
the classification of the school district but may be as high as 4 percent of
the average equalized valuation basis of the constituent municipality. In
certain cases involving school districts in cities with populations exceeding
100,000 the debt limit is 8 percent of the average equalized valuation basis
of the constituent municipality, and in cities with populations in excess of
80,000 the debt limit is 6 percent of the aforesaid average equalized
valuation.

School bonds are authorized by (i) an ordinance adopted by the governing
body of a municipality within a Type I school district; (ii) adoption of a
proposal by resolution by the board of education of a Type II school district
having a board of school estimate; or (iii) adoption of a proposal by
resolution by the board of education and approval of the proposal by the legal
voters of any other Type II school district. If school bonds will exceed the
school district borrowing capacity, a school district (other than a regional
school district) may use the balance of the municipal borrowing capacity. If
the total amount of debt exceeds the school district's borrowing capacity and
any available remaining municipal borrowing capacity, the Commissioner and the
Local Finance Board must approve the proposed authorization before it is
submitted to the voters. All authorizations of debt in a Type II school
district without a board of school estimate require an approving referendum,
except where, after hearing, the Commissioner and the State Board of Education
determine that the issuance of such debt is necessary to meet the
constitutional obligation to provide a thorough and efficient system of public
schools. When such obligations are issued, they are issued by, and in the
name of, the school district.

In Type I and II school districts with a board of school estimate, that
board examines the capital proposal of the board of education and certifies
the amount of bonds to be authorized. When it is necessary to exceed the
borrowing capacity of the municipality, the approval of a majority of the
legally qualified voters of the municipality is required, together with the
approval of the Commissioner and the Local Finance Board. When such bonds are
issued for a Type I school district, they are issued by the municipality and
identified as school bonds. When bonds are issued by a Type II school
district having a board of school estimate, they are issued by, and in the
name of, the school district.

All authorizations of debt must be reported to the Division of Local
Government Services by a supplemental debt statement prior to final approval.

School District Lease Purchase Financings. In 1982, school districts
were given an alterative to the traditional method of bond financing capital
improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase Law").
The Lease Purchase Law permits school districts to acquire a site and school
building through a lease purchase agreement with a private lessor corporation.
For Type II school districts, the lease purchase agreement does not require
voter approval. The rent payments attributable to the lease purchase
agreement are subject to annual appropriation by the school district and are
required, pursuant to N.J.A.C. 6:22-A-1.2(h), to be included in the annual

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current expense budget of the school district. Furthermore, the rent payments
attributable to the lease purchase agreement do not constitute debt of the
school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.

Qualified Bonds. In 1976, legislation was enacted (P.L. 1976, c. 38 and
c. 39) which provides for the issuance by municipalities and school districts
of "qualified bonds." Whenever a local board of education or the governing
body of a municipality determines to issue bonds, it may file an application
with the Local Finance Board, and, in the case of a local board of education,
the Commissioner, to qualify bonds pursuant to P.L. 1976, c. 38 or c. 39.
Upon approval of such an application and after receipt of a certificate
stating the name and address of the paying agent for such bonds, the maturity
schedule, interest rates and payment dates, the State Treasurer shall, in the
case of qualified bonds for school districts, withhold from the school aid
payable to such municipality or school district and in the case of qualified
bonds for municipalities, withhold from the amount of business personal
property tax replacement revenues, gross receipts; tax revenues, municipal
purposes tax assistance fund distributions, State urban aid, State revenue
sharing, and any other funds appropriated as State aid and not otherwise
dedicated to specific municipal programs, payable to such municipalities, an
amount sufficient to cover debt service on such bonds. These "qualified
bonds" are not direct, guaranteed or moral obligations of the State, and debt
service on such bonds will be provided by the State only if the above
mentioned appropriations are made by the State. Total outstanding
indebtedness for "qualified bonds" consisted of $103,720,500 by various school
districts as of June 30, 1992 and $830,037,105 by various municipalities as of
June 30, 1992.

New Jersey School Bond Reserve Act. The New Jersey School Bond Reserve
Act (N.J.S.A. 18A:56-17 et seq.) establishes a school bond reserve within the
constitutionally dedicated Fund for the Support of Free Public Schools. Under
this law the reserve is maintained at an amount equal to 1.5 percent of the
aggregate outstanding bonded indebtedness of counties, municipalities or
school districts for school purposes (exclusive of bonds whose debt service is
provided by State appropriations), but not in excess of monies available in
such Fund. If a municipality, county or school district is unable to meet
payment of the principal of or interest on any of its school bonds, the
trustee of the school bond reserve will purchase such bonds at the face amount
thereof or pay the holders thereof the interest due or to become due. On
June 30, 1991, the book value of the Fund's assets aggregated $59,352,429 and
the reserve, computed as of June 30, 1991, amounted to $19,668,349. There has
never been an occasion to call upon this Fund.

Local Financing Authorities. The Local Authorities Fiscal Control Law
(N.J.S.A. 40A:5A-l et seq.) provides for State supervision of the fiscal
operations and debt issuance practices of independent local authorities and
special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, etc.). Authorities which are subject to differing State or
federal financial restrictions are exempted, but only to the extent of that
difference.

Financial control responsibilities over local authorities and special
districts are assigned to the Local Finance Board and the Director of the
Division of Local Government Services. The Local Finance Board exercises
approval power over the creation of new authorities and special districts as

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well as their dissolution. The Local Finance Board also reviews, conducts
public hearings and issues findings and recommendations on any proposed
project financing of an authority or district, and on any proposed financing
agreement between a municipality or county and an authority or special
district. The Local Finance Board prescribes minimum audit requirements to be
followed by authorities and special districts in the conduct of their annual
audits. The Director reviews and approves annual budgets of authorities and
special districts.

Litigation. The State is a party in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are cases which
challenge the following: the formula relating to State aid to public schools,
the method by which the State shares with its counties maintenance recoveries
and costs for residents in State institutions, unreasonably low Medicaid
payment rates for long-term facilities in New Jersey, the obligation of
counties to maintain Medicaid or Medicare eligible residents of institutions
and facilities for the developmentally disabled, taxes paid into the Spill
Compensation Fund (a fund established to provide money for use by the State to
remediate hazardous waste sites and to compensate other persons for damages
incurred as a result of hazardous waste discharge) based upon Federal
preemption, various provisions, and the constitutionality of the Fair
Automobile Insurance Reform Act of 1990, the State's role in a consent order
concerning the construction of a resource facility in Passaic County, actions
taken by the New Jersey Bureau of Securities against an individual, the
State's actions regarding alleged chromium contamination of State-owned
property in Hudson County, the issuance of emergency redirection orders and a
draft permit by the Department of Environmental Protection and Energy, the
adequacy of Medicaid reimbursement for services rendered by doctors and
dentists to Medicaid eligible children, the Commissioner of Health's
calculation of the hospital assessment required by the Health Care Cost
Reduction Act of 1991, refusal of the State to share with Camden County
Federal funding the State recently received for disproportionate share
hospital payments made to county psychiatric facilities, and the
constitutionality of annual A-901 hazardous and solid waste licensure renewal
fees collected by the Department of Environmental Protection and Energy.
Adverse judgments in these and other matters could have the potential for
either a significant loss of revenue or a significant unanticipated
expenditure by the State.

At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The state is unable to estimate its exposure
for these claims.

Pennsylvania Trust

The following information constitutes only a brief summary of a
number of the complex factors which may impact issuers of Pennsylvania
municipal securities and does not purport to be a complete or exhaustive
description of all conditions to which issuers of Pennsylvania municipal
securities may be subject. Additionally, many factors, including national,
economic, social and environmental policies and conditions, which are not
within the control of such issuers, could have an adverse impact on the
financial condition of such issuers. The Pennsylvania Trust cannot predict
whether or to what extent such factors or other factors may affect the issuers

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of Pennsylvania municipal securities, the market value or marketability of
such securities or the ability of the respective issuers of such securities
held by the Pennsylvania Trust to pay interest on or principal of such
securities. The creditworthiness of obligations issued by local Pennsylvania
issuers may be unrelated to the creditworthiness of obligations issued by the
Commonwealth of Pennsylvania, and there is no obligation on the part of the
Commonwealth of Pennsylvania to make payments on such local obligations.
There may be specific factors that are applicable in connection with
investment in the obligations of particular issuers located within
Pennsylvania, and it is possible the Pennsylvania Trust has invested in
obligations of particular issuers as to which such specific factors are
applicable. However, the information set forth below is intended only as a
general summary and not as a discussion of any specific factors that may
affect any particular issuer of Pennsylvania municipal securities.

State Finance

State Economy. The Commonwealth of Pennsylvania is one of the
most populous states, ranking fifth behind California, New York, Texas and
Florida. Pennsylvania is an established yet growing state with a diversified
economy. It is the headquarters for 60 major corporations and the home for
more than 272,764 businesses. Pennsylvania historically has been identified
as a heavy industry state although that reputation has changed recently as the
industrial composition of the Commonwealth diversified when the coal, steel
and railroad industries began to decline. The major new sources of growth in
Pennsylvania are in the service sector, including trade, medical and the
health services, education and financial institutions. Pennsylvania's
agricultural industries are also an important component of the Commonwealth's
economic structure, accounting for more than $3.73 billion in crop and
livestock products annually, while agribusiness and food related industries
support $37 billion in economic activity annually.

Non-agricultural employment in the Commonwealth declined by 5.1
percent during the recessionary period from 1980 to 1983. In 1984, the
declining trend was reversed as employment grew by 2.9 percent over 1983
levels. From 1984 to 1990, non-agricultural employment continued to grow each
year, increasing an additional 14.3 percent during such period. For the last
three years, employment in the Commonwealth increased 2.0 percent. The growth
in employment experienced in Pennsylvania is comparable to the growth in
employment in the Middle Atlantic region which has occurred during this
period. As a percentage of total non-agricultural employment within the
Commonwealth, non-manufacturing employment has increased steadily since 1980
to its 1994 level of 81.8 percent of total employment. Consequently,
manufacturing employment constitutes a diminished share of total employment
within the Commonwealth. Manufacturing, contributing 18.2 percent of 1994
non-agricultural employment, has fallen behind both the services sector and
the trade sector as the largest single source of employment within the
Commonwealth. In 1994, the services sector accounted for 30.1 percent of all
non-agricultural employment while the trade sector accounted for 22.5 percent.

From 1983 to 1989, Pennsylvania's annual average unemployment rate
dropped from 11.8 percent to 4.5 percent, falling below the national rate in
1986 for the first time in over a decade. Slower economic growth caused the
unemployment rate in the Commonwealth to rise to 6.9 percent in 1991 and 7.5
percent in 1992. The resumption of faster economic growth resulted in a
decrease in the Commonwealth's unemployment rate to 7.1 percent in 1993. As
of August 1995, the seasonally adjusted unemployment rate for the Commonwealth
was 5.5 percent compared to 5.6 percent for the United States as a whole.

The Commonwealth operates under an annual budget which is
formulated and submitted for legislative approval by the Governor each
February. The Pennsylvania Constitution requires that the Governor's budget

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proposal consist of three parts: (i) a balanced operating budget setting forth
proposed expenditures and estimated revenues from all sources and, if
estimated revenues and available surplus are less than proposed expenditures,
recommending specific additional sources of revenue sufficient to pay the
deficiency; (ii) a capital budget setting forth proposed expenditures to be
financed from the proceeds of obligations of the Commonwealth or its agencies
or from operating funds; and (iii) a financial plan for not less than the
succeeding five fiscal years, which includes for each year projected operating
expenditures and estimated revenues and projected expenditures for capital
projects. The General Assembly may add, change or delete any items in the
budget prepared by the Governor, but the Governor retains veto power over the
individual appropriations passed by the legislature. The Commonwealth's
fiscal year begins on July 1 and ends on June 30.

