As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 33-26426*
================================================================================
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 15, SERIES 16 AND SERIES 17
B. Name of depositor: REICH & TANG DISTRIBUTORS L.P.
C. Complete address of depositor's principal executive office:
600 Fifth Avenue
New York, NY 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 April 30, 1997 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / 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 15, Series 16 and Series 17, covered by
prospectuses heretofore filed as part of separate registration
statements on Form S-6 (Registration Nos. 33-26426, 33-26769 and
33-26858, respectively) under the Act.
Each of the Registrants declares that an indefinite number of its units
are being registered by this Registration Statement 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 December 31, 1996 on February 28, 1997.
1155.1
<PAGE>
Prospectus Part A Dated April 30, 1997
INSURED MUNICIPAL SECURITIES TRUST
SERIES 15
The Trust is a unit investment trust designated Series 15
("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. There can be no assurance that the Trust's
investment objectives will be achieved. 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. In addition, capital gains are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsor is
Reich & Tang Distributors L.P. The value of the Units of the Trust will
fluctuate with the value of the underlying bonds.
Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 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. Part A of this Prospectus may not be distributed unless accompanied
by Part B. 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.
- --------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives 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."
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
110894.1
<PAGE>
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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/6587th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "Organization" in Part B of this Prospectus.) The Units being
offered hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a
municipal bond guaranty insurance policy obtained by either the Sponsor
("Sponsor-Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall become
due for payment but shall not have been paid by the issuer or any other insurer
thereof. 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"), 34.6%; Bond Investor's Guaranty
("BIG"), 28.7%; Financial
A-2
110894.1
<PAGE>
Guaranty Insurance Company ("Financial Guaranty"), 19.8%; Municipal Bond
Insurance Association ("MBIA"), 7.2%; and MBIA Corp., 9.7%.
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 3.6% of the
Public Offering Price, or 3.754% of the net amount invested in Bonds per Unit.
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 $506.78 plus accrued interest of
$5.82 under the monthly distribution plan, $8.43 under the semi-annual
distribution plan and $8.43 under the annual distribution plan, for a total of
$512.60, $515.21 and $515.21, respectively. The Public Offering Price per Unit
can vary on a daily basis in accordance with fluctuations in the aggregate bid
price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
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
A-3
110894.1
<PAGE>
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".)
MARKET FOR UNITS. The Sponsor, although not obligated to do
so, presently maintains and intends to continue to maintain a secondary market
for the Units at prices based on the aggregate bid price of the Bonds in the
Trust portfolio. The reoffer price will be based on the aggregate bid price of
the Bonds plus a sales charge of 3.6% of the Public Offering Price (3.754% 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-4
110894.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 15
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Date of Deposit: January 26, 1989 Minimum Principal Distribution:
- --------------- ------------------------------
<S> <C> <C>
Principal Amount of Bonds ... $3,135,000 $1.00 per Unit.
- -------------------------
Number of Units ............. 6,587 Weighted Average Life to Maturity:
- --------------- ---------------------------------
Fractional Undivided Inter- 11.0 Years.
- --------------------------
est in Trust per Unit ..... 1/6587 Minimum Value of Trust:
--------------------- ----------------------
Principal Amount of Trust may be terminated if value
- -------------------
Bonds per Unit ............ $475.94 of Trust is less than $3,200,000
--------------
Secondary Market Public in principal amount of Bonds.
- -----------------------
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2038
of Bonds in Trust ....... $3,217,322+++ or the disposition of the last
Divided by 6,587 Units .... $488.44 Bond in the Trust.
Plus Sales Charge of 3.6% Trustee***: The Chase Manhattan
-------
of Public Offering Price $18.34 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
--------------------
per Unit ................ $506.78+ plan $.97 per $1,000; semi-annual
Redemption and Sponsor's plan $.51 per $1,000; and annual
- ------------------------
Repurchase Price plan is $.33 per $1,000.
----------------
per Unit .................. $488.44+ 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 ............ $18.34++++ issues).
--------------
Difference between Public Sponsor: Reich & Tang Distributors
Offering Price per Unit L.P.
and Principal Amount per Sponsor's Annual Fee: Maximum of
Unit Premium/(Discount) ... $30.84 $.25 per $1,000 principal amount
-----------------------
Evaluation Time: 4:00 p.m. of Bonds (see "Trust Expenses and
- ---------------
New York Time. Charges" in Part B of this
Prospectus).
</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# ......... $31.90 $31.90 $31.90
Less estimated annual fees and
expenses ............................ 1.09 .80 .84
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $30.81 $31.10 $31.06
Estimated interest distribution# ...... 2.56 15.55 31.06
Estimated daily interest accrual# ..... .0855 .0863 .0862
Estimated current return#++ ........... 6.08% 6.13% 6.13%
Estimated long term return++ .......... 4.87% 4.93% 4.92%
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-5
110894.1
<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.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (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, $8.43
semi-annually and $8.43 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.
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>
December 31, 1994 7,890 $774.13 $62.58 $63.16 $63.34 $ 41.98
December 31, 1995 7,048 600.44 49.15 49.61 49.78 189.78
December 31, 1996 6,587 496.49 36.02 36.38 36.44 87.12
</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-6
110894.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 8 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 26.9%+ 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
optional call provisions. The Bonds may also be subject to other calls, which
may be permitted or required by events which cannot be predicted (such as
destruction, condemnation, termination of a contract, or receipt of excess or
unanticipated revenues). One of the issues representing $400,000 of the
principal amount of the Bonds is a general obligation bond. All 7 of the
remaining issues representing $2,735,000 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, Hospital 2, Sales Tax 1, Utility 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 December 31, 1996, $1,595,000 (approximately 50.9% of
the aggregate principal amount of the Bonds) were original issue discount bonds.
Approximately 23.4% of the aggregate principal amount of the Bonds in the Trust
were purchased at a "market" discount from par value at maturity, approximately
16% were purchased at a premium and approximately 9.7% 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 trust is considered to be "concentrated" in a particular category or
industry when the securities in that category or industry constitute
25% or more of the aggregate face amount of the portfolio. See Part B
for disclosure, including risk factors, regarding this concentration.
A-7
110894.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 15
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 15 (the "Trust") at December 31, 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 December
31, 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 March
31, 1996 expressed an unqualified opinion on those financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110
March 28, 1997
<PAGE>
Insured Municipal Securities Trust, Series 15
Portfolio
December 31, 1996
<TABLE>
<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 $ 305,000 Parish of East Baton Rouge La. Pub. AAA 7.250% No Sinking Fund $ 327,939
Imprvmt. Bonds Series ST 1989 2/01/2012 2/01/99 @ 101.5 Ref.
(MBIA Corp.)
2 620,000 Charleston Cnty. S.C. Hosp. Fac. Rev. AAA 6.750 10/01/03 @ 100 S.F. 646,542
Parity Bonds (Roper Hosp.) Series 1986 10/01/2016 10/01/97 @ 102 Ref.
(Financial Guaranty)
3 150,000 Coastal Indus. Wtr. Auth. Tx. Wtr. Rev. AAA 6.375 12/15/97 @ 100 S.F. 154,269
Bonds (BIG) 12/15/2007 None
4 185,000 Coppell Tx. Muni. Util. Dstrct. No. 1 AAA 6.500 No Sinking Fund 189,061
Wtr. & Swr. Sys. Com. Unltd. Tax & 10/01/2007 10/01/97 @ 100 Ref.
Rev. Bonds Series 1987 (AMBAC)
5 400,000 Corpus Christi Tx. Genl. Imprvmt. AAA 7.000 No Sinking Fund 424,176
Bonds 1989 Series (AMBAC) 3/01/2008 3/01/99 @ 100 Ref.
6 225,000 Lubbock Tx. Hlth. Facs. Dev. Corp. AAA 6.000 12/01/07 @ 100 S.F. 225,556
Hosp. Rev. Rfndg. Bonds (Methodist Hosp.) 12/01/2016 12/01/97 @ 102 Ref.
(MBIA)
7 500,000 Travis Cnty. Tx. Hlth. Facs. Dev. Corp. AAA 8.375 11/01/08 @ 100 S.F. 527,340
Insrd. Hosp. Rev. Bonds, (St. David's 11/01/2017 11/01/97 @ 102 Ref.
Cmmnty. Hosp. Prjt.) Series 1987 A (AMBAC)
8 750,000 Intermountain Pwr. Agncy. Utah AAA 5.500 7/01/14 @ 100 S.F. 718,117
Pwr. Supl. Rev. Rfndg. Bonds (BIG) 7/01/2018 1/31/97 @ 100 Ref.
---------- ----------
$3,135,000 Total Investments (Cost $2,901,418) $3,213,000
========== ==========
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
Insured Municipal Securities Trust, Series 15
Footnotes to Portfolio
- -------------------------------------------------------------------------------
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. A
brief description of the ratings symbols and their meaning 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 December 31, 1996, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross unrealized appreciation $ 322,152
Gross unrealized depreciation (10,570)
----------
Net unrealized appreciation $ 311,582
=========
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 15
Statement of Net Assets
December 31, 1996
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $2,901,418) $ 3,213,000
--------------
Other Assets
Accrued Interest 61,170
--------------
Total Other Assets 61,170
--------------
Liabilities
Accrued Expenses 1,075
Advance from Trustee 2,683
--------------
Total Liabilities 3,758
--------------
Excess of Other Assets over Total Liabilities 57,412
--------------
Net Assets (6,587 Units of Fractional Undivided
Interest Outstanding, $496.49 per Unit) $ 3,270,412
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 15
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 241,397 $ 319,556 $ 509,073
----------- ----------- ----------
Expenses
Trustee's Fees 5,737 5,890 7,297
Evaluator's Fees 1,112 938 1,040
Sponser's Advisory Fee 993 1,368 1,580
----------- ----------- ----------
Total Expenses 7,842 8,196 9,917
----------- ----------- ----------
Net Investment Income 233,555 311,360 499,156
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments 42,042 (321,462) (78,557)
Change in Unrealized Appreciation
(Depreciation) on Investments (143,997) 497,365 (451,383)
----------- ----------- ----------
Net Gain (Loss) on Investments (101,955) 175,903 (529,940)
----------- ----------- ----------
Net Increase (Decrease)
in Net Assets
Resulting From Operations $ 131,600 $ 487,263 $ (30,784)
=========== =========== ===========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 15
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 233,555 $ 311,360 $ 499,156
Realized Gain (Loss)
on Investments 42,042 (321,462) (78,557)
Change in Unrealized Appreciation
(Depreciation) on Investments (143,997) 497,365 (451,383)
------------ ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
From Operations 131,600 487,263 (30,784)
------------ ------------- -------------
Distributions to Certificateholders
Investment Income 248,210 359,166 501,011
Principal 597,936 1,419,448 334,245
Redemptions
Interest 5,075 15,964 1,777
Principal 241,892 568,614 77,166
------------ ------------- -------------
Total Distributions
and Redemptions 1,093,113 2,363,192 914,199
------------ ------------- -------------
Total (Decrease) (961,513) (1,875,929) (944,983)
Net Assets
Beginning of Year 4,231,925 6,107,854 7,052,837
------------ ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $53,091, $72,821
and $136,591, Respectively) $ 3,270,412 $ 4,231,925 $ 6,107,854
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 15 (the "Trust") was
organized on January 26, 1989 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 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. 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 is recorded on the accrual basis.
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
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security 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 difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
3. Income Taxes
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>
Insured Municipal Securities Trust, Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 December 31, 1996, 1995 and 1994,
461, 842 and 100 units were redeemed, respectively.
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 December 31, 1996, the "Trustee's Fees" are comprised of
Trustee fees of $3,216 and other expenses of $2,521. The other expenses
include professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust, Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At December 31, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 8,239,251
Less Initial Gross Underwriting Commission 403,723
---------------
7,835,528
Accumulated Cost of Securities Sold,
Matured or Called (4,934,110)
Net Unrealized Appreciation 311,582
Undistributed Net Investment Income 53,091
Undistributed Proceeds From Investments 4,321
---------------
Total $ 3,270,412
===============
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 8,000 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.
<PAGE>
Insured Municipal Securities Trust, Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
December 31, 1996:
Net Asset Value, Beginning of Year** $ 600.44
---------------
Interest Income 35.41
Expenses (1.15)
---------------
Net Investment Income 34.26
---------------
Net Gain or Loss on Investments(1) (13.36)
---------------
Total from Investment Operations 20.90
---------------
Less Distributions
to Certificateholders
Income 36.41
Principal 87.70
for Redemptions
Interest .74
---------------
Total Distributions 124.85
---------------
Net Asset Value, End of Year ** $ 496.49
===============
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years ended
December 31, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since January 1, 1996 and the dates of net gain and loss on
investments.
- ----------
* Unless otherwise stated, based upon average units outstanding during
the year of 6,818 ([6,587 + 7,048]/2).
**Based upon actual units outstanding.
<PAGE>
Prospectus Part A Dated April 30, 1997
INSURED MUNICIPAL SECURITIES TRUST
SERIES 16
- --------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 16
("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. There can be no assurance that the Trust's
investment objectives will be achieved. 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. In addition, capital gains are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsor is
Reich & Tang Distributors L.P. The value of the Units of the Trust will
fluctuate with the value of the underlying bonds.
Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 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. Part A of this Prospectus may not be distributed unless accompanied
by Part B. 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.
- --------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives 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."
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
110891.1
<PAGE>
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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/6417th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "Organization" in Part B of this Prospectus.) The Units being
offered hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a
municipal bond guaranty insurance policy obtained by either the Sponsor
("Sponsor-Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall become
due for payment but shall not have been paid by the issuer or any other insurer
thereof. 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"), 34.1%; Financial Guaranty Insurance
Company ("Financial Guaranty"), 30%; Municipal Bond Insurance Association
("MBIA"), 22.6%; and MBIA Corp., 13.3%.
