As filed with the Securities and Exchange Commission on October 28, 1996
Registration No. 33-22988*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
POST-EFFECTIVE AMENDMENT NO. 8
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,
SERIES 10, SERIES 11, SERIES 12,
SERIES 13 AND SERIES 14
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 Vice President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Distributors L.P. Battle Fowler LLP
600 Fifth Avenue 75 East 55th Street
New York, NY 10020 New York, NY 10022
(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, 1996) 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 (the "Act").
Said Prospectus covers units of undivided interest in Insured
Municipal Securities Trust, Series 10, Series 11, Series 12, Series 13
and Series 14 covered by prospectuses heretofore filed as part of
separate registration statements on Form S-6 (Registration Nos. 33-
22988, 33-24111, 33-24743, 33-25192 and 33-25978, respectively) under
the Act. This filing constitutes Post-Effective Amendment No. 8 for
all of the aforementioned Series.
Each of the Registrants has registered an indefinite number of
securities under the Act pursuant to Section 24(f) under the
Investment Company Act of 1940, as amended, and Rule 24f-2 thereunder,
and each of the Registrants filed a Rule 24f-2 Notice for its fiscal
year ended June 30, 1996 on August 23, 1996.
988.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 10, SERIES 11, SERIES 12,
SERIES 13 AND SERIES 14
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)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
<S> <C> <C>
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
</TABLE>
II. General Description of the Trust and Securities of the Trust
<TABLE>
<S> <C> <C>
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
</TABLE>
-i-
983.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
(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
</TABLE>
III. Organization, Personnel and Affiliated Persons of Depositor
<TABLE>
<S> <C> <C>
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........ "
</TABLE>
-ii-
983.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
<S> <C> <C>
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.. "
</TABLE>
IV. Distribution and Redemption of Securities
<TABLE>
<S> <C> <C>
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
</TABLE>
-iii-
983.1
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
V. Information Concerning the Trustee or Custodian
<S> <C> <C>
48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........ Trust Expenses and Charges
50. Trustee's lien...................... "
</TABLE>
VI. Information Concerning Insurance of Holders of Securities
<TABLE>
<S> <C> <C>
51. Insurance of holders of
trust's securities................ Not Applicable
</TABLE>
VII. Policy of Registrant
<TABLE>
<S> <C> <C>
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
</TABLE>
VIII. Financial and Statistical Information
<TABLE>
<S> <C> <C>
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
</TABLE>
-iv-
983.1
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 10
The Trust is a unit investment trust designated Series 10
("Insured Municipal 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, however, 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. 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, 1996 (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, 1996
82962.1
<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 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.) For
a list of ratings on the Evaluation Date, see "Portfolio". Some of the Bonds
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
1/2278th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
82962.1
<PAGE>
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"), 25%; Bond Investor's Guaranty
("BIG"), 31.3%; and Municipal Bond Insurance Association ("MBIA"), 43.7%.
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 5.82%
of the Public Offering Price, or 6.179% 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 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 $375.75 plus accrued interest of $11.19 under the monthly
distribution plan, $12.99 under the semi-annual distribution plan and $29.30
under the annual distribution plan, for a total of $386.94, $388.74 and
$405.05, 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-3
82962.1
<PAGE>
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 the changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future. (For the Estimated Current Return to
Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information". See "Estimated Long Term Return
and Estimated Current Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the
Sponsor upon request.
DISTRIBUTIONS. Distributions of interest income, less
expenses, will be made by the Trust either monthly, semi-annually or annually
depending upon the plan of distribution applicable to the Unit purchased. A
purchaser of a Unit in the secondary market will initially receive
distributions in accordance with the distribution plan chosen by the prior
owner of such Unit and may thereafter change the plan as provided under
"Interest and Principal Distributions" in Part B of the 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.")
A-4
82962.1
<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 5.82%
of the Public Offering Price (6.179% 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
82962.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 10
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Date of Deposit*: August 18, 1988 Weighted Average Life to
- ---------------- ------------------------
Principal Amount of Bonds ... $800,000 Maturity:
- ------------------------- --------
Number of Units ............. 2,278 17.5 Years.
- ---------------
Fractional Undivided Inter- Minimum Value of Trust:
- -------------------------- ----------------------
est in Trust per Unit ..... 1/2278 Trust may be terminated if
---------------------
Principal Amount of value of Trust is less than
- -------------------
Bonds per Unit ............ $351.19 $1,000,000 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 ....... $808,882.20+++ 2037 or the disposition of the
Divided by 2,278 Units .... $355.08 last Bond in the Trust.
Plus Sales Charge of 5.82% Trustee***: The Chase Manhattan
-------
of Public Offering Price $20.67 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
--------------------
per Unit ................ $375.75+ plan $1.05 per $1,000; semi-
Redemption and Sponsor's annual plan $.60 per $1,000;
- ------------------------
Repurchase Price and annual plan is $.35 per
----------------
per Unit .................. $355.08+ $1,000.
--------
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
- -------------------------- ------------------------
Public Offering Price Evaluation: Minimum of $15
--------------------- ----------
over Redemption and plus $.25 per each issue of
-------------------
Sponsor's Repurchase Bonds in excess of 50 issues
--------------------
Price per Unit ............ $20.67++++ (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) ... $24.56 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).
</TABLE>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
<TABLE>
<CAPTION>
Monthly Semi-Annual Annual
Option Option Option
------ ------ ------
<S> <C> <C> <C>
Gross annual interest income# ......... $23.04 $23.04 $23.04
Less estimated annual fees and
expenses ............................ 1.51 1.27 .76
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $21.53 $21.77 $22.28
Estimated interest distribution# ...... 1.79 10.88 22.28
Estimated daily interest accrual# ..... .0598 .0605 .0619
Estimated current return#++ ........... 5.73% 5.79% 5.93%
Estimated long term return++ .......... 4.52% 4.58% 4.72%
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
</TABLE>
A-6
82962.1
<PAGE>
Footnotes to Summary of Essential Information
* 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, 1996 are reported in the
summary of essential information as if the had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue,
New York, New York 10017 and its unit investment 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
three business days after purchase) of $11.19 monthly, $12.99
semi-annually and $29.30 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
82962.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 4 issues representing
obligations of issuers located in 4 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 31.3% 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). None of the issues are general obligation bonds. Four of the issues
representing $800,000 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:
Building Authority 1, Coal Power 1, Hospital 1 and Sales Tax 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1996, $550,000 (approximately 68.8% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, none were Zero Coupon 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 31.2% were
purchased at a premium and none were purchased at par. For an explanation of
the significance of these factors see "Discount and Zero Coupon Bonds" in Part
B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
A-8
82962.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
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)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1994 2,500 $872.47 $69.05 $69.64 $76.76 $145.18
June 30, 1995 2,480 760.97 59.10 59.66 65.73 102.00
June 30, 1996 2,278 368.12 41.22 41.55 53.33 378.63
</TABLE>
- --------
* 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
82962.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 10
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities
Trust, Series 10 (the "Trust") at June 30, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the date
is September 28, 1995, expressed an unqualified opinion on those financial
statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
Insured Municipal Securities Trust, Series 10
<TABLE>
<CAPTION>
Portfolio of Investments June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C>
1 $ 250,000 La. Pub. Facs. Auth. AAA 8.200% 12/01/01 @ 100 S.F. $ 275,808
Fixed Rate Hlth. & Ed. 12/01/2015 12/01/98 @ 102 Ref.
Cap. Facs. Rev. Bonds
(Our Lady of the Lake
Reg. Med. Cntr.) Series
1985C (BIG)
2 200,000 Enid Ok. Muni. Auth. AAA 6.250 2/01/06 @ 100 S.F. 202,938
Util. and Sales Tax Rev. 2/01/2012 2/01/97 @ 102 Ref.
Bonds Series 1987A
(AMBAC)
3 200,000 Tx. Pub. Bldg. Auth. AAA 6.000 8/01/12 @ 100 S.F. 204,252
Rev. Rfndg. Bonds 8/01/2014 None
Series 1986 (MBIA)
4 150,000 Intermountain Pwr. AAA 5.000 7/01/10 @ 100 S.F. 136,428
Agncy. Utah Pwr. 7/01/2012 1/01/97 @ 100 Ref.
Supply Rev. Rfndg.
Bonds 1987 Series A
(MBIA)
---------------- ----------
$ 800,000 Total Investments (Cost (3) $672,619) $ 819,426
================ ==========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 10
Footnotes to Portfolio - June 30, 1996
- --------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service Inc. A brief description of the ratings
symbols and their meanings is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
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, 1996, the net unrealized appreciation of all the bonds was
comprised of the following.
Gross Unrealized Appreciation $ 146,807
Gross Unrealized Depreciation -
------------------
Net Unrealized Appreciation $ 146,807
==================
(4) 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).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 10
Statement of Net Assets
June 30, 1996
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $672,619) $ 819,426
-----------
Other Assets
Accrued Interest 15,490
Cash 3,882
-----------
Total Other Assets 19,372
-----------
Other Liabilities
Accrued Expenses 216
-----------
Total Other Liabilities 216
-----------
Excess of Other Assets Over Other Liabilities 19,156
-----------
Net Assets (2,278 Units of Fractional Undivided
Interest Outstanding, $368.12 per Unit) $ 838,582
-----------
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 10
<TABLE>
<CAPTION>
Statement of Operations
- -------------------------------------------------------------------------------------------------------------------
For Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 92,949 $ 150,362 $ 175,262
-------------- -------------- -------------
Expenses
Trustee's Fees 3,087 3,390 3,493
Evaluator's Fees 962 962 1,048
Sponsor's Advisory Fees 270 307 375
-------------- -------------- -------------
Total Expenses 4,319 4,659 4,916
-------------- -------------- -------------
Net Investment Income 88,630 145,703 170,346
-------------- -------------- -------------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss)
on Investments (39,649) (52,165) (33,321)
Change in Unrealized Appreciation
(Depreciation) on Investments 17,781 30,720 (101,619)
-------------- -------------- -------------
Net Gain (Loss) on Investments (21,868) (21,445) (134,940)
-------------- -------------- -------------
Net Increase in Net Assets
Resulting from Operations $ 66,762 $ 124,258 $ 35,406
============== ============== =============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 10
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 88,630 $ 145,703 $ 170,346
Realized Gain (Loss) on
Investments (39,649) (52,165) (33,321)
Changes in Unrealized Appreciation
(Depreciation) on Investments 17,781 30,720 (101,619)
-------------- --------------- --------------
Net Increase in Net
Assets Resulting
From Operations 66,762 124,258 35,406
-------------- --------------- --------------
Distributions to Certificateholders
Investment Income 101,159 147,967 172,870
Principal 915,223 255,000 362,950
Redemptions
Interest 2,592 335 -
Principal 96,408 14,936 -
-------------- --------------- --------------
Total Distributions
and Redemptions 1,115,382 418,238 535,820
-------------- --------------- --------------
Total Increase (Decrease) (1,048,620) (293,980) (500,414)
Net Assets
Beginning of Year 1,887,202 2,181,182 2,681,596
-------------- --------------- --------------
End of Year (Including
Undistributed Net Investment
Income of $29,699, $44,820,
and $47,419, Respectively) $ 838,582 $ 1,887,202 $ 2,181,182
============== ============== ==============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 10
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, 10 Series (the "Trust") was
organized on August 18, 1988 (date of deposit) by Bear, Stearns & Co.
Inc. under the laws of the State of New York by a Trust Indenture and
Agreement, and its registered under the Investment Company Act of
1940. The Trust was formed to preserve capital and to provide interest
income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee"). Accordingly,
Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Interest Income
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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the investments is based upon the bid prices for the bonds at the end
of the period, which approximates the fair value of the securities at
that date, 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 differences 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
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor Trusts
under the Internal Revenue Code. Under existing law, if the Trust so
qualifies, it will not be subject to federal income tax on net income
and capital gains that are distributed to unitholders.
<PAGE>
2
Insured Municipal Securities Trust, Series 10
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
4. Trust Administration
Trustee has custody of assets 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 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.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1996, 1995 and 1994, 202,
20 and 0 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.35 to $1.05 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.15 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the year ended June 30, 1996, the "Trustee's Fees" are comprised of
Trustee fees of $1,407, and other expenses of $1,680. The other
expenses include professional, printing and miscellaneous fees.
<PAGE>
3
Insured Municipal Securities Trust, Series 10
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 2,555,251
Less Initial Gross Underwriting Commission (125,200)
------------------
2,430,051
Accumulated Cost of Bond Sold,
Matured or Called (1,757,432)
Net Unrealized Appreciation 146,807
Undistributed Net Investment Income 29,699
Undistributed Proceeds From
Investments (10,543)
------------------
Total $ 838,582
==================
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 2,500 units of
fractional undivided interest of the Trust as of the date of deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
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 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.
<PAGE>
4
Insured Municipal Securities Trust, Series 10
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 760.97
Interest Income $39.07
Expenses (1.82)
---------
Net Investment Income 37.25
Net Gain or Loss on Investments(1) 38.74
-----------
Total from Investment Operations 836.96
Less Distributions
to Certificateholders
Income 42.52
Principal 384.71
for Redemptions
Interest 1.09
Principal 40.52
--------
Total Distributions 468.84
-----------
Net Asset Value, End of Period** $ 368.12
-----------
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- -----------------------------------
* Unless otherwise stated, based upon average units outstanding during
the year of 2,379 ([2,480+2,278]/2).
** Based upon actual units outstanding.
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 11
The Trust is a unit investment trust designated Series 11 ("Insured
Municipal 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, however, 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. 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, 1996 (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, 1996
82195.1
<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 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.) For
a list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds
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
1/2300th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
82195.1
<PAGE>
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"), 32.5%; Financial Guaranty
Insurance Company ("Financial Guaranty"), 41.5%; and Municipal Bond Insurance
Association ("MBIA"), 26.0%.
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 3.62% of the
Public Offering Price, or 3.755% 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 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 $345.87 plus accrued interest of $10.04 under the monthly
distribution plan, $11.83 under the semi-annual distribution plan and $24.50
under the annual distribution plan, for a total of $355.91, $357.70 and
$370.37, respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the
A-3
82195.1
<PAGE>
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
Distributions" in Part B of the 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
A-4
82195.1
<PAGE>
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 3.62%
of the Public Offering Price (3.755% 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
82195.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 11
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
Date of Deposit*: September 23, 1988 Weighted Average Life to
Principal Amount of Bonds ... $770,000 Maturity: 11.3 Years.
Number of Units ............. 2,300 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/2300 value of Trust is less than
Principal Amount of $1,000,000 in principal amount
Bonds per Unit ............ $334.78 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2037 or the disposition of the
of Bonds in Trust ....... $767,615+++ last Bond in the Trust.
Divided by 2,300 Units .... $333.78 Trustee***: The Chase Manhattan
Plus Sales Charge of 3.62% Bank.
of Public Offering Price $12.09 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.05 per $1,000; semi-
per Unit ................ $345.87+ annual plan $.60 per $1,000;
Redemption and Sponsor's and annual plan is $.35 per
Repurchase Price $1,000.
per Unit .................. $333.78+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15
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 ............ $12.09++++ 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) ... $11.09 $.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# ......... $22.67 $22.67 $22.67
Less estimated annual fees and
expenses ............................ 1.50 1.26 1.45
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $21.17 $21.41 $21.22
Estimated interest distribution# ...... 1.76 10.70 21.22
Estimated daily interest accrual# ..... .0588 .0595 .0589
Estimated current return#++ ........... 6.12% 6.19% 6.55%
Estimated long term return++ .......... 4.92% 5.00% 4.94%
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
82195.1
<PAGE>
Footnotes to Summary of Essential Information
* 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, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue,
New York, New York 10017 and its unit investment 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
three business days after purchase) of $10.04 monthly, $11.83
semi-annually and $24.50 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
82195.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 4 issues representing
obligations of issuers located in 2 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; none 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).
None of the issues are general obligation bonds. Four issues representing
$770,000 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: Pollution
Control 1, Public Building 1, Utility 1 and Water Development 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1996, $200,000 (approximately 58.4% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of these
original issue discount bonds, none were Zero Coupon 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 41.6% 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.
A-8
82195.1
<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, 1994 2,500 $919.47 $71.28 $71.91 -0- $ 84.13
June 30, 1995 2,425 790.12 63.21 63.78 -0- 115.56
June 30, 1996 2,300 345.65 37.86 38.23 -0- 413.17
- --------
* 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
82195.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 11
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities
Trust, Series 11 (the "Trust") at June 30, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the
date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 11
Portfolio of Investments June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 250,000 Cleveland Ohio Wtrwks. AAA 5.000% 1/01/13 @ 100 S.F. $ 226,430
Imprvmnt. First Mtg. 1/01/2015 1/01/97 @ 100 Ref.
Rfndg. Rev. Bonds Series
D 1986 (AMBAC)
2 200,000 Tx. Pub. Bldg. Auth. AAA 6.000 8/01/12 @ 100 S.F. 204,252
Rev. Rfndg. Bonds Series 8/01/2014 None
1986 (MBIA)
3 100,000 Austin Tx. Combined AAA 9.500 5/15/01 @ 100 S.F. 116,683
Util. Sys. Rev. Bonds 5/15/2015 5/15/00 @ 100 Ref.
Series 1985A (Financial
Guaranty)
4 220,000 Maple Run Austin Tx. AAA 8.250 No Sinking Fund 227,031
Muni. Util. Dstrct. Tx. 11/15/2006 11/15/96 @ 101.5 Ref.
Cntrct. Rev. Bonds Series
1986 (Financial
Guaranty)
---------- ---------
$ 770,000 Total Investments (Cost (3) $686,341) $ 774,396
========== =========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 11
Footnotes to Portfolio - June 30, 1996
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit
of J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill
Companies, Inc., except for those identified by an asterisk (*)
which are by Moody's Investor Service, Inc. A brief description of
the ratings symbols and their meanings is set forth under
"Description of Bond Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of
the 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, 1996, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross Unrealized Appreciation $ 89,993
Gross Unrealized Depreciation (1,938)
-----------
Net Unrealized Appreciation $ 88,055
===========
(4) 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).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 11
Statement of Net Assets
June 30, 1996
- -------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $686,341) $ 774,396
------------
Other Assets
Accrued Interest 14,612
Cash 6,207
------------
Total Other Assets 20,819
------------
Other Liabilities
Accrued Expenses 215
------------
Total Other Liabilities 215
------------
Excess of Other Assets Over Other Liabilities 20,604
------------
Net Assets (2,300 Units of Fractional Undivided
Interest Outstanding, $345.65 per Unit) $ 795,000
============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 11
Statement of Operations
- -------------------------------------------------------------------------------
For the Years Ended June 30,
1996 1995 1994
Investment Income
Interest $ 82,102 $ 159,177 $ 182,229
--------- --------- ---------
Expenses
Trustee's Fees 2,817 3,383 3,503
Evaluator's Fees 1,031 1,031 1,121
Sponsor's Advisory Fee 296 326 375
--------- --------- ---------
Total Expenses 4,144 4,740 4,999
--------- --------- ---------
Net Investment Income 77,958 154,437 177,230
--------- --------- ---------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (39,017) (56,340) (23,419)
Change in Unrealized Appreciation
(Depreciation) on Investments 21,356 24,658 (123,681)
Net Gain (Loss) on Investments (17,661) (31,682) (147,100)
--------- --------- ---------
Net Increase in Net Assets
Resulting from Operations $ 60,297 $ 122,755 $ 30,130
========= ========= =========
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 11
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 77,958 $ 154,437 $ 177,230
Realized Gain (Loss) on Investments (39,017) (56,340) (23,419)
Change in Unrealized Appreciation
(Depreciation) on Investments 21,356 24,658 (123,681)
----------- ----------- -----------
Net Increase in Net
Assets Resulting
from Operations 60,297 122,755 30,130
----------- ----------- -----------
Distributions to Certificateholders
Investment Income 91,273 157,321 178,633
Principal 1,035,715 286,589 210,325
Redemptions
Interest 1,452 1,353 -
Principal 52,899 60,115 -
----------- ----------- -----------
Total Distributions
and Redemptions 1,181,339 505,378 388,958
----------- ----------- -----------
Total Increase (Decrease) (1,121,042) (382,623) (358,828)
Net Assets
Beginning of Year 1,916,042 2,298,665 2,657,493
----------- ----------- -----------
End of Year (Including
Undistributed Net Investment
Income of $27,304, $42,071 and
$46,308, Respectively) $ 795,000 $ 1,916,042 $ 2,298,665
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 11
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 11 (the "Trust") was
organized on September 23, 1988 (date of deposit) by Bear Stearns &
Co., Inc. 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. The Trust was formed to preserve capital and
to provide interest income.
Effective September 2, 1995, United States Trust Company of New
York was merged into The Chase Manhattan Bank (the "Trustee").
Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements.
Actual amounts could differ from those estimates.
Interest Income
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.
Security Valuation
Investments are carried at market value which is determined by
Kenny S&P Evaluation Services, a business unit of J.J. Kenny
Company, Inc., a subsidiary of The McGraw-Hill Companies, Inc. The
market value of the investments is based upon the bid prices for
the bonds at the end of the period, which approximates the fair
value of the securities at that date, 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 differences
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.
<PAGE>
2
Insured Municipal Securities Trust, Series 11
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts under the Internal Revenue Code. Under existing law, if the
Trust so qualifies, it will not be subject to federal income tax on
net income and capital gains that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets 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 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.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1996, 1995 and 1994,
125, 75 and 0 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.35 to $1.05 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15.00 is paid
to a service bureau for each portfolio valuation. A maximum fee of
$.15 per $1,000 of outstanding investment principal is paid to the
Sponsor. For the year ended June 30, 1996, the "Trustee's Fees" are
comprised of Trustee fees of $1,217, and other expenses of $1,600.
The other expenses include professional, printing and miscellaneous
fees.
<PAGE>
3
Insured Municipal Securities Trust, Series 11
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ------------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original Cost to Certificateholders $ 2,567,793
Less Initial Gross Underwriting
Commission (125,800)
------------
2,441,993
Accumulated Cost of Bonds Sold,
Matured or Called (1,755,652)
Net Unrealized Appreciation 88,055
Undistributed Net Investment Income 27,304
Distributions in Excess of Proceeds from
Investments (6,700)
------------
Total $ 795,000
============
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 2,500 units of
fractional undivided interest of the Trust as of the date of
deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds,
it may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
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 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.
<PAGE>
4
Insured Municipal Securities Trust, Series 11
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ------------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year
ended June 30, 1996:
Net Asset Value, Beginning of Period** $ 790.12
Interest Income $ 34.75
Expenses (1.75)
----------
Net Investment Income 33.00
Net Gain or Loss on Investments(1) 22.57
----------
Total from Investment Operations 845.69
Less Distributions
to Certificateholders
Income 38.63
Principal 438.40
for Redemptions
Interest .62
Principal 22.39
----------
Total Distributions 500.04
----------
Net Asset Value, End of Period** $ 345.65
==========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in
outstanding units since July 1, 1995 and the dates of net gain and
loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 2,362.5 ([2,425+2,300]/2).
** Based upon actual units outstanding.
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 12
The Trust is a unit investment trust designated Series 12 ("Insured
Municipal 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 (including where applicable earned
original discount) under existing law but may be subject to state and local
taxes. Capital gains, however, 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. 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, 1996 (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, 1996
83449.1
<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 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.) For
a list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds
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
1/3436th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
83449.1
<PAGE>
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"), 28.3%; Bond Investor's Guaranty
("BIG"), 19.1%; Financial Guaranty Insurance Company ("Financial Guaranty"),
40.6%; and Municipal Bond Insurance Association ("MBIA"), 12.0%.
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 3.13% of the
Public Offering Price, or 3.231% 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 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 $344.34 plus accrued interest of $7.24 under the monthly distribution
plan, $9.02 under the semi-annual distribution plan and $21.67 under the annual
distribution plan, for a total of $351.58, $353.36 and $366.01, respectively.
The Public Offering Price per Unit can vary on a daily basis in accordance with
fluctuations in the aggregate bid
A-3
83449.1
<PAGE>
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
Distributions" in Part B of the 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
A-4
83449.1
<PAGE>
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 3.13%
of the Public Offering Price (3.231% 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
83449.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 12
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
Date of Deposit*: October 27, 1988 Weighted Average Life to
Principal Amount of Bonds .. $1,415,000 Maturity: 13.8 Years.
Number of Units ............ 3,436 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .... 1/3436 value of Trust is less than
Principal Amount of $1,400,000 in principal amount
Bonds per Unit ........... $411.82 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price of 2037 or the disposition of the
Bonds in Trust ......... $1,147,286.40+++ last Bond in the Trust.
