As filed with the Securities and Exchange Commission on April 25, 1996
Registration No. 33-28384*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT
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 20, SERIES 22
& NEW YORK NAVIGATOR INSURED SERIES 1,
49TH DISCOUNT SERIES, SERIES 23 & NEW YORK
NAVIGATOR INSURED SERIES 2, AND SERIES 24 &
NEW YORK NAVIGATOR INSURED SERIES 3
B. Name of depositors: REICH & TANG DISTRIBUTORS L.P.
GRUNTAL & CO., INCORPORATED
C. Complete address of depositors' principal executive offices:
Reich & Tang Distributors L.P. Gruntal & Co., Incorporated
600 Fifth Avenue 14 Wall Street
New York, NY 10020 New York, NY 10005
D. Name and complete address of agent for service:
PETER J. DeMARCO ROBERT SABLOWSKY Copy of comments to:
Executive Executive Vice-President MICHAEL R. ROSELLA, ESQ.
Vice President Gruntal & Co., Battle Fowler LLP
Reich & Tang Incorporated 75 East 55th Street
Distributors L.P. 14 Wall Street New York, NY 10022
600 Fifth Avenue New York, NY 10005 (212) 856-6858
New York, NY 10020
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, 1996 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 20, Series 22 & New York Navigator Insured
Series 1, 49th Discount Series, Series 23 & New York Navigator Insured
Series 2, and Series 24 & New York Navigator Insured Series 3, covered by
prospectuses heretofore filed as part of separate registration statements
on Form S-6 (Registration Nos. 33-28384, 33-29467, 33-31426 and 33-34944,
respectively) under the Act. This filing constitutes Post-Effective
Amendment No. 7 for Series 20 and Post-Effective Amendment No. 6 for
Series 22 & New York Navigator Insured Series 1, 49th Discount Series,
Series 23 & New York Navigator Insured Series 2, and Series 24 and New
York Navigator Insured Series 3.
786.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 20,
SERIES 22 and NEW YORK NAVIGATOR INSURED SERIES 1
49TH DISCOUNT SERIES, SERIES 23 and NEW YORK NAVIGATOR INSURED SERIES 2
SERIES 24 and NEW YORK NAVIGATOR INSURED SERIES 3
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust................... Front Cover of Prospectus
(b) Title of securities issued...... "
2. Name and address of each depositor.. The Sponsors
3. Name and address of trustee......... The Trustee
4. Name and address of principal
underwriters...................... The Sponsors
5. State of organization of trust...... Organization
6. Execution and termination of
trust agreement................... Trust Agreement, Amendment and
Termination
7. Changes of name..................... Not Applicable
8. Fiscal year......................... "
9. Litigation.......................... None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities...................... Certificates
(b) Cumulative or distributive
securities...................... Interest and Principal Distributions
(c) Redemption...................... Trustee Redemption
(d) Conversion, transfer, etc....... Certificates, Sponsors Repurchase,
Trustee Redemption, Exchange
Privilege and Conversion Offer
(e) Periodic payment plan........... Not Applicable
(f) Voting rights................... Trust Agreement, Amendment and
Termination
(g) Notice to certificateholders.... Records, Portfolio, Trust Agreement,
Amendment and Termination, The
Sponsors, The Trustee
(h) Consents required............... Trust Agreement, Amendment and
Termination
(i) Other provisions................ Tax Status
11. Type of securities
comprising units.................. Objectives, Portfolio, Description
of Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
-i-
789.1
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
13. (a) Load, fees, expenses, etc....... Summary of Essential Information,
Offering Price, Volume and Other
Discounts, Sponsors' and
Underwriters' Profits, Total
Reinvestment Plan, Trust Expenses
and Charges
(b) Certain information regarding
periodic payment certificates... Not Applicable
(c) Certain percentages............. Summary of Essential Information,
Offering Price, Total Reinvestment
Plan
(d) Price differences............... Volume and Other Discounts
(e) Other loads, fees, expenses..... Certificates
(f) Certain profits receivable
by depositors, principal
underwriters, trustee or
affiliated persons.............. Sponsors' and Underwriters' Profits
(g) Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities...... Organization, Certificates
15. Receipt and handling of payments
from purchasers................... Organization
16. Acquisition and disposition of
underlying securities............. Organization, Objectives, Portfolio,
Portfolio Supervision
17. Withdrawal or redemption............ Comparison of Public Offering Price,
Sponsors' Repurchase Price and
Redemption Price, Sponsors
Repurchase, Trustee Redemption
18. (a) Receipt, custody and
disposition of income........... Distribution Elections, Interest and
Principal Distributions, Records,
Total Reinvestment Plan
(b) Reinvestment of distributions... Total Reinvestment Plan
(c) Reserves or special funds....... Interest and Principal Distributions
(d) Schedule of distributions....... Not Applicable
19. Records, accounts and reports....... Records, Total Reinvestment Plan
20. Certain miscellaneous provisions
of trust agreement................ Trust Agreement, Amendment and
Termination
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... The Trustee
(e) and (f) Depositor, removal
and successor................... The Sponsors
21. Loans to security holders........... Not Applicable
22. Limitations on liability............ The Sponsors, The Trustee,
The Evaluator
23. Bonding arrangements................ Part II--Item A
24. Other material provisions
of trust agreement................ Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor........... The Sponsors
26. Fees received by depositor.......... Not Applicable
27. Business of depositor............... The Sponsors
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789.1
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Form N-8B-2 Form S-6
Item Number Heading in Prospectus
28. Certain information as to
officials and affiliated
persons of depositor.............. Part II--Item C
29. Voting securities of depositor...... Not Applicable
30. Persons controlling depositor....... "
31. Payments by depositor for certain
services rendered to trust........ "
32. Payment by depositor for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositor for certain services
rendered to trust................. "
34. Remuneration of other persons for
certain services rendered to
trust............................. "
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states.............. Distribution of Units
36. Suspension of sales of
trust's securities................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution.......... Distribution of Units, Total
Reinvestment Plan
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters.................... The Sponsors
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a) Business of principal
underwriters.................... The Sponsors
(b) Branch offices of principal
underwriters.................... Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation............. Summary of Essential Information,
Offering Price, Accrued Interest,
Volume and Other Discounts,
Total Reinvestment Plan,
Distribution of Units
(b) Schedule as to offering price... Not Applicable
(c) Variation in offering price
to certain persons.............. Distribution of Units, Total
Reinvestment Plan, Volume and
Other Discounts
45. Suspension of redemption rights..... Trustee Redemption
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789.1
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
46. (a) Redemption valuation............ Comparison of Public Offering Price,
Sponsors' Repurchase Price and
Redemption Price, Trustee
Redemption
(b) Schedule as to
redemption price................ Not Applicable
47. Maintenance of position in
underlying securities............. Comparison of Public Offering Price,
Sponsors' Repurchase Price and
Redemption Price, Sponsors
Repurchase, Trustee Redemption
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee........................ The Trustee
49. Fees and expenses of trustee........ Trust Expenses and Charges
50. Trustee's lien...................... "
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities................ Not Applicable
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Objectives, Portfolio, Portfolio
Supervision, Substitution of Bonds
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years.................... Not Applicable
55. Hypothetical account for issuers
of periodic payment plans......... "
56. Certain information regarding
periodic payment certificates..... "
57. Certain information regarding
periodic payment plans............ "
58. Certain other information
regarding periodic payment plans.. "
59. Financial Statements
(Instruction 1(c) to Form S-6).... Statement of Financial Condition
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789.1
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 20
_______________________________________________________________________________
The Trust is a unit investment trust designated Series 20 ("Insured
Municipal Trust") with an underlying portfolio of long-term insured tax-exempt
bonds issued by or on behalf of states, municipalities and public authorities
and was formed to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently exempt
from regular federal income tax under existing law but may be subject to state
and local taxes. Capital gains, however, are subject to tax. (See "Tax Status"
and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsors are Reich
& Tang Distributors L.P. (successor Sponsor to Bear, Stearns & Co. Inc.) and
Gruntal & Co., Incorporated (sometimes referred to as the "Sponsor" or the
"Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109784.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term insured bonds (the "Bonds") issued by or on behalf of
states, municipalities and public authorities which, because of irrevocable
insurance, were rated "AAA" by Standard & Poor's Corporation at the time
originally deposited in the Trust. The "AAA" rating results from insurance
relating only to the Bonds in the Trust and not to Units of the Trust. The
insurance does not remove market risk, as it does not guarantee the market value
of the Units. For a discussion of the significance of such ratings, see
"Description of Bond Ratings" in Part B of this Prospectus, and for a list of
ratings on the Evaluation Date see the "Portfolio." A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Tax Status" in Part B of this Prospectus.) For a
list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds may
be "Zero Coupon Bonds", which are original issue discount bonds that provide for
payment at maturity at par value, but do not provide for the payment of any
current interest. Some of the Bonds in the Trust have been issued with optional
refunding or refinancing provisions ("Refunded Bonds") whereby the issuer of the
Bond has the right to call such Bond prior to its stated maturity date (and
other than pursuant to sinking fund provisions) and to issue new bonds
("Refunding Bonds") in order to finance the redemption. Issuers typically
utilize refunding calls in order to take advantage of lower interest rates in
the marketplace. Some of these Refunded Bonds may be called for redemption
pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby the proceeds
from the issue of the Refunding Bonds are typically invested in government
securities in escrow for the benefit of the holders of the Pre-Refunded Bonds
until the refunding call date. Usually, Pre-Refunded Bonds will bear a triple-A
rating because of this escrow. The issuers of Pre-Refunded Bonds must call such
Bonds on their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest income
with respect to them. For a list of those Bonds which are Pre-Refunded Bonds, if
any, as of the Evaluation Date, see "Notes to Financial Statements" in this Part
A. Some of the Bonds in the portfolio may have been purchased at an aggregate
premium over par. The payment of interest and preservation of capital are, of
course, dependent upon the continuing ability of issuers of the Bonds or the
insurers thereof to meet their obligations. There can be no assurance that the
Trust's investment objectives will be achieved. Investment in the Trust should
be made with an understanding of the risks which an investment in long-term
fixed rate debt obligations may entail, including the risk that the value of the
underlying portfolio will decline with increases in interest rates, and that the
value of Zero Coupon Bonds is subject to greater fluctuation than coupon bonds
in response to changes in interest rates. Each Unit in the Trust represents a
1/6376th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
109784.1
<PAGE>
are issued and outstanding Units which have been purchased by the Sponsor in the
secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal
bond guaranty insurance policy obtained by either the Sponsor ("Sponsor-Insured
Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and issued by one of
the insurance companies (the "Insurance Companies"), described under "Insurance
on the Bonds" in Part B of this Prospectus, covering scheduled payment of
principal thereof and interest thereon when such amounts shall become due for
payment but shall not have been paid by the issuer or any other insurer thereof.
The insurance, unless obtained by MBIA Insurance Corporation ("MBIA Corp."),
will also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption of the
Bonds if interest on any Bonds is ultimately deemed to be subject to regular
federal income tax. Insurance obtained from MBIA Corp. only guarantees the
accelerated payments required to be made by or on behalf of an issuer of small
industrial revenue bonds and pollution control bonds if there is an event which
results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premium payments, if any, as and when required.
To the extent, therefore, that Bonds are only covered by insurance obtained from
MBIA Corp., such Bonds will not be covered for the accelerated payments required
to be made by or on behalf of an issuer of other than small industrial revenue
bonds or pollution control revenue bonds if there occurs an event which results
in the loss of tax-exempt status of the interest on such Bonds. None of the
insurance will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee payment of
principal and interest in such amounts and at such times as such amounts would
have been due absent such acceleration). The insurance relates only to the
prompt payment of principal of and interest on the securities in the portfolio,
and does not remove market risks or guarantee the market value of the Units in
the Trust. The terms of the insurance are more fully described under "Insurance
on the Bonds" in Part B of this Prospectus. For a discussion of the effect of an
occurrence of nonpayment of principal or interest on any Bonds in the Trust, see
"Portfolio Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Bonds. In addition, investors should be
aware that, subsequent to the Date of Deposit, the rating of the claims paying
ability of the insurer of an underlying Bond may be downgraded, which may result
in a downgrading of the rating of the Units in the Trust. The approximate
percentage of the aggregate principal amount of the portfolio that is insured by
each insurance company is as follows: AMBAC Indemnity Corp. ("AMBAC"), 11.4%;
Bond Investor's Guaranty ("BIG"), 8.3%; Financial Guaranty Insurance Company
("Financial Guaranty"), 48.2%; Municipal Bond Insurance Association ("MBIA"),
21.5%; and MBIA Corp., 10.6%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 4.08% of the Public
Offering Price, or 4.253% 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 $413.97 plus accrued interest of
$5.73 under the monthly distribution plan, $7.33 under the semi-annual
distribution plan and $7.35 under the annual distribution plan, for a total of
$419.70, $421.30 and $421.32, respectively. The Public Offering Price per Unit
can vary on a daily basis in accordance with fluctuations in the aggregate bid
price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
A-3
109784.1
<PAGE>
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the distribution plan chosen by the prior owner of such Unit and may thereafter
change the plan as provided under "Interest and Principal Distributions" in Part
B of the Prospectus. Distributions of principal, if any, will be made
semi-annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
A-4
109784.1
<PAGE>
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 4.08% of the Public Offering Price (4.253% of the
net amount invested), plus net accrued interest. If a market is not maintained a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based on the aggregate bid price of the Bonds. (See
"Liquidity--Sponsor Repurchase" and "Public Offering--Offering Price" in Part B
of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their regular
interest distributions, and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.
Residents of Texas, see "Total Reinvestment Plan for Texas Residents" in Part B
of this Prospectus.) The Plan is not designed to be a complete investment
program.
A-5
109784.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 20
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: June 16, 1989 Minimum Principal Distribution:
Principal Amount of Bonds ... $2,720,000 $1.00 per Unit.
Number of Units ............. 6,376 Weighted Average Life to Maturity:
Fractional Undivided Inter- 12.4 Years.
est in Trust per Unit ..... 1/6376 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value
Bonds per Unit ............ $426.60 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 ....... $2,535,986+++ or the disposition of the last
Divided by 6,376 Units .... $397.74 Bond in the Trust.
Plus Sales Charge of 4.08% Trustee***: The Chase Manhattan
of Public Offering Price $16.23 Bank, N.A.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $413.97+ plan $.96 per $1,000; semi-annual
Redemption and Sponsors' plan $.50 per $1,000; and annual
Repurchase Price plan is $.32 per $1,000.
per Unit .................. $397.74+ 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
Sponsors' Repurchase separate maturities as separate
Price per Unit ............ $16.23++++ issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal &
and Principal Amount per Co., Incorporated
Unit Premium/(Discount) ... $(12.63) Sponsors' Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal amount
New York Time. of Bonds (see "Trust Expenses and
Charges" in Part B of this
Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $16.15 $16.15 $16.15
Less estimated annual fees and
expenses ............................ 1.09 .82 .59
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $15.06 $15.33 $15.56
Estimated interest distribution# ...... 1.25 7.66 15.55
Estimated daily interest accrual# ..... .0418 .0425 .0432
Estimated current return#++ ........... 3.64% 3.70% 3.76%
Estimated long term return++ .......... 4.16% 4.24% 4.30%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-6
109784.1
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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 proceeds from securities called January 1, 1996 and certain amounts
distributable as of December 31, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882- 9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $5.73 monthly, $7.33 semi-annually
and $7.35 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-7
109784.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 9 issues representing
obligations of issuers located in 7 states. The Sponsors have not participated
as a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the Bonds
were acquired. Approximately 11.6% 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). One of the issues representing $320,000 of the
principal amount of the Bonds is a general obligation bond. All 8 of the
remaining issues representing $2,700,000 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, Electric & Gas 1, Federally Insured
Mortgage 1, Gas Revenue 1, Municipal Authority 1, Sewer 1, Utility 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, 1995, $2,020,000 (approximately 66.9% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $350,000 (approximately 11.6% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 23.2% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 9.9% 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, 1996 to March 22, 1996
the entire principal amount of the bond in portfolio no. 1 was called
for redemption pursuant to pre-refunding provisions and is no longer
contained in the Trust. 120 Units were redeemed from the Trust.
A-8
109784.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 7,000 $1,007.89 $76.30 $73.76 $73.98 -0-
December 31, 1994 6,909 749.40 70.55 71.22 71.43 $184.37
December 31, 1995 6,376 405.03 43.04 43.51 43.70 364.26
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-9
109784.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, Series 20:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, Series 20 as of December 31,
1995, and the related statements of operations, and changes in net assets for
each of the years in the three year period then ended. These financial
statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, Series 20 as of December 31, 1995, and the results of its operations and
the changes in its net assets for each of the years in the three year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost$2,170,567) $ 2,550,543
Excess of other assets over total liabilities 31,932
------------
Net assets 6,376 units of fractional undivided
interest outstanding,$405.03 per unit) $ 2,582,475
============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
------------ --- ------------ --- --------
1995 1994 1993
------------ ------------ --------
<S> <C> <C> <C>
Investment income - interest $ 234,023 496,326 525,800
------------ ------------ --------
Expenses:
Trustee's fees 5,553 7,325 7,755
Evaluator's fees 942 1,039 1,112
Sponsor's advisory fee 1,155 1,750 1,750
------------ ------------ --------
Total expenses 7,649 10,114 10,617
------------ ------------ --------
Investment income, net 226,374 486,212 515,183
Realized and unrealized gain (loss)
on investment:
Realized loss on bonds sold
or called (379,372) (229,200) -
Unrealized appreciation (depreciation)
for the year 569,976 (281,162) 673
------------ ------------ --------
Net gain (loss)
on investments 190,604 (510,362) 673
------------ ------------ --------
Net increase (decrease)
in net assets resulting
from operations $ 416,978 (24,150) 515,856
------------ ------------ --------
------------ ------------ --------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ -- ------------ -- ----------
1995 1994 1993
------------ ------------ ----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 226,374 486,212 515,183
Realized loss on bonds
sold or called (379,372) (229,200) -
Unrealized appreciation (depreciation)
for the year 569,976 (281,162) 673
------------ ------------ ----------
Net increase (decrease) in net
assets resulting
from operations 416,978 (24,150) 515,856
------------ ------------ ----------
Distributions to Certificateholders of:
Investment income 284,359 492,738 513,424
Principal 2,377,310 1,283,094 -
Redemptions:
Interest 7,305 4,141 -
Principal 343,105 73,498 -
------------ ------------ ----------
Total distributions and redemptions 3,012,079 1,853,471 513,424
------------ ------------ ----------
Total (decrease) increase (2,595,101) (1,877,621) 2,432
Net assets at beginning of year 5,177,576 7,055,197 7,052,765
------------ ------------ ----------
Net assets at end of year (including
undistributed net investment
income of $55,212, $120,502, and
$131,169, respectively) $ 2,582,475 5,177,576 7,055,197
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, Series 20 (Trust) was organized on June
16, 1989 by Bear, Stearns & Co. Inc. and Gruntal & Co., Incorporated 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. Effective September
28, 1995, Reich & Tang Distributors L.P. (Reich & Tang) has become the
successor sponsor (Sponsor) to certain of the unit investments trusts
previously sponsored by Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated. As successor Sponsor, Reich & Tang. has assumed all of the
obligations and rights of Bear Stearns & Co. Inc. and Gruntal & Co.,
Incorporated, the previous sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such discount is
included in interest income; however, it is not distributed until realized
in cash upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is based
upon the bid prices for the bonds at the end of the year, except that the
market value on the date of deposit represents the cost to the Trust based
on the offering prices for investments at that date. The difference between
cost (including accumulated accretion of original issue discount on
zero-coupon bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-5
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 533 and 91 units were redeemed during the years ended December 31,
1995 and 1994, respectively. No units were redeemed during the year ended
December 31, 1993.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 7,184,927
Less initial gross underwriting commission (352,061)
----------
6,832,866
Cost of securities sold or called (4,671,022)
Net unrealized appreciation 379,976
Undistributed net investment income 55,212
Distributions in excess of proceeds
from bonds sold or called (14,557)
---------
Total $ 2,582,475
===========
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
Undistributed net investment income includes accumulated accretion of
original issue discount of $8,723.
F-6
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- ----- ------------ --------------------- ---- ------------ ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 300,000 Lower Colo. Rvr. AAA 8.375% 1/01/10 @ 100 S.F. $ 306,000
Auth. Priority Rev. 1/01/2015 1/01/96 @ 102 Ref.
Bonds Series 1986
(MBIA) (5)
2 125,000 Jacksonville Beach AAA 6.000 10/01/15 @ 100 S.F. 125,674
Fla. Util. Rev. Bonds 10/01/2016 10/01/96 @ 100 Ref.
Series 1986 (AMBAC)
3 700,000 Indianapolis Ind. Gas AAA 4.000 No Sinking Fund 641,263
Util. Sys. Rev. 6/01/2008 None
Rfndg. Bonds Series B
(Financial Guaranty)
4 155,000 Suffolk Cnty. N.Y. AAA 5.250 No Sinking Fund 161,704
So. West Swr. Dstrct. 10/01/2003 None
Rev. Bonds (Financial
Guaranty)
5 475,000 Westmoreland Cnty. AAA 2.000 No Sinking Fund 393,171
Penn. Muni. Auth. 7/01/2002 None
Muni. Serv. Rev.
Bonds Series K
(Financial Guaranty)
6 125,000 Westmoreland Cnty. AAA 2.000 No Sinking Fund 89,786
Penn. Muni. Auth. 7/01/2006 None
Muni. Serv. Rev.
Bonds Series K
(Financial Guaranty)
7 135,000 City of Keller Tx. AAA 6.250 No Sinking Fund 143,325
(Tarrant Cnty.) Gen. 1/01/2007 1/01/99 @ 100 Ref.
Oblig. Bonds Series
1989 (MBIA Corp.)(5)
8 185,000 City of Keller Tx. AAA 6.250 No Sinking Fund 196,409
(Tarrant Cnty.) Gen. 1/01/2008 1/01/99 @ 100 Ref.
Oblig. Bonds Series
1989 (MBIA Corp.)(5)
9 220,000 City of Keller Tx. AAA 6.750 No Sinking Fund 236,650
(Tarrant Cnty.) Wtr. 1/01/2014 1/01/99 @ 100 Ref.
Wks. & Swr. Sys. Rev.
Bonds Series 1989 A
(AMBAC)(5)
10 250,000 City of San Antonio AAA 5.000 2/01/13 @ 100 S.F. 242,463
Tx. Elec. & Gas Sys. 2/01/2014 1/29/96 @ 100 Ref.
Rev. Rfndg. Bonds New
Series 1987 (BIG)
11 350,000 Santa Clara Calif. AAA 0.000 4/01/07 @ 13.074 S.F. 14,098
Hsg. Auth. Multi-Fam. 4/01/2026 10/01/03 @ 8.987 Ref.
Hsg. Rev. Bonds
Series 1984 A (FHA
Insrd. Mtg.
Loan-Cedar Glen
Aprtmts. Prjt.)
(MBIA)
$ 3,020,000 $ 2,550,543
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial
statements.
F-7
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 408,557
Gross unrealized depreciation (28,581)
-------
Net unrealized appreciation $ 379,976
=======
(4) The annual interest income, based upon bonds held at December 31,1995,
(excluding accretion of original issue discount on zero-coupon bonds) to
the Trust is $128,112.
(5) The bonds have been pre-refunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
F-8
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 22
The Trust is a unit investment trust designated Series 22
("Insured Municipal Trust") with an underlying portfolio of long-term insured
tax-exempt bonds issued by or on behalf of states, municipalities and public
authorities and was formed to preserve capital and to provide interest income
(including, where applicable, earned original issue discount) which, in the
opinions of bond counsel to the respective issuers, is, with certain
exceptions, currently exempt from regular federal income tax under existing
law but may be subject to state and local taxes. Capital gains, however, are
subject to tax. (See "Tax Status" and "The Trust--Portfolio" in Part B of
this Prospectus.) The Sponsor is Reich & Tang Distributors L.P. (successor
Sponsor to Bear, Stearns & Co. Inc.). The value of the Units of the Trust
will fluctuate with the value of the underlying bonds. Minimum purchase: 1
Unit.
This Prospectus consists of two parts. Part A contains the Summary
of Essential Information as of December 31, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this Prospectus for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109798.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term insured bonds (the "Bonds") issued by or on behalf of
states, municipalities and public authorities which, because of irrevocable
insurance, were rated "AAA" by Standard & Poor's Corporation at the time
originally deposited in the Trust. The "AAA" rating results from insurance
relating only to the Bonds in the Trust and not to Units of the Trust. The
insurance does not remove market risk, as it does not guarantee the market value
of the Units. For a discussion of the significance of such ratings, see
"Description of Bond Ratings" in Part B of this Prospectus, and for a list of
ratings on the Evaluation Date see the "Portfolio." A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Tax Status" in Part B of this Prospectus.) For a
list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds may
be "Zero Coupon Bonds", which are original issue discount bonds that provide for
payment at maturity at par value, but do not provide for the payment of any
current interest. Some of the Bonds in the Trust have been issued with optional
refunding or refinancing provisions ("Refunded Bonds") whereby the issuer of the
Bond has the right to call such Bond prior to its stated maturity date (and
other than pursuant to sinking fund provisions) and to issue new bonds
("Refunding Bonds") in order to finance the redemption. Issuers typically
utilize refunding calls in order to take advantage of lower interest rates in
the marketplace. Some of these Refunded Bonds may be called for redemption
pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby the proceeds
from the issue of the Refunding Bonds are typically invested in government
securities in escrow for the benefit of the holders of the Pre-Refunded Bonds
until the refunding call date. Usually, Pre-Refunded Bonds will bear a triple-A
rating because of this escrow. The issuers of Pre-Refunded Bonds must call such
Bonds on their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest income
with respect to them. For a list of those Bonds which are Pre-Refunded Bonds, if
any, as of the Evaluation Date, see "Notes to Financial Statements" in this Part
A. Some of the Bonds in the portfolio may have been purchased at an aggregate
premium over par. The payment of interest and preservation of capital are, of
course, dependent upon the continuing ability of issuers of the Bonds or the
insurers thereof to meet their obligations. There can be no assurance that the
Trust's investment objectives will be achieved. Investment in the Trust should
be made with an understanding of the risks which an investment in long-term
fixed rate debt obligations may entail, including the risk that the value of the
underlying portfolio will decline with increases in interest rates, and that the
value of Zero Coupon Bonds is subject to greater fluctuation than coupon bonds
in response to changes in interest rates. Each Unit in the Trust represents a
1/4877th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
109798.1
<PAGE>
are issued and outstanding Units which have been purchased by the Sponsor in the
secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal
bond guaranty insurance policy obtained by either the Sponsor ("Sponsor-Insured
Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and issued by one of
the insurance companies (the "Insurance Companies"), described under "Insurance
on the Bonds" in Part B of this Prospectus, covering scheduled payment of
principal thereof and interest thereon when such amounts shall become due for
payment but shall not have been paid by the issuer or any other insurer thereof.
The insurance, unless obtained by MBIA Insurance Corporation ("MBIA Corp."),
will also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption of the
Bonds if interest on any Bonds is ultimately deemed to be subject to regular
federal income tax. Insurance obtained from MBIA Corp. only guarantees the
accelerated payments required to be made by or on behalf of an issuer of small
industrial revenue bonds and pollution control bonds if there is an event which
results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premium payments, if any, as and when required.
To the extent, therefore, that Bonds are only covered by insurance obtained from
MBIA Corp., such Bonds will not be covered for the accelerated payments required
to be made by or on behalf of an issuer of other than small industrial revenue
bonds or pollution control revenue bonds if there occurs an event which results
in the loss of tax-exempt status of the interest on such Bonds. None of the
insurance will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee payment of
principal and interest in such amounts and at such times as such amounts would
have been due absent such acceleration). The insurance relates only to the
prompt payment of principal of and interest on the securities in the portfolio,
and does not remove market risks or guarantee the market value of the Units in
the Trust. The terms of the insurance are more fully described under "Insurance
on the Bonds" in Part B of this Prospectus. For a discussion of the effect of an
occurrence of nonpayment of principal or interest on any Bonds in the Trust, see
"Portfolio Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Bonds. In addition, investors should be
aware that, subsequent to the Date of Deposit, the rating of the claims paying
ability of the insurer of an underlying Bond may be downgraded, which may result
in a downgrading of the rating of the Units in the Trust. The approximate
percentage of the aggregate principal amount of the portfolio that is insured by
each insurance company is as follows: AMBAC Indemnity Corp. ("AMBAC"), 5.7%;
Bond Investor's Guaranty ("BIG"), 22.7%; Financial Guaranty Insurance Company
("Financial Guaranty"), 38.5%; Municipal Bond Insurance Association ("MBIA"),
19.5%; and MBIA Corp., 13.6%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 4.36% of the Public
Offering Price, or 4.558% 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 $994.60 plus accrued interest of
$10.11 under the monthly distribution plan, $15.33 under the semi-annual
distribution plan and $15.42 under the annual distribution plan, for a total of
$1,004.71, $1,009.93 and $1,010.02, respectively. The Public Offering Price per
Unit can vary on a daily basis in accordance with fluctuations in the aggregate
bid price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
A-3
109798.1
<PAGE>
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the distribution plan chosen by the prior owner of such Unit and may thereafter
change the plan as provided under "Interest and Principal Distributions" in Part
B of the Prospectus. Distributions of principal, if any, will be made
semi-annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
A-4
109798.1
<PAGE>
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 4.36% of the Public Offering Price (4.558% of the
net amount invested), plus net accrued interest. If a market is not maintained a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based on the aggregate bid price of the Bonds. (See
"Liquidity--Sponsor Repurchase" and "Public Offering--Offering Price" in Part B
of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their regular
interest distributions, and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.
Residents of Texas, see "Total Reinvestment Plan for Texas Residents" in Part B
of this Prospectus.) The Plan is not designed to be a complete investment
program.
A-5
109798.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 22
<TABLE>
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
<S> <C>
Date of Deposit: January 18, 1990 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,395,000 $1.00 per Unit.
Number of Units ............. 4,877 Weighted Average Life to Maturity:
Fractional Undivided Inter- 14 Years.
est in Trust per Unit ..... 1/4877 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value of
Bonds per Unit ............ $901.17 Trust is less than $2,000,000 in
Secondary Market Public principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2039 or
of Bonds in Trust ....... $4,648,110+++ the disposition of the last Bond in
Divided by 4,877 Units .... $953.07 the Trust.
Plus Sales Charge of 4.36% Trustee***: The Chase Manhattan
of Public Offering Price $41.53 Bank, N.A.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $994.60+ 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 .................. $953.07+ 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 ............ $41.53++++ 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) ... $93.43 $.25 per $1,000 principal amount of
Evaluation Time: 4:00 p.m. 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
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $63.78 $63.78 $63.78
Less estimated annual fees and
expenses ............................ 1.70 1.45 .47
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $62.08 $62.33 $63.31
Estimated interest distribution# ...... 5.17 31.16 63.30
Estimated daily interest accrual# ..... .1724 .1731 .1758
Estimated current return#++ ........... 6.24% 6.27% 6.36%
Estimated long term return++ .......... 2.83% 2.85% 2.95%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-6
109798.1
<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 proceeds from securities called January 1, 1996 and certain amounts
distributable as of December 31, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882- 9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $10.11 monthly, $15.33 semi-annually
and $15.42 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-7
109798.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 12 issues representing
obligations of issuers located in 8 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 34.8% are hospital revenue bonds; approximately 22.7%
were issued in connection with the financing of nuclear generating facilities;
and approximately 7.9% 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. Twelve issues representing $4,915,000 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: Hospital 4, Mortgage Revenue 1, Nuclear Power 2,
Pooled Loans 1, Toll Road 2, University 1 and Water Improvement 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of December 31, 1995, $450,000 (approximately 10.2% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $250,000 (approximately 5.7% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 32.6% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 34% were purchased at a premium and
approximately 23.2% 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, 1996 to March 22, 1996,
$15,000 of the principal amount of the Bond in portfolio no. 9a was
called and is no longer contained in the Trust.
A-8
109798.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 4,983 $1,106.25 $71.59 $72.21 $72.43 -0-
December 31, 1994 4,928 1,016.59 77.46 72.14 72.35 $ 2.89
December 31, 1995 4,877 966.53 69.69 70.25 70.64 92.52
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-9
109798.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, Series 22:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, Series 22 as of December 31,
1995, and the related statements of operations, and changes in net assets for
each of the years in the three year period then ended. These financial
statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, Series 22 as of December 31, 1995, and the results of its operations and
the changes in its net assets for each of the years in the three year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost$4,262,881) $ 4,648,088
Excess of other assets over total liabilities 65,684
------------
Net assets 4,877 units of fractional undivided
interest outstanding,$966.53 per unit) $ 4,713,772
------------
------------
See accompanying notes to financial statements.
<PAGE>
Statements of Operations
Years Ended December 31,
-------- ------------ --------
1995 1994 1993
-------- ------------ --------
Investment income - interest $ 335,772 366,860 369,567
-------- ------------ --------
Expenses:
Trustee's fees 7,008 6,827 7,075
Evaluator's fees 1,023 1,037 1,112
Sponsor's advisory fee 1,227 1,245 1,249
-------- ------------ --------
Total expenses 9,258 9,109 9,436
-------- ------------ --------
Investment income, net 326,514 357,751 360,131
Realized and unrealized gain (loss)
on investments:
Realized loss on bonds sold or called (62,509) - -
Unrealized appreciation (depreciation)
for the year 287,674 (431,995) 161,964
-------- ------------ --------
Net gain (loss)
on investments 225,165 (431,995) 161,964
-------- ------------ --------
Net increase (decrease)
in net assets resulting
from operations $ 551,679 (74,244) 522,095
======== ============ ========
See accompanying notes to financial statements.
Statements of Changes in Net Assets
Years ended December 31,
------------ - ---------- - ------------
1995 1994 1993
------------ ---------- ------------
Operations:
Investment income, net $ 326,514 357,751 360,131
Realized loss on bonds
sold or called (62,509) - -
Unrealized appreciation
(depreciation) of investments
for the year 287,674 (431,995) 161,964
------------ ---------- ----------
Net increase (decrease)
in net assets resulting
from operations 551,679 (74,244) 522,095
------------ ---------- -----------
Distributions to Certificateholders:
Investment income 342,625 356,136 358,793
Principal 454,568 14,271 -
Redemptions:
Interest 1,032 942 296
Principal 49,429 57,123 18,586
------------ ---------- -----------
Total distributions and redemptions 847,654 428,472 377,675
------------ ---------- -----------
Total (decrease) increase (295,975) (502,716) 144,420
Net assets at beginning of year 5,009,747 5,512,463 5,368,043
------------ ---------- -----------
Net assets at end of year (including
undistributed net investment
income of$80,614, $97,757,
and $96,084 respectively) $ 4,713,772 5,009,747 5,512,463
============ ========== ============
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 22
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, Series 22 (Trust) was organized on
January 18, 1990 by Bear, Stearns & Co. Inc. and Gruntal & Co., Incorporated
(Co-Sponsors) 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.
Effective September 28, 1995, Reich & Tang Distributors L.P. (Reich & Tang)
has become the successor sponsor (Sponsor) to certain of the unit investments
trusts previously sponsored by Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear Stearns & Co. Inc. and Gruntal & Co.,
Incorporated the previous sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase). Accordingly,
Chase is the successor trustee of the unit investment trusts. The Trustee has
custody of and responsibility for the accounting records and financial
statements of the Trust and is responsible for establishing and maintaining a
system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method over
the respective lives of the bonds. The accretion of such discount is included
in interest income; however, it is not distributed until realized in cash
upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is based
upon the bid prices for the bonds at the end of the year, except that the
market value on the date of deposit represents the cost to the Trust based on
the offering prices for investments at that date. The difference between cost
(including accumulated accretion of original issue discount on zero-coupon
bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Trustee to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(Continued)
F-5
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 22
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus for
the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
<PAGE>
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. 51, 55, and 17 units were redeemed during the years ended December 31,
1995, 1994, and 1993 respectively.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 5,162,394
Less initial gross underwriting commission (252,957)
---------
$ 4,909,437
Cost of securities sold or called (661,509)
Net unrealized appreciation 385,207
Undistributed net investment income 80,614
Undistributed proceeds
from bonds sold or called 23
---------
Total $ 4,713,772
=========
The original cost to Certificateholders, less the initial gross underwriting
commission, represents the aggregate initial public offering price net of the
applicable sales charge on 5,000 units of fractional undivided interest of
the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $14,953.
F-6
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 22
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- ----- ------------ ------------------------- ---- ------------ ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 100,000 Marion Cnty. Fla. Hosp. AAA 6.000% 10/01/10 @ 100 S.F. $ 102,483
Dstrct. Ocala Fla. Rev. 10/01/2020 10/01/99 @ 100 Ref.
Bonds (Monroe Regnl. Med.
Cntr.) Series 1989 B
(Financial Guaranty)
2 500,000 Mass. Hlth. & Ed. Facs. AAA 7.300 4/01/01 @ 100 S.F. 559,415
Auth. Rev. Bonds Cap. 10/01/2018 4/01/00 @ 102 Ref.
Asset Prgm. Issue Series
F (MBIA)
3 500,000 Mass. Hlth. & Ed. Facs. AAA 8.000 7/01/07 @ 100 S.F. 556,415
Auth. Rev. Bonds 7/01/2018 7/01/98 @ 102 Ref.
(Newton-Wellesley Hosp.)
Series C (BIG)(5)
4 100,000 Mercer Cnty. N.J. AAA 6.000 12/15/10 @ 100 S.F. 106,918
Imprvmt. Auth. Rev. Bonds 12/15/2015 12/15/99 @ 100 Ref.
(Rgnl. Sludge Prjt.)
Series 1990 (Financial
Guaranty) (5)
5 500,000 Emmaus Penn. Gen. Auth. AAA 7.900 Currently @ 100 S.F. 551,980
Local Gov. Rev. Bonds 5/15/2018 3/15/99 @ 100 Ref.
(Bond Pool Prgm.) Series
1988 F (BIG)
6 500,000 Brazos Tx. River Auth. AAA 7.200 No Sinking Fund 558,530
Colltzd. Rev. Rfndg. 12/01/2018 12/01/99 @ 102 Ref.
Bonds (Houston Ltg. &
Pwr. Co. Prjt.) Series
1989 E (Financial
Guaranty)
7 500,000 Harris Cnty. Tx. Toll Rd. AAA 8.625 8/15/03 @ 100 S.F. 551,720
Sr. Lien Rev. Rfndg. 8/15/2007 8/15/97 @ 103 Ref.
Bonds Series 1987
(Financial Guaranty) (5)
8 500,000 Matagorda Cnty. Tx. AAA 7.200 No Sinking Fund 558,530
Nvgtn. Dstrct. No. One 12/01/2018 12/01/99 @ 102 Ref.
Colltzd. Rev. Rfndg.
Bonds (Houston Ltg. &
Pwr. Co. Prjt.) Series
1989 E (Financial
Guaranty)
9a 345,000 Utah Hsg. Finc. Agncy. AAA 7.250 7/01/07 @ 100 S.F. 359,825
Sngle. Fam. Mtg. Purc. 7/01/2012 7/01/96 @ 103 Ref.
Rfndg. Bonds Series 1987
B (MBIA)
9b 15,000 Utah Hsg. Finc. Agncy. AAA 7.250 7/01/07 @ 100 S.F. 15,000
Sngle. Fam. Mtg. Purc. 7/01/2012 7/01/96 @ 103 Ref.
Rfndg. Bonds Series 1987
B (MBIA)
10 165,000 W.V. Bd. of Regents AAA 7.250 4/01/10 @ 100 S.F. 180,728
Rgstrtn. Fee Rev. Bonds 4/01/2014 4/01/99 @ 100 Ref.
Series 1989 B (MBIA
Corp.) (5)
11 435,000 Wisc. Hlth & Ed. Facs. AAA 7.125 10/01/06 @ 100 S.F. 487,966
Auth. Rev. Bonds (Srs. of 10/01/2019 10/01/99 @ 102 Ref.
The Sorrowful-Ministry
Corp.) Series 1989 B
(MBIA Corp.) (5)
12 250,000 Harris Cnty. Tx. Toll Rd. AAA 0.000 No Sinking Fund 58,578
Rev. Bonds (AMBAC) (5) 8/15/2020 8/15/09 @ 46.915 Ref.
------------ ------------
$ 4,410,000 $ 4,648,088
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial
statements.
F-7
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 22
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc. A
brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 387,937
Gross unrealized depreciation (2,730)
-------
Net unrealized appreciation $ 385,207
=======
(4) The annual interest income, based upon bonds held at December 31, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $312,182.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
F-8
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 1
The Trust is a unit investment trust designated Series 1 ("New
York Navigator 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 and from New York State and City personal income tax. Capital gains,
however, are subject to tax. (See "Tax Status" and "The Trust--Portfolio" in
Part B of this Prospectus.) The Sponsors are Reich & Tang Distributors L.P.
(successor Sponsor to Bear, Stearns & Co. Inc.) and Gruntal & Co.,
Incorporated (sometimes referred to as the "Sponsor" or the "Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109755.1
<PAGE>
THE TRUST. The Trust is a unit investment trust and was formed to
preserve capital and to provide interest income (including 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 and from state and local taxes to the extent
indicated herein when received by persons subject to state and local income
taxation in a state in which the issuers of the Bonds are located. 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. A
Trust designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less than
fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. Although the
Supreme Court has determined that Congress has the authority to subject the
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 a specific preference item for purposes
of the federal individual and/or corporate alternative minimum tax. (See
"Description of Portfolio" in this Part A for a list of these Bonds which pay
interest income subject to the federal individual alternative minimum tax. See
also "Tax Status" in Part B of this Prospectus.) Some of the aggregate
principal amount of the Bonds in the Trust 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 current interest (for the amount
of Zero Coupon Bonds in each Trust, and the cost of such Bonds to that Trust,
see "Description of Portfolio" in this Part A). All of the Bonds in the Trust
were rated "AAA" by Standard & Poor's Corporation at the time originally
deposited in the Trust (see "Portfolio"). This 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. The payment of
interest and preservation of capital are, of course, dependent upon the
continuing ability of the issuers of the Bonds or the insurer thereof to meet
their obligations. There can be no assurance that the Trust's investment
objectives will be achieved. Investment in the Trust should be made with an
understanding of the risks which an investment in long-term fixed rate debt
obligations may entail, including the risk that the value of the underlying
portfolio will decline with increases in interest rates, and that the value of
Zero Coupon Bonds is subject to greater fluctuation than coupon bonds in
response to such changes in interest rates. (See "Portfolio" in Part B of this
Prospectus.) Each Unit in the Trust represents a 1/7692nd 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 Sponsors in the secondary market.
INSURANCE. Each of the Bonds in the New York Navigator Trust is
insured by a municipal bond guaranty insurance policy obtained by the Sponsors
(the "Navigator Sponsor-Insured Bonds") from MBIA Insurance Corporation ("MBIA
Corp.") covering regularly scheduled payments of principal thereof and interest
thereon when such amounts become due for payment but shall not have 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
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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 New York
Navigator Trust 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 New
York Navigator Trust. The insurer's policies relating to small industrial
development bonds and pollution control revenue bonds also guarantee
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 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 does 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 accelerated
payments on any such Bonds unrelated to the taxability of interest on any such
Bonds, the payments guaranteed by MBIA Corp. shall be made in such amounts and
at such times as such payment would have been made absent such an acceleration.
The insurance relates only to the prompt payment of principal of and interest
on the securities in the New York Navigator Trust and does not remove market
risk nor does it guarantee the market value of Units in the New York Navigator
Trust. The terms of the insurance are more fully described under "Insurance on
the Bonds" in Part B of this Prospectus. For discussion of the effect of an
occurrence of non-payment of principal or interest on any Bonds in the New York
Navigator 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 the New
York Navigator Trust. 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 New York Navigator Trust. The premiums for the Navigator Sponsor-Insured
Bonds are obligations of the Sponsors. Additionally, some of the Bonds in the
New York Navigator Trust 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.
Some of the Bonds in the New York Navigator Trust may additionally
be insured by a municipal bond guaranty insurance policy obtained by issuers,
underwriters or prior owners of the Bonds ("Pre-Insured Bonds") and issued by
one of the insurance companies described under "Insurance on the Bonds" in Part
B of this Prospectus (the "Insurance Companies"). 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
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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 such Bond is ultimately deemed to be subject to
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 non such
Bonds, including principal, interest or premium payments, if any, as and when
required. To the extent, therefore, that Bonds are only covered by insurance
obtained from MBIA Corp., such Bonds will not be covered for the 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 he insurance are more fully described herein. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Pre-Insured Bonds. In addition, investors
should be aware that subsequent to the Date of Deposit the rating of the
claims-paying ability of the insurer of an underlying Pre-Insured Bond may be
downgraded.
All of the Bonds in the New York Navigator Trust are covered by
insurance obtained by the Sponsors from MBIA Corp. and 24% of the Bonds in the
New York Navigator Trust are Pre-Insured Bonds. The approximate percentage of
the aggregate principal amount of the Portfolio that is insured by each
Insurance Company with respect to Pre-Insured Bonds is as follows: Bond
Investors Guaranty ("BIG"), 14%; and MBIA Corp., 10%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate offering price of the Bonds in such
Trust divided by the number of Units outstanding, plus a sales charge of 3.94%
of the Public Offering Price, or 4.101% 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 $1,109.09 plus accrued
interest of $10.11 under the monthly distribution plan, $15.94 under the
semi-annual distribution plan and $15.95 under the annual distribution plan,
for a total of $1,119.20, $1,125.03 and $1,125.04, respectively. The Public
Offering Price per Unit can vary on a daily basis in accordance with
fluctuations in the aggregate bid price of the Bonds. (See "Public
Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis,
the rate of return on an investment in Units of each Trust is measured in terms
of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
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portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on
newly issued bonds of a similar type with comparable rating, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses,
will be made by the Trust either monthly, semi-annually or annually depending
upon the plan chosen by the Certificateholder. Certificateholders purchasing
Units in the secondary market will initially receive distributions in
accordance with the elections of the prior owner and may thereafter change the
plan as provided under "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information.")
MARKET FOR UNITS. The Sponsors, although not obligated to do so,
presently maintain and intend to continue to maintain a secondary market for
the Units at a price 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 3.94% of the Public Offering Price (4.101% 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 based on the aggregate bid price of the Bonds. (See "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,
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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.
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INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: January 18, 1990 Weighted Average Life toMaturity:
Principal Amount of Bonds ... $7,675,000 11.8 Years.
Number of Units ............. 7,692 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/7692 value of Trust is less than
Principal Amount of $3,200,000 in principal amount
Bonds per Unit ............ $997.79 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2039 or the disposition of the
of Bonds in Trust ....... $8,207,604+++ last Bond in the Trust.
Divided by 7,692 Units .... $1,067.03 Trustee***: The Chase Manhattan
Plus Sales Charge of 3.94% Bank, N.A.
of Public Offering Price. $42.06 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.00 per $1,000; semi-
per Unit ................ $1,109.09+ annual plan $.54 per $1,000;
Redemption and Sponsors' and annual plan is $.36 per
Repurchase Price $1,000.
per Unit .................. $1,067.03+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Evaluation: Minimum of $15
Excess of Secondary Market plus $.25 per each issue of
Public Offering Price Bonds in excess of 50 issues
over Redemption and (treating separate maturities
Sponsors' Repurchase as separate issues).
Price per Unit ............ $42.06++++ Sponsors: Reich & Tang
Difference between Public Distributors L.P. and Gruntal &
Offering Price per Unit Co., Incorporated.
and Principal Amount per Sponsors' Annual Fee: Maximum of
Unit Premium/(Discount) ... $111.30 $.25 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. Expenses and Charges" in Part B
Minimum Principal Distribution: of this Prospectus).
$1.00 per Unit.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $71.19 $71.19 $71.19
Less estimated annual fees and
expenses ............................ 1.93 1.38 1.29
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $69.26 $69.81 $69.90
Estimated interest distribution# ...... 5.77 34.90 69.90
Estimated daily interest accrual# ..... .1923 .1939 .1941
Estimated current return#++ ........... 6.24% 6.29% 6.30%
Estimated long term return++ .......... 3.92% 3.97% 3.98%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
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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 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882- 9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $10.11 monthly, $15.94
semi-annually and $15.95 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.
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INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 14 issues representing
obligations of issuers located in 14 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 27.4% are hospital revenue bonds; none were issued
in connection with the financing of nuclear generating facilities; and none are
"mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
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). Two of the issues representing $750,000 of the
principal amount of the Bonds are general obligation bonds. All 12 of the
remaining issues representing $7,040,000 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: Commuter Facility 1, Correctional Facilities 2,
Hospital 5, Power 1, Special Obligation 1, University 1 and Water 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of December 31, 1995, $2,170,000 (approximately 28.3%) of the
aggregate principal amount of the Bonds were original issue discount bonds. Of
these original issue discount bonds, $265,000 (approximately 3.5% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 4.9% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 66.8% were purchased at a
premium and none were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus. All of the Bonds are subject to redemption prior to maturity
pursuant to sinking fund or call provisions.
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, 1996 to March 22, 1996,
the entire principal amount of the Bond in portfolio no. 9 was sold and
is no longer contained in the Trust. 170 Units were redeemed from the
Trust.
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FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 8,000 $1,132.41 $69.84 $70.52 $70.74 -0-
December 31, 1994 7,781 1,035.76 69.70 70.38 70.60 -0-
December 31, 1995 7,692 1,082.61 71.36 72.04 72.22 -0-
- --------
* 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.
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Independent Auditors' Report
The Sponsor, Trustee and Certificateholders Insured Municipal Securities Trust,
New York Navigator Insured Series 1:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, New York Navigator Insured
Series 1 as of December 31, 1995, and the related statements of operations, and
changes in net assets for each of the years in the three year period then ended.
These financial statements are the responsibility of the Trustee (see note 2).
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, New York Navigator Insured Series 1 as of December 31, 1995, and the
results of its operations and the changes in its net assets for each of the
years in the three year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 1
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost$7,489,793) $ 8,182,086
Excess of other assets over total liabilities 145,367
-----------
Net assets 7,692 units of fractional undivided
interest outstanding,$1,082.61 per unit) $ 8,327,453
-----------
-----------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
NEW YORK NAVIGATOR INSURED SERIES 1
Statements of Operations
<CAPTION>
Years ended December 31,
------------ ------------ - ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 560,288 566,442 578,355
------------ ------------ ------------
Expenses:
Trustee's fees 8,096 8,283 8,608
Evaluator's fees 2,813 3,099 3,336
Sponsor's advisory fee 1,948 2,000 2,000
------------ ------------ ------------
Total expenses 12,857 13,382 13,944
------------ ------------ ------------
Investment income, net 547,431 553,060 564,411
------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Realized (loss) gain on bonds sold
or called (5,234) 2,785 -
Unrealized appreciation (depreciation)
of investments for the year 378,402 (771,760) 350,884
------------ ------------ ------------
Net gain (loss)
on investments 373,168 (768,975) 350,884
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations $ 920,599 (215,915) 915,295
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
------------ ------------ - ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 547,431 553,060 564,411
Realized (loss) gain on bonds sold
or called (5,234) 2,785 -
Unrealized appreciation
(deppreciation) of investments 378,402 (771,760) 350,884
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations 920,599 (215,915) 915,295
------------ ------------ ------------
Distributions to Certificateholders:
Investment income 556,872 548,098 561,206
Redemptions:
Investment income 992 5,303 -
Principal 94,504 230,771 -
------------ ------------ ------------
Total distributions and
redemptions 652,368 784,172 561,206
------------ ------------ ------------
Total increase (decrease) 268,231 (1,000,087) 354,089
Net assets at beginning of year 8,059,222 9,059,309 8,705,220
------------ ------------ ------------
Net assets at end of year (including
undistributed net investment
income of $137,579, $148,012,
and $148,353 respectively) $ 8,327,453 8,059,222 9,059,309
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 1
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, New York Navigator Insured Series 1
(Trust) was organized on January 18, 1990 by Bear, Stearns & Co. Inc. and
Gruntal & Co., Incorporated (Co-Sponsors) 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. Effective September 28, 1995, Reich & Tang
Distributors L.P. (Reich & Tang) has become the successor sponsor (Sponsor)
to certain of the unit investments trusts previously sponsored by Bear,
Stearns & Co. Inc. and Gruntal and Co. Incorporated. As successor Sponsor,
Reich & Tang has assumed all of the obligations and rights of Bear Stearns
& Co. Inc. and Gruntal and Co. Incorporated, the previous co-sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such discount is
included in interest income; however, it is not distributed until realized
in cash upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is
based upon the bid prices for the bonds at the end of the year, except
that the market value on the date of deposit represents the cost to the
Trust based on the offering prices for investments at that date. The
difference between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
F-5
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 1
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 89 and 219 units were redeemed during the years ended December 31,
1995 and 1994, respectively. No units were redeemed during the year ended
December 31, 1993.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 8,228,502
Less initial gross underwriting commission (403,197)
---------
7,825,305
Cost of securities sold or called (353,242)
Net unrealized appreciation 692,293
Undistributed net investment income 137,579
Undistributed proceeds from bonds sold or called 25,518
---------
Total $ 8,327,453
=========
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.
Undistributed net investment income includes accumulated accretion of
original issue discount of $17,730.
F-6
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 1
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding(2)(7) Value(3)
- ----- ------------ ------------------------- ---- ------------ ---------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 750,000 Dorm. Auth. of the AAA 8.125% 7/01/08 @ 100 S.F. $ 811,777
State 7/01/2017 7/01/97 @ 102 Ref.
of N.Y. (City Univ.)
Sys.