A-2
110891.1
<PAGE>
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 3.8% of the
Public Offering Price, or 3.943% of the net amount invested in Bonds per Unit.
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 $368.12 plus accrued interest of
$3.86 under the monthly distribution plan, $5.58 under the semi-annual
distribution plan and $5.57 under the annual distribution plan, for a total of
$371.98, $373.70 and $373.69, respectively. The Public Offering Price per Unit
can vary on a daily basis in accordance with fluctuations in the aggregate bid
price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
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 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-3
110891.1
<PAGE>
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".)
MARKET FOR UNITS. The Sponsor, although not obligated to do
so, presently maintains and intends to continue to maintain a secondary market
for the Units at prices based on the aggregate bid price of the Bonds in the
Trust portfolio. The reoffer price will be based on the aggregate bid price of
the Bonds plus a sales charge of 3.8% of the Public Offering Price (3.943% 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-4
110891.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 16
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Date of Deposit: February 16, 1989 Minimum Principal Distribution:
- --------------- ------------------------------
<S> <C> <C>
Principal Amount of Bonds ... $2,215,000 $1.00 per Unit.
- -------------------------
Number of Units ............. 6,417 Weighted Average Life to Maturity:
- --------------- ---------------------------------
Fractional Undivided Inter- 8.8 Years.
- --------------------------
est in Trust per Unit ..... 1/6417 Minimum Value of Trust:
--------------------- ----------------------
Principal Amount of Trust may be terminated if value
- -------------------
Bonds per Unit ............ $345.18 of Trust is less than $2,800,000
--------------
Secondary Market Public in principal amount of Bonds.
- -----------------------
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2038
of Bonds in Trust ....... $2,272,664+++ or the disposition of the last
Divided by 6,417 Units .... $354.16 Bond in the Trust.
Plus Sales Charge of 3.8% Trustee***: The Chase Manhattan
-------
of Public Offering Price. $13.96 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
--------------------
per Unit ................ $368.12+ plan $.96 per $1,000; semi-
Redemption and Sponsor's annual plan $.50 per $1,000; and
- ------------------------
Repurchase Price annual plan is $.32 per $1,000.
----------------
per Unit .................. $354.16+ 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 ............ $13.96++++ 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) ... $22.94 $.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).
</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# ......... $21.13 $21.13 $21.13
Less estimated annual fees and
expenses ............................ .89 .66 .77
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $20.24 $20.47 $20.36
Estimated interest distribution# ...... 1.68 10.23 20.36
Estimated daily interest accrual# ..... .0562 .0568 .0565
Estimated current return#++ ........... 5.50% 5.56% 5.53%
Estimated long term return++ .......... 4.39% 4.46% 4.43%
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-5
110891.1
<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.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (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 $3.86 monthly, $5.58
semi-annually and $5.57 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.
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>
December 31, 1994 6,917 $802.85 $62.40 $62.90 $63.07 -0-
December 31, 1995 6,782 545.21 53.63 54.10 54.18 $269.00
December 31, 1996 6,417 359.36 26.43 26.72 26.59 172.33
</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-6
110891.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1996
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 7 issues representing
obligations of issuers located in 3 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 optional call
provisions. The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). None of the Bonds is a general obligation bond. Seven issues
representing $2,215,000 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, Bond Bank 1, Certificates of Obligation 1, Gas
Revenue 1, Sanitary District 1, School Building 1 and Utility 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of December 31, 1996, $1,200,000 (approximately 54.2% of
the aggregate principal amount of the Bonds) were original issue discount bonds.
Approximately 38.5% of the aggregate principal amount of the Bonds in the Trust
were purchased at a "market" discount from par value at maturity, approximately
7.3% 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.
A-7
110891.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 16
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 16 (the "Trust") at December 31, 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 December
31, 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 March
31, 1996 expressed an unqualified opinion on those financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110
March 28, 1997
<PAGE>
Insured Municipal Securities Trust, Series 16
Portfolio
December 31, 1996
<TABLE>
<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 $ 165,000 Decatur Ill. Sanitation Dstrct. Gen. Oblig. AAA 9.100% 2/01/02 @ 100 S.F. $ 181,130
Rfndg.Rev. Bonds (Financial Guaranty) 2/01/2005 2/01/99 @ 100 Ref.
2 200,000 Indiana Bond Bank Spec. Prgm. Bonds AAA 6.250 No Sinking Fund 207,420
Series 1988 A (AMBAC) 8/01/2009 2/01/98 @ 102 Ref.
3 500,000 Indianapolis Ind. Gas Util. Sys. Rev. Rfndg. AAA 4.000 No Sinking Fund 453,710
Bonds Series B (Financial Guaranty) 6/01/2009 None
4 500,000 Tx. Pub. Bldg. Auth. Rev. Rfndg. Bonds AAA 6.000 8/01/12 @ 100 S.F. 520,965
Series 1986 (MBIA) 8/01/2014 None
5 555,000 Lancaster (Dallas Cnty.) Tx. Independent AAA 6.750 No Sinking Fund 584,865
Schl. Dstrct. Schl. Bldg. Unlmtd. Tax 2/01/2010 2/01/99 @ 100 Ref.
Bonds Series 1989 (AMBAC)
6 120,000 Mansfield Tx. (Tarrant, Johnson & Ellis Cntys.) AAA 7.000 No Sinking Fund 127,050
Combination Tax & Rev. Bonds Certs. of Oblig. 2/01/2008 2/01/99 @ 100 Ref.
Series 1989 (MBIA Corp.)
7 175,000 Mansfield Tx. (Tarrant, Johnson & Ellis Cntys.) AAA 7.000 No Sinking Fund 185,281
Combination Tax & Rev. Bonds Certs. of Oblig. 2/01/2009 2/01/99 @ 100 Ref.
Series 1989 (MBIA Corp.)
---------- ----------
$2,215,000 Total Investments (Cost $1,892,264) $2,260,421
========== ==========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 16
Footnotes to Portfolio
- ------------------------------------------------------------------------------
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. A
brief description of the ratings symbols and their meaning 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 December 31, 1996, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross unrealized appreciation $ 374,665
Gross unrealized depreciation (6,508)
-----------
Net unrealized appreciation $ 368,157
===========
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 16
Statement of Net Assets
December 31, 1996
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $1,892,264) $ 2,260,421
--------------
Other Assets
Accrued Interest 49,845
--------------
Total Other Assets 49,845
--------------
Liabilities
Accrued Expenses 806
Advance from Trustee 3,447
--------------
Total Liabilities 4,253
--------------
Excess of Other Assets over Total Liabilities 45,592
--------------
Net Assets (6,417 Units of Fractional Undivided
Interest Outstanding, $359.36 per Unit) $ 2,306,013
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 16
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 159,910 $ 314,562 $ 446,888
----------- ----------- ----------
Expenses
Trustee's Fees 4,412 5,515 6,397
Evaluator's Fees 1,108 942 1,038
Sponser's Advisory Fee 725 1,238 1,362
----------- ----------- ----------
Total Expenses 6,245 7,695 8,797
----------- ----------- ----------
Net Investment Income 153,665 306,867 438,091
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized (Loss) on
Investments (27,488) (348,593) ----
Change in Unrealized Appreciation
(Depreciation) on Investments (41,092) 487,417 (477,222)
----------- ----------- ----------
Net Gain (Loss) on Investments (68,580) 138,824 (477,222)
----------- ----------- ----------
Net Increase (Decrease)
in Net Assets
Resulting From Operations $ 85,085 $ 445,691 $ (39,131)
============ =========== ===========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 16
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 153,665 $ 306,867 $ 438,091
Realized (Loss)
on Investments (27,488) (348,593) ----
Change in Unrealized Appreciation
(Depreciation) on Investments (41,092) 487,417 (477,222)
------------ ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
From Operations 85,085 445,691 (39,131)
------------ ------------- -------------
Distributions to Certificateholders
Investment Income 175,817 366,857 437,205
Principal 1,156,703 1,833,988 ----
Redemptions
Interest 2,765 2,739 1,215
Principal 141,400 97,781 57,267
------------ ------------- -------------
Total Distributions
and Redemptions 1,476,685 2,301,365 495,687
------------ ------------- -------------
Total (Decrease) (1,391,600) (1,855,674) (534,818)
Net Assets
Beginning of Year 3,697,613 5,553,287 6,088,105
------------ ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $34,247, $59,164
and $121,893, Respectively) $ 2,306,013 $ 3,697,613 $ 5,553,287
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 16
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 16 (the "Trust") was
organized on February 16, 1989 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 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. 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 is recorded on the accrual basis.
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
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security 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 difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
3. Income Taxes
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>
Insured Municipal Securities Trust, Series 16
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 December 31, 1996, 1995 and 1994,
365, 135 and 73 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.32 to $.96 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 December 31, 1996, the "Trustee's Fees" are comprised of
Trustee fees of $2,212 and other expenses of $2,200. The other expenses
include professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust, Series 16
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At December 31, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 7,183,192
Less Initial Gross Underwriting Commission 351,976
---------------
6,831,216
Accumulated Cost of Securities Sold,
Matured or Called (4,938,952)
Net Unrealized Appreciation 368,157
Undistributed Net Investment Income 34,247
Undistributed Proceeds From Investments 11,345
---------------
Total $ 2,306,013
===============
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 7,000 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.
<PAGE>
Insured Municipal Securities Trust, Series 16
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
December 31, 1996:
Net Asset Value, Beginning of Year ** $ 545.21
---------------
Interest Income 24.23
Expenses (.95)
---------------
Net Investment Income 23.28
---------------
Net Gain or Loss on Investments(1) (6.81)
---------------
Total from Investment Operations 16.47
---------------
Less Distributions
to Certificateholders
Income 26.64
Principal 175.26
for Redemptions
Interest .42
---------------
Total Distributions 202.32
---------------
Net Asset Value, End of Year ** $ 359.36
===============
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years ended
December 31, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in
outstanding units since January 1, 1996 and the dates of net gain and
loss on investments.
- ----------
* Unless otherwise stated, based upon average units outstanding during
the year of 6,600 ([6,417 + 6,782]/2).
**Based upon actual units outstanding.
<PAGE>
Prospectus Part A Dated April 30, 1997
INSURED MUNICIPAL SECURITIES TRUST
SERIES 17
The Trust is a unit investment trust designated Series 17
("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. There can be no assurance that the Trust's
investment objectives will be achieved. 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. In addition, capital gains are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsor is
Reich & Tang Distributors L.P. The value of the Units of the Trust will
fluctuate with the value of the underlying bonds.
Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 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. Part A of this Prospectus may not be distributed unless accompanied
by Part B. 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.
- --------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives 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."
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
110889.1
<PAGE>
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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/5851st undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "Organization" in Part B of this Prospectus.) The Units being
offered hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a
municipal bond guaranty insurance policy obtained by either the Sponsor
("Sponsor-Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall become
due for payment but shall not have been paid by the issuer or any other insurer
thereof. 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"), 47.6%; Financial Guaranty
Insurance Company ("Financial Guaranty"), 30.7%; and MBIA Corp., 21.7%.
A-2
110889.1
<PAGE>
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 4.9% of the
Public Offering Price, or 5.125% of the net amount invested in Bonds per Unit.
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 $409.03 plus accrued interest of
$4.73 under the monthly distribution plan, $6.87 under the semi-annual
distribution plan and $6.86 under the annual distribution plan, for a total of
$413.76, $415.90 and $415.89, respectively. The Public Offering Price per Unit
can vary on a daily basis in accordance with fluctuations in the aggregate bid
price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
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-3
110889.1
<PAGE>
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.")
MARKET FOR UNITS. The Sponsor, although not obligated to do
so, presently maintains and intends to continue to maintain a secondary market
for the Units at prices based on the aggregate bid price of the Bonds in the
Trust portfolio. The reoffer price will be based on the aggregate bid price of
the Bonds plus a sales charge of 4.9% of the Public Offering Price (5.125% 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-4
110889.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 17
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Date of Deposit: May 16, 1989 Minimum Principal Distribution:
- --------------- ------------------------------
<S> <C> <C>
Principal Amount of Bonds ... $2,310,000 $1.00 per Unit.
Number of Units ............. 5,851 Weighted Average Life to Maturity:
Fractional Undivided Inter- 14.25 Years.
est in Trust per Unit ..... 1/5851 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value
Bonds per Unit ............ $394.80 of Trust is less than $2,800,000
Secondary Market Public in principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2038
of Bonds in Trust ....... $2,276,568+++ or the disposition of the last
Divided by 5,851 Units .... $389.09 Bond in the Trust.
Plus Sales Charge of 4.9% Trustee***: The Chase Manhattan
of Public Offering Price. $19.94 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $409.03+ plan $.96 per $1,000; semi-annual
Redemption and Sponsor's plan $.50 per $1,000; and annual
Repurchase Price plan is $.32 per $1,000.
per Unit .................. $389.09+ 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 ............ $19.94++++ 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) ... $14.23 $.25 per $1,000 principal amount
Evaluation Time: 4:00 p.m. of Bonds (see "Trust Expenses and
New York Time. Charges" in Part B 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# ......... $25.90 $25.90 $25.90
Less estimated annual fees and
expenses ............................ 1.02 .77 .79
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $24.88 $25.13 $25.11
Estimated interest distribution# ...... 2.07 12.56 25.11
Estimated daily interest accrual# ..... .0691 .0698 .0697
Estimated current return#++ ........... 6.08% 6.14% 6.14%
Estimated long term return++ .......... 4.78% 4.85% 4.84%
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-5
110889.1
<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.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (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 $4.73 monthly, $6.87
semi-annually and $6.86 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.