Divided by 3,436 Units ... $333.90 Trustee***: The Chase Manhattan
Plus Sales Charge of 3.13% Bank.
of Public Offering Price $10.44 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.05 per $1,000; semi-
per Unit ............... $344.34+ annual plan $.60 per $1,000;
Redemption and Sponsor's and annual plan is $.35 per
Repurchase Price $1,000.
per Unit ................. $333.90+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15
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 ........... $10.44++++ 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) .. $(67.48) $.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# ......... $22.32 $22.32 $22.32
Less estimated annual fees and
expenses ............................ 1.25 .99 .97
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $21.07 $21.33 $21.35
Estimated interest distribution# ...... 1.76 10.67 21.35
Estimated daily interest accrual# ..... .0585 .0593 .0593
Estimated current return#++ ........... 6.12% 6.19% 6.20%
Estimated long term return++ .......... 5.05% 5.13% 5.13%
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
83449.1
<PAGE>
Footnotes to Summary of Essential Information
* 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, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue,
New York, New York 10017 and its unit investment 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
three business days after purchase) of $7.24 monthly, $9.02 semi-annually
and $21.67 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
83449.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 6 issues representing
obligations of issuers located in 6 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. Approximately 12% of the Bonds are obligations of state and
local housing authorities; none are hospital revenue bonds; approximately 17.7%
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. Six
issues representing $2,095,000 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: Federally Insured Mortgage 1, Gas 1, Nuclear Power 1, Sales Tax 1,
Water 1, and Water and Sewer 1. For an explanation of the significance of these
factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of June 30, 1996, $745,000 (approximately 52.7% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of these
original issue discount bonds, $170,000 (approximately 12% 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 47.3% 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, 1996 to September 15, 1996,
the entire principal amount of the Bond in portfolio no. 5 was called for
redemption pursuant to pre-refunding provisions and is no longer
contained in the Trust.
A-8
83449.1
<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, 1994 3,500 $738.56 $59.11 $59.69 $69.84 $230.31
June 30, 1995 3,500 548.10 52.76 53.31 62.42 174.86
June 30, 1996 3,436 346.76 29.22 29.57 36.83 191.93
- --------
* 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
83449.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 12
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities
Trust, Series 12 (the "Trust") at June 30, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the
date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 12
Portfolio of Investments June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $ 325,000 Indianapolis Ind. Gas Util. AAA 3.500% No Sinking Fund $ 226,311
Sys. Rev. Rfndg. Bonds 6/01/2018 None
1986 Series B (Financial
Guaranty)
2 270,000 Jefferson Sales Tax Dstrct. AAA 8.000 7/01/92 @ 100 S.F. 296,231
Jefferson Parish Louisiana 7/01/2005 7/01/99 @ 103 Ref.
Spec. Sales Tax Rev. Bonds
Series 1986A (BIG)
3 250,000 N.C. Eastern Muni. Pwr. AAA 4.500 7/01/20 @ 100 S.F. 206,710
Agncy. Pwr. Sys. Rev. 1/01/2024 1/01/22 @ 100 Ref.
Rfndg. Bonds Series 1987A
(Financial Guaranty)
4 250,000 Jackson Tenn. Wtr. & Swr. AAA 7.600 7/01/09 @ 100 S.F. 259,843
Sys. Rev. Rfndg. Bonds 1/01/2012 1/01/97 @ 102 Ref.
Series 1988 (AMBAC)
5 150,000 Galveston Cnty. Tx. Wtr. AAA 9.000 7/10/06 @ 100 S.F. 150,263
Auth. Wtr. Sys. Cntrct. Rev. 7/10/2009 7/10/96 @ 100 Ref.
Rfndg. Bonds Mainland Prjt.
Series 1985 (AMBAC)
6 170,000 Santa Clara Calif. Hsg. Auth. AAA 0.000 4/01/07 @ 13.074 S.F. 7,914
Multi-Fam. Hsg. Rev. Bonds 4/01/2026 10/01/03 @ 8.987 Ref.
Series 1984A (FHA Insrd.
Mtg. Loan-Cedar Glen
--------------- Aprtmts. Prjt.) (MBIA) -------------
$ 1,415,000 Total Investments (Cost (3) $1,036,677) $ 1,147,272
================ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
Series 12
Footnotes to Portfolio - June 30, 1996
- ------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. except for those identified by an asterisk (*) which are by
Moody Investors Service, Inc. A brief description of the ratings
symbols and their meanings is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
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, 1996, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross Unrealized Appreciation $ 127,393
Gross Unrealized Depreciation (16,798)
------------------
Net Unrealized Appreciation $ 110,595
==================
(4) 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).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Muncipal Securities Trust,
Series 12
Statements of Net Assets
June 30, 1996
- ------------------------
Investments in Securities,
at Market Value (cost $1,036,677) $ 1,147,272
-----------------
Other Assets
Accrued Interest 46,157
Total Other Assets 46,157
Other Liabilities
Accrued Expenses 1,427
Advance from Trustee 518
Total Other Liabilities 1,945
Excess of Other Assets Over Other Liabilities 44,212
-----------------
Net Assets (3,436 Units of Fractional Undivided
Interest Outstanding, $346.76 per Unit) $ 1,191,484
=================
The accompanying notes form an integral part of the financial statements.
<PAGE>
The accompanying notes form an integral part of the financial statements.
<TABLE>
Insured Municipal Securities Trust,
Series 12
Statement of Operations
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 100,228 $ 165,197 $ 208,378
-------------- -------------- -------------
Expenses
Trustee's Fees 3,504 5,089 4,110
Evaluator's Fees 894 893 973
Sponsor's Advisory Fee 314 404 524
-------------- -------------- -------------
Total Expenses 4,712 6,386 5,607
--------------- --------------- ------------
Net Investment Income 95,516 158,811 202,771
-------------- -------------- -------------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (53,209) (115,285) (57,370)
Change in Unrealized Appreciation
(Depreciation) on Investments 27,173 87,736 (123,746)
---------------- ------------ ------------
Net Gain (Loss) on Investments (26,036) (27,549) (181,116)
--------------- --------------- --------------
Net Increase in Net Assets
Resulting from Operations $ 69,480 $ 131,262 $ 21,655
-------------- -------------- -------------
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust,
Series 12
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 95,516 $ 158,811 $ 202,771
Realized Gain (Loss) on
Investments (53,209) (115,285) (57,370)
Change in Unrealized Appreciation
(Depreciation) on Investments 27,173 87,736 (123,746)
-------------- -------------- -------------
Net Increase in Net
Assets Resulting
from Operations 69,480 131,262 21,655
-------------- -------------- -------------
Distributions to Certificateholders
Investment Income 102,059 185,855 208,249
Principal 663,235 612,010 806,085
Redemptions
Interest 696 - -
Principal 30,348 - -
-------------- ------------- -------------
Total Distributions
and Redemptions 796,338 797,865 1,014,334
-------------- ------------- ------------
Total Increase (Decrease) (726,858) (666,603) (992,679)
Net Assets
Beginning of Year 1,918,342 2,584,945 3,577,624
-------------- ------------- -------------
End of Year (Includes
Undistributed Net Investment
Income of $49,086, $56,325
and $83,369, Respectively) $ 1,191,484 $ 1,918,342 $ 2,584,945
-------------- -------------- -------------
</TABLE>
<PAGE>
Insured Municipal Securities Trust,
Series 12
Notes to Financial Statements
June 30, 1996, 1995, and 1994
- -------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 12 (the "Trust") was
organized on October 27, 1988 by Bear Stearns & Co., Inc. 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. The Trust was
formed to preserve capital and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee").
Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Interest Income
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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the investments is based upon the bid prices for the bonds at the end
of the period, which approximates the fair value of the securities at
that date, 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 differences 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.
<PAGE>
2
Insured Municipal Securities Trust,
Series 12
Notes to Financial Statements
June 30, 1996, 1995, and 1994
- ------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts under the Internal Revenue Code. Under existing law, if the
Trust so qualifies, it will not be subject to federal income tax on
net income and capital gains that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets 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 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.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the year ended June 30, 1996, 64 units were
redeemed. No units were redeemed for the years ended June 30, 1995
and 1994.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.35 to $1.05 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15.00 is paid to
a service bureau for each portfolio valuation. A maximum fee of $.15
per $1,000 of outstanding investment principal is paid to the
Sponsor. For the year ended at June 30, 1996, the "Trustee's Fees"
are comprised of Trustee fees of $1,729, and other expenses of
$1,775. The other expenses include professional, printing and
miscellaneous fees.
<PAGE>
3
Insured Municipal Securities Trust,
Series 12
Notes to Financial Statements
June 30, 1996, 1995, and 1994
- --------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original Cost to Certificateholders $ 3,542,980
Less Initial Gross Underwriting Commission (173,600)
3,369,380
Accumulated Cost of Securities Sold,
Matured or Called (2,337,594)
Net Unrealized Appreciation 110,595
Undistributed Net Investment Income 49,086
Undistributions Proceeds from Investment 17
------------
Total $ 1,191,484
============
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 3,500 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 $4,889.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds,
it may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
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 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.
<PAGE>
4
Insured Municipal Securities Trust,
Series 12
Notes to Financial Statements
June 30, 1996, 1995, and 1994
- -----------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 548.10
Interest Income $ 28.90
Expenses (1.36)
Net Investment Income 27.54
Net Gain or Loss on Investments(1) .74
Total from Investment Operations 576.38
Less Distributions
to Certificateholders
Income 29.43
Principal 191.24
for Redemptions
Interest .20
Principal 8.75
Total Distributions 229.62
Net Asset Value, End of Period** $ 346.76
===========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in
outstanding units since July 1, 1995 ------ and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during the
year of 3,468 ([3,500 + 3,436]/2).
** Based upon actual units outstanding.
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 13
The Trust is a unit investment trust designated Series 13 ("Insured
Municipal 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, however, 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. 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, 1996 (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, 1996
83656.1
<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 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.) For
a list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds
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
1/4869th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
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83656.1
<PAGE>
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"), 8.5%; Bond Investor's Guaranty
("BIG"), 14.9%; Financial Guaranty Insurance Company ("Financial Guaranty"),
4.3%; Municipal Bond Insurance Association ("MBIA"), 27.7%; and MBIA Corp.,
44.6%.
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 3.97% of the
Public Offering Price, or 4.134% 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 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 $456.87 plus accrued interest of $8.07 under the monthly distribution
plan, $10.46 under the semi-annual distribution plan and $26.77 under the
annual distribution plan, for a total of $464.94, $467.33 and $483.64,
respectively. The Public Offering Price per Unit can vary on a daily basis in
accordance with fluctuations in the aggregate bid
A-3
83656.1
<PAGE>
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
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses,
will be made by the Trust either monthly, semi-annually or annually depending
upon the plan of distribution applicable to the Unit purchased. A purchaser of
a Unit in the secondary market will initially receive distributions in
accordance with the distribution plan chosen by the prior owner of such Unit
and may thereafter change the plan as provided under "Interest and Principal
Distributions" in Part B of the 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
A-4
83656.1
<PAGE>
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 3.97%
of the Public Offering Price (4.134% 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
83656.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 13
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
Date of Deposit*: December 1, 1988 Minimum Principal Distribution:
Principal Amount of Bonds .. $2,350,000 $1.00 per Unit.
Number of Units ............ 4,869 Weighted Average Life to Maturity:
Fractional Undivided Inter- 12.6 Years.
est in Trust per Unit .... 1/4869 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value
Bonds per Unit ........... $482.65 of Trust is less than $2,000,000
Secondary Market Public in principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price of The earlier of December 31, 2037
Bonds in Trust.......... $2,139,564.23+++ or the disposition of the last
Divided by 4,869 Units ... $439.43 Bond in the Trust.
Plus Sales Charge of 3.97% Trustee***: The Chase Manhattan
of Public Offering Price $17.44 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ............... $456.87+ plan $1.06 per $1,000; semi-
Redemption and Sponsor's annual plan $.61 per $1,000; and
Repurchase Price annual plan is $.36 per $1,000.
per Unit ................. $439.43+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15 plus
Public Offering Price $.25 per each issue of Bonds in
over Redemption and excess of 50 issues (treating
Sponsor's Repurchase separate maturities as separate
Price per Unit ........... $17.44++++ 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) .. $(25.78) $.25 per $1,000 principal amount
Evaluation Time: 4:00 p.m. of Bonds (see "Trust Expenses
New York Time. 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# ......... $29.51 $29.51 $29.51
Less estimated annual fees and
expenses ............................ 1.18 .830 .41
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $28.33 $28.68 $29.10
Estimated interest distribution# ...... 2.36 14.34 29.10
Estimated daily interest accrual# ..... .0787 .0797 .0808
Estimated current return#++ ........... 6.20% 6.28% 6.37%
Estimated long term return++ .......... 4.71% 4.79% 4.89%
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
83656.1
<PAGE>
Footnotes to Summary of Essential Information
* 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, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue,
New York, New York 10017 and its unit investment 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
three business days after purchase) of $8.07 monthly, $10.46
semi-annually and $26.77 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
83656.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 9 issues representing
obligations of issuers located in 5 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. Approximately 10.6% of the Bonds are obligations of state and
local housing authorities; approximately 31.9% 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). One of the issues representing $200,000 of the
principal amount of the Bonds is a general obligation bond. All eight of the
remaining issues representing $2,150,000 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, Hospital 2, Multi-Family Housing 1,
Toll Revenue 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, 1996, $1,200,000 (approximately 51.1% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $250,000 (approximately 10.6% 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. Approximately 21.2% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 27.7% 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.
A-8
83656.1
<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, 1994 4,962 $848.93 $64.74 $65.36 $71.87 $153.34
June 30, 1995 4,909 689.99 55.71 56.28 63.86 149.53
June 30, 1996 4,869 496.37 40.58 41.02 50.01 179.94
- --------
* 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
83656.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 13
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities
Trust, Series 13 (the "Trust") at June 30, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the
date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 13
Portfolio of Investments June 30, 1996
- ----------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $ 400,000 Carbondale Ill. Hosp. AAA 6.875% 3/01/07 @ 100 S.F. $ 413,052
Rev. Rfndg. Bonds Series 3/01/2015 3/01/97 @ 102 Ref.
1987 (Southern Ill. Hosp.
Serv.) (MBIA Corp.)
2 200,000 City of Chicago Cook AAA 6.000 1/01/12 @ 100 S.F. 202,390
Cnty. Ill. Gen. Oblig. 1/01/2013 1/01/97 @ 100 Ref.
Prjt. & Rfndg. Bonds
Series 1987 (MBIA Corp.)
3 350,000 Hazel Crest Ill. Hosp. AAA 9.125 7/01/99 @ 100 S.F. 375,218
Facs. Rev. Rfndg. and 7/01/2017 7/01/97 @ 102 Ref.
Imprvmnt. Bonds Series
1987 (So. Suburban
Prjt.)(BIG)
4 400,000 Northwest Suburban AAA 5.750 5/01/09 @ 100 S.F. 397,500
Muni. Joint Action Wtr. 5/01/2012 None
Agncy. (Cook, DuPage &
Kane Cntys. Ill.) Wtr.
Supl. Sys. Rev. Bonds
Series 1986 (MBIA
Corp.)
5 100,000 Indiana State Toll Finc. AAA 6.875 7/01/08 @ 100 S.F. 103,079
Auth. Toll Rd. Rev. 7/01/2012 1/01/97 @ 102 Ref.
Rfndg. Series 1985
Bonds (Financial
Guaranty)
6 300,000 Dallas Cnty. Tex. Util. & AAA 8.300 2/15/09 @ 100 S.F. 320,007
Reclamation Dstrct. 2/15/2016 2/15/98 @ 100 S.F.
Unlmtd. Ad Valorem Tax
Bonds Series 1987
(MBIA Corp.)
7 150,000 Intermountain Pwr. AAA 5.000 7/01/10 @ 100 S.F. 136,428
Agncy. Utah Pwr. Supl. 7/01/2012 1/01/97 @ 100 Ref.
Rev. Rfndg. Bonds Series
1987A (MBIA Corp.)
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 13
Portfolio of Investments June 30, 1996
- ----------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
8 $ 200,000 Intermountain Pwr. AAA 5.000% 7/01/10 @ 100 S.F. $ 180,242
Agncy. Utah Pwr. Supl. 7/01/2013 7/01/96 @ 100 Ref.
Rev. Rfndg. Bonds, 1986
Series F (AMBAC)
9 250,000 Santa Clara Calif. Hsg. AAA 0.000 4/01/07 @ 13.074 S.F. 11,638
Auth. Multi-Fam. Hsg. 4/01/2026 10/01/03 @ 8.987 Ref.
Rev. Bonds Series
1984A (FHA Insrd. Mtg.
Loan-Cedar Glen
------------ Aptmnts. Prjt.) (MBIA) -------------
$ 2,350,000 Total Investments (Cost (3) $1,904,391) $ 2,139,554
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 13
Footnotes to Portfolio - June 30, 1996
- ------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Service, Inc. A brief description of the ratings symbols and
their meanings is set forth under "Description of Bond Ratings" in
Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
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, 1996, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross Unrealized Appreciation $ 258,267
Gross Unrealized Depreciation (23,104)
------------------
Net Unrealized Appreciation $ 235,163
==================
(4) 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).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 13
Statement of Net Assets
June 30, 1996
- ------------------------------------------------------------------------------
Investments in Securities,
at Market Value (cost $1,904,391) $ 2,139,554
------------------
Other Assets
Accrued Interest 74,466
Cash 204,312
------------------
Total Other Assets 278,778
------------------
Other Liabilities
Accrued Expenses 1,504
------------------
Total Other Liabilities 1,504
------------------
Excess of Other Assets Over Other Liabilities 277,274
------------------
Net Assets (4,869 Units of Fractional Undivided
Interest Outstanding, $496.37 per Unit) $ 2,416,828
==================
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 13
Statement of Operations
- ------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 176,923 $ 278,298 $ 326,311
-------------- -------------- --------------
Expenses
Trustee's Fees 4,299 6,156 5,052
Evaluator's Fees 1,031 1,031 1,124
Sponsor's Advisory Fee 875 1,050 1,250
-------------- -------------- --------------
Total Expenses 6,205 8,237 7,426
-------------- -------------- --------------
Net Investment Income 170,718 270,061 318,885
-------------- -------------- --------------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (78,461) (139,997) (30,488)
Change in Unrealized Appreciation
(Depreciation) on Investments 39,952 98,965 (213,355)
-------------- -------------- --------------
Net Gain (Loss) on Investments (38,509) (41,032) (243,843)
-------------- -------------- --------------
Net Increase in Net Assets
Resulting from Operations $ 132,209 $ 229,029 $ 75,042
============== ============== ==============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 13
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 170,718 $ 270,061 $ 318,885
Realized Gain (Loss) on
Investments (78,461) (139,997) (30,488)
Change in Unrealized Appreciation
(Depreciation) on Investments 39,952 98,965 (213,355)
-------------- -------------- --------------
Net Increase in Net
Assets Resulting
From Operations 132,209 229,029 75,042
-------------- -------------- --------------
Distributions to Certificateholders
Investment Income 199,116 275,951 322,660
Principal 878,631 737,689 760,873
Redemptions
Interest 488 1,337 631
Principal 24,319 39,257 39,097
------------- -------------- -------------
Total Distributions
and Redemptions 1,102,554 1,054,234 1,123,261
-------------- -------------- --------------
Total Increase (Decrease) (970,345) (825,205) (1,048,219)
Net Assets
Beginning of Year 3,387,173 4,212,378 5,260,597
-------------- -------------- --------------
End of Year (Including
Undistributed Net Investment
Income of $75,271, $104,157
and $111,384, Respectively) $ 2,416,828 $ 3,387,173 $ 4,212,378
-------------- -------------- --------------
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 13
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 13 (the "Trust") was
organized on December 1, 1988 by Bear Stearns & Co., Inc. 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. The Trust was
formed to preserve capital and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee").
Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements.
Actual amounts could differ from those estimates.
Interest Income
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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the investments is based upon the bid prices for the bonds at the end
of the period, which approximates the fair value of the securities at
that date, 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 differences 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.
<PAGE>
2
Insured Municipal Securities Trust, Series 13
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts under the Internal Revenue Code. Under existing law, if the
Trust so qualifies, it will not be subject to federal income tax on
net income and capital gains that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets 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 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.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the year ended June 30, 1996, 1995 and 1994,
forty, fifty-three and thirty-eight units were redeemed,
respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.36 to $1.06 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15.00 is paid to
a service bureau for each portfolio valuation. A maximum fee of $.25
per $1,000 of outstanding investment principal is paid to the
Sponsor. For the year ended June 30, 1996, the "Trustee's Fees" are
comprised of Trustee fees of $2,408, and other expenses of $1,891.
The other expenses include professional, printing and miscellaneous
fees.
<PAGE>
3
Insured Municipal Securities Trust, Series 13
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ----------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the
interests of Certificateholders as follows:
Original Cost to Certificateholders $ 5,084,341
Less Initial Gross Underwriting Commission (249,132)
--------------
4,835,209
Accumulated Cost of Bonds Sold, Matured
or Called (2,937,949)
Net Unrealized Appreciation 235,163
Undistributed Net Investment Income 75,271
Undistributed Proceeds from Investments 209,134
--------------
Total $ 2,416,828
==============
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 5,000 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 $7,128.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds,
it may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
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 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.
<PAGE>
4
Insured Municipal Securities Trust, Series 13
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ------------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 689.99
Interest Income $ 36.19
Expenses (1.27)
----------
Net Investment Income 34.92
Net Gain or Loss on Investments(1) (3.02)
----------
Total from Investment Operations 721.89
Less Distributions
to Certificateholders
Income 40.73
Principal 179.72
for Redemptions
Interest .10
Principal 4.97
----------
Total Distributions 225.52
-----------
Net Asset Value, End of Period** $ 496.37
===========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- --------
* Unless otherwise stated, based upon average units outstanding during the
year of 4,889 ([4,909 + 4,869]/2).
** Based upon actual units outstanding.
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 14
- -------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 14 ("Insured
Municipal 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, however, 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. 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, 1996 (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, 1996
82504.1
<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 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.) For
a list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds
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
1/5680th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
82504.1
<PAGE>
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: Bond Investor's Guaranty ("BIG"), 51.3%; Municipal Bond Insurance
Association ("MBIA"), 37.1%; and MBIA Corp., 11.6%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of each
Unit is equal to the aggregate bid price of the Bonds in the Trust divided by
the number of Units outstanding, plus a sales charge of 5.05% of the Public
Offering Price, or 5.318% 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 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 $336.49 plus accrued interest of $5.82 under the monthly distribution
plan, $7.41 under the semi-annual distribution plan and $21.18 under the annual
distribution plan, for a total of $342.31, $343.90 and $357.67, 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-3
82504.1
<PAGE>
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
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor upon
request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will be
made by the Trust either monthly, semi-annually or annually depending upon the
plan of distribution applicable to the Unit purchased. A purchaser of a Unit in
the secondary market will initially receive distributions in accordance with
the distribution plan chosen by the prior owner of such Unit and may thereafter
change the plan as provided under "Interest and Principal Distributions" in
Part B of the 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.")
A-4
82504.1
<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 5.318% of the
Public Offering Price (5.05% 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
82504.1
<PAGE>
<TABLE>
<CAPTION>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 14
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1996
<S> <C> <C>
Date of Deposit*: December 22, 1988 Weighted Average Life to
- --------------- ------------------------
Principal Amount of Bonds . $2,145,000 Maturity: 18.9 Years.
- ------------------------- --------
Number of Units ........... 5,680 Minimum Value of Trust:
- --------------- ----------------------
Fractional Undivided Inter- Trust may be terminated if
- --------------------------
est in Trust per Unit ... 1/5680 value of Trust is less than
---------------------
Principal Amount of $2,400,000 in principal amount
- -------------------
Bonds per Unit .......... $377.64 of Bonds.
--------------
Secondary Market Public Mandatory Termination Date:
- ----------------------- --------------------------
Offering Price** The earlier of December 31,
Aggregate Bid Price 2037 or the disposition of the
of Bonds in Trust ..... $1,819,318.42+++ last Bond in the Trust.
Divided by 5,680 Units . $320.30 Trustee***: The Chase Manhattan
-------
Plus Sales Charge of 5.05% Bank.
of Public Offering Price $16.19 Trustee's Annual Fee: Monthly
Public Offering Price plan $.97 per $1,000; semi-
per Unit .............. $336.49+ annual plan $.51 per $1,000;
Redemption and Sponsor's and annual plan is $.33 per
- ------------------------
Repurchase Price $1,000.
per Unit ............... $320.30+ Evaluator: Kenny S&P Evaluation
-------- ---------
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15
- -------------------------- ----------
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 ......... $16.19++++ 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) $(41.15) $.25 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.
</TABLE>
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $19.89 $19.89 $19.89
Less estimated annual fees and
expenses ............................ .99 .72 .67
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $18.90 $19.17 $19.22
Estimated interest distribution# ...... 1.58 9.59 19.22
Estimated daily interest accrual# ..... .0525 .0533 .0534
Estimated current return#++ ........... 5.62% 5.69% 5.71%
Estimated long term return++ .......... 5.15% 5.23% 5.25%
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
</TABLE>
A-6
82504.1
<PAGE>
Footnotes to Summary of Essential Information
* 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, 1996 are reported in the
summary of essential information as if they had been distributed as of
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment
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 three business days after purchase) of $5.82 monthly,
$7.41 semi-annually and $21.18 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
82504.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 6 issues representing obligations
of issuers located in 5 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.