Consol. Rev. Bonds
Series 1987 A (MBIA
Corp.) (5)
2 750,000 Dorm. Auth. of the AAA 7.375 7/01/00 @ 100 S.F. 896,684
State 7/07/2016 None
of N.Y. Judicial
Facs.
Lease Rev. Bonds,
(Suffolk Cnty.
Issue)
Series 1986 (BIG)
3 375,000 N.Y. State Med. Care AAA 7.100 8/15/02 @ 100 S.F. 394,328
(Bronx Lebanon 2/15/2027 2/15/97 @ 102 Ref.
Hosp.)
Rev. Bonds (BIG)
4 210,000 N.Y. State Med. Care AAA 8.000 Currently @ 100 S.F. 233,018
Facs. Finc. Agncy. 2/15/2028 8/15/98 @ 102 Ref.
Hosp.
& Nrsg. Home Insrd.
Mtg.
Rev. Bonds Series
1988 B
(MBIA Corp.)
5 500,000 N.Y. State Med. Care AAA 7.350 Currently @ 100 S.F. 551,045
Facs. Finc. Agncy. 2/15/2029 2/15/99 @ 102 Ref.
Hosp.
& Nrsg. Home Insrd.
Mtg.
Rev. Bond (FHA
Insrd.)
Series 1989 B (MBIA
Corp.)
6 750,000 N.Y. State Med. Care AAA 7.450 2/15/98 @ 100 S.F. 856,230
Facs. Finc. Agncy. 2/15/2029 2/15/00 @ 102 Ref.
St.
Luke's Roosevelt
Hosp.
Cntr. FHA Insrd.
Mtg.
Rev. Bonds Series B
(MBIA Corp.) (5)
7 825,000 Pwr. Auth. of the AAA 7.875 1/01/10 @ 100 S.F. 903,111
State 1/01/2013 1/01/98 @ 102 Ref.
of N.Y. Gen. Purp.
Bonds
Series V (MBIA
Corp.) (5)
8 750,000 N.Y. State Urban AAA 7.000 1/01/15 @ 100 S.F. 841,455
Dev. 1/01/2017 1/01/00 @ 102 Ref.
Corp. Correc. Facs.
Rev.
Bonds Series G (MBIA
Corp.) (5)
9 200,000 Metro. Trans. Auth. AAA 8.500 7/01/06 @ 100 S.F. 208,908
N.Y. 7/01/2011 7/01/96 @ 102 Ref.
Commuter Facs. Serv.
Cntrct. Bonds Series
H
(MBIA Corp.) (5)
10 405,000 N.Y. City Gen. AAA 6.000% No Sinking Fund 408,568
Oblig. 8/01/2018 8/01/97 @ 100 Ref.
Bonds Fiscal 1990
Series
A (MBIA Corp.)
11 345,000 N.Y. City Gen. AAA 8.000 No Sinking Fund 381,836
Oblig. 12/01/2017 6/01/98 @ 101.5 Ref.
Bonds Fiscal 1988
Series
C (MBIA Corp.)
12 750,000 N.Y. City Muni. Wtr. AAA 6.000 6/15/17 @ 100 S.F. 769,238
Finc. Auth. Wtr. & 6/15/2019 6/15/99 @ 100 Ref.
Swr.
Sys. Rev. Bonds
Fiscal
1990 Series A (MBIA
Corp.)
13 800,000 Triborough Bridge & AAA 8.000 1/01/09 @ 100 S.F. 873,952
Tunnel Auth. Mtg. 1/01/2018 1/01/98 @ 101.5 Ref.
Recording Tax Spec.
Oblig. Bonds Series
1988
A (MBIA Corp.) (5)
14 180,000 N.Y. State Med. Care AAA 0.000 2/15/16 @ 82.192 S.F. 35,759
Facs. Finc. Agncy. 8/15/2018 8/15/98 @ 21.869 Ref.
Mental
Hlth. Svs. Facs.
Imprvmt.
Rev. Bonds Series
1988 B
(MBIA Corp.) (5)
14a 85,000 N.Y. State Med. Care AAA 0.000 2/15/16 @ 82.192 S.F. 16,177
Facs. Finc. Agncy. 8/15/2018 8/15/98 @ 21.869
Mental Ref.
Hlth. Svs. Facs.
Imprvmt.
Rev. Bonds Series
1988 B
(MBIA Corp.)
------------ ------------
7,675,000 8,182,086
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 1
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 703,731
Gross unrealized depreciation (11,438)
----------
Net unrealized appreciation $ 692,293
==========
(4) The annual interest income, based upon bonds held at December 31, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to
the Trust is $547,669.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
F-9
<PAGE>
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
49TH DISCOUNT SERIES
(MULTIPLIER PORTFOLIO)
_______________________________________________________________________________
The Trust is a unit investment trust designated 49th Discount Series
("Insured Municipal Discount Trust") with an underlying portfolio of long-term
insured tax-exempt bonds issued by or on behalf of states, municipalities and
public authorities and was formed to preserve capital and to provide interest
income (including, where applicable, earned original issue discount) which, in
the opinions of bond counsel to the respective issuers, is, with certain
exceptions, currently exempt from regular federal income tax under existing law
but may be subject to state and local taxes. Capital gains are subject to tax.
(See "Tax Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The
Sponsors are Reich & Tang Distributors L.P. (successor Sponsor to Bear, Stearns
& Co. Inc.) and Gruntal & Co., Incorporated (sometimes referred to as "Sponsor"
or the "Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109766.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term insured bonds (the "Bonds") issued by or on behalf of
states, municipalities and public authorities which, because of irrevocable
insurance, were rated "AAA" by Standard & Poor's Corporation at the time
originally deposited in the Trust. The "AAA" rating results from insurance
relating only to the Bonds in the Trust and not to the Units of the Trust. The
insurance does not remove market risk, as it does not guarantee the market value
of the Units. For a discussion of the significance of such ratings, see
"Description of Bond Ratings" in Part B of this Prospectus, and for a list of
ratings on the Evaluation Date see the "Portfolio." A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Tax Status" in Part B of this Prospectus.) The
Bonds were acquired at prices which resulted in the portfolio as a whole being
purchased at a deep discount from par value. The portfolio may also include
bonds issued at an original issue discount. Additionally, some of the Bonds in
the portfolio may be "Zero Coupon Bonds," which are original issue discount
bonds that provide for payment at maturity at par value, but do not provide for
the payment of any current interest. Some of the Bonds in the Trust have been
issued with optional refunding or refinancing provisions ("Refunded Bonds")
whereby the issuer of the Bond has the right to call such Bond prior to its
stated maturity date (and other than pursuant to sinking fund provisions) and to
issue new bonds ("Refunding Bonds") in order to finance the redemption. Issuers
typically utilize refunding calls in order to take advantage of lower interest
rates in the marketplace. Some of these Refunded Bonds may be called for
redemption pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby
the proceeds from the issue of the Refunding Bonds are typically invested in
government securities in escrow for the benefit of the holders of the Pre-
Refunded Bonds until the refunding call date. Usually, Pre-Refunded Bonds will
bear a triple-A rating because of this escrow. The issuers of Pre- Refunded
Bonds must call such Bonds on their refunding call date. Therefore, as of such
date, the Trust will receive the call price for such bonds but will cease
receiving interest income with respect to them. For a list of those Bonds which
are Pre-Refunded Bonds, if any, as of the Evaluation Date, see "Notes to
Financial Statements" in this Part A. Some of the Bonds in the portfolio may
have been purchased at an aggregate premium over par. The payment of interest
and preservation of capital are, of course, dependent upon the continuing
ability of issuers of the Bonds or the insurers thereof to meet their
obligations. There can be no assurance that the Trust's investment objectives
will be achieved. Investment in the Trust should be made with an understanding
of the risks which an investment in long-term fixed rate debt obligations may
entail, including the risk that the value of the underlying portfolio will
decline with increases in interest rates, and that the value of Zero Coupon
Bonds is subject to greater fluctuation than coupon bonds in response to changes
in interest rates. Each Unit in the Trust represents a 1/6774th undivided
interest in the principal and net income of the Trust. The
A-2
109766.1
<PAGE>
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal
bond guaranty insurance policy obtained by either the Sponsor ("Sponsor-Insured
Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and issued by one of
the insurance companies (the "Insurance Companies"), described under "Insurance
on the Bonds" in Part B of this Prospectus, covering scheduled payment of
principal thereof and interest thereon when such amounts shall become due for
payment but shall not have been paid by the issuer or any other insurer thereof.
The insurance, unless obtained by MBIA Insurance Corporation ("MBIA Corp."),
will also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption of the
Bonds if interest on any Bonds is ultimately deemed to be subject to regular
federal income tax. Insurance obtained from MBIA Corp. only guarantees the
accelerated payments required to be made by or on behalf of an issuer of small
industrial revenue bonds and pollution control bonds if there is an event which
results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premium payments, if any, as and when required.
To the extent, therefore, that Bonds are only covered by insurance obtained from
MBIA Corp., such Bonds will not be covered for the accelerated payments required
to be made by or on behalf of an issuer of other than small industrial revenue
bonds or pollution control revenue bonds if there occurs an event which results
in the loss of tax-exempt status of the interest on such Bonds. None of the
insurance will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee payment of
principal and interest in such amounts and at such times as such amounts would
have been due absent such acceleration). The insurance relates only to the
prompt payment of principal of and interest on the securities in the portfolio,
and does not remove market risks or guarantee the market value of the Units in
the Trust. The terms of the insurance are more fully described under "Insurance
on the Bonds" in Part B of this Prospectus. For a discussion of the effect of an
occurrence of nonpayment of principal or interest on any Bonds in the Trust, see
"Portfolio Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Bonds. In addition, investors should be
aware that, subsequent to the Date of Deposit, the rating of the claims-paying
ability of the insurer of an underlying Bond may be downgraded, which may result
in a downgrading of the rating of the Units in the Trust. The approximate
percentage of the aggregate principal amount of the portfolio that is insured by
each Insurance Company is as follows: AMBAC Indemnity Corp. ("AMBAC"), 3.7%;
Capital Guaranty Insurance Company ("Capital Guaranty"), 45.7%; Financial
Guaranty Insurance Company ("Financial Guaranty"), 4.8%; Municipal Bond
Insurance Association ("MBIA"), 13.4%; and MBIA Corp., 32.4%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 4.52% of the Public
Offering Price, or 4.733% of the net amount invested in Bonds per Unit. In
addition, accrued interest to the expected date of settlement, including earned
original issue discount, is added to the Public Offering Price. If Units had
been purchased on the Evaluation Date, the Public Offering Price per Unit would
have been $638.97 plus accrued interest of $6.99 under the monthly distribution
plan, $10.41 under the semi-annual distribution plan and $10.49 under the annual
distribution plan, for a total of $645.96, $649.38 and $649.46, respectively.
The Public Offering Price per Unit can
A-3
109766.1
<PAGE>
vary on a daily basis in accordance with fluctuations in the aggregate bid
price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under the "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of the Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the distribution plan chosen by the prior owner of such Unit and may thereafter
change the plan as provided under "Interest and Principal Distributions" in Part
B of this Prospectus. Distributions of principal, if
A-4
109766.1
<PAGE>
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 4.52% of the Public Offering Price (4.733% of the
net amount invested), plus net accrued interest. If a market is not maintained a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based on the aggregate bid price of the Bonds. (See
"Liquidity--Sponsor Repurchase" and "Public Offering--Offering Price" in Part B
of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their regular
interest distributions, and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.
Residents of Texas see "Total Reinvestment Plan for Texas Residents" in Part B
of this Prospectus.) The Plan is not designed to be a complete investment
program.
A-5
109766.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
49TH DISCOUNT SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: May 10, 1990 Weighted Average Life to
Principal Amount of Bonds ... $4,511,667 Maturity: 19 Years.
Number of Units ............. 6,774 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/6774 value of Trust is less than
Principal Amount of $2,800,000 in principal amount
Bonds per Unit ............ $666.03 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2039 or the disposition of the
of Bonds in Trust ....... $4,141,376+++ last Bond in the Trust.
Divided by 6,774 Units .... $611.36 Trustee***: The Chase Manhattan
Plus Sales Charge of 4.52% Bank, N.A.
of Public Offering Price $27.61 Trustee's Annual Fee: Monthly
Public Offering Price plan $.98 per $1,000; semi-
per Unit ................ $638.97+ annual plan $.52 per $1,000;
Redemption and Sponsors' and annual plan is $.34 per
Repurchase Price $1,000.
per Unit .................. $611.36+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsors' Repurchase (treating separate maturities
Price per Unit ............ $27.61++++ as separate issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal &
and Principal Amount per Co., Incorporated.
Unit Premium/(Discount) ... $(27.06) Sponsors' Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in Part B
$1.00 per Unit. of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $33.12 $33.12 $33.12
Less estimated annual fees and
expenses ............................ 1.39 1.26 .32
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $31.73 $31.86 $32.80
Estimated interest distribution# ...... 2.64 15.93 32.79
Estimated daily interest accrual# ..... .0881 .0885 .0910
Estimated current return#++ ........... 4.97% 4.99% 5.13%
Estimated long term return++ .......... 4.74% 4.77% 4.95%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-6
109766.1
<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 proceeds from securities called January 1, 1996 and certain amounts
distributable as of December 31, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no. 1-800-882- 9898). For
information regarding redemption by the trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $6.99 monthly, $10.41 semi-annually
and $10.49 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses. For additional
information on ECR and ELTR, see Part B of this Prospectus.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-7
109766.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 10 issues representing
obligations of issuers located in 8 states. The Sponsors have not participated
as a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the Bonds
were acquired. Approximately 30.1% of the Bonds are obligations of state and
local housing authorities; approximately 28.4% are hospital revenue bonds;
approximately 3.7% were issued in connection with the financing of nuclear
generating facilities; and approximately 2.3% 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 issue
representing $250,000 of the principal amount of the Bonds is a general
obligation bond. All 9 of the remaining issues representing $4,961,667 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, Courthouse
1, Federally Assisted Housing 1, Hospital 3, Mortgage Revenue 1, Nuclear Power 1
and Special Obligation 1. For an explanation of the significance of these
factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1995, $2,266,667 (approximately 43.5% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $1,566,667 (approximately 30.1% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 6.1% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 18.2% were purchased at a premium and
approximately 32.2% 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, 1996 to March 22, 1996
the entire principal amount of the Bond in portfolio no. 4 has been
called and is no longer contained in the Trust. 21 Units have been
redeemed from the Trust.
A-8
109766.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 6,990 $767.90 $50.78 $51.44 $51.64 $12.67
December 31, 1994 6,984 689.90 49.56 50.18 50.36 21.46
December 31, 1995 6,774 621.51 44.69 45.22 45.57 98.13
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-9
109766.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, 49th Discount Series:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, 49th Discount Series as of
December 31, 1995, and the related statements of operations, and changes in net
assets for each of the years in the three year period then ended. These
financial statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, 49th Discount Series as of December 31, 1995, and the results of its
operations and the changes in its net assets for each of the years in the three
year period then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $3,820,158) $ 4,177,854
Excess of other assets over total liabilities 32,244
------------
Net assets 6,774 units of fractional undivided
interest outstanding,$621.51 per unit) $ 4,210,098
------------
------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
------------ ------------ ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 316,416 369,454 378,630
------------ ------------ ------------
Expenses:
Trustee's fees 7,647 7,891 9,145
Evaluator's fees 1,507 1,655 1,779
Sponsor's advisory fee 1,374 1,518 1,738
------------ ------------ ------------
Total expenses 10,528 11,064 12,662
------------ ------------ ------------
Investment income, net 305,888 358,390 365,968
------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Net realized (loss) gain on
bonds sold or called (42,293) 1,766 (17,756)
Unrealized appreciation
(depreciation) for the year 251,608 (407,234) 148,577
------------ ------------ ------------
Net gain (loss)
on investments 209,315 (405,468) 130,821
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations $ 515,203 (47,078) 496,789
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------ ------------ ------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 305,888 358,390 365,968
Net realized (loss) gain on
bonds sold or called (42,293) 1,766 (17,756)
Unrealized appreciation
(depreciation) of investments 251,608 (407,234) 148,577
------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations 515,203 (47,078) 496,789
------------ ------------ ------------
Distributions to Certificateholders:
Investment income 309,166 347,774 356,741
Principal 676,368 150,005 88,563
Redemptions:
Interest 2,767 298 -
Principal 135,073 4,176 -
------------ ------------ ------------
Total distributions
and redemptions 1,123,374 502,253 445,304
------------ ------------ ------------
Total (decrease) increase (608,171) (549,331) 51,485
Net assets at beginning of year 4,818,269 5,367,600 5,316,115
------------ ------------ ------------
Net assets at end of year (including
undistributed net investment
income of $116,913, $122,958,
and $112,640, respectively) $ 4,210,098 4,818,269 5,367,600
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 49TH DISCOUNT SERIES
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Organization
Insured Municipal Securities Trust, 49th Discount Series (Trust) was
organized on May 10, 1990 by Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated (Co-Sponsors) 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. Effective September 28, 1995, Reich & Tang
Distributors L.P. (Reich & Tang) has become the successor sponsor (Sponsor)
to certain of the unit investments trusts previously sponsored by Bear,
Stearns & Co. Inc. and Gruntal and Co. Incorporated. As successor Sponsor,
Reich & Tang has assumed all of the obligations and rights of Bear Stearns
& Co. Inc. and Gruntal & Co., Incorporated, the previous sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on
the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such discount is
included in interest income; however, it is not distributed until realized
in cash upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is
based upon the bid prices for the bonds at the end of the year, except
that the market value on the date of deposit represents the cost to the
Trust based on the offering prices for investments at that date. The
difference between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
F-5
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 49TH DISCOUNT SERIES
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 210 and 6 units were redeemed during the years ended December 31, 1995
and 1994, respectively. No units were redeemed during the year ended December
31, 1993.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 5,148,626
Less initial gross underwriting commission (283,174)
------------
4,865,452
Cost of securities sold or called (1,093,485)
Net unrealized appreciation 357,696
Undistributed net investment income 116,913
-----------
Distributions in excess of proceeds
from bonds sold or called (36,478)
Total $ 4,210,098
=========
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.
Undistributed net investment income includes accumulated accretion of
original issue discount of $48,191.
F-6
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, 49TH DISCOUNT SERIES
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- ----- ------------ ------------------------------ ---- ------------ ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 120,000 Alaska Hsg. Finc. Corp. AAA 7.450% 6/01/11 @ 100 S.F. $ 127,980
Colltzd. Bonds 1989 First 12/01/2029 6/01/00 @ 102 Ref.
Series (MBIA Corp.)
2 500,000 Ill. Hlth. Facs. Auth. Rev. AAA 7.600 2/15/06 @ 100 S.F. 613,765
Rfndg. Bonds (Michael Reese 2/15/2019 None
Hosp. & Med. Cntr.) Series
1989 A (Capital Guaranty)
3 500,000 Ind. Hlth Fac. Fincg. Auth. AAA 7.750 8/15/07 @ 100 S.F. 582,395
Hosp. Rev. Bonds (Bartholomew 8/15/2020 8/15/00 @ 102 Ref.
Cnty. Hosp. Prjt.) Series 1990
(Capital Guaranty) (5)
4 700,000 Western Minn. Muni. Pwr. AAA 9.150 No Sinking Fund 714,000
Agncy. Pwr. Supl. Rev. Rfndg. 1/01/2002 1/01/96 @ 102 Ref.
Bonds 1985 Series A (MBIA)
5a 240,000 N.Y. State Med. Care Facs. AAA 7.750 2/15/11 @ 100 S.F. 276,701
Finc. Agncy. Mental Hlth. 2/15/2020 2/15/00 @ 102 Ref.
Servs. Facs. Imprvmnt. Rev.
Bonds 1990 Series A (Capital
Guaranty) (5)
5b 240,000 N.Y. State Med. Care Facs. AAA 7.750 2/15/11 @ 100 S.F. 273,355
Finc. Agncy. Mental Hlth. 2/15/2020 2/15/00 @ 102 Ref.
Servs. Facs. Imprvmnt. Rev.
Bonds 1990 Series A (Capital
Guaranty)
6 200,000 Triborough Bridge & Tunnel AAA 7.125 Currently @ 100 S.F. 223,604
Auth. N.Y. Mtg. Recording Tax 1/01/2019 1/01/00 @ 101 Ref.
Spec. Oblig. Bonds Series 1989
A (Capital Guaranty) (5)
7 250,000 Philadelphia Penn. Gen. Oblig. AAA 7.625 8/01/02 @ 100 S.F. 260,770
Bonds Series A 1986 (Financial 8/01/2016 8/01/96 @ 102 Ref.
Guaranty) (5)
8 700,000 Lawrence Cnty. S.D. Lease AAA 7.650 7/01/01 @ 100 S.F. 801,094
Certs. of Part. (Lawrence 7/01/2010 7/01/00 @ 102 Ref.
Cnty. Courthouse Prjt.)
(Capital Guaranty)
9 195,000 Matagorda Cnty. Tx. Navgtion. AAA 7.500% No Sinking Fund 221,674
Dstrct. No. One Adjustable 12/15/2014 12/15/99 @ 103 Ref.
Rate Colltzd. Poll. Cntrl.
Rev. Bonds (Central Pwr. & Lt.
Co. Prjt.) Series 1984 A
(AMBAC)
10 1,566,667 Ill. Hsg. Dev. Auth. AAA 0.000 7/01/06 @ 13.676 S.F. 82,516
Multi-Fam. Hsg. Rev. Bonds 7/01/2025 None
1983 Series A (MBIA Corp.)
------------ ------------
$ 5,211,667 See $ 4,177,854
============ ============
</TABLE>
See accompanying footnotes to portfolio and notes to financial
statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, 49TH DISCOUNT SERIES
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 455,489
Gross unrealized depreciation (97,793)
--------
Net unrealized appreciation $ 357,696
=======
(4) The annual interest income, based upon bonds held at December 31, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to
the Trust is $288,427.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
F-9
<PAGE>
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 23
The Trust is a unit investment trust designated Series 23 ("Insured
Municipal Trust") with an underlying portfolio of long-term insured tax-exempt
bonds issued by or on behalf of states, municipalities and public authorities
and was formed to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which, in the opinions of bond
counsel to the respective issuers, is, with certain exceptions, currently exempt
from regular federal income tax under existing law but may be subject to state
and local taxes. Capital gains, however, are subject to tax. (See "Tax Status"
and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsors are Reich
& Tang Distributors L.P. (successor Sponsor to Bear, Stearns & Co. Inc.) and
Gruntal & Co., Incorporated (sometimes referred to as the "Sponsor" or the
"Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this Prospectus for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109804.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed, diversified
portfolio of long-term insured bonds (the "Bonds") issued by or on behalf of
states, municipalities and public authorities which, because of irrevocable
insurance, were rated "AAA" by Standard & Poor's Corporation at the time
originally deposited in the Trust. The "AAA" rating results from insurance
relating only to the Bonds in the Trust and not to Units of the Trust. The
insurance does not remove market risk, as it does not guarantee the market value
of the Units. For a discussion of the significance of such ratings, see
"Description of Bond Ratings" in Part B of this Prospectus, and for a list of
ratings on the Evaluation Date see the "Portfolio." A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. (See "Tax Status" in Part B of this Prospectus.) For a
list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds may
be "Zero Coupon Bonds", which are original issue discount bonds that provide for
payment at maturity at par value, but do not provide for the payment of any
current interest. Some of the Bonds in the Trust have been issued with optional
refunding or refinancing provisions ("Refunded Bonds") whereby the issuer of the
Bond has the right to call such Bond prior to its stated maturity date (and
other than pursuant to sinking fund provisions) and to issue new bonds
("Refunding Bonds") in order to finance the redemption. Issuers typically
utilize refunding calls in order to take advantage of lower interest rates in
the marketplace. Some of these Refunded Bonds may be called for redemption
pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby the proceeds
from the issue of the Refunding Bonds are typically invested in government
securities in escrow for the benefit of the holders of the Pre-Refunded Bonds
until the refunding call date. Usually, Pre-Refunded Bonds will bear a triple-A
rating because of this escrow. The issuers of Pre-Refunded Bonds must call such
Bonds on their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest income
with respect to them. For a list of those Bonds which are Pre-Refunded Bonds, if
any, as of the Evaluation Date, see "Notes to Financial Statements" in this Part
A. Some of the Bonds in the portfolio may have been purchased at an aggregate
premium over par. The payment of interest and preservation of capital are, of
course, dependent upon the continuing ability of issuers of the Bonds or the
insurers thereof to meet their obligations. There can be no assurance that the
Trust's investment objectives will be achieved. Investment in the Trust should
be made with an understanding of the risks which an investment in long-term
fixed rate debt obligations may entail, including the risk that the value of the
underlying portfolio will decline with increases in interest rates, and that the
value of Zero Coupon Bonds is subject to greater fluctuation than coupon bonds
in response to changes in interest rates. Each Unit in the Trust represents a
1/4550th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
109804.1
<PAGE>
are issued and outstanding Units which have been purchased by the Sponsor in the
secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal
bond guaranty insurance policy obtained by either the Sponsor ("Sponsor-Insured
Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and issued by one of
the insurance companies (the "Insurance Companies"), described under "Insurance
on the Bonds" in Part B of this Prospectus, covering scheduled payment of
principal thereof and interest thereon when such amounts shall become due for
payment but shall not have been paid by the issuer or any other insurer thereof.
The insurance, unless obtained by MBIA Insurance Corporation ("MBIA Corp."),
will also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption of the
Bonds if interest on any Bonds is ultimately deemed to be subject to regular
federal income tax. Insurance obtained from MBIA Corp. only guarantees the
accelerated payments required to be made by or on behalf of an issuer of small
industrial revenue bonds and pollution control bonds if there is an event which
results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premium payments, if any, as and when required.
To the extent, therefore, that Bonds are only covered by insurance obtained from
MBIA Corp., such Bonds will not be covered for the accelerated payments required
to be made by or on behalf of an issuer of other than small industrial revenue
bonds or pollution control revenue bonds if there occurs an event which results
in the loss of tax-exempt status of the interest on such Bonds. None of the
insurance will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee payment of
principal and interest in such amounts and at such times as such amounts would
have been due absent such acceleration). The insurance relates only to the
prompt payment of principal of and interest on the securities in the portfolio,
and does not remove market risks or guarantee the market value of the Units in
the Trust. The terms of the insurance are more fully described under "Insurance
on the Bonds" in Part B of this Prospectus. For a discussion of the effect of an
occurrence of nonpayment of principal or interest on any Bonds in the Trust, see
"Portfolio Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Bonds. In addition, investors should be
aware that, subsequent to the Date of Deposit, the rating of the claims paying
ability of the insurer of an underlying Bond may be downgraded, which may result
in a downgrading of the rating of the Units in the Trust. The approximate
percentage of the aggregate principal amount of the portfolio that is insured by
each insurance company is as follows: AMBAC Indemnity Corp. ("AMBAC"), 8.7%;
Capital Guaranty Insurance Company ("Capital Guaranty"), 56.5%; Financial
Guaranty Insurance Company ("Financial Guaranty"), 12%; Municipal Bond
Insurance Association ("MBIA"), 13.2%; and MBIA Corp., 9.6%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, plus a sales charge of 4.14% of the Public
Offering Price, or 4.318% 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 $1,002.42 plus accrued interest
of $12.29 under the monthly distribution plan, $17.79 under the semi-annual
distribution plan and $17.75 under the annual distribution plan, for a total of
$1,014.71, $1,020.21 and $1,020.17, respectively. The Public Offering Price per
Unit can vary on a daily basis in accordance with fluctuations in the aggregate
bid price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
A-3
109804.1
<PAGE>
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by investors. The resulting
Estimated Long Term Return represents a measure of the return to investors
earned over the estimated life of the Trust. (For the Estimated Long Term Return
to Certificateholders under the monthly, semi-annual and annual distribution
plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses, will
be made by the Trust either monthly, semi-annually or annually depending upon
the plan of distribution applicable to the Unit purchased. A purchaser of a Unit
in the secondary market will initially receive distributions in accordance with
the distribution plan chosen by the prior owner of such Unit and may thereafter
change the plan as provided under "Interest and Principal Distributions" in Part
B of the Prospectus. Distributions of principal, if any, will be made
semi-annually on June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
A-4
109804.1
<PAGE>
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 4.14% of the Public Offering Price (4.318% of the
net amount invested), plus net accrued interest. If a market is not maintained a
Certificateholder will be able to redeem his or her Units with the Trustee at a
price also based on the aggregate bid price of the Bonds. (See
"Liquidity--Sponsor Repurchase" and "Public Offering--Offering Price" in Part B
of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their regular
interest distributions, and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.
Residents of Texas, see "Total Reinvestment Plan for Texas Residents" in Part B
of this Prospectus.) The Plan is not designed to be a complete investment
program.
A-5
109804.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 23
<TABLE>
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
<S> <C>
Date of Deposit: May 10, 1990 Minimum Principal Distribution:
Principal Amount of Bonds ... $3,610,000 $1.00 per Unit.
Number of Units ............. 4,550 Weighted Average Life to Maturity:
Fractional Undivided Inter- 12.9 Years.
est in Trust per Unit ..... 1/4550 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value
Bonds per Unit ............ $793.41 of Trust is less than $2,000,000
Secondary Market Public in principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2039
of Bonds in Trust ....... $4,379,853+++ or the disposition of the last
Divided by 4,550 Units .... $962.61 Bond in the Trust.
Plus Sales Charge of 4.14% Trustee***: The Chase Manhattan
of Public Offering Price. $39.81 Bank, N.A.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $1,002.42+ plan $.97 per $1,000; semi-annual
Redemption and Sponsors' plan $.51 per $1,000; and annual
Repurchase Price plan is $.33 per $1,000.
per Unit .................. $962.61+ 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
Sponsors' Repurchase separate maturities as separate
Price per Unit ............ $39.81++++ issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. & Gruntal & Co.,
and Principal Amount per Incorporated.
Unit Premium/(Discount) ... $209.01 Sponsors' Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal amount
New York Time. of Bonds (see "Trust Expenses and
Charges" in Part B of this
Prospectus).
</TABLE>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $56.40 $56.40 $56.40
Less estimated annual fees and
expenses ............................ 1.84 1.51 1.97
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $54.56 $54.89 $54.43
Estimated interest distribution# ...... 4.54 27.44 54.43
Estimated daily interest accrual# ..... .1515 .1524 .1511
Estimated current return#++ ........... 5.44% 5.48% 5.43%
Estimated long term return++ .......... 4.38% 4.41% 4.36%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-6
109804.1
<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 proceeds from securities called January 1, 1996 and certain amounts
distributable as of December 31, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882-9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $12.29 monthly, $17.79 semi-annually
and $17.75 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-7
109804.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 10 issues representing
obligations of issuers located in 8 states. The Sponsors have not participated
as a sole underwriter or manager, co-manager or member of an underwriting
syndicate from which any of the initial aggregate principal amount of the Bonds
were acquired. Approximately 5.8% of the Bonds are obligations of state and
local housing authorities; approximately 36.1% are hospital revenue bonds;
approximately 8.7% were issued in connection with the financing of nuclear
generating facilities; and approximately 3.8% 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 issue
representing $500,000 of the principal amount of the Bonds is a general
obligation bond. All 9 of the remaining issues representing $3,660,000 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, Courthouse
1, Federally Assisted Housing 1, Hospital 3, Mortgage Revenue 1, Nuclear Power 1
and Special Obligation 1. For an explanation of the significance of these
factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1995, $1,040,000 (approximately 25.0% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $240,000 (approximately 5.8% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 12.5% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 37.3% were purchased at a premium and
approximately 25.2% 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, 1996 to March 22, 1996,
the entire principal amount of the Bond in portfolio no. 4 was called
for redemption pursuant to pre-refunding provisions and is no longer
contained in the Trust. $85,000 of the principal amount of the Bond in
portfolio no. 2 was sold and is no longer contained in the Trust. 123
Units were redeemed from the Trust.
A-8
109804.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 4,716 $1,090.64 $71.69 $72.37 $72.57 $11.47
December 31, 1994 4,563 987.69 69.81 70.46 70.66 19.83
December 31, 1995 4,550 979.99 67.78 68.43 68.45 52.46
- --------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-9
109804.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, Series 23:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, Series 23 as of December 31,
1995, and the related statements of operations, and changes in net assets for
each of the years in the three year period then ended. These financial
statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, Series 23 as of December 31, 1995, and the results of its operations and
the changes in its net assets for each of the years in the three year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statements of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $3,975,136) $ 4,392,402
Excess of other assets over total liabilities 66,558
----------
Net assets 4,550 units of fractional undivided
interest outstanding, $979.99 per unit) $ 4,458,960
==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
--------- --------- ---------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Investment income - interest $ 317,120 336,456 359,376
--------- --------- ---------
Expenses:
Trustee's fees 5,210 5,621 5,709
Evaluator's fees 2,250 2,479 2,669
Sponsor's advisory fee 1,100 1,142 1,238
--------- --------- ---------
Total expenses 8,560 9,242 9,616
--------- --------- ---------
Investment income, net 308,560 327,214 349,760
--------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Net realized (loss) gain on
bonds sold or called (13,012) 2,146 10,686
Unrealized appreciation
(depreciation) for the year 218,430 (391,930) 152,249
--------- --------- ---------
Net gain (loss) on
investments 205,418 (389,784) 162,935
--------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations $ 513,978 (62,570) 512,695
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
----------- ----------- ----------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 308,560 327,214 349,760
Net realized (loss) gain on
bonds sold or called (13,012) 2,146 10,686
Unrealized appreciation (depreciation)
of investments for the year 218,430 (391,930) 152,249
----------- ----------- ----------
Net increase (decrease)
in net assets resulting
from operations 513,978 (62,570) 512,695
----------- ----------- ----------
Distributions to Certificateholders:
Investment income 309,708 326,331 349,219
Principal 239,375 93,064 55,229
Redemptions:
Interest 201 2,612 4,973
Principal 12,571 152,044 305,766
----------- ----------- ----------
Total distributions and redemptions 561,855 574,051 715,187
----------- ----------- ----------
Total decrease (47,877) (636,621) (202,492)
Net assets at beginning of year 4,506,837 5,143,458 5,345,950
----------- ----------- ----------
Net assets at end of year (including
undistributed net investment
income of$86,115, $87,464,
and $89,193, respectively) $ 4,458,960 4,506,837 5,143,458
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 23
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, Series 23 (Trust) was organized on May
10, 1990 by Bear, Stearns & Co. Inc. and Gruntal & Co., Incorporated
(Co-Sponsors) 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.
Effective September 28, 1995, Reich & Tang Distributors L.P. (Reich &
Tang) has become the successor sponsor (Sponsor) to certain of the unit
investments trusts previously sponsored by Bear, Stearns & Co. Inc.and
Gruntal & Co., Incorporated. As successor Sponsor, Reich & Tang has
assumed all of the obligations and rights of Bear Stearns & Co. Inc. and
Gruntal & Co., Incorporated, the previous sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) ("Chase").
Accordingly, Chase is the successor trustee of the unit investment trusts.
Chase has custody of and responsibility for the accounting records and
financial statements of the Trust and is responsible for establishing and
maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses
on the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest method
over the respective lives of the bonds. The accretion of such discount is
included in interest income; however, it is not distributed until realized
in cash upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is
based upon the bid prices for the bonds at the end of the year, except
that the market value on the date of deposit represents the cost to the
Trust based on the offering prices for investments at that date. The
difference between cost (including accumulated accretion of original issue
discount on zero-coupon bonds) and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the securities
sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 23
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 13, 153 and 284 units were redeemed during the years ended December
31, 1995, 1994 and 1993, respectively.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 5,092,720
Less initial gross underwriting commission (249,543)
---------
4,843,177
Cost of securities sold or called (875,049)
Net unrealized appreciation 417,266
Undistributed net investment income 86,115
Distributions in excess of proceeds
from bonds sold or called (12,549)
---------
Total $ 4,458,960
=========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering price
net of the applicable sales charge on 5,000 units of fractional undivided
interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $7,008.
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 23
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- -- --------- ----------------------- ---- ----------- ----------------------- ---------
<S><C> <C> <C> <C> <C> <C>
1 $ 160,000 Alaska Hsg. Finc. Corp. AAA 7.450% 6/01/11 @ 100 S.F. $ 170,640
Colltzd. Bonds 1989 12/01/2029 6/01/00 @ 102 Ref.
First Series (MBIA
Corp.)
2 500,000 Ill. Hlth. Facs. Auth. AAA 7.600 2/15/06 @ 100 S.F. 613,765
Rev. Rfndg. Bonds 2/15/2019 2/15/99 @ 101 Ref.
(Michael Reese Hosp. &
Med. Cntr.) Series 1989
A (Capital Guaranty)
3 500,000 Ind. Hlth. Fac. Finc. AAA 7.750 8/15/07 @ 100 S.F. 582,395
Auth. Hosp. Rev. Bonds 8/15/2020 8/15/00 @ 102 Ref.
(Bartholomew Cnty.
Hosp. Prjt.) Series
1990 (Capital
Guaranty) (5)
4 550,000 Western Minn. Muni. AAA 9.150 No Sinking Fund 561,000
Pwr. Agncy. Pwr. Supl. 1/01/2002 1/01/96 @ 102 Ref.
Rev. Rfndg. Bonds 1985
Series A (MBIA) (5)
5a 340,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 379,294
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(Capital Guaranty) (5)
5b 160,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 177,046
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series A
(Capital Guaranty)
6 300,000 Triborough Bridge & AAA 7.125 Currently @ 100 S.F. 335,406
Tunnel Auth. N.Y. Mtg. 1/01/2019 1/01/00 @ 101 Ref.
Recording Tax Spec.
Oblig. Bonds Series
1989 A (Capital
Guaranty) (5)
7 500,000 Philadelphia Penn. Gen. AAA 7.625 8/01/02 @ 100 S.F. 521,540
Oblig. Bonds Series A 8/01/2016 8/01/96 @ 102 Ref.
1986 (Financial
Guaranty) (5)
8 550,000 Lawrence Cnty. S.D. AAA 7.650 7/01/01 @ 100 S.F. 629,431
Lease Certs. of Part. 7/01/2010 7/01/00 @ 102 Ref.
(Lawrence Cnty.
Courthouse Prjt.)
(Capital Guaranty)
9 360,000 Matagorda Cnty. Tx. AAA 7.500 No Sinking Fund 409,244
Navgtion. Dstrct. No. 12/15/2014 12/15/99 @ 103 Ref.
One Adjustable Rate
Colltzd. Poll. Cntrl.
Rev. Bonds, (Central
Pwr. & Lt. Co. Prjt.)
Series 1984 A (AMBAC)
10 $ 240,000 Ill. Hsg. Dev. Auth. AAA 0.000% 7/01/06 @ 13.676 S.F. $ 12,641
Multi-Fam. Hsg. Rev. 7/01/2025 None
Bonds 1983 Series A
(MBIA Corp.)
$ 4,160,000 $ 4,392,402
========= =========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 23
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc. A
brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 470,530
Gross unrealized depreciation (53,264)
--------
Net unrealized appreciation $ 417,266
========
(4) The annual interest income, based upon bonds held at December 31, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to the
Trust is $306,944.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 2
_______________________________________________________________________________
The Trust is a unit investment trust designated Series 2 ("New
York Navigator 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 and from New York State and City personal income tax. Capital gains,
however, are subject to tax. (See "Tax Status" and "The Trust--Portfolio" in
Part B of this Prospectus.) The Sponsors are Reich & Tang Distributors L.P.
(successor Sponsor to Bear, Stearns & Co. Inc.) and Gruntal & Co.,
Incorporated (sometimes referred to as the "Sponsor" or the "Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109751.1
<PAGE>
THE TRUST. The Trust is a unit investment trust and was formed to
preserve capital and to provide interest income (including 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 and from state and local taxes to the extent indicated herein when
received by persons subject to state and local income taxation in a state in
which the issuers of the Bonds are located. 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. A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject the 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 a specific preference item for purposes of the federal
individual and/or corporate alternative minimum tax. (See "Description of
Portfolio" in this Part A for a list of these Bonds which pay interest income
subject to the federal individual alternative minimum tax. See also "Tax Status"
in Part B of this Prospectus.) Some of the aggregate principal amount of the
Bonds in the Trust 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 current interest (for the amount of Zero Coupon Bonds in each
Trust, and the cost of such Bonds to that Trust, see "Description of Portfolio"
in this Part A). All of the Bonds in the Trust were rated "AAA" by Standard &
Poor's Corporation at the time originally deposited in the Trust (see
"Portfolio"). This 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. The payment of interest and preservation of capital are, of
course, dependent upon the continuing ability of the issuers of the Bonds or the
insurer thereof to meet their obligations. There can be no assurance that the
Trust's investment objectives will be achieved. Investment in the Trust should
be made with an understanding of the risks which an investment in long-term
fixed rate debt obligations may entail, including the risk that the value of the
underlying portfolio will decline with increases in interest rates, and that the
value of Zero Coupon Bonds is subject to greater fluctuation than coupon bonds
in response to such changes in interest rates. (See "Portfolio" in Part B of
this Prospectus.) Each Unit in the Trust represents a 1/5639th 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
Sponsors in the secondary market.
INSURANCE. Each of the Bonds in the New York Navigator Trust is
insured by a municipal bond guaranty insurance policy obtained by the Sponsors
(the "Navigator Sponsor-Insured Bonds") from MBIA Insurance Corporation ("MBIA
Corp.") covering regularly scheduled payments of principal thereof and interest
thereon when such amounts become due for payment but shall not have 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
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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 New York
Navigator Trust 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 New
York Navigator Trust. The insurer's policies relating to small industrial
development bonds and pollution control revenue bonds also guarantee the
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 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 does 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 accelerated
payments on any such Bonds unrelated to the taxability of interest on any such
Bonds, the payments guaranteed by MBIA Corp. shall be made in such amounts and
at such times such payment would have been made absent such an acceleration. The
insurance relates only to the prompt payment of principal of and interest on the
securities in the New York Navigator Trust and does not remove market risk nor
does it guarantee the market value of Units in the New York Navigator Trust. The
terms of the insurance are more fully described under "Insurance on the Bonds"
in Part B of this Prospectus. For discussion of the effect of an occurrence of
non-payment of principal or interest on any Bonds in the New York Navigator
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 the New
York Navigator Trust. 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
New York Navigator Trust. The premiums for the Navigator Sponsor-Insured Bonds
are obligations of the Sponsors. Additionally, some of the Bonds in the New York
Navigator Trust 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.
Some of the Bonds in the New York Navigator Trust may additionally
be insured by a municipal bond guaranty insurance policy obtained by issuers,
underwriters or prior owners of the Bonds ("Pre-Insured Bonds") and issued by
one of the insurance companies described under "Insurance on the Bonds" in Part
B of this Prospectus (the "Insurance Companies"). 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
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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 such Bond is ultimately deemed to be subject to 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 premium payments, if any, as and when
required. To the extent, therefore, that Bonds are only covered by insurance
obtained from MBIA Corp., such Bonds will not be covered for the 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 he
insurance are more fully described herein. No representation is made herein as
to any Bond insurer's ability to meet its obligations under a policy of
insurance relating to any of the Pre-Insured Bonds. In addition, investors
should be aware that subsequent to the Date of Deposit the rating of the
claims-paying ability of the insurer of an underlying Pre-Insured Bond may be
downgraded.
All of the Bonds in the New York Navigator Trust are covered by
insurance obtained by the Sponsors from MBIA Corp. and 14.9% of the Bonds in the
New York Navigator Trust are Pre-Insured Bonds. The approximate percentage of
the aggregate principal amount of the Portfolio that is insured by each
Insurance Company with respect to Pre-Insured Bonds is as follows: Capital
Guaranty Insurance Company ("Capital Guaranty"), 14.9%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of
each Unit is equal to the aggregate offering price of the Bonds in such Trust
divided by the number of Units outstanding, plus a sales charge of 4.07% of the
Public Offering Price, or 4.242% 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 $1,122.60 plus accrued interest
of $11.07 under the monthly distribution plan, $17.09 under the semi-annual
distribution plan and $17.08 under the annual distribution plan, for a total of
$1,133.67, $1,139.69 and $1,139.68, respectively. The Public Offering Price per
Unit can vary on a daily basis in accordance with fluctuations in the aggregate
bid price of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis, the
rate of return on an investment in Units of each Trust is measured in terms of
"Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in the Trust's
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portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsors
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 chosen by the Certificateholder. Certificateholders purchasing Units in
the secondary market will initially receive distributions in accordance with the
elections of the prior owner and may thereafter change the plan as provided
under "Interest and Principal Distributions" in Part B of this Prospectus.
Distributions of principal, if any, will be made semi-annually on June 15 and
December 15 of each year. (See "Rights of Certificateholders--Interest and
Principal Distributions" in Part B of this Prospectus. For estimated monthly,
semi-annual and annual interest distributions, see "Summary of Essential
Information.")
MARKET FOR UNITS. The Sponsors, although not obligated to do so,
presently maintain and intend to continue to maintain a secondary market for the
Units at a price 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 4.07% of the Public Offering Price (4.242% of the
net amount invested), plus net accrued interest. If a market is not maintained a
Certificateholder will be able to redeem his Units with the Trustee at a price
based on the aggregate bid price of the Bonds. (See "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,
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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.
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INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: May 10, 1990 Weighted Average Life to
Principal Amount of Bonds ... $5,595,000 Maturity: 13.3 Years.
Number of Units ............. 5,639 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/5639 value of Trust is less than
Principal Amount of $2,400,000 in principal amount
Bonds per Unit ............ $992.20 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2039 or the disposition of the
of Bonds in Trust ....... $6,082,764+++ last Bond in the Trust.
Divided by 5,639 Units .... $1,078.70 Trustee***: The Chase Manhattan
Plus Sales Charge of 4.07% Bank, N.A.
of Public Offering Price. $43.90 Trustee's Annual Fee: Monthly
Public Offering Price plan $1.00 per $1,000; semi-
per Unit ................ $1,122.60+ annual plan $.54 per $1,000;
Redemption and Sponsors' and annual plan is $.36 per
Repurchase Price $1,000.
per Unit .................. $1,078.70+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $15
Public Offering Price plus $.25 per each issue of
over Redemption and Bonds in excess of 50 issues
Sponsors' Repurchase (treating separate maturities
Price per Unit ............ $43.90++++ as separate issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal
and Principal Amount per & Co., Incorporated.
Unit Premium/(Discount) ... $130.40 Sponsors' Annual Fee: Maximum
Evaluation Time: 4:00 p.m. of $.25 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in
$1.00 per Unit. Part B of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $72.67 $72.67 $72.67
Less estimated annual fees and
expenses ............................ 1.97 1.43 1.53
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $70.70 $71.24 $71.14
Estimated interest distribution# ...... 5.89 35.62 71.14
Estimated daily interest accrual# ..... .1963 .1979 .1976
Estimated current return#++ ........... 6.30% 6.35% 6.34%
Estimated long term return++ .......... 3.07% 3.12% 3.11%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
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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 proceeds from securities called January 1, 1996 and certain amounts
distributable as of December 31, 1995 are reported in the summary of
essential information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882- 9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $11.07 monthly, $17.09 semi-annually
and $17.08 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.
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INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 14 issues representing
obligations of 8 issuers located in the state of New York. The Sponsors have 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 22.7% 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). Two of the issues representing $800,000 of the
principal amount of the Bonds are general obligation bonds. All 12 of the
remaining issues representing $4,895,000 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: Commuter Facility 1, Correctional Facilities 2,
Hospital 2, Special Obligations 2, Transit Facility 1, University 2, 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, 1995, $2,010,000 (approximately 35.3% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, none were Zero Coupon Bonds. None of the
aggregate principal amount of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 64.7% were purchased
at a premium and none were purchased at par. For an explanation of the
significance of these factors see "Discount and Zero Coupon Bonds" in Part B of
this Prospectus. All of the Bonds are subject to redemption prior to maturity
pursuant to sinking fund or call provisions.
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, 1996 to March 22, 1996,
the entire principal amount of the Bond in portfolio no. 6 was called
for redemption pursuant to pre-refunding provisions and is no longer
contained in the Trust. $215,000 of the principal amount of the Bond in
portfolio No. 12 was sold and is no longer contained in the Trust. 247
Units were redeemed from the Trust.
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FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset** Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 5,986 $1,146.02 $71.52 $72.18 $72.39 -0-
December 31, 1994 5,685 1,050.92 71.45 72.13 72.33 -0-
December 31, 1995 5,639 1,095.23 72.50 73.15 73.27 -0-
- --------
** 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.
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Independent Auditors' Report
The Sponsor, Trustee and Certificateholders Insured Municipal Securities Trust,
New York Navigator Insured Series 2:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, New York Navigator Insured
Series 2 as of December 31, 1995, and the related statements of operations, and
changes in net assets for each of the years in the three year period then ended.
These financial statements are the responsibility of the Trustee (see note 2).
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, New York Navigator Insured Series 2 as of December 31, 1995, and the
results of its operations and the changes in its net assets for each of the
years in the three year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 2
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $5,462,334) $ 6,139,024
Excess of other assets over total liabilities 36,997
----------
Net assets 5,639 units of fractional undivided
interest outstanding, $1,095.23 per unit) $ 6,176,021
==========
See accompanying notes to financial statements.
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 2
Statements of Operations
Years ended December 31,
-------- ---------- --------
1995 1994 1993
-------- ---------- --------
Investment income - interest $ 417,838 425,144 440,173
-------- ---------- --------
Expenses:
Trustee's fees 6,311 6,474 6,803
Evaluator's fees 2,182 2,206 2,372
Sponsor's advisory fee 1,424 1,499 1,499
-------- ---------- --------
Total expenses 9,917 10,179 10,674
-------- ---------- --------
Investment income, net 407,921 414,965 430,039
-------- ---------- --------
Realized gain on bonds sold
or called - 23,772 -
Unrealized appreciation
(depreciation) for the year 257,584 (582,904) 237,627
-------- ---------- --------
Net gain (loss)
on investments 257,584 (559,132) 237,627
-------- ---------- --------
Net increase (decrease)
in net assets resulting
from operations $ 665,505 (144,167) 667,666
======== ========== ========
See accompanying notes to financial statements.
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 2
Statements of Changes in Net Assets
Years ended December 31,
---------- ---------- ----------
1995 1994 1993
---------- ---------- ----------
Operations:
Investment income, net $ 407,921 414,965 430,039
Realized gain on bonds
sold or called - 23,772 -
Unrealized appreciation
(depreciation) for the year 257,584 (582,904) 237,627
---------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations 665,505 (144,167) 667,666
---------- ---------- ----------
Distributions to Certificateholders:
Investment income 413,738 412,818 429,802
Redemptions:
Interest 721 7,158 -
Principal 49,480 321,453 -
---------- ---------- ----------
Total distributions
and redemptions 463,939 741,429 429,802
---------- ---------- ----------
Total increase (decrease) 201,566 (885,596) 237,864
Net assets at beginning of year 5,974,455 6,860,051 6,622,187
---------- ---------- ----------
Net assets at end of year (including
undistributed net investment
income of $93,257 , $99,795,
and $104,806, respectively) $ 6,176,021 5,974,455 6,860,051
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 2
Notes to Financial Statements
December 31, 1995
(1) Organization
Insured Municipal Securities Trust, New York Navigator Insured Series 2
(Trust) was organized on May 10, 1990 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. Effective September
28, 1995, Reich & Tang Distributors L.P. (Reich & Tang) has become the
successor sponsor (Sponsor) to certain of the unit investments trusts
previously sponsored by Bear, Stearns & Co. Inc. As successor Sponsor,
Reich & Tang has assumed all of the obligations and rights of Bear Stearns
& Co. Inc., the previous sponsor.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The accompanying
financial statements have been adjusted to record the unrealized
appreciation (depreciation) of investments and to record interest income
and expenses on the accrual basis.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is based
upon the bid prices for the bonds at the end of the year, except that the
market value on the date of deposit represents the cost to the Trust based
on the offering prices for investments at that date. The difference between
cost and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(Continued)
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 2
Notes to Financial Statements
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 46 and 301 units were redeemed during the years ended December 31,
1995 and 1994, respectively. No units were redeemed during the year ended
December 31, 1993.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 6,065,183
Less initial gross underwriting commission (297,194)
---------
5,767,989
Cost of securities sold or called (305,655)
Net unrealized appreciation 676,690
Undistributed net investment income 93,257
Distributions in excess of proceeds
from bonds sold or called (56,260)
---------
Total $ 6,176,021
=========
The original cost to Certificateholders, less the initial gross underwriting
commission, represents the aggregate initial public offering price net of the
applicable sales charge on 6,000 units of fractional undivided interest of the
Trust as of the date of deposit.
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 2
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- --- --------- --------------------- ---- ------------ ---------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $ 300,000 N.Y. State Dorm. AAA 7.625% 7/01/07 @ 100 S.F. $ 312,057
Auth. City Univ. Rev. 7/01/2013 7/01/96 @ 102 Ref.
Rfndg. Bonds 1986
Issue (MBIA Corp.)
(5)
2 600,000 N.Y. State Dorm. AAA 7.700 5/15/06 @ 100 S.F. 694,974
Auth. State Univ. Ed. 5/15/2012 5/15/00 @ 102 Ref.
Facs. Rev. Bonds
Series 1990 A (MBIA
Corp.) (5)
3 190,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 210,243
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(Capital Guaranty)
3a 410,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 457,384
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(Capital Guaranty)
4 695,000 N.Y. State Med. Care AAA 8.000 No Sinking Fund 771,179
Facs. Finc. Agncy. 2/15/2028 8/15/98 @ 102 Ref.
Hosp. & Nrsg. Home
Insrd. Mtg. Rev.
Bonds Series 1988 A
(MBIA Corp.)
5 500,000 N.Y. State Urban Dev. AAA 6.000 1/01/18 @ 100 S.F. 511,760
Corp. Correc. Facs. 1/01/2019 1/01/00 @ 100 Ref.