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>
December 31, 1994 6,959 $734.55 $62.35 $62.88 $63.04 $ 55.59
December 31, 1995 6,638 495.08 55.23 55.72 55.82 255.64
December 31, 1996 5,851 395.62 31.97 30.22 30.15 85.42
</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-6
110889.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1996
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 5 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 20.6% are hospital revenue bonds; none were issued in
connection with the financing of nuclear generating facilities; and none are
"mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
optional call provisions. The Bonds may also be subject to other calls, which
may be permitted or required by events which cannot be predicted (such as
destruction, condemnation, termination of a contract, or receipt of excess or
unanticipated revenues). None of the Bonds are general obligation bonds. Five
issues representing $2,310,000 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, Fair and Exposition 1, Hospital 1, Redevelopment 1 and
Utility Revenue 1. For an explanation of the significance of these factors see
"The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1996, $2,075,000 (approximately 89.8% of
the aggregate principal amount of the Bonds) were original issue discount bonds.
None of the aggregate principal amount of the Bonds in the Trust were purchased
at a "market" discount from par value at maturity, approximately 10.2% 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.
- --------
* Changes in the Trust Portfolio: From January 1, 1997 to March 21, 1997,
the entire principal amount of the Bond in portfolio no. 2 was called
and is no longer contained in the Trust.
A-7
110889.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 17
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 17 (the "Trust") at December 31, 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 December
31, 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 March
31, 1996 expressed an unqualified opinion on those financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
160 Federal Street
Boston, MA 02110
March 28, 1997
<PAGE>
Insured Municipal Securities Trust, Series 17
Portfolio
December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<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 $ 500,000 Chicago Ill. Metropolitan Fair & Expo. Auth. AAA 5.000% 6/01/12 @ 100 S.F. $ 458,250
Dedicated State Tax Rev. Bonds Series 1986 (BIG) 6/01/2015 6/01/97 @ 100 Ref.
2 600,000 N.H. Indus. Dev. Auth. Res. Rcvry. Rev. AAA 9.250 7/01/99 @ 100 S.F. 620,094
Bonds (SES Claremont Co. L.P. Prjt.) 7/01/2007 1/31/97 @ 103 Ref.
Series 1985 (BIG)
3 235,000 Austin Tx. Cmbnd. Util. Sys. Rev. Bonds AAA 9.500 5/15/06 @ 100 S.F. 272,600
Series 1985 A (Financial Guaranty) 5/15/2015 5/15/00 @ 100 Ref.
4 475,000 Tarrant Cnty. Tx. Hlth. Facs. Dev. Corp. Hlth. AAA 5.000 9/01/13 @ 100 S.F. 438,601
Sys. Rev. Bonds (Harris Methodist Hlth. Sys.) 9/01/2015 9/01/97 @ 100 Ref.
Series 1987 A (Financial Guaranty)
5 500,000 Intermountain Pwr. Agncy. Utah Pwr. AAA 5.000 7/01/10 @ 100 S.F. 475,150
Supl. Rev. Rfndg. Bonds Series A (MBIA Corp.) 7/01/2012 1/01/97 @ 100 Ref.
---------- ----------
$2,310,000 Total Investments (Cost $2,014,684) $2,264,695
========== ==========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 17
Footnotes to Portfolio
- -------------------------------------------------------------------------------
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. A
brief description of the ratings symbols and their meaning 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 December 31, 1996, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $307,690
Gross unrealized depreciation (57,679)
--------
Net unrealized appreciation $250,011
========
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 17
Statement of Net Assets
December 31, 1996
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $2,014,684) $ 2,264,695
--------------
Other Assets
Accrued Interest 53,103
--------------
Total Other Assets 53,103
--------------
Liabilities
Accrued Expenses 730
Advance from Trustee 2,277
--------------
Total Liabilities 3,007
--------------
Excess of Other Assets over Total Liabilities 50,096
--------------
Net Assets (5,851 Units of Fractional Undivided
Interest Outstanding, $395.62 per Unit) $ 2,314,791
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 17
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Investment Income
Interest $ 162,866 $ 346,882 $ 441,951
----------- ----------- ----------
Expenses
Trustee's Fees 4,523 5,964 6,494
Evaluator's Fees 1,112 938 1,036
Sponser's Advisory Fee 649 1,263 1,362
----------- ----------- ----------
Total Expenses 6,284 8,165 8,892
----------- ----------- ----------
Net Investment Income 156,582 338,717 433,059
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized (Loss)
on Investments (12,444) (254,043) (84,916)
Change in Unrealized Appreciation
(Depreciation) on Investments (52,856) 406,623 (388,481)
----------- ----------- ----------
Net Gain (Loss) on Investments (65,300) 152,580 (473,397)
----------- ----------- ----------
Net Increase (Decrease)
in Net Assets
Resulting From Operations $ 91,282 $ 491,297 $ (40,338)
============ =========== ===========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 17
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Operations
Net Investment Income $ 156,582 $ 338,717 $ 433,059
Realized (Loss)
on Investments (12,444) (254,043) (84,916)
Change in Unrealized Appreciation
(Depreciation) on Investments (52,856) 406,623 (388,481)
------------ ------------- -------------
Net Increase (Decrease) in
Net Assets Resulting
From Operations 91,282 491,297 (40,338)
------------ ------------- -------------
Distributions to Certificateholders
Investment Income 185,547 379,634 436,075
Principal 567,018 1,721,058 386,851
Redemptions
Interest 7,631 4,989 339
Principal 302,635 211,017 16,420
------------ ------------- -------------
Total Distributions
and Redemptions 1,062,831 2,316,698 839,685
------------ ------------- -------------
Total (Decrease) (971,549) (1,825,401) (880,023)
Net Assets
Beginning of Year 3,286,340 5,111,741 5,991,764
------------ ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $38,224, $74,820
and $120,726, Respectively) $ 2,314,791 $ 3,286,340 $ 5,111,741
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 17 (the "Trust") was
organized on May 16, 1989 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 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. 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 is recorded on the accrual basis.
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
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security 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 difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
3. Income Taxes
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>
Insured Municipal Securities Trust, Series 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 December 31, 1996, 1995 and 1994,
787, 321 and 21 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.32 to $.96 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 December 31, 1996, the "Trustee's Fees" are comprised of
Trustee fees of $2,107 and other expenses of $2,416. The other expenses
include professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust, Series 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At December 31, 1996, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 7,210,081
Less Initial Gross Underwriting Commission 353,294
---------------
6,856,787
Accumulated Cost of Securities Sold,
Matured or Called (4,842,103)
Net Unrealized Appreciation 250,011
Undistributed Net Investment Income 38,224
Undistributed Proceeds From Investments 11,872
---------------
Total $ 2,314,791
===============
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 7,000 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.
<PAGE>
Insured Municipal Securities Trust, Series 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding for the year ended
December 31, 1996:
Net Asset Value, Beginning of Year ** $ 495.08
---------------
Interest Income 26.08
Expenses (1.01)
---------------
Net Investment Income 25.07
---------------
Net Gain or Loss on Investments(1) (2.80)
---------------
Total from Investment Operations 22.27
---------------
Less Distributions
to Certificateholders
Income 29.71
Principal 90.80
for Redemptions
Interest 1.22
---------------
Total Distributions 121.73
---------------
Net Asset Value, End of Year ** $ 395.62
===============
See "Financial and Statistical Information" in Part A of this
Prospectus for amounts of per unit distributions during the years ended
December 31, 1996, 1995 and 1994 based on actual units.
(1) Net gain or loss on investments is a result of changes in outstanding
units since January 1, 1996 and the dates of net gain and loss on
investments.
- -----------
*Unless otherwise stated, based upon average units outstanding during
the year of 6,245 ([5,851 + 6,638]/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: April 30, 1997
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., or depending on the
particular Trust, among Reich & Tang Distributors L.P. and Gruntal & Co., L.L.C.
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
- --------
* 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.
112677.5
<PAGE>
any Units are redeemed by the Trustee, the fractional undivided interest or pro
rata share in the Trust represented by each unredeemed Unit will increase,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Certificateholders, which may include the Sponsor or the
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."
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
-2-
112677.5
<PAGE>
"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.
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
-3-
112677.5
<PAGE>
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 developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsor is unable to predict
whether any such actions or whether any such proposals or litigation, if enacted
or instituted, will have an adverse impact on the revenues available to pay the
debt service on the Bonds in the portfolio issued to finance such nuclear
projects. See "Description of Portfolio" in Part A for the amount of bonds
issued to finance nuclear generating facilities contained therein.
Mortgage Subsidy Bonds: Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
provided as a general rule that interest on "mortgage subsidy bonds" will not be
exempt from Federal income tax. An exception is provided for certain "qualified
mortgage bonds." Qualified mortgage bonds are bonds that are used to finance
owner-occupied residences and that meet numerous statutory requirements. These
requirements include certain residency, ownership, purchase price and target
area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions and (for bonds issued after December 31, 1984) certain information
reporting, certification, public hearing and policy statement requirements. In
the opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds" will
be exempt from Federal income tax when issued. See "Description of Portfolio" in
Part A for the amount of mortgage subsidy Bonds contained therein.
Mortgage Revenue Bonds: Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to residency,
ownership, purchase price and target area requirements, ceiling amounts for
state and local issuers, arbitrage restrictions, and certain information
reporting certification, and public hearing requirements. There can be no
assurance that additional federal legislation will not be introduced or that
existing legislation will not be further amended, revised, or enacted after
delivery of these Bonds or that certain required future actions will be taken by
the issuing governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion of the
Bond proceeds are not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds"). See "Description of
Portfolio" in Part A for the amount of mortgage revenue bonds contained therein.
Private Activity Bonds: The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial Revenue
Bonds ("IRBs") if issued prior to 1987) which would be primarily of two types:
(1) Bonds for a publicly owned facility which a private entity may
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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
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
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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 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
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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 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
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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 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
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obligations under a policy of insurance relating to any of the Pre-Insured
Bonds. In addition, investors should be aware that subsequent to the Date of
Deposit the rating of the claims-paying ability of the insurer of an underlying
Pre-Insured Bond may be down-graded.
NAVIGATOR INSURED TRUSTS. Sponsor-Insured Bonds: Each of the
Bonds in the Navigator Trusts is insured by a financial guaranty insurance
policy obtained by the Sponsor (the "Navigator Sponsor-Insured Bonds") from MBIA
Corp. covering regularly scheduled payments of principal thereof and interest
thereon when such amounts become due for payment but have not been paid. Such
amounts shall be reduced by any amounts received by the holders or the owners of
the Bonds from any trustee for the Bond issuers, any other Bond insurers or any
other source other than MBIA Corp. MBIA Corp. has issued such policy or policies
covering each of the Bonds in the Navigator Trusts and each such policy will
remain in force until the payment in full of such Bonds, whether or not such
Bonds continue to be held in the Navigator Trusts. The insurer's policies
relating to small industrial development bonds and pollution control revenue
bonds also guarantee any accelerated payments required to be made by or on
behalf of an issuer of Bonds pursuant to the terms of the Bonds if there occurs
an event which results in the loss of the tax-exempt status of the interest on
such Bonds, including principal, interest or premium payments, if any, as and
when required. Such insurance does not cover for any accelerated payments
required to be made by or on behalf of an issuer of other than small industrial
revenue bonds or pollution control revenue bonds if there occurs an event which
results in the loss of the tax exempt status of the interest on such Bonds nor
will the insurance cover accelerated payments of principal or penalty interest
or premiums unrelated to taxability of interest on any of the Bonds, including
pollution control revenue bonds or small industrial development bonds. In the
event of such an acceleration, the payments guaranteed by MBIA Corp. shall be
made in such amounts and at such times as such payments would have been made
absent any such acceleration. The insurance relates only to the prompt payment
of principal of and interest on the securities in the Navigator Portfolios and
does not remove market risk nor does it guarantee the market value of Units in
the Navigator Trusts. The terms of the insurance are more fully described
herein. For discussion of the effect of an occurrence of non-payment of
principal or interest on any Bonds in the Navigator Trusts see "Portfolio
Supervision" in Part B. No representation is made herein as to any bond
insurer's ability to meet its obligations under a policy of insurance relating
to any of the Bonds in the Navigator Trusts. In addition, investors should be
aware that subsequent to the Date of Deposit the rating of the claims-paying
ability of MBIA Corp. may be downgraded, which may result in a downgrading of
the rating of the Units in the Navigator Trusts. The premiums for the Navigator
Sponsor-Insured Bonds are obligations of the Sponsor. Additionally, some of the
Bonds in the Navigator Trusts may be Pre-Insured Bonds (as described below). The
premium for the Pre-Insured Bonds is an obligation of the issuers, underwriters
or prior owners of those Bonds. The insurance policy or policies relating to the
Navigator Sponsor-Insured Bonds provides that, to the extent that Bonds are both
Pre-Insured Bonds and Navigator Sponsor-Insured Bonds, coverage is effective
after a claim has been made upon the insurer of the Pre-Insured Bonds.
Upon notification from the trustee for any bond issuer or any
holder or owner of the Bonds that such trustee or paying agent has insufficient
funds to pay any principal or interest in full when due, MBIA Corp. will be
obligated to deposit funds promptly with Citibank, N.A., New York, New York, as
fiscal agent for MBIA Corp., sufficient to fully cover the deficit. If notice of
nonpayment is received on or after the due date, MBIA Corp. will provide for
payment within one business day following receipt of the notice. Upon payment by
MBIA Corp. of any Bonds, coupons, or interest payments, MBIA Corp. shall succeed
to the rights of the owner of such Bonds, coupons or interest payments with
respect thereto.