The Constitution and the laws of the Commonwealth require all
payments from the treasury, with the exception of refunds of taxes, licenses,
fees and other charges, to be made only by duly enacted appropriations.
Amounts appropriated from a fund may not exceed its actual and estimated
revenues for the fiscal year plus any surplus available. Appropriations from
the principal operating funds of the Commonwealth (the General Fund, the Motor
License Fund and the State Lottery Fund) are generally made for one fiscal
year and are returned to the unappropriated surplus of the fund (a lapse) if
not spent or encumbered by the end of the fiscal year.

Pennsylvania uses the "fund" method of accounting for receipts and
disbursements. For purposes of government accounting, a "fund" is an
independent fiscal and accounting entity with a self-balancing set of
accounts, recording cash and/or other resources together with all related
liabilities and equities which are segregated for the purpose of carrying on
specific activities or attaining certain objectives in accordance with the
fund's special regulations, restrictions or limitations. In the Commonwealth,
funds are established by legislative enactment or in certain cases by
administrative action. Over 150 funds have been established for the purpose
of recording the receipts and disbursements of monies received by the
Commonwealth. Annual budgets are adopted each fiscal year for the principal
operating funds of the Commonwealth and several other special revenue funds.
Expenditures and encumbrances against these funds may only be made pursuant to
appropriation measures enacted by the General Assembly and approved by the
Governor. The General Fund, the Commonwealth's largest fund, receives all tax
revenues, non-tax revenues and federal grants and entitlements that are not
specified by law to be deposited elsewhere. The majority of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. Debt service on all bond indebtedness of the Commonwealth,
except that issued for highway purposes or for the benefit of other special
revenue funds, is payable from the General Fund.

Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting. Since 1984,
the Commonwealth has also prepared annual financial statements in accordance
with generally accepted accounting principles ("GAAP"). Financial statements
prepared in accordance with GAAP have been audited jointly by the Auditor
General of the Commonwealth and an independent public accounting firm each
year since 1984. Budgetary basis financial reports are based on a modified
cash basis of accounting as opposed to a modified accrual basis of accounting
prescribed by GAAP. The budgetary basis financial information maintained by
the Commonwealth to monitor and enforce budgetary control is adjusted at
fiscal year-end to reflect appropriate accruals for financial reporting in
conformity with GAAP.

Financial Results for Recent Fiscal Years (GAAP Basis). The five
year period from fiscal 1990 through fiscal 1994 was marked by public health
and welfare costs growing at a rate double the growth for all the state

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expenditures. Rising caseloads, increased utilization of services and rising
prices joined to produce the rapid rise of public health and welfare costs at
a time when a national recession caused tax revenues to stagnate and even
decline. During the period from fiscal 1990 through fiscal 1994, public
health and welfare costs rose by an average annual rate of 9.4 percent while
tax revenues were growing at an average annual rate of 5.8 percent.
Consequently, spending on other budget programs was restrained to a growth
rate of 4.7 percent and sources of revenues other than taxes became larger
components of fund revenues. Among those sources are transfers from other
funds and hospital and nursing home pooling of contributions to use as federal
matching funds.

Tax revenues declined in fiscal 1991 as a result of the recession
in the economy. A $2.7 billion tax increase enacted for fiscal 1992 brought
financial stability to the General Fund. That tax increase included several
taxes with retroactive effective dates which generated some one-time revenues
during fiscal 1992. The absence of those revenues and a reduction in the
personal income tax rate in fiscal 1993 contributed to the decline in tax
revenues shown for fiscal 1993. Fiscal 1994 tax revenues increased by 4.1
percent, but a decline in other revenues caused by the end of medical
assistance pooled financing in fiscal 1993 held total revenues to a 1.8
percent gain. Expenditures for fiscal 1994 rose by 4.3 percent.

Fiscal 1993 Financial Results -- GAAP Basis. The fund balance of
the General Fund increased by $611.4 million during the fiscal year, led by an
increase in the unreserved balance of $576.8 million over the prior fiscal
year balance. At June 30, 1993, the fund balance totaled $698.9 and the
unreserved/undesignated balance totaled $64.4 million. A continuing recovery
of the Commonwealth's financial condition from the effects of the national
economic recession of 1990 and 1991 is demonstrated by this increase in the
balance and a return to a positive unreserved/undesignated balance. The
previous positive unreserved/undesignated balance was recorded in fiscal 1987.
For the second consecutive fiscal year the increase in the
unreserved/undesignated balance exceeded the increase recorded in the
budgetary basis unappropriated surplus during the fiscal year.

Budgetary Basis. The 1993 fiscal year closed with revenues higher
than anticipated and expenditures about as projected, resulting in an ending
unappropriated balance surplus (prior to the ten percent transfer to the Tax
Stabilization Reserve Fund) of $242.3 million, slightly higher than estimated.
Cash revenues were $41.5 million above the budget estimate and totaled $14.633
billion representing less than a one percent increase over revenues for the
1992 fiscal year. A reduction in the personal income tax rate in July 1992
and revenues from retroactive corporate tax increases received in fiscal 1992
were responsible, in part, for the low revenue growth in fiscal 1993.

Appropriations less lapses totaled an estimated $13.870 billion
representing a 1.1 percent increase over those during fiscal 1992. The low
growth in spending is a consequence of a low rate of revenue growth,
significant one-time expenses during fiscal 1992, increased tax refund
reserves to cushion against adverse decisions on pending litigations, and the
receipt of federal funds for expenditures previously paid out of Commonwealth
funds.

By state statute, ten percent of the budgetary basis
unappropriated surplus at the end of a fiscal year is to be transferred to the
Tax Stabilization Reserve Fund. The transfer for the fiscal 1993 balance is
$24.2 million. The remaining unappropriated surplus of $218.0 million was
carried forward into the 1994 fiscal year.

Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth
revenues during the fiscal year totaled $15,210.7 million, $38.6 million above

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the fiscal year estimate, and 3.9 percent over Commonwealth revenues during
the previous fiscal year. The sales tax was an important contributor to the
higher than estimated revenues. Collections from the sales tax were $5.124
billion, a 6.1 percent increase from the prior fiscal year and $81.3 million
above estimate. The strength of collections from the sales tax offset the
lower than budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the personal
income tax was largely due to shortfalls in income not subject to withholding
such as interest, dividends and other income. Tax refunds in fiscal 1994 were
reduced substantially below the $530 million amount provided in fiscal 1993.
The higher fiscal 1993 amount and the reduced fiscal 1994 amount occurred
because reserves of approximately $160 million were added to fiscal 1993 tax
refunds to cover potential payments if the Commonwealth lost litigation known
as Philadelphia Suburban Corp. v. Commonwealth. Those reserves were carried
into fiscal 1994 until the litigation was decided in the Commonwealth's favor
in December 1993 and $147.3 million of reserves for tax refunds were released.

Expenditures, excluding pooled financing expenditures and net of
all fiscal 1994 appropriation lapses, totaled $14,934.4 million representing a
7.2 percent increase over fiscal 1993 expenditures. Medical assistance and
corrections spending contributed to the rate of spending growth for the fiscal
year.

The Commonwealth maintained an operating balance on a budgetary
basis for fiscal 1994 producing a fiscal year ending unappropriated surplus of
$335.8 million. By state statute, ten percent ($33.6 million) of that surplus
was transferred to the Tax Stabilization Reserve Fund and the remaining
balance was carried over into the 1995 fiscal year. The balance in the Tax
Stabilization Reserve Fund as of June 30, 1995 was $66.3 million.

Fiscal 1995 Fiscal Results (Budgetary Basis): Commonwealth
revenues for the fiscal year were above estimate and exceeded fiscal year
expenditures and encumbrances. Fiscal 1995 was the fourth consecutive fiscal
year the Commonwealth reported an increase in the fiscal year-end
unappropriated balance. Prior to reserves for transfer to the Tax
Stabilization Reserve Fund, the fiscal 1995 closing unappropriated surplus was
$540.0 million, an increase of $204.2 million over the fiscal 1994 closing
unappropriated surplus prior to transfers.

Commonwealth revenues were $459.4 million, 2.9 percent, above the
estimate of revenues used at the time the budget was enacted. Corporation
taxes contributed $329.4 million of the additional receipts largely due to
higher receipts from the corporate net income tax. Fiscal 1995 revenues from
the corporate net income tax were 22.6 percent over collections in fiscal 1994
and include the effects of the reduction of the tax rate from 12.25 percent to
11.99 percent that became effective with tax years beginning on and after
January 1, 1994. The sales and use tax and miscellaneous revenues also showed
strong year-over-year growth that produced above-estimate revenue collections.
Sales and use tax revenues were $5.526.9 million, $128.8 million above the
enacted budget estimate and 7.9 percent over fiscal 1994 collections. Tax
receipts from both motor vehicle and non-motor vehicle sales contributed to
the higher collections. Miscellaneous revenue collections for fiscal 1995
were $183.5 million, $44.9 million above estimate and were largely due to
additional investment earnings, escheat revenues and other miscellaneous
revenues. Personal income tax receipts for fiscal 1995 were slightly above
the budgeted estimate. Receipts totaled $5,083.2 million, $5.1 million above
the estimate and 4.3 percent over collections for fiscal 1994. The higher
than estimated revenues from tax sources were due to faster economic growth in
the national and state economy than had been projected when the budget was
adopted. The higher rate of economic growth for the nation and the state gave
rise to increases in employment, income and sales higher than expected which
translated into above-estimate tax revenues.

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Tax revenue refunds were also higher than estimated in the budget.
The reserve for tax refunds was increased during the fiscal year from $410
million to $460 million, a 110 percent increase over refunds budgeted in
fiscal 1994 which were usually low due to a carryover of $160 million of
reserves for tax refunds from fiscal 1993. An acceleration of the tax refund
process for corporation taxes, litigation settlements, and an increase in the
personal income tax poverty exemption contributed to tax refunds being higher
than initially budgeted.

Expenditures from commonwealth revenues (excluding pooled
financing expenditures), including $65.5 million of supplemental
appropriations enacted at the close of the 1995 fiscal year, totaled $15,674.7
million, representing an increase of 5 percent over spending during fiscal
1994.

Funds held in reserve at the end of fiscal 1995 for transfer to
the Tax Stabilization Reserve Fund totaled $111.0 million. Of this total,
$54.0 million represents the 10 percent transfer of the fiscal year-end
balance prescribed in state law. The remaining $57.0 million represents an
additional 5 percent of the year-end balance and an additional $30 million
proposed by the Governor to be transferred to the Tax Stabilization Reserve
Fund. These additional reserves for transfer are authorized in legislation
pending in the General Assembly. Upon approval by the General Assembly of the
additional transfers and the completion of the required and proposed
transfers, the Tax Stabilization Reserve Fund is anticipated to have an
available balance of $177.3 million representing approximately 1.1 percent of
general fund annual commonwealth revenues.

Fiscal 1996 Budget: The enacted fiscal 1996 budget provides for
expenditures from commonwealth revenues of $16,161.7 million, a 2.7 percent
increase over total appropriations from commonwealth revenues in fiscal 1995.
The appropriations increase for fiscal 1996 is one of the lowest rates in
recent years. The fiscal 1996 budget is based on anticipated commonwealth
revenues, net of enacted tax changes but prior to tax refunds, of $16,268.7
million, an increase over actual fiscal 1995 commonwealth revenues of 0.3
percent. Excluding the estimated effects of the tax changes enacted in 1994
and 1995, commonwealth revenues for fiscal 1996 are estimated to increase by
approximately 2.9 percent. The fiscal 1995 revenue estimate is based on a
forecast of the national economy for gross domestic product growth to slow
from 4.1 percent in 1994 to an average annual rate for 1995 of 2.4 percent and
then to 1.3 percent in 1996. The lower rate of growth is a consequence of
anticipated smaller rates of increases for consumer spending, business fixed
investment and exports. The anticipated decline in the rate of economic
growth is also expected to lead to an increase in the national unemployment
rate to a rate above 6 percent by the end of 1995 and above a rate of 6.5
percent by the end of fiscal 1996.