Rev. Bonds Series G
(MBIA Corp.)
6 100,000 N.Y. State Urban Dev. AAA 8.000 1/01/02 @ 100 S.F. 102,000
Corp. Correc. Facs. 1/01/2006 1/01/96 @ 102 Ref.
Rev. Bonds Series B
(MBIA Corp.) (5)
7 600,000 N.Y. City Gen. Oblig. AAA 6.500 No Sinking Fund 615,366
Rev. Bonds Fiscal 8/15/2018 8/15/97 @ 100 Ref.
1989 Series C (MBIA
Corp.)
8a 165,000 N.Y. City Gen. Oblig AAA 8.500 No Sinking Fund 180,081
Rev. Bonds Fiscal 8/01/2008 8/01/97 @ 102 Ref.
1987 Series D (MBIA
Corp.)
8b 35,000 N.Y. City Gen. Oblig AAA 8.500 No Sinking Fund 37,449
Rev. Bonds Fiscal 8/01/2008 8/01/97 @ 102 Ref.
1987 Series D (MBIA
Corp.)
9 160,000 N.Y. City Muni. Wtr. AAA 5.000% 6/15/15 @ 100 S.F. 154,882
Finc. Auth. Wtr. & 6/15/2017 6/15/96 @ 100 Ref.
Swr. Sys. Rev. Bonds
Fiscal 1987 Series A
(MBIA Corp.)
10 500,000 N.Y. City Muni. Wtr. AAA 6.000 6/15/17 @ 100 S.F. 512,825
Finc. Auth. Wtr. & 6/15/2019 6/15/99 @ 100 Ref.
Swr. Sys. Rev. Bonds
Fiscal 1990 Series A
(MBIA Corp.)
11 500,000 Metro. Trans. Auth. AAA 8.000 7/01/09 @ 100 S.F. 557,180
N.Y. Comm. Facs. 1987 7/01/2018 7/01/98 @ 102 Ref.
Serv. Cntrct. Bonds
Series 2 (MBIA
Corp.) (5)
12 240,000 Metro. Trans. Auth. AAA 8.375 7/01/07 @ 100 S.F. 250,541
N.Y. Trans. Facs. 7/01/2016 7/01/96 @ 102 Ref.
Rev. Bonds Series
1986 F (MBIA Corp.)
(5)
13 250,000 Triborough Bridge & AAA 7.125 Currently @ 100 S.F. 279,505
Tunnel Auth. N.Y. 1/01/2019 1/01/00 @ 101 Ref.
Mtg. Recording Tax
Spec. Oblig. Bonds
Series 1989 A
(Capital Guaranty)
(5)
14 450,000 Triborough Bridge & AAA 8.000 1/01/09 @ 100 S.F. 491,598
Tunnel Auth. N.Y. 1/01/2018 1/01/98 @ 101.5 Ref.
Mtg. Recording Tax
Spec. Oblig. Bonds
Series 1988 A (MBIA
Corp.) (5)
--------- ---------
$ 5,695,000 $ 6,139,024
========= =========
</TABLE>
See accompanying footnotes to Portfolio and notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 2
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 678,522
Gross unrealized depreciation ( 1,832)
-------
Net unrealized appreciation $ 676,690
=======
(4) The annual interest income, based upon bonds held at December 31, 1995 to
the Trust is $417,838.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
SERIES 24
The Trust is a unit investment trust designated Series 24 ("Insured
Municipal Trust") with an underlying portfolio of long-term insured tax-exempt
bonds issued by or on behalf of states, municipalities and public authorities
and was formed to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which, in the opinions of
bond counsel to the respective issuers, is, with certain exceptions, currently
exempt from regular federal income tax under existing law but may be subject to
state and local taxes. Capital gains, however, are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsors
are Reich & Tang Distributors L.P. (successor Sponsor to Bear, Stearns & Co.
Inc.) and Gruntal & Co., Incorporated (sometimes referred to as the "Sponsor"
or the "Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109783.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax under existing law through investment in a fixed,
diversified portfolio of long-term insured bonds (the "Bonds") issued by or on
behalf of states, municipalities and public authorities which, because of
irrevocable insurance, were rated "AAA" by Standard & Poor's Corporation at the
time originally deposited in the Trust. The "AAA" rating results from insurance
relating only to the Bonds in the Trust and not to Units of the Trust. The
insurance does not remove market risk, as it does not guarantee the market
value of the Units. For a discussion of the significance of such ratings, see
"Description of Bond Ratings" in Part B of this Prospectus, and for a list of
ratings on the Evaluation Date see the "Portfolio." A Trust designated as a
short/intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than two years but less than five years; a Trust designated as
an intermediate-term trust must have a dollar-weighted average portfolio
maturity of more than three years but not more than ten years; a Trust
designated as an intermediate/long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years but less than fifteen years;
and a Trust designated as a long-term trust must have a dollar-weighted average
portfolio maturity of more than ten years. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law
excludes such interest from regular federal income tax. Such interest income
may, however, be subject to the federal corporate alternative minimum tax and
to state and local taxes. (See "Tax Status" in Part B of this Prospectus.) For
a list of ratings on the Evaluation Date, see "Portfolio." Some of the Bonds
may be "Zero Coupon Bonds", which are original issue discount bonds that
provide for payment at maturity at par value, but do not provide for the
payment of any current interest. Some of the Bonds in the Trust have been
issued with optional refunding or refinancing provisions ("Refunded Bonds")
whereby the issuer of the Bond has the right to call such Bond prior to its
stated maturity date (and other than pursuant to sinking fund provisions) and
to issue new bonds ("Refunding Bonds") in order to finance the redemption.
Issuers typically utilize refunding calls in order to take advantage of lower
interest rates in the marketplace. Some of these Refunded Bonds may be called
for redemption pursuant to pre-refunding provisions ("Pre-Refunded Bonds")
whereby the proceeds from the issue of the Refunding Bonds are typically
invested in government securities in escrow for the benefit of the holders of
the Pre-Refunded Bonds until the refunding call date. Usually, Pre-Refunded
Bonds will bear a triple-A rating because of this escrow. The issuers of
Pre-Refunded Bonds must call such Bonds on their refunding call date.
Therefore, as of such date, the Trust will receive the call price for such
bonds but will cease receiving interest income with respect to them. For a list
of those Bonds which are Pre-Refunded Bonds, if any, as of the Evaluation Date,
see "Notes to Financial Statements" in this Part A. Some of the Bonds in the
portfolio may have been purchased at an aggregate premium over par. The payment
of interest and preservation of capital are, of course, dependent upon the
continuing ability of issuers of the Bonds or the insurers thereof to meet
their obligations. There can be no assurance that the Trust's investment
objectives will be achieved. Investment in the Trust should be made with an
understanding of the risks which an investment in long-term fixed rate debt
obligations may entail, including the risk that the value of the underlying
portfolio will decline with increases in interest rates, and that the value of
Zero Coupon Bonds is subject to greater fluctuation than coupon bonds in
response to changes in interest rates. Each Unit in the Trust represents a
1/5380th undivided interest in the principal and net income of the Trust. The
principal amount of Bonds deposited in the Trust per Unit is reflected in the
Summary of Essential Information. (See "Organization" in Part B of this
Prospectus.) The Units being offered hereby
A-2
109783.1
<PAGE>
are issued and outstanding Units which have been purchased by the Sponsor in
the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a municipal bond
guaranty insurance policy obtained by either the Sponsor ("Sponsor-Insured
Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and issued by one of
the insurance companies (the "Insurance Companies"), described under "Insurance
on the Bonds" in Part B of this Prospectus, covering scheduled payment of
principal thereof and interest thereon when such amounts shall become due for
payment but shall not have been paid by the issuer or any other insurer thereof.
The insurance, unless obtained by MBIA Insurance Corporation ("MBIA Corp."),
will also cover any accelerated payments of principal and the increase in
interest payments or premiums, if any, payable upon mandatory redemption of the
Bonds if interest on any Bonds is ultimately deemed to be subject to regular
federal income tax. Insurance obtained from MBIA Corp. only guarantees the
accelerated payments required to be made by or on behalf of an issuer of small
industrial revenue bonds and pollution control bonds if there is an event which
results in the loss of tax-exempt status of the interest on such Bonds,
including principal, interest or premium payments, if any, as and when required.
To the extent, therefore, that Bonds are only covered by insurance obtained from
MBIA Corp., such Bonds will not be covered for the accelerated payments required
to be made by or on behalf of an issuer of other than small industrial revenue
bonds or pollution control revenue bonds if there occurs an event which results
in the loss of tax-exempt status of the interest on such Bonds. None of the
insurance will cover accelerated payments of principal or penalty interest or
premiums unrelated to taxability of interest on the Bonds (although the
insurance, including insurance obtained by MBIA Corp., does guarantee payment of
principal and interest in such amounts and at such times as such amounts would
have been due absent such acceleration). The insurance relates only to the
prompt payment of principal of and interest on the securities in the portfolio,
and does not remove market risks or guarantee the market value of the Units in
the Trust. The terms of the insurance are more fully described under "Insurance
on the Bonds" in Part B of this Prospectus. For a discussion of the effect of an
occurrence of nonpayment of principal or interest on any Bonds in the Trust, see
"Portfolio Supervision" in Part B of this Prospectus. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Bonds. In addition, investors should be
aware that, subsequent to the Date of Deposit, the rating of the claims paying
ability of the insurer of an underlying Bond may be downgraded, which may result
in a downgrading of the rating of the Units in the Trust. The approximate
percentage of the aggregate principal amount of the portfolio that is insured by
each insurance company is as follows: AMBAC Indemnity Corp. ("AMBAC"), 22.8%;
Bond Investors Guaranty ("BIG"), 19.4%; Capital Guaranty Insurance Company
("Capital Guaranty"), 31.8%; Financial Guaranty Insurance Company ("Financial
Guaranty"), 10.6%; and MBIA Corp., 15.4%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 4.05% of the
Public Offering Price, or 4.220% 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 $974.03 plus accrued
interest of $10.02 under the monthly distribution plan, $15.05 under the
semi-annual distribution plan and $15.07 under the annual distribution plan,
for a total of $984.05, $989.08 and $989.10, respectively. The Public Offering
Price per Unit can vary on a daily basis in accordance with fluctuations in the
aggregate bid price of the Bonds. (See "Public Offering--Offering Price" in
Part B of this Prospectus.)
A-3
109783.1
<PAGE>
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis,
the rate of return on an investment in Units of each Trust is measured in terms
of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on
newly issued bonds of a similar type with comparable rating, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsor
upon request.
DISTRIBUTIONS. Distributions of interest income, less expenses,
will be made by the Trust either monthly, semi-annually or annually depending
upon the plan of distribution applicable to the Unit purchased. A purchaser of
a Unit in the secondary market will initially receive distributions in
accordance with the distribution plan chosen by the prior owner of such Unit
and may thereafter change the plan as provided under "Interest and Principal
Distributions" in Part B of the Prospectus. Distributions of principal, if any,
will be made semi-annually on June 15 and December 15 of each year. (See
"Rights of Certificateholders--Interest and Principal Distributions" in Part B
of this Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
A-4
109783.1
<PAGE>
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 4.05% of the Public Offering Price (4.220% of the
net amount invested), plus net accrued interest. If a market is not maintained
a Certificateholder will be able to redeem his or her Units with the Trustee at
a price also based on the aggregate bid price of the Bonds. (See
"Liquidity--Sponsor Repurchase" and "Public Offering--Offering Price" in Part B
of this Prospectus.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their regular
interest distributions, and principal distributions, if any, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.
Residents of Texas, see "Total Reinvestment Plan for Texas Residents" in Part B
of this Prospectus.) The Plan is not designed to be a complete investment
program.
A-5
109783.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 24
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: June 28, 1990 Weighted Average Life to
Principal Amount of Bonds ... $4,715,000 Maturity: 10.1 Years.
Number of Units ............. 5,380 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/5380 value of Trust is less than
Principal Amount of $2,400,000 in principal amount
Bonds per Unit ............ $876.39 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2039 or the disposition of the
of Bonds in Trust ....... $5,036,327+++ last Bond in the Trust.
Divided by 5,380 Units .... $936.12 Trustee***: The Chase Manhattan
Plus Sales Charge of 4.05% Bank, N.A.
of Public Offering Price. $37.91 Trustee's Annual Fee: Monthly
Public Offering Price plan $.96 per $1,000; semi-annu
per Unit ................ $974.03+ al plan $.50 per $1,000; and
Redemption and Sponsors' annual plan is $.32 per $1,000.
Repurchase Price Evaluator: Kenny S&P Evaluation
per Unit .................. $936.12+ Services.
+++ Evaluator's Fee for Each
++++ Evaluation: Minimum of $8 plus
Excess of Secondary Market $.25 per each issue of Bonds in
Public Offering Price excess of 50 issues (treating
over Redemption and separate maturities as separate
Sponsors' Repurchase issues).
Price per Unit ............ $37.91++++ Sponsors: Reich & Tang
Difference between Public Distributors L.P. and Gruntal &
Offering Price per Unit Co., Incorporated
and Principal Amount per Sponsors' Annual Fee: Maximum
Unit Premium/(Discount) ... $97.64 of $.25 per $1,000 principal
Evaluation Time: 4:00 p.m. amount of Bonds (see "Trust
New York Time. Expenses and Charges" in Part B
Minimum Principal Distribution: of this Prospectus).
$1.00 per Unit.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $61.59 $61.59 $61.59
Less estimated annual fees and
expenses ............................ 1.82 1.35 1.08
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $59.77 $60.24 $60.51
Estimated interest distribution# ...... 4.98 30.12 60.50
Estimated daily interest accrual# ..... .1660 .1673 .1680
Estimated current return#++ ........... 6.14% 6.18% 6.21%
Estimated long term return++ .......... 3.42% 3.47% 3.50%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-6
109783.1
<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 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882-9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $10.02 monthly, $15.05
semi-annually and $15.07 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-7
109783.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 12 issues representing
obligations of issuers located in 8 states and 1 in the District of Columbia.
The Sponsors have 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 21.2% 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). Three of the issues
representing $1,500,000 of the principal amount of the Bonds are general
obligation bonds. All 9 of the remaining issues representing $3,215,000 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: Correctional Facility 1,
Electric 2, Higher Education 1, Hospital 2, Hydro Electric 1, School District 1
and Toll 1. For an explanation of the significance of these factors see "The
Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1995, $800,000 (approximately 17.0% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $300,000 (approximately 6.4% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. Approximately 15.8% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 63.6% were purchased at a
premium and approximately 3.6% 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, 1996 to March 22, 1996,
$90,000 of the principal amount of the Bond in portfolio no. 10 was sold
and is no longer contained in the Trust. 89 Units were redeemed from
the Trust.
A-8
109783.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 5,831 $1,129.18 $72.47 $73.17 $73.37 -0-
December 31, 1994 5,716 1,041.75 72.60 73.30 73.50 -0-
December 31, 1995 5,380 950.82 71.80 72.38 72.60 $128.53
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5 of
Notes to Financial Statements for a description of the components of Net
Assets.
A-9
109783.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
Insured Municipal Securities Trust, Series 24:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, Series 24 as of December 31,
1995, and the related statements of operations, and changes in net assets for
each of the years in the three year period then ended. These financial
statements are the responsibility of the Trustee (see note 2). Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, Series 24 as of December 31, 1995, and the results of its operations and
the changes in its net assets for each of the years in the three year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost $4,501,822) $ 5,036,309
Excess of other assets over total liabilities 79,080
----------
Net assets 5,380 units of fractional undivided
interest outstanding, $950.82 per unit) $ 5,115,389
==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
--------- -- --------- -- ---------
--------- --------- ---------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Investment income - interest $ 397,583 438,062 444,367
--------- --------- ---------
Expenses:
Trustee's fees 6,061 6,357 6,497
Evaluator's fees 2,000 2,206 2,372
Sponsor's advisory fee 1,434 1,461 1,500
--------- --------- ---------
Total expenses 9,495 10,024 10,369
--------- --------- ---------
Investment income, net 388,088 428,038 433,998
--------- --------- ---------
Realized and unrealized gain (loss) on investments:
Realized (loss) gain on bonds
sold or called (83,618) (7,405) 31,437
Unrealized appreciation (depreciation)
for the year 311,173 (507,494) 232,611
--------- --------- ---------
Net gain (loss)
on investments 227,555 (514,899) 264,048
--------- --------- ---------
Net increase (decrease) in
net assets resulting
from operations $ 615,643 (86,861) 698,046
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
---------- ----------- -----------
---------- ----------- -----------
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 388,088 428,038 433,998
Realized (loss) gain on bonds sold or
called (83,618) (7,405) 31,437
Unrealized (depreciation) appreciation
of investments for the year 311,173 (507,494) 232,611
---------- ----------- -----------
Net (decrease) increase
in net assets resulting
from operations 615,643 (86,861) 698,046
---------- ----------- -----------
Distributions to Certificateholders:
Investment income 402,455 423,523 430,406
Principal 698,442 - -
Redemptions:
Interest 5,299 2,599 2,873
Principal 348,696 116,630 185,728
---------- ----------- -----------
Total distributions and redemptions 1,454,892 542,752 619,007
---------- ----------- -----------
Total (decrease) increase (839,249) (629,613) 79,039
Net assets at beginning of year 5,954,638 6,584,251 6,505,212
---------- ----------- -----------
Net assets at end of year (including
undistributed net investment
income of $96,993, $116,659
and $114,743 respectively) $ 5,115,389 5,954,638 6,584,251
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 24
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, Series 24 (Trust) was organized on
June 28, 1990 by Bear, Stearns, & Co. Inc. and Gruntal & Co., Incorporated
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. Effective
September 28, 1995, Reich & Tang Distributors L.P. (Reich & Tang) has
become the successor sponsor (Sponsor) to certain of the unit investments
trusts previously sponsored by Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear Stearns & Co. Inc. and Gruntal & Co.,
Incorporated, the previous sponsors.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The accompanying
financial statements have been adjusted to record the unrealized
appreciation (depreciation) of investments and to record interest income
and expenses on the accrual basis.
The discount on the zero-coupon bonds is accreted by the interest
method over the respective lives of the bonds. The accretion of such
discount is included in interest income; however, it is not distributed
until realized in cash upon maturity or sale of the respective bonds.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is based
upon the bid prices for the bonds at the end of the year, except that the
market value on the date of deposit represents the cost to the Trust based
on the offering prices for investments at that date. The difference between
cost (including accumulated accretion of original issue discount on
zero-coupon bonds) and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 24
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 336, 115 and 169 units were redeemed during the years ended
December 31, 1995, 1994 and 1993, respectively.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 6,196,626
Less initial gross underwriting commission (303,635)
---------
5,892,991
Cost of securities sold or called (1,409,100)
Net unrealized appreciation 534,487
Undistributed net investment income 96,993
Undistributed proceeds
from bonds sold or called 18
---------
Total $ 5,115,389
=========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering price
net of the applicable sales charge on 6,000 units of fractional undivided
interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $17,931.
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 24
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(6) Value(3)
- ---- --------- --------------------- ----- ------------ ----------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 Anchorage Ak. AAA 7.200% 6/01/10 @ 100 S.F. $ 548,480
Municipality 1989 6/01/2017 6/01/99 @ 101 Ref.
Gen. Oblig. Rev.
Rfndg. Wtr. Bonds
(AMBAC)
2 500,000 Washington D.C. Gen. AAA 8.000 6/01/04 @ 100 S.F. 554,920
Oblig. Rev. Bonds 6/01/2008 6/01/98 @ 102 Ref.
Series 1988 C (AMBAC)
(5)
3 500,000 Sumter Cnty. Fla. AAA 7.500 1/01/05 @ 100 S.F. 574,075
Schl. Dstrct. 1/01/2011 1/01/01 @ 102 Ref.
Multi-Dstrct. Loan
Prgm. Rev. Bonds
(Sumter Cnty. Schl.
Dstrct. Loan) Rev.
Bonds Series 1985
(Capital Guaranty)
4a 165,000 Cmmnwlth. of Mass. AAA 7.500 4/01/07 @ 100 S.F. 184,866
Consldtd. Loan Gen. 4/01/2009 4/01/99 @ 102 Ref.
Oblig. Rev. Bonds
Series B (BIG) (5)
4b 335,000 Cmmnwlth. of Mass. AAA 7.500 4/01/07 @ 100 S.F. 375,334
Consldtd. Loan Gen. 4/01/2009 4/01/99 @ 102 Ref.
Oblig. Rev. Bonds
Series B (BIG) (5)
5 245,000 Dorm. Auth. of the AAA 7.375 7/01/00 @ 100 S.F. 306,679
State of N.Y. 7/01/2016 None
Judicial Facs. Lease
Rev. Bonds (Suffolk
Cnty. Issue) Series
1986 (BIG)
6 500,000 N.Y. State Med. Care AAA 7.450 2/15/98 @ 100 S.F. 570,820
Facs. Finc. Agncy. 2/15/2029 2/15/00 @ 102 Ref.
St. Luke's Roosevelt
Hosp. Cntr. FHA
Insrd. Mtg. Rev.
Bonds Series B (MBIA
Corp.) (5)
7a 340,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 379,294
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(Capital Guaranty)
(5)
7b 160,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 177,046
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(Capital Guaranty)
8 $ 500,000 R.I. Hlth. & Ed. AAA 7.500% 9/15/16 @ 100 S.F. $ 566,715
Bldg. Corp. Hghr. Ed. 9/15/2019 9/15/99 @ 102 Ref.
Fac. Rev. Bonds Bd.
of Gov. for Hghr. Ed.
(Hsg. & Dining Facs.
Issuer) Series A
(Capital Guaranty)
(5)
9 500,000 Matagorda Cnty. Tx. AAA 7.125 No Sinking Fund 552,575
Navgtn. Dstrct. No. 7/01/2019 7/01/99 @ 102 Ref.
One Coll. Rev. Rfndg.
Bonds (Houston Ltg. &
Pwr. Co. Prjt.)
Series 1989 C
(Financial Guaranty)
10 170,000 Snohomish Cnty. Wash. AAA 7.375 1/01/16 @ 100 S.F. 179,559
Pub. Util. Dstrct. 1/01/2019 1/01/97 @ 102 Ref.
No. 1 Generation Sys.
Rev. Bonds Rfndg.
Series 1986 A (BIG)
(5)
11 225,000 Redding Cal. Elec. AAA 0.000 7/01/15 @ 75.356 S.F. 48,373
Sys. Rev. Certs. of 7/01/2019 7/01/99 @ 24.786 Ref.
Part. Series 1989 A
(MBIA Corp.) (5)
See
12 75,000 Harris Cnty. Tx. Toll AAA 0.000 No Sinking Fund 17,573
Rd. Rev. Bonds 8/15/2020 8/15/09 @ 46.915 Ref.
(AMBAC) (5)
--------- ----------
$ 4,715,000 $ 5,036,309
========= ==========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST, SERIES 24
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of $534,487.
(4) The annual interest income, based upon bonds held at December 31, 1995,
(excluding accretion of original issue discount on zero-coupon bonds) to
the Trust is $331,356.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
<PAGE>
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 3
_______________________________________________________________________________
The Trust is a unit investment trust designated Series 3 ("New
York Navigator 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 and from New York State and City personal income tax. Capital gains,
however, are subject to tax. (See "Tax Status" and "The Trust--Portfolio" in
Part B of this Prospectus.) The Sponsors are Reich & Tang Distributors L.P.
(successor Sponsor to Bear, Stearns & Co. Inc.) and Gruntal & Co.,
Incorporated (sometimes referred to as the "Sponsor" or the "Sponsors"). 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, 1995 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust.
Investors should retain both parts of this
Prospectus for future reference.
_______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 30, 1996
109761.1
<PAGE>
THE TRUST. The Trust is a unit investment trust and was formed to
preserve capital and to provide interest income (including 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 and from state and local taxes to the extent
indicated herein when received by persons subject to state and local income
taxation in a state in which the issuers of the Bonds are located. 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. A
Trust designated as a short/intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than two years but less than five years; a
Trust designated as an intermediate-term trust must have a dollar-weighted
average portfolio maturity of more than three years but not more than ten
years; a Trust designated as an intermediate/long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years but less than
fifteen years; and a Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. Although the
Supreme Court has determined that Congress has the authority to subject the
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 a specific preference item for purposes
of the federal individual and/or corporate alternative minimum tax. (See
"Description of Portfolio" in this Part A for a list of these Bonds which pay
interest income subject to the federal individual alternative minimum tax. See
also "Tax Status" in Part B of this Prospectus.) Some of the aggregate
principal amount of the Bonds in the Trust 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 current interest (for the amount
of Zero Coupon Bonds in each Trust, and the cost of such Bonds to that Trust,
see "Description of Portfolio" in this Part A). All of the Bonds in the Trust
were rated "AAA" by Standard & Poor's Corporation at the time originally
deposited in the Trust (see "Portfolio"). This 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. The payment of
interest and preservation of capital are, of course, dependent upon the
continuing ability of the issuers of the Bonds or the insurer thereof to meet
their obligations. There can be no assurance that the Trust's investment
objectives will be achieved. Investment in the Trust should be made with an
understanding of the risks which an investment in long-term fixed rate debt
obligations may entail, including the risk that the value of the underlying
portfolio will decline with increases in interest rates, and that the value of
Zero Coupon Bonds is subject to greater fluctuation than coupon bonds in
response to such changes in interest rates. (See "Portfolio" in Part B of this
Prospectus.) Each Unit in the Trust represents a 1/5446th 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 Sponsors in the secondary market.
INSURANCE. Each of the Bonds in the New York Navigator Trust is
insured by a municipal bond guaranty insurance policy obtained by the Sponsors
(the "Navigator Sponsor-Insured Bonds") from MBIA Insurance Corporation ("MBIA
Corp.") covering regularly scheduled payments of principal thereof and interest
thereon when such amounts become due for payment but shall not have 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
A-2
109761.1
<PAGE>
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 New York
Navigator Trust 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 New
York Navigator Trust. The insurer's policies relating to small industrial
development bonds and pollution control revenue bonds also guarantee the
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 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 does 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 accelerated
payments on any such Bonds unrelated to the taxability of interest on any such
Bonds, the payments guaranteed by MBIA Corp. shall be made in such amounts and
at such times such payment would have been made absent such an acceleration.
The insurance relates only to the prompt payment of principal of and interest
on the securities in the New York Navigator Trust and does not remove market
risk nor does it guarantee the market value of Units in the New York Navigator
Trust. The terms of the insurance are more fully described under "Insurance on
the Bonds" in Part B of this Prospectus. For discussion of the effect of an
occurrence of non-payment of principal or interest on any Bonds in the New York
Navigator 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 the New
York Navigator Trust. 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 New York Navigator Trust. The premiums for the Navigator Sponsor-Insured
Bonds are obligations of the Sponsors. Additionally, some of the Bonds in the
New York Navigator Trust 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.
Some of the Bonds in the New York Navigator Trust may additionally
be insured by a municipal bond guaranty insurance policy obtained by issuers,
underwriters or prior owners of the Bonds ("Pre-Insured Bonds") and issued by
one of the insurance companies described under "Insurance on the Bonds" in Part
B of this Prospectus (the "Insurance Companies"). 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
A-3
109761.1
<PAGE>
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 such Bond is ultimately deemed to be subject to
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 premium payments, if any, as and when
required. To the extent, therefore, that Bonds are only covered by insurance
obtained from MBIA Corp., such Bonds will not be covered for the 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 he insurance are more fully described herein. No representation is made
herein as to any Bond insurer's ability to meet its obligations under a policy
of insurance relating to any of the Pre-Insured Bonds. In addition, investors
should be aware that subsequent to the Date of Deposit the rating of the
claims-paying ability of the insurer of an underlying Pre-Insured Bond may be
downgraded.
All of the Bonds in the New York Navigator Trust are covered by
insurance obtained by the Sponsors from MBIA Corp. and 52.7% of the Bonds in
the New York Navigator Trust are Pre-Insured Bonds. The approximate percentage
of the aggregate principal amount of the Portfolio that is insured by each
Insurance Company with respect to Pre-Insured Bonds is as follows: AMBAC
Indemnity Corp. ("AMBAC"), 7.5%; Bond Investors Guaranty ("BIG"), 7.8%; Capital
Guaranty Insurance Company ("Capital Guaranty"), 12.2%; Financial Guaranty
Insurance Company ("Financial Guaranty"), 4.3%; and Municipal Bond Investors
Assurance Corporation ("MBIA"), 20.9%.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price
of each Unit is equal to the aggregate offering price of the Bonds in such
Trust divided by the number of Units outstanding, plus a sales charge of 3.73%
of the Public Offering Price, or 3.874% 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 available for sale on the
Evaluation Date, the Public Offering Price per Unit would have been $1,143.42
plus accrued interest of $8.92 under the monthly distribution plan, $14.86
under the semi-annual distribution plan and $14.88 under the annual
distribution plan, for a total of $1,152.34, $1,158.28 and $1,158.30,
respectively. The Public Offering Price per Unit can vary on a daily basis in
accordance with fluctuations in the aggregate bid price of the Bonds. (See
"Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method previously described under "Public Offering Price") as
distinguished from a "yield price" basis often used in offerings of tax exempt
bonds (involving the lesser of the yield as computed to maturity of bonds or to
an earlier redemption date). Since they are offered on a dollar price basis,
the rate of return on an investment in Units of each Trust is measured in terms
of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
A-4
109761.1
<PAGE>
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on
newly issued bonds of a similar type with comparable rating, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the Sponsors
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 chosen by the Certificateholder. Certificateholders purchasing
Units in the secondary market will initially receive distributions in
accordance with the elections of the prior owner and may thereafter change the
plan as provided under "Interest and Principal Distributions" in Part B of this
Prospectus. Distributions of principal, if any, will be made semi-annually on
June 15 and December 15 of each year. (See "Rights of
Certificateholders--Interest and Principal Distributions" in Part B of this
Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information.")
MARKET FOR UNITS. The Sponsors, although not obligated to do so,
presently maintain and intend to continue to maintain a secondary market for
the Units at a price 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 3.73% of the Public Offering Price (3.874% 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 based on the aggregate bid price of the Bonds. (See "Sponsor
Repurchase" and "Public Offering--Offering Price" in Part B of this
Prospectus.)
A-5
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<PAGE>
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-6
109761.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1995
Date of Deposit: June 28, 1990 Weighted Average Life to
Principal Amount of Bonds ... $5,410,000 Maturity: 9.2 Years.
Number of Units ............. 5,446 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit ..... 1/5446 value of Trust is less than
Principal Amount of $2,400,000 in principal amount
Bonds per Unit ............ $993.39 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2039 or the disposition of the
of Bonds in Trust ....... $6,003,343+++ last Bond in the Trust.
Divided by 5,446 Units .... $1,102.34 Trustee***: The Chase Manhattan
Plus Sales Charge of 3.73% Bank, N.A.
of Public Offering Price $41.08 Trustee's Annual Fee: Monthly
Public Offering Price plan $.98 per $1,000; semi-
per Unit ................ $1,143.42+ annual plan $.52 per $1,000;
Redemption and Sponsors' and annual plan is $.34 per
Repurchase Price $1,000.
per Unit .................. $1,102.34+ Evaluator: Kenny S&P Evaluation
+++ Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $8 plus
Public Offering Price $.25 per each issue of Bonds in
over Redemption and excess of 50 issues (treating
Sponsors' Repurchase separate maturities as separate
Price per Unit ............ $41.08++++ issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal &
and Principal Amount per Co., Incorporated
Unit Premium/(Discount) ... $150.03 Sponsors' Annual Fee: Maximum of
Evaluation Time: 4:00 p.m. $.25 per $1,000 principal
New York Time. amount of Bonds (see "Trust
Minimum Principal Distribution: Expenses and Charges" in Part B
$1.00 per Unit. of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $72.51 $72.51 $72.51
Less estimated annual fees and
expenses ............................ 1.98 1.43 1.35
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $70.53 $71.08 $71.16
Estimated interest distribution# ...... 5.87 35.54 71.16
Estimated daily interest accrual# ..... .1959 .1974 .1976
Estimated current return#++ ........... 6.17% 6.22% 6.22%
Estimated long term return++ .......... 4.09% 4.14% 4.15%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
A-7
109761.1
<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 1 Chase Manhattan
Plaza, New York, New York 10081 and its unit investment trust office at
770 Broadway, New York, New York 10003 (tel. no.: 1-800-882-9898). For
information regarding redemption by the Trustee, see "Trustee Redemption"
in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
five business days after purchase) of $8.92 monthly, $14.86 semi-annually
and $14.88 annually.
++ The estimated current return and estimated long term return are increased
for transactions entitled to a discount (see "Employee Discounts" in Part
B of this Prospectus), and are higher under the semi-annual and annual
options due to lower Trustee's fees and expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
A-8
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<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1995
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 12 issues representing
obligations of 10 issuers located in the state of New York. The Sponsor has
participated as a sole underwriter or manager, co-manager or member of an
underwriting syndicate from which 8.5% of the initial aggregate principal
amount of the Bonds were acquired. None of the Bonds are obligations of state
and local housing authorities; approximately 25.9% 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). Three of the issues representing
$925,000 of the principal amount of the Bonds are general obligation bonds. All
9 of the remaining issues representing $4,485,000 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: Correctional Facility 2, Hospital 2, Transit
Facility 1, University 2 and Water 2. For an explanation of the significance of
these factors see "The Trust--Portfolio" in Part B of this Prospectus.
As of December 31, 1995, $600,000 (approximately 11.1% of the
aggregate principal amount of the Bonds) were original issue discount bonds.
None of the Bonds were Zero Coupon Bonds. Approximately 15.7% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market"
discount from par value at maturity, approximately 68.6% were purchased at a
premium and approximately 4.6% 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. All of the Bonds are subject to redemption prior to maturity
pursuant to sinking fund or call provisions.
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, 1996 to March 22, 1996,
$120,000 of the principal amount of the Bond in portfolio no. 2 was sold
and is no longer contained in the Trust. 179 Units were redeemed from
the Trust.
A-9
109761.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset** Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
December 31, 1993 5,736 $1,170.80 $71.21 $71.89 $72.09 -0-
December 31, 1994 5,528 1,062.79 71.21 71.91 72.12 -0-
December 31, 1995 5,446 1,116.78 74.66 75.30 75.50 -0-
- --------
** 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-10
109761.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders Insured Municipal Securities Trust,
New York Navigator Insured Series 3:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, New York Navigator Insured
Series 3 as of December 31, 1995, and the related statements of operations, and
changes in net assets for each of the years in the three year period then ended.
These financial statements are the responsibility of the Trustee (see note 2).
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, New York Navigator Insured Series 3 as of December 31, 1995, and the
results of its operations and the changes in its net assets for each of the
years in the three year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1996
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 3
Statement of Net Assets
December 31, 1995
Investments in marketable securities,
at market value (cost$5,285,196) $ 5,955,260
Excess of other assets over total liabilities 126,723
-----------
Net assets 5,446 units of fractional undivided
interest outstanding,$1,116.78 per unit) $ 6,081,983
===========
See accompanying notes to financial statements.
<PAGE>
NEW YORK NAVIGATOR INSURED SERIES 3
Statements of Operations
Years ended December 31,
--------- - --------- - ---------
--------- --------- ---------
1995 1994 1993
--------- --------- ---------
Investment income - interest $ 404,240 410,083 430,047
--------- --------- ---------
Expenses:
Trustee's fees 5,739 6,037 6,376
Evaluator's fees 2,000 2,205 2,372
Sponsor's advisory fee 1,386 1,437 1,500
--------- --------- ---------
Total expenses 9,125 9,679 10,248
--------- --------- ---------
Investment income, net 395,115 400,404 419,799
--------- --------- ---------
Realized and unrealized gain (loss)
on investments:
Realized gain on bonds
sold or called 4,505 13,702 48,786
Unrealized appreciation
(depreciation) for the year 311,690 (626,366) 310,865
--------- --------- ---------
Net gain (loss) on
investments 316,195 (612,664) 359,651
--------- --------- ---------
Net increase (decrease)
in net assets resulting
from operations $ 711,310 (212,260) 779,450
========= ========= =========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
NEW YORK NAVIGATOR INSURED SERIES 3
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
----------- - ----------- -----------
----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Operations:
Investment income, net $ 395,115 400,404 419,799
Realized gain on bonds
sold or called 4,505 13,702 48,786
Unrealized appreciation
(depreciation) of investments
for the year 311,690 (626,366) 310,865
----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations 711,310 (212,260) 779,450
----------- ----------- -----------
Distributions to Certificateholders:
Investment income: 413,714 397,354 418,958
Redemptions:
Interest 847 6,587 5,236
Principal 89,851 224,424 300,218
----------- ----------- -----------
Total distributions and redemptions 504,412 628,365 724,412
----------- ----------- -----------
Total (decrease) increase 206,898 (840,625) 55,038
Net assets at beginning of year 5,875,085 6,715,710 6,660,672
----------- ----------- -----------
Net assets at end of year (including
undistributed net investment
income of $78,640, $98,086 and
$101,626, respectively) $ 6,081,983 5,875,085 6,715,710
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 3
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Organization
Insured Municipal Securities Trust, New York Navigator Insured Series 3
(Trust) was organized on June 28, 1990 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. Effective September
28, 1995, Reich & Tang Distributors L.P. (Reich & Tang) has become the
successor sponsor (the Sponsor) to certain of the unit investments trusts
previously sponsored by Bear, Stearns & Co. Inc. As successor Sponsor,
Reich & Tang has assumed all of the obligations and rights of Bear Stearns
& Co. Inc., the previous sponsor.
(2) Summary of Significant Accounting Policies
Effective September 2, 1995, United States Trust Company of New York was
merged into Chase Manhattan Bank (National Association) (Chase).
Accordingly, Chase is the successor trustee of the unit investment trusts.
The Trustee has custody of and responsibility for the accounting records
and financial statements of the Trust and is responsible for establishing
and maintaining a system of internal control related thereto.
The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The accompanying
financial statements have been adjusted to record the unrealized
appreciation (depreciation) of investments and to record interest income
and expenses on the accrual basis.
Investments are carried at market value which is determined by Kenny S&P
Evaluation Services (Evaluator). The market value of the portfolio is based
upon the bid prices for the bonds at the end of the year, except that the
market value on the date of deposit represents the cost to the Trust based
on the offering prices for investments at that date. The difference between
cost and market value is reflected as unrealized appreciation
(depreciation) of investments. Securities transactions are recorded on the
trade date. Realized gains (losses) from securities transactions are
determined on the basis of average cost of the securities sold or redeemed.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 3
Notes to Financial Statements
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by the
Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis set
forth under "Trust Expenses and Charges" in Part B of this Prospectus.
The Trust Indenture and Agreement provides for interest distributions as
often as monthly (depending upon the distribution plan elected by the
Certificateholders).
See "Financial and Statistical Information" in Part A of this Prospectus
for the amounts of per unit distributions during the years ended December 31,
1995, 1994 and 1993.
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. 82, 208 and 264 units were redeemed during the years ended December
31, 1995, 1994 and 1993, respectively.
(5) Net Assets
At December 31, 1995, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 6,183,780
Less initial gross underwriting commission (303,005)
---------
5,880,775
Cost of securities sold or called (595,579)
Net unrealized appreciation 670,064
Undistributed net investment income 78,640
Undistributed proceeds from bonds sold or called 48,083
---------
Total $ 6,081,983
=========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public offering
price net of the applicable sales charge on 6,000 units of fractional
undivided interest of the Trust as of the date of deposit.
<PAGE>
<TABLE>
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED SERIES 3
Portfolio
December 31, 1995
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.-Refunding (2)(7) Value(3)
- --- --------- --------------------- ---- -------------- --------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 $ 500,000 N.Y. State Dorm. City AAA 5.000% No Sinking Fund $ 477,185
Univ. Sys. Consldtd. 7/01/2017 7/01/00 @ 100 Ref.
Second Gen. Resolution
Rev. Bonds Series 1990
C (MBIA)
2 350,000 Dorm. Auth. of the AAA 7.375 7/01/00 @ 100 S.F. 418,453
State of N.Y. Judicial 7/01/2016 None
Facs. Lease Rev. Bonds
(Suffolk Cnty. Issue)
Series 1986 (MBIA)
3 700,000 N.Y. State Dorm. Auth. AAA 7.700 5/15/06 @ 100 S.F. 810,803
State Univ. Ed. Facs. 5/15/2012 5/15/00 @ 102 Ref.
Rev. Bonds Series 1990
A (MBIA) (5)
4 700,000 N.Y. State Med. Care AAA 7.450 2/15/98 @ 100 S.F. 799,148
Facs. Finc. Agncy. St. 2/15/2029 2/15/00 @ 102 Ref.
Luke's Roosevelt Hosp.
Cntr. FHA Insrd. Mtg.
Rev. Bonds Series B
(MBIA) (5)
5a 230,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 254,504
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series B
(MBIA)
5b 470,000 N.Y. State Med. Care AAA 7.875 8/15/11 @ 100 S.F. 524,318
Facs. Finc. Agncy. 8/15/2015 8/15/98 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1988 Series A
(MBIA) (5)
6 600,000 N.Y. State Urban Dev. AAA 6.000 1/01/18 @ 100 S.F. 614,112
Corp. Correc. Facs. 1/01/2019 1/01/00 @ 100 Ref.
Rev. Bonds Series G
(MBIA)
7 430,000 Metro. Trans. Auth. AAA 7.500 7/01/09 @ 100 S.F. 474,092
Transit Facs. Serv. 7/01/2017 7/01/98 @ 102 Ref.
Cntrct. Rev. Bonds
Series K (MBIA) (5)
8 475,000 N.Y. City Gen. Oblig. AAA 8.500 No Sinking Fund 521,346
Rev. Bonds 1987 Series 11/01/2011 11/01/97 @ 101.5 Ref.
A (MBIA) (5)
9a 125,000 City of N.Y. Gen. AAA 7.750% No Sinking Fund 142,163
Oblig. Serial Rev. 8/15/2024 8/15/99 @ 101.5 Ref.
Bond Fiscal 1990
Series I (MBIA) (5)
9b 75,000 City of N.Y. Gen. AAA 7.750 No Sinking Fund 84,322
Oblig. Serial Rev. 8/15/2024 8/15/99 @ 101.5 Ref.
Bonds Fiscal 1990
Series I (MBIA)
10 100,000 N.Y. City Muni. Wtr. AAA 8.750 6/15/08 @ 100 S.F. 108,982
Finc. Auth. Wtr. & 6/15/2010 6/15/97 @ 102 Ref.
Swr. Sys. Rev. Bonds
Fiscal 1988 Series A
(MBIA) (5)
11 405,000 N.Y. City Muni. Wtr. AAA 7.800 6/15/09 @ 100 S.F. 435,954
Finc. Auth. Wtr. & 6/15/2018 6/15/97 @ 102 Ref.
Swr. Sys. Rev. Bonds
Fiscal 1988 Series B
(MBIA) (5)
12 250,000 Yonkers N.Y. Gen. AAA 7.375 12/01/04 @ 100 S.F. 289,878
Oblig. Schl. Bonds 12/01/2009 12/01/00 @ 102 Ref.
Series 1990 C (MBIA)
(5)
--------- ---------
$ 5,410,000 $ 5,955,260
========= =========
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST,
NEW YORK NAVIGATOR INSURED SERIES 3
Footnotes to Portfolio
December 31, 1995
(1) All ratings are by Standard & Poor's Corporation, except for those
identified by an asterisk (*) which are by Moody's Investors Service, Inc.
A brief description of the ratings symbols and their meanings is set forth
under "Description of Bond Ratings" in Part B of this Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an explanation
of redemption features. See "Tax Status" in Part B of this Prospectus for a
statement of the Federal tax consequences to a Certificateholder upon the
sale, redemption or maturity of a bond.
(3) At December 31, 1995, the net unrealized appreciation of all the bonds was
comprised of the following:
Gross unrealized appreciation $ 671,253
Gross unrealized depreciation (1,189)
-----
Net unrealized appreciation $ 670,064
=======
(4) The annual interest income, based upon bonds held at December 31, 1995, to
the Trust is $394,891.
(5) The bonds have been prerefunded and will be redeemed at the next refunding
call date.
(6) Bonds sold or called after December 31, 1995 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part A of
this Prospectus.
(7) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
<PAGE>
Note: Part 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 28, 1995
THE TRUST
Organization
"Insured Municipal Securities Trust" (the "Trust") consists of the
"unit investment trust" designated as set forth in Part A.* The Trust was
created under the laws of the State of New York pursuant to the Trust
Indenture and Agreement** (collectively, the "Trust Agreement"), dated the
Date of Deposit, among Bear, Stearns & Co. Inc., as Sponsor, or depending on
the particular Trust, among Bear, Stearns & Co. Inc. and Gruntal & Co.,
Incorporated, as Co-Sponsors (the Sponsor or Co-Sponsors, if applicable, are
referred to herein as the "Sponsor"), Kenny S&P Evaluation Services, a
division of J.J. Kenny Co. Inc., as Evaluator and United States Trust Company
of New York, as Trustee. The name of the Sponsor for a particular Trust is
contained in the "Summary of Additional Information" in Part A.
On the Date of Deposit, the Sponsor deposited with the Trustee
long-term insured bonds, and/or delivery statements relating to contracts for
the purchase of certain such bonds (the "Bonds") and cash or an irrevocable
letter of credit issued by a major commercial bank in the amount required for
such purchases. Thereafter, the Trustee, in exchange for the Bonds so
deposited delivered to the Sponsor the Certificates evidencing the ownership
of all Units of the Trust. The Trust consists of the Bonds described under
"The Trust" in Part A, the interest (including, where applicable, earned
original issue discount) on which, in the opinions of bond counsel to the
respective issuers given at the time of original delivery of the Bonds, is
exempt from regular federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the
Trust in the ratio of one Unit to the principal amount of Bonds in the Trust
on such date as specified in Part A of this Prospectus. To the extent that
any Units are redeemed by the Trustee, the fractional undivided interest or
- --------
* This Part B relates to the outstanding series of Insured Municipal
Securities Trust, Insured Municipal Securities Discount Trust, Insured
Municipal Securities New York Navigator Insured Trust, Insured Municipal
Securities New Jersey Navigator Insured Trust and/or Insured
Pennsylvania Navigator Trust as reflected in Part A attached hereto.
** References in this Prospectus to the Trust Agreement are qualified in
their entirety by the Trust Indenture and Agreement which is incorpo-
rated herein.
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pro rata share in the Trust represented by each unredeemed Unit will increase,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Certificateholders, which may include the Sponsor or the Under-
writers, or until the termination of the Trust Agreement.
Objectives
The Trust, one of a series of similar but separate unit investment
trusts formed by the Sponsor, offers investors the opportunity to participate
in a portfolio of long-term insured tax-exempt bonds with a greater
diversification than they might be able to acquire themselves. The objectives
of the Trust are to preserve capital and to provide interest income
(including, where applicable, earned original issue discount) which, in the
opinions of bond counsel given at the time of original delivery of the Bonds,
is exempt from regular federal income tax under existing law and exempt from
state and local income tax to the extent indicated herein when received by
persons subject to state and local taxation in a state in which the issuers of
the Bonds are located. Such interest income may, however, be subject to the
federal corporate alternative minimum taxes and to state and local taxes.
(See "Description of Portfolio" in Part A for a list of those Bonds which pay
interest income subject to federal individual alternative minimum tax. See
also "Tax Status".) Consistent with such objectives, the Sponsor has obtained
bond insurance guaranteeing the scheduled payment of principal and interest on
certain of the Bonds and have purchased, as to the remainder of each Trust
Portfolio, Bonds which are already covered by insurance. (See "Insurance on
the Bonds".) An investor will realize taxable income upon maturity or early
redemption of the market discount bonds in a Trust portfolio and will realize,
where applicable, tax-exempt income to the extent of the earned portion of
interest, including original issue discount earned on the Bonds in a Trust
portfolio. Investors should be aware that there is no assurance the Trust's
objectives will be achieved as these objectives are dependent on the
continuing ability of the issuers of the Bonds to meet their interest and
principal payment requirements, on the abilities of the Insurance Companies to
meet their obligations under the policies of insurance issued on the Bonds, on
the continuing satisfaction of the Bonds of the conditions required for the
exemption of interest thereon from regular federal income tax and on the
market value of the Bonds, which can be affected by fluctuations in interest
rates and other factors.
Since disposition of Units prior to final liquidation of each
Trust may result in an investor receiving less than the amount paid for such
Units (see "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price"), the purchase of a Unit should be looked upon as a
long-term investment. Neither the Trust nor the Total Reinvestment Plan are
designed to be complete investment programs.
Portfolio
All of the Bonds in the Trust were rated "AAA" by Standard &
Poor's Corporation at the time originally deposited in the Trust. (See
"Insurance on the Bonds.") The "AAA" rating was assigned to the Bonds by
Standard & Poor's because each Bond was insured by a municipal bond guaranty
insurance policy issued by a company whose claims-paying ability was rated
"AAA" by Standard & Poor's at that time. In the event of a downgrading of the
claims-paying ability of one of the insurers, as of the Evaluation Date, the
Bonds in the Trust which are insured by that company would no longer be rated
"AAA" by Standard & Poor's. The Units of Trusts containing the downgraded
bonds are no longer rated "AAA."
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
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payable from the income of a specific project or authority and (iv) the number
of issues constituting general obligations of a government entity, see
"Information Regarding the Trust" and "Portfolio" in Part A of this
Prospectus.
When selecting Bonds for a Trust, the following factors, among
others, were considered by the Sponsor: (a) the quality of the Bonds and
whether such Bonds, whether Sponsor-Insured or Pre-Insured, were rated "AAA"
by Standard & Poor's Corporation, (b) the yield and price of the Bonds
relative to other tax-exempt securities of comparable quality and maturity,
(c) income to the Certificateholders of the Trust, (d) whether a bond was
insured, or insurance was available for the Bonds at a reasonable cost, (e) in
connection with Bonds for which bond insurance was obtained by the Sponsor,
the quality of the Bonds and whether they were rated, without regard to such
bond insurance, "A" or better by either Standard & Poor's Corporation or
Moody's Investors Service, and (f) the diversification of the Trust portfolio,
as to purpose of issue and location of issuer, taking into account the
availability in the market of issues which meet the Trust's quality, rating,
yield and price criteria. Subsequent to the Date of Deposit, a Bond may cease
to be rated or its rating may be reduced below that specified above. Neither
event requires an elimination of such Bond from a Trust but may be considered
in the Sponsor's determination to direct the Trustee to dispose of the Bond.
(See "Portfolio Supervision".) For an interpretation of the bond ratings see
"Description of Bond Ratings".
Housing Bonds. Some of the aggregate principal amount of the
Bonds may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to rental housing projects
for low to moderate income families. Since such obligations are usually not
general obligations of a particular state or municipality and are generally
payable primarily or solely from rents and other fees, adverse economic
developments including failure or inability to increase rentals, fluctuations
of interest rates and increasing construction and operating costs may reduce
revenues available to pay existing obligations. See "Description of
Portfolio" in Part A for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount of
the Bonds may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary
considerably from such projections. A hospital's gross receipts and net
income will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to
provide them, physicians' confidence in hospital management capability,
economic developments in the service area, competition, actions by insurers
and governmental agencies and the increased cost and possible unavailability
of malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in
the areas noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse change in these areas may affect
the ability of such issuers to make payment of principal and interest on such
bonds. See "Description of Portfolio" in Part A for the amount of hospital
revenue bonds contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been issued
in connection with the financing of nuclear generating facilities. In view of
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<PAGE>
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the
development and operation of nuclear generating facilities. The Sponsor is
unable to predict whether any such actions or whether any such proposals or
litigation, if enacted or instituted, will have an adverse impact on the
revenues available to pay the debt service on the Bonds in the portfolio
issued to finance such nuclear projects. See "Description of Portfolio" in
Part A for the amount of bonds issued to finance nuclear generating facilities
contained therein.
Mortgage Subsidy Bonds. Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1954, as amended,
provided as a general rule that interest on "mortgage subsidy bonds" will not
be exempt from Federal income tax. An exception is provided for certain
"qualified mortgage bonds." Qualified mortgage bonds are bonds that are used
to finance owner-occupied residences and that meet numerous statutory
requirements. These requirements include certain residency, ownership,
purchase price and target area requirements, ceiling amounts for state and
local issuers, arbitrage restrictions and (for bonds issued after December 31,
1984) certain information reporting, certification, public hearing and policy
statement requirements. In the opinions of bond counsel to the issuing
governmental authorities, interest on all the Bonds in a Trust that might be
deemed "mortgage subsidy bonds" will be exempt from Federal income tax when
issued. See "Description of Portfolio" in Part A for the amount of mortgage
subsidy Bonds contained therein.
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting certification, and public hearing requirements. There
can be no assurance that additional federal legislation will not be introduced
or that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bond proceeds are not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Discount and Zero Coupon Bonds").
See "Description of Portfolio" in Part A for the amount of mortgage revenue
bonds contained therein.
Private Activity Bonds. The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial
Revenue Bonds ("IRBs") if issued prior to 1987) which would be primarily of
two types: (1) Bonds for a publicly owned facility which a private entity may
have a right to use or manage to some degree, such as an airport, seaport
facility or water system and (2) facilities deemed owned or beneficially owned
by a private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first
type, receipts or revenues of the issuer are derived from the project or the
operator or from the unexpended proceeds of the bonds. Such revenues include
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<PAGE>
user fees, service charges, rental and lease payments, and mortgage and other
loan payments.
The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of
the project or corporate guarantor.
The private activity bonds in the Trust have generally been issued
under bond resolutions, agreements or trust indentures pursuant to which the
revenues and receipts payable under the issuer's arrangements with the users
or the corporate operator of a particular project have been assigned and
pledged to the holders of the private activity bonds. In certain cases a
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition,
private activity bonds are frequently directly guaranteed by the corporate
operator of the project or by another affiliated company. See "Description of
Portfolio" in Part A for the amount of private activity bonds contained
therein.