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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 $2,585,000,000, and statutory capital (unaudited)
of approximately $1,467,000,000 as of December 1, 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
to provide financial guaranties for educational facilities. The Omnibus
Consolidated Appropriations Act, 1997 (the "Privatization Act"), enacted by
Congress and signed by the President on September 30, 1996, has repealed
substantially all of the provisions of the Higher Education Act which previously
dictated the structure and operational authorities of Connie Lee. Also in
accordance with the Privatization Act, Construction Loan Insurance Corporation
repurchased on February 27, 1997 all of the 1,914,800 shares (14% of total
ownership) of the stock of Construction Loan Insurance Corporation previously
owned by the United States Department of Education. Construction Loan Insurance
Corporation is currently owned by a group of stockholders that includes Student
Loan Marketing Association ("Sallie Mae") and various institutional investors.
NEITHER CONNIE LEE NOR CONSTRUCTION LOAN INSURANCE CORPORATION IS AN AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES GOVERNMENT, AND THE UNITED STATES
GOVERNMENT IS NOT AN INVESTOR IN CONNIE LEE OR CONSTRUCTION LOAN INSURANCE
CORPORATION. THE OBLIGATIONS OF CONNIE LEE ARE NOT OBLIGATIONS OF THE UNITED
STATES GOVERNMENT OR GUARANTEED IN ANY WAY BY THE FULL FAITH AND CREDIT OF THE
UNITED STATES GOVERNMENT.
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As of December 31, 1996, the total policyholders' surplus of
Connie Lee was $155,885,454 (audited) and total admitted assets were $32,533,675
(audited), as reported to the Commissioner of Insurance of the State of
Wisconsin in Connie Lee's financial statements prepared in accordance with
statutory accounting principals applicable to insurance companies. Copies of
these financial statements are available from Connie Lee upon request.
The consolidated annual (audited) and quarterly (unaudited)
financial statements of Construction Loan Insurance Corporation prepared in
accordance with generally accepted accounting principles are filed periodically
with the Nationally Recognized Municipal Securities Information Repositories
designated under Rule 15c2-12 of the Securities and Exchange Commission. Copies
of these financial statements are available from Connie Lee upon request.
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 December 31,
1996, the total capital and surplus of Financial Guaranty was approximately
$1,093,256,000. 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
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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 September 30,
1996, total shareholders equity of Financial Security and its wholly-owned
subsidiaries was (unaudited) $795,183,000 and total unearned premium reserves
was (unaudited) $358,145,000.
As of the Evaluation Date, Financial Security's claims-paying
ability has been rated "AAA" by Standard & Poor's, Nippon Investors Service
Inc. and Standard and Poor's (Australia) Pty. Ltd. and "Aaa" by Moody's
Investors Service.
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.
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 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 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 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.
- --------
* Now known as Cigna Property and Casualty Company.
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The following table sets forth certain financial information
with respect to the five insurance companies comprising MBIA. The statistics,
which have been furnished by MBIA, are as reported by the insurance companies to
the New York State Insurance Department and are determined in accordance with
statutory accounting principals. No representation is made herein as to the
accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof. In addition,
these numbers are subject to revision by the New York State Insurance Department
which, if revised, could either increase or decrease the amounts.
MUNICIPAL BOND INSURANCE ASSOCIATION ("MBIA")
FIVE MEMBER COMPANIES ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF MARCH 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
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 Inc. is not obligated to pay the debts of or claims
against MBIA Corp. 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. New York has laws prescribing
minimum capital requirements, limiting classes and concentrations of investments
and requiring the approval of policy rates and forms. State laws also regulate
the amount of both the aggregate and individual risks that may be insured, the
payment of dividends by MBIA Corp., changes in control and transactions among
affiliates. Additionally, MBIA Corp. is required to maintain contingency
reserves on its liabilities in certain amounts and for certain periods of time.
As of December 31, 1996, MBIA Corp had admitted assets of $4.4
billion (audited), total liabilities of $3.0 billion (audited), and total
capital and surplus of $1.4 billion (audited) determined 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) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
Copies of MBIA Corp.'s year-end financial statements prepared
in accordance with statutory accounting practices are available without charge
from MBIA Corp. A copy of the Annual Report on Form 10-K of MBIA Inc. is
available from MBIA Corp. or the Securities and Exchange Commission. The
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address of MBIA Corp. is 113 King Street, Armonk, New York 10504. The
telephone number of MBIA Corp. is (914) 273-4545.
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-third largest property/casualty insurer in the
United States, based on Insurance Services Office's Top 100 Insurer net premiums
written for the year ended December 31, 1996. USF&G Company markets commercial
and personal insurance products, concentrating on targeted market segments,
through a distribution network of approximately 3,400 independent agents. USF&G
Corporation's life insurance subsidiary, F&G Life, markets life insurance and
annuity products through a network of wholesalers, brokers and specialty
marketing organizations. USF&G Company accounted for $3.1 billion (or 88%) of
USF&G Corporation's approximately $3.5 billion total revenues earned for the
year ended December 31, 1996. 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
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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.
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 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.
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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.
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 1996 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 New York State Financial Emergency Act for the
City of New York, 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 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. 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
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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 and any future
legislation affecting Medicare or other entitlements.
Implementation of the Financial Plan is also dependent upon the
City's ability to market its securities successfully. The City's financing
program for fiscal years 1997 through 2000 contemplates the issuance of $9.0
billion of general obligation bonds and $3.8 billion of bonds to be issued by
the proposed New York City Infrastructure Finance Authority ("Finance
Authority") to finance education and transportation projects. The creation of
Finance Authority, which is subject to the enactment of State legislation, is
being proposed as part of the City's effort to assist in keeping the City's
indebtedness within the forecast level of the constitutional restrictions on the
amount of debt the City is authorized to incur. Indebtedness subject to the
constitutional debt limit includes liability on capital contracts that are
expected to be funded with general obligation bonds, as well as general
obligation bonds. The City's projections of total debt subject to the general
debt limit that would be required to be issued to fund the updated ten-year
capital strategy published in April 1995 indicates that projected contracts for
capital projects and debt issuance may exceed the general debt limit by the end
of fiscal year 1997 and would exceed the general debt limit by a substantial
amount thereafter, unless legislation is enacted creating the Finance Authority
or other legislative initiatives are identified and implemented. Depending on a
number of factors, including whether the Legislature is expected to enact
legislation creating the Finance Authority or to take other action that would
provide relief under the general debt limit, the City may find it necessary to
curtail its currently defined capital program before the end of fiscal year 1997
to ensure that there is ongoing capacity to enter into capital contracts
necessary to preserve projects designed to safeguard health and safety in the
City. Without the Finance Authority or other legislative relief, the City's
general obligation financed capital program with respect to new projects would
be virtually brought to a halt during the Financial Plan period. General
obligation borrowing would continue to reimburse the City's general fund for
ongoing costs of existing contractual commitments. 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
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
Finance Authority, it would be prevented from meeting its obligation bonds and
notes or bonds of the proposed 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.
On November 14, 1996, the City submitted to the Control Board
the Financial Plan for the 1997 through 2000 fiscal years, which relates to the
City, the BOE and the City University of New York ("CUNY"). The Financial Plan
is a modification to the financial plan submitted to the Control Board on June
21, 1996 (the "June Financial Plan").
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The June Financial Plan identified actions to close a
previously projected gap of approximately $2.6 billion for the 1997 fiscal year.
The proposed actions in the June Financial Plan for the 1997 fiscal year
included (i) agency actions totaling $1.2 billion; (ii) a revised tax reduction
program which would increase projected tax revenues by $369 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, which are currently the subject of a dispute with the Port Authority
of New York and New Jersey (the "Port Authority"); (v) the sale of the City's
television station for $207 million; and (vi) pension costs savings totaling
$134 million resulting from a proposed increase in the earnings assumption for
pension assets from 8.5% to 8.75%.
The 1997-2000 Financial Plan published on November 14, 1996
reflects actual receipts and expenditures and changes in forecast revenues and
expenditures since the June Financial Plan. The 1997-2000 Financial Plan
projects revenues and expenditures for 1997 fiscal year balanced in accordance
with GAAP, and projects gaps of $1.2 billion, $2.1 billion and $3.0 billion for
the 1998, 1999 and 2000 fiscal years, respectively. Changes since the June
Financial Plan include (i) an increase in projected tax revenues of $450
million, $120 million, $50 million and $45 million in fiscal years 1997 and
through 2000, respectively; (ii) a delay in the assumed receipt of $304 million
relating to projected rent payments for the City airports from the 1997 fiscal
year to the 1998 and 1999 fiscal years, and a $34 million reduction in assumed
State and Federal aid for the 1997 Fiscal year; (iii) an approximately $200
million increase in projected overtime and other expenditures in each of the
fiscal years 1997 through 2000; (iv) a $70 million increase in expenditures for
BOE in the 1997 fiscal year for school text books; (v) a reduction in projected
pension costs of $34 million, $50 million, $49 million and $47 million in fiscal
years 1997 through 2000, respectively; and (vi) additional agency actions
totalling $179 million, $386 million, $473 million and $589 million in fiscal
years 1997 through 2000, including personnel reductions through attrition and
early retirement.
The Financial Plan assumes (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 $170 million, $463 million, $492
million and $521 million, in the 1997 through 2000 fiscal years, respectively;
(ii) collection of the projected rent payments for the City's airports,
totalling $270 million and $180 million in the 1998 and 1999 fiscal years,
respectively, 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; (iv) State approval of the cost
containment initiatives and State aid proposed by the City; and (v) a reduction
in City funding for labor settlements for certain public authorities or
corporations. Legislation extending the 12.5% personal income tax surcharge
beyond December 31, 1996, was not enacted in the special legislative session
held in December 1996. Such legislation may be enacted in the 1997 State
Legislative Session. The Financial Plan does not reflect any increased costs
which the City might incur as a result of welfare legislation recently enacted
by Congress or legislation proposed by the Governor, which would, if enacted,
implement such Federal welfare legislation. In addition, the economic and
financial condition of the City may be affected by various financial, social,
economic and political factors which could have a material effect on the City.
In January 1997, the Mayor is expected to publish a
modification (the "January Modification") to the financial plan for the City's
1997 through
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2001 fiscal years and a preliminary budget for the City's 1998 fiscal year. The
January Modification will reflect changes since the Financial Plan, including
the City's program to address the currently forecast gap of approximately $1.2
billion in the 1998 fiscal year. The gap-closing program, as proposed in the
Financial Plan, is currently being further developed and is subject to change in
connection with the January Modification. The Governor released the 1997-1998
Executive Budget on January 14, 1997, which will be considered for adoption by
the State Legislature. Based on a preliminary evaluation of currently available
information, the City's Office of Management and Budget ("OMB") believes that
the reductions in Medicaid reimbursement rates and other entitlement and welfare
initiatives proposed in the 1997-1998 Executive Budget, if approved by the State
Legislature without change, would provide the City with a portion of the $650
million of additional aid and reductions in entitlements costs assumed in the
City's gap-closing program for the 1998 fiscal year. OMB expects that the
January Modification will reflect additional initiative proposed by the City
relating to reductions in entitlement costs and additional governmental aid,
which would be dependent upon State legislative approval. Certain proposed cost
containment and other initiatives have been previously considered and rejected
by the State Legislature. The nature and extent of the impact on the City of the
State budget, when adopted, is uncertain, and no assurance can be given that the
State actions included in the State adopted budget may not have a significant
adverse impact on the City's budget and its Financial Plan. It can be expected
that the proposals contained in the January Modification to close the projected
budget gap for the 1998 fiscal year will engender substantial public debate
which will continue through the time the budget is scheduled to be adopted in
June 1997.
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.
The projections for the 1997 through 2000 fiscal years reflect
the cost of the settlements with the United Federation of Teachers ("UFT") and a
coalition of unions headed by District Council 37 of the American Federation of
State, County and Municipal Employees, which together represent approximately
two-thirds of the City's workforce, and assume that the City will reach
agreement with its remaining municipal unions under terms which are generally
consistent with such settlements. The settlement provides for a wage freeze in
the first two years, followed by a cumulative effective wage increase of 11% by
the end of the five year period covered by the proposed agreements, ending in
fiscal years 2000 and 2001. Additional benefit increases would raise the total
cumulative effective increase to 13% above present costs. Costs associated with
similar settlements for all City-funded employees would total $49 million, $459
million and $1.2 billion in the 1997, 1998 and 1999 fiscal years respectively,
and exceed $2 billion in each fiscal year after the 1999 fiscal year. There can
be no assurance that the City will reach an agreement with the unions that have
not yet reached a settlement with the City on the terms contained in the
Financial Plan.
In the event of a collective bargaining impasse, the terms of
wage settlements could be determined through statutory impasse procedures, which
can impose a binding settlement except in the case of collective bargaining with
the UFT, which may be subject to non-binding arbitration. On January 23, 1996,
the City requested the Office of Collective Bargaining to declare an impasse
against the Patrolmen's Benevolent Association and the Uniformed Firefighters
Association.
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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. On November 5, 1996,
Fitch removed the City's general obligation bonds from FitchAlert, although
Fitch stated the outlook remains negative.
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
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
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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 State issued its first update to the cash-basis 1996-97
State Financial Plan (the "Mid-Year Update") on October 25, 1996. The Mid-Year
Update reflects a balanced 1996-97 State Financial Plan, with a reserve for
contingencies in the General Fund of $300 million. This reserve will be utilized
to help offset a variety of potential risks and other unexpected contingencies
that the State may face during the balance of the 1996-97 fiscal year.
That 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.
In its Mid-Year Update the State revised its forecast of
national and State economic activity through the end of calendar year 1997 to
reflect the stronger-than-expected growth in the first half of 1996. The
national economic forecast has been changed slightly from the initial forecast
on which the original 1996-97 State Financial Plan was based. The revised
forecast projects real Gross Domestic Product in the nation of 2.5 percent for
1996 and 2.4 percent n 1997. The inflation rate is expected to be 3.0 percent in
1996 and 2.9 percent in 1997. The annual rate of job growth is expected to slow
gradually to about 1.8 percent in 1997, down from 2.2 percent in 1996. Growth in
personal income and wages are expected to slow accordingly.