Tax changes enacted with the fiscal 1996 budget totaled $282.9
million, representing an approximate 1.7 percent of base revenues. The
largest dollar value changes were in the corporate net income tax where the
scheduled 1997 reduction of the tax rate to 9.99 percent was accelerated to
the 1995 tax year; a double-weighting was provided for the sales factor of the
corporate net income apportionment calculation; and the maximum annual
allowance for the net operating loss deduction was increased from $500
thousand to $1 million. The fiscal 1996 cost of these corporate income tax
changes is estimated to be $210.8 million representing approximately 75
percent of the fiscal year's tax reduction. Other major components of the tax
reduction include a $12.1 million decrease for the capital stock and franchise
tax from an increase in the basic exemption; $24.7 million from the repeal of
the tax on annuities; and $27.9 million from an acceleration of the scheduled
phase-out of the inheritance tax on transfers of certain property to a
surviving spouse. A 90-day amnesty program was also authorized in the tax

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bill. The amnesty program will be available to taxpayers from October 1995
through January 1996. Tax and interest revenues received from the tax amnesty
program after payment of administration costs are to be credited to the
appropriate fund. Receipts credited to the General Funds in excess of $67
million, plus any shortfall in delinquent tax collection below those in fiscal
1995, will be deposited into a restricted account in the General Fund for
later distribution.

Increases in authorized spending for fiscal 1996 emphasize
education. Appropriations for the basic subsidy for public schools were
increased $143 million, representing a 4.4 percent increase. This increase
reversed a four-year trend of a declining budget share for education. A
limited program to permit certain residents to choose the school district or
private school to provide their children's education was funded in the budget,
but enabling legislation for the program has yet to be enacted. The budget
also contemplates several changes to certain public welfare programs. Changes
made by the General Assembly include the termination of the category of
transitionally needy for cash assistance after June 30, 1995. Newly
qualifying members of this category no longer are eligible for cash payments
for up to two months every two years, but will continue to be eligible for
food stamps and medical assistance benefits. The legislation also eliminated
cash assistance payments for certain other limited recipients. Estimated
savings are approximately $27 million based on a caseload of approximately
90,000 persons per year. The enacted budget also included most of the
Governor's proposed consolidation and elimination of several organizations and
or appropriations. The consolidated programs were absorbed within existing
organizations. Savings of $5.2 million are anticipated to result from these
consolidations and eliminations.

Tax Structure. The Commonwealth, through its principal operating
funds -- the General Fund, the Motor License Fund and the State Lottery Fund
- -- receives over 57 percent of its revenues from taxes levied by the
Commonwealth. Interest earnings, licenses and fees, lottery ticket sales,
liquor store profits, miscellaneous revenues, augmentations and federal
government grants supply the balance of receipts to these funds.

Tax and fee proceeds relating to motor fuels and vehicles are
constitutionally dedicated for highway purposes and are deposited into the
Motor License Fund. Lottery ticket sale revenues are deposited into the State
Lottery Fund and are reserved by statute for programs to benefit senior
citizens. Revenues, other than those specified to be deposited in a
particular fund, are deposited into the General Fund.

The major tax sources for the General Fund of the Commonwealth are
the sales tax enacted in 1953, the personal income tax enacted in 1971, and
the corporate net income tax which in its present form dates back to 1935.
The last restructuring of the Commonwealth's tax system occurred with the
enactment of the Tax Reform Code of 1971 that codified many of the taxes
levied by the Commonwealth.

The major tax sources for the Motor License Fund are the liquid
fuels taxes and the oil company franchise tax. The Motor License Fund also
receives revenues from fees levied on heavy trucks and from taxes on fuels
used for aviation purposes. Use of these revenues is restricted to the repair
and construction of highway bridges and aviation programs respectively.

The Tax Stabilization Reserve Fund was established in 1986 to
provide a source of funds that can be used to alleviate emergencies
threatening the health, safety or welfare of the Commonwealth's citizens or to
offset unanticipated revenue shortfalls due to economic downturns. Income to
the fund is provided by specific appropriation from available balances by the
General Assembly, from investment income and, after fiscal 1991, by the

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transfer to the Tax Stabilization Reserve Fund of 10 percent of the budgetary
basis operating surplus in the General Fund at the close of any fiscal year.
In addition, the proceeds received from the disposition of assets of the
Commonwealth are also to be deposited into the Tax Stabilization Reserve Fund.
The Commonwealth has not prepared estimates of such sales.

Assets of the Tax Stabilization Reserve Fund may be used only upon
the recommendation by the Governor and approval by the vote of two-thirds of
the members of each house of the General Assembly. In February 1991, in
response to a projected fiscal 1991 General Fund budgetary deficit caused by
lower revenues and higher expenditures than budgeted, the Governor
recommended, and the General Assembly authorized, the available balance of
$133.8 million in the Tax Stabilization Reserve Fund be used to pay medical
assistance and special education costs not covered by budgeted funds. On
June 30, 1995, the balance in the Tax Stabilization Reserve Fund was $66.3
million.
Debt Limits and Outstanding Debt. The Pennsylvania Constitution
permits the Commonwealth to issue the following types of debt: (i) debt to
suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years, and (iv) tax anticipation notes payable in the
fiscal year of issuance. All debt except tax anticipation notes must be
amortized in substantial and regular amounts.

Outstanding general obligation debt totalled $5,045.4 million on
June 30, 1995, a decrease of $30.4 million from June 30, 1994. Over the
10-year period ending June 30, 1995, total outstanding general obligation debt
increased at an annual rate of 1.1 percent. Within the most recent 5-year
period, outstanding general obligation debt has grown at an annual rate of 1.7
percent.

General obligation debt for non-highway purposes of $4,068.7
million was outstanding on June 30, 1995. Outstanding debt for these purposes
increased $63.1 million since June 30, 1994, in large part due to the recent
emphasis the Commonwealth has placed on infrastructure investment as a means
to spur economic growth and to provide a higher quality of life for
Commonwealth residents. For the period ending June 30, 1995, the 10-year and
5-year average annual compounded growth rate for total outstanding debt for
non-highway purposes has been 3.8 percent and 6.2 percent, respectively. In
its current debt financing plan, Commonwealth infrastructure investment
projects include improvement and rehabilitation of existing capital
facilities, such as water supply systems and construction of new facilities,
such as roads, prisons and public buildings.

Outstanding general obligation debt for highway purposes was
$976.7 million on June 30, 1995, a decrease of $93.5 million from June 30,
1994. Highway outstanding debt has declined over the most recent 10-year and
5-year periods ending June 30, 1995 by the annual average rates of 5.5 percent
and 9.6 percent, respectively.

During the period from 1980 through 1986, all of the
Commonwealth's highway investment was funded from current year revenues.
Beginning in 1987, a limited return to the issuance of long-term bonds was
required to finance immediately needed repairs to highway bridges. The
highway bridge bonding program is funded from the Highway Bridge Improvement
Restricted Account within the Motor License Fund. Revenues in this restricted
account are derived from six cent per gallon surtax on motor fuel used on
Commonwealth highways by motor carriers and increased registration fees for
trucks and truck tractors weighing above 26,000 pounds. The two funding
sources for the Highway Bridge Improvement Restricted Account were enacted on

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July 13, 1987 to replace revenues from an axle tax on heavy trucks which was
declared unconstitutional by the United States Supreme Court.

The Commonwealth has also issued obligations for its advance
construction interstate program (the "ACI Program") to fund the completion of
the interstate highway network in anticipation of the receipt of reimburse-
ments for the federally financed portion of these projects. As of June 30,
1995, all ACI debt had been retired.

The Commonwealth may incur debt to fund capital projects for
community colleges, highways, public improvements, transportation assistance,
flood control, redevelopment assistance, site development and the Pennsylvania
Industrial Development Authority. Before a project may be funded, it must be
itemized in a capital budget bill adopted by the General Assembly. An annual
capital budget bill states the maximum amount of debt for capital projects
that may be incurred during the current fiscal year for projects authorized in
the current or previous years' capital budget bills. Capital projects debt is
subject to a constitutional limit on debt. As of June 30, 1995, $3,936.1
million of capital projects debt was outstanding.

The issuance of electorate approved debt is subject to the
enactment of legislation which places on the ballot the question of whether
debt shall be incurred. Such legislation must state the purposes for which
the debt is to be authorized and, as a matter of practice, includes a maximum
amount of funds to be borrowed. Upon electorate approval and enactment of
legislation implementing the proposed debt-funded program, bonds may be
issued. As of June 30, 1995, the Commonwealth had $62.4 million of electorate
approved debt outstanding.

Debt issued to rehabilitate areas affected by disasters is
authorized by specific legislation. The Commonwealth had $45.1 million of
disaster relief debt outstanding as of June 30, 1995.

Due to the timing of major tax payment dates, the Commonwealth's
cash receipts are generally concentrated in the last four months of the fiscal
year, from March through June. Disbursements are distributed more evenly
throughout the fiscal year. As a result, operating cash shortages can occur
during certain months of the fiscal year. The Commonwealth is in the process
of offering a total of $500.0 million of tax anticipation notes for the
account of the General Fund in fiscal 1996. All such notes will mature on
June 28, 1996 and will be paid from fiscal 1996 General Fund receipts.

Pending the issuance of bonds, the Commonwealth may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may not
exceed three years. Currently, there are no bond anticipation notes
outstanding.

Certain state-created agencies have statutory authority to incur
debt for which state appropriations to pay debt service thereon is not
required. The debt of these agencies is supported by assets of, or revenues
derived from, the various projects financed and is not an obligation of the
Commonwealth. Some of these agencies, however, are indirectly dependent on
Commonwealth appropriations. These entities include: Delaware River Joint
Toll Bridge Commission, Delaware River Port Authority, Pennsylvania Energy
Development Authority, Pennsylvania Higher Education Assistance Agency,
Pennsylvania Higher Educational Facilities Authority, Pennsylvania Industrial
Development Authority, Pennsylvania Infrastructure Investment Authority,
Pennsylvania State Public School Building Authority, Pennsylvania Turnpike
Commission, the Philadelphia Regional Port Authority and the Pennsylvania
Economic Development Financing Authority. As of December 31, 1993, the
aggregate outstanding indebtedness of these entities was $5,767.7 million.

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The Pennsylvania Housing Finance Agency ("PHFA"), as of June 30,
1995, had $2,130.0 million of revenue bonds and $24.0 million of notes
outstanding. The statute creating PHFA provides that if there is a potential
deficiency in the capital reserve fund or if funds are necessary to avoid
default on interest, principal or sinking fund payments on bonds or notes of
PHFA, the Governor, upon notification from the PHFA, shall place in the budget
of the Commonwealth for the next succeeding year an amount sufficient to make
up any such deficiency or to avoid any such default. The budget as finally
adopted by the General Assembly may or may not include the amount so placed
therein by the Governor. PHFA is not permitted to borrow additional funds so
long as any deficiency exists in the capital reserve fund.

The Hospitals and Higher Education Facilities Authority of
Philadelphia, as of June 30, 1995, had $21.1 million of bonds outstanding
which benefit from a moral obligation of the Commonwealth's Department of
Public Welfare to request a budget appropriation to make up any deficiency in
the debt service reserve fund for said bonds. The budget as finally adopted
may or may not include the amount requested.

The Commonwealth, through several of its departments and agencies,
has entered into various agreements to lease, as lessee, certain real property
and equipment and to make lease rental payments. Some of those lease payments
are pledged as security for various outstanding debt obligations issued by
certain public authorities or other entities within the state. All lease
payments due from Commonwealth departments and agencies are subject to and
dependent upon an annual spending authorization approved through the
Commonwealth's annual budget process. The Commonwealth is not required by law
to appropriate or otherwise provide moneys from which the lease payments are
to be paid. The obligations to be paid from such lease payments are not
bonded debt of the Commonwealth.

The Commonwealth maintains contributory benefit pension plans
covering all state employees, public school employees and employees of certain
other state-related organizations. Unfunded actuarial accrued liabilities for
the Public School Employees' Retirement Fund as of June 30, 1993 were $3,303
million, and for the State Employees' Retirement Fund were negative $847
million as of December 31, 1993.