Litigation. Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In
addition, legislation to effect changes in public school financing has been
introduced in a number of states. The Sponsor is unable to predict the
outcome of the pending litigation and legislation in this area and what
effect, if any, resulting changes in the sources of funds, including proceeds
from property taxes applied to the support of public schools, may have on the
school bonds in a Trust.
To the Sponsor's knowledge, there was no litigation pending as of
the initial Date of Deposit with respect to any Bonds which might reasonably
be expected to have a material adverse effect on a Trust. Subsequent to the
Date of Deposit, litigation may be initiated on a variety of grounds with
respect to Bonds in a Trust. Such litigation, as, for example, suits
challenging the issuance of pollution control revenue bonds under
recently-enacted environmental protection statutes, may affect the validity of
such Bonds or the tax-free nature of the interest thereon. The Sponsor is
unable to predict whether any such litigation may be instituted or, if
instituted, whether it might have a material adverse effect on a Trust.
Other Factors. The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 years after
the original issuance dates of such bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period.
In recent periods of declining interest rates there have been increased
redemptions of bonds, particularly housing bonds, pursuant to such redemption
provisions. In addition, the Bonds in the Trusts are also subject to
mandatory redemption in whole or in part at par at any time that voluntary or
involuntary prepayments of principal on the underlying collateral are made to
the trustee for such bonds or that the collateral is sold by the bond issuer.
Prepayments of principal tend to be greater in periods of declining interest
rates; it is possible that such prepayments could be sufficient to cause a
bond to be redeemed substantially prior to its stated maturity date, earliest
call date or sinking fund redemption date.
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The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as
destruction, condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the Sponsor is
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore,
what effect, if any, the applicable federal bankruptcy law provisions will
have on the Trusts.
The Trust may also include "moral obligation" bonds. Under
statutes applicable to such bonds, if any issuer is unable to meet its
obligations, the repayment of such bonds becomes a moral commitment but not a
legal obligation of the state or municipality in question. See "Description
of Portfolio" in Part A of this Prospectus for the amount of moral obligation
bonds contained therein.
Certain of the Bonds in the Trust are subject to redemption prior
to their stated maturity dates pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund appropriated specifically toward the retirement
of a debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by
which a bond is redeemed at or before maturity from the proceeds of a new
issue of bonds. In general, call provisions are more likely to be exercised
when the offering side evaluation of a bond is at a premium over par than when
it is at a discount from par. A listing of the sinking fund and call
provisions, if any, with respect to each of the Bonds is contained under
"Portfolio". Certificateholders will realize a gain or loss on the early
redemption of such Bonds, depending upon whether the price of such Bonds is at
a discount from or at a premium over par at the time Certificateholders
purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any of the Bonds. Because certain of the
Bonds from time to time may be redeemed or will mature in accordance with
their terms or may be sold under certain circumstances, no assurance can be
given that a Trust will retain its present size and composition for any length
of time. The proceeds from the sale of a Bond or the exercise of any
redemption or call provision will be distributed to Certificateholders on the
next distribution date, except to the extent such proceeds are applied to meet
redemptions of Units. (See "Trustee Redemption".)
Puerto Rico Bonds. Certain of the Bonds in the portfolio 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 1993, approximately 86% of Puerto Rico's exports
were to the United States mainland, which was also the source of 69% of Puerto
Rico's imports. In fiscal 1993, Puerto Rico experienced a $2.5 billion
positive adjusted trade balance. The economy of Puerto Rico is dominated by
the manufacturing and service sectors. The manufacturing sector has
experienced a basic change over the years as a result of increased emphasis on
higher wage, high technology industries such as pharmaceuticals, electronics,
computers, microprocessors, professional and scientific instruments, and
certain high technology machinery and equipment. The service sector,
including finance, insurance and real estate, 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
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years, the service sector has experienced significant growth in response to
and paralleling the expansion of the manufacturing sector. Since fiscal 1987,
personal income has increased consistently in each fiscal year. In fiscal
1993, aggregate personal income was $24.1 billion ($20.6 billion in 1987
prices) and personal income per capita was $6,760 ($5,767 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 1993 were $5.3 billion, of which $3.6 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 1994
averaged 1,011,000. Unemployment, although at a low level compared to the
late 1970s, remains above the average for the United States. In fiscal 1994,
the unemployment rate in Puerto Rico was 15.9%. Puerto Rico's decade-long
economic expansion continued throughout the five-year period from fiscal 1989
through fiscal 1993. Almost every sector of its economy was affected and
record levels of employment were achieved. Factors behind this expansion
include Commonwealth sponsored economic development programs, the relatively
stable prices of oil imports, the continued growth of the United States
economy, periodic declines in exchange value of the United States dollar and
the relatively low cost borrowing during the period. Real gross product
(adjusted to reflect 1987 prices) amounted to approximately $20.07 billion in
fiscal 1993, or 3.1% above the fiscal 1992 level. The Puerto Rico Planning
Board's economic activity index, a composite index for thirteen economic
indicators, increased 1.6% in fiscal 1994 compared to fiscal 1993, which
period showed an increase of 1.4% over fiscal 1992. Growth in the Puerto Rico
economy in fiscal 1995 depends on several factors, including the state of the
United States economy and the relative stability in the price of oil imports,
the exchange value of the U.S. dollar and the cost of borrowing.
Discount And Zero Coupon Bonds
Some of the Bonds in a Trust may be original issue discount bonds.
The original issue discount, which is the difference between the initial
purchase price of the Bonds and the face value, is deemed to accrue on a daily
basis and the accrued portion will be treated as tax-exempt interest income
for regular federal income tax purposes. Upon sale or redemption, any gain
realized that is in excess of the earned portion of original issue discount
will be taxable as capital gain. (See "Tax Status".) The current value of an
original issue discount bond reflects the present value of its face amount at
maturity. The market value tends to increase more slowly in early years and
in greater increments as the Bonds approach maturity. Of these original issue
discount bonds, some of the aggregate principal amount of the Bonds in the
Trust may be Zero Coupon Bonds. (See "Description of Portfolio" in Part A.)
Zero Coupon Bonds do not provide for the payment of any current interest and
provide for payment at maturity at face value unless sooner sold or redeemed.
The market value of Zero Coupon Bonds is subject to greater fluctuations than
coupon bonds in response to changes in interest rates. Zero Coupon Bonds
generally are subject to redemption at compound accreted value based on par
value at maturity. Because the issuer is not obligated to make current
interest payments, Zero Coupon Bonds may be less likely to be redeemed than
coupon bonds issued at a similar interest rate, although certain zero coupon
housing bonds may be subject to mandatory call provisions.
Some of the Bonds in the Trust may have been purchased at a
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in each Trust were lower than the current market interest rates for
newly issued bonds of comparable rating and type. At the time of issuance the
discount bonds were for the most part issued at then current coupon interest
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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
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
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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 ("HBI Program"), Municipal Bond
Insurance Association ("MBIA"), MBIA Corp. or United States Fidelity and
Guaranty Company ("USF&G Company") (collectively the "Insurance Companies").
The cost of this insurance is borne by the respective issuers, underwriters or
prior owners of the Pre-Insured Bonds. The percentage of each Portfolio
insured by each insurance company, if any, is set forth under "Insurance" in
Part A of this Prospectus.
AMBAC is a Wisconsin-domiciled stock insurance company, regulated
by the Insurance Department of the State of Wisconsin, and licensed to do
business in 50 states, the District of Columbia and the Commonwealth of Puerto
Rico, with admitted assets (unaudited) of approximately $2,145,000,000, and
statutory capital (unaudited) of approximately $1,218,000,000 as of
December 31, 1994. Statutory capital consists of the statutory contingency
reserve and policyholders' surplus of the insurance company. AMBAC is a
wholly owned subsidiary of AMBAC Inc., a 100% publicly-held company.
As of the Evaluation Date the claims-paying ability of AMBAC has
been rated "AAA" by Standard & Poor's.
Capital Guaranty is a monoline stock insurance company
incorporated in Maryland, and is a wholly owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company. Capital Guaranty
Corporation is publicly owned and its shares are traded on the New York Stock
Exchange. Other than their capital commitment to Capital Guaranty
Corporation, the shareholders of Capital Guaranty Corporation are not
obligated to pay the debts of, or the claims against, Capital Guaranty
Insurance Company. Capital Guaranty is authorized to provide insurance in 50
States, the District of Columbia and three U.S. territories. As of
December 31, 1994, Capital Guaranty had more than $15.7 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserves of Capital Guaranty Insurance
Company was approximately $196,529,000 (unaudited) and total admitted assets
were approximately $303,723,316 (unaudited) as reported to the Insurance
Department of the State of Maryland as of December 31, 1994.
As of the Evaluation Date, the claims-paying ability of Capital
Guaranty has been rated "AAA" by Standard & Poor's.
Connie Lee, a stock insurance company incorporated in Wisconsin,
is a wholly-owned subsidiary of College Construction Loan Insurance
Association, a stockholder-owned District of Columbia insurance holding
company whose creation was authorized by the 1986 amendments to the Higher
Education Act. The United States Department of Education and Student Loan
Marketing Association are founding shareholders of College Construction Loan
Insurance Association. As a federally authorized company, Connie Lee's
structure and operational authorities are subject to revision by amendments to
the Higher Education Act or other federal enactments. CONNIE LEE IS NOT AN
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES GOVERNMENT, ALTHOUGH THE UNITED
STATES GOVERNMENT IS A STOCKHOLDER OF COLLEGE CONSTRUCTION LOAN INSURANCE
ASSOCIATION. THE OBLIGATIONS OF CONNIE LEE ARE NOT OBLIGATIONS OF THE UNITED
STATES GOVERNMENT.
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As of December 31, 1994, the total policyholders' surplus of
Connie Lee was $106,496,295 (unaudited) and total admitted assets were
$194,152,295 (unaudited), as reported to the Commissioner of Insurance of the
State of Wisconsin.
As of the Evaluation Date, the claims-paying ability of Connie Lee
has been rated "AAA" by Standard & Poor's.
Financial Guaranty is a wholly-owned subsidiary of FGIC
Corporation ("FGIC"), a Delaware holding company. FGIC is a wholly-owned
subsidiary of General Electric Capital Corporation ("GECC"). Neither FGIC nor
GECC is obligated to pay the debts of or the claims against Financial
Guaranty. Financial Guaranty is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As of
December 31, 1994, the total capital and surplus of Financial Guaranty was
approximately $893,700,000. In addition, Financial Guaranty is currently
authorized 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 and a member of The
Continental Insurance Companies, a group of property and casualty insurance
companies. It provides unconditional and non-cancelable insurance on
industrial development revenue bonds. As of December 31, 1993, Firemen's
statutory surplus (audited) was $502,800,000.
As of the Evaluation Date, the claims-paying ability of Firemen's
has been rated "AA-" by Standard & Poor's (see "Ratings" under "Insurance on
the Bonds" in this Part B).
Financial Security is a monoline insurance company incorporated
under the laws of the State of New York and is licensed, along with its two
subsidiaries, to engage in the financial guaranty insurance business in 49
states, the District of Columbia and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial
Security Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange
listed company. Holdings is owned approximately 60.5% by US WEST Capital
Corporation ("US WEST"), 7.6% by Fund American Enterprises Holdings, Inc.
("Fund American"), and 7.4% by The Tokio Marine and Fire Insurance Co., Ltd.
("Tokio Marine"). US WEST is a subsidiary of US WEST, Inc., which operates
businesses involved in communications, data solutions, marketing services and
capital assets, including the provision of telephone services in 14 states in
the western and midwestern United States. Fund American is a financial
services holding company whose principal operating subsidiary is one of the
nation's largest mortgage servicers. Tokio Marine is a major Japanese
property and casualty insurance company. US WEST has announced its intention
to dispose of its remaining interest in Holdings as part of its strategic plan
to withdraw from businesses not directly involved in telecommunications. Fund
American has certain rights to acquire additional shares of Holdings from US
WEST and Holdings. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or either of its two
subsidiaries are reinsured among such companies on an agreed upon percentage
substantially proportional to their respective capital surplus and reserves,
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subject to applicable statutory risk limitations. In addition, Financial
Security reinsures a portion of its liabilities under certain of its financial
guaranty insurance policies with other reinsurers under various quota-share
treaties and on a transaction-by-transaction basis. Such reinsurance does not
alter or limit Financial Security's obligations under any financial guaranty
insurance policy. As of September 30, 1994, total shareholder equity of
Financial Security and its wholly-owned subsidiaries was (unaudited)
$732,413,000 and total unearned premium reserves was (unaudited) $202,284,000.
As of the Evaluation Date, Financial Security's claims-paying
ability has been rated "AAA" by Standard & Poor's Corporation.
On the original date of deposit, some of the Bonds in the Trusts
may have been pre-insured pursuant to the HIBI Program operated by IIC. Under
the HIBI Program, all insurance written was pooled pursuant to a Reinsurance
Participation Agreement among United States Fire Insurance Company, The North
River Insurance Company, Westchester Fire Insurance Company, International
Insurance Company and Industrial Indemnity Company (collectively, including
IIC, the "Companies"). Under the Reinsurance Participation Agreement, each
Company shared in the business produced by each participant in the pool on the
following basis: United States Fire Insurance Company--41%, IIC--18%, The
North River Insurance Company--18%, Westchester Fire Insurance Company--18%
and International Insurance Company--5%. As of December 31, 1992, the
Reinsurance Participation Agreement terminated. As of January 1, 1993, each
party to the HIBI Program remains liable on risks in force until their
expiration.
As of the Evaluation Date, the claims-paying ability of each of
the Companies has been rated by Standard & Poor's as follows: IIC has been
rated A+; United States Fire Insurance Company, North River Insurance Company
and Westchester Fire Insurance Company have each been rated A; and
International Insurance Company has not been rated (see "Ratings" under
"Insurance on the Bonds" in this Part B).
IIC is a wholly-owned subsidiary of Industrial Indemnity Holdings,
Inc. Industrial Indemnity Holdings, Inc. is a wholly owned subsidiary of
Talegen Holdings, Inc. (formerly Crum and Forster, Inc.) For the year ending
December 1994, total policyholders' surplus of IIC was $305,487,051. For the
fiscal year ending December 31, 1992 IIC participated in a Reinsurance
Participation Agreement with certain other Crum and Forster, Inc. companies.
As of January 1, 1993, Industrial Indemnity Company was not a participant in
the Reinsurance Participation Agreement.
As of the Evaluation Date, the claims-paying ability of IIC has
been rated "A+" by Standard & Poor's. As a result of this rating, the ratings
of all Bonds in the Trusts insured by IIC, except pre-refunded bonds, are
rated (see "Ratings" under "Insurance on the Bonds" in this Part B).
MBIA is an association of five insurance companies which joined
together to insure severally (and not jointly) new issues of municipal bonds.
Each insurance company comprising Municipal Bond Insurance Association
("MBIA", also known as the "Association") will be severally and not jointly
obligated under the MBIA policy in the following respective percentages: The
Aetna Casualty and Surety Company, 33%; Fireman's Fund Insurance Company, 30%;
The Travelers Indemnity Company, 15%; Aetna Insurance Company*, 12%; and The
Continental Insurance Company, 10%. As a several obligor, each such insurance
company will be obligated only to the extent of its percentage of any claim
under the MBIA policy and will not be obligated to pay any unpaid obligation
of any other member of MBIA. Each insurance company's participation is backed
- --------
* Now known as Cigna Property and Casualty Company.
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by all of its assets. However, each insurance company is a multiline insurer
involved in several lines of insurance other than municipal bond insurance,
and the assets of each insurance company also secure all of its other
insurance policy and surety bond obligations.
The following table sets forth certain financial information with
respect to the five insurance companies comprising MBIA. The statistics,
which have been furnished by MBIA, are as reported by the insurance companies
to the New York State Insurance Department and are determined in accordance
with statutory accounting principals. No representation is made herein as to
the accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof. In
addition, these numbers are subject to revision by the New York State
Insurance Department which, if revised, could either increase or decrease the
amounts.
MUNICIPAL BOND INSURANCE ASSOCIATION ("MBIA")
FIVE MEMBER COMPANIES ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF SEPTEMBER 30, 1994
(000's omitted)
New York New York New York
Statutory Statutory Policyholder's
Assets Liabilities Surplus
The Aetna Casualty & Surety Company $10,030,200 $ 8,275,300 $1,754,900
Fireman's Fund Insurance Company 6,815,775 4,904,534 1,911,241
The Travelers Indemnity Company 10,295,359 8,515,392 1,779,967
Cigna Property and Casualty Company 5,112,251 4,842,235 270,016
(Formerly Aetna Insurance Company)
The Continental Insurance Company 2,794,536 2,449,805 344,731
TOTAL $35,048,121 $28,987,266 $6,060,855
MBIA Insurance Corporation (formerly known as Municipal Bond
Investors Assurance Corporation) ("MBIA Corp.") is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Corp.
commenced municipal bond insurance operations on January 5, 1987. MBIA Inc.
is not obligated to pay the debts of or claims against the Insurer. MBIA
Corp. is a limited liability corporation rather than a several liability
association. MBIA Corp. is domiciled, in the State of New York and licensed
to do business in all 50 states, the District of Columbia and the Commonwealth
of Puerto Rico. MBIA Corp. is a separate and distinct entity from the
Association. MBIA Corp. has no liability to the bondholders for the
obligations of the Association under the Policy.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors
Group, Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent corporation of Bond Investors Guaranty
Insurance Co. ("BIG"). Through a Reinsurance Agreement, BIG has ceded all of
its net insured risks, as well as its unearned premium and contingency
reserves, to MBIA and MBIA has reinsured BIG's net outstanding exposure. As
of September 30, 1994, MBIA Corp. had admitted assets of $3.3 billion
(unaudited), total liabilities of $2.2 billion (unaudited), and total capital
and surplus of $1.1 billion (unaudited) prepared in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities.
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As of the Evaluation Date, the claims-paying ability of MBIA and
MBIA Corp. has been rated "AAA" by Standard & Poor's.
USF&G Company is the principal subsidiary of USF&G, a holding
company engaged primarily in the insurance business. USF&G Company, founded
in 1896, is the twenty-fourth largest property/casualty insurer in the United
States, based on net premiums written for the year ended December 31, 1993.
USF&G Company markets commercial and personal insurance products,
concentrating on targeted market segments, through a distribution network of
approximately 3,900 independent agents. USF&G's life insurance subsidiary,
F&G Life, markets life insurance and annuity products through a network of
wholesalers, brokers and specialty marketing organizations. USF&G Company
accounted for $2.3 billion (or 94%) of USF&G's approximately $2.4 billion
total premiums earned for the year ended December 31, 1994. As of the
Evaluation Date, the claims-paying ability of USF&G Company has been rated
BBB- for senior secured obligations (see "Ratings" under "Insurance on the
Bonds" in this Part B).
Insured Municipal Securities Trust
Sponsor-Insured Bonds. For those Bonds which are not covered by
an insurance policy obtained by the issuers of such Bonds, the Sponsor has
obtained bond insurance from either BIG, Financial Guaranty, MBIA or MBIA
Corp. in an effort to protect Certificateholders against nonpayment of
principal and interest in respect of such Bonds (the "Sponsor-Insured Bonds").
The bond insurance on the Sponsor-Insured Bonds covers the Sponsor-Insured
Bonds deposited in a Trust at the time that they are physically delivered to
the Trustee (in the case of bearer bonds) or registered in the name of the
Trustee or its nominee or delivered along with an assignment (in the case of
registered bonds) or registered in the name of the Trustee or its nominee (in
the case of bonds held in book-entry form). Accordingly, although contracts
to purchase Sponsor-Insured Bonds are not covered by the bond insurance
obtained by the Sponsor, such Bonds will be insured when they are deposited in
the Trust. When selecting Bonds for a Trust prior to obtaining insurance
thereon, the Sponsor considers the factors listed under "Portfolio", among
others. The insurers of the Sponsor-Insured Bonds apply their own standards
in determining whether to insure the Sponsor-Insured Bonds. To the extent
that the standards of such insurers are more restrictive than those of the
Sponsor, the Sponsor's investment criteria have been limited to the more
restrictive standards.
Pre-Insured Bonds. The Bonds which are insured under policies
obtained by the Bond issuers are insured by AMBAC, BIG, Financial Guaranty,
Firemen's, MBIA, or MBIA Corp. (collectively, the "Insurance Companies") on
the date the Bonds were originally deposited in the Trust. The cost of this
insurance is borne by the respective issuers of the Pre-Insured Bonds. The
percentage of the Portfolio insured by each Insurance Company, if any, is set
forth under "Insurance" in Part A.
Ratings. As of the Date of Deposit for each of the respective
Trusts, Standard & Poor's had rated the claims-paying ability of each of the
above insurance companies "AAA" and had rated each of the Bonds in the
Portfolio "AAA" because the insurance companies had insured the Bonds. The
assignment of such "AAA" ratings was due to Standard & Poor's assessment of
the creditworthiness of the insurance companies and their ability to pay
claims on their policies of insurance. Subsequently, the rating of the
claims-paying ability of the insurer of an underlying Bond may cease to be
rated or may be downgraded which may result in a downgrading of the rating of
the Units in the Trust. For a discussion of the rating of the claims-paying
ability of each of the Bond insurers see "Insurance On The Bonds". For a list
of Bond Ratings as of the Evaluation Date see the "Portfolio" in Part A of
this Prospectus. For a discussion of the rating assigned to the Units of the
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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 Navigator Trust
New York Risk Factors
This summary is included for the purpose of providing a general
description of New York State's (the "State") and New York City's (the "City")
credit and financial condition. The information set forth below is derived
from the official statements and/or preliminary drafts of official statements
prepared in connection with the issuance of State and City municipal bonds.
The Fund has not independently verified this information.
State Economic Trends. Over the long term, the State and the City
face serious potential economic problems. The City accounts for approximately
41% of the State's population and personal income, and the City's financial
health affects the State in numerous ways. The State historically has been
one of the wealthiest states in the nation. For decades, however, the State
has grown more slowly than the nation as a whole, gradually eroding its
relative economic affluence. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the suburbs
and an influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the South
and the West have had in attracting people and business. The City has also
had to face greater competition as other major cities have developed financial
and business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City. In recent
years the State's economic position has improved in a manner consistent with
that for the Northeast as a whole. The State has for many years had a very
high State and local tax burden relative to other states. The State and its
localities have used these taxes to develop and maintain their transportation
networks, public schools and colleges, public health systems, other social
services and recreational facilities. Despite these benefits, the burden of
State and local taxation, in combination with the many other causes of
regional economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate within, the
State.
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Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced budgets,
reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State and its localities.
New York City. The City, with a population of approximately 7.3
million, is an international center of business and culture. Its
non-manufacturing economy is broadly based, with the banking and securities,
life insurance, communications, publishing, fashion design, retailing and
construction industries accounting for a significant portion of the City's
total employment earnings. Additionally, the City is the nation's leading
tourist destination. The City's manufacturing activity is conducted primarily
in apparel and publishing.
The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product (GCP) fell in those two years. In order to achieve a balanced budget
as required by the laws of the State for the 1992 fiscal year, the City
increased taxes and reduced services during the 1991 fiscal year to close a
then projected gap of $3.3 billion in the 1992 fiscal year which resulted
from, among other things, lower than projected tax revenue of approximately
$1.4 billion, reduced State aid for the City and greater than projected
increases in legally mandated expenditures, including public assistance and
Medicaid expenditures. Beginning in calendar year 1992, the improvement in
the national economy helped stabilize conditions in the City. Employment
losses moderated toward year-end and real GCP increased, boosted by strong
wage gains. The City's current four-year financial plan assumes that, after
noticeable improvements in the City's economy during calendar year 1994,
economic growth will slow in calendar years 1995 and 1996 with local
employment increasing modestly. In December 1994, the City experienced
substantial shortfalls in payments of non-property tax revenues from those
forecasted. Through December 1994, collections of non-property taxes were
approximately $200 million lower than projected.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP"), and the City's 1995 fiscal year results are
projected to be balanced in accordance with GAAP. The City was required to
close substantial budget gaps in recent years in order to maintain balanced
operating results. For fiscal year 1995, the City has adopted a budget which
has halted the trend in recent years of substantial increases in City spending
from one year to the next. There can be no assurance that the City will
continue to maintain a balanced budget as required by State law without
additional tax or other revenue increases or reductions in City services,
which could adversely affect the City's economic base.
Pursuant to the laws of the State, the City prepares an annual
four-year financial plan, which is reviewed and revised on a quarterly basis
and which includes the City's capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps.
The City is required to submit its financial plans to review bodies, including
the New York State Financial Control Board ("Control Board"). If the City
were to experience certain adverse financial circumstances, including the
occurrence or the substantial likelihood and imminence of the occurrence of an
annual operating deficit of more than $100 million or the loss of access to
the public credit markets to satisfy the City's capital and seasonal financing
requirements, the Control Board would be required by State law to exercise
powers, among others, of prior approval of City financial plans, proposed
borrowings and certain contracts.
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The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements. There can be no
assurance that there will not be reductions in State aid to the City from
amounts currently projected or that State budgets in future fiscal years will
be adopted by the April 1 statutory deadline and that such reductions or
delays will not have adverse effects on the City's cash flow or expenditures.
The Mayor is responsible for preparing the City's four-year
financial plan, including the City's current financial plan for the 1995
through 1998 fiscal years (the "1995-1998 Financial Plan" or "Financial
Plan"). The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize.
Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City
employees consistent with those assumed in the Financial Plan, employment
growth, the results of a pending actuarial audit of the City's pension system
which is expected to significantly increase the City's annual pension costs,
the ability to implement proposed reductions in City personnel and other cost
reduction initiatives, which may require in certain cases the cooperation of
the City's municipal unions, revenue generating transactions and provision of
State and Federal aid and mandate relief.
Implementation of the Financial Plan is also dependent upon the
City's ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1995 through 1998
contemplates the issuance of $10.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. In addition, the City
issues revenue and tax anticipation notes to finance its seasonal working
capital requirements. The success of projected public sales of City bonds and
notes will be subject to prevailing market conditions, and no assurance can be
given that such sales will be completed. If the City were unable to sell its
general obligation bonds and notes, it would be prevented from meeting its
planned capital and operating expenditures.
On October 25, 1994, the City published the Financial Plan for the
1995-1998 fiscal years, which is a proposed modification to a financial plan
submitted to the Control Board on July 8, 1994 (the "July Financial Plan") and
which relates to the City, the Board of Education ("BOE") and the City
University of New York.
The City's July Financial Plan set forth proposed actions for the
1995 fiscal year to close a previously projected gap of approximately $2.3
billion for the 1995 fiscal year, which included City actions aggregating $1.9
billion, a $288 million increase in State actions over the 1994 and 1995
fiscal years, and a $200 million increase in Federal assistance. The City
actions included proposed agency actions aggregating $1.1 billion, including
productivity savings; tax and fee enforcement initiatives; service reductions;
and savings for the restructuring of City services. City actions also
included savings of $45 million resulting from proposed tort reform, the
projected transfer to the 1995 fiscal year of $171 million of the projected
1994 fiscal year surplus, savings of $200 million for employee health care
costs, $51 million in reduced pension costs, savings of $225 million from
refinancing City bonds and $65 million from the proposed sale of certain City
assets.
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The 1995-1998 Financial Plan published on October 25, 1994
reflects actual receipts and expenditures and changes in forecast revenues and
expenditures since the July Financial Plan and projects revenues and
expenditures for the 1995 fiscal year balanced in accordance with GAAP. For
the 1995 fiscal year, the Financial Plan includes actions to offset an
additional potential $1.1 billion budget gap, resulting principally from a
$104 million decrease in the $171 million projected surplus from the 1994
fiscal year to be transferred to the 1995 fiscal year, due primarily to lower
than projected tax revenues for the 1994 fiscal year; reductions in projected
tax revenues for the 1995 fiscal year totaling $170 millon; $60 million of
increased City pension contributions resulting from lower than expected
earnings on pension fund assets for the 1994 fiscal year; a $166 million
shortfall in projected increased Federal assistance due primarily to the
failure to enact national health care reform; the failure of the State
Legislature to approve tort reform; the failure to achieve the projected
savings of $200 million for employee health care costs; a $165 million
increase in projected overtime expenditures; and additional agency spending
requirements, primarily for increased costs for foster care and homeless
services, and other decreased projected revenues.
The gap-closing measures for the 1995 fiscal year set forth in the
1995-1998 Financial Plan include additional proposed agency actions
aggregating $851 million, including $342 million of reduced personal services
costs resulting from a reduction in the number of city employees, additional
expenditure reductions and $42 million of greater than forecast miscellaneous
revenues. Additional proposed gap-closing actions include the availability of
$200 million, primarily from reserves held for unreported health insurance
claims. The $851 million of agency actions proposed in the Financial Plan for
the 1995 fiscal year, together with the $1.1 billion of agency actions
proposed in the July Financial Plan, are substantial and difficult to
implement. Agency actions proposed in the Financial Plan for the 1995 fiscal
year include reduced expenditures for the Police Department totaling $67
million, a $107 million reduction in the City's subsidy to the New York City
Health and Hospital Corporation ("HHC"), reduced allocations to BOE totaling
$190 million, expenditure reductions totaling $102 million for the Human
Resources Administration, expenditure reduction totaling $32 million for the
Department of Corrections, a portion of which is subject to modification of a
court consent decree, and a $113 million reduction in the City's subsidy to
the Metropolitan Transportation Authority (the "MTA"). The Financial Plan is
subject to the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives.
Based on currently available results, the Mayor's Office of
Management and Budget ("OMB") believes that developments since the publication
of the Financial Plan on October 25, 1994 have caused an additional $650
million budget gap in the 1995 fiscal year due to (i) projected tax revenue
shortfalls of $400 million, (ii) failure to renegotiate the terms of certain
Port Authority leases to increase revenues by $75 million, (iii) miscellaneous
revenue shortfalls of $25 million, and (iv) increases in certain agency
expenditures of $150 million. The projected tax revenue shortfalls for the
1995 fiscal year result from lower capital gains, bonuses and business
profits, the timing of certain payments and discounting by retailers. OMB has
also identified gap-closing actions totaling $650 million in the 1995 fiscal
year. Certain of these gap-closing actions will be subject to the ability of
the City to implement expenditure reduction initiatives and, in the case of
the social security refund, final approval by the Internal Revenue Service.
In the event these gap-closing actions cannot be fully implemented, the City
will be required to adopt additional gap-closing measures for the remainder of
the 1995 fiscal year, and there is no assurance that such measures will enable
the City to achieve a balanced budget for the 1995 fiscal year. Current
forecasts of revenues and expenditures for the fiscal year 1995, including the
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gap-closing actions, could require the City to take actions within the 1995
fiscal year to meet its cash flow requirements.
The Financial Plan also sets forth projections for the 1996
through 1998 fiscal years and outlines a proposed gap-closing program to close
projected gaps of $1.0 billion, $1.5 billion and $2.0 billion for the 1996
through 1998 fiscal years, respectively, after successful implementation of
the $1.1 billion gap-closing program for the 1995 fiscal year.
OMB believes that developments since the publication of the
Financial Plan have caused the $1.0 billion gap projected in the Financial
Plan for the 1996 fiscal year to increase to $2.7 billion. The $1.5 billion
increase in the forecast budget gap for fiscal year 1996 is due to (i) a
projected tax revenue shortfall of approximately $400 million, reflecting the
impact of the recent shortfall in collections of non-property taxes described
above, (ii) an $80 million shortfall in projected property tax receipts due to
a lower than forecast increase in the tentative assessment roll published by
the New York City Department of Finance, (iii) a reduction of $390 million in
the forecast receipts of State and Federal aid, (iv) a reduction of $75
million in forecast receipts of lease payments for New York City airports,
(v) higher costs of $260 million for Medicaid and agency spending, (vi)
additional pension funding costs of $300 million resulting from an ongoing
actuarial audit of the City pension systems and (vii) $45 million in
additional costs for unachieved tort reform.
In February the Mayor published a modification (the "February
Modification") to the Financial Plan for the City's 1995 through 1998 fiscal
years and a preliminary budget for the City's 1996 fiscal year. The February
Modification reflected changes since the Financial Plan including measures to
be taken to assure balance in the 1995 fiscal year described above and the
City's program to address the currently forecast gap of approximately $2.7
billion in fiscal year 1996 which gap is projected to increase to $3.2 billion
and $3.8 billion in 1997 and 1998, respectively. The gap-closing program is
subject to change. However, the major components of the gap-closing program
for fiscal year 1996 are (i) a reduction in spending for entitlements of
approximately $1.2 billion, primarily affecting public assistance and Medicaid
payments by the City, (ii) $600 million in savings from municipal unions and
(iii) $500 million from the Board of Education. In addition, the City will
continue to seek mandate relief such as tort reform and other changes in City
procedures and use of resources through privatization and efficient
utilization of the City's assets.
The proposals contained in the February Modification to close the
projected budget gaps for the 1995 and 1996 fiscal years engendered
substantial public debate, and the public debate relating to the 1996 fiscal
year budget will most likely continue through the time the budget is scheduled
to be adopted in June 1995. On January 17, 1995, Standard & Poor's placed the
City's general obligation bonds on CreditWatch with negative implications.
Standard & Poor's stated that it will review the February Modification for
evidence of continued progress toward long-term structural balance, and
eventual elimination of certain types of budget devices, as well as the next
State budget proposal, to determine the extent of the City's relief from State
mandates in education, social services, and health care expenditures.
Standard & Poor's stated that, by April 1995, financial plans which continue
to incorporate budget devices or fail to reflect ongoing budget relief from
the State, will result in a lowering of the rating to the "BBB" category for
New York City's general obligation bonds.
In January 1993, the City announced a settlement with a coalition
of municipal unions, including Local 237 of the International Brotherhood of
Teamsters, District Council 37 of the American Federation of State, County and
Municipal Employees and other unions covering approximately 44% of the City's
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workforce. The settlement, which has been ratified by the unions, includes a
total net expenditure increase of 8.25% over a 39 month period, ending
March 31, 1995 for most of these employees. The City is presently bargaining
with the Correction Officers' Benevolent Association and the Sanitation
Officers' Association. In addition, the Transit Police Benevolent
Association's delegate body rejected a tentative settlement with the City.
The contract dispute is currently being arbitrated before the State's Public
Employment Relations Board. Moreover, a contract dispute between the City and
the Licensed Practical Nurses is currently in arbitration before the City's
Office of Collective Bargaining.
The Financial Plan provides no additional wage increases for City
employees after their contracts expire in the 1995-1996 fiscal years. Each 1%
wage increase for all employees commencing in the 1995 and 1996 fiscal years
would cost the City an additional $28 million for the 1995 fiscal year, $140
million for the 1996 fiscal year and $150 million each year thereafter above
the amounts provided for in the Financial Plan.
Various actions proposed in the Financial Plan, including the
proposed increase in State aid, are subject to approval by the Governor and
the State Legislature, and the proposed increase in Federal aid is subject to
approval by Congress and the President. State and Federal actions are
uncertain and no assurance can be given that such actions will in fact be
taken or that the savings that the City projects will result from these
actions will be realized. The State Legislature failed to approve a
substantial portion of the proposed State assumption of Medicaid costs in the
last session. The Financial Plan assumes that these proposals will be
approved by the State Legislature during the 1995 fiscal year and that the
Federal government will increase its share of funding for the Medicaid
program. If these measures cannot be implemented, the City will be required
to take other actions to decrease expenditures or increase revenues to
maintain a balanced financial plan.
Although the City has maintained balanced budgets in each of its
last thirteen fiscal years, and is projected to achieve balanced operating
results for the 1995 fiscal year, there can be no assurance that the gap-
closing actions proposed by the Financial Plan can be successfully implemented
or that the City will maintain a balanced budget in future years without
additional State aid, revenue increases or expenditure reductions. Additional
tax increases and reductions in essential City services could adversely affect
the City's economic base.
The 1995-1998 Financial Plan is based on numerous assumptions,
including the continuing improvement in the City's and the region's economy
and a modest employment recovery during calendar year 1994 and the concomitant
receipt of the economically sensitive tax revenues in the amounts projected.
The 1995-1998 Financial Plan is subject to various other uncertainties and
contingencies relating to, among other factors, the extent, if any, to which
wage increases for City employees exceed the annual increases assumed for the
1995 through 1998 fiscal years; continuation of the 9% interest earnings
assumptions for pension fund assets and current assumptions with respect to
wages for City employees affecting the City's required pension fund
contributions; the willingness and ability of the State, in the context of the
State's current financial condition, to provide the aid contemplated by the
Financial Plan and to take various other actions to assist the City, including
the proposed State takeover of certain Medicaid costs and State mandate
relief; the ability of the Health and Hospitals Corporation ("HHC"), BOE and
other such agencies to maintain balanced budgets; the willingness of the
Federal government to provide Federal aid; approval of the proposed
continuation of the personal income tax surcharge; adoption of the City's
budgets by the City Council in substantially the forms submitted by the Mayor;
the ability of the City to implement proposed reductions in City personnel and
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other cost reduction initiatives, which may require in certain cases the
cooperation of the City's municipal unions, and the success with which the
City controls expenditures; savings for health care costs for City employees
in the amounts projected in the Financial Plan; additional expenditures that
may be incurred due to the requirements of certain legislation requiring
minimum levels of funding for education; the impact on real estate tax
revenues of the current weakness in the real estate market; the City's ability
to market its securities successfully in the public credit markets; and
additional expenditures that may be incurred as a result of deterioration in
the condition of the City's infrastructure. Certain of these assumptions have
been questioned by the City Comptroller and other public officials.
The projections and assumptions contained in the 1995-1998
Financial Plan are subject to revision, which may involve substantial change,
and no assurance can be given that these estimates and projections, which
include actions which the City expects will be taken but which are not within
the City's control, will be realized.
From time to time, the Control Board staff, the City Comptroller
and others issue reports and make public statements regarding the City's
financial condition, commenting on, among other matters, the City's financial
plans, projected revenues and expenditures and actions by the City to
eliminate projected operating deficits. Some of these reports and statements
have warned that the City may have underestimated certain expenditures and
overestimated certain revenues and have suggested that the City may not have
adequately provided for future contingencies. Certain of these reports have
analyzed the City's future economic and social conditions and have questioned
whether the City has the capacity to generate sufficient revenues in the
future to meet the costs of its expenditure increases and to provide necessary
services.
On January 17, 1995, the City Comptroller issued a report which
concluded that the risks for the 1995 fiscal year had increased from $453
million to $658 million, primarily as a result of the lower-than-projected tax
revenues totaling $400 million, partially offset by the anticipated receipt of
an additional $100 million of revenues from the refund by the Internal Revenue
Service of social security overpayments by the City in the 1995 fiscal year.
The report stated that the shortfall in tax revenue collections is explained
largely by weaknesses in the banking industry and securities sector, which
have been hurt by the tight monetary policies of the Federal Reserve Board
which have resulted in losses from bond trading operations, layoffs and lower
year-end bonuses. The report stated that this shortfall may increase if total
returns in the financial sector do not improve in the first half of the 1995
calendar year.
On December 27, 1994, the City Comptroller issued a report on the
City's economy which noted that the City's economic recovery had slowed in the
third quarter of the 1994 calendar year and concluded that the City's economy
is still very weak and the local recovery is fragile. The report noted that
the indications of weakness in the City's economy included slower growth in
payroll employment and retail sales in the third quarter, as well as softness
in the Manhattan commercial real estate market. The report also noted that
the tight monetary policies implemented by the Federal Reserve Bank since
February 1994 to curb inflationary pressures were particularly harmful to
interest rate sensitive and cyclical sectors, such as retailing, the
securities industry, banking and manufacturing and that the City's service
driven economy has not benefited from the national recovery, which was largely
driven by interest rate sensitive sectors of housing, capital goods and
consumer durable goods. The report noted that the slow-down in economic
activity was expected to continue in the fourth quarter of 1994, with more
cutbacks in local governments and additional layoffs in the financial sector,
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which will offset new hiring in other areas and result in a slow growth in the
1995 calendar year.
On November 30, 1994, OSDC issued a report reviewing the Financial
Plan. The report concluded that a projected budget gap of $252 million
existed for the 1995 fiscal year, due largely to higher social service costs
and uncertainties concerning the receipt of revenues from increased collection
efforts. The report identified additional substantial risks for the 1995
fiscal year totaling $351 million, including the proposed reduction in the
City subsidy to the Transit Authority, the receipt of revenues by the City as
a result of the refund of social security overpayments, the projected
subleasing of certain assets and possible additional expenditures for the BOE.
After taking into account possible reduced expenditures of $100 millon, OSDC
concluded that the City faces risks of approximately $500 million for the
remainder of the 1995 fiscal year.
With respect to the 1996 through 1998 fiscal years, the OSDC in
its March 21, 1995 report projects gaps of approximately $3 billion, $3.6
billion and $4.1 billion, respectively. According to the OSDC, the projected
gap could be greater than forecast by the City primarily because the City has
not yet secured $133 million in anticipated health insurance savings and
overtime costs from uniformed agencies are likely to be $80 million higher
than projected by the City. The report also identified a number of additional
risks which could raise the 1996 budget gap by another $400 millon (a net gap
of $232 million after accounting for possible savings from overestimating
prior year's expenses). These risks include (i) the expiration of the 14%
personal income tax surcharge which the Financial Plan assumes will be
extended by the State, (ii) unfunded liabilities at the Board of Education and
(iii) potentially higher pension costs. Additionally, the 1996 gap-closing
program relies to a very large degree on cooperation from Federal and State
governments and municipal unions. In fact, the City has direct control of
less than $500 million of the total gap-closing measures. Therefore, no
assurance can be given that the 1996 measures will be successfully
implemented.
On December 8, 1994, the staff of the Control Board issued a
report on the Financial Plan. In its report the staff concluded that the City
faced risks of more than $513 million in the 1995 fiscal year. The staff
noted that tax receipts are stagnant, primarily because of a further
contraction in the property tax and sluggish growth in the non-property taxes,
related to erosion of profits in the securities industry, and that there are
substantial risks for the 1995 fiscal year with respect to possible increased
overtime and City Medicaid payments to HHC, shortfalls in parking fine
collections, the projected refund of social security payments, a proposed
asset sale, the renegotiation of certain Port Authority leases and possible
additional expenditures at BOE. In addition, the staff indicated that there
are risks of $2.0 billion, $2.6 billion and $3.1 billion for the 1996, 1997
and 1998 fiscal years, respectively. Risks for 1996 through 1998 fiscal years
include the potential for increased overtime and lower nonproperty tax
revenues, increased spending for City Medicaid payments to HHC, additional
expenditures at BOE, uncertainties concerning the proposed reduction in City
expenditures for health care costs, the anticipated revenues from
renegotiation of the terms of certain Port Authority leases, savings resulting
from the proposed tort reform to limit damage claims against the City, and
increased Federal aid for Medicaid. The report noted that the City faced
additional risks with respect to its assumptions regarding pension costs, a
reduced subsidy to the Transit Authority, social services savings and the cost
of wages. The staff noted that it is imperative that the City Council and the
Mayor work together to ensure that the actions taken for the 1995 fiscal year
are recurring and help reduce the over $2 billion gap for the 1996 fiscal year
and that a cooperative effort is necessary if the City is to solve its
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structural budget problems and bring stability to the delivery of services to
its residents.
On March 17, 1995 the Control Board staff issued its report
commenting on the February Modification. The report notes that the February
Modification attempts to address the structural imbalances by dramatically
lowering expenditures in large budget areas while continuing the restructuring
of the City's finances. Their analysis does show a risk of at least $486
million in fiscal 1996, particularly because more than $2 billion in projected
budget relief is dependent upon the action of others. Both the Control Board
and the OSDC have noted that the City has not yet brought its long term
expenditures in line with recurring revenues; therefore, the City is likely to
face future budget gaps requiring it to reduce expenditures and/or increase
revenues.
A substantial portion of the capital improvements in the City are
financed by indebtedness issued by the Municipal Assistance Corporation for
the City of New York ("MAC"). MAC was organized in 1975 to provide financing
assistance for the City and also to exercise certain review functions with
respect to the City's finances. MAC bonds are payable out of certain State
sales and compensating use taxes imposed within the City, State stock transfer
taxes and per capita State aid to the City. Any balance from these sources
after meeting MAC debt service and reserve fund requirements and paying MAC's
operating expenses is remitted to the City or, in the case of the stock
transfer taxes, rebated to the taxpayers. The State is not, however,
obligated to continue the imposition of such taxes or to continue
appropriation of the revenues therefrom to MAC, nor is the State obligated to
continue to appropriate the State per capita aid to the City which would be
required to pay the debt service on certain MAC obligations. MAC has no
taxing power and MAC bonds do not create an enforceable obligation of either
the State or the City. As of September 30, 1994, MAC had outstanding an
aggregate of approximately $4.885 billion of its bonds.
The City's general obligation bonds are rated Baa1 by Moody's.
Standard & Poor's has rated the City's general obligation bonds A-. Fitch
Investors Service, Inc. ("Fitch") has rated them A-. Such ratings reflect
only the view of Moody's, Standard & Poor's and Fitch, from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of
the City's general obligation bonds.
New York State and its Authorities. The State's current fiscal
year commenced on April 1, 1995, and ends on March 31, 1996, and is referred
to herein as the State's 1995-96 fiscal year. The prior fiscal year, which
ended on March 31, 1995, is referred to herein as the State's 1994-95 fiscal
year. The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The State Financial Plan for the 1994-95 fiscal year was formulated
on June 16, 1994 and is based on the State's budget as enacted by the
Legislature and signed into law by then Governor Cuomo. On February 1,
Governor Pataki presented his 1995-96 Executive Budget, containing his
recommendations for the upcoming fiscal year. The Governor's budget is
balanced on a cash basis in the General Fund (described below). However,
there can be no assurance that the Legislature will enact the proposed
Executive Budget into law, that the budget will be adopted in a more timely
manner than the prior year's budget, or that actual results will not differ
materially and adversely from the projections set forth below.
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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.
The State Financial Plan is based upon forecasts of national and
State economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economics. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, Federal
financial and monetary policies, the availability of credit, and the condition
of the world economy, which could have an adverse effect on the State. There
can be no assurance that the State economy will not experience results in the
current fiscal year that are worse than predicted, with corresponding material
and adverse effects on the State's projections of receipts and disbursements.
The State Division of the Budget ("DOB") believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth below, and those projections may be changed materially
and adversely from time to time.
As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and regional economy
and actions of the Federal government, as well as State actions affecting the
level of receipts and disbursements. Owing to these and other factors, the
State may, in future years, face substantial potential budget gaps resulting
from a significant disparity between tax revenues projected from a lower
recurring receipts base and the future costs of maintaining State programs at
current levels. Any such recurring imbalance would be exacerbated if the
State were to use a significant amount of nonrecurring resources to balance
the budget in a particular fiscal year. To address a potential imbalance for
a given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution the Governor is required to propose a
balanced budget each year. To correct recurring budgetary imbalances, the
State would need to take significant actions to align recurring receipts and
disbursements in future fiscal years. There can be no assurance, however,
that the State's actions will be sufficient to preserve budgetary balance in a
given fiscal year or to align recurring receipts and disbursements in future
fiscal years.
The General Fund is the general 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 1994-95 fiscal year, the General Fund was expected
to account for approximately 52 percent of total governmental-fund receipts
and 51 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.
As a result of the national and regional economic recession, the
State's tax receipts for its 1991 and 1992 fiscal years were substantially
lower than projected, which resulted in reductions in State aid to localities
for the State's 1992 and 1993 fiscal years from amounts previously projected.
The State completed its 1993 fiscal year with a positive margin of $671
million in the General Fund, which was deposited into a tax refund reserve
account. The State's economy, as measured by employment, started to recover
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near the start of the 1993 calendar year, continued into mid-1994 and then
virtually ceased and the State completed its 1994 fiscal year with a
cash-basis balanced budget in the State's General Fund (the major operating
fund of the State), after depositing $1.5 billion in various reserve funds.
The State's 1994-95 Financial Plan, which is based upon the
enacted State budget, projected a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions, which
include increased State education aid and State assumption of certain costs
previously paid by the City and restoration of certain prior year revenue
sharing reductions. However, the State Legislature failed to enact a
substantial portion of the proposed State assumption of local Medicaid costs,
other significant mandate relief items, and the proposed tort reform
legislation, which would have provided the City with additional savings. On
February 1, 1995, as part of his Executive Budget for the 1995-96 fiscal year,
the Governor submitted the third quarterly update to the State Financial Plan
for the 1994-95 fiscal year. This update reflects changes to receipts and
disbursements. The update revises the projected General Fund receipts and
disbursements contained in the 1994-95 State Financial Plan as revised by the
first and second quarterly updates issued on July 29, 1994 and October 28,
1994. The update reflected that estimates of General Fund receipts for the
1994-95 fiscal year have been reduced by $585 million, from the mid-year
update, and are down $1.058 billion from the budget enacted in June 1994 (of
which $227 million results from a post mid-year accounting restatement of the
State Financial Plan). Offsetting this projected loss in receipts, however,
are projected reductions of $312 million in disbursements from the mid-year
update, attributable to lower spending through the first nine months of the
fiscal year, and to the use of greater than anticipated receipts from the
State lottery. The net result of the projected reductions in receipts and
disbursements is a negative margin of $273 million against the mid-year
update's projection of a $14 million surplus, producing a potential deficit of
$259 million for the 1994-95 fiscal year. The Governor has proposed to close
this deficit through a hiring freeze, a review of pending contracts, and
spending cuts in certain programs that were started or expanded in the 1994-95
budget. Governor Pataki submitted a proposed budget for the State's 1995-96
fiscal year on February 1, 1995. The Governor's budget for 1995-96 fiscal
year included significant savings from Medicaid cost containment measures and
welfare reform and substantial reductions in State aid to localities,
including the City.
The 1995-96 Executive Budget is the first to be submitted by the
Governor, who assumed office on January 1. It proposes actual reductions in
the year-over-year dollar levels of State spending from the General Fund for
the first time in over half a century with a proposed cut of 3.4 percent.
There are, however, risks and uncertainties concerning whether or not certain
tax and spending cuts proposed in the Executive Budget will be upheld in the
face of potential legal challenges. For example, there can be no assurance
that cuts in social-welfare entitlement programs will not be challenged in
court. Further, the Comptroller has indicated his intention to challenge in
Court the proposed use of certain pension reserves in the Executive Budget.
According to the Executive Budget, in the 1995-96 fiscal year, the
State Financial Plan would be out of balance by almost $4.7 billion, as a
result of three key factors: (1) the projected structural deficit resulting
from the ongoing disparity between sluggish growth in receipts, the effect of
prior-year tax changes, and the rapid acceleration of spending growth ($2.1
billion); (2) the impact of unfunded 1994-95 initiatives, including capital
projects such as sports and recreational facilities, an increase in revenue
sharing to local governments, further State takeover of local Medicaid costs,
more school aid, and increased tuition assistance ($1.1 billion); and (3) the
use of one-time solutions to fund recurring spending in the 1994-95 budget
($1.5 billion). Tax cuts proposed to spur economic growth and provide relief
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for low and middle-income taxpayers add $240 million to the projected
imbalance or budget gap, bringing the total to approximately $5 billion.
The Executive Budget proposes to close the budget gap for the
1995-96 fiscal year through (1) $1.9 billion from cost containment savings in
social-welfare programs, particularly Medicaid cost-containment
recommendations ($1.277 billion), Income-Maintenance restructuring
recommendations ($340 million), and the consolidation of various child-care
programs into a Family Services Block Grant to counties and New York City; (2)
$2.5 billion in savings from State agency restructuring that is expected to
reduce spending on the State workforce, SUNY and CUNY, mental hygiene
programs, capital projects, the prison population, and public authorities; (3)
$350 million in savings from local assistance reforms, by freezing school aid,
revenue sharing and county costs of preschool special education at current
levels, while proposing program legislation to provide relief from certain
mandates that increase local spending; and (4) $200 million in new revenue
measures, primarily a new Quick Draw Lottery game and changes to tax-payment
schedules. The Executive Budget indicates that for years State revenues have
grown at a lower rate than State spending, producing an increasing structural
deficit, and that if the proposals in the Executive Budget are upheld
(particularly the spending cuts described above) the State will start to
eliminate the structural imbalance that has characterized the State's fiscal
record. There can, however, be no assurances that the tax and spending cuts
proposed in the Executive Budget will be upheld or enacted as proposed, or
that if enacted, will eliminate potential imbalances in future fiscal years.
As expected, the Governor's proposals have engendered substantial
public debate which will continue until the enactment of the budget by the
State legislature, which as expected did not occur before April 1, 1995. In
certain recent fiscal years, the State has failed to enact a budget prior to
the beginning of the State's fiscal year. The delay in the adoption of the
State's budget could delay the projected receipt by the City of State aid, and
there can be no assurance that State budgets in future fiscal years will be
adopted by the April 1 statutory deadline.
As a result of various uncertainties and other factors, including
consumer attitudes toward spending, Federal financial and monetary policies,
the availability of credit and the condition of the world economy, actual
results could differ materially and adversely from the State's current
projections and the State's projections could be materially and adversely
changed from time to time.
On January 13, 1992 Standard & Poor's Corporation ("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 December 12, 1994, confirmed its A- rating.
On January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On December 12, 1994, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.
The fiscal stability of the State is related to the fiscal
stability of its authorities, which generally have responsibility for
financing, constructing and operating revenue-producing public benefit
facilities. The authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. As of September 30, 1992, there were 18
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authorities that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 18 authorities was $63.5
billion as of September 30, 1993. As of March 31, 1994, aggregate public
authority debt outstanding as State-supported debt was $21.1 billion and as
State-related debt was $29.4 billion.
The authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent years,
however, the State has provided financial assistance through appropriations,
in some cases of a recurring nature, to certain of the 18 authorities for
operating and other expenses and, in fulfillment of its commitments on moral
obligation indebtedness or otherwise for debt service. This assistance is
expected to continue to be required in future years.
The MTA, a State agency, oversees the operation of the City's
subway and bus system (the "Transit Authority" or "TA") and commuter rail
lines serving the New York metropolitan area. Fare revenues from such
operations have been insufficient to meet expenditures, and the MTA depends
heavily upon a system of State, local, Triborough Bridge and Tunnel Authority
("TBTA") and, to the extent available, Federal support. Over the past several
years, the State has enacted several taxes, including a surcharge on the
profits of banks, insurance corporations and general business corporations
doing business in the 12-county region served by the MTA and a special
one-quarter of 1% regional sales and use tax, that provide additional revenues
for mass transit purposes including assistance to the MTA. The surcharge,
which expires in November 1995, yielded $507 million in calendar year 1992, of
which the MTA was entitled to receive approximately 90% or approximately $456
million. For the 1994-95 State fiscal year, total State assistance to the MTA
is estimated at approximately $1.3 billion.
In 1993, State legislation authorized the funding of a five-year
$9.56 billion MTA capital plan for the five-year period, 1992 through 1996
(the "1992-1996 Capital Program"). The MTA has received approval of the
1992-96 Capital Program based on this legislation from the 1992-96 Capital
Program Review Board, as State law requires. This is the third five-year plan
since the Legislature authorized procedures for the adoption, approval and
amendment of a five-year plan in 1981 for a capital program designed to
upgrade the performance of the MTA's transportation systems and to supplement,
replace and rehabilitate facilities and equipment. The MTA, the TBTA and the
TA are collectively authorized to issue an aggregate of $3.1 billion of bonds
(net of certain statutory exclusions) to finance a portion of the 1992-96
Capital Program. The 1992-96 Capital Program is expected to be financed in
significant part through the dedication of State petroleum business taxes.
There can be no assurance that all the necessary governmental
actions for the Capital Program will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the 1992-96 Capital
Program, or parts thereof, will not be delayed or reduced. Furthermore, the
power of the MTA to issue certain bonds expected to be supported by the
appropriation of State petroleum business taxes is currently the subject of
court challenge. If the Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional State assistance.
The State's experience has been that if an Authority suffers
serious financial difficulties, both the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes may be adversely affected.
The Housing Finance Agency ("HFA") and the Urban Development Corporation
("UDC") have in the past required substantial amounts of assistance from the
State to meet debt service costs or to pay operating expenses. Further
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assistance, possibly in increasing amounts, may be required for these, or
other Authorities in the future. In addition, certain statutory arrangements
provide for State local assistance payments otherwise payable to localities to
be made under certain circumstances to certain Authorities. The State has no
obligation to provide additional assistance to localities whose local
assistance payments have been paid to Authorities under these arrangements.
However, in the event that such local assistance payments are so diverted, the
affected localities could seek additional State funds.
Litigation. A number of court actions have been brought involving
State finances. The court actions in which the State is a defendant generally
involve state programs and miscellaneous tort, real property, and contract
claims and the monetary damages sought are substantial. Adverse development
in these proceedings or the initiation of new proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the
current fiscal year or thereafter.
In addition to the proceedings noted below, the State is party to
other claims and litigation which its legal counsel has advised are not
probable of adverse court decisions. Although the amounts of potential
losses, if any, are not presently determinable, it is the State's opinion that
its ultimate liability in these cases is not expected to have a material
adverse effect on the State's financial position in the current fiscal year or
thereafter.
On May 31, 1988, the United States Court took jurisdiction of a
claim of the State of Delaware that certain unclaimed dividends, interest and
other distributions made by issuers of securities and held by New York-based
brokers incorporated in Delaware for beneficial owners who cannot be
identified or located, had been, and were being, wrongfully taken by the State
of New York pursuant to New York's Abandoned Property Law (State of Delaware
v. State of New York, United States Supreme Court). All 50 states and the
District of Columbia moved to intervene, claiming a portion of such
distributions and similar property taken by the State of New York from New
York-based banks and depositories incorporated in Delaware. In a decision
dated March 30, 1993, the Court granted all pending motions of the states and
the District of Columbia to intervene and remanded the case to a Special
Master for further proceedings consistent with the Court's decision. The
Court determined that the abandoned property should be remitted first to the
state of the beneficial owner's last known address, if ascertainable and, if
not, then to the states of incorporation of the intermediary bank, broker or
depository. New York and Delaware have executed a settlement agreement which
provides for payment by New York to Delaware of $35 million in the State's
1993-94 fiscal year and five annual payments thereafter of $33 million. New
York and Massachusetts have executed a settlement agreement which provided for
aggregate payments by New York of $23 million, payable over consecutive years.
The claims of the other states and the District of Columbia remain.
Among the more significant of these claims still pending against
the State at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes transferred
title to the State of certain land in central New York; (2) certain aspects of
the State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; 3) contamination in the
Love Canal area of Niagara Falls; (4) an action against State and New York
City officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain
proper housing; (5) challenges to the practice of reimbursing certain Office
of Mental Health patient care expenses from the client's Social Security
benefits; (6) a challenge to the methods by which the state reimburses
localities for the administrative costs of food stamp programs; (7) alleged
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responsibility of State officials to assist in remedying racial segregation in
the City of Yonkers; (8) an action in which the State is a third party
defendant, for injunctive or other appropriate relief, concerning liability
for the maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) an action challenging legislation enacted in 1990
which had the effect of deferring certain employer contributions to the State
Teachers' Retirement System and reducing State aid to school districts by a
like amount; (10) a challenge to the constitutionality of financing programs
of the Thruway Authority authorized by Chapters 166 and 410 of the Laws of
1991; (11) a challenge to the constitutionality of financing programs of the
MTA and the Thruway Authority authorized by Chapter 56 of the laws of 1993;
(12) challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on inpatient hospital bills paid by commercial insurers
and employee welfare benefit plans and portions of Chapter 55 of The Laws of
1992 which require hospitals to impose and remit to the State an 11% surcharge
on hospital bills paid by commercial insurers; (14) challenges to the
promulgation of the State's proposed procedure to determine the eligibility
for and nature of home care services for Medicaid recipients; (15) a challenge
to State implementation of a program which reduces Medicaid benefits to
certain home-relief recipients; (16) challenges to the rationality and
retroactive application of State regulations recalibrating nursing home
Medicaid rates; and (17) challenge by AT&T to New York Tax Law Section 186-a
(2-a) as violative of the Commerce Clause of the U.S. Constitution.
New Jersey Navigator Trust
New Jersey Risk Factors
State Finance. New Jersey is the ninth largest state in population and
the fifth smallest in land area. With an average of 1,050 people per square
mile, it is the most densely populated of all the states. The State's
economic base is diversified, consisting of a variety of manufacturing,
construction and service industries, supplemented by rural areas with
selective commercial agriculture. Historically, New Jersey's average per
capita income has been well above the national average, and in 1992 the State
ranked second among the states in per capital personal income ($26,967).
The Trust is susceptible to political, economic or regulatory factors
affecting issuers of the New Jersey securities. The following information
provides only a brief summary of some of the complex factors affecting the
financial situation in New Jersey (the "State") and is derived from sources
that are generally available to investors and is believed to be accurate. It
is based in part on information obtained from various State and local agencies
in New Jersey. No independent verification has been made of any of the
following information.
The New Jersey Economic Policy Council, a statutory arm of the New
Jersey Department of Commerce and Economic Development, has reported in New
Jersey Economic Indicators, a monthly publication of the New Jersey Department
of Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from
the export boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost momentum.
In the meantime, the prolonged fast growth in the State in the mid 1980s
resulted in a tight labor market situation, which has led to relatively high
wages and housing prices. This means that, while the incomes of New Jersey
residents are relatively high, the State's business sector has become more
vulnerable to competitive pressures.
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The onset of the national recession (which officially began in July 1990
according to the National Bureau of Economic Research) caused an acceleration
of New Jersey's job losses in construction and manufacturing. In addition,
the national recession caused an employment downturn in such previously
growing sectors as wholesale trade, retail trade, finance, utilities and
trucking and warehousing. Reflecting the downturn, the rate of unemployment
in the State rose from a low of 3.6% during the first quarter of 1989 to an
estimated 6.1% in December 1994, which is above the national average of 5.4%
in December 1994. 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, 1993, there was a total authorized bond indebtedness of
approximately $9.0 billion, of which $3.6 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
$1.4 billion was unissued. The debt service obligation of such outstanding
indebtedness was $103.5 million for Fiscal Year 1994.
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. It
is estimated that New Jersey closed its Fiscal Year 1993 with a surplus of
$937.4 million.
ln 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
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costs. Projections and estimates of receipts from income taxes, however, have
also been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to 3.5% to a new
range of 2% to 7%, with the higher rates applying to married couples with
incomes exceeding $70,000 who file joint returns, and to individuals filing
single returns with incomes of more than $35,000.
The Florio administration had contended that the income tax package
would help reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation, the State would assume
approximately $289 million in social services costs that previously were paid
by counties and municipalities and funded by property taxes. In addition,
under the new formula for funding school aid, an extra $1.1 billion was
proposed to be sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased
from 7% to 6%. On November 2, 1993, Governor Florio lost his bid for
re-election to Christine Todd Whitman, who was sworn into office on
January 18, 1994. Governor Whitman, a Republican, enjoys the benefit of
having a Republican majority in both the New Jersey Senate and Assembly.
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 will take effect.
On June 30, 1994, Governor Whitman signed the New Jersey Legislature's
$15.7 billion budget for Fiscal Year 1995. The balanced budget, which
includes $455 million in surplus, is $141 million less than the 1994 budget.
Whether the State can achieve a balanced budget depends on its ability to
enact and implement expenditure reductions and to collect estimated tax
revenues. The Fiscal Year 1995 Appropriations Act forecasts sales and use tax
collections of $3.98 billion, a 5.3% increase from receipts estimated in the
Revised Revenue Estimates for Fiscal Year 1994. It also forecasts gross
income tax collections of $4.582 billion, a 1.2% increase from receipts,
estimated for Fiscal Year 1994, and corporation business tax collections of
$915 million, a 12% decrease from receipts estimated for Fiscal Year 1994.
However, projections and estimates of receipts from taxes have been subject to
variance in recent years as a result of several factors, most recently a
significant slowdown in the national, regional and State economies, sluggish
employment and uncertainties in taxpayer behavior as a result of actual and
proposed changes in Federal tax laws.
Debt Ratings. For many years, prior to 1991, both Moody's Investors
Service, Inc., and Standard and Poor's Corporation have rated New Jersey
general obligation bonds "Aaa" and "AAA", respectively. Currently, Moody's
Investors Service, Inc. rates New Jersey general obligation bonds Aal. On
July 3, 1991, however, Standard and Poor's Corporation downgraded New Jersey
general obligation bonds to "AA+." On June 4, 1992 Standard & Poor's
Corporation placed New Jersey general obligation bonds on Credit Watch with
negative implications, citing as its principal reason for its caution the
unexpected denial by the Federal Government of New Jersey's request for $450
million in retroactive Medicaid payments for psychiatric hospitals. These
funds were critical to closing a $1 billion gap in the State's $15 billion
budget for fiscal year 1992 which ended on June 30, 1992. Under New Jersey
state law, the gap in the current budget must be closed before the new budget
year begins on July 1, 1992. Standard and Poor's Corporation suggested the
State could close fiscal 1992's budget gap and help fill fiscal 1993's hole by
a reversion of $700 million of pension contributions to its general fund under
a proposal to change the way the State calculates its pension liability. On
July 6, 1992, Standard and Poor's Corporation reaffirmed its "AA+" rating for
New Jersey general obligation bonds and removed the debt from its Credit Watch
list, although it stated that New Jersey's long-term financial outlook is
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negative. Standard and Poor's Corporation was concerned that the State was
entering the 1993 fiscal year that began July 1, 1992 with a slim $26 million
surplus and remained concerned about whether the sagging State economy would
recover quickly enough to meet lawmakers' revenue projections. It also
remained concerned about the recent federal ruling leaving in doubt how much
the State was due in retroactive Medicaid reimbursements and a ruling by a
federal judge, now on appeal, of the State's method for paying for uninsured
hospital patients. However, on July 27, 1994, Standard and Poor's announced
that it was changing the State's outlook from negative to stable due to a
brightening of the State's prospects as a result of Governor Whitman's effort
to trim spending and cut taxes, coupled with an improving economy. Standard
and Poor's reaffirmed its "AA+" rating at the same time. There can be no
assurance that these ratings will continue or that particular bond issues may
not be adversely affected by changes in the State or local economic and
political conditions.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New
Jersey general obligation bonds to "Aal", stating that the reduction reflected
a developing pattern of reliance on nonrecurring measures to achieve budgetary
balance, four years of financial operations marked by revenue shortfalls and
operating deficits, and the likelihood that serious financial pressures would
persist. On August 5, 1994, Moody's reaffirmed its "Aal" rating, citing on
the positive side New Jersey's broad-based economy, high income levels,
history of maintaining a positive financial position and moderate (although
rising) debt ratios, and, on the negative side, a continued reliance on
one-time revenue and a dependence on pension-related savings to achieve
budgetary balance.
Capital Construction. In addition to payment from bond proceeds,
capital construction can also be funded by appropriation of current revenues
on a pay-as-you go basis. This amount represents 2.2% of the total Fiscal
Year 1993 Budget. In Fiscal Year 1993, the amount was $331.0 million and was
for transportation projects. This appropriation was credited to the
Transportation Trust Fund Account of the State General Fund.
All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning. This permanent commission was
established in November 1975, and is charged with the preparation of the State
Capital Improvement Plan, which contains proposals for State spending for
capital projects.
Lease Financing. The State has entered into a number of leases relating
to the financing of certain real property and equipment. The State leases the
State Tax Processing Building and the Richard J. Hughes Justice Complex in
Trenton, both from the Mercer County Improvement Authority (the "Authority").
On August 8, 1991 the Authority defeased outstanding bonds originally issued
to finance construction of the Richard J. Hughes Justice Complex through the
issuance of custody receipts (the "Custody Receipts") in the aggregate
principal amount of $95,760,000. The rental is sufficient to cover the debt
service on the Authority's Custody Receipts. Maximum annual rental payments
on these leases, including debt service, maintenance and payments in lieu of
taxes, will be approximately $11 million. The State's obligation to pay the
rentals is subject to appropriations being made by the State Legislature. The
Custody Receipts will mature in the years 1992 through 2018.
The State has also entered into a lease agreement, as lessee, with the
New Jersey Economic Development Authority, as lessor (the "EDA") to lease
(i) office buildings that are presently under construction and, when finished,
are expected to house the New Jersey Division of Motor Vehicles, New Jersey
Network (the State's public television station) and a branch of the United
States Postal Service and (ii) a parking facility that is also under
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construction, all of which were financed by the EDA's $114,391,434.70 initial
aggregate principal amount of Trenton Office Complex Revenue Bonds, 1980
Series dated December 1, 1989. The State has also entered into a lease
agreement, as lessee, with the EDA to lease approximately 13 acres of real
property and certain infrastructure improvements thereon located in the City
of Newark. This property is in a geographical area generally bounded by
McCarter Highway, Mulberry Street and Saybrook Place and its purchase was
financed by $21,510,000 aggregate principal amount of New Jersey Economic
Development Authority Revenue Bonds, New Jersey Performing Arts Center Site
Acquisition Project, 1991 Series, issued on August 20, 1991. The rental
payments required to be made by the State under such lease agreements are
sufficient to cover debt service on such bonds and other amounts payable to
the EDA, including certain administrative expenses of the EDA, and such rental
payments are subject to annual appropriation by the State Legislature.
Maximum annual debt service on such bonds is approximately $12,200,000. All
of such bonds are still outstanding and mature in the years 1992 through 2012.
The State has also entered into a sublease with the EDA to lease two
parking lots, certain infrastructure improvements and related elements located
at Liberty State Park in the City of Jersey City. These parking lots and
improvements have been financed by a $13,683,767.50 aggregate principal amount
of New Jersey Economic Development Authority Lease Rental Bonds, 1992 Series
(Liberty State Park Project) dated March 15, 1992. The rental payments that
will be required to be made by the State under such sublease agreement will be
sufficient to cover debt service on such bonds and other amounts payable to
the EDA, and such rental payments will be subject to appropriation by the
State Legislature.
In 1981, the Governor signed into law a bill creating the New Jersey
Building Authority (the "Building Authority") having the power to construct
facilities for leasing to the State (P.L. 1981, c. 120). The law provides for
leasing to the State on a basis similar to that described above. The Building
Authority is authorized to have not more than $250 million of its notes and
bonds outstanding exclusive of refunded bonds and notes, provided that if the
Building Authority issues bonds or notes to finance the total cost of a
project based on estimates prepared by an independent consultant and the
consultant determines later that the costs of the project as initially
approved have increased, the Building Authority may issue additional bonds or
notes to finance the increased cost notwithstanding the $250 million
limitation. In 1985 the Building Authority issued $129,635,000 of 1985 Series
Bonds for five office building projects in the Trenton area. During April
1987 the Building Authority issued $103,760,000 of the 1987 Series Bonds to
refund the outstanding term bonds of the 1985 issue. On April 6, 1989 the
Building Authority issued $49,752,390.30 of 1989 Series Bonds for the
renovation and historical restoration of portions of the State Capital Complex
in Trenton. On October 9, 1991 the Building Authority issued $74,999,815.75
of State Building Revenue Bonds, 1991 Series (Garden State Savings Bonds,
1991A), as capital appreciation bonds, under the Garden State Savings Act of
1991, for the continued renovation and historical restoration of portions of
the State Capital Complex in Trenton and for the construction of a structured
parking facility. As of December 31, 1991 the total amount of Building
Authority Bonds outstanding was $238,687,206.05. Outstanding Building
Authority bonds are secured by annual rentals from the State which are subject
to annual appropriations by the State Legislature. The State's combined
annual rental payment for all leases with the Building Authority will be
(i) approximately $17.5 million per year for the years ending June 15, 1992
through 1998, 2012 and 2013 and (ii) approximately $31.0 million per year for
the years ending June 15, 1999 through 2011.
Beginning in April 1984, the State, acting through the Director of the
Division of Purchase and Property, entered into a series of lease purchase
agreements which provide for the acquisition of equipment and real property to
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be used by various departments and agencies of the State. To date, the State
has completed nine lease purchase agreements which have resulted in issuance
of Certificates of Participation totaling $541,085,000. A Certificate of
Participation evidences a proportionate interest of the owner thereof in the
lease payments to be made by the State under the terms of the agreement. As
of December 31, 1991, $305,400,000 Certificates of Participation remain
outstanding. The agreements relating to these transactions provide for
semiannual rental payments. The State's obligation to pay rentals due under
these leases is subject to annual appropriations being made by the State
Legislature. The final maturity of the outstanding Certificates of
Participation is December 15, 2013. The majority of proceeds from these
transactions have been or will be used to acquire equipment for the State and
its agencies. The rentals payable by the State will be made from monies
appropriated by the State Legislature. The State intends to continue to use
this financing technique for a substantial portion of its future equipment
requirements.
"Moral Obligation" Financing. Aside from its general obligation bonds,
the State's "moral obligation" backs certain obligations issued by the New
Jersey Housing and Mortgage Finance Agency, the South Jersey Port Corporation
and the Higher Education Assistance Authority.
New Jersey Housing and Mortgage Finance Agency. Neither the New Jersey
Housing and Mortgage Finance Agency nor its predecessors, the New Jersey
Housing Finance Agency and the New Jersey Mortgage Finance Agency, have had a
deficiency in a debt service reserve fund which required the State to
appropriate funds to meet its "moral obligation". It is anticipated that this
agency's revenues will continue to be sufficient to cover debt service on its
bonds.
South Jersey Port Corporation. The State provides the South Jersey Port
Corporation (the "Corporation") with funds to cover all debt service and
property tax requirements, when earned revenues are anticipated to be
insufficient to cover these obligations.
Higher Education Assistance Authority. The Higher Education Assistance
Authority has issued $24,996,064 aggregate principal amount of revenue bonds,
the interest on which has been capitalized to but not including January 1,
1993. After the period of capitalized interest has ended, it is anticipated
that the authority's revenues will be sufficient to cover debt service on its
bonds.
Below are listed State appropriations made since 1986 which covered
deficiencies in revenues of the Corporation, for debt service and property tax
payments.
Appropriation for Appropriation for
Calendar Year Debt Service Property Tax
1986........................... $0 $1,647,216.00
1987........................... 0 1,647,216.00
1988........................... 0 1,647,216.00
1989........................... 1,281,793.58 1,745,917.00
1990........................... 2,362,850.67 1,850,000.00
1991........................... 2,770,851.00 1,850,000.00
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On April 2, 1987, the Corporation issued $31,580,000 aggregate principal
amount of Revenue Bonds, 1987 Series C (the "Series C Bonds"), a portion of
the proceeds of which will be used (i) on January 1, 1995, to refund all of
the Corporation's Marine Terminal Revenue Bonds, 1985 Refunding Series and
(ii) to pay interest on the Series C Bonds until January 1, 1995. Because of
the funded escrow, it is expected that there will not be any need for the
State to provide funds to pay debt service on the Series C Bonds through
January 1, 1995. Also, in addition to the bonded indebtedness of the
Corporation set forth above, on April 2, 1987, the Corporation issued
$10,295,000 Marine Terminal Revenue Bonds, 1987 Series D, to provide funds for
financing a portion of the costs of various capital improvements. On
February 10, 1989, the Corporation issued $4,085,000 Marine Terminal Revenue
Bonds, 1989 Series E, to provide funds for financing a portion of the costs of
various capital improvements and additions to the Corporation's marine
terminal facilities. On November 21, 1989, the Corporation issued $3,655,000
Marine Terminal Revenue Bonds, 1989 Series F, to provide for the costs of
acquiring land in the City of Camden, for the purpose of expanding the
Corporation's marine terminal facilities.
Municipal Finance. New Jersey's local finance system is regulated by
various statutes designed to assure that all local governments and their
issuing authorities remain on a sound financial basis. Regulatory and
remedial statutes are enforced by the Division of Local Government Services
(the "Division") in the State Department of Community Affairs.
Counties and Municipalities. The Local Budget Law (N.J.S.A. 4OA: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. 4OA:4-45.1 et seq.) (the "Cap
Law") generally limits the year-to-year increase of the total appropriations
of any municipality and the tax levy of any county to either 5 percent or an
index rate determined annually by the Director, whichever is less. However,
where the index percentage rate exceeds 5 percent, the Cap law permits the
governing body of any municipality or county to approve the use of a higher
percentage rate up to the index rate. Further, where the index percentage
rate is less than 5 percent, the Cap Law also permits the governing body of
any municipality or county to approve the use of a higher percentage rate up
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to 5 percent. Regardless of the rate utilized, certain exceptions exist to
the Cap Law's limitation on increases in appropriations. The principal
exceptions to these limitations are municipal and county appropriations to pay
debt service requirements; to comply with certain other State or federal
mandates; amounts approved by referendum; and, in the case of municipalities
only, to fund the preceding year's cash deficit or to reserve for shortfalls
in tax collections. The Cap Law, scheduled to expire on December 31, 1990,
was re-enacted with amendments and made a permanent part of the Municipal
Finance System.
State law also regulates the issuance of debt by local units. The Local
Budget Law limits the amount of tax anticipation notes that may be issued by
local units and requires the repayment of such notes within three months of
the end of the fiscal year (six months in the case of the counties) in which
issued. The local Bond Law (N.J.S.A. 40A:2-1 et seq.) governs the issuance of
bonds and notes by the local units. No local unit is permitted to issue bonds
for the payment of current expenses (other than Fiscal Year Adjustment Bonds
described more fully below). Local units may not issue bonds to pay
outstanding bonds, except for reflecting purposes, and then only with the
approval of the Local Finance Board. Local units may issue bond anticipation
notes for temporary periods not exceeding in the aggregate approximately ten
years from the date of first issue. The debt that any local unit may
authorize is limited to a percentage of its equalized valuation basis, which
is the average of the equalized value of all taxable real property and
improvements within the geographic boundaries of the local unit, as annually
determined by the Director of the Division of Taxation, for each of the three
most recent years. In the calculation of debt capacity, the local Bond Law
and certain other statutes permit the deduction of certain classes of debt
("statutory deductions") from all authorized debt of the local unit ("gross
capital debt") in computing whether a local unit has exceeded its statutory
debt limit. Statutory deductions from gross capital debt consist of bonds or
notes (i) authorized for school purposes by a regional school district or by a
municipality or a school district with boundaries coextensive with such
municipality to the extent permitted under certain percentage limitations set
forth in the School Bond Law (as hereinafter defined); (ii) authorized for
purposes which are self-liquidating, but only to the extent permitted by the
Local Bond Law; (iii) authorized by a public body other than local unit the
principal of and interest on which is guaranteed by the local unit, but only
to the extent permitted by law; (iv) that are bond anticipation notes; (v) for
which provision for payment has been made; or (vi) authorized for any other
purpose for which a deduction is permitted by law. Authorized net capital
debt (gross capital debt minus statutory deductions) is limited to 3.5 percent
of the equalized valuation basis in the case of municipalities and 2 percent
of the equalized valuation basis in the case of counties. The debt limit of a
county or municipality, with certain exemptions, may be exceeded only with the
approval of the Local Finance Board.
Chapter 75 of the Pamphlet Laws of 1991 signed into law on March 28,
1991 requires certain municipalities and permits all other municipalities to
adopt the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition
budget for January to June. Since expenditures would be expected to exceed
revenues primarily because state aid for the calendar year would not be
received by the municipality until after the end of the transition year
budget, the act authorizes the issuance of Fiscal Year Adjustment Bonds to
fund the one time deficit for the six month transition budget. The act
provides that the deficit in the six month transition budget may be funded
initially with bond anticipation notes based on the estimated deficit in the
six month transition budget. Notes issued in anticipation of Fiscal Year
Adjustment Bonds, including renewals, can only be issued for up to one year
unless the Local Finance Board permits the municipality to renew them for a
further period of time. The Local Finance Board must confirm the actual
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deficit experienced by the municipality. The municipality then may issue
Fiscal Year Adjustment Bonds to finance the deficit on a permanent basis. The
purpose of the Act is to assist municipalities that are heavily dependent on
state aid and that have had to issue tax anticipation notes to fund operating
cash flow deficits each year. While the act does not authorize counties to
change their fiscal years, it does provide that counties with cash flow
deficits may issue Fiscal Year Adjustment Bonds as well.
State law authorizes State officials to supervise fiscal administration
in any municipality which is in default on its obligations; which experiences
severe tax collection problems for two successive years; which has a deficit
greater than 4 percent of its tax levy for two successive years; which has
failed to make payments due and owing to the State, county, school district or
special district for two consecutive years; which has an appropriation in its
annual budget for the liquidation of debt which exceeds 25 percent of its
total operating appropriations (except dedicated revenue appropriations) for
the previous budget year; or which has been subject to a judicial
determination of gross failure to comply with the Local Bond Law, the Local
Budget Law or the Local Fiscal Affairs Law which substantially jeopardizes its
fiscal integrity. State officials are authorized to continue such supervision
for as long as any of the conditions exist and until the municipality operates
for a fiscal year without incurring a cash deficit.
There are 567 municipalities and 21 counties in New Jersey. During
1987, 1988, and 1989 no county exceeded its statutory debt limitations or
incurred a cash deficit in excess of 4 percent of its tax levy. The number of
municipalities which have a cash deficit greater than 4 percent of their tax
levies was five for 1987, zero for 1988, and six for 1989. The number of
municipalities which exceeded statutory debt limits was six, five, and one as
of December 31, 1987, 1988, and 1989, respectively. No New Jersey
municipality or county has defaulted on the payment of interest or principal
on any outstanding debt obligation since the 1930's.
School Districts. All New Jersey school districts are coterminous with
the boundaries of one or more municipalities. They are characterized by the
manner in which the board of education, the governing body of the school
district, takes office. Type I school districts, most commonly found in
cities, have a board of education appointed by the mayor or the chief
executive officer of the municipality constituting the school district. In a
Type II school district, the board of education is elected by the voters of
the district. Nearly all regional and consolidated school districts are
Type II school districts.
School Budgets. In every school district having a board of school
estimate, the board of school estimate examines the budget request and fixes
the appropriation amounts for the next year's operating budget after a public
hearing at which the taxpayers and other interested persons shall have an
opportunity to raise objections and to be heard with respect to the budget.
This board, whose composition is fixed by statute, certifies the budget to the
municipal governing bodies and to the local board of education. If either
disagrees, they must appeal to the State Commissioner of Education (the
"Commissioner") to request changes.
The Quality Education Act of 1990 (N.J.S.A. 18A:7D-1 et seq.) limits the
annual increase of a school district's net current expense budget. The
Commissioner certifies the allowable amount of increase for each school
district but may grant a higher level of increase in certain limited
instances. A school district may also submit a proposal to the voters to
raise amounts above the allowable amount of increase. If defeated, such a
proposal is subject to further review or appeal only if the Commissioner
determines that additional funds are required to provide a thorough and
efficient education.
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In Type I or Type II school districts which have failed monitoring
over a period of time by the State because of continued educational
deficiencies, and are implementing an approved corrective action plan, the
Commissioner is required to determine the cost to the school district of the
implementation of those portions of the corrective action plan which are
directly responsive to the district's deficiencies as identified in the
monitoring process. Where appropriate, the Commissioner is required to
reallocate funds within the district's budget to support the corrective action
plan. The Commissioner is also required to determine the amount of additional
revenue needed to implement the corrective action plan, and to recertify the
budget for the district.
In State operated school districts the State District Superintendent has
the responsibility for the development of the budget subject to appeal by the
governing body of the municipality to the Commissioner and the Director of the
Division of Local Government Services in the State Department of Community
Affairs. Based upon his review, the Director is required to certify the
amount of revenues which can be raised locally to support the budget of the
State operated district. Any difference between the amount which the Director
certifies, and the total amount of local revenues required by the budget
approved by the Commissioner, is to be paid by the State in the fiscal year in
which the expenditures are made subject to the availability of appropriations.
School District Bonds. School district bonds and temporary notes are
issued in conformity with N.J.S.A 18A:24-1 et seq. (the "School Bond Law"),
which closely parallels the Local Bond Law. Although school districts are
exempted from the 5 percent down payment provision generally applied to bonds
issued by municipalities and counties, they are subject to debt limits (which
vary depending on the type of school system provided) and to State regulation
of their borrowing. The debt limitation on school district bonds depends upon
the classification of the school district but may be as high as 4 percent of
the average equalized valuation basis of the constituent municipality. In
certain cases involving school districts in cities with populations exceeding
100,000 the debt limit is 8 percent of the average equalized valuation basis
of the constituent municipality, and in cities with populations in excess of
80,000 the debt limit is 6 percent of the aforesaid average equalized
valuation.
School bonds are authorized by (i) an ordinance adopted by the governing
body of a municipality within a Type I school district; (ii) adoption of a
proposal by resolution by the board of education of a Type II school district
having a board of school estimate; or (iii) adoption of a proposal by
resolution by the board of education and approval of the proposal by the legal
voters of any other Type II school district. If school bonds will exceed the
school district borrowing capacity, a school district (other than a regional
school district) may use the balance of the municipal borrowing capacity. If
the total amount of debt exceeds the school district's borrowing capacity and
any available remaining municipal borrowing capacity, the Commissioner and the
Local Finance Board must approve the proposed authorization before it is
submitted to the voters. All authorizations of debt in a Type II school
district without a board of school estimate require an approving referendum,
except where, after hearing, the Commissioner and the State Board of Education
determine that the issuance of such debt is necessary to meet the
constitutional obligation to provide a thorough and efficient system of public
schools. When such obligations are issued, they are issued by, and in the
name of, the school district.
In Type I and II school districts with a board of school estimate, that
board examines the capital proposal of the board of education and certifies
the amount of bonds to be authorized. When it is necessary to exceed the
borrowing capacity of the municipality, the approval of a majority of the
legally qualified voters of the municipality is required, together with the
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approval of the Commissioner and the Local Finance Board. When such bonds are
issued for a Type I school district, they are issued by the municipality and
identified as school bonds. When bonds are issued by a Type II school
district having a board of school estimate, they are issued by, and in the
name of, the school district.
All authorizations of debt must be reported to the Division of Local
Government Services by a supplemental debt statement prior to final approval.
School District Lease Purchase Financings. In 1982, school districts
were given an alterative to the traditional method of bond financing capital
improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase Law").
The Lease Purchase Law permits school districts to acquire a site and school
building through a lease purchase agreement with a private lessor corporation.
For Type II school districts, the lease purchase agreement does not require
voter approval. The rent payments attributable to the lease purchase
agreement are subject to annual appropriation by the school district and are
required, pursuant to N.J.A.C. 6:22-A-1.2(h), to be included in the annual
current expense budget of the school district. Furthermore, the rent payments
attributable to the lease purchase agreement do not constitute debt of the
school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.
Qualified Bonds. In 1976, legislation was enacted (P.L. 1976, c. 38 and
c. 39) which provides for the issuance by municipalities and school districts
of "qualified bonds." Whenever a local board of education or the governing
body of a municipality determines to issue bonds, it may file an application
with the Local Finance Board, and, in the case of a local board of education,
the Commissioner, to qualify bonds pursuant to P.L. 1976, c. 38 or c. 39.
Upon approval of such an application and after receipt of a certificate
stating the name and address of the paying agent for such bonds, the maturity
schedule, interest rates and payment dates, the State Treasurer shall, in the
case of qualified bonds for school districts, withhold from the school aid
payable to such municipality or school district and in the case of qualified
bonds for municipalities, withhold from the amount of business personal
property tax replacement revenues, gross receipts; tax revenues, municipal
purposes tax assistance fund distributions, State urban aid, State revenue
sharing, and any other funds appropriated as State aid and not otherwise
dedicated to specific municipal programs, payable to such municipalities, an
amount sufficient to cover debt service on such bonds. These "qualified
bonds" are not direct, guaranteed or moral obligations of the State, and debt
service on such bonds will be provided by the State only if the above
mentioned appropriations are made by the State. Total outstanding
indebtedness for "qualified bonds" consisted of $103,720,500 by various school
districts as of June 30, 1992 and $830,037,105 by various municipalities as of
June 30, 1992.
New Jersey School Bond Reserve Act. The New Jersey School Bond Reserve
Act (N.J.S.A. 18A:56-17 et seq.) establishes a school bond reserve within the
constitutionally dedicated Fund for the Support of Free Public Schools. Under
this law the reserve is maintained at an amount equal to 1.5 percent of the
aggregate outstanding bonded indebtedness of counties, municipalities or
school districts for school purposes (exclusive of bonds whose debt service is
provided by State appropriations), but not in excess of monies available in
such Fund. If a municipality, county or school district is unable to meet
payment of the principal of or interest on any of its school bonds, the
trustee of the school bond reserve will purchase such bonds at the face amount
thereof or pay the holders thereof the interest due or to become due. On
June 30, 1991, the book value of the Fund's assets aggregated $59,352,429 and
the reserve, computed as of June 30, 1991, amounted to $19,668,349. There has
never been an occasion to call upon this Fund.
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Local Financing Authorities. The Local Authorities Fiscal Control Law
(N.J.S.A. 4OA:5A-l et seq.) provides for State supervision of the fiscal
operations and debt issuance practices of independent local authorities and
special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, etc.). Authorities which are subject to differing State or
federal financial restrictions are exempted, but only to the extent of that
difference.
Financial control responsibilities over local authorities and special
districts are assigned to the Local Finance Board and the Director of the
Division of Local Government Services. The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
well as their dissolution. The Local Finance Board also reviews, conducts
public hearings and issues findings and recommendations on any proposed
project financing of an authority or district, and on any proposed financing
agreement between a municipality or county and an authority or special
district. The Local Finance Board prescribes minimum audit requirements to be
followed by authorities and special districts in the conduct of their annual
audits. The Director reviews and approves annual budgets of authorities and
special districts.
Litigation. The State is a party in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are cases which
challenge the following: the formula relating to State aid to public schools,
the method by which the State shares with its counties maintenance recoveries
and costs for residents in State institutions, unreasonably low Medicaid
payment rates for long-term facilities in New Jersey, the obligation of
counties to maintain Medicaid or Medicare eligible residents of institutions
and facilities for the developmentally disabled, taxes paid into the Spill
Compensation Fund (a fund established to provide money for use by the State to
remediate hazardous waste sites and to compensate other persons for damages
incurred as a result of hazardous waste discharge) based upon Federal
preemption, various provisions, and the constitutionality of the Fair
Automobile Insurance Reform Act of 1990, the State's role in a consent order
concerning the construction of a resource facility in Passaic County, actions
taken by the New Jersey Bureau of Securities against an individual, the
State's actions regarding alleged chromium contamination of State-owned
property in Hudson County, the issuance of emergency redirection orders and a
draft permit by the Department of Environmental Protection and Energy, the
adequacy of Medicaid reimbursement for services rendered by doctors and
dentists to Medicaid eligible children, the Commissioner of Health's
calculation of the hospital assessment required by the Health Care Cost
Reduction Act of 1991, refusal of the State to share with Camden County
Federal funding the State recently received for disproportionate share
hospital payments made to county psychiatric facilities, and the
constitutionality of annual A-901 hazardous and solid waste licensure renewal
fees collected by the Department of Environmental Protection and Energy.
Adverse judgments in these and other matters could have the potential for
either a significant loss of revenue or a significant unanticipated
expenditure by the State.
At any given time, there are various numbers of claims and cases pending
against the State, State agencies and employees seeking recovery of monetary
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damages that are primarily paid out of the fund created pursuant to the New
Jersey Tort Claims Act. In addition at any given time, there are various
numbers of contract claims against the State and State agencies seeking
recovery of monetary damages. The state is unable to estimate its exposure
for these claims.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is computed by
adding to the aggregate bid price of the Bonds in the Trust divided by the
number of Units outstanding, an amount based on the applicable sales charge
times the aggregate offering price of the Bonds (see "Public Offering Price"
in Part A for the applicable sales charge for the Trust). A proportionate
share of accrued interest on the Bonds to the expected date of settlement for
the Units is added to the Public Offering Price. Accrued interest is the
accumulated and unpaid interest on a Bond from the last day on which interest
was paid and is accounted for daily by the Trust at the initial daily rate set
forth under "Summary of Essential Information" in Part A of this Prospectus.
This daily rate is net of estimated fees and expenses. The Public Offering
Price can vary on a daily basis from the amount stated in Part A in accordance
with fluctuations in the prices of the Bonds and the price to be paid by each
investor will be computed as of the date the Units are purchased. The
aggregate bid price evaluation of the Bonds is determined in the manner set
forth under "Trustee Redemption."
The Evaluator may obtain current bid or offering prices for the
Bonds from investment dealers or brokers (including the Sponsor) that
customarily deal in tax-exempt obligations or from any other reporting service
or source of information which the Evaluator deems appropriate.
Accrued Interest
An amount of accrued interest which represents accumulated unpaid
or uncollected interest on a Bond from the last day on which interest was paid
thereon will be added to the Public Offering Price and paid by the
Certificateholder at the time Units are purchased. Since the Trust normally
receives the interest on Bonds twice a year and the interest on the Bonds in
the Trust is accrued on a daily basis (net of estimated fees and expenses),
the Trust will always have an amount of interest accrued but not actually
received and distributed to 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 Bear, Stearns & Co.
Inc., Gruntal & Co., Incorporated and of any underwriter of a Trust, pursuant
to employee benefit arrangements, may purchase Units of a Trust at a price
equal to the offering side evaluation of the underlying securities in a Trust
during the initial offering period and at the bid side thereafter, divided by
the number of Units outstanding plus a reduced charge of $10.00 per Unit.
Such arrangements result in less selling effort and selling expenses than
sales to employee groups of other companies. Resales or transfers of Units
purchased under the employee benefit arrangements may only be made through the
Sponsor's secondary market, so long as it is being maintained.
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Distribution Of Units
Certain banks and thrifts will make Units of the Trust available
to their customers on an agency basis. A portion of the sales charge paid by
their customers is retained by or remitted to the banks. Under the Glass-
Steagall Act, banks are prohibited from underwriting Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
The Sponsor intends to qualify the Units for sale in substantially all
States through the Underwriters and through dealers who are members of the
National Association of Securities Dealers, Inc. Units may be sold to dealers
at prices which represent a concession of up to (a) 4% of the Public Offering
Price for the Insured Municipal Securities Trust Series, (b) $25.00 per unit
for the Insured Municipal Securities Trust Discount Series or (c) $33.00 per
Unit, for the Insured Municipal Securities Navigator Trust, subject to the
Sponsor's right to change the dealers' concession from time to time. In
addition, for transactions of 1,000,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. Such Units may then be distributed to the public by the
dealers at the Public Offering Price then in effect. The Sponsor reserves the
right to reject, in whole or in part, any order for the purchase of Units.
The Sponsor reserves the right to change the discounts from time to time.
Sponsor's Profits
The Sponsor will receive a gross commission on all Units sold in
the secondary market equal to the applicable sales charge on each transaction.
(See "Offering Price".) In addition, in maintaining a market for the Units
(see "Sponsor Repurchase") the Sponsor will realize profits or sustain losses
in the amount of any difference between the price at which they buy Units and
the price at which they resell such Units.
Participants in the Total Reinvestment Plan can designate a broker
as the recipient of a dealer concession (see "Total Reinvestment Plan").
Comparison of Public Offering Price, Sponsor's
Repurchase Price And Redemption Price
The secondary market Public Offering Price of Units will be
determined on the basis of the current bid prices of the Bonds in the Trust,
plus the applicable sales charge. The value at which Units may be resold in
the Secondary Market or redeemed will be determined on the basis of the
current bid prices of the Bonds without any sales charge. On the Evaluation
Date, the Public Offering Price and the Sponsor's initial Repurchase Price per
Unit (each based on the bid side evaluation of the Bonds in the Trust) each
exceeded the Redemption Price and the Sponsor's secondary market Repurchase
Price per Unit (based upon the current bid side evaluation of the Bonds in the
Trust) by the amounts shown under "Summary of Essential Information" in Part A
of this Prospectus. For this reason, among others (including fluctuations in
the market prices of such Bonds and the fact that the Public Offering Price
includes the applicable sales charge), the amount realized by a Certificate-
holder upon any redemption of Sponsor repurchase of Units may be less than the
price paid for such Units.
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ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
Units of the Trust are offered to investors on a "dollar price"
basis (using the computation method previously described under "Public
Offering Price") as distinguished from a "yield price" basis often used in
offerings of tax exempt bonds (involving the lesser of the yield as computed
to maturity of bonds or to an earlier redemption date). Since they are
offered on a dollar price basis, the rate of return on an investment in Units
of the Trust is measured in terms of "Estimated Current Return" and "Estimated
Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing
the average yield for the portfolio of each Trust in order to reflect
estimated fees and expenses of that Trust and the maximum sales charge paid by
Unitholders. The resulting Estimated Long Term Return represents a measure of
the return to Unitholders earned over the estimated life of each Trust. The
Estimated Long Term Return as of the day prior to the Evaluation Date is
stated for the Trust under "Summary of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of the Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current
interest rates on newly issued bonds of a similar type with comparable rating,
the Estimated Current Return per Unit may be affected adversely if such Bonds
are redeemed prior to their maturity. On the day prior to the Evaluation
Date, the Estimated Net Annual Interest Income per Unit divided by the Public
Offering Price resulted in the Estimated Current Return stated for the Trust
under "Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to the Trust and with the redemption, maturity, sale or
other disposition of the Bonds in the Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future.
A schedule of cash flow projections is available from the Sponsor
upon request.
RIGHTS OF CERTIFICATEHOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
Certificates executed by the Trustee and the Sponsor. Certificates may be
issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been
selected by the Certificateholder. Certificates are transferable by
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presentation and surrender to the Trustee properly endorsed and/or accompanied
by a written instrument or instruments of transfer. Although no such charge
is presently made or contemplated, the Trustee may require a Certificateholder
to pay $2.00 for each Certificate reissued or transferred and any governmental
charge that may be imposed in connection with each such transfer or
interchange. Mutilated, destroyed, stolen or lost Certificates will be
replaced upon delivery of satisfactory indemnity and payment of expenses
incurred.
Interest And Principal Distributions
Interest received by the Trust is credited by the Trustee to an
Interest Account and a deduction is made to reimburse the Trustee without
interest for any amounts previously advanced. Proceeds representing principal
received from the maturity, redemption, sale or other disposition of the Bonds
are credited to a Principal Account.
Distributions to each Certificateholder from the Interest Account
are computed as of the close of business on each Record Date for the following
Payment Date and consist of an amount substantially equal to one-twelfth, one-
half or all of such Certificateholder's pro rata share of the Estimated Net
Annual Interest Income in the Interest Account, depending upon the applicable
plan of distribution. Distributions from the Principal Account (other than
amounts representing failed contracts, as previously discussed) will be
computed as of each semi-annual Record Date, and will be made to the Certifi-
cateholders on or shortly after the next semi-annual Payment Date. Proceeds
representing principal received from the disposition of any of the Bonds
between a Record Date and a Payment Date which are not used for redemptions of
Units will be held in the Principal Account and not distributed until the
second succeeding semi-annual Payment Date. No distributions will be made to
Certificateholders electing to participate in the Total Reinvestment Plan.
Persons who purchase Units between a Record Date and a Payment Date will
receive their first distribution on the second Payment Date after such
purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date.
For the purpose of minimizing fluctuations in the distributions from the
Interest Account, the Trustee will advance sufficient funds, without interest,
as may be necessary to provide interest distributions of approximately equal
amounts. All funds in respect of the Bonds received and held by the Trustee
prior to distribution to Certificateholders may be of benefit to the Trustee
and do not bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct from
the Interest Account, and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the Trust
(as determined on the basis set forth under "Trust Expenses and Charges").
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Amounts so
withdrawn shall not be considered a part of the Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Interest and
Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee.
The estimated monthly, semi-annual or annual interest distribution
per Unit will initially be in the amount shown under Summary of Essential
Information and will change and may be reduced as Bonds mature or are
redeemed, exchanged or sold, or as expenses of the Trust fluctuate. No
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distribution need be made from the Principal Account until the balance therein
is an amount sufficient to distribute $1.00 per Unit.
Distribution Elections
Interest is distributed monthly, semi-annually or annually,
depending upon the distribution plan applicable to the Unit purchased. Record
Dates are the first day of each month for monthly distributions, the first day
of each June and December for semi-annual distributions and the first day of
each December for annual distributions. Payment Dates will be the fifteenth
day of each month following the respective Record Dates.
Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Every October each Certificateholder may change his distribution
election by notifying the Trustee in writing of such change between October 1
and November 1 of each year. (Certificateholders deciding to change their
election should contact the Trustee by calling the number listed on the back
cover hereof for information regarding the procedures that must be followed in
connection with this written notification of the change of election.) Failure
to notify the Trustee on or before November 1 of each year will result in a
continuation of the plan for the following 12 months.
Records
The Trustee shall furnish Certificateholders in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year the Trustee will furnish to each person who at any time
during the calendar year was a Certificateholder of record, a statement
showing (a) as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of Bonds and earned
original issue discount, if any), amounts paid for purchases of Replacement
Bonds and redemptions of Units, if any, deductions for applicable taxes and
fees and expenses of the Trust, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (b) as to the Principal Account: the
dates of disposition of any Bonds and the net proceeds received therefrom
(including any unearned original issue discount but excluding any portion
representing accrued interest), deductions for payments of applicable taxes
and fees and expenses of the Trust, amounts paid for purchases of Replacement
Bonds and redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (c) a list of the Bonds held and the
number of Units outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit based upon the last computation thereof made
such calendar year; and (e) amounts actually distributed to Certificateholders
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts representing the pro rata share
of each Unit outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate-
holders at all reasonable times during usual business hours, books of record
and account of its transactions as Trustee, including records of the names and
addresses of Certificateholders, Certificates issued or held, a current list
of Bonds in the portfolio and a copy of the Trust Agreement.
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TAX STATUS
All Bonds acquired by each Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax. Such interest may, however, be
subject to the federal corporate alternative minimum tax and to state and
local taxes. Neither the Sponsor nor the Trustee nor their respective counsel
have made any review of the proceedings relating to the issuance of the Bonds
or the bases for such opinion and express no opinion as to these matters, and
neither the Trustee nor the Sponsor nor their respective counsel has made an
independent examination or verification that the federal income tax status of
the Bonds has not been altered since the time of the original delivery of
those opinions.
The Revenue Reconciliation Act of 1993 ("P.L. 103-66") increases
maximum marginal income tax rates for individuals and corporations (generally
effective for taxable years beginning after December 31, 1992), extends the
authority to issue certain categories of tax-exempt bonds (qualified small
issue bonds and qualified mortgage bonds), limits the availability of capital
gain treatment for tax-exempt bonds purchased at a market discount, increases
the amount of Social Security benefits subject to tax (effective for taxable
years beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to the
effect of P.L. 103-66 on an investment in Units.
In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:
The Trusts are not associations taxable as corporations for
federal income tax purposes under the Internal Revenue Code of 1986 (the
"Code"), and income received by the Trusts that consists of interest
excludable from federal gross income under the Code will be excludable
from the federal gross income of the Certificateholders of such Trusts.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer-
tificateholder will be considered to have received his pro rata share of
Bond interest when it is received by that Trust, and the net income
distributable to Certificateholders that is exempt from federal income
tax when received by that Trust will constitute tax-exempt income when
received by the Certificateholders.
Gain (other than any earned original issue discount) realized on a
sale or redemption of the Bonds or on a sale of a Unit is, however,
includable in gross income for federal income tax purposes, generally as
capital gain, although gain on the disposition of a Bond or a Unit
purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market
discount. (It should be noted in this connection that such gain does
not include any amounts received in respect of accrued interest.) Such
gain may be long or short-term depending on the facts and circumstances.
Capital losses are deductible to the extent of capital gains; in
addition, up to $3,000 of capital losses of non-corporate Certificate-
holders may be deducted against ordinary income. Capital assets
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acquired on or after January 1, 1988 must be held for more than one year
to qualify for long-term capital gain treatment.
Each Certificateholder will realize taxable income or loss when
the Trust disposes of a Bond (whether by sale, exchange, redemption or
payment at maturity), as if the Certificateholder had directly disposed
of his pro rata share of such Bond. The gain or loss is measured by the
difference between (i) the tax cost of such pro rata share and (ii) the
amount received therefor. For this purpose, a Certificateholder's per
Unit tax cost for each Bond is determined by allocating the total tax
cost of each Unit among all the Bonds held in the Trust (in accordance
with the portion of the Trust comprised by each Bond). In order to
determine the amount of taxable gain or loss, the Certificateholder's
amount received is similarly allocated at that time. The Certificate-
holder may exclude from the amount received any amounts that represent
accrued interest or the earned portion of any original issue discount
but may not exclude amounts attributable to market discount. Thus, when
a Bond is disposed of by a Trust at a gain, taxable gain will equal the
difference between (i) the amount received and (ii) the amount paid plus
any original issue discount (limited, in the case of Bonds issued after
June 8, 1980, to the portion earned from the date of acquisition to the
date of disposition). Gain on the disposition of a Bond purchased at a
market discount generally will be treated as ordinary income, rather
than capital gain, to the extent of accrued market discount. No
deduction is allowed for the amortization of bond premium on tax-exempt
bonds, such as the Bonds, in computing regular federal income tax.
Discount generally accrues based on the principle of compounding
of accrued interest, not on a straight-line or ratable method, with the
result that the amount of earned original issue discount is less in the
earlier years and more in the later years of a bond term. The tax basis
of a discount bond is increased by the amount of accrued, tax-exempt
original issue discount thus determined. This method of calculation
will produce higher capital gains (or lower losses) to a Certificate-
holder, as compared to the results produced by the straight-line method
of accounting for original issue discount, upon an early disposition of
a Bond by the Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable gain or loss when a
Unit is sold or redeemed. The amount received is allocated among all
the Bonds in a particular Trust in the same manner as when that Trust
disposes of Bonds and the Certificateholder may exclude accrued interest
and the earned portion of any original issue discount (but not amounts
attributable to market discount). The return of a Certificateholder's
tax cost is otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross
income for taxpayers whose "modified adjusted gross income" combined
with a portion of their benefits exceeds a base amount. The base amount
is $25,000 for an individual, $32,000 for a married couple filing a
joint return and zero for married persons filing separate returns.
Interest on tax-exempt bonds is to be added to adjusted gross income for
purposes of computing the amount of Social Security benefits that are
includable in gross income and determining whether an individual's
income exceeds the base amount above which a portion of the benefits
would be subject to tax. For taxable years beginning after December 31,
1993, the amount of Social Security benefits subject to tax has been
increased.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount by
which the adjusted current earnings (which will include tax-exempt
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interest) of the corporation exceeds alternative minimum taxable income
(determined without regard to this item). Further, interest on the
Bonds is includable in a 0.12% additional corporate minimum tax imposed
by the Superfund Amendments and Reauthorization Act of 1986 for taxable
years beginning before January 1, 1996. In addition, in certain cases,
Subchapter S corporations with accumulated earnings and profits from
Subchapter C years will be subject to a minimum tax on excess "passive
investment income" which includes tax-exempt interest.
Under federal law, interest on Navigator Trust-held Bonds issued
by authority of the Government of Puerto Rico is exempt from regular
federal income tax, and state and local income tax in the United States
and Puerto Rico. The New York Navigator Insured Trust is not subject to
the New York State Franchise Tax on Business Corporations or the New
York City General Corporation Tax. Under the personal income tax laws
of the State and City of New York, the income of the New York Navigator
Insured Trust will be treated as the income of the Certificateholders.