The State economic forecast has been changed slightly from the
one formulated with the July 1996-97 State Financial Plan. Moderate growth is
projected to continue through the second half of 1996, with employment, wages
and incomes continuing their modest rise. Personal income is projected to
increase by 5.2 percent in 1996 and 4.7 percent in 1997, reflecting robust
projected wage growth fueled in part by financial sector bonus payments. Overall
employment growth will continue at a modest rate, reflecting the slowdown in the
national economy, continued spending restraint in government, and restructuring
in the health care and financial sectors.
The forecast for continued moderate growth, and any resultant
impact on the State's 1996-1997 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 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,
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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 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 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 1996-97 fiscal year. Actual receipts through the first two quarters of the
1996-96 State fiscal year reflecting stronger-than-expected growth in most
taxes, with actual receipts exceeding expectations by $276 million. Based on the
revised economic outlook and actual receipts for the first six months of
1996-97, projected General Fund receipts for the 1996-97 State fiscal year have
been increased by $420 million. Most of this projected increase is in the yield
of the personal income tax ($241 million), with additional increases now
expected in business taxes ($124 million) and other tax receipts ($49 million).
Projected collections from user taxes and fees have been revised downward
slightly ($5 million). Revisions were also made to both miscellaneous receipts
and in transfers from other funds (an $11 million combined projected increase).
Disbursements through the first six months of the fiscal year
were $415 million less than projected, primarily because of delays in processing
payments following delayed enactment of the State budget. As a result, no
savings are included in the Mid-Year Update from this slower-than-expected
spending. Projections of 1996-97 General Fund disbursements are increased by
$120 million, since increased General Fund disbursements for education are
required to replace a projected decrease in lottery receipts. This modification
is shown in the form of an increased transfer of General Fund monies to the
Lottery Fund in the Special Revenue fund type. The projected closing fund
balance in the General Fund of $337 million reflects a balance of $252 million
in the Tax Stabilization Reserve Fund (following a payment of $15 million during
the current fiscal year) and a deposit of $85 million to the Contingency Reserve
Fund.
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
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 August 5,
1996, confirmed its A- rating. On January 6, 1992, Moody's reduced
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its ratings on outstanding limited-liability State lease purchase and
contractual obligations from A to Baa1. On July 26, 1996, 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, 1996 amounted to approximately $2.8 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. It has an average of 1,062 people per square mile, and 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 1994 the State ranked second among the states in per
capital personal income ($7,742).
The Trust is susceptible to political, economic or regulatory
factors affecting issuers of the New Jersey securities. The following
information provides only a brief summary of some of the complex factors
affecting the financial situation in New Jersey (the "State") and is derived
from sources that are generally available to investors and is believed to be
accurate. It is based in part on information obtained from various State and
local agencies in New Jersey. No independent verification has been made of any
of the following information.
The New Jersey Economic Policy Council, a statutory arm of the
New Jersey Department of Commerce and Economic Development, has reported in New
Jersey Economic Indicators, a monthly publication of the New Jersey Department
of Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from the
export boom experienced by many Midwest states and the State's service sectors,
which had fueled the State's prosperity since 1982, lost momentum. In the
meantime, the prolonged fast growth in the State in the mid 1980s resulted in a
tight labor market situation, which has led to relatively high wages and housing
prices. This means that, while the incomes of New Jersey residents are
relatively high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in
July 1990 according to the National Bureau of Economic Research) caused an
acceleration of New Jersey's job losses in construction and manufacturing. In
addition, the national recession caused an employment downturn in such
previously growing sectors as wholesale trade, retail trade, finance, utilities
and trucking and warehousing. Reflecting the downturn, the rate of unemployment
in the State rose from a low of 3.6% during the first quarter of 1989 to an
estimated 5.9% in January 1997, which is above the national average
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of 5.4% in February 1997. 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, 1995, there was a total authorized bond indebtedness of
approximately $9.48 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 $1.83 billion
was unissued. The debt service obligation on such outstanding indebtedness was
$466.3 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 $569 million.
In order to provide additional revenues to balance future
budgets, to redistribute school aid and to contain real property taxes, on June
27, 1990, and July 12, 1990, former Governor Florio signed into law legislation
which was estimated to raise approximately $2.8 billion in additional taxes
(consisting of $1.5 billion in sales and use taxes and $1.3 billion in income
taxes), the biggest tax hike in New Jersey history. There can be no assurance
that receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990,
with the increase in the State's sales and use tax rate from 6% to 7% and the
elimination of exemptions for certain products and services not previously
subject to the tax, such as telephone calls, paper products (which has since
been reinstated), soaps and detergents, janitorial services, alcoholic beverages
and cigarettes. At the time of enactment, it was projected that these taxes
would raise approximately $1.5 billion in additional revenue. Projections and
estimates and receipts from sales and use taxes, however, have been subject to
variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991,
in the form of an increased state income tax on individuals. At the time of
enactment, it was projected that this increase would raise approximately $1.3
billion in additional income taxes to fund a new school aid formula, a new
homestead rebate program and state assumption of welfare and social services
costs. Projections and estimates of receipts from income taxes, however, have
also been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to 3.5% to a new
range of 2% to 7%, with the higher rates applying to married couples with
incomes exceeding $70,000 who file joint returns, and to individuals filing
single returns with incomes of more than $35,000.
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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 28, 1996, Governor Whitman signed the New Jersey
Legislature's $16.5 billion budget for Fiscal Year 1997. The balanced budget,
which includes $550 million in surplus, is less than the 1996 budget. Whether
the State can achieve a balanced budget depends on its ability to enact and
implement expenditure reductions and to collect the estimated tax revenues.
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 had rated New Jersey general obligation
bonds "Aaa" and "AAA", respectively. However, Moody's Investors Service Inc.
currently rates New Jersey general obligation bonds Aa1 and Standard & Poor's
Ratings Group currently rates New Jersey general obligation bonds AA+ with
outlook stable. On July 3, 1991, 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
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+"
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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 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
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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 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
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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>
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
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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 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.
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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 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;
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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.
The Quality Election Act has been declared unconstitutional by
the New Jersey Supreme Court in 1994. The Supreme Court, while retaining
jurisdiction over this issue has stated that the State was required to address
the "special education needs" of 30 special needs districts for which funding
was required in addition to that necessary to achieve parity for richer
districts. The Supreme Court stated that it will not immediately intervene if
substantial equivalence of the special needs districts and wealthier districts
is achieved by the State for the 1997-1998 school year. The Court further
ordered the State to adopt a law assuring such substantial equivalence by
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September 1996. Recently, the Court again heard oral arguments as to whether
the State is in compliance with its Order entered in Abbott by Abbott v.
Burke, 136 N.J. 444 (1994). A decision in that matter is pending.
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.
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In Type I and II school districts with a board of school
estimate, that board examines the capital proposal of the board of education and
certifies the amount of bonds to be authorized. When it is necessary to exceed
the borrowing capacity of the municipality, the approval of a majority of the
legally qualified voters of the municipality is required, together with the
approval of the Commissioner and the Local Finance Board. When such bonds are
issued for a Type I school district, they are issued by the municipality and
identified as school bonds. When bonds are issued by a Type II school district
having a board of school estimate, they are issued by, and in the name of, the
school district.
All authorizations of debt must be reported to the Division of
Local Government Services by a supplemental debt statement prior to final
approval.
School District Lease Purchase Financings. In 1982, school
districts were given an alterative to the traditional method of bond financing
capital improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase
Law"). The Lease Purchase Law permits school districts to acquire a site and
school building through a lease purchase agreement with a private lessor
corporation. For Type II school districts, the lease purchase agreement does not
require voter approval. The rent payments attributable to the lease purchase
agreement are subject to annual appropriation by the school district and are
required, pursuant to N.J.A.C. 6:22-A-1.2(h), to be included in the annual
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
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is unable to meet payment of the principal of or interest on any of its school
bonds, the trustee of the school bond reserve will purchase such bonds at the
face amount thereof or pay the holders thereof the interest due or to become
due. On June 30, 1991, the book value of the Fund's assets aggregated
$59,352,429 and the reserve, computed as of June 30, 1991, amounted to
$19,668,349. There has never been an occasion to call upon this Fund.
Local Financing Authorities. The Local Authorities Fiscal
Control Law (N.J.S.A. 40A:5A-l et seq.) provides for State supervision of the
fiscal operations and debt issuance practices of independent local authorities
and special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, etc.). Authorities which are subject to differing State or federal
financial restrictions are exempted, but only to the extent of that difference.
Financial control responsibilities over local authorities and
special districts are assigned to the Local Finance Board and the Director of
the Division of Local Government Services. The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
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
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fees collected by the Department of Environmental Protection and Energy. Adverse
judgments in these and other matters could have the potential for either a
significant loss of revenue or a significant unanticipated expenditure by the
State.
At any given time, there are various numbers of claims and
cases pending against the State, State agencies and employees seeking recovery
of monetary damages that are primarily paid out of the fund created pursuant to
the New Jersey Tort Claims Act. In addition at any given time, there are various
numbers of contract claims against the State and State agencies seeking recovery
of monetary damages. The state is unable to estimate its exposure for these
claims.
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%
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ACCRUED INTEREST. An amount of accrued interest which
represents accumulated unpaid or uncollected interest on a Bond from the last
day on which interest was paid thereon will be added to the Public Offering
Price and paid by the Certificateholder at the time Units are purchased. Since
the Trust normally receives the interest on Bonds twice a year and the interest
on the Bonds in the Trust is accrued on a daily basis (net of estimated fees and
expenses), the Trust will always have an amount of interest accrued but not
actually received and distributed to Certificateholders. A Certificateholder
will not recover his proportionate share of accrued interest until the Units are
sold or redeemed, or the Trust is terminated. At that time, the
Certificateholder will receive his proportionate share of the accrued interest
computed to the settlement date in the case of a sale or termination and to the
date of tender in the case of redemption.
EMPLOYEE DISCOUNTS. Employees (and their immediate families)
of Reich & Tang Distributors L.P. and its affiliates, Gruntal & Co. L.L.C. 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.
Participants in the Total Reinvestment Plan can designate a
broker as the recipient of a dealer concession (see "Total Reinvestment Plan").
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COMPARISON OF PUBLIC OFFERING PRICE, SPONSOR'S REPURCHASE
PRICE AND REDEMPTION PRICE. The secondary market Public Offering Price of Units
will be determined on the basis of the current bid prices of the Bonds in the
Trust, plus the applicable sales charge. The value at which Units may be resold
in the Secondary Market or redeemed will be determined on the basis of the
current bid prices of the Bonds without any sales charge. On the Evaluation
Date, the Public Offering Price and the Sponsor's initial Repurchase Price per
Unit (each based on the bid side evaluation of the Bonds in the Trust) each
exceeded the Redemption Price and the Sponsor's secondary market Repurchase
Price per Unit (based upon the current bid side evaluation of the Bonds in the
Trust) by the amounts shown under "Summary of Essential Information" in Part A
of this Prospectus. For this reason, among others (including fluctuations in the
market prices of such Bonds and the fact that the Public Offering Price includes
the applicable sales charge), the amount realized by a Certificateholder upon
any redemption of Sponsor repurchase of Units may be less than the price paid
for such Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of the Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing the
average yield for the portfolio of each Trust in order to reflect estimated fees
and expenses of that Trust and the maximum sales charge paid by Unitholders. The
resulting Estimated Long Term Return represents a measure of the return to
Unitholders earned over the estimated life of each Trust. The Estimated Long
Term Return as of the day prior to the Evaluation Date is stated for the Trust
under "Summary of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of the Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current interest
rates on newly issued bonds of a similar type with comparable rating, the
Estimated Current Return per Unit may be affected adversely if such Bonds are
redeemed prior to their maturity. On the day prior to the Evaluation Date, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for the Trust under
"Summary of Essential Information" in Part A.
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.
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A schedule of cash flow projections is available from the
Sponsor upon request.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. Ownership of Units of the Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor. Certificates
may be issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been selected
by the Certificateholder. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and/or accompanied by a written
instrument or instruments of transfer. Although no such charge is presently made
or contemplated, the Trustee may require a Certificateholder to pay $2.00 for
each Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Interest received by the
Trust is credited by the Trustee to an Interest Account and a deduction is made
to reimburse the Trustee without interest for any amounts previously advanced.
Proceeds representing principal received from the maturity, redemption, sale or
other disposition of the Bonds are credited to a Principal Account.
Distributions to each Certificateholder from the Interest
Account are computed as of the close of business on each Record Date for the
following Payment Date and consist of an amount substantially equal to
one-twelfth, one-half or all of such Certificateholder's pro rata share of the
Estimated Net Annual Interest Income in the Interest Account, depending upon the
applicable plan of distribution. Distributions from the Principal Account (other
than amounts representing failed contracts, as previously discussed) will be
computed as of each semi-annual Record Date, and will be made to the
Certificateholders on or shortly after the next semi-annual Payment Date.
Proceeds representing principal received from the disposition of any of the
Bonds between a Record Date and a Payment Date which are not used for
redemptions of Units will be held in the Principal Account and not distributed
until the second succeeding semi-annual Payment Date. No distributions will be
made to Certificateholders electing to participate in the Total Reinvestment
Plan. Persons who purchase Units between a Record Date and a Payment Date will
receive their first distribution on the second Payment Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date. For
the purpose of minimizing fluctuations in the distributions from the Interest
Account, the Trustee will advance sufficient funds, without interest, as may be
necessary to provide interest distributions of approximately equal amounts. All
funds in respect of the Bonds received and held by the Trustee prior to
distribution to Certificateholders may be of benefit to the Trustee and do not
bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct
from the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Trust
(as determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so
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withdrawn shall not be considered a part of the Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Interest and Principal
Accounts such amounts as may be necessary to cover purchases of Replacement
Bonds and redemptions of Units by the Trustee.