Approximately 13.8% of the Bonds are obligations of state and local housing
authorities; approximately 11.7% are hospital revenue bonds; approximately 14%
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 are general obligation bonds. Six
issues representing $2,145,000 of the principal amount of the Bonds are payable
from the income of a specific project or authority and are not supported by the
issuer's power to levy taxes. The portfolio is divided for purpose of issue as
follows: Coal Power 1, Federally Assisted Housing 1, Hospital 1, Nuclear Power
1, Waste Water 1, and Water and Sewer 1. For an explanation of the significance
of these factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of June 30, 1996, $1,845,000 (approximately 86% of the aggregate
principal amount of the Bonds) were original issue discount bonds. Of these
original issue discount bonds, $295,000 (approximately 13.8% of the aggregate
principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon Bonds do not
provide for the payment of any current interest and provide for payment at
maturity at par value unless sooner sold or redeemed. The market value of Zero
Coupon Bonds is subject to greater fluctuations than coupon bonds in response
to changes in interest rates. None of the aggregate principal amount of the
Bonds in the Trust were purchased at a "market" discount from par value at
maturity, approximately 14% 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.
A-8
82504.1
<PAGE>
<TABLE>
<CAPTION>
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)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1994 6,000 $729.98 $57.12 $58.34 $68.42 $202.00
June 30, 1995 5,755 657.31 50.18 50.70 54.76 65.89
June 30, 1996 5,697 352.97 38.78 39.15 49.65 290.71
</TABLE>
- --------
* 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
82504.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 14
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities
Trust, Series 14 (the "Trust") at June 30, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at June 30, 1996 by correspondence with the Trustee, provides a
reasonable basis for the opinion expressed above. The financial statements for
the prior periods presented were audited by other independent accountants,
whose report dated September 15, 1995, except as to Note 7 as to which the
date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 16, 1996
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 14
Portfolio of Investments June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 250,000 Village of Evergreen AAA 6.000% No Sinking Fund $ 250,325
Park Cook Cnty. Ill. 02/15/2012 02/15/98 @ 100 Ref.
Hosp. Fac. Rev. Rfndg.
Bonds (Little Co. of Mary
Hosp. Inc.) Series 1988
(MBIA Corp.)
2 500,000 Northwest Suburban AAA 5.750 No Sinking Fund 496,875
Muni. Joint Action Wtr. 05/01/2012 None
Agncy (Cook, DuPage &
Kane Cntys. Ill) Wtr.
Supl. Sys. Rev. Bonds
Series 1986 (MBIA)
3 300,000 N.J. Wasterwtr. AAA 9.000 No Sinking Fund 324,225
Treatment Trust Insrd. 09/01/2006 09/01/97 @ 102 Ref.
Loan Rev. Bonds Series
1987 (BIG)
4 300,000 N.C. Eastern Muni. Pwr. AAA 4.500 No Sinking Fund 248,052
Agency Pwr. Sys. Rev. 01/01/2024 01/01/22 @ 100 S.F.
Rfndg. Bonds Series
1987 A (BIG)
5 500,000 Intermountain Pwr. AAA 5.750 07/01/19 @ 100 S.F. 486,060
Agncy. Utah Spec. Oblig. 07/01/2020 07/01/96 @ 100 Ref.
Bonds 1986 Series C
(BIG)
6 295,000 Santa Clara Calif. Hsg. AAA 0.000 04/01/07 @ 13.074 S.F. 13,732
Auth. Multi-Fam Hsg. 04/01/2026 10/01/03 @ 8.987 Ref.
Rev. Bonds Series
1984A (FHA Insrd. Mtg.
Loan-Cedar Glen Aptmts.
Prjt.)(MBIA)
------------ -----------
$ 2,145,000 Total Investments (Cost (3) $1,549,638) $ 1,819,269
============ ===========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 14
Footnotes to Portfolio - June 30, 1996
- -----------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meanings is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
(2) See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
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, 1996, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross Unrealized Appreciation $ 279,169
Gross Unrealized Depreciation (9,538)
------------
Net Unrealized Appreciation $ 269,631
============
(4) 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).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 14
Statement of Net Assets
June 30, 1996
- -------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $1,549,638) $ 1,819,269
------------
Other Assets
Accrued Interest 40,193
Cash 151,730
------------
Total Other Assets 191,923
------------
Other Liabilities
Accrued Expenses 327
------------
Total Other Liabilities 327
------------
Excess of Other Assets
Over Other Liabilities 191,596
------------
Net Assets (5,697 Units of Fractional Undivided
Interest Outstanding, $352.97 per Unit) $ 2,010,865
============
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 14
Statement of Operations
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 178,797 $ 307,176 $ 349,062
--------- ---------- ---------
Expenses
Trustee's Fees 4,642 5,406 5,406
Evaluator's Fees 1,031 1,031 1,123
Sponsor's Advisory Fee 1,024 1,124 1,499
--------- ---------- ---------
Total Expenses 6,697 7,561 8,028
--------- ---------- ---------
Net Investment Income 172,100 299,615 341,034
--------- ---------- ---------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (203,383) (87,748) (258,390)
Change Unrealized Appreciation
(Depreciation) for Investments 184,491 49,722 (72,200)
--------- ---------- ---------
Net Gain (Loss) on Investments (18,892) (38,026) (330,590)
Net Increase in Net Assets
Resulting from Operations $ 153,208 $ 261,589 $ 10,444
========= ========== =========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
<TABLE>
Insured Municipal Securities Trust, Series 14
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 172,100 $ 299,615 $ 341,034
Realized Gain (Loss) on
Investments (203,383) (87,748) (258,390)
Changes in Unrealized Appreciation
(Depreciation) on Investments 184,491 49,722 (72,200)
----------- ------------ -------------
Net Increase in Net
Assets Resulting
from Operations 153,208 261,589 10,444
----------- ------------ -------------
Distributions to Certificateholders
Investment Income 225,226 301,860 349,464
Principal 1,669,129 394,022 1,212,000
Redemptions
Interest 799 4,112 -
Principal 29,982 158,684 -
----------- ------------ -------------
Total Distributions
and Redemptions 1,925,136 858,678 1,561,464
Total (Decrease) (1,771,928) (597,089) (1,551,020)
Net Assets
Beginning of Year 3,782,793 4,379,882 5,930,902
----------- ------------ -------------
End of Year (Includes
Undistributed Net Investment
Income of $52,745, $106,670
and $113,027, Respectively) $ 2,010,865 $ 3,782,793 $ 4,379,882
=========== ========== ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 14
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 14 (the "Trust") was
organized on December 1, 1988 by Bear, Stearns & Co., Inc. 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. The Trust was
formed to preserve capital and to provide interest income.
Effective September 2, 1995, United States Trust Company of New York
was merged into The Chase Manhattan Bank (the "Trustee").
Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial
statements in accordance with GAAP requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ
from those estimates.
Interest Income
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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc.,
a subsidiary of The McGraw-Hill Companies, Inc. The market value of
the investments is based upon the bid prices for the bonds at the end
of the period, which approximates the fair value of the securities at
that date, 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 differences 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
No provision for federal income taxes has been made in the
accompanying financial statements because the Trust intends to
continue to qualify for the tax treatment applicable to Grantor
Trusts under the Internal Revenue Code. Under existing law, if the
Trust so qualifies, it will not be subject to federal income tax on
net income and capital gains that are distributed to unitholders.
<PAGE>
2
Insured Municipal Securities Trust, Series 14
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ------------------------------------------------------------------------------
4. Trust Administration
The Trustee has custody of assets 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 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.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1996 and 1995, 75 and 245
units were redeemed, respectively. No units were redeemed in the year
ended June 30, 1994.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.33 to $.97 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $15.00 is paid to
a service bureau for each portfolio valuation. A maximum fee of $.25
per $1,000 of outstanding investment principal is paid to the
Sponsor. For the year ended June 30, 1996, the "Trustee's Fees" are
comprised of Trustee fees of $2,545, and other expenses of $2,097.
The other expenses include professional, printing and miscellaneous
fees.
<PAGE>
3
Insured Municipal Securities Trust, Series 14
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- ------------------------------------------------------------------------------
5. Net Assets
At June 30, 1996, the net assets of the Trust represented the
interests of Certificateholders as follows:
Original Cost to Certificateholders $ 6,141,542
Less Initial Gross Underwriting Commission (300,936)
-----------
5,840,606
Accumulated Cost of Securities Sold,
Matured or Called (4,299,335)
Net Unrealized Appreciation 269,631
Undistributed Net Investment Income 52,745
Distributions in Excess of Proceeds
from Investments 147,218
-----------
Total $ 2,010,865
===========
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 6,000 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 $8,366.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds,
it may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
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 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.
<PAGE>
4
Insured Municipal Securities Trust, Series 14
Notes to Financial Statements
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
8. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
June 30, 1996:
Net Asset Value, Beginning of Period** $ 657.31
Interest Income $ 31.23
Expenses (1.17)
-----------
Net Investment Income 30.06
Net Gain or Loss on Investments(1) 1.81
-----------
689.18
Total from Investment Operations
Less Distributions
to Certificateholders
Income 39.33
Principal 291.50
for Redemptions
Interest .14
Principal 5.24
-----------
Total Distributions 336.21
-----------
Net Asset Value, End of Period** $ 352.97
===========
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years
ended June 30, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1995 and the dates of net gain and loss on
investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 5,726 ([5,755 + 5,697]/2).
** Based upon actual units outstanding.
<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, 1996
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. (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 business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, as Evaluator and depending on the
particular Trust, either The Bank of New York or The Chase Manhattan Bank, 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 any Units
are redeemed by the Trustee, the fractional undivided interest or
- --------
* 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 Pennsylvania Navigator Insured Trust and/or
Insured Municipal Securities New Jersey Navigator Insured Trust as
reflected in Part A
attached hereto.
** References in this Prospectus to the Trust Agreement are qualified in
their entirety by the Trust Indenture and Agreement which is
incorporated herein.
C/M: 11939.0001 112677.4
<PAGE>
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
Underwriters, or until the termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit
investment trusts formed by the Sponsor, offers investors the opportunity to
participate in a portfolio of long-term insured tax-exempt bonds with a greater
diversification than they might be able to acquire themselves. The objectives
of the Trust are to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which, in the opinions of
bond counsel given at the time of original delivery of the Bonds, is exempt
from regular federal income tax under existing law 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 Ratings Services, a division of The McGraw-Hill Companies ("Standard &
Poor's") 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."
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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, (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 or Moody's Investors Service, Inc.
("Moody's"), 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 third-party payors and government programs such as
Medicare and Medicaid. Both private third-party payors and government programs
have undertaken cost containment measures designed to limit payments.
Furthermore, government programs are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings and government
funding restrictions, all of which may materially decrease the rate of program
payments for health care facilities. There can be no assurance that payments
under governmental programs will remain at levels comparable to present levels
or will, in the future, be sufficient to cover the costs allocable to patients
participating in such programs. In addition, there can be no assurance that a
particular hospital or other health care facility will continue to meet the
requirements for participation in such programs.
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The health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could result
in (i) an early redemption of bonds, (ii) alteration of the facilities financed
by the Bonds or which secure the Bonds, (iii) a change in the tax exempt status
of the Bonds or (iv) an inability to produce revenues sufficient to make timely
payment of debt service on the Bonds. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse change in these areas may affect the
ability of such issuers to make payment of principal and interest on such
bonds. See "Description of Portfolio" in Part A for the amount of hospital
revenue bonds contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been
issued in connection with the financing of nuclear generating facilities. In
view of recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsor is unable to
predict whether any such actions or whether any such proposals or litigation,
if enacted or instituted, will have an adverse impact on the revenues available
to pay the debt service on the Bonds in the portfolio issued to finance such
nuclear projects. See "Description of Portfolio" in Part A for the amount of
bonds issued to finance nuclear generating facilities contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage
subsidy bonds" which are obligations of which all or a significant portion of
the proceeds are to be used directly or indirectly for mortgages on
owner-occupied residences. Section 103A of the Internal Revenue Code of 1954,
as amended, provided as a general rule that interest on "mortgage subsidy
bonds" will not be exempt from Federal income tax. An exception is provided for
certain "qualified mortgage bonds." Qualified mortgage bonds are bonds that are
used to finance owner-occupied residences and that meet numerous statutory
requirements. These requirements include certain residency, ownership, purchase
price and target area requirements, ceiling amounts for state and local
issuers, arbitrage restrictions and (for bonds issued after December 31, 1984)
certain information reporting, certification, public hearing and policy
statement requirements. In the opinions of bond counsel to the issuing
governmental authorities, interest on all the Bonds in a Trust that might be
deemed "mortgage subsidy bonds" will be exempt from Federal income tax when
issued. See "Description of Portfolio" in Part A for the amount of mortgage
subsidy Bonds contained therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage
revenue bonds." Under the Internal Revenue Code of 1986, as amended (the
"Code") (and under similar provisions of the prior tax law) "mortgage revenue
bonds" are obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting certification, and public hearing requirements. There can
be no assurance that additional federal legislation will not be introduced or
that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the 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.
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Private Activity Bonds. The portfolio of the Trust may
contain other Bonds which are "private activity bonds" (often called Industrial
Revenue Bonds ("IRBs") if issued prior to 1987) which would be primarily of two
types: (1) Bonds for a publicly owned facility which a private entity may have
a right to use or manage to some degree, such as an airport, seaport facility
or water system and (2) facilities deemed owned or beneficially owned by a
private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first type,
receipts or revenues of the issuer are derived from the project or the operator
or from the unexpended proceeds of the bonds. Such revenues include user fees,
service charges, rental and lease payments, and mortgage and other loan
payments.
The second type of issue will generally finance projects
which are owned by or for the benefit of, and are operated by, corporate
entities. Ordinarily, such private activity bonds are not general obligations
of governmental entities and are not backed by the taxing power of such
entities, and are solely dependent upon the creditworthiness of the corporate
user of the project or corporate guarantor.
The private activity bonds in the Trust have generally been
issued under bond resolutions, agreements or trust indentures pursuant to which
the revenues and receipts payable under the issuer's arrangements with the
users or the corporate operator of a particular project have been assigned and
pledged to the holders of the private activity bonds. In certain cases a
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition,
private activity bonds are frequently directly guaranteed by the corporate
operator of the project or by another affiliated company. See "Description of
Portfolio" in Part A for the amount of private activity bonds contained
therein.
Litigation. Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In addition,
legislation to effect changes in public school financing has been introduced in
a number of states. The Sponsor is unable to predict the outcome of the pending
litigation and legislation in this area and what effect, if any, resulting
changes in the sources of funds, including proceeds from property taxes applied
to the support of public schools, may have on the school bonds in a Trust.
To the Sponsor's knowledge, there 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
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obligations at par from unused proceeds of the issue within a stated period. In
recent periods of declining interest rates there have been increased
redemptions of bonds, particularly housing bonds, pursuant to such redemption
provisions. In addition, the Bonds in the Trusts are also subject to mandatory
redemption in whole or in part at par at any time that voluntary or involuntary
prepayments of principal on the underlying collateral are made to the trustee
for such bonds or that the collateral is sold by the bond issuer. Prepayments
of principal tend to be greater in periods of declining interest rates; it is
possible that such prepayments could be sufficient to cause a bond to be
redeemed substantially prior to its stated maturity date, earliest call date or
sinking fund redemption date.
The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as destruction,
condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the 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
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States. During fiscal year 1995, approximately 89% of Puerto Rico's exports
were to the United States mainland, which was also the source of 65% of Puerto
Rico's imports. In fiscal 1995, Puerto Rico experienced a $4.6 billion positive
adjusted 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, wholesale and retail trade, and hotel and related
services, 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 recent years, the service sector has
experienced significant growth in response to and paralleling the expansion of
the manufacturing sector. Since fiscal 1985, personal income, both aggregate
and per capita, has increased consistently in each fiscal year. In fiscal 1995,
aggregate personal income was $27.0 billion ($22.5 billion in 1987 prices) and
personal income per capita was $7,296 ($6,074 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 many types in
addition to federal transfer payments, are lower on a per capita basis in
Puerto Rico than in any state. Transfer payments to individuals in fiscal 1995
were $5.9 billion, of which $4.0 billion, or 67.6%, represent entitlement 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 1995 averaged 1,051,000, an
increase of 4.0% over fiscal 1994. The unemployment rate in Puerto Rico for
fiscal 1995 decreased from 16.0% to 13.8%. The Puerto Rico Planning Board's
most recent gross product forecast for fiscal 1996, made in February 1995,
showed an increase of 2.7%. The 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 1.7% over the same period of fiscal 1993. During
the first four months of fiscal 1996 the Index increased 1.8% compared to the
same period of fiscal 1995, which period showed an increase of 2.7% over the
same period of fiscal 1994. 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, the level of federal transfers 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
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coupon bonds issued at a similar interest rate, although certain zero coupon
housing bonds may be subject to mandatory call provisions.
Some of the Bonds in the Trust may have been purchased at a
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in each Trust were lower than the current market interest rates for
newly issued bonds of comparable rating and type. At the time of issuance the
discount bonds were for the most part issued at then current coupon interest
rates. The current 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
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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
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
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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 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 corporation,
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in 50 states, the District of Columbia,
the Territory of Guam and the Commonwealth of Puerto Rico, with admitted assets
(unaudited) of approximately $2,505,000,000, and statutory capital (unaudited)
of approximately $1,384,000,000 as of June 30, 1996. Statutory capital consists
of AMBAC's policyholders' surplus and statutory contingency reserve. AMBAC is a
wholly owned subsidiary of AMBAC Inc., a 100% publicly-held company. Standard &
Poor's, Moody's and Fitch Investors Service, L.P. ("Fitch") have each assigned
a triple-A claims paying ability rating to AMBAC.
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.
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.
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As of June 30, 1996, the total policyholders' surplus of
Connie Lee was $112,734,947 (unaudited) and total admitted assets were
$219,098,333 (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, 1996,
the total capital and surplus of Financial Guaranty was approximately
$1,069,597,000. 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
CNA, a group of life, 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 June 30, 1996,
Firemen's statutory surplus (audited) was $405,434,074.
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 in 1984 under the laws of the State of New York and is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial
Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed
company. Major shareholders of Holdings include Fund American Enterprises
Holdings, Inc., US WEST Capital Corporation and The Tokio Marine and Fire
Insurance Co., Ltd. No shareholder of Holdings is obligated to pay any debt of
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.
Pursuant to an intercompany agreement, liabilities on
financial guaranty insurance written or reinsured from third parties by
Financial Security or any of its domestic operating insurance company
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, 1996, total shareholders equity of Financial Security and its
wholly-owned subsidiaries was (unaudited) $785,072,000 and total unearned
premium reserves was (unaudited) $351,180,000.
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As of the Evaluation Date, Financial Security's claims-paying
ability has been rated "AAA" by Standard & Poor's.
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 ICC (collectively, 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
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 insurance.
The company's address is 255 California Street, San Francisco, California
94111. For the six months ending June 30, 1996, the policy holders' surplus of
ICC was $275,983,684. For the year ended December 31, 1995, total
policyholders' surplus of IIC was $298,612,826.
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.
Some of the members of the Association are among the
shareholders of MBIA, Inc. MBIA, Inc. is the parent of MBIA Insurance
Corporation (formerly known as Municipal Bond Investors Assurance Corporation)
("MBIA Corp.") and is the principal operating subsidiary of MBIA Inc., a New
York Stock Exchange listed company. MBIA Corp. commenced municipal bond
insurance
- --------
* Now known as Cigna Property and Casualty Company.
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operations on January 5, 1987. MBIA Corp. is a separate and distinct entity
from the Association. MBIA Corp. has no liability to the bondholders for the
obligations of the Association.
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.
<TABLE>
<CAPTION>
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
<S> <C> <C> <C>
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
</TABLE>
MBIA Corp. is domiciled in the State of New York and licensed
to do business in and subject to regulation under the laws of all 50 states,
the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of
the Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. MBIA Corp. has two European branches, one in the Republic of
France and the other in the Kingdom of Spain.
As of June 30, 1996, MBIA Corp. had admitted assets of $4.2
billion (unaudited), total liabilities of $2.8 billion (unaudited), and total
capital and surplus of $1.4 billion (unaudited) prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1995, MBIA Corp. had admitted assets of $3.8
billion (audited), total liabilities of $2.5 billion (audited), and total
capital and surplus of $1.3 billion (audited).
As of the Evaluation Date, the claims-paying ability of MBIA
Corp. has been rated "AAA" by Standard & Poor's and Fitch, and Aaa by Moody'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-fourth largest property/casualty
insurer in the United States, based on net premiums written for the year ended
December 31, 1995. USF&G Company markets commercial and personal insurance
products, concentrating on targeted market segments, through a distribution
network of approximately 3,600 independent agents. USF&G Corporation's life
insurance subsidiary, F&G Life, markets life insurance and annuity products
through a
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network of wholesalers, brokers and specialty marketing organizations. USF&G
Company accounted for $2.5 billion (or 94%) of USF&G Corporation's
approximately $2.7 billion total premiums earned for the year ended December
31, 1995. As of the Evaluation Date, the claims-paying ability of USF&G Company
has been rated A by Standard & Poor's (see "Ratings" under "Insurance on the
Bonds" in this Part B).
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
Special Factors Affecting New York
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 New York State and New York City municipal
bonds. The Sponsors have not independently verified this information.
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.
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. 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
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 printing.
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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. 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. After noticeable improvements in the City's
economy during calendar year 1994, economic growth slowed in calendar year
1995, and the City's current four-year financial plan assumes that moderate
economic growth will continue through calendar year 2000.
For each of the 1981 through 1995 fiscal years, the City
achieved balanced operating results as reported in accordance with generally
accepted accounting principles ("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-funded spending from one year
to the next. 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's current four-year financial plan projects substantial budget gaps
for each of the 1998 through 2000 fiscal years. The City is required to submit
its financial plans to review bodies, including the New York State Financial
Control Board ("Control Board").
The fourth quarter modification to the City's financial plan
for the 1996 fiscal year, submitted to the Control Board on June 21, 1996 (the
"1996 Modification"), projects a balanced budget in accordance with GAAP for
the 1996 fiscal year, after taking into account a discretionary transfer of
$243 million. The 1996 Modification assumes $119 million of savings from a
proposed increase in the investment earnings assumptions for pension assets,
$39 million of which, relating to the police pension fund, the City currently
does not expect to be achieved. The Financial Plan for the 1997 through 2000
fiscal years, submitted to the Control Board on June 21, 1996, which relates to
the City, the Board of Education ("BOE") and the City University of New York
("CUNY"), is based on the City's expense and capital budgets for the City's
1997 fiscal year, which were adopted on June 12, 1996, and includes proposed
actions by the City for the 1997 fiscal year to close substantial projected
budget gaps resulting from lower than projected tax receipts and other revenues
and greater than projected expenditures.
Although the City has maintained balanced budgets in each of
its last fifteen fiscal years, and is projected to achieve balanced operating
results for the 1996 fiscal year, there can be no assurance that the gap-
closing actions proposed in the Financial Plan can be successfully implemented
or that the City will maintain a balanced budget in future years without
additional State aid, revenue increases or expenditure reductions. Additional
tax increases and reductions in essential City services could adversely affect
the City's economic base.
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.
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In addition, the Federal Budget negotiation process could result in a reduction
in or a delay in the receipt of Federal grants in the City's 1997 fiscal year
which could have additional adverse effects on the City's cash flow or
revenues.
The Mayor is responsible for preparing the City's four-year
financial plan, including the City's current financial plan for the 1997
through 2000 fiscal years (the "1997-2000 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 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, the ability of the New York City Health and
Hospitals Corporation ("HHC") and BOE to take actions to offset reduced
revenues, the ability to complete revenue generating transactions and provision
of State and Federal aid and mandate relief and the impact on City revenues of
proposals for Federal and State welfare reform.
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 1997 through 2000
contemplates the issuance of $5.7 billion of general obligation bonds and $4.5
billion of bonds to be issued by the proposed New York City Infrastructure
Finance Authority ("Infrastructure Finance Authority") primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make
other capital investments. The creation of Infrastructure Finance Authority,
which is subject to the enactment of State legislation, is being proposed by
the City as part of the City's effort to avoid conflict with the forecast level
of the constitutional restrictions on the amount of debt the City is authorized
to issue. In addition, the City issues revenue and tax anticipation notes to
finance its seasonal working capital requirements. The success of projected
public sales of City bonds and notes and Infrastructure Finance Authority bonds
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 or bonds of the proposed Infrastructure Finance
Authority, it would be prevented from meeting its planned capital and operating
expenditures. Future developments concerning the City and public discussion of
such developments, as well as prevailing market conditions, may affect the
market for outstanding City general obligation bonds and notes.