Interest on the Bonds of the New York Navigator Insured Trust that is
exempt from tax under the laws of the State and City of New York when
received by the Trust will retain its status as tax-exempt interest to
its Certificateholders. In addition, non-residents of New York City
will not be subject to the New York City personal income tax on gains
derived with respect to their Units of the New York Navigator Insured
Trust. Non-residents of New York State will not be subject to New York
State personal income tax on such gains unless the Units are employed in
a business, trade or occupation carried on in New York State. A New
York State or New York City resident should determine his basis and
holding periods for his Units in the same manner for New York State and
New York City tax purposes as for federal tax purposes. For
corporations doing business in New York State, interest earned on state
and municipal obligations that are exempt from federal income tax,
including obligations of New York State, its political subdivisions and
instrumentalities, must be included in calculating New York State and
New York City entire net income for purposes of calculating New York
State and New York City franchise (income) tax.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the
income tax laws of any state or local government. The laws of such
states and local governments vary with respect to the taxation of such
obligations. See "Rights of Certificateholders" in this Part B.
The Insured Municipal Securities Trust is not subject to the New
York State Franchise Tax on Business Corporations or the New York City
General Corporation Tax. For a Certificateholder who is a New York
resident, however, a pro rata portion of all or part of the income of
the Trust will be treated as the income of the Certificateholder under
the income tax laws of the State and City of New York. Similar
treatment may apply in other states.
The exemption of interest on municipal obligations for federal
income tax purposes does not necessarily result in exemption under the income
tax laws of any state or political subdivision. In general, municipal bond
interest exempt from federal income tax is taxable income to residents of the
State or City of New York under the tax laws of those jurisdictions unless the
bonds are issued by the State of New York or one of its political subdivisions
or by the Commonwealth of Puerto Rico or one of its political subdivisions.
For corporations doing business in New York State, interest earned on state
and municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and instrumental-
ities, must be included in calculating New York State and New York City entire
net income for purposes of calculating New York State and New York City
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franchise (income) tax. The laws of the several states and local taxing
authorities vary with respect to the taxation of such obligations and each
Certificateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.
Any proceeds received pursuant to the terms of the insurance on
the Bonds that represent maturing interest on defaulted obligations will
be excludable from federal gross income if, and to the same extent that,
such interest would have been so excludable if paid by the issuers of
such defaulted obligations.
In the opinion of Freeman, Zeller & Bryant, special counsel to the
Sponsor on New Jersey tax matters, which opinion is made in reliance upon
certain information and based on certain assumptions respecting the New Jersey
Navigator Trust, under existing New Jersey law applicable to individuals who
are New Jersey residents and New Jersey estates and trusts:
The New Jersey Navigator Trust will be recognized as a trust
and not as an association taxable as a corporation.
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, estate
or trusts.
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).
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.
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
Certificateholders or through the New Jersey Navigator Trust, are
exempt from tax under the Act.
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 Law.
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.
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Therefore, interest on any such Bonds allocable to a Certificateholder who is
such a "substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of IRBs that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding tax-
exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of
other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current
or future owners or users of the facilities financed by the Bonds, the amount
of such persons' outstanding tax-exempt IRBs, or the facilities themselves,
and no assurance can be given that future events will not affect the tax-
exempt status of the Bonds. Investors should consult their tax advisors for
advice with respect to the effect of these provisions on their particular tax
situation.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for regular federal income tax purposes.
However, such interest is deductible for New York State and New York City
income tax purposes by corporations that are required to include interest on
the Bonds in New York State and New York City entire net income for purposes
of calculating New York State and City franchise (income) taxes. In addition,
under rules used by the Internal Revenue Service for determining when borrowed
funds are considered used for the purpose of purchasing or carrying particular
assets, the purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly traceable to
the purchase of Units. Also, in the case of certain financial institutions
that acquire Units, in general no deduction is allowed for interest expense
allocable to the Units.
From time to time proposals have been introduced before Congress
to restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trust, and it can be expected that
similar proposals may be introduced in the future.
In 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.
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LIQUIDITY
Sponsor Repurchase
The Sponsor, although not obligated to do so, intend to maintain a
secondary market for the Units and continuously to offer to repurchase the
Units. The Sponsor's secondary market repurchase price, after the initial
public offering is completed, will be based on the aggregate bid price of the
Bonds in the Trust portfolio, determined by the Evaluator on a daily basis,
and will be the same as the redemption price. The aggregated bid price is
determined by the Evaluation on a daily basis and 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 Bear, Stearns &
Co. Inc., 245 Park Avenue, New York, NY 10167 on behalf of the Sponsor. Units
received after 4 P.M., New York Time, will be deemed to have been repurchased
on the next business day. In the event a market is not maintained for the
Units, a Certificateholder may be able to dispose of Units only by tendering
them to the Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsor, subject to change, to repurchase units on
the basis of a price higher than the bid prices of the bonds in the trusts.
Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of this
Trust, although in all bond trusts, the purchase price of a unit depends
primarily on the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
re-offered for sale by the Sponsor at a price based on the aggregate bid price
of the Bonds in the Trust plus the applicable sales charge (see "Public
Offering Price" in Part A) plus net accrued interest. Any Units that are
purchased by the Sponsor in the secondary market also may be redeemed by the
Sponsor if it determines such redemption to be in its best interest.
The Sponsor may, under certain circumstances, as a service to
Certificateholders, elect to purchase any Units tendered to the Trustee for
redemption (see "Trustee Redemption"). Factors which the Sponsor will
consider in making a determination will include the number of Units of all
Trust which it has in inventory, its estimate of the salability and the time
required to sell such Units and general market conditions. For example, if in
order to meet redemptions of Units the Trustee must dispose of Bonds, and if
such disposition cannot be made by the redemption date (seven calendar days
after tender), the Sponsor may elect to purchase such Units. Such purchase
shall be made by payment to the Certificateholder not later than the close of
business on the redemption date of an amount equal to the Redemption Price on
the date of tender.
Trustee Redemption
Units may also be tendered to the Trustee for redemption at its
corporate trust office as set forth in Part A of this Prospectus, upon proper
delivery of Certificates representing such Units and payment of any relevant
tax. At the present time there are no specific taxes related to the
redemption of Units. No redemption fee will be charged by the Sponsor or the
Trustee. Units redeemed by the Trustee will be cancelled.
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Certificates representing Units to be redeemed must be delivered
to the Trustee and must be properly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing
satisfactory indemnity, as in the case of lost, stolen or mutilated
Certificates). Thus, redemptions of Units cannot be effected until
Certificates representing such Units have been delivered by the person seeking
redemption. (See "Certificates".) Certificateholders must sign exactly as
their names appear on the faces of their Certificates. In certain instances
the Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Within seven calendar days following a tender for redemption, or,
if such seventh day is not a business day, on the first business day prior
thereto, the Certificateholder will be entitled to receive in cash an amount
for each Unit tendered equal to the Redemption Price per Unit computed as of
the Evaluation Time set forth under "Summary of Essential Information" in
Part A on the date of tender. The "date of tender" is deemed to be the date
on which Units are received by the Trustee, except that with respect to Units
received after the close of trading on the New York Stock Exchange, the date
of tender is the next day on which such Exchange is open for trading, and such
Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell Bonds in order
to make funds available for redemptions. Such sales, if required, could
result in a sale of Bonds by the Trustee at a loss. To the extent Bonds are
sold, the size and diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each Unit
in the Trust determined by the Trustee on the basis of (i) the cash on hand in
the Trust or moneys in the process of being collected, (ii) the value of the
Bonds in the Trust based on the bid prices of such Bonds and (iii) interest
accrued thereon, less (a) amounts representing taxes or other governmental
charges payable out of the Trust, (b) the accrued expenses of the Trust and
(c) cash allocated for the distribution to Certificateholders of record as of
the business day prior to the evaluation being made. The Evaluator may
determine the value of the Bonds in the Trust (1) on the basis of current bid
prices of the Bonds obtained from dealers or brokers who customarily deal in
bonds comparable to those held by the Trust, (2) on the basis of bid prices
for bonds comparable to any Bonds for which bid prices are not available,
(3) by determining the value of the Bonds by appraisal, or (4) by any
combination of the above. The Evaluator will determine the aggregate current
bid price evaluation of the Bonds in the Trust, taking into account the market
value of the Bonds insured under the Bond Insurance Policy, in the manner
described as set forth under "Public Offering--Offering Price". Insurance
does not guarantee the market value of the Bonds or the Units, and while Bond
insurance represents an element of market value in regard to insured Bonds,
its exact effect, if any, on market value cannot be predicted.
The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer-
tificateholder at prices which will return to the Certificateholder an amount
in cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
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the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of redemption
and to postpone the date of payment of the Redemption Price per Unit for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor is not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual and
annual Certificateholders (except Texas residents*) may elect to have all
interest and principal distributions, if any, with respect to their Units
reinvested either in units of various series of "Insured Municipal Securities
Trust" or "Municipal Securities Trust" which will have been created shortly
before each semi-annual or annual Payment Date (a "Primary Series") or, if
units of a Primary Series are not available, in units of a previously formed
series of the Trust which have been repurchased by the Sponsor in the
secondary market or which constitute a portion of the Units of the Trust not
sold by the Sponsor prior to such Payment Date (a "Secondary Series") (Primary
Series and Secondary Series are hereafter collectively referred to as
"Available Series"). Series of "Municipal Securities Trustee" do not have
insurance. The first interest distribution to Certificateholders cannot be
reinvested unless such distribution is scheduled for June 15 or December 15 in
the case of semi-annual Certificateholders or December 15 in the case of
annual Certificateholders (each such date being referred to herein as the
"Plan Reinvestment Date").
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor at a
price equal to the aggregate offering price per Unit of the bonds in the
Available Series portfolio during the initial offering of the Available Series
or at the aggregate bid price per Unit of the Available Series if its initial
offering has been completed, plus a sales charge equal to 3.627% of the net
amount invested in such bonds or 3-1/2% of the Reinvestment Price per Plan
Unit, plus accrued interest, divided by one hundred (the "Reinvestment Price
per Plan Unit"). All Plan Units will be sold at this reduced sales charge of
3-1/2% in comparison to the regular sales charge on primary and secondary
market sales of Units in any series of "Municipal Securities Trust".
Participants in the Plan will have the opportunity to designate, in the
Authorization Form for the Plan, the name of a broker to whom the Sponsor will
allocate a sales commission of 1-1/2% of the Reinvestment Price per Plan Unit,
payable out of the 3-1/2% sales charge. If no such designation is made, the
Sponsor will retain the sales commission.
- --------
* Texas residents may elect to participate in the "Total Reinvestment Plan
for Texas Residents" hereinafter described.
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Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder
who is entitled to receive $130.50 interest income from the Trust would
acquire 13.05 Plan Units assuming that the Reinvestment Price per Plan Unit,
plus accrued interest, approximated $10 (Ten Dollars).
A semi-annual or annual Certificateholder may join the Plan at the
time he invests in Units of the Trust or any time thereafter by delivering to
the Trustee an Authorization Form which is available from brokers, any
Underwriter of the Units or the Sponsor. In order that distributions may be
reinvested on a particular Plan Reinvestment Date, the Authorization Form must
be received by the Trustee not later than the 15th day of the month preceding
such Date. Authorization Forms not received in time for a particular Plan
Reinvestment Date will be valid only for the second succeeding Plan
Reinvestment Date. Similarly, a participant may withdraw from the program at
any time by notifying the Trustee (see below). However, if written
confirmation of withdrawal is not given to the Trustee prior to a particular
distribution, the participant will be deemed to have elected to participate in
the Plan with respect to that particular distribution and his withdrawal would
become effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to Units
purchased in the Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased in the Trust) for each subsequent
distribution so long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from the Trust
in the opinion of the Sponsor, the authorization will be voided and
participants will be provided with both a notice of the material change and a
new Authorization Form which would have to be returned to the Trustee before
the Certificateholder would again be able to participate in the Plan. The
Sponsor anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from
all federal income tax, or the inclusion of bonds which were not rated "A" or
better by Standard & Poor's Corporation or Moody's Investors Service, Inc. on
the date such bonds were initially deposited in the Available Series
portfolio.
The Sponsor has the option at any time to use units of a Secondary
Series to fulfill the requirements of the Plan in the event units of a Primary
Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not
declared effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that
the quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered on
or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such Record
Dates are June 1 and December 1 of each year for semi-annual
Certificateholders, and December 1 of each year for annual Certificateholders.
On each Record Date the Sponsor will send a current Prospectus relating to the
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
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participant his regular semi-annual or annual distribution. If the Plan is so
suspended, it will resume in effect with the next Plan Reinvestment Date
assuming units of an Available Series are then being offered.
To aid a participant who might desire to withdraw either from the
Plan or from a particular distribution, the Trustee has established a toll
free number (see "Summary of Essential Information" in Part A) for
participants to use for notification of withdrawal, which must be confirmed in
writing prior to the Plan Reinvestment Date. Should the Trustee be so
notified, it will make the appropriate cash disbursement. Unless the
withdrawing participant specifically indicates in his written confirmation
that (a) he wishes to withdraw from the Plan for that particular distribution
only, or (b) he wishes to withdraw from the Plan for less than all units of
each series of "Municipal Securities Trust" or "Insured Municipal Securities
Trust" which he might then own (and specifically identifies which series are
to continue in the Plan), he will be deemed to have withdrawn completely from
the Plan in all respects. Once a participant withdraws completely, he will
only be allowed to again participate in the Plan by submitting a new
Authorization Form. A sale or redemption of a portion of a participant's Plan
Units will not constitute a withdrawal from the Plan with respect to the
remaining Plan Units owned by such participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual Cer-
tificateholder fail to have an annual distribution plan, such Certificate-
holder will be deemed to have elected the semi-annual plan of distribution,
and to participate in the Plan with respect to distributions made, in
connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash
may withdraw from the Plan with respect to such Plan Units and remain in the
Plan with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from
the Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor intends to maintain a
market for the Plan Units and continuously to offer to purchase Plan Units at
prices based upon the aggregate offering price of the Bonds in the Available
Series portfolio during the initial offering of the Available Series, or at
the aggregate bid price of the Bonds of the Available Series after its initial
offering has been completed. The Sponsor may discontinue such purchases at
any time. The aggregate bid price of the underlying bonds may be expected to
be less than the aggregate offering price. In the event that a market is not
maintained for Plan Units, a participant desiring to dispose of his Plan Units
may be able to do so only by tendering such Plan Units to the Trustee for
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.
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Any participant may tender his Plan Units for redemption to the
Available Series Trust. Participants may redeem Plan Units by making a
written request to the Trustee, at the address listed in the "Summary of
Essential Information" in Part A, on the Redemption Form supplied by the
Trustee. The redemption price per Plan Unit will be determined as set forth
in the "Insured Municipal Securities Trust" Prospectus of the Available Series
from which such Plan Unit was purchased following receipt of the request and
adjusted to reflect the fact that it relates to a Plan Unit. There is no
charge for the redemption of Plan Units.
The Trust Agreement requires that the Trustee notify the Sponsor
of any tender of Plan Units for redemption. So long as the Sponsor is
maintaining a bid in the secondary market, the Sponsor will purchase any Plan
Units tendered to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such
Plan Units on the date of tender not later than the day on which such Plan
Units otherwise would have been redeemed by the Trustee.
Participants in the Plan will not receive individual certificates
for their Plan Units unless the amount of Plan Units accumulated represents
$1,000 principal amount of bonds underlying such Units and, in such case, a
written request for certificates is made to the Trustee. All Plan Units will
be accounted for by the Trustee on a book entry system. Each time Plan Units
are purchased under the Plan, a participant will receive a confirmation
stating his cost, number of Units purchased and estimated current return.
Questions regarding a participant's statements should be directed to the
Trustee by calling the Trustee at the number set forth under "Summary of
Essential Information" in Part A of this Prospectus.
All expenses relating to the operation of the Plan will be borne
by the Sponsor. The Sponsor and the Trustee reserve the right to suspend,
modify or terminate the Plan at any time for any reason, including the right
to suspend the Plan if the Sponsor is unable or unwilling to establish a
Primary Series or is unable to provide Secondary Series Units. All
participants will receive notice of any such suspension, modification or
termination.
Total Reinvestment Plan For Texas Residents
Except as specifically provided under this section, and unless the
context otherwise requires, all provisions and definitions contained under the
heading "Total Reinvestment Plan" shall be applicable to the Total
Reinvestment Plan for Texas Residents ("Texas Plan").
Semi-annual and annual Certificateholders of the Trust who are
residents of Texas have the option prior to any semi-annual or annual
distribution to affirmatively elect to reinvest that distribution, including
both interest and principal, if any, in an Available Series.
A resident of Texas who is a semi-annual or annual Certificate-
holder may join the Texas Plan for any particular semi-annual or annual
distribution by delivering to the Trustee an Authorization Form For Texas
Residents ("Texas Authorization Form") specifically mentioning the date of the
particular semi-annual or annual distribution he wishes to reinvest. On or
about each semi-annual or annual Record Date, Texas Authorization Forms shall
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
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delivers a Texas Authorization Form to the Trustee may thereafter withdraw
said authorization by notifying the Trustee at its toll free telephone number
prior to a Plan Reinvestment Date. Such notification of withdrawal must be
confirmed in writing prior to the Plan Reinvestment Date. Under no
circumstances shall a Texas Authorization Form be provided or accepted by the
Trustee which provides for the reinvestment of distributions for more than one
Plan Reinvestment Date.
On or about each semi-annual and annual Record Date, the Sponsor
will send a current Prospectus relating to the Available Series being offered
on the next Plan Reinvestment Date along with a letter incorporating a Texas
Authorization Form which specifies the funds available for reinvestment,
reminds each participant that no Plan Units will be purchased for him unless
the Texas Authorization Form is received by the Trustee on or before that
particular Plan Reinvestment Date, and states that the Texas Authorization
Form is valid only for that particular semi-annual or annual distribution. If
the Available Series should materially differ from the Trust, the participant
will be provided with a notice of the material change and a new Texas
Authorization Form which would have to be returned to the Trustee before the
Certificateholder would again be able to participate in the Plan.
Each semi-annual and annual Certificateholder who has acquired
Plan Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, with respect to such Units, but such Certificate-
holder will not be deemed to participate in the Plan for any particular
distribution unless and until he delivers to the Trustee a Texas Authorization
Form pertaining to those Plan Units. (Should the Available Series from which
Plan Units are purchased for the account of an annual Certificateholder fail
to have an annual distribution plan, such Certificateholder will be deemed to
have elected the semi-annual plan of distribution, and to participate in the
Plan with respect to distributions made in connection with such Plan Units.)
TRUST ADMINISTRATION
Portfolio Supervision
Except for the purchase of Replacement Bonds or as discussed
herein, the acquisition of any Bonds for the Trust other than Bonds initially
deposited by the Sponsor is prohibited. Although it is the Sponsor's and
Trustee's intention not to dispose of Bonds insured pursuant to the Bond
Insurance in the event of default, nevertheless, the Sponsor may direct the
Trustee to dispose of Bonds upon (i) default in payment of principal or
interest on such Bonds, (ii) institution of certain legal proceedings with
respect to the issuers of such Bonds, (iii) default under other documents
adversely affecting debt service on such Bonds, (iv) default in payment of
principal or interest on other obligations of the same issuer or guarantor,
(v) with respect to revenue Bonds, decline in revenues and income of any
facility or project below the estimated levels calculated by proper officials
charged with the construction or operation of such facility or project or
(vi) decline in price or the occurrence of other market or credit factors that
in the opinion of the Sponsor would make the retention of such Bonds in the
Trust detrimental to the interests of the Certificateholders. If a default in
the payment of principal or interest on any of the Bonds occurs and if the
Sponsor fails to instruct the Trustee to sell or hold such Bonds, the Trust
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
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by the Trustee subject to the terms and conditions of the Agreement to the
same extent as the Bonds originally deposited. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the Bonds substituted therefor.
Trust Agreement, Amendment And Termination
The Trust Agreement may be amended by the Trustee, the Sponsor and
the Evaluator without the consent of any of the Certificateholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor
governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not adversely affect the interests of the
Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent
of the holders of Certificates evidencing 66-2/3% of the Units then
outstanding for the purpose of modifying the rights of Certificateholders;
provided that no such amendment or waiver shall reduce any Certificateholder's
interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the
holders of all Certificates. The Trust Agreement may not be amended, without
the consent of the holders of all Certificates then outstanding, to increase
the number of Units issuable or to permit the acquisition of any bonds in
addition to or in substitution for those initially deposited in the Trust,
except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of any
such amendment.
The Trust Agreement provides that the Trust shall terminate upon
the maturity, redemption or other disposition, as the case may be, of the last
of the Bonds held in the Trust but in no event is it to continue beyond the
end of the calendar year preceding the fiftieth anniversary of the execution
of the Trust Agreement. If the value of the Trust shall be less than the
minimum amount set forth under "Summary of Essential Information" in Part A,
the Trustee may, in its discretion, and shall when so directed by the Sponsor,
terminate the Trust. The Trust may also be terminated at any time with the
consent of the holders of Certificates representing 100% of the Units then
outstanding. In the event of termination, written notice thereof will be sent
by the Trustee to all Certificateholders. Within a reasonable period after
termination, the Trustee must sell any Bond remaining in the Trust, and, after
paying all expenses and charges incurred by the Trust, distribute to each
Certificateholder, upon surrender for cancellation of his Certificate for
Units, his pro rata share of the Interest and Principal Accounts.
The Sponsors
For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Sponsor is Bear, Stearns & Co. Inc., a
Delaware corporation, which is engaged in the underwriting, investment banking
and brokerage business and is a member of the National Association of
Securities Dealers, Inc. and all principal securities and commodities
exchanges, including the New York Stock Exchange, the American Stock Exchange,
the Midwest Stock Exchange and the Pacific Stock Exchange. Bear Stearns
maintains its principal business offices at 245 Park Avenue, New York, New
York 10167 and, since its reorganization from a partnership to a corporation
in October, 1985 has been a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Bear Stearns, through its predecessor entities, has been
engaged in the investment banking and brokerage business since 1923. Bear
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Stearns is the sponsor for numerous series of unit investment trusts,
including: A Corporate Trust, Series 1 (and Subsequent Series); New York
Municipal Trust, Series 1 (and Subsequent Series); Municipal Securities Trust,
Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent Series),
High Income Series 1 (and Subsequent Series), Multi-State Series 1 (and
Subsequent Series); Insured Municipal Securities Trust, Series 1-4 (Multiplier
Portfolio), Series 1 (and Subsequent Series), 5th Discount Series (and
Subsequent Series), Navigator Series (and Subsequent Series); Mortgage
Securities Trust, CMO Series 1 (and Subsequent Series); and Equity Securities
Trust, Series 1, Signature Series, Gabelli Communications Income Trust (and
Subsequent Series). The information included herein is only for the purpose
of informing investors as to the financial responsibility of the Sponsor and
its ability to carry out its contractual obligations.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Sponsors are Bear, Stearns & Co. Inc. 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. Bear, Stearns & Co. Inc. 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 Bear, Stearns & Co. Inc. shall act as sole Sponsor. If one of
the Sponsors fails to perform its duties under the Trust Agreement or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by
public authorities, that Sponsor may be discharged under the Trust Agreement
and a new Sponsor may be appointed or the remaining Sponsor may continue to
act as Sponsor.
Gruntal & Co., Incorporated, a Delaware corporation, operates a
regional securities broker/dealer from its main office in New York City and
branch offices in nine states and the District of Columbia. The firm is very
active in the marketing of investment companies and has signed dealer
agreements with every mutual fund group, as well as being the managing
distributor for The Home Group Money Market and Mutual Funds. Further,
through its Syndicate Department, Gruntal & Co. Incorporated has underwritten
a large number of Closed-End Funds and has been Co-Manager on the following
offerings: Cigna High Income Shares; Dreyfus New York Municipal Income, Inc.;
Franklin Principal Maturity Trust and Van Kampen Merritt Limited Term High
Income Trust. The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for
errors in judgment except in cases of its own willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the Trustee an
instrument of resignation executed by the Sponsor.
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.
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The Trustee
For certain of the Trusts as set forth in the "Summary of
Essential Information" in Part A, the Trustee is United States Trust Company
of New York, with its principal place of business at 770 Broadway, New York,
New York 10003. United States Trust Company of New York has, since its
establishment in 1853, engaged primarily in the management of trust and agency
accounts for individuals and corporations. The Trustee is a member of the New
York Clearing House Association and is subject to supervision and examination
by the Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The Trustee shall not be liable or responsible in any way for
taking any action, or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect
of the Bonds or the Trust which it may be required to pay under current or
future law of the United States or any other taxing authority having
jurisdiction. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Bonds pursuant to
the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and
appoint a successor as provided in the Trust Agreement. Notice of such
removal and appointment shall be mailed to each Certificateholder by the
Sponsor. If upon resignation of the Trustee no successor has been appointed
and has accepted the appointment within thirty days after notification, the
retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The resignation or removal of the Trustee becomes
effective only when the successor Trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor Trustee. Upon
execution of a written acceptance of such appointment by such successor
Trustee, all the rights, powers, duties and obligations of the original
Trustee shall vest in the successor.
Any corporation into which the Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Evaluator
The Evaluator is Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. with main offices located at 65 Broadway, New York, New
York 10006. The Evaluator is a wholly-owned subsidiary of McGraw Hill, Inc.
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The Evaluator is a registered investment advisor and also provides financial
information services.
The Trustee, the Sponsor and the Certificateholders may rely on
any evaluation furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the Trust
Agreement shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, the Sponsor or Certificateholders for errors in
judgment, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and
Trustee, and the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933, the
premiums on the Sponsor-Insured Bonds, initial preparation and printing of the
Certificates, legal expenses, advertising and selling expenses, expenses of
the Trustee including, but not limited to, an amount equal to interest accrued
on certain "when issued" bonds since the date of settlement for the Units,
initial fees and other out-of-pocket expenses. The fees of the Evaluator,
however, incurred during the initial public offering are paid directly by the
Trust.
The Sponsor will not charge the Trust a fee for its services as
such. (See "Sponsor's Profits".)
The Sponsor will receive for portfolio supervisory services to the
Trust an Annual Fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. The Sponsor's fee may exceed the
actual cost of providing portfolio supervisory services for this Trust, but at
no time will the total amount received for portfolio supervisory services
rendered to all series of the Municipal Securities Trust in any calendar year
exceed the aggregate cost to the Sponsor of supplying such services in such
year. (See "Portfolio Supervision".)
The Trustee will receive for its ordinary recurring services to
the Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust
Agreement, see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the Bonds
in the Trust after the initial public offering is completed, a fee in the
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
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of the Certificateholders by amounts not exceeding proportionate increases in
consumer prices for services as measured by the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel fees) of the Trustee incurred and
advances made in connection with its activities under the Trust Agreement,
including the expenses and costs of any action undertaken by the Trustee to
protect the Trust and the rights and interests of the Certificateholders; fees
of the Trustee for any extraordinary services performed under the Trust
Agreement; indemnification of the Trustee for any loss or liability accruing
to it without gross negligence, bad faith or willful misconduct on its part,
arising out of or in connection with its acceptance or administration of the
Trust; indemnification of the Sponsor for any losses, liabilities and expenses
incurred in acting as Sponsor of the Trust without gross negligence, bad faith
or willful misconduct on its part; and all taxes and other governmental
charges imposed upon the Bonds or any part of the Trust (no such taxes or
charges are being levied, made or, to the knowledge of the Sponsor,
contemplated). The above expenses, including the Trustee's fees, when paid by
or owing to the Trustee are secured by a first lien on the Trust. In
addition, the Trustee is empowered to sell Bonds in order to make funds
available to pay all expenses.
The accounts of the Trust shall be audited not less than annually
by independent public accountants selected by the Sponsor. So long as the
Sponsor maintains a secondary market, the Sponsor will bear any audit expense
which exceeds 50 cents per Unit. Certificateholders covered by the audit
during the year may receive a copy of the audited financials upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their Units
of this Trust for Units of one or more of any available series of Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust, A Corporate Trust or Equity Securities Trust
(the "Exchange Trusts") at a reduced sales charge as set forth below. Under
the Exchange Privilege, the Sponsor's repurchase price for units of the
Exchange Trust will be based on the aggregate bid price of the Bonds in the
Trust portfolio. Units in an Exchange Trust then will be sold to the Certifi-
cateholder at a price based on the aggregate offer price of the Bonds in the
Exchange Trust portfolio (or for Units of Equity Securities Trust, based on
the market value of the underlying securities in the Trust Equity portfolio)
during the initial public offering period of the Exchange Trust; or based on
the aggregate bid price of the Bonds in the Exchange Trust portfolio if its
initial public offering has been completed, plus accrued interest (or for
Units of Equity Securities Trust, based on the market value of the underlying
securities in the Trust Equity portfolio) and a reduced sales charge as set
forth below.
Except for Certificateholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of a Trust,
the sales charge applicable to the purchase of units of an Exchange Trust
shall be 1.5% per unit (or per 1,000 Units for the Mortgage Securities Trust
or per 100 Units for the Equity Securities Trust). For Certificateholders who
wish to exercise the Exchange Privilege within the first five months of their
purchase of Units of a Trust, the sales charge applicable to the purchase of
units of an Exchange Trust shall be the greater of (i) 1.5% per unit (or per
1,000 Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust), or (ii) an amount which when coupled with the sales charge
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paid by the Certificateholder upon his original purchase of Units of the Trust
at least equals the sales charge applicable in the direct purchase of units of
an Exchange Trust. The Exchange Privilege is subject to the following
conditions:
(1) The Sponsor must be maintaining a secondary market in both
the Units of the Trust held by the Certificateholder and the Units of
the available Exchange Trust. While the Sponsor has indicated their
intention to maintain a market in the Units of all Trusts sponsored by
it, the Sponsor is under no obligation to continue to maintain a
secondary market and therefore there is no assurance that the Exchange
Privilege will be available to a Certificateholder at any specific time
in the future. At the time of the Certificateholder's election to
participate in the Exchange Privilege, there also must be Units of the
Exchange Trust available for sale, either under the initial primary
distribution or in the Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new
funds in order to complete an exchange. Units of the Mortgage
Securities Trust may only be acquired in blocks of 1,000 Units. Units
of the Equity Securities Trust may only be acquired in blocks of 100
Units.
(3) The Sponsor reserves the right to modify, suspend or
terminate the Exchange Privilege. The Sponsor will provide
Certificateholders of the Trust with 60 days prior written notice of any
termination or material amendment to the Exchange Privilege, provided
that, no notice need be given if (i) the only material effect of an
amendment is to reduce or eliminate the sales charge payable at the time
of the exchange, to add one or more series of the Trust eligible for the
Exchange Privilege or to delete a series which has been terminated from
eligibility for the Exchange Privilege, (ii) there is a suspension of
the redemption of units of an Exchange Trust under Section 22(e) of the
Investment Company Act of 1940, or (iii) an Exchange Trust temporarily
delays or ceases the sale of its units because it is unable to invest
amounts effectively in accordance with its investment objectives,
policies and restrictions. During the 60 day notice period prior to the
termination or material amendment of the Exchange Privilege described
above, the Sponsor will continue to maintain a secondary market in the
units of all Exchange Trusts that could be acquired by the affected
Certificateholders. Certificateholders may, during this 60 day period,
exercise the Exchange Privilege in accordance with its terms then in
effect. In the event the Exchange Privilege is not available to a Cer-
tificateholder at the time he wishes to exercise it, the Certificate-
holder will immediately be notified and no action will be taken with
respect to his Units without further instructions from the Certificate-
holder.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to sell his Units and apply the proceeds from
the sale to purchase Units of one or more of the Exchange Trusts. If Units of
a designated, outstanding series of an Exchange Trust are at the time
available for sale and such Units may lawfully be sold in the state in which
the Certificateholder is a resident, the Certificateholder will be provided
with a current prospectus or prospectuses relating to each Exchange Trust in
which he indicates an interest. He may then select the Trust or Trusts into
which he desires to invest the proceeds from his sale of Units. The exchange
transaction will operate in a manner essentially identical to a secondary
market transaction except that units may be purchased at a reduced sales
charge.
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Example: Assume that after the initial public offering has been completed, a
Certificateholder has five units of a Trust with a current value of $700 per
unit which he has held for more than 5 months and the Certificateholder wishes
to exchange the proceeds for units of a secondary market Exchange Trust with a
current price of $725 per unit. The proceeds from the Certificateholder's
original units will aggregate $3,500. Since only whole units of an Exchange
Trust may be purchased under the Exchange Privilege, the Certificateholder
would be able to acquire four units (or 4,000 Units of the Mortgage Securities
Trust or 400 Units of the Equity Securities Trust) for a total cost of
$2,943.50 ($2,900 for units and $43.50 for the sales charge). The remaining
$556.50 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5-1/2% sales
charge times the public offering price).
The Conversion Offer
Certificateholders of any registered unit investment trust for
which there is no active secondary market in the units of such trust (a
"Redemption Trust") may elect to redeem such units and apply the proceeds of
the redemption to the purchase of available Units of one or more series of A
Corporate Trust, Municipal Securities Trust, Insured Municipal Securities
Trust, Mortgage Securities Trust, New York Municipal Trust or Equity
Securities Trust sponsored by Bear, Stearns & Co. Inc. (the "Conversion
Trusts") at the Public Offering Price for units of the Conversion Trust based
on a reduced sales charge as set forth below. Under the Conversion Offer,
units of the Redemption Trust must be tendered to the trustee of such trust
for redemption at the redemption price, which is based upon the aggregate bid
side evaluation of the underlying bonds in such trust and is generally about
1-1/2% to 2% lower than the offering price for such bonds (or for Units of
Equity Securities Trust, based on the market value of the underlying
securities in the Equity Trust portfolio). The purchase price of the units
will be based on the aggregate offer price of the underlying bonds in the
Conversion Trust portfolio during its initial offering period (or for Units of
Equity Securities Trust, based on the market value of the underlying
securities in the Equity Trust portfolio), or at a price based on the
aggregate bid price of the underlying bonds if the initial public offering of
the Conversion Trust has been completed, plus accrued interest (or for Units
of Equity Securities Trust, based on the market value of the underlying
securities in the Equity Trust portfolio) and a sales charge as set forth
below.
Except for Certificateholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of a Redemption
Trust, the sales charge applicable to the purchase of Units of the Conversion
Trust shall be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities
Trust or per 100 Units for the Equity Securities Trust). For
Certificateholders who wish to exercise the Conversion Offer within the first
five months of their purchase of units of a Redemption Trust, the sales charge
applicable to the purchase of Units of a Conversion Trust shall be the greater
of (i) 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust or
per 100 Units for the Equity Securities Trust) or (ii) an amount which when
coupled with the sales charge paid by the Certificateholder upon his original
purchase of units of the Redemption Trust at least equals the sales charge
applicable in the direct purchase of Units of a Conversion Trust. The
Conversion Offer is subject to the following limitations:
(1) The Conversion Offer is limited only to Certificateholders of
any Redemption Trust, defined as a unit investment trust for which there
is no active secondary market at the time the Certificateholder elects
to participate in the Conversion Offer. At the time of the
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Certificateholder's election to participate in the Conversion Offer,
there also must be available units of a Conversion Trust, either under a
primary distribution or in the Sponsor's secondary market.
(2) Exchanges under the Conversion Offer will be effected in
whole units only. Certificateholders will not be permitted to advance
any new funds in order to complete an exchange under the Conversion
Offer. Any excess proceeds from units being redeemed will be returned
to the Certificateholder. Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 units. Units of the Mortgage
Securities Trust may only be acquired in blocks of 100 Units.
(3) The Sponsor reserves the right to modify, suspend or
terminate the Conversion Offer at any time without notice to
Certificateholders of Redemption Trusts. In the event the Conversion
Offer is not available to a Certificateholder at the time he wishes to
exercise it, the Certificateholder will be notified immediately and no
action will be taken with respect to his units without further
instruction from the Certificateholder. The Sponsor also reserves the
right to raise the sales charge based on actual increases in the
Sponsor's costs and expenses in connection with administering the
program, up to a maximum sales charge of $20 per unit (or per 1,000
units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust).
To exercise the Conversion Offer, a Certificateholder of a
Redemption Trust should notify his retail broker of his desire to redeem his
Redemption Trust Units and use the proceeds from the redemption to purchase
Units of one or more of the Conversion Trusts. If Units of a designated,
outstanding series of a Conversion Trust are at that time available for sale
and if such Units may lawfully be sold in the state in which the
Certificateholder is a resident, the Certificateholder will be provided with a
current prospectus or prospectuses relating to each Conversion Trust in which
he indicates an interest. He then may select the Trust or Trusts into which
he decides to invest the proceeds from the sale of his Units. The transaction
will be handled entirely through the Certificateholder's retail broker. The
retail broker must tender the units to the trustee of the Redemption Trust for
redemption and then apply the proceeds of the redemption toward the purchase
of units of a Conversion Trust at a price based on the aggregate offer or bid
side evaluation per Unit of the Conversion Trust, depending on which price is
applicable, plus accrued interest and the applicable sales charge. The
certificates must be surrendered to the broker at the time the redemption
order is placed and the broker must specify to the Sponsor that the purchase
of Conversion Trust Units is being made pursuant to the Conversion Offer. The
Certificateholder's broker will be entitled to retain $5 of the applicable
sales charge.
Example: Assume a Certificateholder has five units of a Redemption Trust
which he has held for more than 5 months with a current redemption price of
$675 per unit based on the aggregate bid price of the underlying bonds and the
Certificateholder wishes to participate in the Conversion Offer and exchange
the proceeds for units of a secondary market Conversion Trust with a current
price of $700 per Unit. The proceeds from the Certificateholder's redemption
of units will aggregate $3,375. Since only whole units of a Redemption Trust
may be purchased under the Conversion Offer, the Certificateholder will be
able to acquire four units of the Conversion Trust (or 4,000 units of the
Mortgage Securities Trust or 400 Units of the Equity Securities Trust) for a
total cost of $3,045 ($3,000 for units and $45 for the sales charge). The
remaining $330 would be remitted to the Certificateholder in cash. If the
Certificateholder acquired the same number of Conversion Trust units at the
same time in a regular secondary market transaction, the price would have been
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<PAGE>
$3,165 ($3,000 for units and $165 sales charge, assuming a 5-1/2% sales charge
times the public offering price).
Description of the Exchange Trusts and the Conversion Trusts
A Corporate Trust may be an appropriate investment vehicle for an
investor who is more interested in a higher current return on his investment
(although taxable) than a tax-exempt return (resulting from the fact that the
current return from taxable fixed income securities is normally higher than
that available from tax-exempt fixed income securities). Municipal Securities
Trust and New York Municipal Trust may be appropriate investment vehicles for
an investor who is more interested in tax-exempt income. The interest income
from New York Municipal Trust is, in general, also exempt from New York State
and local New York income taxes, while the interest income from Municipal
Securities Trust is subject to applicable New York State and local New York
taxes, except for that portion of the income which is attributable to New York
obligations in the Trust portfolio, if any. The interest income from each
State Trust of the Municipal Securities Trust, Multi-State Series is, in
general, exempt from state and local taxes when held by residents of the state
where the issuers of bonds in such State Trusts are located. The Insured
Municipal Securities Trust combines the advantages of providing interest
income free from regular federal income tax under existing law with the added
safety of irrevocable insurance. Insured Navigator Series further combines
the advantages of providing interest income free from regular federal income
tax and state and local taxes when held by residents of the state where
issuers of bonds in such State Trusts are located with the added safety of
irrevocable insurance. Mortgage Securities Trust offers an investment vehicle
for investors who are interested in obtaining safety of capital and a high
level of current distribution of interest income through investment in a fixed
portfolio of collateralized mortgage obligations. Equity Securities Trust
offers investors an opportunity to achieve capital appreciation together with
a high level of current income.
Tax Consequences of the Exchange Privilege and the Conversion Offer
A surrender of units pursuant to the Exchange Privilege or the
Conversion Offer will constitute a "taxable event" to the Certificateholder
under the Code. The Certificateholder will realize a tax gain or loss that
will be of a long- or short-term capital or ordinary income nature depending
on the length of time the units have been held and other factors. A
Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such
Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
OTHER MATTERS
Legal Opinions
The legality of the Units offered hereby and certain matters
relating to federal tax law have been passed upon by Messrs. Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022, as counsel for the
Sponsor. Messrs. Carter, Ledyard & Milburn, Two Wall Street, New York, New
York 10005 have acted as counsel for United States Trust Company of New York.
Certain matters relating to New Jersey tax law have been passed upon by
Freeman, Zeller & Bryant, as special New Jersey counsel to the Sponsor.
Certain matters relating to Pennsylvania tax law have been passed upon by
Saul, Ewing, Remick & Saul, as special Pennsylvania counsel to the Sponsor.
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<PAGE>
Independent Auditors
The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A, have been examined by KPMG
Peat Marwick LLP, independent certified public accountants, for the periods
indicated in its reports appearing herein. The financial statements examined
by KPMG Peat Marwick LLP have been so included in reliance on its report given
upon its authority as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Corporation
A brief description of the applicable Standard & Poor's
Corporation rating symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard
& Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA -- This is the highest rating assigned by Standard & Poor's
to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
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
- --------
* As described by Standard & Poor's Corporation.
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<PAGE>
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest for bonds in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "BB" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings (Prov.) following a rating indicates the
rating is provisional, which assumes the successful completion of the project
being financed by the issuance of the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to
such likelihood and risk.
DESCRIPTION OF RATING ON THE UNITS*
A Standard & Poor's Corporation's rating on the units of an
investment trust (hereinafter referred to collectively as "units" and "fund")
is a current assessment of creditworthiness with respect to the investments
held by such fund. This assessment takes into consideration the financial
capacity of the issuers and of any guarantors, insurers, lessees, or
mortgagors with respect to such investments. The assessment, however, does
not take into account the extent to which fund expenses or portfolio asset
sales for less than the fund's purchase price will reduce payment to the unit
holder of the interest and principal required to be paid on the portfolio
assets. In addition, the rating is not a recommendation to purchase, sell, or
hold units, inasmuch as the rating does not comment as to market price of the
units or suitability for a particular investor.
Funds rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard & Poor's,
credit characteristics comparable to assets that are rated "AAA", or certain
short-term investments. Standard & Poor's defines its AAA rating for such
assets as the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is very strong.
- --------
* As described by Standard & Poor's Corporation.
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<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
9TH - 50TH DISCOUNT SERIES
SERIES 2 - 32
NEW YORK NAVIGATOR INSURED SERIES 1 - 16
NEW JERSEY NAVIGATOR INSURED SERIES 1 - 12
=============================================================================
AUTHORIZATION FOR INVESTMENT IN INSURED MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
___ Discount Series/Series _______.
I hereby authorize the United States Trust Company of New York, Trustee, to
pay all semi-annual or annual distributions of interest and principal (if any)
with respect to such units to the United States Trust Company of New York, as
TRP Plan Agent, who shall immediately invest the distributions in units of the
available series of Insured Municipal Securities Trust above or, if
unavailable, of other available series of Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- --------------------------------
Registered Holder (Print) Registered Holder (Print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State and Zip Code ____________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
==============================================================================
MAIL TO YOUR BROKER
OR
UNITED STATES TRUST COMPANY OF NEW YORK
ATTN: THE UNIT INVESTMENT DEPARTMENT, UNIT A
770 BROADWAY
NEW YORK, NEW YORK 10003
112677.1
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
SERIES 1 - 4 (MULTIPLIER PORTFOLIO)
SERIES 1 - 2 AND 1ST - 8TH DISCOUNT SERIES
==============================================================================
AUTHORIZATION FOR INVESTMENT IN MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
___ Discount Series/Series __________.
I hereby authorize The Bank of New York, Trustee to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of Insured Municipal
Securities Trust above or, if unavailable, of other available series of
Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__ all
respects to the terms and conditions of participation set forth in the
prospectus relating to such available series.
- ------------------------------------------- --------------------------------
Registered Holder (Print) Registered Holder (Print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name
Street Address
City, State and Zip Code
Salesman's Name ___________________________ Salesman's No.
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
==============================================================================
MAIL TO YOUR BROKER
OR
THE BANK OF NEW YORK
ATTN: UNIT INVESTMENT TRUST DIVISION
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<PAGE>
INDEX
Title Page INSURED
MUNICIPAL SECURITIES TRUST
Summary of Essential Information............A-5 (Unit Investment Trust)
Information Regarding the Trust.............A-7 Prospectus
Financial and Statistical Information.......A-8
Audit and Financial Information Dated: April 28, 1995
Report of Independent Accountants.........F-1
Statement of Net Assets...................F-2 Sponsor:
Statement of Operations...................F-3 Bear, Stearns & Co. Inc.
Statement of Changes in Net Assets........F-4 245 Park Avenue
Notes to Financial Statements.............F-5 New York, New York 10167
Portfolio.................................F-6 212-272-2500
The Trust.................................. 1
Risk Considerations....................... 15 (and for certain Trusts:)
Public Offering............................. 41 Gruntal & Co., Incorporated
Estimated Long Term Return and 14 Wall Street
Estimated Current Return.................. 42 New York, New York 10005
Rights of Certificateholders................ 43 212-267-8800
Tax Status.................................. 45
Liquidity................................... 50 Trustee:
Total Reinvestment Plan..................... 53
Trust Administration........................ 57 United States Trust Company
Trust Expenses and Charges.................. 60 of New York
Exchange Privilege and Conversion 770 Broadway
Offer..................................... 61 New York, New York 10003
Other Matters............................... 66 1-800-428-8890
Description of Bond Ratings................. 66
Description of Rating on the Units.......... 67 or
The Bank of New York
101 Barclay Street
New York, New York 10286
1-800-431-8002
Evaluator:
Parts A and B of this Prospectus do not
contain all of the information set forth in Kenny S&P
the registration statement and exhibits Evaluation Services,
relating thereto, filed with the Securities a division of
and Exchange Commission, Washington, D.C., J.J. Kenny Co., Inc.
under the Securities Act of 1933, and to 65 Broadway
which reference is made. New York, New York 10006
* * *
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the
Sponsor. The Trust is registered as a unit investment trust under the
Investment Company Act of 1940. Such registration does not imply that the
Trust or any of its Units have been guaranteed, sponsored, recommended or
approved by the United States or any state or any agency or officer thereof.
112677.1
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Signatures.
Consent of Independent Auditors.
Consent of Counsel (included in Exhibit 99.3.1).
Consents of the Evaluator and Confirmation of Ratings (included in
Exhibit 99.5.1).
The following exhibits:
99.1.1 -- Form of Reference Trust Agreement, as amended (filed as
Exhibit 1.1 to Amendment No. 1 to Form S-6 Registration
Statement Nos. 33-28384,33-29467, 33-31426 and 33-34944 of
Insured Municipal Securities Trust, Series 20, Series 22 & New
York Navigator Insured Series 1, 49th Discount Series,
Series 23 & New York Navigator Insured Series 2, and Series 24
& New York Navigator Insured Series 3, respectively, on
June 16, 1989, January 18, 1990, May 10, 1990 and June 28,
1990, respectively, and incorporated herein by reference).
99.1.1(a) -- Amended Reference Trust Agreement of Insured Municipal
Securities Trust, New York Navigator Insured Series 2,
including certain Amendments to Trust Indenture and Agreement
referred to under Exhibit 1.1.1 below (filed as Exhibit 1.1(a)
to Post-Effective Amendment No. 1 to Form S-6 Registration
Statement No. 33-31426 of Insured Municipal Securities Trust,
New York Navigator Insured Series 2 on May 1, 1991 and
incorporated herein by reference).
99.1.1 (b) -- Amended Reference Trust Agreement of Insured Municipal
Securities Trust, Series 24, including certain Amendments to
Trust Indenture and Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 1.1(b) to Post-Effective Amendment
No. 1 to Form S-6 Registration Statement No. 33-34944 of
Insured Municipal Securities Trust, Series 24 on May 1, 1991
and incorporated herein by reference).
99.1.1 (c) -- Amended Reference Trust Agreement of Insured Municipal
Securities Trust, New York Navigator Insured Series 3,
including certain Amendments to Trust Indenture and Agreement
referred to under Exhibit 1.1.1 below (filed as Exhibit 1.1(c)
to Post-Effective Amendment No. 1 to Form S-6 Registration
Statement No. 33-34944 of Insured Municipal Securities Trust,
New York Navigator Series 3 on May 1, 1991 and incorporated
herein by reference).
II-1
786.1
<PAGE>
*99.1.1.1 -- Trust Indenture and Agreement for Insured Municipal Securities
Trust, 47th Discount Series and Series 20 (and Subsequent
Series).
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).
*99.1.3.6 -- Certificate of Incorporation of Gruntal & Co., Incorporated, as
amended.
*99.1.3.7 -- By-Laws of Gruntal & Co., Incorporated, as amended.
99.1.4 -- Form of Agreement Among Underwriters (filed as Exhibit 1.4 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-28384
of Insured Municipal Securities Trust, Series 20 on June 16,
1989 and incorporated herein by reference).
99.1.5 -- Form of Insurance Policy of Financial Guaranty Insurance
Company for Sponsor-Insured Bonds (filed as Exhibit 1.5 to
Post-Effective Amendment No. 7 to Form S-6 Registration
Statement No. 33-26426 of Insured Municipal Securities Trust,
Series 15 on April 25, 1996 and incorporated herein by
reference).
99.1.5.1 -- Form of Insurance Policy of Bond Investors Guaranty for
Sponsor-Insured Bonds (filed as Exhibit 1.5.1 to Post-Effective
Amendment No. 7 to Form S-6 Registration Statement No. 33-26426
of Insured Municipal Securities Trust, Series 15 on April 25,
1996 and incorporated herein by reference).
99.1.5.2 -- Form of Insurance Policy of Municipal Bond Investors
Assurance Corporation (filed as Exhibit 1.5.2 to Post-
Effective Amendment No. 7 to Form S-6 Registration
Statement No. 33-26426 of Insured Municipal Securities
Trust, Series 15 on April 25, 1996 and incorporated
herein by reference).
99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-28384 of Insured
Municipal Securities Trust, Series 20 on June 16, 1989 and
incorporated herein by reference).
99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
delivery thereof and to the use of their name under the
headings "Tax Status" and "Legal Opinions" in the Prospectus
(filed as Exhibit 3.1 to Amendment No. 1 to Form S-6
Registration Statement Nos. 33-28384, 33-29467, 33-31426 and
33-34944 of Insured Municipal Securities Trust, Series 20,
Series 22 & New York Navigator Insured Series 1, 49th Discount
Series, Series 23 & New York Navigator Insured Series 2, and
Series 24 & New York Navigator Insured Series 3, respectively,
- --------
* Being filed by this Amendment.
II-2
II-2
786.1
<PAGE>
on June 16, 1989, January 18, 1990, May 10, 1990 and June 28,
1990, respectively, and incorporated herein by reference).
*99.5.1 -- Consents of the Evaluator and Confirmation of Ratings of
Standard & Poor's Corporation.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 99.6.0 to 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).
*99.6.1 -- Power of Attorney of Gruntal & Co., Incorporated, by its
officers and a majority of its Directors.
*99.7.0 -- Form of Agreement Among Co-Sponsors.
*27 -- Financial Data Schedule(s) (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-3
786.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Insured Municipal Securities Trust, Series 20, Series 22 & New
York Navigator Insured Series 1, 49th Discount Series, Series 23 & New York
Navigator Insured Series 2, and Series 24 & New York Navigator Insured
Series 3, certifies that it has met all of the requirements for effectiveness
of this Post-Effective Amendment to the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933. The registrant has duly caused
this Post-Effective Amendment to the Registration Statements to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 17th day of April, 1996.
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20, SERIES
22 & NEW YORK NAVIGATOR INSURED SERIES 1, 49TH
DISCOUNT SERIES, SERIES 23 & NEW YORK NAVIGATOR
INSURED SERIES 2, AND SERIES 24 & NEW YORK NAVIGATOR
INSURED SERIES 3
(Registrants)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: 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.
Name Title Date
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) April 17, 1996
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director )By: PETER J. DeMARCO
STEVEN W. DUFF Director ) Attorney-in-Fact*
BERNADETTE N. FINN Vice President )
LORRAINE C. HYSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )
- ---------------
* 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-4
786.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Insured Municipal Securities Trust, Series 20, Series 22 & New
York Navigator Insured Series 1, 49th Discount Series, Series 23 & New York
Navigator Insured Series 2, and Series 24 & New York Navigator Insured
Series 3, certifies that it has met all of the requirements for effectiveness
of this Post-Effective Amendment to the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933. The registrant has duly caused
this Post-Effective Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 17th day of April, 1996.
INSURED MUNICIPAL SECURITIES TRUST, SERIES 20, SERIES
22 & NEW YORK NAVIGATOR INSURED SERIES 1, 49TH
DISCOUNT SERIES, SERIES 23 & NEW YORK NAVIGATOR
INSURED SERIES 2, AND SERIES 24 & NEW YORK NAVIGATOR
INSURED SERIES 3
(Registrants)
GRUNTAL & CO., INCORPORATED
(Depositor)
By: ROBERT SABLOWSKY
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this
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 Gruntal & Co., Incorporated, the Depositor, in the capacities and on the
dates indicated.
Name Title Date
HOWARD SILVERMAN Chief Executive Officer and )
Director ) April 17, 1996
EDWARD E. BAO Executive Vice President and )
Director )
BARRY RICHTER Executive Vice President and )
Director ) By: ROBERT SABLOWSKY
ROBERT SABLOWSKY Executive Vice President and ) Attorney-in-Fact*
Director )
LIONEL G. HEST Senior Executive and Director )
- ---------------
* An executed copy of the power of attorney was filed as Exhibit 6.1 to
Registration Statement No. 33-36316 on August 10, 1990.