Municipal Finance

Local Finance. The Local Government Unit Debt Act (Act 52 of
1978) (the "Debt Act") establishes debt limits for local government units.
Local government units include municipalities (except a first class city or
county), school districts and intermediate units. The Act establishes three
classes of debt for a local government unit: (i) electoral debt (debt incurred
with the approval of the electors of the municipality for which there is no
limitation on the amount that may be incurred); (ii) nonelectoral debt (debt
of a local government unit not being electoral or lease rental debt); (iii)
lease rental debt (the principal amount of debt of an authority organized by a
municipality or debt of another local government unit, which debt is to be
repaid by the local government unit through a lease, subsidy contract,
guarantee or other form of agreement evidencing acquisition of a capital
asset, payable or which may be payable out of tax revenues and other general
revenues. Each local government unit is subject to a limitation as to the
amount of class "ii" and class "iii" debt which may be issued which is based
upon such local government unit's Borrowing Base.

Borrowing Base is defined in the Debt Act as the annual arithmetic
average of the total revenues for the three full fiscal years ended next
preceding the date of the incurring of nonelectoral debt or lease rental debt.
Total revenues for the purposes of the Debt Act excludes, inter alia, certain

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state and federal subsidies and reimbursements, certain pledged revenues,
interest on pledged funds and nonrecurring items.

The debt limitations applicable to the various local government
units are set forth below:

Nonelectoral Nonelectoral plus
Lease Rental
First Class
School District 100% of Borrowing Base 200% of Borrowing Base

County 300% of Borrowing Base 400% of Borrowing Base

Other 250% of Borrowing Base 350% of Borrowing Base

A county may utilize an additional debt limit of 100% of its
Borrowing Base for additional nonelectoral or additional lease rental debt, or
both, if such county has assumed countywide responsibility for hospitals and
other public health services, air and water pollution control, flood control,
environmental protection, water distribution and supply systems, sewage and
refuse collection and disposal systems, education at any level, highways,
public transportation, or port operations, but such additional debt limit may
be so utilized only to provide funds for and towards the costs of capital
facilities for any or any combination of the foregoing purposes.

City of Philadelphia. The City of Philadelphia ("Philadelphia")
is the largest city in the Commonwealth, with an estimated population of
1,585,577 according to the 1990 Census. Philadelphia functions both as a city
of the first class and a county for the purpose of administering various
governmental programs.

Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities
in remedying fiscal emergencies was enacted by the General Assembly and
approved by the Governor in June 1991. PICA is designed to provide assistance
through the issuance of funding debt to liquidate budget deficits and to make
factual findings and recommendations to the assisted city concerning its
budgetary and fiscal affairs. Philadelphia is operating under a five year
fiscal plan approved by PICA on April 17, 1995, with the latest update
approved July 18, 1995.

PICA has issued $1,418,680,000 of its Special Tax Revenue Bonds in
the following series: Series of 1992 in the amount of $474,555,000; Series of
1993 in the amount of $643,430,000; and Series of 1993A in the amount of
$178,675,000 (issued to advance refund a portion of the Series of 1992); and
Series of 1994 in the amount of $122,020,000. This financial assistance has
included the refunding of certain city general obligation bonds, the funding
of capital projects and the liquidation of the Cumulative General Fund balance
deficit as of June 30, 1992 of $224.9 million. The audited General Fund
balance as of June 30, 1995 showed a surplus of approximately $15.4 million.
The unaudited preliminary General Fund balance as of June 30, 1995 estimates a
surplus of approximately $59.6 million. Pursuant to restrictions in the Act
establishing PICA, the Authority shall not issue bonds for the purpose of
financing a capital project or deficit on a date later than December 31, 1994,
or financing a cash flow deficit on a date later than December 31, 1996.
PICA's ability to refund existing outstanding debt is unrestricted.

Litigation. According to the Preliminary Official Statement dated
October 4, 1995 describing Tax Anticipation Notes, First Series of 1995-1996
of the Commonwealth of Pennsylvania, the Office of Attorney General and the
Office of General Counsel have reviewed the status of pending litigation
against the Commonwealth, its officers and employees, and have identified the

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following cases as ones where an adverse decision could materially affect the
Commonwealth's governmental operations. Listed below are all litigation items
so identified that may have a material effect on government operations of the
Commonwealth and consequently, the Commonwealth's ability to pay debt service
on its obligations.

Under Act No. 1978-152 approved September 28, 1978, as amended,
the General Assembly approved a limited waiver of sovereign immunity. Damages
for any loss are limited to $250,000 for each person and $1,000,000 for each
accident. The Supreme Court of Pennsylvania has held that this limitation is
constitutional. Approximately 3,500 suits against the Commonwealth remain
open. Tort claim payments for the departments and agencies, other than the
Department of Transportation, are paid from departmental and agency operating
and program appropriations. Tort claim payments for the Department of
Transportation are paid from an appropriation from the Motor License Fund.
The Motor License Fund tort claim appropriation for fiscal 1996 is $27.0
million.

Baby Neal v. Commonwealth

In April of 1990, the American Civil Liberties Union ("ACLU") and
various named plaintiffs filed a lawsuit against the Commonwealth in federal
court seeking an order requiring the Commonwealth to provide additional
funding for child welfare services. No figures for the amount of funding
sought are available. A similar lawsuit filed in the Commonwealth Court,
captioned as The City of Philadelphia, Hon. Wilson Goode v. Commonwealth of
Pennsylvania, Hon. Robert P. Casey et al., was resolved through a court
approved settlement providing, inter alia, for more Commonwealth funding for
these services for fiscal year 1991 as well as a commitment to pay to counties
$30.0 million over five years. The Commonwealth then sought dismissal of the
federal action based on, among other things, the settlement of the
Commonwealth Court case.

In January of 1992, the U.S. District Court, per Judge Kelly,
denied the ACLU's motion for class certification and held that the "next
friends" seeking to represent the interests of the 16 minor plaintiffs in the
case were inadequate representatives. The Commonwealth filed a motion for
summary judgment on most of the counts in the ACLU's complaint on the basis
of, among other things, Suter v. Artist M.. After the motion for summary
judgment was filed, the ACLU filed a renewed motion to certify sub-classes.

In December of 1994, the Third Circuit reversed Judge Kelly's
ruling, finding that he erred in refusing to certify the class. Consistent
with the Third Circuit's ruling, the District Court recently certified the
class, and the parties have resumed discovery.

County of Allegheny v. Commonwealth of Pennsylvania

On December 7, 1987, the Supreme Court of Pennsylvania held in
County of Allegheny v. Commonwealth of Pennsylvania, that the statutory scheme
for county funding of the judicial system is in conflict with the Pennsylvania
Constitution. However, the Supreme Court of Pennsylvania stayed its judgment
to afford the General Assembly an opportunity to enact appropriate funding
legislation consistent with its opinion and ordered that the prior system of
county funding shall remain in place until this is done. Allegheny County, on
February 12, 1991, filed a motion in the Supreme Court of Pennsylvania to lift
the stay and enforce the judgment. The Supreme Court subsequently denied the
motion.

On March 3, 1989, the City of Philadelphia, Allegheny County, and
the state County Commissioner's Association filed suit in the Supreme Court of
Pennsylvania to require the General Assembly to appropriate the funds required

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by the Supreme Court of Pennsylvania. That suit was summarily dismissed on
March 31, 1989. On February 14, 1991, the Pennsylvania State Association of
County Commissioners and the Counties of Blair, Bucks, Erie, Huntington and
Perry filed in the Commonwealth Court of Pennsylvania an action for
declaratory judgment requesting an order that the Commonwealth be required to
provide funds for the operation of the courts of common pleas in accordance
with the County of Allegheny decision. These parties also requested the
Supreme Court of Pennsylvania to assume plenary jurisdiction over their case.
The Supreme Court of Pennsylvania refused to do so, and these parties have
withdrawn the Commonwealth Court action.

On October 5, 1992, the Pennsylvania State Association of County
Commissioners, along with Allegheny, Beaver, Clarion, Forest, Tioga and
Washington counties, filed in the Supreme Court of Pennsylvania a motion to
enforce judgment seeking an order that would direct the Commonwealth to
restore funding for local courts and district justices to levels existing in
1987. By order dated May 26, 1993, the motion to enforce judgment was denied.

On December 7, 1992, the State Association of County Commissioners
filed a new action in mandamus seeking to compel the Commonwealth to comply
with the decision in County of Allegheny. The Commonwealth has filed a
response in opposition to the new action. The counties have requested a
continuance until April 30, 1995. The Court has not acted on the new action.

The General Assembly has yet to consider legislation implementing
the Supreme Court of Pennsylvania's judgment.

Fidelity Bank v. Commonwealth of Pennsylvania

On November 30, 1989, Fidelity Bank, N.A. ("Fidelity") filed a
declaratory judgment action in the Commonwealth Court of Pennsylvania in which
Fidelity raised various challenges to the constitutional validity of the
Amended Bank Shares Act (Act No. 1989-21) and related legislation. After the
Commonwealth Court ruled in favor of the Commonwealth, finding no
constitutional deficiencies, Fidelity, the Commonwealth, and certain
intervenor banks filed Notices of Appeal to the Pennsylvania Supreme Court on
August 5, 1994.

Pursuant to a Settlement Agreement dated as of April 21, 1995, the
Commonwealth agreed to enter a credit in favor of Fidelity in the amount of
$4,100,000 in settlement of the constitutional and non-constitutional issues,
including interest. This credit represents a credit of approximately five
percent (5%) of the potential claim of Fidelity, had the constitutional issues
been resolved in favor of Fidelity.

Pursuant to a separate Settlement Agreement dated as of April 21,
1995, the Commonwealth settled with the intervening banks, referred to as "New
Banks," in connection with issues concerning the New Bank Tax Credit law which
were raised in the above-referenced Pennsylvania Supreme Court appeal. As
part of the settlement, the Commonwealth agreed neither to assess nor attempt
to recoup any new bank tax credits which had been granted or taken by any of
the intervening banks. No expenditure of Commonwealth funds is required in
order to implement this aspect of the settlement with the intervening banks,
since the credits have already been claimed by said banks.

Although the described settlements have quantified the
Commonwealth's exposure to Fidelity and the intervening banks, other banks
have filed protective Petitions which are currently pending with the Board of
Appeals or Board of Finance and Revenue. Depending upon the outcomes of these
administrative appeals, one or more of these banks may seek to raise the
issues which were advanced by Fidelity, although not brought to final
resolution by the Pennsylvania Supreme Court.

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Based upon the favorable decision of the Commonwealth Court on the
constitutional issue(s) and the terms of the settlement with Fidelity, it is
not expected that substantial liability remains under the Amended Bank Shares
Act cases.

Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey

This action was filed in January, 1991 by an association of rural
and small schools, several individual school districts, and a group of parents
and students, against Governor Robert P. Casey and Secretary of Education
Donald M. Carroll, Jr. The action challenges the constitutionality of the
Commonwealth's system for funding local school districts. The action consists
of two parallel cases, one in the Commonwealth Court of Pennsylvania, and one
in the United States District Court for the Middle District of Pennsylvania.
The federal court case has been indefinitely stayed, pending resolution of the
state court case. The state court case is in the pretrial discovery stage.
The trial has not yet been scheduled.

Austin v. Department of Corrections, et al.

In November 1990, the American Civil Liberties Union ("ACLU")
brought a class action lawsuit on behalf of the inmate populations in thirteen
Commonwealth correctional institutions.

The lawsuit challenged the conditions of confinement at each
institution and included specified allegations of overcrowding, deficiencies
in medical and mental health services, inadequate environmental conditions,
disparate treatment of HIV positive prisoners and other assorted claims.

No damages are sought. The ACLU sought injunctive relief which
would modify conditions, change practices and procedures and increase the
number of staff deployment. On August 1, 1994, the parties submitted a
proposed settlement agreement to the Court for its review. The Court held
hearings on the proposed Settlement Agreement in December 1994. The Court
approved the Settlement Agreement with a January 17, 1995 Memorandum. On
February 3, 1995, the Commonwealth paid $1.3 million in attorneys' fees to the
plaintiffs' attorneys in accordance with the Agreement. The remaining
$100,000 in attorneys' fees will be paid upon dismissal of the preliminary
injunction relating to certain health issues.