The estimated monthly, semi-annual or annual interest
distribution per Unit will initially be in the amount shown under Summary of
Essential Information and will change and may be reduced as Bonds mature or are
redeemed, exchanged or sold, or as expenses of the Trust fluctuate. No
distribution need be made from the Principal Account until the balance therein
is an amount sufficient to distribute $1.00 per Unit.
DISTRIBUTION ELECTIONS. Interest is distributed monthly,
semi-annually or annually, depending upon the distribution plan applicable to
the Unit purchased. Record Dates are the first day of each month for monthly
distributions, the first day of each June and December for semi-annual
distributions and the first day of each December for annual distributions.
Payment Dates will be the fifteenth day of each month following the respective
Record Dates.
Certificateholders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of the
prior owner. Every October each Certificateholder may change his distribution
election by notifying the Trustee in writing of such change between October 1
and November 1 of each year. (Certificateholders deciding to change their
election should contact the Trustee by calling the number listed on the back
cover hereof for information regarding the procedures that must be followed in
connection with this written notification of the change of election.) Failure to
notify the Trustee on or before November 1 of each year will result in a
continuation of the plan for the following 12 months.
RECORDS. The Trustee shall furnish Certificateholders in
connection with each distribution a statement of the amount of interest, if any,
and the amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year the Trustee will furnish to each person who at any time
during the calendar year was a Certificateholder of record, a statement showing
(a) as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of Bonds and earned original
issue discount, if any), amounts paid for purchases of Replacement Bonds and
redemptions of Units, if any, deductions for applicable taxes and fees and
expenses of the Trust, and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (b) as to the Principal Account: the dates of
disposition of any Bonds and the net proceeds received therefrom (including any
unearned original issue discount but excluding any portion representing accrued
interest), deductions for payments of applicable taxes and fees and expenses of
the Trust, amounts paid for purchases of Replacement Bonds and redemptions of
Units, if any, and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (c) a list of the Bonds held and the number of Units
outstanding on the last business day of such calendar year; (d) the Redemption
Price per Unit based upon the last computation thereof made such calendar year;
and (e) amounts actually distributed to Certificateholders during such calendar
year from the Interest and Principal Accounts, separately stated, expressed both
as total dollar amounts representing the pro rata share of each Unit outstanding
on the last business day of such calendar year.
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The Trustee shall keep available for inspection by
Certificateholders 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 Certificateholder will be considered to have
received his pro rata share of Bond interest when it is
received by that Trust, and the net income distributable to
Certificateholders that is exempt from federal income tax
when received by that Trust will constitute tax-exempt income
when received by the Certificateholders.
Gain (other than any earned original issue discount) realized
on a sale or redemption of the Bonds or on a sale of a Unit
is, however, includable in gross income for federal income
tax purposes, generally as capital gain, although gain on the
disposition of a Bond or a Unit purchased at a market
discount generally will be treated as ordinary income, rather
than capital gain, to the extent of accrued market discount.
(It should be noted in this connection that such gain does
not include any amounts received in respect of accrued
interest.) Such gain may be long or short-term depending on
the facts and circumstances. Capital losses are deductible to
the extent of capital gains; in addition, up to $3,000 of
capital losses of non-corporate Certificateholders may be
deducted against ordinary income. Capital assets must be held
for more than one year to qualify for long-term capital gain
treatment.
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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 Certificateholder may exclude from the amount
received any amounts that represent accrued interest or the
earned portion of any original issue discount but may not
exclude amounts attributable to market discount. Thus, when a
Bond is disposed of by 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 Certificateholder, as compared to the
results produced by the straight-line method of accounting
for original issue discount, upon an early disposition of a
Bond by the Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable gain or loss
when a Unit is sold or redeemed. The amount received is
allocated among all the Bonds in a particular Trust in the
same manner as when that Trust disposes of Bonds and the
Certificateholder may exclude accrued interest and the earned
portion of any original issue discount (but not amounts
attributable to market discount). The return of a
Certificateholder's tax cost is otherwise a tax-free return
of capital.
A portion of social security benefits is includable in gross
income for taxpayers whose "modified adjusted gross income"
combined with a portion of their benefits exceeds a base
amount. The base amount is $25,000 for an individual, $32,000
for a married couple filing a joint return and zero for
married persons filing separate returns. Interest on
tax-exempt bonds is to be added to adjusted gross income for
purposes of computing the amount of Social Security benefits
that are includable in gross income and determining whether
an individual's income exceeds the base amount above which a
portion of the benefits would be subject to tax.
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.
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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 instrumentalities,
must be included in calculating New York State and New York City entire net
income for purposes of calculating New York State and New York City franchise
(income) tax. The laws of the several states and local taxing authorities vary
with respect to the taxation of such obligations and each 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
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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 Certificateholder who is an
individual, estate or trust does not exceed the Redemption
Price. To the extent that the amount received by the
Certificateholder exceeds the Redemption Price, any such gain
will not be exempt from tax under the Act.
(5) All proceeds representing interest on defaulted
obligations derived by Certificateholders who are individuals,
estates or trusts from an insurance policy, either paid
directly to the Certificateholder or through the New Jersey
Navigator Trust, are exempt from tax under the Act.
(6) The Units of the New Jersey Navigator Trust may
be taxable in the estates of New Jersey residents under the
New Jersey Transfer Inheritance Tax Law or the New Jersey
Estate Tax Laws.
(7) If a Certificateholder is a corporation subject
to the New Jersey Corporation Business Tax or New Jersey
Corporation Income Tax, interest from the Bonds in the New
Jersey Navigator Trust which is allocable to such corporation
will be includable in its entire net income for purposes of
the New Jersey Corporation Business Tax or New Jersey
Corporation Income Tax, less any interest expense 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
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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 case of Bonds that are Industrial Revenue Bonds
("IRBs") or certain types of private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on such
Bonds is exempt from regular federal income tax. However, interest on such Bonds
will not be exempt from regular federal income tax for any period during which
such Bonds are held by a "substantial user" of the facilities financed by the
proceeds of such Bonds or by a "related person" thereof within the meaning of
the Code. Therefore, interest on any such Bonds allocable to a Certificateholder
who is such a "substantial user" or "related person" thereof will not be
tax-exempt. Furthermore, in the case of IRBs that qualify for the "small issue"
exemption, the "small issue" exemption will not be available or will be lost if,
at any time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result
of other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current or
future owners or users of the facilities financed by the Bonds, the amount of
such persons' outstanding tax-exempt IRBs, or the facilities themselves, and no
assurance can be given that future events will not affect the tax-exempt status
of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for regular federal income tax purposes.
However, such interest is deductible for New York State and New York City income
tax purposes by corporations that are required to include interest on the Bonds
in New York State and New York City entire net income for purposes of
calculating 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.
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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 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
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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 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 business days following a tender for redemption,
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
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determine the value of the Bonds in the Trust (1) on the basis of current bid
prices of the Bonds obtained from dealers or brokers who customarily deal in
bonds comparable to those held by the Trust, (2) on the basis of bid prices for
bonds comparable to any Bonds for which bid prices are not available, (3) by
determining the value of the Bonds by appraisal, or (4) by any combination of
the above. The Evaluator will determine the aggregate current bid price
evaluation of the Bonds in the Trust, taking into account the market value of
the Bonds insured under the Bond Insurance Policy, in the manner described as
set forth under "Public Offering--Offering Price". Insurance does not guarantee
the market value of the Bonds or the Units, and while Bond insurance represents
an element of market value in regard to insured Bonds, its exact effect, if any,
on market value cannot be predicted.
The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering
Certificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per Unit
for any period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor is not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual
and annual Certificateholders (except Texas residents*) may elect to have all
interest and principal distributions, if any, with respect to their Units
reinvested either in units of various series of "Insured Municipal Securities
Trust" or "Municipal Securities Trust" which will have been created shortly
before each semi-annual or annual Payment Date (a "Primary Series") or, if units
of a Primary Series are not available, in units of a previously formed series of
the Trust which have been repurchased by the Sponsor in the secondary market or
which constitute a portion of the Units of the Trust not sold by the Sponsor
prior to such Payment Date (a "Secondary Series") (Primary Series and Secondary
Series are hereafter collectively referred to as "Available Series"). Series of
"Municipal Securities 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
- --------
* Texas residents may elect to participate in the "Total Reinvestment
Plan for Texas Residents" hereinafter described.
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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.
A semi-annual or annual Certificateholder may join the Plan at
the time he invests in Units of the Trust or any time thereafter by delivering
to the Trustee an Authorization Form which is available from brokers, any
Underwriter of the Units or the Sponsor. In order that distributions may be
reinvested on a particular Plan Reinvestment Date, the Authorization Form must
be received by the Trustee not later than the 15th day of the month preceding
such Date. Authorization Forms not received in time for a particular Plan
Reinvestment Date will be valid only for the second succeeding Plan Reinvestment
Date. Similarly, a participant may withdraw from the program at any time by
notifying the Trustee (see below). However, if written confirmation of
withdrawal is not given to the Trustee prior to a particular distribution, the
participant will be deemed to have elected to participate in the Plan with
respect to that particular distribution and his withdrawal would become
effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to Units
purchased in the Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased in the Trust) for each subsequent
distribution so long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from the Trust in
the opinion of the Sponsor, the authorization will be voided and participants
will be provided with both a notice of the material change and a new
Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan. The Sponsor
anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from all
federal income tax, or the inclusion of bonds which were not rated "A" or better
by Standard & Poor's Corporation or Moody's Investors Service, Inc. on the date
such bonds were initially deposited in the Available Series portfolio.
The Sponsor has the option at any time to use units of a
Secondary Series to fulfill the requirements of the Plan in the event units of a
Primary
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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 writing prior
to the Plan Reinvestment Date. Should the Trustee be so notified, it will make
the appropriate cash disbursement. Unless the withdrawing participant
specifically indicates in his written confirmation that (a) he wishes to
withdraw from the Plan for that particular distribution only, or (b) he wishes
to withdraw from the Plan for less than all units of each series of "Municipal
Securities Trust" or "Insured Municipal Securities Trust" which he might then
own (and specifically identifies which series are to continue in the Plan), he
will be deemed to have withdrawn completely from the Plan in all respects. Once
a participant withdraws completely, he will only be allowed to again participate
in the Plan by submitting a new Authorization Form. A sale or redemption of a
portion of a participant's Plan Units will not constitute a withdrawal from the
Plan with respect to the remaining Plan Units owned by such participant.
Unless a Certificateholder notifies the Trustee in writing to
the contrary, each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual
Certificateholder fail to have an annual distribution plan, such
Certificateholder will be deemed to have elected the semi-annual plan of
distribution, and to participate in the Plan with respect to distributions made,
in connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash may
withdraw from the Plan with respect to such Plan Units and remain in the Plan
with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from the
Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "Municipal Securities
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Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor intends to
maintain a market for the Plan Units and continuously to offer to purchase Plan
Units at prices based upon the aggregate offering price of the Bonds in the
Available Series portfolio during the initial offering of the Available Series,
or at the aggregate bid price of the Bonds of the Available Series after its
initial offering has been completed. The Sponsor may discontinue such purchases
at any time. The aggregate bid price of the underlying bonds may be expected to
be less than the aggregate offering price. In the event that a market is not
maintained for Plan Units, a participant desiring to dispose of his Plan Units
may be able to do so only by tendering such Plan Units to the Trustee for
redemption at the Redemption Price of the full units in the Available Series
corresponding to such Plan Units, which is based upon the aggregate bid price of
the underlying bonds as described in the "Insured Municipal Securities Trust"
Prospectus for the Available Series in question. If a participant wishes to
dispose of his Plan Units, he should inquire of the Sponsor as to current market
prices prior to making a tender for redemption to the Trustee.
Any participant may tender his Plan Units for redemption to
the Available Series Trust. Participants may redeem Plan Units by making a
written request to the Trustee, at the address listed in the "Summary of
Essential Information" in Part A, on the Redemption Form supplied by the
Trustee. The redemption price per Plan Unit will be determined as set forth in
the "Insured Municipal Securities Trust" Prospectus of the Available Series from
which such Plan Unit was purchased following receipt of the request and adjusted
to reflect the fact that it relates to a Plan Unit. There is no charge for the
redemption of Plan Units.
The Trust Agreement requires that the Trustee notify the
Sponsor of any tender of Plan Units for redemption. So long as the Sponsor is
maintaining a bid in the secondary market, the Sponsor will purchase any Plan
Units tendered to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such Plan
Units on the date of tender not later than the day on which such Plan Units
otherwise would have been redeemed by the Trustee.
Participants in the Plan will not receive individual
certificates for their Plan Units unless the amount of Plan Units accumulated
represents $1,000 principal amount of bonds underlying such Units and, in such
case, a written request for certificates is made to the Trustee. All Plan Units
will be accounted for by the Trustee on a book entry system. Each time Plan
Units are purchased under the Plan, a participant will receive a confirmation
stating his cost, number of Units purchased and estimated current return.
Questions regarding a participant's statements should be directed to the Trustee
by calling the Trustee at the number set forth under "Summary of Essential
Information" in Part A of this Prospectus.
All expenses relating to the operation of the Plan will be
borne by the Sponsor. The Sponsor and the Trustee reserve the right to suspend,
modify or terminate the Plan at any time for any reason, including the right to
suspend the Plan if the Sponsor is unable or unwilling to establish a Primary
Series or is unable to provide Secondary Series Units. All participants will
receive notice of any such suspension, modification or termination.