II-5
786.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in these Post-Effective Amendments to the Registration
Statements of our reports on the financial statements of Insured Municipal
Securities Trust, Series 20; Insured Municipal Securities Trust, Series 22;
Insured Municipal Securities Trust, New York Navigator Insured Series 1; Insured
Municipal Securities Trust, Discount Series 49; Insured Municipal Securities
Trust, Series 23; Insured Municipal Securities Trust, New York Navigator Insured
Series 2; Insured Municipal Securities Trust, Series 24 and Insured Municipal
Securities Trust, New York Navigator Insured Series 3 included herein and to the
reference to our firm under the heading "Independent Auditors" in the Prospectus
which is part of this Registration Statement.
KPMG PEAT MARWICK LLP
New York, New York
April 17, 1996
II-6
786.1
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
99.1.1 Form of Reference Trust Agreement, as
amended (filed as Exhibit 1.1 to Amendment
No. 1 to Form S-6 Registration Statement
Nos. 33-28384, 33-29467, 33-31426 and
33-34944 of Insured Municipal Securities
Trust, Series 20, Series 22 & New York
Navigator Insured Series 1, 49th Discount
Series, Series 23 & New York Navigator
Insured Series 2, and Series 24 & New York
Navigator Insured Series 3, respectively,
on June 16, 1989, January 18, 1990,
May 10, 1990 and June 28, 1990,
respectively, and incorporated herein by
reference).
99.1.1 (a) Amended Reference Trust Agreement of
Insured Municipal Securities Trust, New
York Navigator Insured Series 2, including
certain Amendments to Trust Indenture and
Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 1.1(a) to Post-
Effective Amendment No. 1 to Form S-6
Registration Statement No. 33-31426 of
Insured Municipal Securities Trust, New
York Navigator Insured Series 2 on May 1,
1991 and incorporated herein by
reference).
99.1.1 (b) Amended Reference Trust Agreement of
Insured Municipal Securities Trust,
Series 24, including certain Amendments to
Trust Indenture and Agreement referred to
under Exhibit 1.1.1 below (filed as
Exhibit 1.1(b) to Post-Effective Amendment
No. 1 to Form S-6 Registration Statement
No. 33-34944 of Insured Municipal
Securities Trust, Series 24 on May 1, 1991
and incorporated herein by reference).
99.1.1 (c) Amended Reference Trust Agreement of
Insured Municipal Securities Trust, New
York Navigator Insured Series 3, including
certain Amendments to Trust Indenture and
Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 1.1(c) to Post-
Effective Amendment No. 1 to Form S-6
Registration Statement No. 33-34944 of
Insured Municipal Securities Trust, New
York Navigator Series 3 on May 1, 1991 and
incorporated herein by reference).
99.1.1.1 Trust Indenture and Agreement for Insured
Municipal Securities Trust, 47th Discount
Series and Series 20 (and Subsequent
Series)...........................................
-1-
786.1
<PAGE>
Exhibit Description Page No.
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).
99.1.3.6 Certificate of Incorporation of Gruntal &
Co., Incorporated, as amended.....................
99.1.3.7 By-Laws of Gruntal & Co., Incorporated, as
amended...........................................
99.1.4 Form of Agreement Among Underwriters
(filed as Exhibit 1.4 to Amendment No. 1
to Form S-6 Registration Statement
No. 33-28384 of Insured Municipal
Securities Trust, Series 20 on June 16,
1989 and incorporated herein by
reference).
99.1.5 Form of Insurance Policy of Financial
Guaranty Insurance Company for Sponsor-
Insured Bonds (filed as Exhibit 1.5 to
Post-Effective Amendment No. 7 to Form S-6
Registration Statement No. 33-26426 of
Insured Municipal Securities Trust, Series
15 on April 25, 1996 and incorporated
herein by reference).
99.1.5.1 Form of Insurance Policy of Bond Investors
Guaranty for Sponsor-Insured Bonds (filed
as Exhibit 1.5.1 to Post-Effective
Amendment No. 7 to Form S-6 Registration
Statement No. 33-26426 of Insured
Municipal Securities Trust, Series 15 on
April 25, 1996 and incorporated herein by
reference).
99.1.5.2 Form of Insurance Policy of Municipal Bond
Investors Assurance Corporation (filed as
Exhibit 1.5.2 to Post-Effective Amendment
No. 7 to Form S-6 Registration Statement
No. 33-26426 of Insured Municipal
Securities Trust, Series 15 on April 25,
1996 and incorporated herein by
reference).
99.2.1 Form of Certificate (filed as Exhibit 2.1 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-28384
of Insured Municipal Securities Trust, Series 20 on
June 16, 1989 and incorporated herein by reference).
-2-
786.1
<PAGE>
Exhibit Description Page No.
99.3.1 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 3.1 to Amendment No. 1 to
Form S-6 Registration Statement
Nos. 33-28384, 33-29467, 33-31426 and
33-34944 of Insured Municipal Securities
Trust, Series 20, Series 22 & New York
Navigator Insured Series 1, 49th Discount
Series, Series 23 & New York Navigator
Insured Series 2, and Series 24 & New York
Navigator Insured Series 3, respectively,
on June 16, 1989, January 18, 1990,
May 10, 1990 and June 28, 1990,
respectively, and incorporated herein by
reference).
99.5.1 Consents of the Evaluator and Confirmation
of Ratings of Standard & Poor's
Corporation.....................................
99.6.0 Power of Attorney of Reich & Tang
Distributors L.P., the Depositor, by its
officers and a majority of its Directors
(filed as Exhibit 99.6.0 to 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).
99.6.1 Power of Attorney of Gruntal & Co.,
Incorporated, by its officers and a
majority of its Directors........................
99.7.0 Form of Agreement Among Co-Sponsors.
27 Financial Data Schedule(s) (for EDGAR
filing only).
-3-
786.1
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<TOTAL-ASSETS> 5143871
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28482
<TOTAL-LIABILITIES> 28482
<SENIOR-EQUITY> 5115389
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1046577
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 534487
<NET-ASSETS> 5115389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 397583
<OTHER-INCOME> 0
<EXPENSES-NET> 9495
<NET-INVESTMENT-INCOME> 388088
<REALIZED-GAINS-CURRENT> (83618)
<APPREC-INCREASE-CURRENT> 311173
<NET-CHANGE-FROM-OPS> 615643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 402455
<DISTRIBUTIONS-OF-GAINS> 698442
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 336
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 116659
<ACCUMULATED-GAINS-PRIOR> 579
<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> 1041.75
<PER-SHARE-NII> 71.80
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 128.53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 950.82
<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> 0000863533
<NAME> NY Nvgtr SERIES 3
<SERIES>
<NUMBER> 2
<NAME> Series 3
<S> <C>
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 5285196
<INVESTMENTS-AT-VALUE> 5955260
<RECEIVABLES> 122857
<ASSETS-OTHER> 4108
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6082226
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 242
<TOTAL-LIABILITIES> 242
<SENIOR-EQUITY> 6081983
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 137508
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 670064
<NET-ASSETS> 6081983
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 404240
<OTHER-INCOME> 0
<EXPENSES-NET> 9125
<NET-INVESTMENT-INCOME> 395115
<REALIZED-GAINS-CURRENT> 4505
<APPREC-INCREASE-CURRENT> 311690
<NET-CHANGE-FROM-OPS> 711310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 413714
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 82
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 98088
<ACCUMULATED-GAINS-PRIOR> 424
<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> 1062.79
<PER-SHARE-NII> 74.66
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1116.78
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
47th DISCOUNT SERIES and SERIES 20 (and Subsequent Series)
TRUST INDENTURE AND AGREEMENT
Among
BEAR, STEARNS & CO. INC.;
GRUNTAL & CO., INCORPORATED
As Depositors
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
and
STANDARD & POOR'S CORPORATION
As Evaluator
Dated: June 16, 1989
360298.1
<PAGE>
TRUST INDENTURE AND AGREEMENT
INSURED MUNICIPAL SECURITIES TRUST
47th DISCOUNT SERIES and SERIES 20 (and Subsequent Series)
CONTENTS
Page
INTRODUCTION .............................................................. 1
ARTICLE I - DEFINITIONS; CERTIFICATES................................ 3
Section 1.1. Definitions.................................. 3
Section 1.2. Form of Certificate.......................... 5
ARTICLE II - DEPOSIT OF BONDS; DECLARATION OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES........................... 7
Section 2.1. Deposit of Bonds............................. 7
Section 2.2. Declaration of Trust......................... 8
Section 2.3. Issue of Certificates........................ 8
Section 2.4. Form of Certificates......................... 8
Section 2.5. Certain Contracts Satisfactory............... 8
Section 2.6. Bond Insurance............................... 8
ARTICLE III - ADMINISTRATION OF TRUST................................ 9
Section 3.1. Initial Cost................................. 9
Section 3.2. Interest Account............................. 9
Section 3.3. Principal Account............................ 10
Section 3.4. Reserve Account.............................. 10
Section 3.5. Distributions................................ 11
Section 3.6. Distribution Statements...................... 15
Section 3.7. Sale of Bonds................................ 17
Section 3.8. Refunding Bonds.............................. 18
Section 3.9. Counsel...................................... 19
Section 3.10. Notice and Sale by Trustee................... 19
Section 3.11. Trustee Not to Amortize...................... 19
Section 3.12. Action by Trustee Regarding Bonds............ 19
Section 3.13. Notice of Change in Principal
Account.................................... 20
Section 3.14. Limited Replacement of Special
Bonds...................................... 20
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<PAGE>
ARTICLE IV - EVALUATION OF BONDS; EVALUATOR.......................... 22
Section 4.1. Evaluation of Bonds.......................... 22
Section 4.2. Compensation of Evaluator.................... 22
Section 4.3. Liability of Evaluator....................... 23
Section 4.4. Resignation, Removal and Other
Matters.....................................23
ARTICLE V - TRUST EVALUATION; REDEMPTION,
PURCHASE, TRANSFER, INTERCHANGE OR
REPLACEMENT OF CERTIFICATES.................................. 25
Section 5.1. Trust Evaluation............................. 25
Section 5.2. Redemptions by Trustee; Purchases
by Depositors.............................. 26
Section 5.3. Transfer or Interchange of Certificates...... 28
Section 5.4. Certificates Mutilated, Destroyed,
Stolen or Lost............................. 29
ARTICLE VI - TRUSTEE; REMOVAL OF DEPOSITORS.......................... 30
Section 6.1. General Definition of Trustee's
Liabilities, Rights and Duties;
Removal of Depositors...................... 30
Section 6.2. Books, Records and Reports................... 33
Section 6.3. Indenture and List of Bonds on File.......... 33
Section 6.4. Compensation................................. 34
Section 6.5. Removal and Resignation of the
Trustee; Successor......................... 34
Section 6.6. Qualifications of Trustee.................... 36
ARTICLE VII - DEPOSITORS............................................. 37
Section 7.1. Power of Attorney............................ 37
Section 7.2. Succession................................... 37
Section 7.3. Resignation of a Depositor................... 38
Section 7.4. Liability of Depositors and
Indemnification............................ 38
Section 7.5. Compensation................................. 39
ARTICLE VIII - RIGHTS OF CERTIFICATEHOLDERS.......................... 40
Section 8.1. Beneficiaries of Trust....................... 40
Section 8.2. Rights, Terms and Conditions................. 40
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<PAGE>
ARTICLE IX - ADDITIONAL COVENANTS; MISCELLANEOUS
PROVISIONS.................................................. 41
Section 9.1. Amendments................................... 41
Section 9.2. Termination.................................. 42
Section 9.3. Construction................................. 44
Section 9.4. Registration of Certificates................. 44
Section 9.5. Written Notice............................... 44
Section 9.6. Severability................................. 44
Section 9.7. Dissolution of Depositors Not to
Terminate.................................. 44
-------------
This Table of Contents does not constitute part of the Indenture.
360298.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
47th DISCOUNT SERIES
AND SERIES 20
(A UNIT INVESTMENT TRUST)
AND
SUBSEQUENT SERIES
TRUST INDENTURE AND AGREEMENT
DATED JUNE 16, 1989
This Trust Indenture and Agreement ("Indenture") dated June 16,
1989, among Bear, Stearns & Co. Inc., ("Bear Stearns"), Gruntal & Co.,
Incorporated ("Gruntal"), as Depositors, United States Trust Company of New
York, as Trustee and Standard & Poor's Corporation, as Evaluator.
WITNESSETH THAT
In consideration of the premises and of the mutual agreements herein
contained, the Depositors, the Trustee and the Evaluator agree as follows:
INTRODUCTION
The Depositors, concurrently with the execution and delivery hereof,
are establishing Insured Municipal Securities Trust, 47th Discount Series and
Series 20, wherein certain interest bearing obligations will be deposited by the
Depositors, to be held by the Trustee in trust for the use and benefit of the
registered holders of certificates of ownership to be issued as hereinafter
provided. The parties hereto are entering into this Indenture for the purpose of
establishing certain of the terms, covenants and conditions of Insured Municipal
Securities Trust, 47th Discount Series and Series 20 and of each additional
series of such Trust which may be established from time to time hereafter. For
Insured Municipal Securities Trust, 47th Discount Series and Series 20 and each
subsequent series of Insured Municipal Securities Trust (as to which this
Indenture is to be applicable) the parties hereto shall execute a separate
Reference Trust Agreement incorporating by reference this Indenture and
effecting any amendment, supplement or variation from or to this Indenture with
respect to the related series and specifying for that series (i) the Bonds
deposited in trust and the number of Units delivered by the Trustee in exchange
for the Bonds pursuant to Section 2.03; (ii) the initial fractional undivided
interest represented by each Unit; (iii) the First Record Date; (iv) the First
Payment Date; (v) the First Settlement Date; (vi) the
360298.1
<PAGE>
Evaluator's fee; (vii) the liquidation amount for purposes of Section 6.01(g);
(viii) the Trustee's fee and (ix) any other change or addition contemplated or
permitted by this Indenture.
-2-
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<PAGE>
ARTICLE I
Definitions; Certificates
Section 1.1. Definitions: Whenever used in this Indenture the
following words and phrases, unless the context clearly indicates otherwise,
shall have the following meanings:
(1) "Bonds" shall mean the bonds, including Contract Bonds, (i)
which are listed in Schedule A to the Reference Trust Agreement or (ii)
which have been received by the Trust in exchange, substitution or
replacement pursuant to Sections 3.08 and 3.14 hereof, as may from time to
time continue to be held as part of the Trust.
(2) "Business Day" shall mean any day other than a Saturday, Sunday,
or, in the City of New York, a legal holiday or a day on which banking
institutions are authorized by law to close.
(3) "Certificate" shall mean any one of the certificates
substantially in the form hereinafter recited executed by the Trustee and
the Depositors evidencing ownership of an undivided fractional interest in
the Trust.
(4) "Certificateholder" shall mean the registered holder of any
Certificate as recorded on the books of the Trustee, his legal
representatives and heirs and the successors of any corporation,
partnership or legal entity which is a registered holder of any
Certificate, and as such shall be deemed a beneficiary of the trust
created by the Indenture to the extent of his pro rata share thereof.
(5) "Contract Bonds" shall mean Bonds which are to be acquired by
the Trust pursuant to contracts, including (i) Bonds listed in Schedule A
to the Reference Trust Agreement, contracts for the purchase thereof which
have been assigned to the Trustee and cash or an irrevocable letter of
credit issued by a commercial bank in the amount required for such
purchase which has been delivered to the Trustee and (ii) Bonds which the
Depositors have contracted to purchase for the Trust pursuant to Section
3.14.
(6) "Depositors" shall mean Bear, Stearns & Co. Inc.
("Bear Stearns") or its successors and Gruntal & Co.,
Incorporated ("Gruntal") or its successors or any successor
Depositor appointed as herein provided.
(7) "Evaluator" shall mean Standard & Poor's Corporation, or its
successors or any successor evaluator appointed as herein provided.
-3-
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<PAGE>
(8) "First Payment Date" shall mean the date specified in Part II of
the Reference Trust Agreement.
(9) "First Record Date" shall mean the date specified in Part II of
the Reference Trust Agreement.
(10) "First Settlement Date" shall mean the date specified in Part
II of the Reference Trust Agreement.
(11) "Indenture" shall mean this Trust Indenture and Agreement as
originally executed or, if amended as herein provided, as so amended.
(12) "Insurance" shall mean the contract or contracts or policy or
policies of insurance obtained by the Depositors guaranteeing the
scheduled payment when due of the principal of and interest on the Bonds
(except Bonds held pursuant and subject to this Indenture which are
insured by individual policies of insurance which have been obtained by
the issuers of such Bonds (the "Pre-Insured Bonds")) held pursuant and
subject to this Indenture, together with the proceeds, if any, thereof
payable to or received by the Trustee for the benefit of the Trust and the
Certificateholders thereof or guaranteeing the stated payment of interest
and principal with respect to any such Bonds as long as they remain
outstanding.
(13) "Insurer" shall mean that bond insurance company from which the
Depositors have purchased Insurance or any corporation into which it may
be merged or with which it may be consolidated or any corporation
resulting from the merger or consolidation to which it shall be a party,
or any corporation succeeding to all or substantially all of its business,
or any successor bond insurer designated as such by operation of law.
(14) "Payment Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(15) "Plan Units" shall mean fractional units offered by the
Depositors pursuant to the reinvestment plans described in the final
prospectus of the Trust filed within the appropriate registration forms
under the Securities Act of 1933, and for which Plan Units the Trustee is
acting as Trustee.
(16) "Record Date" shall have the meaning assigned to it in Part II
of the Reference Trust Agreement.
(17) "Redemption Form" shall mean the form provided by the Trustee
at the request of holders of Plan Units for the purpose of redeeming such
Units, as such form may be
-4-
360298.1
<PAGE>
reasonably acceptable to the Depositors and the Trustee from
time to time.
(18) "Reference Trust Agreement" shall mean the Indenture for the
particular series of Insured Municipal Securities Trust into which the
terms of this Indenture are incorporated.
(19) The words "herein", "hereby", "herewith", "hereof",
"hereinafter", "hereunder", "hereinabove", "hereafter", "heretofore" and
similar words or phrases of reference and association shall refer to this
Indenture in its entirety.
(20) "Trust" shall mean the trust created by this Indenture, which
shall consist of the Bonds held pursuant and subject to this Indenture
together with all undistributed interest received or accrued thereon, and
any undistributed cash realized from the sale, redemption, liquidation, or
maturity thereof. Such amounts as may be on deposit in the Reserve Account
hereinafter established shall be excluded from the definition of the
Trust.
(21) "Trustee" shall mean United States Trust Company of New York,
or its successors or any successor Trustee appointed as herein provided.
(22) "Unit" shall mean the fractional undivided interest in and
ownership of the Trust initially specified in Part II of the Reference
Trust Agreement, the denominator of which shall be decreased by the number
of any such Units redeemed as provided in Section 5.02.
(23) Words importing singular number shall include the plural number
in each case and vice versa, and words importing person shall include
corporations and associations, as well as natural persons.
Section 1.2. Form of Certificate: The form of Cer- tificate
evidencing ownership of fractional undivided interests in each Trust shall be
substantially as follows:
-5-
360298.1
<PAGE>
No.
CERTIFICATE OF OWNERSHIP
--evidencing--
A Fractional Undivided Interest
--in--
INSURED MUNICIPAL SECURITIES TRUST
SERIES _____
- -------------------------
PLAN OF DISTRIBUTION
- -------------------------
CUSIP
This is to certify that ____________________________________________ is the
owner and registered holder of this Certificate evidencing the ownership of
unit(s) of fractional undivided interest in the above named Trust created under
the laws of the State of New York pursuant to the Trust Indenture and Agreement
among Bear, Stearns & Co. Inc. (and such other Depositors, if any, identified
therein) as Depositors, United States Trust Company of New York as Trustee, and
Standard & Poor's Corporation as Evaluator (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 asserts 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 holder in person or by his duly authorized attorney at the Trustees'
office upon surrender of this Certificate properly endorsed or accompanied by a
written instrument of transfer or 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 Depositors (referred to in the Indenture) and the manual signature
of an authorized signature of the Trustee.
Date: AGENT FOR THE DEPOSITORS
____________________________________________
Authorized Signatory
UNITED STATES TRUST COMPANY OF NEW YORK,
Trustee
By _________________________________________
Authorized Officer
-6-
360298.1
<PAGE>
ASSIGNMENT
For Value Received ____________________________________________
hereby sells, assigns and transfers unto ___________________________________
the within Certificate and does hereby irrevocably constitute and appoint
__________________________________________________________________________
attorney, to transfer the within Certificate on the books of the Trustee, with
full power of substitution in the premises.
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.
___________________________
Signature Guaranteed
[end of certificate]
ARTICLE II
Deposit of Bonds; Declaration of Trust;
Form and Issuance of Certificates
Section 2.1. Deposit of Bonds: The Depositors, concurrently with the
execution and delivery of the Reference Trust Agreement, have deposited with the
Trustee in trust the Bonds listed in Schedule A to the Reference Trust Agreement
in bearer form or registered in the name of the Trustee, or its nominee, or duly
endorsed in blank or accompanied by all necessary instruments of assignment and
transfer in proper form to be held, managed and applied by the Trustee as herein
provided. The Depositors shall deliver the Bonds listed on said Schedule A to
the Trustee which were not actually delivered concurrently with the execution
and delivery of the Reference Trust Agreement within 90 days after said
execution and delivery, or if the contract to buy such Bond between the
Depositors and seller is terminated by the seller thereof for any reason beyond
the control of the Depositors, the Depositors shall forthwith take the remedial
action specified in Section 3.14.
-7-
360298.1
<PAGE>
Section 2.2. Declaration of Trust: The Trustee declares that it
holds and will hold the Trust as Trustee in trust upon the trusts herein set
forth for the use and benefit of all present and future Certificateholders.
Section 2.3. Issue of Certificates: The Trustee hereby acknowledges
receipt of the deposit referred to in Section 2.1, and simultaneously with the
receipt of said deposit, has executed Certificates substantially in the form
above recited representing the ownership of the number of Units specified in
Part II of the Reference Trust Agreement.
Section 2.4. Form of Certificates: Each Certificate referred to in
Section 2.3 is, and each Certificate hereafter issued shall be, in substantially
the form hereinabove recited, numbered serially for identification, in fully
registered form, transferable only on the books of the Trustee as herein
provided, executed manually by an authorized officer of the Trustee and in
facsimile by an Associate Director of Bear, Stearns & Co. Inc., on behalf of the
Depositors.
Section 2.5. Certain Contracts Satisfactory: The Depositors approve
as satisfactory in form and substance the contracts to be assumed by the Trustee
with regard to any Bonds listed in Schedule A to the Reference Trust Agreement
and authorize the Trustee on behalf of the Trust to assume such contracts and
otherwise to carry out the terms and provisions thereof or to take other
appropriate action in order to complete the deposit of the Bonds covered thereby
into the Trust.
Section 2.6. Bond Insurance: Concurrently with the delivery to the
Trustee of the Bonds listed in Schedule A to the Reference Trust Agreement, the
Insurer has delivered to and deposited with the Trustee, the Insurance, the
premium of which is fully paid, to protect certain of such Bonds (as identified
in Schedule A to the Insurance) and the Certificateholders of the Trust against
nonpayment of scheduled principal and interest when due on any of such Bond or
Bonds.
The Trustee shall take all action deemed necessary or advisable by
it in connection with the Insurance to continue the Insurance in full force and
effect, provided however, that the Trustee shall not be required to pay any
Insurance premium, all in such manner as in its sole discretion shall appear to
result in the most protection and least expense to the Trust.
At all times during the existence of the Trust, the Insurance shall
provide for payment by the Insurer to the Trustee of any amounts of scheduled
principal and interest due, but not paid, by the issuer of the Bond. The Trustee
shall promptly notify the Insurer of any nonpayment or threatened nonpayment of
scheduled principal or interest and the Insurer shall, in
-8-
360298.1
<PAGE>
accordance with the terms of the policies, make payment to the Trustee of all
amounts of scheduled principal and interest at that time due, but not paid.
Notwithstanding any other provision hereof, upon the making of any
payment referred to in the preceding paragraphs, the Insurer shall succeed to
the rights of the Trustee under the Bond or Bonds involved to the extent of the
payments made. Concurrently with the payment of any amounts by the Insurer
occasioned by the nonpayment thereof by the issuer, the Trustee shall execute
and deliver to the Insurer any receipt, instrument or document required to
evidence the right of the Insurer in the Bond or Bonds involved to payment of
principal and/or interest thereon to the extent of the payments made by the
Insurer to the Trustee.
The Pre-Insured Bonds which are not insured by the Insurer, shall be
guaranteed from their respective date of issuance by the respective Insurance
Companies designated for each such Bond in the prospectus for the Trust. With
respect to such Pre-Insured Bonds in the Trust, the Trustee shall promptly
notify the respective insurers of any nonpayment of principal or interest on
such Bonds and if an insurer should fail to make payment to the Trustee within
30 days after receipt of such notice, the Trustee shall take all action against
such insurer deemed necessary by the Trustee to collect all amounts of principal
and interest at that time due, but not collected.
ARTICLE III
Administration of Trust
Section 3.1. Initial Cost: The cost of the initial preparation,
printing and execution of the Certificates and this Indenture, the initial fees
of the Trustee and its counsel, and the initial fees of the Evaluator and other
reasonable expenses in connection therewith, shall be paid by the Depositors,
provided, however, that the liability on the part of the Depositors for such
initial costs, fees and expenses shall not include any fees, costs or other
expenses incurred in connection herewith after the execution of this Indenture
and the deposit referred to in Section 2.1.
Section 3.2. Interest Account: The Trustee shall collect the
interest on the Bonds as it becomes payable (including all interest accrued but
unpaid prior to the date of deposit of the Bonds in trust and including that
part of the proceeds of the sale, liquidation, redemption or maturity of any
Bonds or the proceeds of Insurance which represents accrued interest thereon and
including all moneys representing penalties for the failure to make timely
payments on the Bonds, or as
-9-
360298.1
<PAGE>
liquidated damages for default or breach of any condition or term of the Bonds
or of any instrument underlying such Bonds) and credit such interest to a
separate account to be known as the "Interest Account "
Section 3.3. Principal Account: (a) The Bonds and all moneys (except
moneys held by the Trustee pursuant to subsection (b) hereof), other than
amounts credited to the Interest Account, received by the Trustee in respect of
the Bonds shall be credited to a separate account to be known as the "Principal
Account".
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Bonds or deposited to secure such purchases are hereby declared to be
held specially by the Trustee for such purchases and shall not be deemed to be
part of the Principal Account until (i) the Depositors fail to purchase timely a
Contract Bond and has not given the Failed Contract Notice (as defined in
Section 3.14) at which time the moneys and/or letters of credit attributable to
the Contract Bond not purchased by the Depositors shall be credited to the
Principal Account; or (ii) the Depositors have given the Trustee the Failed
Contract Notice at which time the moneys and/or letters of credit attributable
to failed contracts referred to in such Notice shall be credited to the
Principal Account; provided, however, that if the Depositors also notify the
Trustee in the Failed Contract Notice that they have purchased or entered into a
contract to purchase a New Bond (as defined in Section 3.14), the Trustee shall
not credit such moneys and/ or letters of credit to the Principal Account unless
the New Bond shall also have failed or is not delivered by the Depositors within
two business days after the settlement date of such New Bond, in which event the
Trustee shall forthwith credit such moneys and/or letters of credit to the
Principal Account. The Trustee shall in any case forthwith credit to the
Principal Account, and/or cause the Depositors to deposit in the Principal
Account, the difference, if any, between the purchase price of the failed
Contract Bond and the purchase price of the New Bond, together with any sales
charge and accrued interest applicable to such difference and distribute such
moneys to Certificateholders pursuant to Section 3.5.
Section 3.4. Reserve Account: From time to time the Trustee shall
withdraw from the cash on deposit in the Interest Account or the Principal
Account such amounts as it, in its sole discretion, shall deem requisite to
establish a reserve for any applicable taxes or other governmental charges that
may be payable out of or by the Trust. Such amounts so withdrawn shall be
credited to separate account which shall be known as the "Reserve Account". The
Trustee shall not be required to distribute to the Certificateholders any of the
amounts in the Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for payment of
any applicable taxes or other governmental
-10-
360298.1
<PAGE>
charges, then it shall promptly deposit such amounts in the appropriate account
from which withdrawn or, if the Trust has been terminated or is in the process
of termination, the Trustee shall distribute to each Certificateholder such
holder's interest in the Reserve Account in accordance with Section 9.2.
Section 3.5. Distributions: On the First Settlement Date, the
Trustee shall advance out of its own funds and cause to be deposited in and
credited to the Interest Account an amount equal to all interest accrued on the
Bonds but unpaid as of the First Settlement Date. Immediately after such
advance, the Trustee shall distribute out of the Interest Account to the
Depositors, as Certificateholder of record on the First Settlement Date, an
amount equal to the amount then credited to the Interest Account. The Trustee
shall be entitled to be reimbursed, without interest, out of the cash balance in
the Interest Account from time to time, for amounts advanced pursuant to this
Section 3.5 before it is required to make any additional distributions to
Certificateholders. Repayment of any advance made by the Trustee to the Interest
Account pursuant to this Section 3.5 shall be secured by a lien upon the Trust
prior to the interests of the Certificateholders. In the event the advance by
the Trustee is not reimbursed prior to the first distribution referred to in
Part II(e) hereof, the Trustee shall have the power to sell Bonds in the manner
provided in Section 5.2 hereof. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any sale of Bonds made
pursuant to this Section 3.5. The Trustee shall promptly notify the Depositors
of such action in writing and shall set forth in such notice the Bonds sold and
the proceeds received therefrom.
On or before each Record Date, the Trustee shall:
(a) Deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account, and pay to itself
individually the amounts that it is at the time entitled to receive
pursuant to Section 6.4 or pursuant to this Section 3.5.
(b) Deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account, and pay to the
Evaluator the amount that it is at the time entitled to receive pursuant
to Section 4.2.
(c) Deduct from the Interest Account, or, to the extent funds are
not available in such Account, from the Principal Account, and pay an
amount equal to the unpaid fees and expenses, if any, of counsel pursuant
to Section
3.9 as certified to it by the Depositors.
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(d) Deduct from the Interest Account, or to the extent funds are not
available in such Account, from the Principal Account one-twelfth of the
estimated annual amount that the Depositors are entitled to receive
pursuant to Section 7.4 and hold such amount without interest until such
time as it is payable to the Depositors as set forth below; provided that
the Trustee shall deduct from the Interest Account when making the first
monthly distribution, or to the extent funds are not available in such
Account, from the Principal Account an amount equal to a fraction of the
estimated annual amount that the Depositors are entitled to receive
pursuant to Section 7.4 in which the numerator is the number of months or
fraction thereof that Units in the Trust have been owned by a
Certificateholder other than the Depositors and the denominator is twelve.
On or before the first Payment Date after the conclusion of each
calendar year, the Trustee shall, upon certification in satisfactory form to the
Trustee, upon which the Trustee may rely, distribute to the Depositors from the
amount so held pursuant to the immediately preceding paragraph the amounts that
the Depositors are at the time entitled to receive pursuant to Section 7.4 on
account of their services theretofore performed and expenses theretofore
incurred.
On each semi-annual Payment Date or within a reasonable period of
time thereafter, the Trustee shall distribute by mail to each Certificateholder
of record at the close of business on the preceding Record Date, at the post
office address appearing on the registration books of the Trustee, such holder's
pro rata share of the balance in the Interest Account computed as of the Record
Date on the basis of one-half of the estimated annual interest income to the
Trust for the ensuing twelve months, after deduction of the estimated costs and
expenses to be incurred during such period except that the first distribution
will be in the amount specified in the prospectus for any trust created under
this Indenture.
In the event the amount on deposit in the Interest Account on a
semi-annual Payment Date is not sufficient for the payment of the amount of
interest to be distributed on the basis of the aforesaid computation, the
Trustee shall advance out of its own funds and cause to be deposited in and
credited to the Interest Account such amount as may be required to permit
payment of the interest distribution to be made on such Payment Date and shall
be entitled to be reimbursed, without interest, out of interest received by the
Trust on the first Record Date following the date of such advance on which such
reimbursement may be made without reducing the amount in the Interest Account to
an amount less than that required for the next ensuing interest distribution.
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In lieu of the semi-annual distributions of interest provided above,
a Certificateholder may elect to receive monthly payments from the Interest
Account. Certificateholders desiring to receive monthly distributions and who
purchase their Certificates prior to the Record Date for the first distribution
may elect at the time of purchase to receive distributions on a monthly basis by
notice to the Trustee. Such notice shall be effective with respect to subsequent
distributions until changed by further notice to the Trustee. In October of each
year after the initial public offering of the Units, the Trustee shall furnish
each Certificateholder a card to be returned to the Trustee by November 1 of
such year if the Certificateholder wishes to change his plan of distribution.
Those wishing to change shall so indicate on the card and return it to the
Trustee and accompany the card by the surrender of the Certificate to which it
relates. Changes may be made only as herein provided and will become effective
as of the following December 2 to continue until further notice.
For monthly distributions, the share of the balance in the Interest
Account to be distributed to a Certificateholder who has elected to receive
monthly distributions, after the first distribution (which shall be in the
amount specified in the prospectus for any trust created under this Indenture),
shall be computed as of each monthly Record Date, and distribution made as
provided herein on or shortly after the fifteenth day of the month of
computation to the Certificateholder of record on such date of computation. Such
computation shall be made on the basis of one-twelfth of the estimated annual
interest income to the Trust for the ensuing twelve months for the account of
Certificateholders who have elected to receive monthly distributions, after
deduction of the estimated costs and expenses to be incurred on behalf of such
Certificateholders during the twelve month period for which such interest income
has been estimated.
For annual distributions, the share of the balance in the Interest
Account to be distributed to a Certificateholder who has elected to receive
annual distributions, after the first distribution (which shall be in the amount
specified in the prospectus for any trust created under this Indenture), shall
be computed as of each annual Record Date, and distribution made as provided
herein on or shortly after the fifteenth day of the month of computation to the
Certificateholder of record on such date of computation. Such computation shall
be made on the basis of the estimated annual interest income to the Trust for
the ensuing twelve months for the account of Certificateholders who have elected
to receive annual distributions, after deduction of the estimated costs and
expenses to be incurred on behalf of such Certificateholders during the twelve
month period for which such interest income has been estimated.
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To the extent practicable, the Trustee shall allocate the expenses
of the Trust among Units, giving effect to differences in administrative and
operational cost among those who have chosen to receive distributions monthly,
semi-annually and annually.
In the event the amount on deposit in the Interest Account for a
monthly distribution is not sufficient for the payment of the amount of interest
to be distributed to Certificateholders participating in such distribution on
the basis of the aforesaid computation, the Trustee shall advance out of its own
funds and cause to be deposited in and credited to the Interest Account such
amounts as may be required to permit payment of the monthly interest
distribution to be made as aforesaid and shall be entitled to be reimbursed,
without interest, out of interest received by the Trust subsequent to the date
of such advance and subject to the condition that the funds in or available for
the Interest Account will not be reduced in an amount less than required for the
next ensuing distribution of interest. Distributions to Certificateholders who
are participating in either of the optional plans for distribution of interest
shall not be affected because of advancements by the Trustee for the purpose of
equalizing distributions to Certificateholders participating in the other plan.
On each semi-annual Payment Date or within a reasonable period of
time thereafter, the Trustee shall distribute by mail to each Certificateholder
of record at the close of business on the preceding Record Date, at the post
office address appearing on the registration books of the Trustee, such holder's
pro rata share of the cash balance of the Principal Account computed as of the
Record Date. The Trustee shall not be required to make a distribution from the
Principal Account unless the cash balance on deposit therein available for
distribution shall be sufficient to permit distribution of at least $1.00 per
Unit.
If the Depositors (i) fail to replace any failed Special Bond or
(ii) are unable or fail to enter into any contract for the purchase of any New
Bond in accordance with Section 3.14, the Trustee shall distribute to all
Certificateholders the principal, accrued interest and sales charge attributable
to such Special Bonds at the next Monthly Payment Date which is more than thirty
days after the expiration of the Purchase Period (as defined in Section 3.14) or
at such earlier time or in such manner as the Trustee in its sole discretion
deems to be in the best interest of the Certificateholders.
If any contract for a New Bond in replacement of a Special Bond
shall fail, the Trustee shall distribute the principal, accrued interest and
sales charge attributable to the Special Bond to the Certificateholders at the
next Monthly
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Payment Date which is more than thirty days after the date on which the contract
in respect of such New Bond failed or at such earlier time or in such earlier
manner as the Trustee in its sole discretion determines to be in the best
interest of the Certificateholders.
If, at the end of the Purchase Period, less than all moneys
attributable to a failed Special Bond have been applied or allocated by the
Trustee pursuant to a contract to purchase New Bonds, the Trustee shall
distribute the remaining moneys to Certificateholders at the next Monthly
Payment Date which is more than thirty days after the end of the Purchase Period
or at such earlier time thereafter as the Trustee in its sole discretion deems
to be in the best interest of the Certificateholders.
The amounts to be distributed to each Certificateholder shall be
that pro rata share of the cash balance of the Interest and Principal Accounts,
computed as set forth above, as shall be represented by the Units evidenced by
the outstanding Certificate or Certificates registered in the name of such
Certificateholder.
In the computation of each such share, fractions of less than one
cent shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Interest Account or the Principal Account shall be held
in the same manner as other amounts subsequently deposited in each such
accounts, respectively.
For the purpose of distribution, as herein provided, the holders of
record on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Certificateholder of record. Nothing herein shall be construed to
prevent the payment of amounts from the Interest Account and the Principal
Account to individual Certificateholders by means of one check, draft or other
proper instrument, provided that the appropriate statement of such distribution
shall be furnished therewith as provided in Section 3.6 hereof.
Section 3.6. Distribution Statements: With each distribution from
the Interest or Principal Accounts the Trustee shall set forth, either in the
instrument by means of which payment of such distribution is made or in an
accompanying statement the amount being distributed from each such account
expressed as a dollar amount per Unit.
In the event that the issuer of any of the Bonds shall fall to make
payment when due of any interest or principal and such failure results in a
change in the amount which would otherwise be paid as a distribution of interest
the Trustee shall, with the first such distribution to each Certificateholder
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following such failure, set forth in an accompanying statement (a) the name of
the issuer and the Bond, (b) the amount of the reduction in the distribution per
Unit resulting from such failure, (c) the percentage of the aggregate principal
amount of Bonds which such Bond represents, and (d) to the extent then
determined, information regarding any disposition or legal action with respect
to such Bonds.
Within a reasonable period of time after the last business day of
each calendar year, the Trustee shall furnish to each person who at any time
during such calendar year was a Certificateholder a statement setting forth,
with respect to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds,
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.14, and for redemptions of Units pursuant to Section 5.2,
(3) the deductions for applicable taxes and fees and expenses
of the Trustee, the Evaluator and counsel pursuant to Section 3.9,
the annual audit fees referred to in Section 6.2 and the annual fee
of the Depositors for portfolio supervisory services pursuant to
Section 7.4, and
(4) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last business day of such
calendar year;
(B) as to the Principal Account:
(1) the date and the net proceeds received from the sale,
maturity, liquidation or redemption of any of the Bonds, excluding
any portion thereof credited to the Interest Account,
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.14, and for redemptions of Units pursuant to Section 5.2,
(3) the deductions for payment of applicable taxes and fees
and expenses of the Trustee, the Evaluator and counsel pursuant to
Section 3.9, the annual audit fees referred to in Section 6.4 and
the annual fee of the Depositors for portfolio supervisory services
pursuant to Section 7.4, and
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(4) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last business day of such
calendar year; and
(C) the following information:
(1) a list of Bonds disposed of or acquired during such
calendar year and a list of Bonds as of the last business day of
such calendar year,
(2) the number of Units outstanding on the last
business day of such calendar year,
(3) the Net Asset Value per Unit based on the last Trust
Evaluation made during such calendar year, and
(4) the amounts actually distributed to Certificateholders
during such calendar year from the Interest and Principal Accounts,
separately stated, expressed both as total dollar amounts and as
dollar amounts per Unit outstanding on the Record Dates for such
distributions and the status of such distributions for Federal
income tax purposes.
Section 3.7. Sale of Bonds: In order to maintain the sound
investment character of the Trust, the Depositors may direct the Trustee to sell
or liquidate Bonds at such prices and times and in such manner as shall be
determined by the Depositors, provided that the Depositors have determined that
any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the
payment of principal or interest when due and payable;
(b) that any action or proceeding has been instituted at law or in
equity seeking to restrain or enjoin the payment of principal or interest
on any such Bond or that there exists any other legal question or
impediment affecting such Bonds or the payment of principal or interest
thereon;
(c) that there has occurred any breach of covenant or warranty in
any trust indenture or other document relating to the issuer or guarantor
of the Bonds which would adversely affect either immediately or
contingently the payment of debt service on such Bonds, or their general
credit standing, or otherwise impair the sound investment character of
such Bonds;
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(d) that there has been a default in the payment of principal of or
interest on any other outstanding obligations of an issuer or guarantor of
such Bonds;
(e) that in the case of revenue Bonds, the revenues and income of
the facility or project or other special funds expressly charged and
pledged for debt service on any such Bonds shall fall substantially below
the estimated revenues or income calculated by the engineers or other
proper officials charged with the acquisition, construction or operation
of such facility or project, so that, in the opinion of the Depositors,
the retention of such Bonds would be detrimental to the sound investment
character of the Trust and to the interests of the Certificateholders; or
(f) that the price of any such Bonds has declined to such an extent,
or such other market or credit factor exists, that in the opinion of the
Depositors the retention of such Bonds would be detrimental to the
interests of the Certificateholders.
Upon receipt of such direction from the Depositors, upon which the
Trustee shall rely, the Trustee shall proceed to sell the specified Bonds in
accordance with such direction. The Trustee shall not be liable or responsible
in any way for depreciation or loss incurred by reason of any sale made pursuant
to any such direction, or by reason of the failure of the Depositors to give any
such direction, and in the absence of such direction the Trustee shall have no
duty to sell any Bonds under this Section 3.7 except to the extent otherwise
required by Section 3.10 of this Indenture. All proceeds from the disposition of
Bonds pursuant to this Section 3.7 which represent accrued interest thereon
shall be deposited in the Interest Account and the balance thereof in the
Principal Account and shall thereafter be distributed in accordance with Section
3.5.
Section 3.8. Refunding Bonds: In the event that an offer shall be
made to issue new securities in exchange or substitution for any issue of Bonds
pursuant to a plan for the refunding or refinancing of such Bonds, or an
exchange offer therefor; or tenders of Bonds for sinking fund or other cash
redemptions shall be solicited, the Depositors shall instruct the Trustee in
writing to reject such offer and either to hold or sell such Bonds, except that
if (1) the issuer is in default with respect to such Bonds or (2) in the opinion
of the Depositors, given in writing to the Trustee, the issuer will probably
default with respect to such Bonds in the reasonably foreseeable future, the
Depositors shall instruct the Trustee in writing to accept or reject such offer
to take any other action with respect thereto as the Depositors may deem proper.
Any security so received in exchange shall be deposited hereunder and shall be
subject to the terms and conditions of this Indenture to the same extent as the
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Bonds originally deposited hereunder. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder, including an identification of the Bonds eliminated and the
Bonds substituted therefor.
Section 3.9. Counsel: The Depositors may employ from time to time as
they may deem necessary a firm of attorneys for any legal services that may be
required in connection with the disposition of Bonds pursuant to Section 3.7 or
the substitution of any securities for Bonds as the result of any refunding
permitted under Section 3.8. The fees and expenses of such counsel shall be paid
by the Trustee from the Interest and Principal Accounts as provided for in
Section 3.5(c) hereof.
Section 3.10. Notice and Sale by Trustee: If at any time the
principal of or interest on any of the Bonds shall be in default and not paid or
provision for payment thereof shall not have been duly made, the Trustee shall
notify the Depositors thereof. If within thirty days after such notification the
Depositors have not given any instruction in writing to sell or to hold or has
not taken any other action in connection with such Bonds, the Trustee shall sell
such Bonds forthwith, and the Trustee shall not be liable or responsible in any
way for depreciation or loss incurred by reason of such sale.
Section 3.11. Trustee Not to Amortize: Nothing in this Indenture, or
otherwise, shall be construed to require the Trustee to make any adjustments
between the Interest and Principal Accounts by reason of any premium or discount
in respect of any of the Bonds.
Section 3.12. Action by Trustee Regarding Bonds: In the event that
the Trustee shall have been notified at any time of any action to be taken or
proposed to be taken by holders of the Bonds (including but not limited to the
making of any demand, direction, request, giving of any notice, consent or
waiver or the voting with respect to any amendment or supplement to any
indenture or other instrument under or pursuant to which the Bonds have been
issued) the Trustee shall promptly notify the Depositors and shall thereupon
take such action or refrain from taking such action as the Depositors shall in
writing direct; provided, however, that if the Depositors shall not within five
business days of the giving of such notice to the Depositors direct the Trustee
to take or refrain from taking any action, the Trustee shall take such action as
it, in its sole discretion, shall deem advisable. Neither the Depositors nor the
Trustee shall be liable to any person for any action or failure to take action
with respect to this Section 3.12.
Section 3.13. Notice of Change in Principal Account: The Trustee
shall give prompt written notice to the Depositors
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and the Evaluator of all amounts credited to or withdrawn from the Principal
Account pursuant to any provisions of this Article III, and the balance of such
account after giving effect to such credit of withdrawal.
Section 3.14. Limited Replacement of Special Bonds: If any contract
in respect of Contract Bonds other than a contract to purchase a New Bond (as
defined below), including those purchased on a when, as and if issued basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositors or the Trustee (such failed Contract Bonds being herein called the
"Special Bonds"), the Depositors shall notify the Trustee, (such notice being
herein called the "Failed Contract Notice") of its inability to deliver the
failed Special Bond to the Trustee after it is notified in writing that the
Special Bond will not be delivered by the seller thereof to the Depositor. Prior
to, or simultaneously with, giving the Trustee the Failed Contract Notice, or
within a maximum of twenty days after giving such Notice (such twenty day period
being herein called the "Purchase Period"), the Depositors shall, if possible,
purchase or enter into the contract, if any, to purchase an obligation to be
held as a Bond hereunder (herein called the "New Bond") as part of the Trust in
replacement of the failed Special Bond, subject to the satisfaction of all of
the following conditions in the case of each purchase or contract to purchase:
(a) The New Bonds (i) shall be tax exempt bonds issued by states or
their political subdivisions, (ii) shall have a fixed maturity date
(whether or not entitled to the benefits of any sinking, redemption,
purchase or similar fund) not exceeding the date of maturity of the
Special Bond it replaces and not less than ten years after the date of
purchase, (iii) shall bear fixed interest at a rate not less than that of
the Special Bond which it replaces, and shall be purchased at a price that
results in a yield to maturity at least equal to that of the Special Bond
it replaces on the date the Special Bond was deposited in the Trust, (iv)
shall be payable as to principal and interest in United States currency,
and (v) shall not be a when, as and if issued Bond.
(b) Each New Bond shall be (i) insured by a municipal bond guaranty
insurance policy and shall have the benefit of such insurance under terms
equivalent to the insurance with respect to the Failed Bond and (ii) shall
not cause Units of the Trust to cease to be rated AAA by Standard & Poor's
Corporation.
(c) The purchase price of the New Bonds (exclusive of accrued
interest) shall not exceed the principal attributable to the Special
Bonds.
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(d) The Depositors shall furnish a notice to the Trustee (which may
be part of the Failed Contract Notice) in respect of the New Bond
purchased or to be purchased that shall (i) identify the New Bonds, (ii)
state that the contract to purchase, if any, entered into by the
Depositors is satisfactory in form and substance, and (iii) state that the
foregoing conditions of clauses (a) through (c) have been satisfied with
respect to the New Bonds.
Upon satisfaction of the foregoing conditions with respect to any
New Bond, the Depositors shall pay the purchase price for the New Bond from
their own resources or, if the Trustee has credited any moneys and/or letters of
credit attributable to the failed Special Bond to the Principal Account, the
Trustee shall pay the purchase price of the New Bond upon directions from the
Depositors from the moneys and/or letters of credit so credited to the Principal
Account. If the Depositors have paid the purchase price, and, in addition, the
Trustee has credited moneys of the Depositors to the Principal Account, the
Trustee shall forthwith return to the Depositors the portion of such moneys that
is not properly distributable to Certificateholders pursuant to Section 3.5.
Whenever a New Bond is acquired by the Depositors pursuant to the
provisions of this Section 3.14, the Trustee shall, within five days thereafter,
mail to all Certificateholders notices of such acquisition, including an
identification of the failed Special Bonds and the New Bonds acquired. The
purchase price of the New Bonds shall be paid out of the principal attributable
to the failed Special Bonds. The Trustee shall not be liable or responsible in
any way for depreciation or loss incurred by reason of any purchase made
pursuant to any such directions and in the absence of such directions the
Trustee shall have no duty to purchase any Bonds under this Indenture. The
Depositors shall not be liable for any failure to instruct the Trustee to
purchase any New Bonds or for errors of judgment in respect of this Section
3.14; provided, however, that this provision shall not protect the Depositors
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
ARTICLE IV
Evaluation of Bonds; Evaluator
Section 4.1. Evaluation of Bonds: The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositors upon request
the value of each issue of Bonds (treating separate maturities of Bonds as
separate issues) as of
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the close of trading on the New York Stock Exchange on the bid side of the
market on the days on which the Trust Evaluation is required by Section 5.1,
and, in addition, as of the close of trading on the New York Stock Exchange on
the offering side of the market until such time as the Evaluator and Trustee
have been informed by the Depositors that the initial public offering has been
completed and thereafter if the secondary market for the Units is maintained
based on offering side values, such additional evaluation being made as of the
last business day of each calendar week effective for transactions during the
following week commencing with the week after the initial public offering has
been completed. If the Bonds are listed on a national securities exchange, the
current bid or offering side evaluation shall be determined on the basis of the
closing sale price on such exchange (unless the Evaluator deems such price
inappropriate as a basis for valuation). If the Bonds are not so listed or, if
so listed and the principal market therefor is other than on such exchange or
there is no such closing sale price available, the current bid or offering price
evaluation shall be based on the closing sale prices of such Bonds on the
over-the-counter market (unless the Evaluator deems such prices inappropriate as
a basis for valuation), or, if no such closing sale prices are available (1) on
the basis of current bid or offering prices for the Bonds, (ii) if bid or
offering prices are not available for any Bonds, on the basis of current bid or
offering prices for comparable obligations, (iii) by determining the value of
the Bonds on the bid or offering side of the market by appraisal or (iv) by any
combination of the above.
For each evaluation, the Evaluator shall also determine and furnish
to the Trustee and the Depositors the aggregate of (a) the value of all Bonds on
the basis of such evaluation and (b) on the basis of the information furnished
to the Evaluator by the Trustee pursuant to Section 3.13, cash on hand in the
Trust.
For the purpose of this Section 4.1, the Evaluator may obtain
current bid or offering prices for the obligations from investment dealers or
brokers (including the Depositors) that customarily deal in tax-exempt
obligations or from any other reporting service or source of information which
the Evaluator deems appropriate.
Section 4.2. Compensation of Evaluator: As compensation for its
services hereunder, the Evaluator shall be paid the fee specified in Part II of
the Reference Trust Agreement, provided that if at any time the fee of the
Trustee shall have been increased pursuant to Section 6.4, the compensation of
the Evaluator shall at the same time be ratably increased.
Section 4.3. Liability of Evaluator: The Trustee, the Depositors and
the Certificateholders may rely on any
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evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. The determinations made by the Evaluator hereunder shall be
made in good faith upon the basis of the best information available to it. The
Evaluator shall be under no liability to the Trustee, the Depositors or the
Certificateholders for errors in judgment or any action taken in good faith,
provided, however, that this provision shall not protect the Evaluator against
any liability to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties hereunder.
Section 4.4. Resignation, Removal and Other Matters: (a) The
Evaluator may resign and be discharged hereunder, by executing an instrument in
writing resigning as the Evaluator and filing the same with the Depositors and
the Trustee not less than sixty days before the date specified in such
instrument when, subject to Section 4.4(c), such resignation is to take effect.
Upon receiving such notice of resignation, the Depositors and the Trustee shall
use their best efforts to appoint a successor Evaluator having qualifications
and at a rate of compensation satisfactory to the Depositors and the Trustee.
Such appointment shall be made by written instrument executed by the Depositors
and the Trustee, in duplicate, one copy of which shall be delivered to the
resigning Evaluator and one copy to the successor Evaluator. The Depositors or
the Trustee may remove the Evaluator at any time upon thirty days' written
notice and appoint a successor Evaluator having qualifications and at a rate of
compensation satisfactory to the Depositors and the Trustee. Such appointment
shall be made by written instrument executed by the Depositors and the Trustee,
in duplicate, one copy of which shall be delivered to the Evaluator so removed
and one copy to the successor Evaluator. Notice of such resignation or removal
and appointment of a successor Evaluator shall be mailed by the Trustee to each
Certificateholder.
(b) If the Evaluator resigns and no successor Evaluator shall have
been appointed and have accepted appointment within thirty days after receipt of
the notice of resignation by the Depositors and the Trustee, the Evaluator may
forthwith apply to a court of competent jurisdiction for the appointment of a
successor Evaluator. Such court may thereupon, after such notice, if any, as it
may deem proper, appoint a successor Evaluator.
(c) Any successor Evaluator appointed hereunder shall execute,
acknowledge and deliver to the Depositors and the Trustee an instrument
accepting such appointment hereunder, and such successor Evaluator without any
further act, deed or conveyance shall become vested with all the rights, powers,
duties and obligations of its predecessor hereunder with like
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effect as if originally named the Evaluator herein and shall be bound by all the
terms and conditions of this Indenture. Any resignation or removal of the
Evaluator and appointment of a successor Evaluator pursuant to this Section 4.4
shall become effective upon such acceptance of appointment.