The 1997-2000 Financial Plan projects revenues and
expenditures for the 1997 fiscal year balanced in accordance with GAAP. The
projections for the 1997 fiscal year reflect proposed actions to close a
previously projected gap of approximately $2.6 billion for the 1997 fiscal
year. The proposed actions for the 1997 fiscal year include (i) additional
agency actions totaling $1.2 billion; (ii) a revised tax reduction program
which would increase projected tax revenues by $385 million due to the
four-year extension of the 12.5% personal income tax surcharge and other
actions; (iii) savings resulting from cost containment in entitlement programs
to reduce City expenditures and additional proposed State aid of $75 million;
(iv) the assumed receipt of revenues relating to rent payments for the City's
airports totaling $269 million, which are currently the subject of a dispute
with the Port Authority; (v) the sale of the City's television station for
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$207 million; and (vi) pension cost savings totaling $134 million resulting
from a proposed increase in the earnings assumption for pension assets from
8.5% to 8.75%, $40 million of which the City currently does not expect to be
achieved.
The Financial Plan also sets forth projections for the 1998
through 2000 fiscal years and projects gaps of $1.7 billion, $2.7 billion and
$3.4 billion for the 1998, 1999 and 2000 fiscal years, respectively.
The 1997-2000 Financial Plan is based on numerous assumptions,
including the condition of the City's and the region's economy and a modest
employment recovery and the concomitant receipt of economically sensitive tax
revenues in the amounts projected. The 1997-2000 Financial Plan is subject to
various other uncertainties and contingencies relating to, among other factors,
the extent, if any, to which wage increases for City employees exceed the
annual wage costs assumed for the 1997 through 2000 fiscal years; continuation
of projected interest earnings assumptions for pension fund assets and current
assumptions with respect to wages for City employees affecting the City's
required pension fund contributions; the willingness and ability of the State,
in the context of the State's current financial condition, to provide the aid
contemplated by the Financial Plan and to take various other actions to assist
the City; the ability of HHC, BOE and other such agencies to maintain balanced
budgets; the willingness of the Federal government to provide the amount of
Federal aid contemplated in the Financial Plan; adoption of the City's budgets
by the City Council in substantially the forms submitted by the Mayor; the
ability of the City to implement proposed reductions in City personnel and
other cost reduction initiatives, and the success with which the City controls
expenditures; the impact of conditions in the real estate market on real estate
tax revenues; the City's ability to market its securities successfully in the
public credit markets; and unanticipated expenditures that may be incurred as a
result of the need to maintain the City's infrastructure. Certain of these
assumptions have been questioned by the City Comptroller and other public
officials.
The projections for the 1997 through 2000 fiscal years also
assume (i) approval by the Governor and the State Legislature of the extension
of the 12.5% personal income tax surcharge, which is projected to provide
revenue of $171 million, $447 million, $478 million and $507 million in the
1997 through 2000 fiscal years, respectively; (ii) collection of the projected
rent payments for the City's airports, which may depend on the successful
completion of negotiations with the Port Authority or the enforcement of the
City's rights under the existing leases thereto through pending legal actions;
(iii) the ability of HHC and BOE to identify actions to offset substantial City
and State revenue reductions and the receipt by BOE of additional State aid;
and (iv) State approval of the cost containment initiatives and State aid
proposed by the City. The Financial Plan does not reflect any increased costs
which the City might incur as a result of welfare legislation recently enacted
by Congress.
In connection with the Financial Plan, the City has outlined a
gap-closing program for the 1998 through 2000 fiscal years to substantially
reduce the remaining $1.7 billion, $2.7 billion and $3.4 billion projected
budget gaps for such fiscal years. This program, which is not specified in
detail, assumes additional agency programs to reduce expenditures or increase
revenues by $674 million, $959 million and $1.1 billion in the 1998 through
2000 fiscal years, respectively; additional reductions in entitlement cost of
$400 million, $750 million and $1.0 billion in the 1998 through 2000 fiscal
years, respectively; additional savings of $250 million, $300 million and $500
million in the 1998 through 2000 fiscal years, respectively, resulting from
restructuring City government by consolidating operations, privatization and
mandate management and other initiatives; additional proposed Federal and State
aid of $105 million, $200 million and $300 million in the 1998 through
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2000 fiscal years, respectively; additional revenue initiatives and asset sales
of $155 million, $350 million and $400 million in the 1998 through 2000 fiscal
years, respectively; and the availability in each of the 1998 through 2000
fiscal years of $100 million of the General Reserve.
The City's projected budget gaps for the 1999 and 2000 fiscal
years do not reflect the savings expected to result from prior years' programs
to close the gaps set forth in the Financial Plan. Thus, for example, recurring
savings anticipated from the actions which the City proposes to take to balance
the fiscal year 1998 budget are not taken into account in projecting the budget
gaps for the 1999 and 2000 fiscal years.
The City's financial plans have been the subject of extensive
public comment and criticism. On July 16, 1996, the staff of the City
Comptroller issued a report on the Financial Plan. The report concluded that
the City's fiscal situation remains serious, and that the City faces budgetary
risks of approximately $787 million to $941 million for the 1997 fiscal year,
which increase to $4.16 billion to $4.31 billion for fiscal year 2000.
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.
On March 1, 1996, Moody's stated that the rating for City
general obligation bonds remains under review pending the outcome of the
adoption of the City's budget for the 1997 fiscal year, and, in light of the
status of the debate on public assistance and Medicaid reform; the enactment of
a State budget, upon which major assumptions regarding State aid are dependent,
which may be extensively delayed; and the seasoning of the City's economy with
regard to its strength and direction in the face of a potential national
economic slowdown. Since July 15, 1993, Fitch Investors Service, L.P. ("Fitch")
has rated City bonds A-. On February 28, 1996, Fitch placed the City's general
obligation bonds on FitchAlert with negative implications.
New York State and its Authorities. The State's current fiscal
year commenced on April 1, 1996, and ends on March 31, 1997, and is referred to
herein as the State's 1996-97 fiscal year. The State's budget for the 1996-97
fiscal year was enacted by the Legislature on July 13, 1996, more than three
months after the start of the fiscal year. The State Financial Plan for the
1996-97 fiscal year was formulated on July 25, 1996 and is based on the State's
budget as enacted by the Legislature and signed into law by the Governor, as
well as actual results for the first quarter of the current fiscal year. The
State's prior fiscal year commenced on April 1, 1995, and ended on March 31,
1996, and is referred to herein as the State's 1995-96 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. 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 closed projected budget gaps of $5.0 billion and
$3.9 billion for its 1995-96 and 1996-97 fiscal years, respectively. The
1997-98 gap was projected at $1.44 billion, based on the Governor's proposed
budget of
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December 1995. As a result of changes made in the enacted budget, that gap is
now expected to be larger. However, the gap is not expected to be as large as
those faced in the prior two fiscal years. The Governor has indicated that he
will propose to close any potential imbalance primarily through General Fund
expenditure reductions and without increases in taxes or deferrals of scheduled
tax reductions.
The 1996-97 State Financial Plan is projected to be balanced
on a cash basis. As compared to the Governor's proposed budget as revised on
March 20, 1996, the State's adopted budget for 1996-97 increases General Fund
spending by $842 million, primarily from increases for education, special
education and higher education ($563 million). The balance represents funding
increases to a variety of other programs, including community projects and
increased assistance to fiscally distressed cities. Resources used to fund
these additional expenditures include $540 million in increased revenues
projected for 1996-97 based on higher-than-projected tax collections during the
first half of calendar 1996, $110 million in projected receipts from a new
State tax amnesty program, and other resources including certain non-recurring
resources. The total amount of non-recurring resources included in the 1996-97
State budget is projected by the State Division of the Budget ("DOB") to be
$1.3 billion, or 3.9 percent of total General Fund receipts.
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 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. Because of the uncertainty and
unpredictability of changes in these factors, their impact cannot be fully
included in the assumptions underlying the State's projections. There can be no
assurance that the State economy will not experience results that are worse
than predicted, with corresponding material and adverse effects on the State's
financial projections.
The 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.
The State Financial Plan is based on a June 1996 projection by
DOB of national and State economic activity. The national economy has resumed a
more robust rate of growth after a "soft landing" in 1995, with over 11 million
jobs added nationally since early 1992. The State economy has continued to
expand, but growth remains somewhat slower than in the nation. Although the
State has added approximately 240,000 jobs since late 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. Government downsizing has also moderated these job gains. DOB
forecasts that national economic growth will be quite strong in the first half
of calendar 1996, but will moderate considerably as the year progresses. The
overall growth rate of the national economy during calendar year 1996 is
expected to be just slightly below the "consensus" of a widely followed survey
of national economic forecasters. Growth in real Gross Domestic Product during
1996 is projected to be moderate at 2.1 percent, with anticipated declines in
federal spending and net exports more than offset by increases in consumption
and investment. Inflation, as measured by the Consumer Price Index, is
projected to be contained at about 3 percent due to moderate wage growth and
foreign competition. Personal income and wages are projected to increase by
about 5 percent.
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The forecast of the State's economy shows modest expansion
during the first half of calendar 1996, but some slowdown is projected during
the second half of the year. Although industries that export goods and services
are expected to continue to do well, growth is expected to be slowed by
government cutbacks at all levels and by tight fiscal constraints on health and
social services. On an average annual basis, employment growth in the State is
expected to be up slightly from the 1995 rate. Personal income is expected to
record moderate gains in 1996. Bonus payments in the securities industry are
expected to increase further from last year's record level.
The forecast for continued slow growth, and any resultant
impact on the State's 1996-97 Financial Plan, contains some uncertainties.
Stronger- than-expected gains in employment could lead to a significant
improvement in consumption spending. Investments could also remain robust.
Conversely, the prospect of a continuing deadlock on federal budget deficit
reduction or fears of excessively rapid economic growth could create upward
pressures on interest rates. In addition, the State economic forecast could
over- or underestimate the level of future bonus payments or inflation growth,
resulting in forecasted average wage growth that could differ significantly
from actual growth. Similarly, the State forecast could fail to correctly
account for expected declines in government and banking employment and the
direction of employment change that is likely to accompany telecommunications
deregulation.
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 1996-97 fiscal year, the General Fund is expected to
account for approximately 47 percent of total governmental-fund receipts and 71
percent of total governmental-fund 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 1996-97 fiscal year. Total receipts and transfers from other funds are
projected to be $33.17 billion, an increase of $365 million from the prior
fiscal year. Total General Fund disbursements and transfers to other funds are
projected to be $33.12 billion, an increase of $444 million from the total in
the prior fiscal year.
The State reported a General Fund operating surplus of $380
million for the 1995-96 fiscal year, as compared to an operating deficit of
$1.43 billion for the prior fiscal year. The 1995-96 fiscal year surplus
reflects several major factors, including the cash-basis surplus and the
benefit of $529 million in Local Government Assistance Corporation ("LGAC")
bond proceeds which were used to fund various local assistance programs. This
was offset in part by a $437 million increase in tax refund liability primarily
resulting from the effects of ongoing tax reductions and (to a lesser extent)
changes in accrual measurement policies, and increases in various other
expenditure accruals. Revenues increased $530 million (nearly 1.7 percent) over
the prior fiscal year with an increase in personal income taxes and
miscellaneous revenues offset by decreases in business and other taxes.
Expenditures decreased $716 million (2.2 percent) from the prior fiscal year
with the largest decrease occurring in State aid for social services programs
and State operations spending. Net other financing sources nearly tripled,
increasing $561 million, due primarily to an increase in bonds issued by LGAC,
a transfer from the Mass Transportation Operating Assistance Fund and transfers
from public benefit corporations.
On January 13, 1992, Standard & Poor's reduced its ratings on
the State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
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contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on October 3,
1995, confirmed its A- rating. On January 6, 1992, Moody's reduced its ratings
on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On October 2, 1995, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.
Litigation. The court actions in which the State is a
defendant generally involve State programs and miscellaneous tort, real
property, and contract claims. While the ultimate outcome and fiscal impact, if
any, on the State of those proceedings and claims are not currently
predictable, adverse determinations in certain of them might have a material
adverse effect upon the State's ability to maintain a balanced 1996-97 State
Financial Plan.
The claims involving the City other than routine litigation
incidental to the performance of their governmental and other functions and
certain other litigation arise out of alleged constitutional violations, torts,
breaches of contract and other violations of law and condemnation proceedings.
While the ultimate outcome and fiscal impact, if any, on the City of those
proceedings and claims are not currently predictable, adverse determinations in
certain of them might have a material adverse effect upon the City's ability to
carry out the 1997-2000 Financial Plan. The City has estimated that its
potential future liability on account of outstanding claims against it as of
June 30, 1995 amounted to approximately $2.5 billion.
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 ($26,967).
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.
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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 6.4% in February 1996, which is above the national average of 5.5% in
February 1996. 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.
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.
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
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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.
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, both Moody's Investors Service, Inc.,
and Standard & 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 Aa1. On July 3, 1991, however,
Standard & 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 &
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 & 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 & Poor's
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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 & 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 & 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.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New
Jersey general obligation bonds to "Aa1", 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 "Aa1" 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. Capital Construction expenditures for Fiscal Year 1995
represent 1.9% of the total Fiscal Year 1995 expenditures. In Fiscal Year 1995,
total Capital Construction expenditures were $289.8 million, a decrease of
$83.4 million from Fiscal Year 1994. This amount reflects a reduction of $136.4
million in capital projects and an increase of $53.0 million in expenditures to
the Transportation Trust Fund Authority.
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
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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.
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
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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.
"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.
<TABLE>
<CAPTION>
Appropriation for Appropriation for
Calendar Year Debt Service Property Tax
<S> <C> <C>
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
</TABLE>
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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.
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
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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 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
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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 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.
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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 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
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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 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.
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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
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
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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
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 58 major corporations. Pennsylvania
historically has been identified as a heavy industry state although that
reputation has changed over the last thirty years as the industrial composition
of the Commonwealth diversified when the coal, steel and railroad industries
began to decline. A more diversified economy was necessary as the traditionally
strong industries in the Commonwealth declined due to a long-term shift in
jobs, investment and workers away from the northeast part of the nation. The
major 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 $3.6 billion in
crop and livestock products annually, while agribusiness and food related
industries support $39 billion in economic activity annually.
Non-agricultural employment in Pennsylvania over the last ten
years increased at an annual rate of 1.02 percent. This rate compares to a 0.36
percent rate for the Middle Atlantic region and 1.78 percent for the U.S.
during the period 1990 through 1992. Non-agricultural employment declined by
94,000 jobs. By 1994 employment exceeded the pre-recession level. For the last
three years, employment in the Commonwealth has increased 3.4 percent. The
growth in employment experienced in Pennsylvania during this period is higher
than the 2.9 percent growth in the Middle Atlantic region. Non- manufacturing
employment has increased in recent years to its 1995 level of
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82.1 percent of total employment in Pennsylvania. Consequently, manufacturing
employment constitutes a diminished share of total employment within
Pennsylvania. Manufacturing, contributing 17.9 percent of 1995 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 1993 the
services sector accounted for 30.4 percent of all non-agricultural employment
while the trade sector accounted for 22.8 percent.
Pennsylvania's annual average unemployment rate was below the
national average from 1986 until 1990. 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 7.0 percent in 1993. As of
March 1996, the most recent month for which data is available, the seasonally
adjusted unemployment rate for the Commonwealth was 5.6 percent, the same rate
as that for the United States.
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
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. A gubernatorial veto can
be overridden only by a two-thirds majority of all members of each house. 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
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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). For
the five year period fiscal 1991 through fiscal 1995, total revenues and other
sources rose at a 9.1 percent average annual rate while total expenditures and
other uses grew by 7.4 percent annually. Over two-thirds of the increase in
total revenues and other sources during this period occurred during fiscal 1992
when a $2.7 billion tax increase was enacted to address a fiscal 1991 budget
deficit and to fund increased expenditures for fiscal 1992. For the four year
period fiscal 1992 through fiscal 1995, total revenues and other sources
increased at an annual average of 3.3 percent, less than one-half the rate of
increase for the five year period beginning with fiscal 1991. This slower rate
of growth was due, in part, to tax rate reductions and other tax law revisions
that restrained the growth of tax receipts for fiscal years 1993, 1994 and
1995.
Expenditures and other uses followed a pattern similar to
that for revenues, although with smaller growth rates, during the fiscal 1991
through fiscal 1995 period. Program areas having the largest increase in costs
for the fiscal 1991 to fiscal 1995 period were for protection of persons and
property, due to an expansion of state prisons, and for public health and
welfare, due to rising caseloads, program utilization and increased prices.
Recently, efforts to restrain the rapid expansion of public health and welfare
program costs have resulted in expenditure increases at or below the total rate
of increase for total expenditures in each fiscal year. For the period fiscal
1992 through fiscal 1995, public health and welfare costs increased by an
average annual rate of 3.5 percent, well below the 5.2 percent average for
total expenditures and other uses during the same period.
Fiscal 1994 Financial Results (GAAP Basis). The fund balance
increased $194.0 million over the prior year's fund balance due largely to an
increased reserve for encumbrances and an increase in other designated funds.
The unreserved-undesignated balance increased by $14.8 million to $79.2
million. Revenues and other sources increased by 1.8 percent over the prior
fiscal year while expenditures and other uses increased by 4.3 percent.
Consequently, the operating surplus declined to $179.4 million for fiscal 1994
from $686.3 million for fiscal 1993.
Budgetary Basis. Commonwealth revenues during the fiscal year
totaled $15,210.7 million, $38.6 million above 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
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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.
Fiscal 1995 Fiscal Results (GAAP Basis). Revenues and other
sources totaled $23,771.6 million, an increase of $1,135.0 million (0.5
percent) over the prior fiscal year. The largest increase was $817.9 million in
taxes which represents a 5.6 percent increase over taxes in the prior fiscal
year. Expenditures and other uses rose by $1,364.1 million to $23,821.4
million, an increase over the prior fiscal year of 6.1 percent. Consequently,
an operating deficit of $49.8 million was recorded for the fiscal year and led
to a decline in fund balance to $688.3 million at June 30, 1995. Two items
predominantly contributed to the fund balance decline. First, a more
comprehensive procedure was used for fiscal 1995 to compute the liabilities for
certain public welfare programs leading to an increase for the year-end
accruals. Second, a change to the methodology to calculate the year-end accrual
for corporate tax payables increased the tax refund liability by $72 million
for the 1995 fiscal year when compared to the previous fiscal year.
The fund balance for June 30, 1994, was restated for the
fiscal 1995 financial statements. That restatement totaled $116.7 million to
recognize previously unreported revenues and expenditures for fiscal 1994. The
fund balance for June 30, 1994, as restated, was $776.3 million.
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
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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.
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 unusually 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 prior 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 were authorized in legislation
recently enacted by the General Assembly. The Tax Stabilization Reserve Fund is
anticipated to have an available balance of $182.8 million at June 30, 1996,
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 $16,165.7 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, 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 1996 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. The U.S.
Department of Labor reported the national unemployment rate for 1995 to be 5.6
percent.
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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 bill. The amnesty program
was available to taxpayers from October 1995 through January 1996. Tax and
interest revenues received from the tax amnesty program after payment of
administration costs were credited to the appropriate fund. Receipts credited
to the General Fund 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.
Revised estimates for the fiscal 1996 budget were included in
the Governor's February 1996 submission of his fiscal 1997 budget proposal.
Supplemental appropriation funding needs were recommended totaling $54.2
million, representing 0.3 percent of approved appropriations for fiscal 1996.
The majority of the supplemental appropriations are for the Department of
Corrections to meet the additional operational costs arising from a larger
inmate population than budgeted, and for the Department of Education to meet
local school subsidy costs which were underestimated in the adopted budget. All
anticipated supplemental appropriation needs for the Department of Public
Welfare are expected to be met from a reallocation of appropriation authority
within the Department. Funding for the requested supplemental appropriations
will be provided by appropriation lapses anticipated during the fiscal year.
Appropriation lapses totaling $50 million from prior fiscal years'
appropriations and $90 million from current fiscal year appropriations are
expected. The $140 million total appropriation lapses estimated for fiscal 1996
compares to actual appropriation lapses totaling $205 million and $194 million
during fiscal 1995 and fiscal 1994 respectively. The General Assembly has not
yet approved the requested supplemental appropriations.
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Commonwealth revenues for fiscal 1996 are anticipated to be
$2.5 million (less than 0.1 percent) over the official estimate of revenues for
the fiscal year. Within the revised estimate, receipts from the corporate net
income tax and interest earnings are anticipated to exceed the official
estimate while receipts from the sales and use tax, the personal income tax and
the gross receipts tax are anticipated to fall below their official estimate
levels.
The fiscal year ending unappropriated surplus (prior to any
transfer to the Tax Stabilization Reserve Fund) is estimated to be $118.3
million, an increase of $105.6 million over the enacted budget estimate. The
increase is primarily due to the amount of appropriation lapses now anticipated
in excess of supplemental appropriation needs and to a lower estimate of tax
refunds.
For the current fiscal year through April 1996, Commonwealth
revenue receipts have totaled $11.9 million (less than one-tenth percent) above
the estimate for the period. Higher than estimated receipts for non-tax
revenues have helped offset revenue shortfalls in tax collections. Receipts
from both the corporate taxes and the sales and use tax are lagging behind
estimates for the fiscal year-to-date period, while receipts from the personal
income tax and non-tax revenue have exceeded their estimates to-date.
Fiscal 1997 Proposed Budget. In February 1996, the Governor
presented his proposed fiscal 1997 budget to the General Assembly. Proposed
appropriations from General Fund Commonwealth revenues totals $16,189.9
million, a reduction from the estimated $16,219.9 million (including proposed
supplemental appropriations) for fiscal 1996. The proposed reduction represents
a decline of approximately 0.2 percent in appropriations from the prior fiscal
year. Revenue receipts are estimated to increase by $403.9 million, or 2.5
percent, over anticipated receipts for fiscal 1996. The anticipated increased
revenues, together with the projected $140 million of appropriation lapses
during fiscal 1996 and the proposed draw-down of approximately $95 million of
surplus provide the funding sources for the proposed budget. The proposed
drawdown of the fiscal 1996 unappropriated surplus produces a projected 1997
fiscal year end surplus of under $5 million, without any consideration of
possible appropriation lapses for fiscal 1997.
The decline in appropriation authority over the prior fiscal
year in the proposed budget relies on several program changes. The largest
changes proposed are $329 million of cost containment efforts in public health
and welfare programs. The largest savings are generated by proposed changes in
eligibility criteria. Savings of $249 million are projected from the
elimination of medical assistance benefits for able-bodied adults without
children and $40 million from tightened standards of employability for those
collecting benefits. Other proposed changes, including changes contained in
proposed federal welfare reform measures, provide an additional $39 million of
budgetary savings. Program reductions are also planned for the residential
portion of the mental health/mental retardation program that could involve a
limited number of staff cuts at state institutions. The budget also relies on
certain provisions of proposed federal welfare reforms. In particular, an
increase in the proportion of federal funding for medical assistance is assumed
which is anticipated to provide $261.8 million of additional federal funds and
a commensurate reduction in required state funds. Other significant cost
restraints include reductions to appropriations for the state-aided colleges
and universities and no increases for the state-related colleges and
universities. Funds for basic education programs to local school districts are
proposed to increase slightly. The largest increase, $33.3 million, is proposed
for an initiative to improve the use of technology in learning. A restructuring
of the economic development programs and incentives of the Commonwealth are
also proposed to combine and improve the delivery of such programs. A proposed
securitization of current loans held by the Sunny Day
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Fund is budgeted to provide a portion of the initial capitalization for the
realigned programs. The current trend of escalating costs of the corrections
program continues in this budget. An amount of $80.3 million is included to
meet the increased costs of the rising prison population.
The proposed fiscal 1997 budget includes tax reductions
totaling $60.2 million. Included in the proposed reductions are a 0.25 mill
reduction to the tax rate for the capital stock and franchise taxes, an
exemption of certain computer services from the sales and use tax, and a $1,000
per job tax credit for newly created jobs. All require legislative enactment.
The General Assembly is considering the Governor's proposed
budget in committee deliberations and floor action on implementing legislation.
The various legislative bills required to implement the proposed budget have
begun to move through the legislative process. However, legislation enacting
medical assistance program changes estimated in the proposed budget to produce
approximately $249 million in savings was approved by the Senate but rejected
by the House of Representatives. Delay in the enactment of the proposed changes
beyond March 1996 will impede timely implementation of the proposed changes
and, in the absence of other budgetary measures, result in higher spending than
anticipated in the proposed fiscal 1997 budget. Appropriations committees of
the General Assembly are considering 1997 fiscal year budget appropriations,
and upon committee approval of appropriation bills, will be considered by each
house. The General Assembly may change, eliminate or add amounts and items to
the proposed budget submitted by the Governor and there can be no assurance
that the budget, as proposed by the Governor, will be enacted into law.