The parties are currently complying with monitoring provisions
outlined in the Agreement. The monitoring phase will expire on January 6,
1998. The Attorneys' fees for the 3-year monitoring period will not exceed
$60,000 in any one year.

Scott v. Snider

In 1991, a consortium of public interest law firms filed a class
action suit, Scott v. Snider, against various Commonwealth officers, alleging
that the Commonwealth of Pennsylvania had failed to comply with a 1989 federal
mandate to provide and pay for early and periodic screening, diagnostic, and
treatment services for all Medicaid-eligible children under the age of 21. If
the federal court were to grant all of the relief that plaintiffs are seeking,
the Commonwealth would be obligated, among other things, (1) to substantially
revise the methods by which it presently identifies children in need of
treatment and (2) to expand the scope of services and treatment presently
provided to such children and to increase fees paid to pediatric providers.

In July 1994, the Court denied the plaintiffs' request to proceed
as a class action and dismissed five of the eighteen plaintiff organizations

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from the case. The parties have reached a tentative settlement agreement
which they have submitted to the court for approval.

Envirotest/Synterra Partners

On November 11, 1993, the Commonwealth of Pennsylvania, Department
of Transportation and Envirotest/Synterra Partners ("Envirotest"), a
partnership, entered into a "Contract for Centralized Emissions Inspection
Facilities." Thereafter, Envirotest acquired certain land and constructed
approximately 85 automobile emissions inspection facilities throughout various
regions of the Commonwealth.

By Act of the General Assembly in October 1994 (Act No. 1994-95),
the emissions testing program was suspended and the Department of
Transportation was directed to consider other alternatives to the centralized
testing program. Former Governor Robert P. Casey vetoed the legislation and
the General Assembly overrode the veto in November 1994. As a result, the
program was suspended and the Department of Transportation was prohibited from
expending funds to implement the program. Revised regulations from the
Environmental Protection Agency are expected in August 1995.

On April 12, 1995, Envirotest Systems Corporation, Envirotest
Partners (successor to Envirotest/Synterra Partners) and the Commonwealth of
Pennsylvania entered into a Standstill Agreement pursuant to which the parties
will proceed to discuss the resolution of claims which Envirotest might have
against the Commonwealth arising from the suspension of the emissions testing
program. Envirotest filed a Statement of Claim with the Pennsylvania Board of
Claims on May 10, 1995, and filed a complaint with the Commonwealth Court on
May 15, 1995, to preserve its position. In those pleadings, Envirotest
asserted damages in excess of $350 million.

The Office of General Counsel has been informed by representatives
of Envirotest that it has expended approximately $200 million to date to
acquire land and construct and maintain the inspection facilities. The Office
of General Counsel believes it is premature at this time to estimate the
nature and size of Envirotest's potential claim in this matter.

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

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customarily deal in tax-exempt obligations or from any other reporting service
or source of information which the Evaluator deems appropriate.

The sales charge computed by the Evaluator is based upon the
number of years remaining to maturity of each Bond. Bonds will be deemed to
mature on their stated maturity dates unless bonds have been called for
redemption, funds have been placed in escrow to redeem them on an earlier call
date or are subject to a "mandatory put," in which case the maturity will be
deemed to be such other date.

The table below sets forth the various sales charges based on the
length of maturity of each Bond.

As Percent of Public
Time to Maturity Offering Price

less than 6 months 0%

6 mos. to 1 year 1%

over 1 yr. to 2 yrs. 1 1/2%

over 2 yrs. to 4 yrs. 2 1/2%

over 4 yrs. to 8 yrs. 3 1/2%

over 8 yrs. to 15 yrs. 4 1/2%

over 15 years 5 1/2%

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 Certificateholders. A Certificateholder will not
recover his proportionate share of accrued interest until the Units are sold
or redeemed, or the Trust is terminated. At that time, the Certificateholder
will receive his proportionate share of the accrued interest computed to the
settlement date in the case of a sale or termination and to the date of tender
in the case of redemption.

Employee Discounts

Employees (and their immediate families) of Reich & Tang
Distributors L.P. and its affiliates, Gruntal & Co., Incorporated 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.

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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, (b) $25.00 per Unit
for the Insured Municipal Securities Trust Discount Series or (c) $33.00 per
Unit, for the Insured Municipal Securities Navigator Trust, 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 they buy Units and
the price at which they resell 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 Certificate-
holder upon any redemption of Sponsor repurchase of Units may be less than the
price paid for such Units.

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ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN

Units of the Trust are offered to investors on a "dollar price"
basis (using the computation method previously described under "Public
Offering Price") as distinguished from a "yield price" basis often used in
offerings of tax exempt bonds (involving the lesser of the yield as computed
to maturity of bonds or to an earlier redemption date). Since they are
offered on a dollar price basis, the rate of return on an investment in Units
of 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 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 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. 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 the Trust
under "Summary of Essential Information" in Part A.

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

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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 Certifi-
cateholders on or shortly after the next semi-annual Payment Date. Proceeds
representing principal received from the disposition of any of the Bonds
between a Record Date and a Payment Date which are not used for redemptions of
Units will be held in the Principal Account and not distributed until the
second succeeding semi-annual Payment Date. No distributions will be made to
Certificateholders electing to participate in the Total Reinvestment Plan.
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

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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 Certificate-
holders at all reasonable times during usual business hours, books of record
and account of its transactions as Trustee, including records of the names and
addresses of Certificateholders, Certificates issued or held, a current list
of Bonds in the portfolio and a copy of the Trust Agreement.

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TAX STATUS

All Bonds acquired by each 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
have 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.

In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.

In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:

The Trusts are not associations taxable as corporations for
federal income tax purposes under the Internal Revenue Code of 1986 (the
"Code"), and income received by the Trusts that consists of interest
excludable from federal gross income under the Code will be excludable
from the federal gross income of the Certificateholders of such Trusts.

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 that Trust, and the net income
distributable to Certificateholders that is exempt from federal income
tax when received by that 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 Certificate-
holders may be deducted against ordinary income. Capital assets must be
held for more than one year to qualify for long-term capital gain
treatment.

Each Certificateholder will realize taxable income 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

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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 Certificate-
holder 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 a 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 Certificate-
holder, 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 gain or loss when a
Unit is sold or redeemed. The amount received is allocated among all
the Bonds in a particular Trust in the same manner as when that 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 has been
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 alternative minimum taxable income
(determined without regard to 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,
Subchapter S corporations with accumulated earnings and profits from
Subchapter C years will be subject to a minimum tax on excess "passive
investment income" which includes tax-exempt interest.

Under federal law, interest on Navigator Trust-held Bonds issued
by authority of the Government of Puerto Rico is exempt from regular

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federal income tax, and state and local income tax in the United States
and Puerto Rico. The New York Navigator Insured Trust is not subject to
the New York State Franchise Tax on Business Corporations or the New
York City General Corporation Tax. Under the personal income tax laws
of the State and City of New York, the income of the New York Navigator
Insured Trust will be treated as the income of the Certificateholders.
Interest on the Bonds of the New York Navigator Insured Trust that is
exempt from tax under the laws of the State and City of New York when
received by the Trust will retain its status as tax-exempt interest to
its Certificateholders. In addition, non-residents of New York City
will not be subject to the New York City personal income tax on gains
derived with respect to their Units of the New York Navigator Insured
Trust. Non-residents of New York State will not be subject to New York
State personal income tax on such gains unless the Units are employed in
a business, trade or occupation carried on in New York State. A New
York State or New York City resident should determine his basis and
holding periods for his Units in the same manner for New York State and
New York City tax purposes as for federal tax purposes. 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 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 local government. The laws of such
states and local governments vary with respect to the taxation of such
obligations. See "Rights of Certificateholders" in this Part B.

The Insured Municipal Securities 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 instrumental-
ities, 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
Certificateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.

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.

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In the opinion of Freeman, Zeller & Bryant, special counsel to the
Sponsor on New Jersey tax matters, which opinion is made in reliance upon
certain information and based on certain assumptions respecting the New Jersey
Navigator Trust, under existing New Jersey law applicable to individuals who
are New Jersey residents and New Jersey estates and trusts:

(1) The New Jersey Navigator Trust will be recognized
as a trust and not as an association taxable as a
corporation. The New Jersey Navigator Trust will not be
subject to the New Jersey Corporation Business Tax or the
New Jersey Corporation Income Tax.

(2) The income of the New Jersey Navigator Trust will
be treated as income of the Certificateholders who are
individuals, estates or trusts under the New Jersey Gross
Income Tax Act, N.J.S.A. 54A: 1-1 et seq. (the "Act").
Interest on the Bonds that is exempt from tax under the Act
when received by the New Jersey Navigator Trust will retain
its status as tax-exempt interest under the Act when
distributed to Certificateholders who are individuals,
estates or trusts.

(3) Certificateholders, who are individuals, estates,
or trusts will not be subject to the Act on any gain
realized when the New Jersey Navigator Trust disposes of a
Bond (whether by sale, exchange, redemption, or payment at
maturity). Any loss realized on such disposition may not be
utilized to offset gains realized by such Certificateholder
on the disposition of assets the gain on which is subject to
the New Jersey Gross Income Tax.

(4) The sale, exchange or redemption of a Unit by a
Certificateholder shall be treated as a sale or exchange of
a Certificateholder's pro rata interest in the assets in the
New Jersey Navigator Trust at the time of the transaction
and any gain will be exempt from tax under the Act to the
extent that the price received by the selling Certificate-
holder who is an individual, estate or trust does not exceed
the Redemption Price. To the extent that the amount
received by the Certificateholder exceeds the Redemption
Price, any such gain will not be exempt from tax under the
Act.

(5) All proceeds representing interest on defaulted
obligations derived by Certificateholders who are
individuals, estates or trusts from an insurance policy,
either paid directly to the Certificateholder or through the
New Jersey Navigator Trust, are exempt from tax under the
Act.

(6) The Units of the New Jersey Navigator Trust may
be taxable in the estates of New Jersey residents under the
New Jersey Transfer Inheritance Tax Law or the New Jersey
Estate Tax Laws.

(7) If a Certificateholder is a corporation subject
to the New Jersey Corporation Business Tax or New Jersey
Corporation Income Tax, interest from the Bonds in the New
Jersey Navigator Trust which is allocable to such
corporation will be includable in its entire net income for
purposes of the New Jersey Corporation Business Tax or New
Jersey Corporation Income Tax, less any interest expense

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incurred to carry such investment to the extent such
interest expense has not been deducted in computing Federal
taxable income. Net gains derived by such corporation on
the disposition of the Bonds by the New Jersey Navigator
Trust or on the disposition of its Units will be included in
its entire net income for purposes of the New Jersey
Corporation Business Tax or New Jersey Corporation Income
Tax. Any proceeds paid under the insurance policy issued to
the Trustee of the New Jersey Navigator Trust with respect
to the Bonds or under individual policies obtained by
issuers of Bonds which represent maturing interest or
maturing principal on defaulted obligations held by the
Trustee will be included in its entire net income for
purposes of the New Jersey Corporation Business Tax or New
Jersey Corporation Income Tax if, and to the same extent as,
such interest or proceeds would have been so included if
paid by the issuer of the defaulted obligations.