TOTAL REINVESTMENT PLAN FOR TEXAS RESIDENTS. Except as
specifically provided under this section, and unless the context otherwise
requires, all provisions and definitions contained under the heading "Total
Reinvestment Plan" shall be applicable to the Total Reinvestment Plan for Texas
Residents ("Texas Plan").
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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
Certificateholder 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 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
Certificateholder 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
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in payment of principal or interest on other obligations of the same issuer or
guarantor, (v) with respect to revenue Bonds, decline in revenues and income of
any facility or project below the estimated levels calculated by proper
officials charged with the construction or operation of such facility or project
or (vi) decline in price or the occurrence of other market or credit factors
that in the opinion of the Sponsor would make the retention of such Bonds in the
Trust detrimental to the interests of the Certificateholders. If a default in
the payment of principal or interest on any of the Bonds occurs and if the
Sponsor fails to instruct the Trustee to sell or hold such Bonds, the Trust
Agreement provides that the Trustee may sell such Bonds. The Trustee shall not
be liable for any depreciation or loss by reason of any sale of bonds or by
reason of the failure of the Sponsor to give directions to the Trustee.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Agreement to the same
extent as the Bonds originally deposited. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the Bonds substituted therefor.
TRUST AGREEMENT, AMENDMENT AND TERMINATION. The Trust
Agreement may be amended by the Trustee, the Sponsor and the Evaluator without
the consent of any of the Certificateholders: (1) to cure any ambiguity or to
correct or supplement any provision which may be defective or inconsistent; (2)
to change any provision thereof as may be required by the Securities and
Exchange Commission or any successor governmental agency; or (3) to make such
other provisions in regard to matters arising thereunder as shall not adversely
affect the interests of the Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent of
the holders of Certificates evidencing 66-2/3% of the Units then outstanding for
the purpose of modifying the rights of 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.
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THE SPONSORS. The Sponsor, Reich & Tang Distributors L.P.
("Reich & Tang") 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 eleven subsidiaries,
divisions and affiliates offering a wide array of investment styles and products
to institutional clients. These affiliates in the aggregate are investment
advisers or managers to over 54 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-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).
On August 30, 1996, New England Mutual Life Insurance Company
("The New England") and Metropolitan Life Insurance Company ("MetLife") merged,
with MetLife being the continuing company. RTAM L.P. remains a wholly-owned
subsidiary of NEIC LP, but RTAM Inc. its sole general partner, is now an
indirect subsidiary of MetLife. Also, Metlife New England Holdings, Inc., a
wholly-owned subsidiary of MetLife, owns 55% of the outstanding limited
partnership interest of NEIC L.P., 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., L.L.C., a Delaware limited liability company,
operates a regional securities broker/dealer from its main office in New York
City and branch
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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., L.L.C. 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.
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 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
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incurred by reason of the sale by the Trustee of any of the Bonds pursuant to
the Trust Agreement.
For further information relating to the responsibilities of
the Trustee under the Trust Agreement, reference is made to the material set
forth under "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is obligated
to appoint a successor Trustee as soon as possible. In addition, if the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint a successor
as provided in the Trust Agreement. Notice of such removal and appointment shall
be mailed to each Certificateholder by the Sponsor. If upon resignation of the
Trustee no successor has been appointed and has accepted the appointment within
thirty days after notification, the retiring Trustee may apply to a court of
competent jurisdiction for the appointment of a successor. The resignation or
removal of the Trustee becomes effective only when the successor Trustee accepts
its appointment as such or when a court of competent jurisdiction appoints a
successor Trustee. Upon execution of a written acceptance of such appointment by
such successor Trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
THE EVALUATOR. The Evaluator is Kenny S&P Evaluation Services,
a division of 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
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and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933, the
premiums on the Sponsor-Insured Bonds, initial preparation and printing of the
Certificates, legal expenses, advertising and selling expenses, expenses of the
Trustee including, but not limited to, an amount equal to interest accrued on
certain "when issued" bonds since the date of settlement for the Units, initial
fees and other out-of-pocket expenses. The fees of the Evaluator, however,
incurred during the initial public offering are paid directly by the Trust.
The Sponsor will not charge the Trust a fee for its services
as such. (See "Sponsor's Profits".)
The Sponsor will receive for portfolio supervisory services to
the Trust an Annual Fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. The Sponsor's fee may exceed the
actual cost of providing portfolio supervisory services for this Trust, but at
no time will the total amount received for portfolio supervisory services
rendered to all series of the Municipal Securities Trust in any calendar year
exceed the aggregate cost to the Sponsor of supplying such services in such
year. (See "Portfolio Supervision".)
The Trustee will receive for its ordinary recurring services
to the Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust Agreement,
see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the
Bonds in the Trust after the initial public offering is completed, a fee in the
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
-56-
112677.5
<PAGE>
which exceeds 50 cents per Unit. Certificateholders covered by the audit during
the year may receive a copy of the audited financials upon request.
Unless the Sponsor otherwise directs, the accounts of the
Trust shall be audited not less than annually by independent public accountants
selected by the Sponsor. The expenses of the audit shall be an expense of the
Trust. So long as the Sponsor maintains a secondary market, the Sponsor will
bear any audit expense which exceeds $.50 per 1,000 Units. 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 will be able to elect
to exchange any or all of their Units of this Trust for Units of one or more of
any available series of Equity Securities Trust Insured Municipal Securities
Trust, Municipal Securities Trust, New York Municipal Trust or Mortgage
Securities Trust (the "Exchange Trusts") at a reduced sales charge as set forth
below. Under the Exchange 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 particular Trust portfolio. Units in an Exchange Trust then
will be sold to the Certificateholder at a price based on the aggregate offer
price of the Bonds in the Exchange Trust portfolio (or for Units of Equity
Securities Trust, based on the market value of the underlying securities in the
Trust portfolio) during the initial public offering period of the Exchange
Trust; and after the initial public 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 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
the Trust, any purchaser who purchases Units under the Exchange Privilege will
pay a lower sales charge than that which would be paid for the Units by a new
investor. For Certificateholders who wish to exercise the Exchange Privilege
within the first five months of their purchase of Units of the Trust, the sales
charge applicable to the purchase of units of an Exchange Trust shall be the
greater of (i) the reduced sales charge or (ii) an amount which when coupled
with the sales charge paid by the Certificateholder upon his original purchase
of Units of the Trust would equal the sales charge applicable in the direct
purchase of units of an Exchange Trust.
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
-57-
112677.5
<PAGE>
federal income tax and state and local taxes when held by residents of the state
where issuers of bonds in such State Trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high level
of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust offers
investors an opportunity to achieve capital appreciation together with a high
level of current income.
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION
OFFER. A surrender of units pursuant to the Exchange Privilege or the Conversion
Offer will constitute a "taxable event" to the Certificateholder under the Code.
The Certificateholder will realize a tax gain or loss that will be of a long- or
short-term capital or ordinary income nature depending on the length of time the
units have been held and other factors. A Certificateholder's tax basis in the
Units acquired pursuant to the Exchange Privilege or Conversion Offer will be
equal to the purchase price of such Units. Investors should consult their own
tax advisors as to the tax consequences to them of exchanging or redeeming units
and participating in the Exchange Privilege or Conversion Offer.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby and
certain matters relating to federal tax law have been passed upon by Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022, as counsel for the
Sponsor. Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005
have acted as counsel for 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.
INDEPENDENT ACCOUNTANTS. The financial statements of the
Trusts for the year ended December 31, 1996 included in Part A of this
Prospectus have been examined by Price Waterhouse LLP, independent accountants.
The financial statements 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 December 31, 1994 and
December 31, 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.
- --------
* As described by Standard & Poor's.
-58-
112677.5
<PAGE>
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's from other
sources it considers reliable. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
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
- --------
* As described by Standard & Poor's Corporation.
-59-
112677.5
<PAGE>
to such investments. The assessment, however, does not take into account the
extent to which fund expenses or portfolio asset sales for less than the fund's
purchase price will reduce payment to the unit holder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell, or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a particular
investor.
Funds rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard & Poor's,
credit characteristics comparable to assets that are rated "AAA", or certain
short-term investments. Standard & Poor's defines its AAA rating for such assets
as the highest rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong.
-60-
112677.5
<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
4 NEW YORK PLAZA
NEW YORK, NEW YORK 10004
112677.5
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
SERIES 1 - 4 (MULTIPLIER PORTFOLIO)
SERIES 1 - 2 AND 1ST - 8TH DISCOUNT SERIES
==============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
___ Discount Series/Series __________.
I hereby authorize The Bank of New York, Trustee to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Insured Municipal
Securities Trust above or, if unavailable, of other available series of
Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- --------------------------------
Registered Holder (Print) Registered Holder (Print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State and Zip Code ____________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
==============================================================================
MAIL TO YOUR BROKER
OR
THE BANK OF NEW YORK
ATTN: UNIT INVESTMENT TRUST DIVISION
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
112677.5
<PAGE>
<TABLE>
INDEX INSURED
-----
<CAPTION>
<S> <C>
MUNICIPAL SECURITIES TRUST
Title Page (Unit Investment Trust)
- ----- ----
Prospectus
Summary of Essential Information..................................A-5
Financial and Statistical Information.............................A-6 Dated: April 30, 1997
Information Regarding the Trust...................................A-7
Audit and Financial Information...................................F-1 Sponsor:
The Trust...........................................................1 Reich & Tang Distributors L.P.
Risk Considerations................................................15 600 Fifth Avenue
Public Offering....................................................35 New York, New York 10020
Estimated Long Term Return and (212) 830-5200
Estimated Current Return........................................ 37
Rights of Certificateholders...................................... 38
Tax Status........................................................ 40 (and for certain Trusts:)
Liquidity......................................................... 45 Gruntal & Co., L.L.C.
Total Reinvestment Plan........................................... 47 14 Wall Street
Trust Administration.............................................. 51 New York, New York 10005
Trust Expenses and Charges........................................ 55 212-267-8800
Exchange Privilege and Conversion
Offer............................................................57 Trustee:
Other Matters..................................................... 58
Description of Bond Ratings....................................... 58 The Chase Manhattan Bank
Description of Rating on the Units................................ 59 4 New York Plaza
New York, New York 10004
800-882-9898
or
The Bank of New York
101 Barclay Street
Parts A and B of this Prospectus do not New York, New York 10286
contain all of the information set forth in 800-431-8002
the registration statement and exhibits
relating thereto, filed with the Securities Evaluator:
and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, and to Kenny S&P
which reference is made. 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.
112677.5
<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 (incorporated by reference to the Post-Effective
Amendment to Form S-6 Registration Statement No. 33-26426, filed on April 25,
1996).
The Prospectus consisting of pages.
Signatures.
Consent of Independent Accountants.
Consent of Counsel (included in Exhibit 99.3.1).
Consent of the Evaluator (included in Exhibit 99.5.1).
The following exhibits:
**99.1.1 -- Form of Reference Trust Agreement (filed as Exhibit
99.1.1 to Post-Effective Amendment No. 8 to Form S-6
Registration Statement No. 33-26426 on April 25, 1997
and incorporated herein by reference).
99.1.1.1 -- Trust Indenture and Agreement for Insured Municipal
Securities Trust, 9th Discount Series (and Subsequent
Series) (filed as Exhibit 99.1.1.1 to the
Post-Effective Amendment to Form S-6 Registration
Statement No. 33-26426 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).
99.1.5 -- Form of Insurance Policy of Financial Guaranty
Insurance Company for Sponsor-Insured Bonds (filed as
Exhibit 99.1.5 to the Post-Effective Amendment to
Form S-6 Registration Statement No. 33-26426 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 99.1.5.1
to the Post-Effective Amendment to Form S-6
Registration Statement No. 33-26426 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 99.1.5.2 to
the Post-Effective Amendment to Form S-6 Registration
Statement
- --------
** Filed herewith for the EDGAR filing only.
II-1
1155.1
<PAGE>
No. 33-26426 on April 25, 1996 and incorporated
herein by reference).
**99.2.1 -- Form of Certificate (filed as Exhibit 99.2.1 to Post-
Effective Amendment No. 8 to Form S-6 Registration
Statement No. 33-26426 on April 25, 1997 and
incorporated herein by reference).
**99.3.1 -- Form of Opinion of Battle Fowler LLP as to the
legality of the securities being registered,
including their consent to the delivery thereof and
to the use of their name under the headings "Tax
Status" and "Legal Opinions" in the Prospectus (filed
as Exhibit 99.3.1 to Post-Effective Amendment No. 8
to Form S-6 Registration Statement No. 33-26426 on
April 25, 1997 and incorporated herein by reference).
*99.5.1 -- Consent of the Evaluator.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P.,
the Depositor, by its officers and majority of its
Directors (filed as Exhibit 99.6.0 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.
** Filed herewith for the EDGAR filing only.
1155.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrants, New York Municipal Trust, Series 15, Series 16, and Series
17, 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 17th day of April, 1997.
NEW YORK MUNICIPAL TRUST
SERIES 15, SERIES 16 AND SERIES 17
(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, Treasurer ) April 17, 1997
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. HYSLER 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 Registration Statement No. 33-62627 on November 16,
1995.
II-3
1155.1
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment to the registration statement on Form S-6 of our report
dated March 28, 1997, relating to the financial statements and financial
highlights for the year ended December 31, 1996 of the Insured Municipal
Securities Trust, Series 15; Insured Municipal Securities Trust, Series 16; and
Insured Municipal Securities Trust, Series 17, which appear in such Prospectus.
We also consent to the reference to us under the heading "Independent
Accountants" in the Prospectus.