Disaster Declaration. A disaster emergency was declared by
the Governor and a federal major disaster declaration was made by the President
of the United States for certain counties in the Commonwealth for a blizzard
and subsequent flooding in January 1996. Substantial damage to public and
private facilities occurred and many municipalities' financial resources have
been strained by the costs of responding to these weather related conditions. A
special session of the General Assembly has been convened by the Governor to
consider legislation to respond to those needs. No provision for funding of any
legislation to be considered in this special session has been provided in the
fiscal 1996 budget estimate or in the proposed fiscal 1997 budget. While
legislation to be considered during this special session may only cover items
included in the Governor's proclamation, legislation to be considered may
include additional or increased taxes and fees, redirection of current revenues
to disaster relief programs, additional debt financing, and other financing
arrangements.
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
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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 by the transfer to the Tax Stabilization
Reserve Fund of 15 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 not specified to be
deposited elsewhere 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 December 31, 1995,
the balance in the Tax Stabilization Reserve Fund was $122.9 million and $57.0
million is in the General Fund pending transfer to the Tax Stabilization
Reserve Fund in fiscal 1996.
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.
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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. From
1987 through 1994, 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 a 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 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 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 December 31, 1995, $3,857.1
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 December 31, 1995, the Commonwealth had $883.4 million of electorate
approved debt outstanding.
Debt issued to rehabilitate areas affected by disasters is
authorized by specific legislation. The Commonwealth had $43.8 million of
disaster relief debt outstanding as of December 31, 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 engages in
short-term borrowing to fund expenses within the fiscal year through the sale
of tax anticipation notes. The Commonwealth has issued 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 organizations have statutory authority
to issue debt for which state appropriations to pay debt service thereon are
not
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required. The debt of these organizations 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.
The Pennsylvania Housing Finance Agency ("PHFA"), as of
December 31, 1995, had $2,164.8 million of revenue bonds 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, 1994 were $3,797
million, and for the State Employees' Retirement Fund were negative $249
million as of December 31, 1994.
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)
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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 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 plus
Nonelectoral 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
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balance of the city as of June 30, 1995, showed a surplus of approximately
$80.5 million, up from approximately $1.54 million as of June 30, 1994.
No further bonds are to be issued by PICA for the purpose of
financing a capital project or deficit as the authority for such bond sales
expired December 31, 1994. PICA's authority to issue debt for the purpose of
financing a cash flow deficit expires on December 31, 1996. Its ability to
refund existing outstanding debt is unrestricted. PICA had $1,237.5 million in
special revenue bonds outstanding as of December 31, 1995.
Litigation. According to the Official Statement dated May 15,
1996 describing General Obligation Bonds 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 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 certified the class, and the
parties have resumed discovery.
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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 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 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.
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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 a new
constitutional challenge in the Commonwealth Court. However, as set forth
above, the Commonwealth Court has previously examined and confirmed the Act's
constitutionality.
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 has been assigned to
Judge Pellegrini, and is in the pre-trial discovery stage. The trial has not
yet been scheduled. Following a status conference among counsel, Judge
Pellegrini issued an Order, dated May 30, 1996, to consider inter alia, the
report of the Governor's Commission on Public School Finance and the course of
future proceedings, including trial.
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.
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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.
On December 15, 1995, Envirotest Systems Corporation,
Envirotest Partners (successor to Envirotest/Synterra Partners) and the
Commonwealth of Pennsylvania entered into a Settlement Agreement ("Agreement")
pursuant to which the parties settled all claims which Envirotest might have
had against the Commonwealth arising from the suspension of the emissions
testing program. Under the Agreement, Envirotest is to receive $145 million,
with interest at 6 percent per annum, payable $25 million in 1995, $40 million
each in 1996, 1997, and 1998. An additional $15 million may be required to be
paid in 1998, depending upon the results of property liquidations by
Envirotest.
Pennsylvania Human Relations Commission v. School District of Philadelphia, et
al. v. Commonwealth of Pennsylvania, et al.
On November 3, 1995, the Commonwealth of Pennsylvania and the
Governor of Pennsylvania, along with the City of Philadelphia and the Mayor of
Philadelphia, were joined as additional respondents in an enforcement action
commenced in Commonwealth Court in 1973 by the Pennsylvania Human Relations
Commission against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The enforcement action was pursued to remedy
unintentional conditions of segregation in the public schools of Philadelphia.
The Commonwealth and the City were joined in the "remedial phase" of the
proceeding "to determine their liability, if any, to pay additional costs
necessary to remedy the unlawful conditions found to exist in the Philadelphia
public schools." The Commonwealth and the City sought to appeal their joinders
to the Supreme Court of Pennsylvania, but the Court denied the petitions
without comment.
On February 28, 1996, the School District of Philadelphia
filed a third-party complaint against the Commonwealth of Pennsylvania asking
Commonwealth Court to require the Commonwealth to "supply such funding as is
necessary for full compliance with the November 28, 1994 and other remedial
Orders of the Commonwealth Court." In addition, a group of intervenors on March
4, 1996 filed a third party complaint against the Commonwealth of Pennsylvania
and the City of Philadelphia requesting Commonwealth Court to declare that "it
is the obligation of the Commonwealth and the City to supply the additional
funds identified as necessary for the District to fully comply with the orders
of the Commonwealth Court," and to require the Commonwealth and the City to
supply such additional funding as is necessary for the District to comply with
the orders.
By order dated April 30, 1996, Judge Doris A. Smith of
Commonwealth Court overruled the Commonwealth's and the City's preliminary
objections seeking dismissal of the claims against them. The Commonwealth and
the City are required to file answers to the complaints by May 10, 1996.
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April 30, 1996 was the court's deadline to conclude discovery. The court has
scheduled trial to commence May 30, 1996.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is
computed by adding to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, an amount based on the applicable sales
charge times the aggregate offering price of the Bonds (see "Public Offering
Price" in Part A for the applicable sales charge for the Trust). A
proportionate share of accrued interest on the Bonds to the expected date of
settlement for the Units is added to the Public Offering Price. Accrued
interest is the accumulated and unpaid interest on a Bond from the last day on
which interest was paid and is accounted for daily by the Trust at the initial
daily rate set forth under "Summary of Essential Information" in Part A of this
Prospectus. This daily rate is net of estimated fees and expenses. The Public
Offering Price can vary on a daily basis from the amount stated in Part A in
accordance with fluctuations in the prices of the Bonds and the price to be
paid by each investor will be computed as of the date the Units are purchased.
The aggregate bid price evaluation of the Bonds is determined in the manner set
forth under "Trustee Redemption."
The Evaluator may obtain current bid or offering prices for
the Bonds from investment dealers or brokers (including the Sponsor) that
customarily deal in tax-exempt obligations or from any other reporting service
or source of information which the Evaluator deems appropriate.
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
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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. Such arrangements result in less selling effort and selling expenses
than sales to employee groups of other companies. Resales or transfers of Units
purchased under the employee benefit arrangements may only be made through the
Sponsor's secondary market, so long as it is being maintained.
Distribution Of Units
Certain banks and thrifts will make Units of the Trust
available to their customers on an agency basis. A portion of the sales charge
paid by their customers is retained by or remitted to the banks. Under the
Glass- Steagall Act, banks are prohibited from underwriting Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Sponsor intends to qualify the Units for sale in
substantially all States through the Underwriters and through dealers who are
members of the National Association of Securities Dealers, Inc. Units may be
sold to dealers at prices which represent a concession of up to (a) 4% of the
Public Offering Price for the Insured Municipal Securities Trust Series, (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.
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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.
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
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Offering Price resulted in the Estimated Current Return stated for the Trust
under "Summary of Essential Information" in Part A.
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.
A schedule of cash flow projections is available from the
Sponsor upon request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been
selected by the Certificateholder. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed and/or accompanied
by a written instrument or instruments of transfer. Although no such charge is
presently made or contemplated, the Trustee may require a Certificateholder to
pay $2.00 for each Certificate reissued or transferred and any governmental
charge that may be imposed in connection with each such transfer or
interchange. Mutilated, destroyed, stolen or lost Certificates will be replaced
upon delivery of satisfactory indemnity and payment of expenses incurred.
Interest And Principal Distributions
Interest received by the Trust is credited by the Trustee to
an Interest Account and a deduction is made to reimburse the Trustee without
interest for any amounts previously advanced. Proceeds representing principal
received from the maturity, redemption, sale or other disposition of the Bonds
are credited to a Principal Account.
Distributions to each Certificateholder from the Interest
Account are computed as of the close of business on each Record Date for the
following Payment Date and consist of an amount substantially equal to
one-twelfth, one-half or all of such Certificateholder's pro rata share of the
Estimated Net Annual Interest Income in the Interest Account, depending upon
the applicable plan of distribution. Distributions from the Principal Account
(other than amounts representing failed contracts, as previously discussed)
will be computed as of each semi-annual Record Date, and will be made to the
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.
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For the purpose of minimizing fluctuations in the distributions from the
Interest Account, the Trustee will advance sufficient funds, without interest,
as may be necessary to provide interest distributions of approximately equal
amounts. All funds in respect of the Bonds received and held by the Trustee
prior to distribution to Certificateholders may be of benefit to the Trustee
and do not bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct
from the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Trust
(as determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In
addition, the Trustee may withdraw from the Interest and Principal Accounts
such amounts as may be necessary to cover purchases of Replacement Bonds and
redemptions of Units by the Trustee.
The estimated monthly, semi-annual or annual interest
distribution per Unit will initially be in the amount shown under Summary of
Essential Information and will change and may be reduced as Bonds mature or are
redeemed, exchanged or sold, or as expenses of the Trust fluctuate. No
distribution need be made from the Principal Account until the balance therein
is an amount sufficient to distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually,
depending upon the distribution plan applicable to the Unit purchased. Record
Dates are the first day of each month for monthly distributions, the first day
of each June and December for semi-annual distributions and the first day of
each December for annual distributions. Payment Dates will be the fifteenth day
of each month following the respective Record Dates.
Certificateholders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of the
prior owner. Every October each Certificateholder may change his distribution
election by notifying the Trustee in writing of such change between October 1
and November 1 of each year. (Certificateholders deciding to change their
election should contact the Trustee by calling the number listed on the back
cover hereof for information regarding the procedures that must be followed in
connection with this written notification of the change of election.) Failure
to notify the Trustee on or before November 1 of each year will result in a
continuation of the plan for the following 12 months.
Records
The Trustee shall furnish Certificateholders in connection
with each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year the Trustee will furnish to each person who at any time
during the calendar year was a Certificateholder of record, a statement showing
(a) as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of Bonds and earned
original issue discount, if any), amounts paid for purchases of Replacement
Bonds and redemptions of Units, if any, deductions for applicable taxes and
fees and expenses of the Trust, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
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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.
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.
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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 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
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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.
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). 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 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 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
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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.
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.
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(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 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
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<PAGE>
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 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"
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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.
The opinions of bond counsel or special tax counsel to the
issuing governmental authorities to the effect that interest on the Bonds is
exempt from regular federal income tax may be limited to law existing at the
time the Bonds were issued, and may not apply to the extent that future changes
in law, regulations or interpretations affect such Bonds. Investors are advised
to consult their own tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intends to
maintain a secondary market for the Units and continuously to offer to
repurchase the
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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.
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
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<PAGE>
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 three calendar days following a tender for redemption,
or, if such third 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.
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
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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 Trust" 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 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
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.
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<PAGE>
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
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
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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
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.
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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 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
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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 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
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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
The Sponsor, Reich & Tang Distributors L.P. ("Reich & Tang")
(successor to the Unit Investment Trust division of Bear, Stearns & Co. Inc.),
a Delaware limited partnership, is engaged in the brokerage business and is a
member of the National Association of Securities Dealers, Inc. Reich & Tang is
also a registered investment adviser. 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, having its
principal place of business at 399 Boylston Street, Boston, MA 02116, 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 successor sponsor for
numerous series of unit investment trusts, including: New York Municipal Trust,
Series 1 (and Subsequent Series); Municipal Securities Trust, Series 1 (and
Subsequent Series), 1st Discount Series (and Subsequent Series); Multi-
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State Series 1 (and Subsequent Series); Mortgage Securities Trust, Series 1
(and Subsequent Series); Insured Municipal Securities Trust, Series 1 (and
Subsequent Series), 5th Discount Series (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.
On August 30, 1996, the merger of New England Mutual Life
Insurance Company and Metropolitan Life Insurance Company ("MetLife") became
effective, with MetLife being the continuing company. RTAM LP remains a
wholly-owned subsidiary of NEIC LP, a New York Stock Exchange listed company,
but its sole general partner is now an indirect subsidiary of MetLife. MetLife
also indirectly owns a majority of the outstanding limited partnership interest
of NEIC LP.
MetLife is a mutual life insurance company with assets of
$142.2 billion at March 31, 1996. It is the second largest life insurance
company in the United States in terms of total assets. MetLife provides a wide
range of insurance and investment products and services to individuals and
groups and is the leader among United States life insurance companies in terms
of total life insurance in force, which exceeded $1.2 trillion at March 31,
1996 for MetLife and its insurance affiliates. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million
people worldwide.
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. The firm is very active in the marketing of
investment companies and has signed dealer agreements with many mutual fund
groups. 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
For certain of the Trusts, as set forth in the "Summary of
Essential Information" in Part A, the Trustee is The Chase Manhattan Bank with
its principal executive office located at 270 Park Avenue, New York, New York
10017 (800) 428-8890 and its unit investment trust office at 770 Broadway, New
York, New York 10003. Effective on or after November 15, 1996 the address of
the Trustee's unit investment trust office will be 4 New York Plaza, New York,
New York 10004. The Trustee is subject to supervision by the Superintendent of
Banks of the State of New York, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
For certain other Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is The Bank of New York, a trust
company organized under the laws of New York, having its offices at 101 Barclay
Street, New York, New York 10286. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State of New
York and the Board of Governors of the Federal Reserve System, and its deposits
are insured by the Federal Deposit Insurance Corporation to the extent
permitted by law. The Trustee must be a banking corporation organized under the
laws of the United States or any state which is authorized under such laws to
exercise corporate trust powers and must have at all times an aggregate
capital, surplus and undivided profits of not less than $5,000,000. The duties
of the Trustee are primarily ministerial in nature. The Trustee did not
participate in the selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for
taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect
of the Bonds or the Trust which it may be required to pay under current or
future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds pursuant to the Trust
Agreement.
For further information relating to the responsibilities of
the Trustee under the Trust Agreement, reference is made to the material set
forth under "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and
appoint a successor as provided in the Trust Agreement. Notice of such removal
and appointment shall be mailed to each Certificateholder by the Sponsor. If
upon resignation of the Trustee no successor has been appointed
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and has accepted the appointment within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The resignation or removal of the Trustee becomes
effective only when the successor Trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor Trustee. Upon
execution of a written acceptance of such appointment by such successor
Trustee, all the rights, powers, duties and obligations of the original Trustee
shall vest in the successor.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under
the laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a division of
a business unit of J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill
Companies, 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".)
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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
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 or Equity Securities Trust (the "Exchange
Trusts") at a reduced sales charge as set forth below. Under the Exchange
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Privilege, the Sponsor's repurchase price during the initial offering period of
the Units being surrendered will be based on the market value of the Securities
in the Trust portfolio or on the aggregate offer price of the Bonds in the
other Trust Portfolios; and, after the initial offering period has been
completed, 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 Certificate-
holder 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; and after the initial
offering period has been completed, based on the aggregate bid price of the
Bonds in the Exchange Trust portfolio if its initial 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 approximately 1.5% of the price of each Exchange Trust unit (or
1,000 Units for the Mortgage Securities Trust or 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% of the price of each Exchange Trust unit (or 1,000
Units for the Mortgage Securities Trust or 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
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<PAGE>
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 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
Municipal Securities Trust, Insured Municipal Securities Trust, Mortgage
Securities Trust, New York Municipal Trust or Equity Securities Trust (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 market
value of the underlying securities in the Trust portfolio or 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. The purchase price
of the units will be based on the aggregate offer price of the under-
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<PAGE>
lying bonds in the Conversion Trust portfolio during its initial offering
period, 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 and a sales charge as set forth below. If the participant
elects to purchase units of the Equity Securities Trust under the Conversion
Offer, the purchase price of the units will be based, at all times, on the
market value of the underlying securities in the Trust portfolio plus a sales
charge.
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
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
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<PAGE>
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 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
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
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<PAGE>
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 The Chase Manhattan Bank. Booth & Baron, 122 East 42nd Street, New
York, New York 10168, have acted as counsel for the Bank of New York. Certain
matters 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, special Pennsylvania counsel to the Sponsor.
Independent Accountants
The financial statements of the Trusts for the year ended
June 30, 1996 included in Part A of this Prospectus have been examined by
Price Waterhouse LLP, independent accountants. The financial statements
Waterhouse LLP have been so included in reliance on their report given upon
the authority of said firm as experts in accounting and auditing. KPMG Peat
Marwick LLP has consented to the incorporation by reference of their report on
the statements of operations and changes in net assets for the Trusts included
in Part A of this Prospectus for the periods ended June 30, 1994 and June 30,
1995, respectively.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Ratings Services
A brief description of the applicable Standard & Poor's
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:
- --------
* As described by Standard & Poor's.
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C/M: 11939.0001 112677.4
<PAGE>
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay principal and interest
for bonds in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications
of credit quality, the ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings (Prov.) following a rating indicates the
rating is provisional, which assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to such
likelihood and risk.
DESCRIPTION OF RATING ON THE UNITS*
A Standard & Poor's rating on the units of an investment
trust (hereinafter referred to collectively as "units" and "fund") is a current
assessment of creditworthiness with respect to the investments held by such
fund. This assessment takes into consideration the financial capacity of the
issuers and of any guarantors, insurers, lessees, or mortgagors with respect to
such investments. The assessment, however, does not take into account the
extent to which fund expenses or portfolio asset sales for less than the fund's
purchase price will reduce payment to the unit holder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell, or hold units, inasmuch as the
rating does not comment as to market price of the units or suitability for a
particular investor.
- --------
* As described by Standard & Poor's Corporation.
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C/M: 11939.0001 112677.4
<PAGE>
Funds rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard & Poor's,
credit characteristics comparable to assets that are rated "AAA", or certain
short-term investments. Standard & Poor's defines its AAA rating for such
assets as the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is very strong.
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C/M: 11939.0001 112677.4
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
9TH - 50TH DISCOUNT SERIES
SERIES 3 - 32
NEW YORK NAVIGATOR INSURED SERIES 1 - 17
NEW JERSEY NAVIGATOR INSURED SERIES 1 - 13
=============================================================================
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 Chase Manhattan Bank, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Chase Manhattan Bank, 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 CHASE MANHATTAN BANK
ATTN: THE UNIT INVESTMENT DEPARTMENT, UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003
C/M: 11939.0001 112677.4
<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
C/M: 11939.0001 112677.4
<PAGE>
<TABLE>
<S> <C>
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, 1996
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............................................... 15
Public Offering................................................... 50 (and for certain Trusts:)
Estimated Long Term Return and Gruntal & Co., Incorporated
Estimated Current Return........................................ 52 14 Wall Street
Rights of Certificateholders...................................... 53 New York, New York 10005
Tax Status........................................................ 55 212-267-8800
Liquidity......................................................... 61
Total Reinvestment Plan........................................... 64 Trustee:
Trust Administration.............................................. 68
Trust Expenses and Charges........................................ 72 The Chase Manhattan Bank
Exchange Privilege and Conversion 770 Broadway
Offer........................................................... 73 New York, New York 10003
Other Matters..................................................... 78 800-882-9898
Description of Bond Ratings....................................... 78
Description of Rating on the Units................................ 79 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 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
65 Broadway
New York, New York 10006
</TABLE>
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.
C/M: 11939.0001 112677.4
<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 Post-Effective Amendment
No. 8 to Form S-6 Registration Statements Nos. 33-22988,
33-24111, 33-24743, 33-25192 and 33-25978 of Insured Municipal
Securities Trust, Series 10, Series 11, Series 12, Series 13
and Series 14, respectively, on October 28, 1996 and
incorporated herein by reference).
*99.1.1.1 -- Amended Reference Trust Agreements dated December 5, 1988 to
the Reference Trust Agreements for Insured Municipal Securities
Trust, 40th Discount Series and Series 13 filed as Exhibit 1.1
to Amendment No. 1 to Form S-6 Registration Statement No.
33-25192 on December 1, 1988 (filed as Exhibit 1.1.1 to
Post-Effective Amendment No. 8 to Form S-6 Registration
Statements Nos. 33-22988, 33-24111, 33-24743, 33-25192 and
33-25978 of Insured Municipal Securities Trust, Series 10,
Series 11, Series 12, Series 13, and Series 14, on October 28,
1996 and incorporated herein by reference).
99.1.1.2 -- Trust Indenture and Agreement for Insured Municipal
Securities Trust, 9th Discount Series (and Subsequent Series)
dated April 11, 1985 (filed as Exhibit 1.1.1 to Post-Effective
Amendment No. 7 to Form S-6 Registration Statement No. 33-26426
of Insured Municipal Securities Trust, Series 15 on April 25,
1996 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 dated June 11, 1985 and
December 31, 1986, respectively (filed as Exhibit 1.4 to
- --------
* Being filed by this Amendment.
II-1
988.1
<PAGE>
Post-Effective Amendment Nos. 10 and 8 to Form S-6 Registration
Statements Nos. 33-08699, 33-24031 and 33-25127 of Municipal
Securities Trust, Series 35, Series 39 and Series 40 on October
25, 1996 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
Post-Effective Amendment No. 7 to Form S-6 Registration
Statement No. 33-26426 of Insured Municipal Securities Trust,
Series 15 on April 25, 1996 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 Post-Effective
Amendment No. 7 to Form S-6 Registration Statement No. 33-26426
of Insured Municipal Securities Trust, Series 15 on April 25,
1996 and incorporated herein by reference).
99.1.5.2 -- Form of Insurance Policy of Municipal Bond Investors Assurance
Corporation (filed as Exhibit 1.5.2 to Post-Effective Amendment
No. 7 to Form S-6 Registration Statement No. 33-26426 of
Insured Municipal Securities Trust, Series 15 on April 25, 1996
and incorporated herein by reference).
*99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to
Post-Effective Amendment No. 8 to Form S-6 Registration
Statement Nos. 33-22988, 33-24111, 33-24743, 33-25192 and
33-05978 of Insured Municipal Securities Trust, Series 10,
Series 11, Series 12, Series 13, and Series 14, on October 28,
1996 and incorporated herein by reference).
*99.3.1 -- Opinion of Battle Fowler LLP 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 Post-Effective Amendment No. 8 to Form
S-6 Registration Statements Nos. 33-22988, 33-24111, 33-24743,
33-25192 and 33-25978 of Insured Municipal Securities Trust,
Series 10, Series 11, Series 12, Series 13 and Series 14,
respectively, on October 28, 1996 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 6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities Trust,
Series 6, Signature Series, Gabelli Entertainment and Media
Trust on November 16, 1995 and incorporated herein by
reference).
*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-2
988.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrants, Insured Municipal Securities Trust, Series 10, Series 11,
Series 12, Series 13 and Series 14 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
25th day of October, 1996.
INSURED MUNICIPAL SECURITIES TRUST,
SERIES 10, SERIES 11, SERIES 12,
SERIES 13 AND SERIES 14
(Registrants)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: /s/PETER J. DEMARCO
Peter J. DeMarco
(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, ) October 25, 1996
Treasurer and Chief Financial )
Officer
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director ) By: /s/ Peter J. DeMarco
STEVEN W. DUFF Director ) Peter J. DeMarco
BERNADETTE N. FINN Vice President ) Attorney-in-Fact*
LORRAINE C. HYLSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )
</TABLE>
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-62627 on
November 16, 1995.