In the opinion of Saul, Ewing, Remick & Saul, special counsel to
the Sponsor on Pennsylvania tax matters, under existing law:

(1) Units evidencing fractional undivided interests in the Trust,
to the extent represented by obligations issued by the
Commonwealth of Pennsylvania, any public authority, commission,
board or other agency created by the Commonwealth of Pennsylvania,
any political subdivision of the Commonwealth of Pennsylvania or
any public authority created by any such political subdivision, or
by the Government of Puerto Rico or its public authorities, are
not taxable under any of the personal property taxes presently in
effect in Pennsylvania;

(2) Distributions of interest income to Certificateholders that
would not be taxable if received directly by a Pennsylvania resident are
not subject to personal income tax under the Pennsylvania Tax Reform
Code of 1971; nor will such interest be taxable under Philadelphia
School District Investment Income Tax imposed on Philadelphia resident
individuals;

(3) A Certificateholder which is an individual, estate or trust
will have a taxable event under the Pennsylvania state and local income
tax referred to in the preceding paragraph upon the redemption or sale
of Units;

(4) A Certificateholder which is a corporation will have a
taxable event under the Pennsylvania Corporate Net Income Tax or, if
applicable, the Mutual Thrift Institutions Tax, upon the redemption or
sale of its Units. Interest income distributed to Certificateholders
which are corporations is not subject to Pennsylvania Corporate Net
Income Tax or Mutual Thrift Institutions Tax. However, banks, title
insurance companies and trust companies may be required to take the
value of Units into account in determining the taxable value of their
shares subject to Shares Tax;

(5) Under Act No. 68 of December 3, 1993, gains derived by the
Trust from the sale, exchange or other disposition of Pennsylvania Bonds
may be subject to Pennsylvania personal or corporate income taxes.
Those gains which are distributed by the Trust to Certificateholders who
are individuals will be subject to Pennsylvania Personal Income Tax and,
for residents of Philadelphia, to Philadelphia School District
Investment Income Tax. For Certificateholders which are corporations,
the distributed gains will be subject to Corporate Net Income Tax or
Mutual Thrift Institutions Tax.

(6) For Pennsylvania Bonds, gains which are not distributed by
the Trust will nevertheless be taxable to Certificateholders if derived
by the Trust from the sale, exchange or other disposition of these Bonds
issued on or after February 1, 1994. Such gains which are not
distributed by the Trust will remain nontaxable to Certificateholders if
derived by the Trust from the sale, exchange or other disposition of
Bonds issued prior to February 1, 1994. However, for gains from the
sale, exchange or other disposition of these Bonds to be taxable under
the Philadelphia School District Investment Income Tax, the Bonds must
be held for six months or less;

(7) Gains from the sale, exchange or other disposition of Puerto
Rico Bonds will be taxable to Certificateholders if distributed or
retained by the Trust. However, for gains from the sale, exchange or
other disposition of these Bonds to be taxable under the Philadelphia
School District Investment Income Tax, the Bonds must be held for six
months or less;

(8) Units are subject to Pennsylvania inheritance and estate
taxes;

(9) Any proceeds paid under insurance policies issued to the
Trustee or obtained by issuers or the underwriters of the Bonds, the
Sponsor or others which represent interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted obligations;
and

(10) The Trust is not taxable as a corporation under Pennsylvania
tax laws applicable to corporations.

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

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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 New York State and 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 particular, Congress
may consider the adoption of some form of "flat tax," which could have an
adverse impact on the value of tax-exempt bonds.

In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the
federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the federal
government to regulate and control bonds such as the Bonds in the Trust and to
tax interest on such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the Bonds
in the Trust in accordance with Section 103 of the Code.

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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, intend 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 aggregated bid price,
determined by the Evaluator on a daily basis, is computed on the basis set
forth under "Trustee Redemption". Certificateholders 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 Reich & Tang
Distributors L.P., 600 Fifth Avenue, New York, New York 10020 on behalf of the
Sponsor. 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 Certificateholder may be able to dispose of Units
only by tendering them to the Trustee for redemption.

Prospectuses relating to certain other bond trusts indicate an
intention by the respective 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
Trust 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.

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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 Certificateholders of record as of
the business day prior to the evaluation being made. The Evaluator may
determine the value of the Bonds in the Trust (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.

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The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer-
tificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.

The Trustee reserves the right to suspend the right of redemption
and to postpone the date of payment of the Redemption Price per Unit for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor 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 Certificateholders (each such date being referred to herein as the
"Plan Reinvestment Date").

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 3.50% 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
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.

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<PAGE>

3.50% 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 1.50% of the Reinvestment Price per Plan Unit,
payable out of the 3.50% sales charge. If no such designation is made, the
Sponsor will retain the sales commission.

Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder
who is entitled to receive $130.50 interest income from the Trust would
acquire 13.05 Plan Units assuming that the Reinvestment Price per Plan Unit,
plus accrued interest, 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
Certificateholders, and December 1 of each year for annual Certificateholders.
On each Record Date the Sponsor will send a current Prospectus relating to the

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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 Cer-
tificateholder fail to have an annual distribution plan, such Certificate-
holder 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

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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 Certificate-
holder 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

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be sent by the Trustee to every Certificateholder 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 Certificate-
holder 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

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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 Certificateholders;
provided that no such amendment or waiver shall reduce any Certificateholder's
interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the
holders of all Certificates. The Trust Agreement may not be amended, without
the consent of the holders of all Certificates then outstanding, to increase
the number of Units issuable or to permit the acquisition of any bonds in
addition to or in substitution for those initially deposited in the Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.

The Trust Agreement provides that the Trust shall terminate upon
the maturity, redemption or other disposition, as the case may be, of the last
of the Bonds held in the Trust but in no event is it to continue beyond the
end of the calendar year preceding the fiftieth anniversary of the execution
of the Trust Agreement. If the value of the Trust shall be less than the
minimum amount set forth under "Summary of Essential Information" in Part A,
the Trustee may, in its discretion, and shall when so directed by the Sponsor,
terminate the Trust. The Trust may also be terminated at any time with the
consent of the holders of Certificates representing 100% of the Units then
outstanding. In the event of termination, written notice thereof will be sent
by the Trustee to all Certificateholders. Within a reasonable period after
termination, the Trustee must sell any Bond remaining in the Trust, and, after
paying all expenses and charges incurred by the Trust, distribute to each
Certificateholder, upon surrender for cancellation of his Certificate for
Units, his pro rata share of the Interest and Principal Accounts.

The Sponsors

Effective September 28, 1995, Reich & Tang Distributors L.P.
("Reich & Tang") has become the successor sponsor to certain of the unit
investment trusts previously sponsored by Bear, Stearns & Co. Inc. As
successor Sponsor, Reich & Tang has assumed all of the obligations and rights
of Bear, Stearns & Co. Inc., the previous sponsor.

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Reich & Tang, a Delaware limited partnership, is engaged in the
brokerage business and is a member of the National Association of Securities
Dealers, Inc. Reich & Tang maintains its principal business offices at 600
Fifth Avenue, New York, New York 10020. Reich & Tang Asset Management L.P.
("RTAM LP"), a registered investment adviser, is the 99% limited partner of
the Sponsor. RTAM LP is 99.5% owned by New England Investment Companies, LP
("NEIC LP") and Reich & Tang Asset Management, Inc., a wholly owned subsidiary
of NEIC LP, owns the remaining .5% interest of RTAM LP and is its general
partner. NEIC LP's general partner is New England Investment Companies, Inc.
("NEIC"), a holding company offering a broad array of investment styles across
a wide range of asset categories through ten investment advisory/management
affiliates and two distribution affiliates. These affiliates in the aggregate
are investment advisers or managers to over 57 registered investment
companies. Reich & Tang 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); 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.

For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Sponsors are Reich & Tang and Gruntal & Co.,
Incorporated, both of whom have entered into an Agreement Among Co-Sponsors
pursuant to which both parties have agreed to act as Co-Sponsors for the
Trust. Reich & Tang has been appointed by Gruntal & Co., Incorporated as
agent for purposes of taking any action required or permitted to be taken by
the Sponsor under the Trust Agreement. If the Sponsors are unable to agree
with respect to action to be taken jointly by them under the Trust Agreement
and they cannot agree as to which Sponsor shall act as sole Sponsor, then
Reich & Tang shall act as sole Sponsor. If one of the Sponsors fails to
perform its duties under the Trust Agreement or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, that
Sponsor may be discharged under the Trust Agreement and a new Sponsor may be
appointed or the remaining Sponsor may continue to act as Sponsor.

Gruntal & Co., Incorporated, a Delaware corporation, operates a
regional securities broker/dealer from its main office in New York City and
branch offices in nine states and the District of Columbia. The firm is very
active in the marketing of investment companies and has signed dealer
agreements with every mutual fund group, as well as being the managing
distributor for The Home Group Money Market and Mutual Funds. Further,
through its Syndicate Department, Gruntal & Co. Incorporated has underwritten
a large number of Closed-End Funds and has been Co-Manager on the following
offerings: Cigna High Income Shares; Dreyfus New York Municipal Income, Inc.;
Franklin Principal Maturity Trust and Van Kampen Merritt Limited Term High
Income Trust. The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for
errors in judgment except in cases of its own willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties.

The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.

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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

The Trustee is The Chase Manhattan Bank (National Association), a
national banking association with its principal executive office located at 1
Chase Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, New York 10003 (800) 882-9898. The Trustee
is subject to the supervision by the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System.

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.

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The Evaluator

The Evaluator is Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. with main offices located at 65 Broadway, New York, New
York 10006. 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 Certificateholders for errors in
judgment, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.

The Evaluator may resign or may be removed by the Sponsor and
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.

TRUST EXPENSES AND CHARGES

At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933, the
premiums on the Sponsor-Insured Bonds, initial preparation and printing of the
Certificates, 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 fees of the Evaluator,
however, incurred during the initial public offering are paid directly by the
Trust.

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 Certificateholders".

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

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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 Certificateholders; fees
of the Trustee for any extraordinary services performed under the Trust
Agreement; indemnification of the Trustee for any loss or liability accruing
to it without gross negligence, bad faith or willful misconduct on its part,
arising out of or in connection with its acceptance or administration of the
Trust; indemnification of the Sponsor for any 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 financials upon request.

EXCHANGE PRIVILEGE AND CONVERSION OFFER

Exchange Privilege

Certificateholders may elect to exchange any or all of their Units
of this Trust 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
(the "Exchange Trusts") at a reduced sales charge as set forth below. Under
the Exchange Privilege, the Sponsor's repurchase price for units of the
Exchange Trust will be based on the aggregate bid price of the Bonds in the
Trust portfolio. Units in an Exchange Trust then will be sold to the Certifi-
cateholder at a price based on the aggregate offer price of the Bonds in the
Exchange Trust portfolio (or for Units of Equity Securities Trust, based on
the market value of the underlying securities in the Trust Equity 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 Trust Equity portfolio) and a reduced sales charge as set
forth below.

Except for Certificateholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of a Trust,
the sales charge applicable to the purchase of units of an Exchange Trust
shall be 1.5% per unit (or per 1,000 Units for the Mortgage Securities Trust

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or per 100 Units for the Equity Securities Trust). For Certificateholders who
wish to exercise the Exchange Privilege within the first five months of their
purchase of Units of a Trust, the sales charge applicable to the purchase of
units of an Exchange Trust shall be the greater of (i) 1.5% 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 Certificateholder 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 their
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 modify, suspend or
terminate the Exchange Privilege. The Sponsor will provide
Certificateholders of the Trust with 60 days prior written notice of any
termination or material amendment to the Exchange Privilege, provided
that, no notice need be given if (i) the only material effect of an
amendment is to reduce or eliminate the sales charge payable at the time
of the exchange, to add one or more series of the Trust eligible for the
Exchange Privilege or to delete a series which has been terminated from
eligibility for the Exchange Privilege, (ii) there is a suspension of
the redemption of units of an Exchange Trust under Section 22(e) of the
Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest
amounts effectively in accordance with its investment objectives,
policies and restrictions. During the 60 day notice period prior to the
termination or material amendment of the Exchange Privilege described
above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected
Certificateholders. Certificateholders may, during this 60 day period,
exercise the Exchange Privilege in accordance with its terms then in
effect. In the event the Exchange Privilege is not available to a Cer-
tificateholder at the time he wishes to exercise it, the Certificate-
holder will immediately be notified and no action will be taken with
respect to his Units without further instructions from the Certificate-
holder.

To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to sell his Units and apply the proceeds from
the sale to purchase Units of one or more of the Exchange Trusts. 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

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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
$2,943.50 ($2,900 for units and $43.50 for the sales charge). The remaining
$556.50 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 $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5-1/2% sales
charge times the public offering price).