PRICE WATERHOUSE LLP
Boston, MA 02110
April 25, 1997
<PAGE>
Independent Auditors' Consent
Re: Insured Municipal Securities Trust, Series 15
Insured Municipal Securities Trust, Series 16
Insured Municipal Securities Trust, Series 17
We consent to the incorporation by reference of our report dated March
31, 1996, 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 December 31,
1995, and to the reference to our firm under the heading "Independent
Accountants" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
April 24, 1997
<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> 0000845294
<NAME> IMST, Series 15
<SERIES>
<NUMBER> 1
<NAME> IMST, Series 15
<S> <C>
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2,901,418
<INVESTMENTS-AT-VALUE> 3,213,000
<RECEIVABLES> 61,170
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,274,170
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,758
<TOTAL-LIABILITIES> 3,758
<SENIOR-EQUITY> 3,270,412
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 53,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,321
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 311,582
<NET-ASSETS> 3,270,412
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 241,397
<OTHER-INCOME> 0
<EXPENSES-NET> 7,842
<NET-INVESTMENT-INCOME> 233,555
<REALIZED-GAINS-CURRENT> 42,042
<APPREC-INCREASE-CURRENT> (143,997)
<NET-CHANGE-FROM-OPS> 131,600
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 253,285
<DISTRIBUTIONS-OF-GAINS> 839,828
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 461
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (961,513)
<ACCUMULATED-NII-PRIOR> 72,821
<ACCUMULATED-GAINS-PRIOR> 56
<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> 600.44
<PER-SHARE-NII> 34.26
<PER-SHARE-GAIN-APPREC> (13.36)
<PER-SHARE-DIVIDEND> 37.15
<PER-SHARE-DISTRIBUTIONS> 87.70
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 496.49
<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> 0000846125
<NAME> IMST, Series 16
<SERIES>
<NUMBER> 1
<NAME> IMST, Series 16
<S> <C>
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 1,892,264
<INVESTMENTS-AT-VALUE> 2,260,421
<RECEIVABLES> 49,845
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,310,266
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,253
<TOTAL-LIABILITIES> 4,253
<SENIOR-EQUITY> 2,306,013
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,247
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,345
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368,157
<NET-ASSETS> 2,306,013
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 159,910
<OTHER-INCOME> 0
<EXPENSES-NET> 6,245
<NET-INVESTMENT-INCOME> 153,665
<REALIZED-GAINS-CURRENT> (27,488)
<APPREC-INCREASE-CURRENT> (41,092)
<NET-CHANGE-FROM-OPS> 85,085
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 178,582
<DISTRIBUTIONS-OF-GAINS> 1,298,103
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 365
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,391,600)
<ACCUMULATED-NII-PRIOR> 59,164
<ACCUMULATED-GAINS-PRIOR> 610,001
<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> 545.21
<PER-SHARE-NII> 23.28
<PER-SHARE-GAIN-APPREC> (6.81)
<PER-SHARE-DIVIDEND> 27.06
<PER-SHARE-DISTRIBUTIONS> 175.26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 359.36
<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> 0000846418
<NAME> IMST, Series 17
<SERIES>
<NUMBER> 1
<NAME> IMST, Series 17
<S> <C>
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2,014,684
<INVESTMENTS-AT-VALUE> 2,264,695
<RECEIVABLES> 53,103
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,317,798
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,007
<TOTAL-LIABILITIES> 3,007
<SENIOR-EQUITY> 2,314,791
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 38,224
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,872
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 250,011
<NET-ASSETS> 2,314,791
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 162,866
<OTHER-INCOME> 0
<EXPENSES-NET> 6,284
<NET-INVESTMENT-INCOME> 156,582
<REALIZED-GAINS-CURRENT> (12,444)
<APPREC-INCREASE-CURRENT> (52,856)
<NET-CHANGE-FROM-OPS> 91,282
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 193,178
<DISTRIBUTIONS-OF-GAINS> 869,653
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 787
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (971,549)
<ACCUMULATED-NII-PRIOR> 74,820
<ACCUMULATED-GAINS-PRIOR> 567,072
<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> 495.08
<PER-SHARE-NII> 25.07
<PER-SHARE-GAIN-APPREC> (2.80)
<PER-SHARE-DIVIDEND> 30.93
<PER-SHARE-DISTRIBUTIONS> 90.80
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 395.62
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[NAME OF TRUST]
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement (the "Agreement") dated [insert
closing date] between [Name of Depositor(s)], as Depositor(s), [Name of
Trustee], as Trustee, and [Name of Evaluator], as Evaluator, if any, sets forth
certain provisions in full and incorporates other provisions by reference to the
document entitled "[Name and date of Indenture]" and as amended in part by this
Agreement (collectively, such documents hereinafter called the "Indenture and
Agreement"). This Agreement and the Indenture, as incorporated by reference
herein, will constitute a single instrument.
WITNESSETH THAT:
[insert for Equity Trusts only: WHEREAS, this Agreement is a
Reference Trust Agreement as defined in Section 1.1 of the Indenture, and shall
be amended and modified from time to time by an Addendum as defined in Section
1.1 (1) of the Indenture, such Addendum setting forth any Additional Securities
as defined in Section 1.1 (2) of the Indenture;
WHEREAS, the Depositor wishes to deposit Securities, and any
Additional Securities as listed on any Addendums hereto, into the Trust and
issue Units, and Additional Units as the case maybe, in respect thereof pursuant
to Sections 2.1 and 2.6 of the Indenture;] and
NOW THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the Depositor, Trustee and Evaluator, if
any, as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Section 1. 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 the following sections of the Indenture hereby are
amended as follows:
[refer to original filing for Applicable Indenture
Amendments].
C/M: 11939.0004 481375.1
<PAGE>
[for Equity Trust only: Section 2. This Reference Trust
Agreement may be amended and modified by Addendums, attached hereto, evidencing
the purchase of Additional Securities which have been deposited to effect an
increase over the number of Units initially specified in Part II of this
Reference Trust Agreement ("Additional Closings"). The Depositor, Trustee and
Evaluator hereby agree that their respective representations, agreements and
certifications contained in the Closing Memorandum dated [ ], relating to the
initial deposit of Securities continue as if such representations, agreements
and certifications were made on the date of such Additional Closings and with
respect to the deposits made therewith, except as such representations,
agreements and certifications relate to their respective By-Laws and as to which
they each represent that their has been no amendment affecting their respective
abilities to perform their respective obligations under the Indenture.]
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
Section 1. The following special terms and conditions are
hereby agreed to:
(a) The Securities (including Contract Securities) listed in
the Prospectus relating to this series of Equity Securities Trust (the
"Prospectus") have been deposited in the Trust under this Agreement (see
"Portfolio" in Part A of the Prospectus which for purposes of this Indenture and
Agreement is the Schedule of Securities or Schedule A).
(b) The number of Units delivered by the Trustee in
exchange for the Securities referred to in Section 2.3 is
[ ].
(c) For the purposes of the definition of Unit in item (22) of
Section 1.1, the fractional undivided interest in and ownership of the Trust
initially is 1/[ ] as of the date hereof.
(d) The term Record Date shall mean the first business
day of [ ] commencing on [ ].
(e) The term Distribution Date shall mean the
fifteenth day of [ ] commencing on [ ].
(f) The First Settlement Date shall mean [ ].
(g) For purposes of Section 6.1(g), the liquidation amount is
hereby specified to be 40% of the aggregate value of the Securities at the
completion of the Deposit Period.
-2-
C/M: 11939.0004 481375.1
<PAGE>
(h) For purposes of Section 6.4, the Trustee shall be paid per
annum an amount computed according to the following schedule, determined on the
basis of the number of Units outstanding as of the Record Date preceding the
Record Date on which the compensation is to be paid, provided, however, that
with respect to the period prior to the first Record Date, the Trustee's
compensation shall be computed at $[ ] per 100 Units:
rate per [ ] units number of Units outstanding
[$ ] [ ]
(i) For purposes of Section 7.4, the Depositor's
maximum annual supervisory fee is hereby specified to be
$[ ] per 100 Units outstanding.
(j) The Termination Date shall be [ ] or
the earlier disposition of the last Security in the Trust.
(k) The fiscal year for the Trust shall end on
[ ] of each year.
(l) For purposes of this series of [Equity Securities Trust],
the form of Certificate set forth in Indenture shall be appropriately modified
to reflect the title of this Series and represent 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: 11939.0004 481375.1
CERTIFICATE OF OWNERSHIP
--evidencing--
A Fractional Undivided Interest
--in--
[NAME OF TRUST]
- --------------------
PLAN OF DISTRIBUTION
- --------------------
CUSIP
This is to certify that [Name of Sponsor(s)] is the owner and registered
holder of this Certificate evidencing the ownership of [ ] unit(s) of fractional
undivided interest in the above-named Trust created under the laws of the State
of New York pursuant to the Trust Indenture and Agreement among [Name of
Sponsor] (and such other Depositors, if any, identified therein), as
Depositor(s), [Name of Trustee], as Trustee, and [Evaluator, if any] (the
"Indenture"), a copy of which is available at the office of the Trustee. 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 which Indenture is
contained in the Prospectus relating to the Trust. This Certificate is
transferable and interchangeable by the registered owner in person or by his
duly authorized attorney at the Trustee's office upon surrender of this
Certificate properly endorsed or accompanied by a written instrument of transfer
and any other documents that the Trustee may require for transfer, in form
satisfactory to the Trustee and payment of the fees and expenses as provided in
the Indenture.
Witness the facsimile signature of a duly authorized officer of the Agent
for the Depositor(s) (referred to in the Indenture) and the manual signature of
an authorized signatory of the Trustee.
C/M: 11939.0001 481379.1
<PAGE>
Date:
Agent for Depositor(s)
By -------------------------------
Authorized Signatory
[NAME OF TRUSTEE],
Trustee
By -------------------------------
Authorized Officer
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.
Date: ------------------------------------------
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.
C/M: 11939.0001 481379.1
<PAGE>
Date:
Agent for Depositor(s)
By -------------------------------
Authorized Signatory
[Name of Trustee],
Trustee
By -------------------------------
Authorized Officer
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.
Date: ----------------------------------
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.
C/M: 11939.0001 481379.1
Exhibit 3.1
BATTLE FOWLER LLP
A LIMITED LIABILITY PARTNERSHIP
75 East 55th Street
New York, New York 10022
(212) 856-7000
[DATE]
[Addressed to Sponsor(s)]
Re: [Name of Unit Investment Trust(s) sponsored by Sponsor(s)]
----------------------------------------------------------
Dear Sirs:
We have acted as special counsel for [Name of Sponsor(s)], as
Depositor(s), Sponsor(s) and Principal Underwriter(s) (collectively, the
"Depositors") of [Name of Trust(s)] (the "Trusts") in connection with the
issuance by the Trusts, respectively, of [Number of] units of fractional
undivided interest (collectively, the "Units") in [each] such Trust. Pursuant to
the Trust Agreement(s) referred to below, the Depositor(s) have transferred to
the Trust(s) certain long-term bonds and contracts to purchase certain long-term
bonds together with irrevocable letters of credit to be held by the Trustee upon
the terms and conditions set forth in the Trust Agreement(s). (All bonds to be
acquired by the Trust(s) 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 (the "Trust Agreement(s)") among the Depositor(s),
[Name of Trustee], as Trustee, and [Name of Evaluator], 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- ) filed with the Commission pursuant to the Securities Act of 1933 (the
"1933 Act"), and Amendment No. 1
C/M: 11939.0001 481925.1
(IMST Series 33)
<PAGE>
2
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
Committees of [each of] the Depositor(s) authorizing the execution and delivery
by the Depositor(s) of the Trust Agreement(s) and the consummation of the
transactions contemplated thereby; (f) the Certificate(s) of Incorporation and
By-Laws of [each of] the Depositor(s), [each] certified to by an authorized
officer of [each of] the Depositor(s) as of a recent date; and (g) a certificate
of an authorized officer of [each of] the Depositor(s) with respect to certain
factual matters contained therein.
We have also examined the Application for an Order of
Exemption from certain provisions of Sections 11(a) and 11(c) of the 1940 Act,
which has been filed with the Commission by the Depositor(s) and Gruntal & Co.,
Incorporated; Equity Securities Trust (Series 1, Signature Series, Gabelli
Communications Income Trust and Subsequent Series), Mortgage Securities Trust
(CMO Series 1 and Subsequent Series), Municipal Securities Trust, Series 1 (and
Subsequent Series (including Insured Municipal Securities Trust, Series 1 (and
Subsequent Series and 5th Discount Series and Subsequent Series)); New York
Municipal Trust, Series 1 and Subsequent Series); and A Corporate Trust, Series
1 (and Subsequent Series) on November 12, 1992 and as amended thereafter and the
related Exemptive Order (IC-20729) issued by the Commission on November 22,
1994.
We have not reviewed the financial statements, compilation of
the Securities held by the Trust(s), or 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.
C/M: 11939.0001 481925.1
(IMST Series 33)
<PAGE>
3
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 Agreement(s) have been duly authorized and
entered into by an authorized officer of the Depositor and are valid and binding
obligations of the Depositor(s) in accordance with their terms.
(2) The execution and delivery of the Certificate evidencing
the Units has been duly authorized by the Depositor and such Certificate, when
executed by the Depositor and the Trustee in accordance with the provisions of
the Certificate and the Trust Agreements and issued for the consideration
contemplated therein, will constitute fractional undivided interests in the
Trusts, will be entitled to the benefits of the 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 Trust.
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 Master Agreement Among Underwriters
relating to the Trusts 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
addressees 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 LLP
C/M: 11939.0001 481925.1
(IMST Series 33)
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
April 30, 1997
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 15
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-26426 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
April 30, 1997
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 16
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-26769 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
April 30, 1997
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Re: Insured Municipal Securities Trust,
Series 17
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-26858 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