II-3
988.1
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus Part A constituting part of
this Post- Effective Amendment to the registration statement on Form S-6 of our
reports dated October 16, 1996, relating to the financial statements and
financial highlights for the year ended June 30, 1996 of the Insured Municipal
Securities Trust, Series 10, Insured Municipal Securities Trust, Series 11,
Insured Municipal Securities Trust, Series 12, Insured Municipal Securities
Trust, Series 13 and Insured Municipal Securities Trust, Series 14, which appear
in such Prospectus. We also consent to the reference to us under the heading
"Independent Accountants" in the Prospectus Part B.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
October 28, 1996
<PAGE>
Independent Auditors' Consent
Re: Insured Municipal Securities Trust, Series 10
Insured Municipal Securities Trust, Series 11
Insured Municipal Securities Trust, Series 12
Insured Municipal Securities Trust, Series 13
Insured Municipal Securities Trust, Series 14
We consent to the incorporation by reference of our report dated
September 15, 1995, with exception to note 7, as to which the date is September
28, 1995, on the statements of operations and changes in net assets for the
subject trusts for each of the years in the two year period ended June 30,
1995, and to the reference to our firm under the heading "Independent
Accountants" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
October 16, 1996
<TABLE> <S> <C>
<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> 0000835775
<NAME> IMST, SERIES 10
<SERIES>
<NUMBER> 1
<NAME> IMST, SERIES 10
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 672619
<INVESTMENTS-AT-VALUE> 819426
<RECEIVABLES> 19372
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 838798
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216
<TOTAL-LIABILITIES> 216
<SENIOR-EQUITY> 838582
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29699
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (10543)
<ACCUM-APPREC-OR-DEPREC> 146807
<NET-ASSETS> 838582
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 92949
<OTHER-INCOME> 0
<EXPENSES-NET> 4319
<NET-INVESTMENT-INCOME> 88630
<REALIZED-GAINS-CURRENT> (39649)
<APPREC-INCREASE-CURRENT> 17781
<NET-CHANGE-FROM-OPS> 66762
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 103751
<DISTRIBUTIONS-OF-GAINS> 1011631
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 202
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1048620)
<ACCUMULATED-NII-PRIOR> 44820
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (14912)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 760.97
<PER-SHARE-NII> 37.25
<PER-SHARE-GAIN-APPREC> 38.74
<PER-SHARE-DIVIDEND> 43.61
<PER-SHARE-DISTRIBUTIONS> 425.23
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 368.12
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<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> 0000839046
<NAME> IMST, SERIES 11
<SERIES>
<NUMBER> 1
<NAME> IMST, SERIES 11
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 686341
<INVESTMENTS-AT-VALUE> 774396
<RECEIVABLES> 14612
<ASSETS-OTHER> 6207
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 795,215
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215
<TOTAL-LIABILITIES> 215
<SENIOR-EQUITY> 795000
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 27304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (6700)
<ACCUM-APPREC-OR-DEPREC> 88055
<NET-ASSETS> 795000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 82102
<OTHER-INCOME> 0
<EXPENSES-NET> 4144
<NET-INVESTMENT-INCOME> 77958
<REALIZED-GAINS-CURRENT> (39017)
<APPREC-INCREASE-CURRENT> 21356
<NET-CHANGE-FROM-OPS> 60297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 92725
<DISTRIBUTIONS-OF-GAINS> 1088614
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 125
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1121042)
<ACCUMULATED-NII-PRIOR> 42071
<ACCUMULATED-GAINS-PRIOR> 64414
<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> 790.12
<PER-SHARE-NII> 33.00
<PER-SHARE-GAIN-APPREC> 22.57
<PER-SHARE-DIVIDEND> 39.25
<PER-SHARE-DISTRIBUTIONS> 460.79
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 345.65
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<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> 0000840822
<NAME> IMST, SERIES 12
<SERIES>
<NUMBER> 1
<NAME> IMST, SERIES 12
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1036677
<INVESTMENTS-AT-VALUE> 1147272
<RECEIVABLES> 46157
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1193429
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1945
<TOTAL-LIABILITIES> 1945
<SENIOR-EQUITY> 1191484
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 49086
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 110595
<NET-ASSETS> 1191484
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 100228
<OTHER-INCOME> 0
<EXPENSES-NET> 4712
<NET-INVESTMENT-INCOME> 95516
<REALIZED-GAINS-CURRENT> (53209)
<APPREC-INCREASE-CURRENT> 27173
<NET-CHANGE-FROM-OPS> 69480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 102755
<DISTRIBUTIONS-OF-GAINS> 693583
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 64
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (726858)
<ACCUMULATED-NII-PRIOR> 56325
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 548.10
<PER-SHARE-NII> 27.54
<PER-SHARE-GAIN-APPREC> .74
<PER-SHARE-DIVIDEND> 29.63
<PER-SHARE-DISTRIBUTIONS> 199.99
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 346.76
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<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> 0000841967
<NAME> IMST, SERIES 13
<SERIES>
<NUMBER> 1
<NAME> IMST, SERIES 13
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1904391
<INVESTMENTS-AT-VALUE> 2139554
<RECEIVABLES> 74466
<ASSETS-OTHER> 204312
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2418332
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1504
<TOTAL-LIABILITIES> 1504
<SENIOR-EQUITY> 2416828
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 75271
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 209134
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 235163
<NET-ASSETS> 2416828
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 176923
<OTHER-INCOME> 0
<EXPENSES-NET> 6205
<NET-INVESTMENT-INCOME> 170718
<REALIZED-GAINS-CURRENT> (78461)
<APPREC-INCREASE-CURRENT> 39952
<NET-CHANGE-FROM-OPS> 132209
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 199604
<DISTRIBUTIONS-OF-GAINS> 902950
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 40
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (970345)
<ACCUMULATED-NII-PRIOR> 104157
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (11416)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 698.99
<PER-SHARE-NII> 34.92
<PER-SHARE-GAIN-APPREC> (3.02)
<PER-SHARE-DIVIDEND> 40.83
<PER-SHARE-DISTRIBUTIONS> 184.69
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 496.37
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<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> 0000843784
<NAME> IMST, SERIES 14
<SERIES>
<NUMBER> 1
<NAME> IMST, SERIES 14
<S> <C>
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1549638
<INVESTMENTS-AT-VALUE> 1819269
<RECEIVABLES> 40193
<ASSETS-OTHER> 151730
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2010562
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 327
<TOTAL-LIABILITIES> 327
<SENIOR-EQUITY> 2010865
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 52745
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 147218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 269631
<NET-ASSETS> 2010865
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 178797
<OTHER-INCOME> 0
<EXPENSES-NET> 6697
<NET-INVESTMENT-INCOME> 172100
<REALIZED-GAINS-CURRENT> (203383)
<APPREC-INCREASE-CURRENT> 184491
<NET-CHANGE-FROM-OPS> 153208
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 226025
<DISTRIBUTIONS-OF-GAINS> 1699111
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 75
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1771928)
<ACCUMULATED-NII-PRIOR> 106670
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (144671)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 657.31
<PER-SHARE-NII> 30.06
<PER-SHARE-GAIN-APPREC> 1.81
<PER-SHARE-DIVIDEND> 39.47
<PER-SHARE-DISTRIBUTIONS> 296.74
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 352.97
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 10
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated August 18, 1988 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Insured Municipal Securities Trust, 9th Discount Series, and
Subsequent Series, Trust Indenture and Agreement" dated April 11, 1985 as
amended in part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture") and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, and the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Insured Municipal Securities
Trust, Series 10, and all Subsequent Series, the following sections of the
Indenture are amended as follows:
(a) Section 1.01(6) shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.";
(b) Section 1.02 shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.", wherever the former
shall appear in said Section.
C/M 11939.0001 406278.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/2,500.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on January 1, 1989 for monthly
distributions, December 1 and June 1 of each year for semi-annual distributions
(commencing on December 1, 1988) and December 1 of each year for annual
distributions (commencing on December 1, 1988).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on January 15, 1989 for
monthly distributions, December 15 and June 15 of each year for semi-annual
distributions (commencing on December 15, 1988) and December 15 of each year
for annual distributions (commencing on December 15, 1988).
(e) All Certificateholders of record on December 1, 1988 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after December 15, 1988 (the "First
Payment Date"), and thereafter distributions will be made monthly,
semi-annually or annually, depending upon the plan of distribution chosen by
each Certificateholder.
(f) The First Settlement Date shall mean August 25, 1988.
(g) The number of Units referred to in Section 2.03 is 2,500.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess
of 50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the liquidation amount is
hereby specified to be $800,000.
-2-
C/M 11939.0001 406278.1
<PAGE>
(j) For purposes of Section 6.04, the Trustee shall be paid per annum
$1.05 per $1,000 principal amount of Bonds for that portion of the Trust under
the monthly distribution plan, $.60 per $1,000 principal amount of Bonds for
that portion of the Trust under the semi-annual distribution plan and $.35 per
$1,000 principal amount of Bonds for that portion of the Trust under the annual
distribution plan. During the first year after the date hereof, such payments
to the Trustee will be reduced by a portion [a maximum of $.88 per Unit times
the number of Units on the monthly distribution plan, $.60 per unit plus $.28
of Trust expenses (to be assumed and paid by the Trustee) times the number of
Units on the semi-annual distribution plan and $.35 per Unit plus $.53 of Trust
expenses (to be assumed and paid by the Trustee) times the number of Units of
the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $0.15 per $1,000 principal amount of Bonds in the
Trust.
(l) For purposes of Section 9.05, the Depositor's address is 245 Park
Avenue, New York, New York 10167.
(m) For purposes of this Series of Insured Municipal Securities
Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
C/M 11939.0001 406278.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By: ------------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ---- day of ---------, 198-, before me personally appeared
- ----------------------, to me known, who being by me duly sworn, said that he
is an Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
----------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ----- day of ---------------, 198-, before me personally
appeared ---------------------, to me known, who being by me duly sworn, said
that he is an Authorized Signator of United States Trust Company of New York,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation and that he signed his name
thereto by like authority.
--------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- ----------------------------
(Assistant) Secretary
C/M 11939.0001 406278.1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
INSURED MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 10
As of August 18, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund Cost of Bonds
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2) to Trust(3)
--- ------ ----------------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 $250,000 Burke Cnty. Ga. Dev. Auth. Poll. Cntrl. Rev. AAA 11.750% No Sinking Fund $307,165
Bonds (Oglethorpe Pwr. Corp. Vogtle Prjt.) 11/01/2014 11/01/94 @ 102 Ref.
(Financial Guaranty)
2 250,000 Rockport Inc. Poll. Cntrl. Rev. Bonds Series AAA 9.375% No Sinking Fund 277,513
1985A (AEP Genrtng. Co.) (Financial 9/01/2014 9/01/95 @ 102 Ref.
Guaranty)
3 250,000(4) La. Pub. Facs. Auth. Fixed Rate Hlth. & Ed. AAA* 8.200% 12/01/01 @ 100 S.F. 251,673
Cap. Facs. Rev. Bonds (Our Lady of the 12/01/2015 12/01/98 @ 100 Ref.
Lake Reg. Med. Cntr.) Series 1985C (BIG)
4 250,000 Mass. Ind. Finc. Agncy. Poll. Cntrl. Rev. AAA 10.125% No Sinking Fund 283,610
Bonds 1983 Series (Eastern Edison Co. Prjt.) 8/01/2008 8/01/93 @ 103 Ref.
(AMBAC)
5 200,000 Missoula Mont. Hosp. Facs. Rev. Bonds AAA 9.400% No Sinking Fund 222,280
(Sisters of Charity Prjt.-St. Patrick's Hosp. 9/01/2012 9/01/95 @ 102 Ref.
Prjt.) (AMBAC)
6 250,000 Farmington N.M. Util. Sys. Rev. Bonds AAA 9.750% 5/15/06 @ 100 S.F. 284,572
Series 1985 (Financial Guaranty) 5/15/2013 5/15/96 @ 102 Ref.
7 200,000 Enid Ok. Muni. Auth. Util. and Sales Tax AAA 6.250% 2/01/06 @ 106 S.F 165,004
Rev. Bonds Series 1987A (AMBAC) 2/01/2012 2/01/97 @ 102 Ref.
8 200,000 Pittsburgh Penn. Gen. Oblig. Rev. Bonds AAA 6.000% 3/01/89 @ 100 S.F. 159,454
Series A 1986 (AMBAC) 3/01/2014 3/01/96 @ 100 Ref.
9 100,000 Memphis-Shelby Cnty. Tenn. Arpt. Auth. AAA 9.125% 9/01/06 @ 100 S.F. 108,308
Gen. Rev. Bonds Series 1985 (MBIA) 9/01/2015 9/01/93 @ 102 Ref.
10 200,000 Tx. Pub. Bldg. Auth. Rev. Rfndg. Bonds AAA 6.000% 8/01/12 @ 100 S.F. 154,740
Series 1985 (MBIA) 8/01/2014 8/01/97 @ 100 Ref.
11 100,000 Houston Tx. Swr. Sys. Jr. Lien Rev. Rfndg. AAA 9.375% 12/01/06 @ 100 S.F. 111,830
Bonds Series 1985 (Financial Guaranty) 12/01/2013 12/01/95 @ 102 Ref.
12 150,000 Intermountain Pwr. Agncy. Utah Pwr. Supply AAA 5.000% 7/01/10 @ 100 S.F. 101,202
Rev. Rfndg. Bonds Series A (MBIA) 7/01/2012 1/01/97 @ 100 Ref.
13 100,000 Fremont Calif. Mtg. Rev. Bonds Issue F 1985 AAA 0.000% 6/01/11 @ 20.202 S.F. 2,700
(Heritage Village Prjt.) (MBIA) 6/01/2027 12/01/96 @ 4.883 Ref.
---------- ----------
$2,500,000 $2,430,051
========== ==========
</TABLE>
C/M 11939.0001 406278.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 11
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated September 23, 1988 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Insured Municipal Securities Trust, 9th Discount Series, and
Subsequent Series, Trust Indenture and Agreement" dated April 11, 1985 as
amended in part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture") and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, and the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Insured Municipal Securities
Trust, Series 11, and all Subsequent Series, the following sections of the
Indenture are amended as follows:
(a) Section 1.01(6) shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.";
(b) Section 1.02 shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.", wherever the former
shall appear in said Section.
C/M 11939.0001 406278.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/2,500.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on February 1, 1989 for monthly
distributions, December 1 and June 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on February 15, 1989 for
monthly distributions, December 15 and June 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on January 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after January 15, 1989 (the "First
Payment Date"), and thereafter distributions will be made monthly,
semi-annually or annually, depending upon the plan of distribution chosen by
each Certificateholder.
(f) The First Settlement Date shall mean September 30, 1988.
(g) The number of Units referred to in Section 2.03 is 2,500.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess
of 50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the liquidation amount is
hereby specified to be $1,000,000.
-2-
C/M 11939.0001 406278.1
<PAGE>
(j) For purposes of Section 6.04, the Trustee shall be paid per annum
$1.05 per $1,000 principal amount of Bonds for that portion of the Trust under
the monthly distribution plan, $.60 per $1,000 principal amount of Bonds for
that portion of the Trust under the semi-annual distribution plan and $.35 per
$1,000 principal amount of Bonds for that portion of the Trust under the annual
distribution plan. During the first year after the date hereof, such payments
to the Trustee will be reduced by a portion [a maximum of $.88 per Unit times
the number of Units on the monthly distribution plan, $.60 per unit plus $.28
of Trust expenses (to be assumed and paid by the Trustee) times the number of
Units on the semi-annual distribution plan and $.35 per Unit plus $.53 of Trust
expenses (to be assumed and paid by the Trustee) times the number of Units of
the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $0.15 per $1,000 principal amount of Bonds in the
Trust.
(l) For purposes of Section 9.05, the Depositor's address is 245 Park
Avenue, New York, New York 10167.
(m) For purposes of this Series of Insured Municipal Securities
Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
C/M 11939.0001 406278.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By:---------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 19 day of September, 1988, before me personally appeared
Peter DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
--------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 12th day of September, 1988, before me personally appeared
Tania G. Vaile, to me known, who being by me duly sworn, said that he is an
Authorized Signator of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that she signed her name thereto by like
authority.
----------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- --------------------------
(Assistant) Secretary
C/M 11939.0001 406278.1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
INSURED MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 11
As of September 23, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund Cost of Bonds
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2) to Trust(3)
--- ------ ----------------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 $200,000 Burke Cnty. Ga. Dev. Auth. Poll. Cntrl. Rev. AAA 11.750% No Sinking Fund $ 246,902
Bonds (Oglethorpe Pwr. Corp. Vogtle Prjt.) 11/01/2014 11/01/94 @ 102 Ref.
(Financial Guaranty)
2 105,000 Chicago Ill. Schl. Finc. Auth. Gen. Oblig. AAA 8.750% 6/01/06 @ 100 S.F. 113,647
Schl. Asstnc. Bonds Rfndg. Series 1985 6/01/2009 6/01/95 @ 102 Ref.
(Financial Guaranty)
3 250,000 Rockport Inc. Poll. Cntrl. Rev. Bonds Series AAA 9.375% No Sinking Fund 282,340
1985A (AEP Genring. Co.) (Financial 9/01/2014 9/01/95 @ 102 Ref.
Guaranty)
4 200,000 Mass. Indus. Finc. Agncy. Poll. Cntrl. Rev. AAA 10.125% No Sinking Fund 228,030
Bonds 1983 Series (Eastern Edison Co. Prjt.) 8/01/2008 8/01/93 @ 103 Ref.
(AMBAC)
5 250,000 Cnty. of Monroe Mich. Poll. Cntrl. Rev. AAA 9.625% No Sinking Fund 178,678
Bonds (Detroit Edison Co. Prjt.) Series A 12/01/2015 12/01/95 @ 103 Ref.
1985 (AMBAC)
6 250,000 Cleveland Ohio Wtrwks. Imprvmnt. First AAA 5.000% 1/01/13 @ 100 S.F. 280,905
Mtg. Rfndg. Rev. Bonds Series D 1986 1/01/2015 1/01/97 @ 100 Ref.
(AMBAC)
7 250,000 Cuyahoga Ohio Hosp. Rfndg. Rev. Bonds AAA 9.250% 10/01/01 @ 100 S.F. 205,242
(Deaconess Hosp. of Cleveland) Series 1985 10/01/2009 10/01/95 @ 102 Ref.
A (Financial Guaranty)
8 250,000 Pittsburgh Penn. Gen. Oblig. Rev. Bonds AAA 6.000% 3/01/89 @ 100 S.F. 162,080
Series A 1986 (AMBAC) 3/01/2014 3/01/96 @ 100 Ref.
9 200,000 Tx. Pub. Bldg. Auth. Rev. Rfndg. Bonds AAA 6.000% 8/01/12 @ 100 S.F. 116,614
Series 1986 (MBIA) 8/01/2014 8/01/97 @ 100 Ref.
10 100,000 Austin Tx. Combined Util. Sys. Rev. Bonds AAA* 9.500% 5/15/01 @ 100 S.F. 228,969
Series 1985A (Financial Guaranty) 5/15/2015 5/15/00 @ 100 Ref.
11 220,000 Maple Run Austin Tx. Muni. Util. Dstrct. Tx. AAA 8.250% No Sinking Fund 106,891
Cntrct. Rev. Bonds Series 1986 (Financial 11/15/2006 11/15/96 @ 101 1/2Ref.
Guaranty)
12 100,000 Pierce Cnty. Wa. Swr. Rev. & Rfndg. Bonds AAA 8.625% 2/01/97 @ 100 S.F. 3,405
Series 1985 (MBIA) 12/01/2003 2/01/95 @ 100 Ref.
13 125,000 Fremont Calif. Mtg. Rev. Bonds Issue F 1985 AAA 0.000% 6/01/11 @ 20.202 S.F.
(Heritage Village Prjt.) (MBIA) 6/01/2027 12/01/96 @ 4.883 Ref.
---------- ----------
$2,500,000 $2,441,993
========== ==========
</TABLE>
C/M 11939.0001 406278.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 12
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated October 27, 1988 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Insured Municipal Securities Trust, 9th Discount Series, and
Subsequent Series, Trust Indenture and Agreement" dated April 11, 1985 as
amended in part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture") and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, and the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Insured Municipal Securities
Trust, Series 12, and all Subsequent Series, the following sections of the
Indenture are amended as follows:
(a) Section 1.01(6) shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.";
(b) Section 1.02 shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.", wherever the former
shall appear in said Section.
C/M 11939.0001 406278.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/3,500.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on March 1, 1989 for monthly
distributions, December 1 and June 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on March 15, 1989 for
monthly distributions, December 15 and June 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on February 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after February 15, 1989 (the "First
Payment Date"), and thereafter distributions will be made monthly,
semi-annually or annually, depending upon the plan of distribution chosen by
each Certificateholder.
(f) The First Settlement Date shall mean November 3, 1988.
(g) The number of Units referred to in Section 2.03 is 3,500.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess
of 50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the liquidation amount is
hereby specified to be $1,400,000.
-2-
C/M 11939.0001 406278.1
<PAGE>
(j) For purposes of Section 6.04, the Trustee shall be paid per annum
$1.05 per $1,000 principal amount of Bonds for that portion of the Trust under
the monthly distribution plan, $.60 per $1,000 principal amount of Bonds for
that portion of the Trust under the semi-annual distribution plan and $.35 per
$1,000 principal amount of Bonds for that portion of the Trust under the annual
distribution plan. During the first year after the date hereof, such payments
to the Trustee will be reduced by a portion [a maximum of $.88 per Unit times
the number of Units on the monthly distribution plan, $.60 per unit plus $.28
of Trust expenses (to be assumed and paid by the Trustee) times the number of
Units on the semi-annual distribution plan and $.35 per Unit plus $.53 of Trust
expenses (to be assumed and paid by the Trustee) times the number of Units of
the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $0.15 per $1,000 principal amount of Bonds in the
Trust.
(l) For purposes of Section 9.05, the Depositor's address is 245 Park
Avenue, New York, New York 10167.
(m) For purposes of this Series of Insured Municipal Securities
Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
C/M 11939.0001 406278.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By:---------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 25th day of October, 1988, before me personally appeared
Peter DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 7th day of October, 1988, before me personally appeared Tania
G. Vaile, to me known, who being by me duly sworn, said that she is an
Authorized Signator of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that she signed her name thereto by like
authority.
-------------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- --------------------------
(Assistant) Secretary
C/M 11939.0001 406278.1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
INSURED MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 12
As of October 27, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund Cost of Bonds
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2) to Trust(3)
--- ------ ----------------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 $250,000 Tallahassee Fla. Cap. Prgrm. Rev. Bonds AAA 8.250% 10/10/09 @ 100 S.F. $ 264,590
Series 1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
2 350,000 Orlando Fla. Cap. Prgrm. Rev. Bonds Series AAA 8.250% 10/01/09 @ 100 S.F. 370,426
1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
3 350,000 Burke Cnty. Ga. Dev. Auth. Poll. Cntrl. Rev. AAA 11.750% No Sinking Fund 432,170
Bonds (Oglethorpe Pwr. Corp. Vogtle Prjt.) 11/01/2014 11/01/94 @ 102 Ref.
(Financial Guaranty)
4 325,000 Indianapolis Ind. Gas Util. Sys. Rev. Rfndg. AAA 3.500% No Sinking Fund 173,638
Bonds 1986 Series B (Financial Guaranty) 6/01/2018 Non Callable
5 270,000 Jefferson Sales Tax Dstrct. Jefferson Paris AAA 8.000% 7/01/92 @ 100 S.F. 279,755
Louisiana Spec. Sales Tax Rev. Bonds 7/01/2005 7/01/96 @ 103 Ref.
Series A (BIG)
6 200,000 Mass. Indus. Finc. Agncy. Poll. Cntrl. Rev. AAA 10.125% No Sinking Fund 228,354
Bonds 1983 Series (Eastern Edison Co. Prjt.) 8/01/2008 8/01/93 @ 103 Ref.
(AMBAC)
7 250,000 N.C. Eastern Muni. Pwr. Agncy. Pwr. Sys. AAA 4.500% 7/01/20 @ 100 S.F. 157,475
Ref. Rfndg. Bonds Series 1987A (Financial 1/01/2024 1/01/97 @ 100 Ref.
Guaranty)
8 250,000 Mercer Cnty, N.D. Poll. Cntrl. Rev. Bonds AAA 10.500% 6/30/09 @ 100 S.F. 295,115
Series 1984 (Basin Elec. Pwr. Co-Op 6/30/2013 12/30/94 @ 102 Ref.
Antelope Valley Station) (AMBAC)
9 250,000 Jackson Tenn. Wtr. & Swr. Sys. Rev. Rfndg. AAA* 7.600% 7/01/09 @ 100 S.F. 250,835
Bonds Series 1988 (AMBAC) 1/01/2012 1/01/97 @ 102 Ref.
10 150,000 Galveston Cnty. Tx. Wtr. Auth. Wtr. Sys. AAA 9.000% 7/10/06 @ 100 S.F. 165,728
Cntrct. Rev. Rfndg. Bonds Mainland Prjt. 7/10/2009 7/10/96 @ 100 Ref.
Series 1985 (AMBAC)
11 250,000 Harris Cnty. Tx. Hosp. Dstrct. Rfndg. Rev. AAA 8.500% 4/01/06 @ 100 S.F. 267,652
Bonds Series 1986 (BIG) 4/01/2015 4/01/96 @ 102 Ref.
12 200,000 Sam Rayburn Tx. Muni. Pwr. Agncy. Pwr. AAA 9.250% 9/01/04 @ 100 S.F. 224,290
Supl. Sys. Rev. Bonds (MBIA) 9/01/2008 9/01/95 @ 102 Ref.
13 230,000 Waco Tx. Hosp. Rfndg. Rev. Bonds Series AAA 9.000% 9/01/00 @ 100 S.F. 254,867
1985 (Hillcrest Baptist Med. Cntr. Prjt.) 9/01/2005 9/01/95 @ 102 Ref.