The Conversion Offer

Certificateholders 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 sponsored by Bear, Stearns & Co. Inc. (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 underlying bonds in the
Conversion Trust portfolio during its initial offering period (or for Units of
Equity Securities Trust, based on the market value of the underlying
securities in the Equity Trust portfolio), or at a price based on the
aggregate bid price of the underlying bonds if the initial public offering of
the Conversion Trust has been completed, plus accrued interest (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 Certificateholders 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 1.5% per Unit (or per 1,000 Units for the Mortgage Securities
Trust or per 100 Units for the Equity Securities Trust). For
Certificateholders 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) 1.5% 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 Certificateholder upon his original
purchase of units of the Redemption Trust at least equals the sales charge

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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 Certificateholders 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
Certificateholder'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. Certificateholders 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 Certificateholder. Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 units. Units of the Mortgage
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
Certificateholders of Redemption Trusts. In the event the Conversion
Offer is not available to a Certificateholder at the time he wishes to
exercise it, the Certificateholder will be notified immediately and no
action will be taken with respect to his units without further
instruction from the Certificateholder. 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 Certificateholder 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
Certificateholder is a resident, the Certificateholder 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 Certificateholder's retail broker. The
retail broker must tender the units to the trustee of the Redemption Trust for
redemption and then apply the proceeds of 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
Certificateholder's broker will be entitled to retain $5 of the applicable
sales charge.

Example: Assume a Certificateholder has five units of a Redemption Trust
which he 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
Certificateholder wishes to participate in the Conversion Offer and exchange
the proceeds for units of a secondary market Conversion Trust with a current
price of $700 per Unit. The proceeds from the Certificateholder's redemption
of units will aggregate $3,375. Since only whole units of a Redemption Trust
may be purchased under the Conversion Offer, the Certificateholder will be

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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 $3,045 ($3,000 for units and $45 for the sales charge). The
remaining $330 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of Conversion Trust units at the
same time in a regular secondary market transaction, the price would have been
$3,165 ($3,000 for units and $165 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. Insured Navigator Series further combines
the advantages of providing interest income free from regular federal income
tax and state and local taxes when held by residents of the state where
issuers of bonds in such State Trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high
level of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust
offers investors an opportunity to achieve capital appreciation together with
a high level of current income.

Tax Consequences of the Exchange Privilege and the Conversion Offer

A surrender of units pursuant to the Exchange Privilege or the
Conversion Offer will constitute a "taxable event" to the Certificateholder
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 Battle Fowler LLP, 75
East 55th Street, New York, New York 10022, as counsel for the Sponsor.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have
acted as counsel for Chase Manhattan Bank, N.A. of New York. Certain matters

-84-
112677.2

<PAGE>

relating to New Jersey tax law have been passed upon by Freeman, Zeller &
Bryant, as special New Jersey counsel to the Sponsor. Certain matters
relating to Pennsylvania tax law have been passed upon by Saul, Ewing, Remick
& Saul, as special Pennsylvania counsel to the Sponsor.

Independent Auditors

The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A, have been examined by KPMG
Peat Marwick LLP, independent certified public accountants, for the periods
indicated in its reports appearing herein. The financial statements examined
by KPMG Peat Marwick LLP have been so included in reliance on its report given
upon its authority 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.

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.

- --------
* As described by Standard & Poor's Corporation.

-85-
112677.2

<PAGE>

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.

DESCRIPTION OF RATING ON THE UNITS*

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.

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.
- --------
* As described by Standard & Poor's Corporation.

-86-
112677.2

<PAGE>

FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
9TH - 50TH DISCOUNT SERIES
SERIES 3 - 32
NEW YORK NAVIGATOR INSURED SERIES 1 - 16
NEW JERSEY NAVIGATOR INSURED SERIES 1 - 12

=============================================================================

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
CHASE MANHATTAN BANK, N.A.
ATTN: THE UNIT INVESTMENT DEPARTMENT, UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003

112677.2

<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

112677.2

<PAGE>

INDEX

Title Page INSURED
MUNICIPAL SECURITIES TRUST
Summary of Essential Information............A-5 (Unit Investment Trust)
Information Regarding the Trust.............A-7 Prospectus
Financial and Statistical Information.......A-8
Audit and Financial Information Dated: October 31, 1995
Report of Independent Accountants.........F-1
Statement of Net Assets...................F-2 Sponsor:
Statement of Operations...................F-3 Reich & Tang Distributors L.P.
Statement of Changes in Net Assets........F-4 600 Fifth Avenue
Notes to Financial Statements.............F-5 New York, New York 10020
Portfolio.................................F-6 (212) 830-5200
The Trust.................................. 1
Risk Considerations....................... 16
Public Offering............................. 57 (and for certain Trusts:)
Estimated Long Term Return and Gruntal & Co., Incorporated
Estimated Current Return.................. 60 14 Wall Street
Rights of Certificateholders................ 60 New York, New York 10005
Tax Status.................................. 63 212-267-8800
Liquidity................................... 69
Total Reinvestment Plan..................... 72 Trustee:
Trust Administration........................ 76
Trust Expenses and Charges.................. 80 Chase Manhattan Bank, N.A.
Exchange Privilege and Conversion 770 Broadway
Offer..................................... 81 New York, New York 10003
Other Matters............................... 85 1-800-882-9898
Description of Bond Ratings................. 86
Description of Rating on the Units.......... 87 or

Parts A and B of this Prospectus do not The Bank of New York
contain all of the information set forth in 101 Barclay Street
the registration statement and exhibits New York, New York 10286
relating thereto, filed with the Securities 1-800-431-8002
and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, and to Evaluator:
which reference is made.
Kenny S&P
* * * Evaluation Services,
a division of
J.J. Kenny Co., Inc.
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.

112677.2

<PAGE>

PART II

ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS

CONTENTS OF REGISTRATION STATEMENT

This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:

The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Consent of Independent Auditors.
Consent of Counsel (included in Exhibit 99.3.1).
Consents of the Evaluator and Confirmation of Ratings of Standard & Poor's
Corporation (included in Exhibit 99.5.1).

The following exhibits:

99.1.1 -- Reference Trust Agreement including certain Amendments to the
Trust Indenture and Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 1.1 to Amendments No. 1 to Form S-6
Registration Statements Nos. 33-07253, 33-07769, 33-08700, 33-
09512 and 33-10166 of Insured Municipal Securities Trust, 22nd
Discount Series, 23rd Discount Series, 24th Discount Series,
25th Discount Series and 26th Discount Series, respectively, on
July 15, 1986, September 4, 1986, October 2, 1986, November 6,
1986 and November 14, 1986, respectively, and incorporated
herein by reference).

99.1.1.1 -- Trust Indenture and Agreement for Insured Municipal Securities
Trust, 9th Discount Series and Subsequent Series (filed as
Exhibit 1.1.1 to Amendment No. 1 to Form S-6 Registration
Statement No. 2-95854 of Insured Municipal Securities Trust,
9th Discount Series on April 11, 1985 and incorporated herein
by reference).

99.1.3.4 -- Certificate of Formation and Agreement among Limited Partners,
as amended, of Reich & Tang Distributors L.P. (filed as Exhibit
99.1.3.4 to Post-Effective Amendment No. 10 to Form S-6
Registration Statements Nos. 2-98914, 33-00376, 33-00856 and
33-01869 of Municipal Securities Trust, Series 28, 39th
Discount Series, Series 29 & 40th Discount Series and Series 30
& 41st Discount Series, respectively, on October 31, 1995 and
incorporated herein by reference).

99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4 to
Amendment No. 1 to Form S-6 Registration Statement No. 2-97191
of Insured Municipal Securities Trust, 10th Discount Series and
Series 3 on May 8, 1985, and incorporated herein by reference).

99.1.5 -- Form of Insurance Policy of Financial Guaranty Insurance
Company for Sponsor-Insured Bonds (filed as Exhibit 1.5 to
Amendment No. 1 to Registration Statement No. 2-95261 of
Insured Municipal Securities Trust, 7th Discount Series on
February 7, 1985 and incorporated herein by reference).

99.1.5.1 -- Form of Insurance Policy of Bond Investors Guaranty for
Sponsor-Insured Bonds (filed as Exhibit 1.5.1 to Amendment

II-1
1706.1

<PAGE>

No. 1 to Form S-6 Registration Statement No. 33-08700 of
Insured Municipal Securities Trust, 24th Discount Series on
October 2, 1986 and incorporated herein by reference).

99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-01313 of Insured
Municipal Securities Trust, 16th Discount Series on
November 27, 1985 and incorporated herein by reference).

99.3.1 -- Opinion of Battle Fowler LLP (formerly Battle, Fowler, Jaffin &
Kheel) as to the legality of the securities being registered,
including their consent to the filing thereof and to the use of
their name under the headings "Tax Status" and "Legal Opinions"
in the Prospectus, and to the filing of their opinion regarding
tax status of the Trust (filed as Exhibit 3.1 to Amendments
No. 1 to Form S-6 Registration Statements Nos. 33-07253, 33-
07769, 33-08700, 33-09512 and 33-10166 of Insured Municipal
Securities Trust, 22nd Discount Series, 23rd Discount Series,
24th Discount Series, 25th Discount Series and 26th Discount
Series, respectively, on July 15, 1986, September 4, 1986,
October 2, 1986 and November 6, 1986 and November 14, 1986,
respectively, and incorporated herein by reference).

*99.5.1 -- Consents of the Evaluator and Confirmation of Ratings of
Standard & Poor's Corporation.

99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its Officers and a majority of its Directors
(filed as Exhibit 99.6.0 to Post-Effective Amendment No. 10 to
Form S-6 Registration Statements Nos. 2-98914, 33-00376,
33-00856 and 33-01869 of Municipal Securities Trust, Series 28,
39th Discount Series, Series 29 & 40th Discount Series and
Series 30 & 41st Discount Series, respectively, on October 31,
1995 and incorporated herein by reference).

*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.

II-2
1706.1

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrants, Insured Municipal Securities Trust, 22nd Discount Series, 23rd
Discount Series, 24th Discount Series, 25th Discount Series and 26th Discount
Series, certify that they have met all of the requirements for effectiveness
of this Post-Effective Amendment to the Registration Statements pursuant to
Rule 485(b) under the Securities Act of 1933. The registrants have duly
caused this Post-Effective Amendment to the Registration Statements to be
signed on their behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 26th day of October, 1995.

INSURED MUNICIPAL SECURITIES TRUST, 22ND DISCOUNT
SERIES, 23RD DISCOUNT SERIES, 24TH DISCOUNT SERIES,
25TH DISCOUNT SERIES AND 26TH DISCOUNT SERIES
(Registrants)

REICH & TANG DISTRIBUTORS L.P.
(Depositor)

By: Reich & Tang Asset Management, Inc.,
as general partner

By: /s/LORRAINE C. HYLSLER
Lorraine C. Hylsler
(Authorized Signatory)

Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement has been signed
below by the following persons who constitute the principal officers and a
majority of the directors of Reich & Tang Asset Management, Inc., the general
partner of Reich & Tang Distributors L.P., the Depositor, in the capacities
and on the dates indicated.

<TABLE>
<CAPTION>
Name Title Date

<S> <C> <C>
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) October 26, 1995
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director )By: /s/LORRAINE C. HYLSLER
STEVEN W. DUFF Director ) Lorraine C. Hylsler
BERNADETTE N. FINN Vice President ) Attorny-in-Fact*
LORRAINE C. HYLSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )

</TABLE>

- ---------------

* An executed power of attorney was filed as Exhibit 99.6.0 to Post-
Effective Amendment No. 10 to Form S-6 Registration Statements Nos.
2-98914, 33-00376, 33-00856 and 33-01869 of Municipal Securities Trust,
Series 28, 39th Discount Series, Series 29 & 40th Discount Series and
Series 30 & 41st Discount Series, respectively, on October 31, 1995.

II-3
1706.1

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the use in these Post-Effective Amendments to the Registration
Statements of our reports on the financial statements of Insured Municipal
Securities Trust, 22nd Discount Series; Insured Municipal Securities Trust, 23rd
Discount Series; Insured Municipal Securities Trust, 24th Discount Series;
Insured Municipal Securities Trust, 25th Discount Series; and Insured Municipal
Securities Trust, 26th Discount Series included herein and to the reference to
our firm under the heading "Independent Auditors" in the Prospectus which is
part of this Registration Statement.

KPMG Peat Marwick LLP

New York, New York
October 16, 1995

<PAGE>

II-4
1706.1

<PAGE>

EXHIBIT INDEX

Exhibit Description Page No.

99.1.1 Reference Trust Agreement including certain Amendments
to the Trust Indenture and Agreement referred to under
Exhibit 1.1.1 below (filed as Exhibit 1.1 to
Amendments No. 1 to Form S-6 Registration Statements
Nos. 33-07253, 33-07769, 33-08700, 33-09512 and 33-
10166 of Insured Municipal Securities Trust, 22nd
Discount Series, 23rd Discount Series, 24th Discount
Series, 25th Discount Series and 26th Discount Series,
respectively, on July 15, 1986, September 4, 1986,
October 2, 1986, November 6, 1986 and November 14,
1986, respectively, and incorporated herein by
reference).

99.1.1.1 Trust Indenture and Agreement for Insured Municipal
Securities Trust, 9th Discount Series and Subsequent
Series (filed as Exhibit 1.1.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 2-95854 of Insured
Municipal Securities Trust, 9th Discount Series on
April 11, 1985 and incorporated herein by reference).

99.1.3.4 Certificate of Formation and Agreement among Limited
Partners, as amended, of Reich & Tang Distributors
L.P. (filed as Exhibit 99.1.3.4 to Post-Effective
Amendment No. 10 to Form S-6 Registration Statements
Nos. 2-98914, 33-00376, 33-00856 and 33-01869 of
Municipal Securities Trust, Series 28, 39th Discount
Series, Series 29 & 40th Discount Series and Series 30
& 41st Discount Series, respectively, on October 31,
1995 and incorporated herein by reference).

99.1.4 Form of Agreement Among Underwriters (filed as Exhibit
1.4 to Amendment No. 1 to Form S-6 Registration
Statement No. 2-97191 of Insured Municipal Securities
Trust, 10th Discount Series and Series 1 on May 8,
1985 and incorporated herein by reference).

99.1.5 Form of Insurance Policy of Financial Guaranty
Insurance Company for Sponsor-Insured Bonds (filed as
Exhibit 1.5 to Amendment No. 1 to Registration
Statement No. 2-95261 of Insured Municipal Securities
Trust, 7th Discount Series on February 7, 1985 and
incorporated herein by reference).

99.1.5.1 Form of Insurance Policy of Bond Investors Guaranty
for Sponsor-Insured Bonds (filed as Exhibit 1.5.1 to
Amendment No. 1 to Form S-6 Registration Statement
No. 33-08700 of Insured Municipal Securities Trust,
24th Discount Series on October 2, 1986 and
incorporated herein by reference).

99.2.1 Form of Certificate (filed as Exhibit 2.1 to Amendment
No. 1 to Form S-6 Registration Statement Nos. 33-01313
of Insured Municipal Securities Trust, 16th Discount
Series on November 27, 1985 and incorporated herein by
reference).

-1-
1706.1

<PAGE>

Exhibit Description Page No.

99.3.1 Opinion of Battle Fowler LLP (formerly Battle, Fowler,
Jaffin & Kheel) as to the legality of the securities
being registered, including their consent to the
filing thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the
Prospectus, and to the filing of their opinion
regarding tax status of the Trust (filed as
Exhibit 3.1 to Amendments No. 1 to Form S-6
Registration Statements Nos. 33-07253, 33-07769, 33-
08700, 33-09512 and 33-10166 of Insured Municipal
Securities Trust, 22nd Discount Series, 23rd Discount
Series, 24th Discount Series, 25th Discount Series and
26th Discount Series, respectively, on July 15, 1986,
September 4, 1986, October 2, 1986, November 6, 1986
and November 14, 1986, respectively, and incorporated
herein by reference).

99.5.1 Consents of the Evaluator and Confirmation of Ratings
of Standard & Poor's Corporation......................

99.6.0 Power of Attorney of Reich & Tang Distributors L.P.,
the Depositor, by its Officers and a majority of its
Directors (filed as Exhibit 99.6.0 to Post-Effective
Amendment No. 10 to Form S-6 Registration Statements
Nos. 2-98914, 33-00376, 33-00856 and 33-01869 of
Municipal Securities Trust, Series 28, 39th Discount
Series, Series 29 & 40th Discount Series and Series 30
& 41st Discount Series, respectively, on October 31,
1995 and incorporated herein by reference).

27 Financial Data Schedule(s) (for EDGAR filing only)...

-2-
1706.1

<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of the
end of the most current period and is
qualified in its entirety by reference to such
financial statements.

</LEGEND>
<CIK> 0000797224
<NAME> IMST, 22ND DISCOUNT SERIES
<SERIES>
<NUMBER> 1
<NAME> IMST, 22ND DISCOUNT SERIES

<S> <C>
<FISCAL-YEAR-END> Jun-30-1995
<PERIOD-START> Jul-01-1994
<PERIOD-END> Jun-30-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 3835121
<INVESTMENTS-AT-VALUE> 3663556
<RECEIVABLES> 62231
<ASSETS-OTHER> 401205
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4126992
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2128
<TOTAL-LIABILITIES> 2128
<SENIOR-EQUITY> 4124864
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2340250
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (171565)
<NET-ASSETS> 4124864
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 412868
<OTHER-INCOME> 0
<EXPENSES-NET> 18215
<NET-INVESTMENT-INCOME> 394653
<REALIZED-GAINS-CURRENT> (347072)
<APPREC-INCREASE-CURRENT> 181361
<NET-CHANGE-FROM-OPS> 228942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 393233
<DISTRIBUTIONS-OF-GAINS> 1932217
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 273
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2179056)
<ACCUMULATED-NII-PRIOR> 272518
<ACCUMULATED-GAINS-PRIOR> 67
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 451.99
<PER-SHARE-NII> 27.95
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 138.54
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 301.66
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

</LEGEND>
<CIK> 0000799010
<NAME> IMST, 23RD DISCOUNT SERIES
<SERIES>
<NUMBER> 1
<NAME> IMST, 23RD DISCOUNT SERIES

<S> <C>
<FISCAL-YEAR-END> Jun-30-1995
<PERIOD-START> Jul-01-1994
<PERIOD-END> Jun-30-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 3439089
<INVESTMENTS-AT-VALUE> 3140239
<RECEIVABLES> 80118
<ASSETS-OTHER> 457522
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3677879
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<CIK> 0000801326
<NAME> IMST, 24TH DISCOUNT SERIES
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</LEGEND>
<CIK> 0000804082
<NAME> IMST, 25TH DISCOUNT SERIES
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<NAME> IMST, 25TH DISCOUNT SERIES

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<CIK> 0000806088
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<NAME> IMST, 26TH DISCOUNT SERIES

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Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034

Sanford B. Bragg
Managing Director
Managed Funds Ratings

October 31, 1995

Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020

Re: Insured Municipal Securities Trust, 22nd Discount Series

We have received the post-effective amendment to the registration statement
SEC file number 33- 07253 for the above captioned trust.

Since the portfolio is composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities for so long as they remain outstanding and such
policies have been issued by one or more insurance companies which have been
assigned "AAA" claims paying ability ratings by Standard & Poor's, we reaffirm
the assignment of a "AAA" rating to the units of the trust and a "AAA" rating to
the securities contained in the trust.

You have permission to use the name of Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc. and the above-assigned ratings in
connection with your dissemination of information relating to these units,
provided that it is understood that the ratings are not "market" ratings nor
recommendations to buy, hold or sell the units of the trust or the securities in
the trust. Further, it should be understood that the rating on the units 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 holders
of the interest and principal required to be paid on the portfolio assets.
Standard & Poor's reserves the right to advise its own clients, subscribers, and
the public of the ratings. Standard & Poor's relies on the sponsor and its
counsel, accountants and other experts for the accuracy and completeness of the
information submitted in connection with the ratings. Standard & Poor's does not
independently verify the truth or accuracy of any such information.

The letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the amendment referred to
above. However, this letter should not be construed as a consent by us, within
the meaning of Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Sincerely,

<PAGE>

Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034

Sanford B. Bragg
Managing Director
Managed Funds Ratings

October 31, 1995

Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020

Re: Insured Municipal Securities Trust, 23rd Discount Series

We have received the post-effective amendment to the registration statement
SEC file number 33- 07769 for the above captioned trust.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Sincerely,

<PAGE>

Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034

Sanford B. Bragg
Managing Director
Managed Funds Ratings

October 31, 1995

Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020

Re: Insured Municipal Securities Trust, 24th Discount Series

We have received the post-effective amendment to the registration statement
SEC file number 33- 08700 for the above captioned trust.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Sincerely,

<PAGE>

Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034

Sanford B. Bragg
Managing Director
Managed Funds Ratings

October 31, 1995

Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020

Re: Insured Municipal Securities Trust, 25th Discount Series

We have received the post-effective amendment to the registration statement
SEC file number 33- 09512 for the above captioned trust.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Sincerely,

<PAGE>

Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies, Inc.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034

Sanford B. Bragg
Managing Director
Managed Funds Ratings

October 31, 1995

Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020

Re: Insured Municipal Securities Trust, 26th Discount Series

We have received the post-effective amendment to the registration statement
SEC file number 33-10166 for the above captioned trust.

We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.

Sincerely,

<PAGE>
J.J KENNY STANDARD & POOR'S
65 Broadway A Division of The McGraw-Hill Companies
New York, NY 10006-2551
Tel (212) 770-4422
Fax (212) 797-8681

October 31, 1995

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Re: Insured Municipal Securities Trust 22nd Discount Series

Gentlemen:

We have examined the post-effective Amendment to the Registration Statement
File No.33-07253 for the above-captioned trust. We hereby acknowledge that Kenny
S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in the Amendment of
the reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co.,
Inc. as evaluator.

In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings currently indicated in our
KENNYBASE database.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/trh

<PAGE>
J.J KENNY STANDARD & POOR'S
65 Broadway A Division of The McGraw-Hill Companies
New York, NY 10006-2551
Tel (212) 770-4422
Fax (212) 797-8681

October 31, 1995

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Re: Insured Municipal Securities Trust 23rd Discount Series

Gentlemen:

We have examined the post-effective Amendment to the Registration Statement
File No.33-07769 for the above-captioned trust. We hereby acknowledge that Kenny
S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in the Amendment of
the reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co.,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/trh

<PAGE>
J.J KENNY STANDARD & POOR'S
65 Broadway A Division of The McGraw-Hill Companies
New York, NY 10006-2551
Tel (212) 770-4422
Fax (212) 797-8681

October 31, 1995

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Re: Insured Municipal Securities Trust 24th Discount Series

Gentlemen:

We have examined the post-effective Amendment to the Registration Statement
File No.33-08700 for the above-captioned trust. We hereby acknowledge that Kenny
S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in the Amendment of
the reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co.,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/trh

<PAGE>
J.J KENNY STANDARD & POOR'S
65 Broadway A Division of The McGraw-Hill Companies
New York, NY 10006-2551
Tel (212) 770-4422
Fax (212) 797-8681

October 31, 1995

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Re: Insured Municipal Securities Trust 25th Discount Series

Gentlemen:

We have examined the post-effective Amendment to the Registration Statement
File No.33-09512 for the above-captioned trust. We hereby acknowledge that Kenny
S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in the Amendment of
the reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co.,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/trh

<PAGE>
J.J KENNY STANDARD & POOR'S
65 Broadway A Division of The McGraw-Hill Companies
New York, NY 10006-2551
Tel (212) 770-4422
Fax (212) 797-8681

October 31, 1995

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Re: Insured Municipal Securities Trust 26th Discount Series

Gentlemen:

We have examined the post-effective Amendment to the Registration Statement
File No.33-10166 for the above-captioned trust. We hereby acknowledge that Kenny
S&P Evaluation Services, a division of J. J. Kenny Co., Inc. is currently acting
as the evaluator for the trust. We hereby consent to the use in the Amendment of
the reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co.,
Inc. as evaluator.

You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.

Sincerely,

Frank A. Ciccotto

FAC/trh