(MBIA)
14 175,000 Santa Clara Calif. Hsg. Auth. Multi-Fam. AAA 0.000% 4/01/07 @ 13.074 S.F. 4,485
Hsg. Rev. Bonds Series 1984A (FHA Insrd. 4/01/2026 10/01/97 @ 5.011 Ref.
Mtg. Loan-Cedar Glen Aprtmnts. Prjt.)
(MBIA)
---------- ----------
$3,500,000 $3,369,380
========== ==========
</TABLE>
C/M 11939.0001 406278.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 13
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated December 1, 1988 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Insured Municipal Securities Trust, 9th Discount Series, and
Subsequent Series, Trust Indenture and Agreement" dated April 11, 1985 as
amended in part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture") and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, and the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Insured Municipal Securities
Trust, Series 13, and all Subsequent Series, the following sections of the
Indenture are amended as follows:
(a) Section 1.01(6) shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.";
(b) Section 1.02 shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.", wherever the former
shall appear in said Section.
C/M 11939.0001 406278.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/5,000.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on April 1, 1989 for monthly
distributions, December 1 and June 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on April 15, 1989 for
monthly distributions, December 15 and June 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on March 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after March 15, 1989 (the "First Payment
Date"), and thereafter distributions will be made monthly, semi-annually or
annually, depending upon the plan of distribution chosen by each
Certificateholder.
(f) The First Settlement Date shall mean December 1, 1988.
(g) The number of Units referred to in Section 2.03 is 5,000.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess
of 50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the liquidation amount is
hereby specified to be $2,000,000.
-2-
C/M 11939.0001 406278.1
<PAGE>
(j) For purposes of Section 6.04, the Trustee shall be paid per annum
$.97 per $1,000 principal amount of Bonds for that portion of the Trust under
the monthly distribution plan, $.80 per $1,000 principal amount of Bonds for
that portion of the Trust under the semi-annual distribution plan and $.29 per
$1,000 principal amount of Bonds for that portion of the Trust under the annual
distribution plan. During the first year after the date hereof, such payments
to the Trustee will be reduced by a portion [a maximum of $.80 per Unit times
the number of Units on the monthly distribution plan, $.51 per unit plus $.29
of Trust expenses (to be assumed and paid by the Trustee) times the number of
Units on the semi-annual distribution plan and $.33 per Unit plus $.47 of Trust
expenses (to be assumed and paid by the Trustee) times the number of Units of
the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $0.15 per $1,000 principal amount of Bonds in the
Trust.
(l) For purposes of Section 9.05, the Depositor's address is 245 Park
Avenue, New York, New York 10167.
(m) For purposes of this Series of Insured Municipal Securities
Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
C/M 11939.0001 406278.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By:---------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 18th day of November, 1988, before me personally appeared
Peter DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
-------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 2nd day of November, 1988, before me personally appeared
Thomas Porrazzo, to me known, who being by me duly sworn, said that he is an
Authorized Signator of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that he signed his name thereto by like
authority.
------------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- -----------------------------
(Assistant) Secretary
C/M 11939.0001 406278.1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
INSURED MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 13
As of December 1, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund Cost of Bonds
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2) to Trust(3)
--- ------ ----------------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 205,000 Municipality of Anchorage, Alaska 1986 AAA 8.125% 6/01/02 @ 100 S.F. $ 210,781
Gen. Oblig. Wtr. Bonds (Financial Guaranty) 6/01/2011 6/01/96 @ 102 Ref.
2 395,000 City of Dunedin Fla. Hosp. Ref. Bonds Series AAA 8.900% No Sinking Fund 437,818
1982 (Mease Hosp. & Clinic Prjt.) (MBIA) 10/01/1999 10/01/95 @ 102 Ref.
3 400,000 Orlando Fla. Cap. Prgrm. Rev. Bonds Series AAA 8.250% 10/01/09 @ 100 S.F. 415,244
1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
4 400,000 Tallahassee Fla. Cap. Prgrm. Rev. Bonds AAA 8.250% 10/01/09 @ 100 S.F. 415,244
Series 1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
5 350,000 Burke Cnty. Ga. Dev. Auth. Poll. Cntrl. Rev. AAA 11.750% No Sinking Fund 431,179
Bonds (Oglethorpe Pwr. Corp--Vogtle Prjt.) 11/01/2014 11/01/94 @ 102 Ref.
(Financial Guaranty)
6 400,000 Carbondale Ill. Hosp. Rev. Rfndg. Bonds AAA 6.875% 3/01/07 @ 100 S.F. 362,972
Series 1987 (Southern Ill. Hosp. Serv.) 3/01/2015 3/01/97 @ 102 Ref.
(MBIA Corp.)
7 200,000 City of Chicago Cook Cnty. Ill. Gen. Oblig. AAA 6.000% 1/01/12 @ 100 S.F. 163,918
Prjt. & Rfndg. Bonds Series 1987 (MBIA 1/01/2013 1/01/97 @ 100 Ref.
Corp.)
8 350,000 Hazel Crest Ill. Hosp. Facs. Rev. Rfndg. and AAA* 9.125% 7/01/99 @ 100 S.F. 396,368
Imprvent. Bonds (So. Suburban Prjt.) (BIG) 7/01/2017 7/01/97 @ 102 Ref.
9 400,000 Northwest Suburban Muni. Joint Action Wtr. AAA 5.750% 5/01/09 @ 100 S.F. 317,744
Agency (Cook, DuPage & Kane Cntys. Ill.) 5/01/2012 5/01/96 @ 100 Ref.
Wtr. Supl. Sys. Rev. Bonds Series 1986
(MBIA)
10 100,000 Indiana State Toll Finc. Auth. Toll Rd. Rev. AAA 6.875% 7/01/08 @ 100 S.F. 92,093
Rfndg. Bonds (Financial Guaranty) 7/01/2012 1/01/97 @ 102 Ref.
11 50,000 Parish of West Feliciana St. of La. Poll. AAA 12.000% No Sinking Fund 62,770
Cntrl. Rev. Bonds (Gulf Sts. Utils. Co. Prjt.) 5/01/2014 1/01/95 @ 103 Ref.
Series 1984D (AMBAC)
12 150,000 Mich. St. Hsg. Dev. Auth. Multi-Fam. Insrd. AAA 8.875% 1/01/04 @ 100 S.F. 161,250
Hsg. Bonds Series A (Financial Guaranty) 7/01/2017 7/01/95 @ 103 Ref.
13 350,000 Mercer Cnty. N.D. Poll. Contrl. Rev. Bonds AAA 10.500% 6/30/09 @ 100 S.F. 411,548
Series 1984 (Basin Elec. Pwr. Co-Op. 6/30/2013 12/30/94 @ 102 Ref.
Antelope Valley Station) (AMBAC)
14 350,000 Sam Rayburn Tx. Muni. Pwr. Agncy Pwr. AAA 9.250% 9/01/04 @ 100 S.F. 392,112
Supl. Sys. Rev. Bonds (MBIA) 9/01/2008 9/01/95 @ 102 Ref.
15 300,000 Dallas Cnty. Tex. Util. & Reclamation Dstrct. AAA 8.300% 2/15/09 @ 100 S.F. 310,662
Unlmtd. Ad Valorem Tax Bonds Series 1987 2/15/2016 2/15/98 @ 100 Ref.
(MBIA Corp.)
16 150,000 Intermountain Pwr. Agncy. Utah Pwr. Supl. AAA 5.000% 7/01/10 @ 100 S.F. 106,244
Rev. Rfndg. Bonds Series A (MBIA Corp.) 7/01/2012 1/01/97 @ 100 Ref.
17 200,000 Intermountain Pwr. Agncy. Utah Pwr. Supl. AAA 5.000% 7/01/10 @ 100 S.F. 140,800
Rev. Rfndg. Bonds, 1986 Series F (AMBAC) 7/01/2013 1/01/96 @ 100 Ref.
18 250,000 Santa Clara Calif. Hsg. Auth. Multi-Fam. AAA 0.000% 4/01/07 @ 13.074 S.F. 6,462
Hsg. Rev. Bonds Series 1984A (FHA Insrd. 4/01/2026 10/01/97 @ 5.011 Ref.
Mtg. Loan-Cedar Glen Aptmnts. Prjt.)
(MBIA)
---------- ----------
$5,000,000 $4,835,209
========== =============
</TABLE>
C/M 11939.0001 406278.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 14
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated December 22, 1988 among Bear,
Stearns & Co. Inc., as Depositor, United States Trust Company of New York, as
Trustee and Standard & Poor's Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Insured Municipal Securities Trust, 9th Discount Series, and
Subsequent Series, Trust Indenture and Agreement" dated April 11, 1985 as
amended in part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture") and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a single
instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, and the Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Indenture are herein incorporated by reference in their
entirety and shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Insured Municipal Securities
Trust, Series 14, and all Subsequent Series, the following sections of the
Indenture are amended as follows:
(a) Section 1.01(6) shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.";
(b) Section 1.02 shall be amended by adding the following word
immediately after the words "Bear, Stearns & Co.": "Inc.", wherever the former
shall appear in said Section.
C/M 11939.0001 406278.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in Schedule A hereto have
been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in Article I the
fractional undivided interest in and ownership of the Trust is 1/6,000.
(c) The term Record Date shall mean the first day of each month (or
the last business day prior thereto) commencing on May 1, 1989 for monthly
distributions, December 1 and June 1 of each year for semi-annual distributions
(commencing on June 1, 1989) and December 1 of each year for annual
distributions (commencing on December 1, 1989).
(d) The term Payment Date shall mean the fifteenth day of each month
(or the last business day prior thereto) commencing on May 15, 1989 for monthly
distributions, December 15 and June 15 of each year for semi-annual
distributions (commencing on June 15, 1989) and December 15 of each year for
annual distributions (commencing on December 15, 1989).
(e) All Certificateholders of record on April 1, 1989 (the "First
Record Date"), regardless of the plan of distribution selected, will receive a
distribution to be made on or shortly after April 15, 1989 (the "First Payment
Date"), and thereafter distributions will be made monthly, semi-annually or
annually, depending upon the plan of distribution chosen by each
Certificateholder.
(f) The First Settlement Date shall mean December 30, 1988.
(g) The number of Units referred to in Section 2.03 is 6,000.
(h) For the purposes of Section 4.02(a), the Evaluator shall receive
for each evaluation of the Bonds in the Trust a minimum fee of $15, plus a fee
of $0.25 for determining the aggregate value of each issue of Bonds in excess
of 50 issues (treating separate maturities of Bonds as separate issues).
(i) For the purposes of Section 6.01(g), the liquidation amount is
hereby specified to be $2,400,000.
-2-
C/M 11939.0001 406278.1
<PAGE>
(j) For purposes of Section 6.04, the Trustee shall be paid per annum
$.97 per $1,000 principal amount of Bonds for that portion of the Trust under
the monthly distribution plan, $.51 per $1,000 principal amount of Bonds for
that portion of the Trust under the semi-annual distribution plan and $.33 per
$1,000 principal amount of Bonds for that portion of the Trust under the annual
distribution plan. During the first year after the date hereof, such payments
to the Trustee will be reduced by a portion [a maximum of $.80 per Unit times
the number of Units on the monthly distribution plan, $.51 per unit plus $.29
of Trust expenses (to be assumed and paid by the Trustee) times the number of
Units on the semi-annual distribution plan and $.33 per Unit plus $.47 of Trust
expenses (to be assumed and paid by the Trustee) times the number of Units of
the annual distribution plan] of the amount of interest which accrues on any
"when, as and if issued" Bonds between the first settlement date of the Trust
and the respective dates of delivery of such Bonds.
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $0.25 per $1,000 principal amount of Bonds in the
Trust.
(l) For purposes of Section 9.05, the Depositor's address is 245 Park
Avenue, New York, New York 10167.
(m) For purposes of this Series of Insured Municipal Securities
Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Reference
Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-3-
C/M 11939.0001 406278.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By:----------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 22nd day of December, 1988, before me personally appeared
Peter DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
---------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 14th day of December, 1988, before me personally appeared
Thomas Porrazzo, to me known, who being by me duly sworn, said that he is an
Authorized Signator of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that he signed his name thereto by like
authority.
-----------------------------
Notary Public
C/M 11939.0001 406278.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- ----------------------------
(Assistant) Secretary
C/M 11939.0001 406278.1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
INSURED MUNICIPAL SECURITIES TRUST
PORTFOLIO
SERIES 14
As of December 22, 1988
A MONTHLY PAYMENT SERIES
SEMI-ANNUAL PAYMENT SERIES OR ANNUAL PAYMENT SERIES
Aggregate Name of Issuer and Coupon/ Redemption Feature
Portfolio Principal Title of Bonds Maturity S.F.-- Sinking Fund Cost of Bonds
No. Amount Contracted for(5) Ratings(1) Date(s)(2) Ref.-- Refunding(2) to Trust(3)
--- ------ ----------------- ---------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 300,000 San Jose Calif. Arpt. Rev. Bonds Series 1985 AAA* 8.750% 3/01/02 @ 100 S.F. $ 324,873
(MBIA) 3/01/2016 3/01/93 @ 104 Ref.
2 400,000 Orlando Fla. Cap. Prgrm. Rev. Bonds. Series AAA 8.250% 10/01/09 @ 100 S.F. 415,188
1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
3 400,000 Tallahassee Fla. Cap. Prgm. Rev. Bonds AAA 8.250% 10/01/09 @ 100 S.F. 415,188
Series 1988 (BIG) 10/01/2021 10/01/98 @ 102 Ref.
4 400,000 Burke Cnty. Ga. Poll. Cntrl. Rev. Bonds (Ga. AAA 12.000% No Sinking Fund 495,748
Pwr. Co. Plant Vogtle. Prjt.) 1st Series 1984 10/01/2014 10/01/94 @ 102 Ref.
(BIG)
5 400,000 Cherokee Cnty. Ga. Wtr. & Swrage. Auth. AAA 9.125% 8/01/06 @ 100 S.F. 446,020
Rev. Bonds Series 1985 (MBIA) 8/01/2009 8/01/95 @ 102.5 Ref.
6 375,000 Columbus Ga. Med. Centr. Hosp. Auth. Rev. AAA 9.125% 7/01/01 @ 100 S.F. 417,825
Rfndg. Bonds Anticipation Certs. Series 1985 7/01/2005 7/01/95 @ 102 Ref.
(BIG)
7 250,000 Fulco Ga. Hosp. Auth. Rev. Bonds AAA 9.300% 4/01/06 @ 100 S.F. 281,533
Anticipation Certs. (St. Joseph's Hosp. of 10/01/2015 10/01/95 @ 102 Ref.
Atlanta Proj.) Series 1985A (AMBAC)
8 150,000 Chicago Hts. Ill. Gen. Oblig. Corp. Purp. AAA 9.000% No Sinking Fund 166,515
Bonds Series 1985A (MBIA) 12/01/2006 6/01/96 @ 102 Ref.
9 250,000 Village of Evergreen Park Cook Cnty. Ill. AAA 6.000% 8/15/11 @ 100 S.F. 209,065
Hosp. Fac. Rev. Rfndg. Bonds (Little Co. of 2/15/2012 2/15/98 @ 100 Ref.
Mary Hosp. Inc.) Series 1988 (MBIA Corp.)
10 500,000 Northwest Suburban Muni. Joint Action Wtr. AAA 5.750% 5/01/09 @ 100 S.F. 404,170
Agncy. (Cook, DuPage & Kane Cntys. Ill.) 5/01/2012 5/01/96 @ 100 Ref.
Wtr. Supl. Sys. Rev. Bonds Series 1986
(MBIA)
11 400,000 Mass. Indus. Finc. Agncy. Poll. Cntrl. Rev. AAA 10.125% No Sinking Fund 453,824
Bonds 1983 Series (Eastern Edison Co. Prjt.) 8/01/2008 8/01/93 @ 103 Ref.
(AMBAC)
12 300,000 N.J. Wastewtr. Treatment Trust Insrd. Loan AAA* 9.000% No Sinking Fund 331,470
Rev. Bonds Series 1987 (BIG) 9/01/2006 9/01/97 @ 102 Ref.
13 400,000 Farmington N.M. Util. Sys. Rev. Bonds AAA 9.750% 5/15/06 @ 100 S.F. 463,668
Series 1985 (Financial Guaranty) 5/15/2013 5/15/96 @ 102 Ref.
14 300,000 N.C. Eastern Muni. Pwr. Agncy. Pwr. Sys. AAA 4.500% 7/01/20 @ 100 S.F. 191,649
Rev. Rfndg. Bonds Series 1987A (BIG) 1/01/2024 1/01/97 @ 100 Ref.
15 375,000 Charleston Cnty. S.C. Hosp. Fac. Rev. Rfndg. AAA 9.125% 10/01/06 @ 100 S.F. 418,822
& Imprvmt. Bonds (Roper Hosp. Prjt.) Series 10/01/2011 10/01/95 @ 102 Ref.
1985 (Financial Guaranty)
16 500,000 Intermountain Pwr. Agncy. Utah Spec. Oblig. AAA* 5.750% 7/01/19 @ 100 S.F. 397,260
Bonds Series C (BIG) 7/01/2020 7/01/96 @ 100 Ref.
17 300,000 Santa Clara Calif. Hsg. Auth. Multi-Fam. AAA 0.000% 4/01/07 @ 13.074 S.F. 7,788
Hsg. Rev. Bonds Series 1984A (FHA Insrd. 4/01/2026 10/01/97 @ 5.011 Ref.
Mtg. Loan-Cedar Glen Aprtmts. Prjt.)
(MBIA)
---------- ----------
$6,000,000 $5,840,606
========== =============
</TABLE>
C/M 11939.0001 406278.1
INSURED MUNICIPAL SECURITIES TRUST
SERIES 13
AMENDED REFERENCE TRUST AGREEMENT
This Amended Reference Trust Agreement, dated December 5, 1988 among
Bear, Stearns & Co. Inc., as Depositor, United States Trust Company of New
York, as Trustee and Standard & Poor's Corporation, as Evaluator amends that
certain "Insured Municipal Securities Trust 9th Discount Series (and subsequent
Series), Trust Indenture And Agreement" dated April 11, 1985 (the "Indenture"),
as amended by that certain "Insured Municipal Securities Trust Series 13,
Reference Trust Agreement dated December 1, 1988 among Bear, Stearns & Co.
Inc., as Depositor, United States Trust Company of New York, as Trustee and
Standard & Poor's Corporation, as Evaluator (the "Reference Trust Agreement").
WITNESSETH THAT:
Pursuant to the provisions of Section 9.01 of the Indenture, the
Depositor, Trustee and Evaluator hereby agree to amend the Reference Trust
Agreement in order to correct certain typographical errors contained in that
Agreement and to restate certain portions of that Agreement so as to reflect
properly the intent of the parties hereto. The parties hereto, therefore, agree
as follows:
That paragraphs (j) and (k) of Part II of the Reference Trust
Agreement be amended in their entirety to read as follows:
"(j) For purposes of Section 6.04, the Trustee shall be paid per
annum $.97 per $1,000 principal amount of Bonds for that portion of the Trust
under the monthly distribution plan, $.51 per $1,000 principal amount of Bonds
for that portion of the Trust under the semi-annual distribution plan and $.33
per $1,000 principal amount of Bonds for that portion of the Trust under the
annual distribution plan. During the first year after the date hereof, such
payments to the Trustee will be reduced by a portion [a maximum of $.80 per
Unit times the number of Units on the monthly distribution plan, $.51 per Unit
plus $.29 of Trust expenses (to be assumed and paid by the Trustee) times the
number of Units on the semi-annual distribution plan and $.33 per Unit plus
$.47 of Trust expenses (to be assumed and paid by the Trustee) times the number
of Units of the annual distribution plan) of the amount of interest which
accrues on any "when, as and if issued" Bonds between the first settlement date
of the Trust and the respective dates of delivery of such Bonds.
C/M 11939.0001 408532.1
<PAGE>
(k) For purposes of Section 7.04, the Depositor's maximum annual fee
is hereby specified to be $.25 per $1,000 principal amount of Bonds in the
Trust."
IN WITNESS WHEREOF, the parties hereto have caused this Amended
Reference Trust Agreement to be duly executed on the date first written above.
[Signatures on separate pages)
-2-
C/M 11939.0001 408532.1
<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
By:---------------------
Authorized Signator
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 6th day of December, 1988, before me personally appeared
Peter DeMarco, to me known, who being by me duly sworn, said that he is an
Authorized Signator of Bear, Stearns & Co. Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed
his name thereto by authority of the Board of Directors of said corporation.
-----------------------------
Notary Public
C/M 11939.0001 408532.1
<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By:------------------------------------
Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 6th day of December, 1988, before me personally appeared
Thomas Porrazzo, to me known, who being by me duly sworn, said that he is an
Authorized Signator of United States Trust Company of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation and that he signed his name thereto by like
authority.
------------------------------
Notary Public
C/M 11939.0001 408532.1
<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
By:--------------------------
Vice President
SEAL
ATTEST:
- ----------------------------
(Assistant) Secretary
C/M 11939.0001 408532.1
CERTIFICATE OF OWNERSHIP
Evidencing A Fractional Undivided Interest in
INSURED MST
No. MUNICIPAL SECURITIES TRUST UNITS
SERIES
PLAN OF DISTRIBUTION:
CUSIP
THIS IS TO
CERTIFY THAT
is the owner and registered holder of this
Certificate evidencing the ownership of
Unit(s)
of fractional undivided interest in Insured Municipal Securities Trust of the
above Series (hereinafter called the "Trust") created under the laws of the
State of New York by the Trust Indenture and Agreement as modified by the
Reference Trust Agreement relating to the sequentially numbered series of the
Series noted on the face hereof (hereinafter called the "Indenture") among BEAR,
STEARNS & CO. INC. (hereinafter called the "Depositor"), UNITED STATES TRUST
COMPANY OF NEW YORK (hereinafter called the "Trustee"), and STANDARD & POOR'S
CORPORATION (hereinafter called the "Evaluator"). This Certificate is issued
under and is subject to the terms, provisions and conditions of the Indenture to
which the holder of this Certificate by virtue of the acceptance hereof assents
and is bound, a summary of certain of the pertinent provisions of which is set
forth on the reverse hereof. The Depositor hereby grants and conveys all of its
right, title and interest in and to the Trust to the extent of the fractional
undivided interest represented hereby to the registered holder of this
Certificate subject to and in pursuance of the Indenture. This Certificate is
transferable and interchangeable by the registered holder in person or by his
duly authorized attorney at the corporate trust office of the Trustee upon
surrender of this Certificate properly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and payment of the
fees and expenses applicable hereto set forth herein.
This Certificate shall not become valid or binding for any purpose until
properly executed by the Trustee under the Indenture.
C/M: 11939.0001 408567.1
<PAGE>
IN WITNESS WHEREOF, Bear, Stearns & Co. Inc., as Depositor, has caused
this Certificate to be executed in facsimile by an authorized signatory and
United States Trust Company of New York, as Trustee, has caused this Certificate
to be executed in its corporate name by an authorized officer.
BEAR, STEARNS & CO. INC. Date:
Depositor
By
Authorized Signatory
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
By
Authorized Officer
C/M: 11939.0001 408567.1
<PAGE>
The following is a summary of certain provisions of the indenture (a copy of
which is on file and available for inspection to the holder hereof at the
corporate trust office of the Trustee), to which this Certificate is subject and
to which reference is hereby made. All of the terms, conditions and covenants of
the indenture are incorporated herein by reference as fully as if set forth
herein. The Trust consists of (1) such of the interest-bearing debt securities
and obligations that may be deposited in trust and listed in Schedule A of the
indenture (including contracts, if any, for the purchase of certain of such
securities and obligations together with the cash, cash equivalents and/or an
irrevocable letter of credit issued by a commercial bank in the amount required
for such purchase) and any other securities that may be deposited in the Trust
in exchange or substitution therefor in accordance with the Indenture, as may
from time to time continue to be held in the Trust and (2) such cash amounts as
from time to time may be held in the Interest Account and the Principal Account
maintained under the Indenture in the manner described below.
At any given time this Certificate shall represent a fractional undivided
interest in the Trust, the numerator of which fraction shall be the number of
units set forth on the face hereof and the denominator of which shall be the
total number of units of fractional undivided interest represented by all
Certificates of this Series which are outstanding at such time.
The registered holder of this Certificate is entitled at any time upon tender of
this Certificate to the Trustee at its corporate trust office in the City of New
York, endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form, and upon payment of any tax or other
governmental charges, to receive on the seventh calendar day following the day
on which such tender is made, or, if such calendar day is not a business day, on
the first business day prior to such calendar day, an amount in cash equal to
the evaluation of the fractional undivided interest in the Trust evidenced by
this Certificate, upon the basis provided for in the indenture (the "Redemption
Price"). The right of redemption may be suspended and the date of payment may be
postponed for any period during which the New York Stock Exchange is closed or
trading on that Exchange is restricted, or for any period during which an
emergency exists so that disposal of the obligations held in the Trust is not
reasonably practicable or it is not reasonably practicable fairly to determine
the value of such obligations in accordance with the Indenture or for such other
periods as the Securities and Exchange Commission may by order permit.
The Trustee is irrevocably authorized in its discretion, in lieu of redeeming
this Certificate if tendered for redemption, to sell this Certificate in the
over-the-counter market or by private sale for the account of the
Certificateholder at a price which
C/M: 11939.0001 408567.1
<PAGE>
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 this Certificate. In the event of any such sale the
Trustee shall pay the net proceeds thereof to the Certificateholder on the day
he would otherwise be entitled to receive payment of the Redemption Price.
Interest received by the Trustee as part of the Trust (including interest
accrued and unpaid prior to the day of deposit of any obligation in the Trust
and that part of the proceeds of the sale, liquidation, redemption or maturity
of any such obligation which represents accrued interest) shall be credited by
the Trustee to the Interest Account. The fractional undivided interest
represented by this Certificate in the balance in the Interest Account (after
the deductions referred to below) shall first be computed as of the semi-annual
Record Date (as defined in the Indenture). The next computation shall be made as
of the next succeeding semi-annual Record Date, and thereafter as of the first
day of June and December of each year commencing with the first such day
following the date of this Certificate.
An amount in cash equal to the fractional undivided interest in the Interest
Account (on the basis set forth below) computed as set forth above, shall be
distributed on the 15th day of the respective months, or within a reasonable
period of time thereafter, to the registered holder of this Certificate at the
close of business on the first day of the month in which such distribution is
made.
The Trustee shall make semi-annual distributions from the Interest Account on
the basis of one-half of the estimated annual interest income expected by the
Trustee to be received by the Trust in the ensuing twelve month period, after
deduction of the estimated costs and expenses to be incurred during such period,
except as otherwise hereafter provided. To the extent cash in the Interest
Account is insufficient for any distribution the Trustee shall advance its own
funds sufficient therefor and shall be entitled to reimbursement, without
interest, out of interest received by the Trust subsequent to such advance.
All moneys (other than interest) received by the Trustee, as part of the Trust
(including amounts received from the sale, liquidation, redemption or maturity
of any obligation held in the Trust) shall be credited by the Trustee to a
separate Principal Account. The fractional undivided interest represented by
this Certificate in the cash balance in the Principal Account (after the
deductions referred to below) shall be computed as of the first day of June and
December of each year, commencing with the semi-annual Record Date. An amount in
cash equal to the fractional undivided interest in the Principal Account,
computed as set forth above, shall be distributed on the fifteenth day of the
respective months, or within a reasonable time thereafter, to
C/M: 11939.0001 408567.1
<PAGE>
the registered holder of this Certificate at the close of business on the first
day of such month. The Trustee shall not be required to make a distribution from
the Principal Account unless the cash balance on such deposit therein available
for such distribution shall be sufficient to permit the distribution of at least
$1.00 per Unit.
Distributions from the Interest and Principal Accounts shall be made to the
registered holder hereof by check mailed to the address of such holder appearing
in the registration books of the Trustee.
From time to time deductions shall be made from the Interest Account and
Principal Account, as more fully set forth in the Indenture, for redemptions,
compensation of the Trustee, compensation of the Evaluator, payment of the
Depositor's fee for services as such, reimbursement of certain expenses incurred
or advances made by or on behalf of the Trustee, certain legal expenses, and
payment of, or the establishment of a reserve for, applicable taxes or
government charges, if any.
Within a reasonable period of time after the end of each calendar year the
Trustee shall furnish to the registered holder of this Certificate a statement
setting forth, among other things, the amounts received by the Trust and
deductions therefrom and the amounts distributed during the preceding year in
respect of interest on, payments and prepayments of principal of, and sales,
redemptions or maturities of, obligations held in the Trust.
This Certificate shall be transferable by the registered holder hereof by
presentation and surrender at the corporate trust office of the Trustee properly
endorsed or accompanied by a written instrument or instruments of transfer in
form satisfactory to the Trustee and executed by the registered holder hereof or
his authorized attorney. Certificates of this Series are interchangeable for one
or more Certificates in an equal aggregate number of Units of fractional
undivided interest at the corporate trust office of the Trustee, in
denominations of a single Unit of fractional undivided interest or any whole
multiple thereof.
The holder of this Certificate may be required to pay a transfer charge in
connection with the transfer or exchange of this Certificate, as well as any tax
or other governmental charge that may be imposed in connection with the
transfer, exchange or other surrender of this Certificate.
The holder of this Certificate, by virtue of the acceptance hereof, assents to
and shall be bound by the terms of the Indenture, a copy of which is on file and
available for inspection at the corporate trust office of the Trustee, to which
reference is made for all the terms, conditions and covenants thereof.
C/M: 11939.0001 408567.1
<PAGE>
The Trustee may deem and treat the person in whose name this Certificate is
registered upon the books of the Trustee as the owner hereof for all purposes
and the Trustee shall not be affected by any notice to the contrary.
The Indenture and the Trust created thereby shall terminate upon the maturity,
redemption, sale or other disposition of the last security held thereunder,
provided, however, that in no event shall the Indenture and the Trust continue
beyond the end of the calendar year preceding the fiftieth anniversary of the
execution of the Indenture. The Indenture also provides that the Trust may be
terminated at any time by the written consent of the holders of Certificates
representing all of the Units outstanding and under certain circumstances which
include a decrease in the value of the Trust to less than 40% of the initial
aggregate principal amount of the securities deposited in the Trust. Upon any
termination the Trustee shall fully liquidate the securities then held, if any,
and distribute pro rata the funds then held in the Trust upon surrender of the
Certificates, all in the manner provided in the Indenture. Upon termination, the
Trustee shall be under no further obligation with respect to the Trust, except
to hold the funds in trust without interest until distribution as aforesaid and
shall have no duty upon any such termination to communicate with the holder
hereof other than by mail at the address of such holder appearing on the
registration books of the Trustee.
STATEMENT REGARDING DISTRIBUTIONS
On the face of this Certificate it is indicated whether the registered holder
hereof has elected to receive distributions from the Interest Account monthly,
semi-annually, or annually.
This Certificate by its terms provides that distributions from the Interest
Account shall first be computed as of the semi-annual Record Date, and
thereafter as of the next succeeding semi-annual Record Date commencing with the
first such day following the date of the Certificate, and an amount in cash
equal to the share of the Interest Account represented by this Certificate
distributed on the fifteenth day of the respective months next following such
computations, or within a reasonable period of time thereafter, to the
registered holder of this Certificate at the close of business on the first day
of the month in which the distribution is made.
If monthly distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed monthly as of the first day of each month of each year, commencing with
the monthly Record Date, and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly after
the fifteenth day of each month.
C/M: 11939.0001 408567.1
<PAGE>
If annual distributions have been selected, the fractional undivided interest
represented by this Certificate in the balance in the Interest Account, after
the first distribution and after the deductions referred to above, will be
computed annually as of the first day of December of each year, commencing with
the annual Record Date and an amount in cash as thus computed will be
distributed to the holder hereof at such date of computation on or shortly after
the fifteenth day of each December.
All Certificateholders of record as of the First Record Date (as defined in the
Indenture) however, regardless of the plan of distribution selected, will
receive the distribution to be made on or shortly after the First Payment Date
(as defined in the Indenture), and thereafter, distributions will be made
monthly, semi-annually or annually depending upon the plan of distribution
chosen by the holder hereof.
The plan of distribution chosen by the registered holder hereof may be changed
by written notice to the Trustee not later than November 1 in any calendar year
by surrender to the Trustee of this Certificate, together with a completed form
for selection of plan of distribution provided by the Trustee. A plan of
distribution shall continue in effect until changed as herein provided. A change
in a plan of distribution may only be made as indicated herein and will be
effective as of December 2 for the ensuing twelve months. Distributions to
Certificateholders who are participating in one of the optional plans for
distribution of interest shall not be affected because of advancements of the
Trustee for the purpose of equalizing distributions to Certificateholders
participating in a different plan.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF TRANSFERS MIN ACT - Custodian
(Cust) (Minor)
under Uniform Transfers to Minors Act
(State)
Additional abbreviations may also be used though not in the above list.
C/M: 11939.0001 408567.1
<PAGE>
ASSIGNMENT
For Value Received hereby
sells, assigns and transfers unto
the within Certificate and does hereby irrevocably constitute and appoint
attorney, to transfer the within Certificate on the books of the Trustee, with
full power of substitution in the premises.
Dated:
NOTICE: The signature(s) to this
assignment must correspond with
the name(s) as written above
upon the face of this
Certificate in every particular,
without alteration or
enlargement or any change
whatever.
Signature Guaranteed
C/M: 11939.0001 408567.1
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, New York 10017
(212) 856-7000
August 18, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Insured Municipal Securities Trust,
37th Discount Series and Series 10
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Insured
Municipal Securities Trust, 37th Discount Series and Insured Municipal
Securities Trust, Series 10 (collectively, the "Trusts") in connection with the
issuance by the Trusts, respectively, of 11,000 units of fractional undivided
interest and 2,500 units of fractional undivided interest (collectively, the
"Units") in such Trusts. Pursuant to the Trust Agreements referred to below,
the Depositor has transferred to the Trusts certain long-term bonds and
contracts to purchase certain long-term bonds together with an irrevocable
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All bonds to be acquired by the Trusts are
collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trusts and the issuance and
sale of the Units: (a) the Reference Trust Agreement of even date relating to
each Trust (collectively, the "Trust Agreements") among the Depositor, United
States Trust Company of New York, as Trustee, and Standard & Poor's
Corporation, as Evaluator; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trusts, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 33-22988) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"), and
Amendment No. 1 thereto (said Registration Statement, as amended by said
Amendment
C/M 11939.0001 406241.1
<PAGE>
2
Bear Stearns & Co.
August 18, 1988
No. 1 being herein called the "Registration Statement"); (d) the proposed form
of final Prospectus (the "Prospectus") relating to the Units, which is expected
to be filed with the Commission this day; (e) certified resolutions of the
Executive Committee of the Depositor authorizing the execution and delivery by
the Depositor of the Trust Agreements and the consummation of the transactions
contemplated thereby; (f) the Certificate of Incorporation and ByLaws of the
Depositor; and (g) a certificate of an authorized officer of the Depositor with
respect to certain factual matters contained therein.
We have also examined the Application for Orders of Exemption from
certain provisions of Sections 14(a) and 22(d) of the 1940 Act and Rules 19b-1
and 22c-1 thereunder, and the First Amendment thereto, and the Application for
Orders of Exemption from certain provisions of Sections 11(a) and 22(d) of the
1940 Act, which have been filed with the Commission by the Depositor on behalf
of New York Municipal Trust, Series 1 and Subsequent Series, and the related
exemptive Orders issued on November 8, 1978 and April 29, 1981.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trusts, and other financial or statistical data contained in
the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations
under equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other states or jurisdictions except as to
matters of Federal and Delaware corporate law.
C/M 11939.0001 406241.1
<PAGE>
3
Bear Stearns & Co.
August 18, 1988
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer of the Depositor and are valid and binding obligations
of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by you and such Certificates, when executed by
you as Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute fractional undivided
interests in the respective Trusts, will be entitled to the benefits of the
respective Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust Agreements and the
Registration Statement, and the Units will be fully paid and non-assessable by
the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Agreement Among Underwriters relating
to each Trust and the Trustee may rely on this opinion as fully and to the same
extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressee and
the Trustee in connection with the issuance of the Units of the Trust and may
not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler
C/M 11939.0001 406241.1
<PAGE>
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, New York 10017
(212) 856-7000
September 23, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Insured Municipal Securities Trust,
38th Discount Series and Series 11
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Insured
Municipal Securities Trust, 38th Discount Series and Insured Municipal
Securities Trust, Series 11 (collectively, the "Trusts") in connection with the
issuance by the Trusts, respectively, of 11,000 units of fractional undivided
interest and 2,500 units of fractional undivided interest (collectively, the
"Units") in such Trusts. Pursuant to the Trust Agreements referred to below,
the Depositor has transferred to the Trusts certain long-term bonds and
contracts to purchase certain long-term bonds together with an irrevocable
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All bonds to be acquired by the Trusts are
collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trusts and the issuance and
sale of the Units: (a) the Reference Trust Agreement of even date relating to
each Trust (collectively, the "Trust Agreements") among the Depositor, United
States Trust Company of New York, as Trustee, and Standard & Poor's
Corporation, as Evaluator; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trusts, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 33-24111) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"), and
Amendment No. 1
C/M 11939.0001 406241.1
<PAGE>
2
Bear Stearns & Co.
September 23, 1988
thereto (said Registration Statement, as amended by said Amendment No. 1 being
herein called the "Registration Statement"; (d) the proposed form of final
Prospectus (the "Prospectus") relating to the Units, which is expected to be
filed with the Commission this day; (e) certified resolutions of the Executive
Committee of the Depositor authorizing the execution and delivery by the
Depositor of the Trust Agreements and the consummation of the transactions
contemplated thereby; (f) the Certificate of Incorporation and ByLaws of the
Depositor; and (g) a certificate of an authorized officer of the Depositor with
respect to certain factual matters contained therein.
We have also examined the Application for Orders of Exemption from
certain provisions of Sections 14(a) and 22(d) of the 1940 Act and Rules 19b-1
and 22c-1 thereunder, and the First Amendment thereto, and the Application for
Orders of Exemption from certain provisions of Sections 11(a) and 22(d) of the
1940 Act, which have been filed with the Commission by the Depositor on behalf
of New York Municipal Trust, Series 1 and Subsequent Series, and the related
exemptive Orders issued on November 8, 1978 and April 29, 1981.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trusts, and other financial or statistical data contained in
the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations
under equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other
C/M 11939.0001 406241.1
<PAGE>
3
Bear Stearns & Co.
September 23, 1988
states or jurisdictions except as to matters of Federal and Delaware
corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer of the Depositor and are valid and binding obligations
of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by you and such Certificates, when executed by
you as Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute fractional undivided
interests in the respective Trusts, will be entitled to the benefits of the
respective Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust Agreements and the
Registration Statement, and the Units will be fully paid and non-assessable by
the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Agreement Among Underwriters relating
to each Trust and the Trustee may rely on this opinion as fully and to the same
extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressee and
the Trustee in connection with the issuance of the Units of the Trust and may
not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler
C/M 11939.0001 406241.1
<PAGE>
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, New York 10017
(212) 856-7000
October 27, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Insured Municipal Securities Trust,
39th Discount Series and Series 12
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Insured
Municipal Securities Trust, 39th Discount Series and Insured Municipal
Securities Trust, Series 12 (collectively, the "Trusts") in connection with the
issuance by the Trusts, respectively, of 12,000 units of fractional undivided
interest and 3,500 units of fractional undivided interest (collectively, the
"Units") in such Trusts. Pursuant to the Trust Agreements referred to below,
the Depositor has transferred to the Trusts certain long-term bonds and
contracts to purchase certain long-term bonds together with an irrevocable
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All bonds to be acquired by the Trusts are
collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trusts and the issuance and
sale of the Units: (a) the Reference Trust Agreement of even date relating to
each Trust (collectively, the "Trust Agreements") among the Depositor, United
States Trust Company of New York, as Trustee, and Standard & Poor's
Corporation, as Evaluator; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trusts, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 33-24743) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"), and
Amendment No. 1
C/M 11939.0001 406241.1
<PAGE>
2
Bear Stearns & Co.
October 27, 1988
thereto (said Registration Statement, as amended by said Amendment No. 1 being
herein called the "Registration Statement"); (d) the proposed form of final
Prospectus (the "Prospectus") relating to the Units, which is expected to be
filed with the Commission this day; (e) certified resolutions of the Executive
Committee of the Depositor authorizing the execution and delivery by the
Depositor of the Trust Agreements and the consummation of the transactions
contemplated thereby; (f) the Certificate of Incorporation and ByLaws of the
Depositor; and (g) a certificate of an authorized officer of the Depositor with
respect to certain factual matters contained therein.
We have also examined the Application for Orders of Exemption from
certain provisions of Sections 14(a) and 22(d) of the 1940 Act and Rules 19b-1
and 22c-1 thereunder, and the First Amendment thereto, and the Application for
Orders of Exemption from certain provisions of Sections 11(a) and 22(d) of the
1940 Act, which have been filed with the Commission by the Depositor on behalf
of New York Municipal Trust, Series 1 and Subsequent Series, and the related
exemptive orders issued on November 8, 1978 and April 29, 1981.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trusts, and other financial or statistical data contained in
the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations
under equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other
C/M 11939.0001 406241.1
<PAGE>
3
Bear Stearns & Co.
October 27, 1988
states or jurisdictions except as to matters of Federal and Delaware
corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer of the Depositor and are valid and binding obligations
of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by you and such Certificates, when executed by
you as Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute fractional undivided
interests in the respective Trusts, will be entitled to the benefits of the
respective Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust Agreements and the
Registration Statement, and the Units will be fully paid and non-assessable by
the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Agreement Among Underwriters relating
to each Trust and the Trustee may rely on this opinion as fully and to the same
extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressee and
the Trustee in connection with the issuance of the Units of the Trust and may
not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler
C/M 11939.0001 406241.1
<PAGE>
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, New York 10017
(212) 856-7000
December 1, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Insured Municipal Securities Trust,
40th Discount Series and Series 13
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Insured
Municipal Securities Trust, 40th Discount Series and Insured Municipal
Securities Trust, Series 13 (collectively, the "Trusts") in connection with the
issuance by the Trusts, respectively, of 14,000 units of fractional undivided
interest and 5,000 units of fractional undivided interest (collectively, the
"Units") in such Trusts. Pursuant to the Trust Agreements referred to below,
the Depositor has transferred to the Trusts certain long-term bonds and
contracts to purchase certain long-term bonds together with an irrevocable
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All bonds to be acquired by the Trusts are
collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trusts and the issuance and
sale of the Units: (a) the Reference Trust Agreement of even date relating to
each Trust (collectively, the "Trust Agreements") among the Depositor, United
States Trust Company of New York, as Trustee, and Standard & Poor's
Corporation, as Evaluator; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trusts, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 33-25192) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"), and
Amendment No. 1
C/M 11939.0001 406241.1
<PAGE>
2
Bear Stearns & Co.
December 1, 1988
thereto (said Registration Statement, as amended by said Amendment No. 1 being
herein called the "Registration Statement"); (d) the proposed form of final
Prospectus (the "Prospectus") relating to the Units, which is expected to be
filed with the Commission this day; (e) certified resolutions of the Executive
Committee of the Depositor authorizing the execution and delivery by the
Depositor of the Trust Agreements and the consummation of the transactions
contemplated thereby; (f) the Certificate of Incorporation and ByLaws of the
Depositor; and (g) a certificate of an authorized officer of the Depositor with
respect to certain factual matters contained therein.
We have also examined the Application for Orders of Exemption from
certain provisions of Sections 14(a) and 22(d) of the 1940 Act and Rules 19b-1
and 22c-1 thereunder, and the First Amendment thereto, and the Application for
Orders of Exemption from certain provisions of Sections 11(a) and 22(d) of the
1940 Act, which have been filed with the Commission by the Depositor on behalf
of New York Municipal Trust, Series 1 and Subsequent Series, and the related
exemptive Orders issued on November 8, 1978 and April 29, 1981.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trusts, and other financial or statistical data contained in
the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations
under equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other
C/M 11939.0001 406241.1
<PAGE>
3
Bear Stearns & Co.
December 1, 1988
states or jurisdictions except as to matters of Federal and Delaware
corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer of the Depositor and are valid and binding obligations
of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by you and such Certificates, when executed by
you as Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute fractional undivided
interests in the respective Trusts, will be entitled to the benefits of the
respective Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust Agreements and the
Registration Statement, and the Units will be fully paid and non-assessable by
the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Agreement Among Underwriters relating
to each Trust and the Trustee may rely on this opinion as fully and to the same
extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressee and
the Trustee in connection with the issuance of the Units of the Trust and may
not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler
C/M 11939.0001 406241.1
<PAGE>
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, New York 10017
(212) 856-7000
December 22, 1988
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Insured Municipal Securities Trust,
41st Discount Series and Series 14
Dear Sirs:
We have acted as special counsel for Bear, Stearns & Co. Inc., as
Depositor, Sponsor and Principal Underwriter (the "Depositor") of Insured
Municipal Securities Trust, 41st Discount Series and Insured Municipal
Securities Trust, Series 14 (collectively, the "Trusts") in connection with the
issuance by the Trusts, respectively, of 15,000 units of fractional undivided
interest and 6,000 units of fractional undivided interest (collectively, the
"Units") in such Trusts. Pursuant to the Trust Agreements referred to below,
the Depositor has transferred to the Trusts certain long-term bonds and
contracts to purchase certain long-term bonds together with an irrevocable
letter of credit to be held by the Trustee upon the terms and conditions set
forth in the Trust Agreements. (All bonds to be acquired by the Trusts are
collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of the
following documents relating to the creation of the Trusts and the issuance and
sale of the Units: (a) the Reference Trust Agreement of even date relating to
each Trust (collectively, the "Trust Agreements") among the Depositor, United
States Trust Company of New York, as Trustee, and Standard & Poor's
Corporation, as Evaluator; (b) the Notification of Registration on Form N-8A
and the Registration Statement on Form N-8B-2, as amended, relating to the
Trusts, as filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Investment Company Act of 1940
C/M 11939.0001 406241.1
<PAGE>
2
Bear Stearns & Co.
December 22, 1988
(the "1940 Act"); (c) the Registration Statement on Form S-6 (Registration No.
33-25978) filed with the Commission pursuant to the Securities Act of 1933 (the
"1933 Act"), and Amendment No. 1 thereto (said Registration Statement, as
amended by said Amendment No. 1 being herein called the "Registration
Statement"); (d) the proposed form of final Prospectus (the "Prospectus")
relating to the Units, which is expected to be filed with the Commission this
day; (e) certified resolutions of the Executive Committee of the Depositor
authorizing the execution and delivery by the Depositor of the Trust Agreements
and the consummation of the transactions contemplated thereby; (f) the
Certificate of Incorporation and ByLaws of the Depositor; and (g) a certificate
of an authorized officer of the Depositor with respect to certain factual
matters contained therein.
We have also examined the Application for Orders of Exemption from
certain provisions of Sections 14(a) and 22(d) of the 1940 Act and Rules 19b-1
and 22c-1 thereunder, and the First Amendment thereto, and the Application for
Orders of Exemption from certain provisions of Sections 11(a) and 22(d) of the
1940 Act, which have been filed with the Commission by the Depositor on behalf
of New York Municipal Trust, Series 1 and Subsequent Series, and the related
exemptive Orders issued on November 8, 1978 and April 29, 1981.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trusts, and other financial or statistical data contained in
the Registration Statement and the Prospectus, as to which you have been
furnished with the reports of the accountants appearing in the Registration
Statement and the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganizations,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations
under equitable principles governing the availability of equitable remedies.
C/M 11939.0001 406241.1
<PAGE>
3
Bear Stearns & Co.
December 22, 1988
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other states or jurisdictions except as to
matters of Federal and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer of the Depositor and are valid and binding obligations
of the Depositor in accordance with their respective terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by you and such Certificates, when executed by
you as Depositor and the Trustee in accordance with the provisions of the
Certificates and the respective Trust Agreements and issued for the
consideration contemplated therein, will constitute factional undivided
interests in the respective Trusts, will be entitled to the benefits of the
respective Trust Agreements, will conform in all material respects to the
description thereof for the Units as provided in the Trust Agreements and the
Registration Statement, and the Units will be fully paid and non-assessable by
the Trusts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Agreement Among Underwriters relating
to each Trust and the Trustee may rely on this opinion as fully and to the same
extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressee and
the Trustee in connection with the issuance of the Units of the Trust and may
not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler
C/M 11939.0001 406241.1
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 10
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-22988 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 Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 11
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-24111 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 Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 12
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-24743 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 Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 13
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-25192 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 Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 14
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-25978 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 Registratin Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commision.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
Managed Funds Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
Standard & Poor's
abc
October 31, 1996
Reich & Tang
600 5th Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust, Series 10
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-22988.
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,
Sanford B. Bragg
Managing Director
/lv
<PAGE>
Managed Funds Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
Standard & Poor's
abc
October 31, 1996
Reich & Tang
600 5th Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust, Series 11
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-24111.
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,
Sanford B. Bragg
Managing Director
/lv
<PAGE>
Managed Funds Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
Standard & Poor's
abc
October 31, 1996
Reich & Tang
600 5th Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust, Series 12
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-24743.
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,
Sanford B. Bragg
Managing Director
/lv
<PAGE>
Managed Funds Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
Standard & Poor's
abc
October 31, 1996
Reich & Tang
600 5th Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust, Series 13
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-25192.
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,
Sanford B. Bragg
Managing Director
/lv
<PAGE>
Managed Funds Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
Standard & Poor's
abc
October 31, 1996
Reich & Tang
600 5th Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust, Series 14
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-25978.
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,
Sanford B. Bragg
Managing Director
/lv