(d) Any corporation into which the Evaluator hereunder may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Evaluator hereunder shall be a party, shall
be the successor Evaluator under this Indenture without the execution or filing
of any paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which the Evaluator may seek to retain certain powers, rights
and privileges theretofore obtaining for any period of time following such
merger or consolidation, to the contrary notwithstanding.
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ARTICLE V
Trust Evaluation; Redemption, Purchase, Transfer, Interchange or
Replacement of Certificates
Section 5.1. Trust Evaluation: The Trustee shall make an evaluation
of the Trust (herein called a "Trust Evaluation") as of the closing of trading
on the New York Stock Exchange, (i) or the last business day of each of the
months of December and June, (ii) on the day on which any Unit is tendered for
redemption to the Depositors for repurchase unless such tender shall occur
subsequent to the close of trading on the New York Stock Exchange, in which
event on the business day next following such day, and on each business day
after the initial public offering has been completed, and (iii) on any other day
desired by the Trustee or requested by the Depositors. Each Trust Evaluation
shall take into account and itemize separately:
(1) the cash on hand in the Trust (other than cash declared held
specially for purchase of Contract Bonds) or moneys in the process of
being collected from matured interest coupons or Bonds matured or called
for redemption prior to maturity.
(2) the value of each issue of the Bonds (including Contract Bonds)
on the bid side of the market as determined by the Evaluator pursuant to
Section 4.1, and
(3) accrued but unpaid interest on the Bonds.
For each such Trust Evaluation there shall be deducted from the sum of the
above:
(1) amounts representing any applicable taxes or governmental
charges payable out of the Trust and for which no deductions shall have
previously been made for the purpose of addition to the Reserve Account,
(2) amounts representing accrued expenses of the Trust including but
not limited to unpaid fees and expenses (including legal and auditing
expenses) of the Trustee, the Evaluator and counsel pursuant to Section
3.9 on or prior to the date of evaluation, and
(3) cash held for distribution to Certificateholders of record as of
a date prior to the evaluation then being made.
The value of the pro rata share of each Unit determined on the basis of any such
Trust Evaluation is referred to herein as the "Net Asset Value" per Unit.
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Section 5.2. Redemptions by Trustee; Purchases by Depositors: Any
Certificate tendered for redemption by a Certificateholder or his duly
authorized attorney to the Trustee at its corporate trust office, or any Plan
Unit tendered to the Trustee for redemption by the registered holder thereof
pursuant to the Redemption Form, shall be redeemed by the Trustee on the seventh
calendar day following the day on which tender for redemption is made, provided
that if such day of redemption is not a business day, then such Certificate
shall be redeemed on the first business day prior thereto (such seventh calendar
day or first business day prior thereto being herein called the "Redemption
Date"). Subject to payment by such Certificateholder of any tax or other
governmental charges which may be imposed thereon, such redemption is to be made
by payment on the Redemption Date of cash equivalent to the Net Asset Value per
Unit or Plan Unit determined by the Trustee as of the closing of trading on the
New York Stock Exchange, on the date of tender, multiplied by the number of
Units represented by such Certificate or Redemption Form (herein called the
"Redemption Price"). Certificates or Redemption Forms received for redemption by
the Trustee on any day after the close of trading on the New York Stock Exchange
will be held by the Trustee until the next day on which the New York Stock
Exchange is open for trading and will be deemed to have been tendered on such
day for redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositors in writing, suspend the right of redemption or postpone the date of
payment of the Redemption Price for more than seven calendar days following the
day on which tender for redemption is made:
(1) for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of
which disposal by the Trust of the Bonds is not reasonably practicable or
it is not reasonably practicable fairly to determine in accordance
herewith the value of the Bonds; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit,
and the Trustee shall not be liable to any person or in any way for any loss or
damage which may result from any such suspension or postponement.
Not later than the close of business on the day of tender of a
Certificate or Redemption Form for redemption by a
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Certificateholder other than the Depositors, the Trustee shall notify the
Depositors of such tender. The Depositors shall have the right to purchase such
Certificate or Redemption Form by notifying the Trustee of its election to make
such purchase as soon as practicable thereafter, but in no event subsequent to
the close of business on the second business day after the day on which such
Certificate or Redemption Form was tendered for redemption. Such purchase shall
be made by payment for such Certificate or Redemption Form by the Depositors to
the Certificateholder or Plan Unit holder not later than the close of business
on the Redemption Date of an amount equal to the Redemption Price which would
otherwise be payable by the Trustee to such Certificateholder or Plan Unit
holder.
Any Certificate or Redemption Form so purchased by the Depositors
may, at the option of the Depositors, be tendered to the Trustee for redemption
at the corporate trust office of the Trustee in the manner provided in the first
paragraph of this Section 5.2.
If the Depositors do not elect to purchase any Certificate or
Redemption Form tendered to the Trustee for redemption, or if a Certificate or
Redemption Form is being tendered by the Depositors for redemption, that portion
of the Redemption Price which represents interest shall be withdrawn from the
Interest Account to the extent funds are available. The balance paid on any
redemption, including accrued interest, if any, shall be withdrawn from the
Principal Account to the extent that funds are available for such purpose. If
such available balance shall be insufficient, the Trustee shall sell such Bonds
from among those designated on the current list for such purpose as provided
below and in the manner, in its discretion, as it shall deem advisable or
necessary in order to fund the Principal Account for purposes of such
redemption. Sales of Bonds by the Trustee shall be made in such manner as the
Trustee shall determine, subject to any minimum face amount limitations on sale
which shall have been specified by the Depositor and agreed to by the Trustee.
In the event that funds are withdrawn from the Principal Account or Bonds are
sold for payment of any portion of the Redemption Price representing accrued
interest, the Principal Account shall be reimbursed when sufficient funds are
next available in the Interest Account for such funds so applied.
The Depositors shall maintain with the Trustee a current list of
Bonds designated to be sold for the purpose of redemption of Certificates or
Redemption Forms tendered for redemption and not purchased by the Depositors,
and for payment of expenses hereunder, provided that if the Depositors shall for
any reason fail to maintain such a list, the Trustee, in its sole discretion,
may designate a current list of Bonds for such purposes. The net proceeds of any
sales of Bonds from such list representing principal shall be credited to the
Principal Account
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and the proceeds of such sales representing accrued interest shall be credited
to the Interest Account.
Neither the Trustee nor the Depositors shall be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
of Bonds made pursuant to this Section 5.2.
Certificates evidencing Units, or Redemption Forms evidencing Plan
Units, redeemed pursuant to this Section 5.2 shall be cancelled by the Trustee
and the Units or Plan Units evidenced by such Certificates or Redemption Forms
shall be terminated by such redemptions. In the event that a Certificate shall
be tendered representing a number of Units greater than those requested to be
redeemed by the Certificateholder, the Trustee shall issue to each
Certificateholder, upon payment of any tax or charges of the character referred
to in the second paragraph to Section 5.3, a new Certificate evidencing the
Units representing the balance of the Certificate so tendered.
Notwithstanding the foregoing provisions of this Section 5.2, the
Trustee is hereby irrevocably authorized in its discretion, in the event that
the Depositors do not elect to purchase any Certificate or Redemption Form
tendered to the Trustee for redemption, or in the event that a Certificate or
Redemption Form is being tendered by the Depositors for redemption, in lieu of
redeeming Units or Plan Units tendered for redemption, to sell such Units or
Plan Units in the over-the-counter market or by private sale for the account of
tendering Unit or Plan Unit holders at prices which will return to the Unit or
Plan Unit holders amounts in cash, net after deducting brokerage commissions,
transfer taxes and other charges, equal to or in excess of the Redemption Prices
which such Unit or Plan Unit holders would otherwise be entitled to receive on
redemption pursuant to this Section 5.2. The Trustee shall pay to the Unit or
Plan Unit holders the net proceeds of any such sale on the day they would
otherwise be entitled to receive payment of the Redemption Price hereunder.
Section 5.3. Transfer or Interchange of Certificates: A Certificate
may be transferred by the registered holder thereof by presentation and
surrender of such Certificate at the corporate trust office of the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the
Certificateholder or his authorized attorney, whereupon a new registered
Certificate or Certificates for the same number of Units executed by the Trustee
and the Depositor will be issued in exchange and substitution therefor.
Certificates issued pursuant to this Indenture are interchangeable for one or
more other Certificates in an equal aggregate number of Units and all
Certificates issued shall be issued in denominations of one Unit or any multiple
thereof as may be requested by the
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Certificateholder. The Trustee may deem and treat the person in whose name any
Certificate shall be registered upon the books of the Trustee as the owner of
such Certificate for all purposes hereunder and the Trustee shall not be
affected by any notice to the contrary, nor be liable to any person or in any
way for so deeming or treating the person in whose name any Certificate shall be
so registered.
A sum sufficient to pay any tax or other governmental charge that
may be imposed in connection with any such transfer or interchange shall be paid
by the Certificateholder to the Trustee. The Trustee may require a
Certificateholder to pay $2.00 for each new Certificate issued on any such
transfer or interchange.
All Certificates cancelled pursuant to this Indenture shall be
disposed of by the Trustee without liability on its part.
Section 5.4. Certificates Mutilated, Destroyed, Stolen or Lost: In
case any Certificate shall become mutilated or be destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and substitution
therefor upon the holder's furnishing the Trustee with proper identification and
indemnity satisfactory to the Trustee, and complying with such other reasonable
regulations and conditions as the Trustee may prescribe and paying such expenses
as the Trustee may incur. Any mutilated Certificate shall be duly surrendered
and cancelled before any new Certificate shall be issued in exchange and
substitution therefor. Upon the issuance of any new Certificate a sum sufficient
to pay any tax or other governmental charge and the fees and expenses of the
Trustee may be imposed. Any such new Certificate issued pursuant to this section
shall constitute complete and indefeasible evidence of ownership in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
In the event the Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in exchange
and substitution for any Certificate which shall have become mutilated or shall
have been destroyed, stolen or lost, make the distributions in respect of such
mutilated, destroyed, stolen or lost Certificate (without surrender thereof
except in the case of a mutilated Certificate) as provided in Section 9.2 hereof
if the Trustee is furnished with such security or indemnity as it may require to
save it harmless, and in the case of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
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ARTICLE VI
Trustee; Removal of Depositors
Section 6.1. General Definition of Trustee's Liabilities, Rights and
Duties; Removal of Depositors: In addition to and notwithstanding the other
duties, rights, privileges and liabilities of the Trustee otherwise set forth
herein, the liabilities of the Trustee are further defined as follows:
(a) all moneys deposited with or received by the Trustee hereunder
shall be held by the Trustee without interest in trust as part of the
Trust or the Reserve Account until required to be disbursed in accordance
with the provisions of this Indenture and such moneys will be segregated
by separate recordation on the trust ledgers of the Trustee so long as
such practice preserves a valid preference under applicable law, or if
such preference is not so preserved the Trustee shall handle such moneys
in such other manner as shall constitute the segregation and holding
thereof in trust within the meaning of the Investment Company Act of 1940;
(b) the Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement,
assignment, resolution, draft or other document, whether or not of the
same kind prima facie properly executed, or for the disposition of moneys,
Bonds or Certificates pursuant to this Indenture, or in respect of any
evaluation which the Trustee is required to make or is required or
permitted to have made by others under this Indenture or otherwise except
by reason of its gross negligence, lack of good faith or willful
misconduct, provided that the Trustee shall not in any event be liable or
responsible for any evaluation made by the Evaluator. The Trustee may
construe any of the provisions of this Indenture, insofar as the same may
appear to be ambiguous or inconsistent with any other provisions hereof,
and any construction of any such provisions hereof by the Trustee in good
faith shall be binding upon the parties hereto. The Trustee shall in no
event be deemed to have assumed or incurred any liability, duty or
obligation to any Certificateholder, the Evaluator or the Depositors,
other than as expressly provided for herein;
(c) the Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Indenture or for the
due execution hereof by the Depositors or the Evaluator, or for the form,
character, genuineness, sufficiency, value or validity of any Bonds
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(except that the Trustee shall be responsible for the exercise of due care
in determining the genuineness of Bonds delivered to it pursuant to
contracts for the purchase of such Bonds) or for or in respect of the
validity or sufficiency of the Certificates or of the due execution
thereof by the Depositors, and the Trustee shall in no event assume or
incur any liability, duty or obligation to any Certificateholder, the
Evaluator or the Depositors other than as expressly provided for herein.
The Trustee shall not be responsible for or in respect of the validity of
any signature by or on behalf of the Depositors or the Evaluator;
(d) the Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may involve it in
expense or liability, unless as often as required, it shall be furnished
with reasonable security and indemnity against such expense or liability
as it may require, and any pecuniary cost of the Trustee from such actions
shall be deductible from and a charge against the Interest and Principal
Accounts. The Trustee shall in its discretion undertake such action as it
may deem necessary at any and all times to protect the Trust and the
rights and interests of the Certificateholders pursuant to the terms of
this Indenture, provided, however, that the expenses and costs of such
actions, undertakings or proceedings shall be reimbursable to the Trustee
from the Interest and Principal Accounts, and the payment of such costs
and expenses shall be secured by a lien on the Trust prior to the
interests of the Certificateholders;
(e) the Trustee may employ agents, attorneys, accountants and
auditors and shall not be answerable for the default or misconduct of any
such agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable care. The
Trustee shall be fully protected in respect of any action under this
Indenture taken, or suffered, in good faith by it in accordance with the
opinion of counsel. The fees and expenses charged by such agents,
attorneys, accountants or auditors shall constitute an expense of the
Trustee reimbursable from the Interest and Principal Accounts as set forth
in Section 3.5 hereof;
(f) other than as provided in Article VII hereunder, if at any time
there is only one Depositor acting hereunder and said Depositor shall
resign or fail to undertake or perform or become incapable of undertaking
or performing any of the duties which by the terms of this Indenture are
required by it to be undertaken or performed and no express provision is
made for action to be taken by the Trustee in such event, or said
Depositor shall be adjudged a bankrupt
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or insolvent, or a receiver of such Depositor or of its property shall be
appointed, or any public officer shall take charge or control of such
Depositor or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then in any such case, the Trustee may do any
one or more of the following: (1) appoint a successor Depositor who shall
act hereunder in all respects in place of the Depositor, who shall be
compensated semi-annually, at rates deemed by the Trustee to be reasonable
under the circumstances, by deduction from the Interest Account or from
the Principal Account, but no such deduction shall be made exceeding such
reasonable amount as the Securities and Exchange Commission may prescribe
in accordance with Section 26(a)(2)(C) of the Investment Company Act of
1940; (2) continue to act in the capacity of Trustee hereunder in its own
absolute discretion without appointing any successor Depositor; or (3)
terminate this Indenture and the Trust created hereby and liquidate the
Trust, all in the manner provided in Section 9.2;
(g) if the value of the Trust as shown by any evaluation by the
Trustee pursuant to Section 5.1 hereof shall be less than the liquidation
amount specified in Part II of the Reference Trust Agreement, the Trustee
may in its discretion, and shall, when so directed by the Depositors,
terminate this Indenture and the Trust created hereby and liquidate the
Trust, all in the manner provided in Section 9.2;
(h) in no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon or upon it as Trustee hereunder or upon or in respect of
the Trust which it may be required to pay under any present or future law
of the United States of America or any other taxing authority having
jurisdiction in the premises. For all such taxes and charges and for any
expenses, including counsel fees, which the Trustee may sustain or incur
with respect to such taxes or charges, the Trustee shall be reimbursed and
indemnified out of the Interest and Principal Accounts of the Trust, and
the payment of such amounts so paid by the Trustee shall be secured by a
prior lien on the Trust;
(i) the Trustee, except by reason of its gross negligence, lack of
good faith, reckless disregard of its obligations hereunder or willful
misconduct, shall not be liable for any action taken or suffered to be
taken by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
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(j) notwithstanding anything in this Indenture to the contrary, the
Trustee is authorized and empowered to enter into any safekeeping
arrangement or arrangements it deems necessary or appropriate for holding
the Bonds then owned by the Trust and the Trustee is authorized and
empowered in its sole right to amend, supplement or terminate any
safekeeping arrangement or arrangements made under this provision.
Section 6.2. Books, Records and Reports: The Trustee shall keep
proper books of record and account of all the transactions under this Indenture
at its corporate trust office including a record of the name and address of, and
the Certificates issued by the Trust and held by, every Certificateholder, and
such books and records shall be open to inspection by any Certificateholder at
all reasonable times during the usual business hours, and such books and records
shall be made available to the Depositors upon the request of the Depositors
including, but not limited to, a record of the name and address of, and the
Certificates issued by the Trust and held by, every Certificateholder.
The Trustee shall cause audited statements as to the assets and
income of each Trust to be prepared on an annual basis by independent public
accountants selected by the Depositors, provided, however, if the cost to a
Trust for preparation of such statements shall exceed an amount equivalent to
$.50 per Unit on an annual basis then the Trustee shall not be required to have
such statements prepared. Such audited statements will be made available to
Certificateholders upon request.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of counsel to the Depositors, the Trustee shall pay, or
reimburse to the Depositors or others, the costs of the preparation of documents
and information with respect to each Trust required by law or regulation in
connection with the maintenance of a secondary market in units of each Trust.
Such costs may include but are not limited to accounting and legal fees, blue
sky registration and filing fees, printing expenses and other reasonable
expenses related to documents required under Federal and state securities laws.
The Trustee shall make such annual or other reports as may from time
to time be required under any applicable state or federal statute or rule or
regulation thereunder.
Section 6.3. Indenture and List of Bonds on File: The Trustee shall
keep a certified copy or duplicate original of this Indenture on file at its
corporate trust office available for inspection at all reasonable times during
the usual business hours by any Certificateholder and the Trustee shall keep and
so make available for inspection a current list of the Bonds.
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Section 6.4. Compensation: For services performed under this
Indenture the Trustee shall be paid at the rate per annum set forth in Part II
of the Reference Trust Agreement which shall be computed on the basis of the
greatest principal amount of Bonds in the Trust at any time during the period
with respect to which such compensation is being computed. The Trustee may from
time to time adjust its compensation as set forth above provided that the total
adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent," or, if such index shall cease to be
published, then as measured by the available index most nearly comparable to
such index. The consent or concurrence of any Certificateholder hereunder shall
not be required for any such adjustment or increase; however, the consent of the
Depositor shall be required. Such compensation shall be charged by the Trustee
against the Interest and Principal Accounts on or before the Payment Date on
which such period terminates; provided, however, that such compensation shall be
deemed to provide only for the usual normal and recurring functions undertaken
as Trustee pursuant to this Indenture.
The Trustee shall charge the Interest and Principal Accounts as
provided for in Section 3.5(a) for any and all expenses, including the fees of
counsel which may be retained by the Trustee in connection with its activities
hereunder, and disbursements incurred hereunder and any extraordinary services
performed by the Trustee hereunder. The Trustee shall be indemnified and held
harmless against any loss or liability accruing to it without negligence, bad
faith or willful misconduct on its part, arising out of or in connection with
the acceptance or administration of this trust, including the costs and expenses
(including counsel fees) of defending itself against any claim of liability in
the premises. If the cash balances in the Interest and Principal Accounts shall
be insufficient to provide for amounts payable pursuant to this Section 6.4, the
Trustee shall have the power to sell (i) Bonds from the current list of Bonds
designated to be sold pursuant to Section 5.2 hereof, or (ii) if no such Bonds
have been so designated, such Bonds as the Trustee may see fit to sell in its
own discretion, and to apply the proceeds of any such sale in payment of the
amounts payable pursuant to this Section 6.4. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
of Bonds made pursuant to this Section 6.4. Any moneys payable to the Trustee
pursuant to this section shall be secured by a prior lien on the Trust.
Section 6.5. Removal and Resignation of the Trustee Successor: The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor Trustee.
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(a) Any resignation or removal of the Trustee and appointment of a
successor pursuant to this section shall not become effective until acceptance
of appointment by the successor Trustee as provided in subsection (b) hereof.
(b) The Trustee or any trustee hereafter appointed may resign and be
discharged of the trust created by this Indenture by executing an instrument in
writing resigning as such Trustee, filing the same with the Depositors and
mailing a copy of a notice of resignation to all Certificateholders then on
record not less than sixty days before the date specified in such instrument
when, subject to Section 6.5(d), such resignation is to take effect. Upon
receiving such notice of resignation, the Depositors shall use their best
efforts to promptly appoint a successor Trustee as hereinafter provided, by
written instrument, in duplicate, one copy of which shall be delivered to the
resigning Trustee and one copy to the successor Trustee. In case at any time the
Trustee shall become incapable of acting or shall be deemed incapable of acting
by the written consent of holders of Certificates evidencing 66-2/3% of the
outstanding Units of the Trust, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purposes of re- habilitation, conservation, or liquidation, then
in any such case the Depositors may remove the Trustee and appoint a successor
Trustee by written instrument, in duplicate, one copy of which shall be
delivered to the Trustee so removed and one copy to the successor Trustee;
provided that notice of such removal and appointment of a successor shall be
given to each Certificateholder then of record.
(c) Any successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositors and the retiring Trustee an instrument
accepting such appointment hereunder, and such successor Trustee without any
further act, deed or conveyance shall become vested with all the rights, powers,
duties and obligations of its predecessor hereunder with like effect as if
originally named Trustee herein and shall be bound by all the terms and
conditions of this Indenture. Upon the request of such successor Trustee, the
Depositors and the retiring Trustee shall, upon payment of any amounts due the
retiring Trustee or provision therefor to the satisfaction of such retiring
Trustee, execute and deliver an instrument acknowledged by it transferring to
such successor Trustee all the rights and powers of the retiring Trustee; and
the retiring Trustee shall transfer, deliver and pay over to the successor
Trustee all bonds and moneys at the time held by it hereunder, together with all
necessary instruments of transfer and assignment or other documents properly
executed necessary to effect such transfer and such of the records or copies
thereof maintained by the retiring Trustee in the administration hereof
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as may be requested by the successor Trustee, and shall thereupon be discharged
from all duties and responsibilities under this Indenture. The retiring Trustee
shall, nevertheless, retain a lien upon all Bonds and moneys at the time held by
it hereunder to secure any amounts then due the retiring Trustee hereunder.
(d) In case at any time the Trustee shall resign and no successor
Trustee shall have been appointed and have accepted appointment within thirty
days after notice of resignation has been received by the Depositors, the
retiring Trustee may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
Trustee.
(e) Any corporation into which any Trustee hereunder may be merged
or with which it may consolidate, or any corporation resulting from any merger
or consolidation to which any Trustee hereunder shall be a party, shall be the
successor Trustee under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which any such Trustee may seek to retain certain powers, rights and
privileges theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
Section 6.6. Qualifications of Trustee: The Trustee, or any
successor thereof, shall be a corporation organized and doing business under the
laws of the United States or any state thereof, which is authorized under such
laws to exercise corporate trust powers and having at all times an aggregate
capital, surplus, and undivided profits of not less than $2,500,000.
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ARTICLE VII
Depositors
Section 7.1. Power of Attorney: (a) At all times prior to the
termination of this Indenture and while the Depositors shall continue to act
jointly hereunder, there shall be maintained on file with the Trustee a power of
attorney executed in favor of Bear Stearns by Gruntal constituting and
appointing Bear Stearns as the true and lawful agent and attorney-in-fact of
Gruntal to execute and deliver for and on behalf of Gruntal, as a Depositor of
any Trust created hereunder, all notices, opinions, certificates, lists,
demands, directions, instruments or other documents or agreements provided or
permitted to be executed by the Depositors hereunder or to take other action in
respect thereof. Such power of attorney shall also appoint Bear Stearns as the
true and lawful agent and attorney-in-fact of Gruntal to receive, on behalf of
Gruntal as a Depositor of any Trust created hereunder, all notices, opinions,
certificates, lists, demands, directions, instruments or other documents to be
provided to the Depositors hereunder. Such power of attorney shall continue in
effect until written notice of revocation thereof has been received by the
Trustee. Prior to the receipt of such notice of revocation, the Trustee shall be
entitled to rely conclusively upon such power of attorney as authorizing Bear
Stearns to give any and all notices, opinions, certificates, lists, demands,
directions, instruments or other documents or agreements provided or permitted
to be executed by the Depositors hereunder or to take other action in respect
thereof on behalf of Gruntal.
(b) In the event that the power of attorney referred to in Section
7.1(a) shall be revoked by written notice given by Gruntal and it shall not be
replaced within one business day by another power of attorney conforming with
the requirements of said Section 7.1(a), the Depositors shall be deemed to have
been unable to reach agreement with respect to action to be taken jointly by
them hereunder and thereupon Gruntal shall be discharged hereunder upon the
expiration of such one-day period and thereupon Bear Stearns shall act hereunder
without the necessity of any other or further action on their part or on the
part of the Trustee.
Section 7.2. Succession: The covenants, provisions and agreements
herein contained shall in every case be binding upon any successor to the
business of the Depositors. In the event of the death, resignation or withdrawal
of any partner of either of the Depositors or of any successor Depositor which
may be a partnership, the deceased, resigning or withdrawing partner shall be
relieved of all further liability hereunder if at the time of such death,
resignation or withdrawal such Depositor maintains a net worth (determined in
accordance with generally
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accepted accounting principles) of at least $1,000,000. In the event of an
assignment by any Depositor to a successor corporation or partnership as
permitted by the next following sentence, such Depositor and, if such Depositor
is a partnership, its partners shall be relieved of all further liability under
this Indenture. The Depositors may transfer all or substantially all of their
assets to a corporation or partnership which carries on the business of that
Depositor, if at the time of such transfer such successor duly assumes all the
obligations of said Depositor under this Indenture and if at such time such
successor maintains a net worth of at least $1,000,000 (determined in accordance
with generally accepted accounting principles).
Section 7.3. Resignation of a Depositor: If at any time, any
Depositor desires to resign its position as Depositor hereunder, it may resign
by delivering to the Trustee an instrument of resignation executed by such
Depositor. Such resignation shall become effective upon the expiration of thirty
days from the date on which such instrument is delivered to the Trustee. Upon
effective resignation hereunder, the resigning Depositor shall be discharged and
shall no longer be liable in any manner hereunder except as to acts or omissions
occurring prior to such resignation and any successor Depositor appointed by the
Trustee pursuant to Section 6.1(f) shall thereupon perform all duties and be
entitled to all rights under this Indenture. The successor Depositor shall not
be under any liability hereunder for occurrences or omissions prior to the
execution of such instrument.
Section 7.4. Liability of Depositors and Indemnification:
(a) No Depositor shall be under any liability to any other
Depositor, the Trust or the Certificateholders for any action or for
refraining from the taking of any action in good faith pursuant to this
Indenture, or for errors in judgment or for depreciation or loss incurred
by reason of the purchase or sale of any Bonds, provided, however, that
this provision shall not protect the Depositors against any liability to
which they would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of their duties or by
reason of their reckless disregard of their obligations and duties
hereunder. The Depositors may rely in good faith on any paper, order,
notice, list, affidavit, receipt, evaluation, opinion, endorsement,
assignment, draft or any other document of any kind prima facie properly
executed and submitted to them by the Trustee, the Trustee's counsel, the
Evaluator or any other person for any matters arising hereunder. The
Depositors shall in no event be deemed to have assumed or incurred any
liability, duty, or obligation to any
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Certificateholder, the Evaluator or the Trustee other than as expressly
provided for herein.
(b) The Trust shall pay and hold the Depositors harmless from and
against any loss, liability or expense incurred in acting as Depositors of
the Trust other than by reason of wilful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of the reckless
disregard of their obligations and duties hereunder, including the costs
and expenses of the defense against any claim or liability in the
premises. The Depositors shall not be under any obligation to appear in,
prosecute or defend any legal action which in their opinion may involve
them in any expense or liability, provided, however, that the Depositors
may, in their discretion, undertake any such action which they may deem
necessary or desirable in respect of this Indenture and the rights and
duties of the parties hereto and the interests of the Certificateholders
hereunder and, in such event, the legal expenses and costs of any such
action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust and shall be paid directly by the Trustee out of
the Interest and Principal Accounts as provided by Section 3.5.
(c) None of the provisions of this Indenture shall be deemed to
protect or purport to protect the Depositors against any liability to the
Trust or to the Certificateholders to which the Depositors would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of their duties, or by reason of the Depositors'
reckless disregard of their obligations and duties under this Indenture.
(d) Notwithstanding the discharge of a Depositor of the Trust in
accordance with Section 6.1(f) or Section 7.1(b), such Depositor shall
continue to be fully liable in accordance with the provisions hereof in
respect of action taken or refrained from under this Agreement by the
Depositors before the date of such discharge or by the undischarged
Depositors before or after the date of such discharge, as fully and to the
same extent as if no discharge has occurred.
Section 7.5. Compensation: The Depositors shall receive at the times
set forth in Section 3.5 as compensation for performing portfolio supervisory
services, such amount and for such periods as specified in Part II of the
Reference Trust Agreement. The computation of such compensation shall be made on
the basis of the principal amount of Bonds in the Trust at the beginning of each
calendar year period. At no time, however, will the total amount received by the
Depositors for services
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rendered to all series of the Insured Municipal Securities Trust in any calendar
year exceed the aggregate cost to them of supplying such services in such year.
Such rate may be increased by the Trustee from time to time, without the consent
or approval of any Certificateholder or the Depositors, by amounts not exceeding
the proportionate increase during the period from the date of such Reference
Trust Agreement to the date of any such increase, in consumer prices as
published either under the classification "All Services Less Rent" in the
Consumer Price Index published by the United States Department of Labor, or, if
such Index is no longer published, a similar index.
In the event that any amount of the compensation paid to the
Depositors pursuant to Section 3.5 is found to be an improper charge against the
Trust, the Depositors shall reimburse the Trust in such amount. An improper
charge shall be established if a final judgment or order for reimbursement of
the Trust shall be rendered against the Depositors and such judgment or order
shall not be effectively stayed or a final settlement is established in which
the Depositors agree to reimburse the Trust for amounts paid to the Depositors
pursuant to this Section 7.4.
ARTICLE VIII
Rights of Certificateholders
Section 8.1. Beneficiaries of Trust: By the purchase and acceptance
or other lawful delivery and acceptance of any Certificate the Certificateholder
shall be deemed to be a beneficiary of the trust created by this Indenture and
vested with all right, title and interest in the Trust to the extent of the Unit
or Units set forth and evidenced by such Certificate, subject to the terms and
conditions of this Indenture and of such Certificate.
Section 8.2. Rights, Terms and Conditions: In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture the Certificateholders shall have the following rights and powers and
shall be subject to the following terms and conditions:
(a) A Certificateholder may at any time tender his Certificate or
Certificates to the Trustee for redemption in accordance with Section 5.2.
(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Indenture or the Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
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liabilities of the parties hereto or any of them. Each Certificateholder
expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustee at any
time to account, in any manner other than as expressly provided in this
Indenture, in respect of the Bonds or moneys from time to time received,
held and applied by the Trustee hereunder.
(c) No Certificateholder shall have any right to vote or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners; nor shall
any Certificateholder ever be under any liability to any third persons by
reason of any action taken by the parties to this Indenture for any other
cause whatsoever.
ARTICLE IX
Additional Covenants; Miscellaneous Provisions
Section 9.1. Amendments: This Indenture may be amended from time to
time by the parties hereto or their respective successors, without the consent
of any of the Certificateholders (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision contained herein; (b) to change any provision required
by the Securities and Exchange Commission or any successor governmental agency
to be changed; or (c) to make such other provision in regard to matters or
questions arising hereunder as shall not adversely affect the interests of the
Certificateholders; provided, however, that the parties hereto may not amend
this Indenture so as to (1) increase the number of Units above the number set
forth in Part II of the Reference Trust Agreement except as provided in Section
5.4 hereof or such lesser amount as may be outstanding at any time during the
term of this Indenture or (2) subject to Sections 3.8 and 3.14 permit the
deposit or acquisition hereunder of securities either in addition to or in
replacement of any of the Bonds.
This Indenture may also be amended from time to time by the
Depositors and the Trustee (or the performance of any of the provisions of this
Agreement may be waived) with the expressed written consent of holders of
Certificates evidencing 66-2/3% of the Units at the time outstanding under the
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the holders of
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Certificates, save for the termination of the Trust as set forth in Section 9.2
below; provided, however, that no such amendment or waiver shall (i) reduce the
interest in the Trust represented by Units evidenced by any Certificate without
the consent of the holder of such Certificate, (ii) reduce the aforesaid
percentage of Units, the holders of which are required to consent to any such
amendment, without the consent of the holders of all Certificates then
outstanding or (iii) affect the duties, obligations and responsibilities of the
Trustee without its consent.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification to all then outstanding Certificateholders of the
substance of such amendment.
Section 9.2. Termination: This Indenture and the Trust created
hereby shall terminate upon the maturity, redemption, sale or other disposition
as the case may be of the last Bond held hereunder unless sooner terminated as
hereinbefore specified and may be terminated at any time by written consent of
all the holders of Certificates; provided that in no event shall the Trust
continue beyond the end of the calendar year preceding the fiftieth anniversary
of the execution of this Indenture.
Written notice of any termination, specifying the time or times at
which the Certificateholders may surrender their Certificates for cancellation
shall be given by the Trustee to each Certificateholder at his address appearing
on the registration books of the Trustee. Within a reasonable period of time
after such termination the Trustee shall fully liquidate the Bonds then held, if
any, and shall:
(a) deduct from the Interest Account or, to the extent that funds
are not available in such account, from the Principal Account and pay to
itself individually an amount equal to the sum of
(1) its accrued compensation for its ordinary recurring services,
(2) any compensation due it for its extraordinary services, and
(3) any other costs, expenses, advances or indemnities
as provided herein;
(b) deduct from the Interest Account or, to the extent that funds
are not available in such account, from the Principal Account and pay
accrued and unpaid fees of the Evaluator and counsel pursuant to Section
3.9;
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(c) deduct from the Interest Account or the Principal Account any
amounts which may be required to be deposited in the Reserve Account to
provide for payment of any applicable taxes or other governmental charges
and any other amounts which may be required to meet expenses incurred
under this Indenture;
(d) distribute to each Certificateholder, upon surrender for
cancellation of his Certificate or Certificates, such holder's pro rata
share of the balance of the Interest Account;
(e) distribute to each Certificateholder, upon surrender for
cancellation of his Certificate or Certificates, such holder's pro rata
share of the balance of the Principal Account; and
(f) together with such distribution to each Certificateholder as
provided for in (d) and (e), furnish to each such Certificateholder a
final distribution statement as of the date of the computation of the
amount distributable to Certificateholders, setting forth the data and
information in substantially the form and manner provided for in Section
3.6 hereof.
The amounts to be so distributed to each Certificateholder shall be
that pro rata share of the balance of the total Interest and Principal Accounts
as shall be represented by the Units therein evidenced by the outstanding
Certificate or Certificates held of record by such Certificateholder.
The Trustee shall be under no liability with respect to moneys held
by it in the Interest, Reserve and Principal Accounts upon termination except to
hold the same in trust without interest until disposed of in accordance with the
terms of this Indenture.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the liquidation distribution with respect thereto. If
within one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take steps to contact the
remaining Certificateholders concerning surrender of their Certificates and the
cost thereof shall be paid out of the moneys and other assets which remain in
trust hereunder.
Section 9.3. Construction: This Indenture is executed and delivered
in the State of New York, and all local laws or
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<PAGE>
rules of construction of such State shall govern the rights of the parties
hereto and the Certificateholders and the interpretation of the provisions
hereof.
Section 9.4. Registration of Certificates: The Depositors agree and
undertake to register the Certificates with the Securities and Exchange
Commission or other applicable governmental agency pursuant to applicable
Federal or State statutes, if such registration shall be required, and to do all
things that may be necessary or required to comply with this provision during
the term of the Trust created hereunder, and the Trustee shall incur no
liability or be under any obligation or expense in connection therewith.
Section 9.5. Written Notice: Any notice, demand, direction or
instruction to be given to the Depositors hereunder shall be in writing and
shall be duly given if mailed or delivered to: Bear, Stearns & Co. Inc., 245
Park Avenue, New York, N.Y. 10167, Gruntal & Co., Incorporated, 14 Wall Street,
New York, N.Y. 10005 or at such other address as shall be specified by the
Depositors to the Trustee in writing. Any notice, demand, direction or
instruction to be given to the Trustee shall be in writing and shall be duly
given if mailed or delivered to the Trustee, 770 Broadway, New York, New York
10003, Attention: Corporate Trust and Agency Division or such other address as
shall be specified to the Depositors by the Trustee in writing. Any notice,
demand, direction or instruction to be given to the Evaluator hereunder shall be
in writing and shall be duly given if mailed to the Evaluator at 25 Broadway,
New York, New York 10004. Any notice to be given to the Certificateholders shall
be duly given if mailed or delivered to each Certificateholder at the address of
such holder appearing on the registration books of the Trustee.
Section 9.6. Severability: If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy or express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or of the Certificates
or the rights of the holders thereof.
Section 9.7. Dissolution of Depositors Not to Terminate: The
dissolution of one or all of the Depositors from or for any cause whatsoever
shall not operate to terminate this Indenture or the Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first above written.
[Signatures and acknowledgments on separate pages.]
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<PAGE>
BEAR, STEARNS & CO. INC.
Depositor
_________________________________
Associate Director
ATTEST:
___________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I , , a Notary Public in and for
the said County in the State aforesaid, do hereby certify that
personally known to me to be the same person whose name is
subscribed to the foregoing instrument and personally known to me to be an
Associate Director of Bear, Stearns & Co. Inc., a corporation, appeared before
me this day in person, and acknowledged that he signed and delivered the said
instrument as his free and voluntary act as such Associate Director and as the
free and voluntary act of said Bear, Stearns & Co. Inc., for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this day of , 19 .
_______________________________
Notary Public
(SEAL)
My Commission expires:
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<PAGE>
GRUNTAL & CO., INCORPORATED
Depositor
_____________________________
Director
ATTEST:
_____________________________
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
I, , a Notary Public in and for
the said County in the State aforesaid, do hereby certify that
personally known to me to be the same person whose name is
subscribed to the foregoing instrument and personally known to me to be a
Director of Gruntal & Co., Incorporated, a corporation, appeared before me this
day in person, and acknowledged that he signed and delivered the said instrument
as his free and voluntary act as such Director and as the free and voluntary act
of said Gruntal & Co., Incorporated, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this day of , 19 .
______________________________
Notary Public
(SEAL)
My Commission expires:
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<PAGE>
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
_________________________________________
Assistant Vice President
(SEAL)
ATTEST:
____________________________
Assistant Secretary
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of , 19 , before me personally came to me known, who
being by me duly sworn, said that he is an Assistant Vice President of United
States Trust Company of New York, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to the said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said corporation; and that
he signed his name thereto by like authority.
__________________________
Notary Public
(SEAL)
My Commission expires:
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<PAGE>
STANDARD & POOR'S CORPORATION
Evaluator
__________________________________
Vice President
(SEAL)
ATTEST:
______________________________
Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this day of , 19 , before me personally appeared , to me known,
who, being by me duly sworn, said that he is Vice President of Standard & Poor's
Corporation, one of the corporations described in and which (by facsimile)
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to the said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said corporation, and that
he signed his name (by facsimile) thereto by like authority.
____________________________
Notary Public
(SEAL)
My Commission expires:
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CERTIFICATE OF INCORPORATION
OF
GRUNTAL & CO., INCORPORATED
ARTICLE I
The name of the corporation is Gruntal & Co., Incorporated (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is No. 100 West Tenth Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business to be conducted or promoted and the
purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation is
authorized to issue is 1,000 shares of common stock, par value $.10 per share
(the "Common Stock").
ARTICLE V
The name and mailing address of the incorporator is
Charles B. Schaffran, Esq., c/o Schulte Roth & Zabel, 460 Park
Avenue, New York, New York 10022.
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<PAGE>
ARTICLE VI
The Board of Directors of the Corporation is authorized to adopt,
amend or repeal By-laws of the Corporation.
ARTICLE VII
Elections of directors need not be by written ballot except and to
the extent provided in the By-laws of the Corporation.
ARTICLE VIII
The Corporation shall redeem, or convert to a fixed income
security, all or any part of the outstanding shares of Common Stock of the
Corporation owned by any person required to be approved by the Board of
Directors of the New York Stock Exchange, Inc. as a member, allied member or
approved person, who fails or ceases to be so approved, as may be necessary to
reduce such person's ownership of Common Stock below that level which enables
such person to exercise a controlling influence over the management or
policies of the Corporation. The terms of such redemption or conversion shall
be as determined in good faith by the Board of Directors of the Corporation to
be fair and equitable and shall be final and binding upon the holder of the
Common Stock to be redeemed or converted.
ARTICLE IX
The Corporation shall not declare or pay any dividend which would
impair the capital of the Corporation nor distribute any assets of the
Corporation to any holder of the Common Stock, unless the value of the assets
remaining after such payment or
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<PAGE>
distribution is at least equal to the aggregate of the
Corporation's debts and liabilities, including capital.
ARTICLE X
The Corporation shall, to the full extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as amended from time
to time, indemnify and reimburse all persons whom it may indemnify and
reimburse pursuant thereto. Notwithstanding the foregoing, the indemnification
provided for in this Article X shall not be deemed exclusive of any other
rights to which those entitled to receive indemnification or reimbursement
hereunder may be entitled under any By-law of the Corporation, agreement, vote
of stockholders or disinterested directors or otherwise.
IN WITNESS WHEREOF, I have signed this certificate of
incorporation this 26th day of September 1983.
___________________________________________
Charles B. Schaffran
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<PAGE>
CERTIFICATE OF AMENDMENT
of the
CERTIFICATE OF INCORPORATION
of
GRUNTAL & CO., INCORPORATED
Gruntal & Co., Incorporated, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. That the Board of Directors and sole stockholder of Gruntal &
Co., Incorporated, by joint unanimous written consent dated February 18, 1987,
adopted resolutions amending the Certificate of Incorporation of said
Corporation, such amendment to be effective upon obtaining the approval of the
New York Stock Exchange and filing a certificate of amendment with the
Secretary of State of Delaware.
As amended, a new Article XI shall be added which shall read as
follows:
To the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time, a director of this
Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director. Any repeal or modification of the foregoing provision
by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing
at the time of such repeal or modification.
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<PAGE>
2. That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this Corporation has caused this Certificate
to be signed by Howard Silverman, its President and Chief Executive Officer,
and attested by Albert M. Hartig, its Secretary, this 14th day of May, 1987.
GRUNTAL & CO., INCORPORATED
By:_________________________________________
Howard Silverman
President and
Chief Executive Officer
ATTEST:
By________________________________
Albert M. Hartig
Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GRUNTAL & CO., INCORPORATED
Gruntal & Co., Incorporated, a Delaware corporation (the
"Corporation"), hereby certifies as follows:
1. The Board of Directors of the Corporation duly adopted by
unanimous written consent without a meeting, pursuant to Section 141(f) of the
General Corporation Law of the State of Delaware, resolutions setting forth
and declaring advisable the amendment of Article III of the Certificate of
Incorporation of the Corporation so that, as amended, the only paragraph of
Article III of the Certificate of Incorporation of the Corporation shall be
replaced in its entirety with the following paragraph:
"The nature of the business to be conducted or promoted and
the purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, except that the
Corporation shall not underwrite or participate in the marketing
of securities, within the meaning of Section 305(b) of the Federal
Power Act, of Long Island Lighting Company."
2. In lieu of a special meeting, written consent to
the foregoing amendment has been given by the sole shareholder in
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<PAGE>
accordance with Section 228 of the General Corporation Law of the State of
Delaware, and such amendment has been duly adopted by such shareholder in
accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Corporation has caused this certificate
to be signed by Howard Silverman, its President, and attested by Lionel G.
Hest, its secretary, this 17th day of May, 1988.
GRUNTAL & CO., INCORPORATED
By:_________________________________________
Howard Silverman
President
[Seal]
ATTEST:
By:__________________________
Lionel G. Hest
Secretary
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359950.1
BY-LAWS
OF
GRUNTAL & CO., INCORPORATED
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors and the transaction of such other
business as properly may be brought before the meeting at such date, time and
place either within or without the State of Delaware as may be designated by
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders
may be called at any time by the Chairman of the Board, if any, the Vice
Chairman of the Board, if any, the President or the Board of Directors, to be
held at such date, time and place either within or without the State of
Delaware as may be stated in the notice of the meeting. A special meeting of
stockholders shall be called by the Secretary upon the written request,
stating the purpose of the meeting, of stockholders who together own of record
a majority of the outstanding shares of common stock entitled to vote at such
meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty days, or if
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<PAGE>
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these
by-laws, the holders of a majority of the outstanding shares of stock entitled
to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum.
In the absence of a quorum the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided by
Section 1.4 of these by-laws until a quorum shall attend. Shares of its own
capital stock belonging on the record date for the meeting to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board, by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence
of the President by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors, or in the absence
of such designation by a chairman chosen at the meeting. The Secretary, or in
the absence of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant Secretary
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an
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irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing a later date
with the Secretary of the Corporation. Voting at meetings of stockholders need
not be by written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of stock entitled to vote
thereon present in person or by proxy at such meeting shall so determine. At
all meetings of stockholders for the election of directors a plurality of the
votes cast shall be sufficient to elect. With respect to other matters unless
otherwise provided by law or by the certificate of incorporation or these
by-laws, the affirmative vote of the holders of a majority of the shares of
stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders.
Section 1.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed: (1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (2) the record date for determining the
stockholders entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed;
and (3) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder
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and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane
to the meeting, during ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city where the meeting
is to be held which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during
the whole time thereof an may be inspected by any stockholder who is present.
Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the certificate of incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board shall consist of one or more members,
the number thereof to be determined from time to time by the Board.
Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until the annual meeting of
stockholders next succeeding his or her election and until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal. Any director may resign at any time upon written
notice to the Board of Directors or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. Any director or the entire Board of
Directors may be
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removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors. Unless otherwise provided
in the certificate of incorporation or these by-laws, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors or from any other cause may be filled by a majority of the directors
then in office, although less than a quorum, or by the sole remaining
director.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board may from time to time determine, and if so
determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors. Not
less than 24 hours' notice thereof shall be given by the person or persons
calling the meeting.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated
by the Board, may participate in a meeting of the Board or of such committee,
as the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of
the Board of Directors a majority of the entire Board shall constitute a
quorum for the transaction of business. The vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board unless the certificate of incorporation or these by-laws shall
require a vote of a greater number. In case at any meeting of the Board a
quorum shall not be present, the members of the Board present may adjourn the
meeting from time to time until a quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in the absence
of the Chairman of the Board by the Vice Chairman of the Board, if any, or in
the absence of the Vice Chairman of the Board by the President, or in their
absence by a chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary an Assistant Secretary, shall act as secretary
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of the meeting, but in the absence of the Secretary and any
Assistant Secretary the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.8. Action by Directors without a Meeting. Unless
otherwise restricted by the certificate of incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or such committee.
Section 2.9. Compensation of Directors. The Board of
Directors shall have the authority to fix the compensation of
directors.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board, designate a Management Committee
consisting of not less than three directors of the Corporation, who shall meet
when deemed necessary. Subject to the limitations hereinafter provided, the
Management Committee shall have and may exercise all the powers and authority
of the Board in the management of the business and affairs of the Corporation,
at any time when the entire Board is not in session, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. The
Board of Directors may from time to time, by resolution passed by a majority
of the entire Board, designate one or more other committees, each committee to
consist of one or more of the directors of the Corporation and to have such
powers and authority of the Board as shall be stated in such resolution.
Notwithstanding the foregoing, neither the Management Committee nor any other
committee of the Board shall have power or authority in reference to amending
the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or a substantial part of the Corporation's property and assets,
recommending to the stockholders the dissolution of the Corporation or
revocation of dissolution, indemnifying directors or amending these by-laws,
declaring a dividend or authorizing the issuance of stock. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he, she or they
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constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in place of any such absent or disqualified member.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend
and repeal rules for the conduct of its business. In the absence of a
provision by the Board or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote
of a majority of the members present at a meeting at the time of such vote if
a quorum is then present shall be the act of such committee, and in other
respects each committee shall conduct its business in the same manner as the
Board conducts its business pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall
elect a President, a Treasurer and a Secretary, and it may, if it so
determines, elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board may also elect one or more Executive Vice
Presidents, one or more Vice Presidents and one or more other assistant
officers as the Board may deem desirable or appropriate and may give any of
them such further designations or alternate titles as it considers desirable.
Any number of offices may be held by the same person.* See below
Section 4.2. Term of Office; Resignation; Removal; Vacancies.
Except as otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the first meeting
of the Board after the annual meeting of stockholders next succeeding his or
her election, and until his or her successor is elected and qualified or until
his or her earlier death, resignation or removal. Any officer may resign at
any time upon written notice to the Board or the President or the Secretary of
the Corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation
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* Persons not elected by the Board of Directors holding any of
the foregoing titles shall not be officers of the
Corporation.
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shall be necessary to make it effective. The Board may remove any officer with
or without cause at any time. Any such removal shall be without prejudice to
the contractual rights of such officer, if any, with the Corporation, but the
election of an officer shall not of itself create contractual rights. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the term by
the Board at any regular or special meeting.
Section 4.3. Chairman of the Board. The Chairman of the Board, if
any, shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present and shall have and may
exercise such powers as may, from time to time, be assigned to him or her by
the Board and as may be provided by law.
Section 4.4. Vice Chairman of the Board. In the absence of the
Chairman of the Board, the Vice Chairman of the Board, if any, shall preside
at all meetings of the Board of Directors and of the stockholders at which he
or she shall be present and shall have and may exercise such powers as may,
from time to time, be assigned to him or her by the Board and as may be
provided by law.
Section 4.5. President. In the absence of the Chairman of the
Board and the Vice Chairman of the Board, the President shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. The President shall be the chief executive officer and shall
have general charge and supervision of the business of the Corporation and, in
general, shall perform all duties incident to the office of the president of a
Corporation and such other duties as may, from time to time, be assigned to
him or her by the Board or as may be provided by law.
Section 4.6. Vice Presidents. The Vice President or Vice
Presidents, at the request or in the absence of the President or during the
President's inability to act, shall perform the duties of the President, and
when so acting shall have the powers of the President. If there be more than
one Vice President, the Board of Directors may determine which one or more of
the Vice Presidents shall perform any of such duties; or if such determination
is not made by the Board, the President may make such determination, otherwise
any of the Vice Presidents may perform any of such duties. The Vice President
or Vice Presidents shall have such other powers and shall perform such other
duties as may, from time to time, be assigned to him or her or them by the
Board or the President or as may be provided by law.
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Section 4.7. Secretary. The Secretary shall have the duty to
record the proceedings of the meetings of the stockholders, the Board of
Directors and any committees in a book to be kept for that purpose, shall see
that all notices are duly given in accordance with the provisions of these
by-laws or as required by law, shall be custodian of the records of the
Corporation, may affix the corporate seal to any document the execution of
which, on behalf of the Corporation, is duly authorized, and when so affixed
may attest the same, and, in general, shall perform all duties incident to the
office of secretary of a corporation and such other duties as may, from time
to time, be assigned to him or her by the Board or the President or as may be
provided by law.
Section 4.8. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by or
under authority of the Board of Directors. If required by the Board, the
Treasurer shall give a bond for the faithful discharge of his or her duties,
with such surety or sureties as the Board may determine. The Treasurer shall
keep or cause to be kept full and accurate records of all receipts and
disbursements in books of the Corporation, shall render to the President and
to the Board, whenever requested, an account of the financial condition of the
Corporation, and, in general, shall perform all the duties incident to the
office of treasurer of a corporation and such other duties as may, from time
to time, be assigned to him or her by the Board or the President or as may be
provided by law.
Section 4.9. Other Officers. The other officers, if any, of the
Corporation shall have such powers and duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors which
is not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to give security
for the faithful performance of his or her duties.
ARTICLE V
Indemnification of Officers, Directors,
Employees and Agents
Section 5.1. Indemnification with Respect to Third
Party Actions. The Corporation shall indemnify any officer or
director, and it may, upon determination by the Board of
Directors, indemnify any other agent or employee, who was or is a
party or is threatened to be made a party to any threatened,
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pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, partner, trustee
or agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, taxes and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 5.2. Indemnification with Respect to Actions by or in the
Right of the Corporation. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, partner,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper. Any indemnification under this Section 5.2
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the
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director, officer, employee, partner, trustee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in this Section 5.2. Such determination shall be made (1) by the Board
of Directors by a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5.3. Payment of Expenses in Advance of Disposition of
Action. Expenses incurred by an officer or director in defending any actual or
threatened civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the officer or
director to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation as authorized in this
Article V. Such expenses incurred by other employees or agents may be paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 5.4. Indemnification Provided in this Article V
"Non-Exclusive". The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article V shall not be deemed exclusive of any
other rights to which those seeking indemnification or the advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee, partner, trustee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 5.5. Insurance. In the discretion of the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner, trustee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her
and incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation otherwise would have the power
to indemnify him or her against such liability.
Section 5.6. Definition of "Corporation". For the
purposes of this Article V, references to the "Corporation"
include any constituent corporation (including any constituent of
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a constituent) absorbed in a consolidation or merger as well as the resulting
or surviving corporation so that any person who is or was a director, officer,
employee, partner, trustee or agent of such a constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee, partner, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article V with respect to the resulting
or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
Section 5.7. Saving Clause. In the event any provision of this
Article V shall be held invalid by any court of competent jurisdiction, such
holding shall not invalidate any other provision hereof, and the remaining
provisions of this Article V shall be construed as if such invalid provision
had not been included.
ARTICLE VI
Stock
Section 6.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name
of the Corporation by the Chairman or Vice Chairman of the Board, if any, or
the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by such holder in the Corporation. Any
or all of the foregoing signatures may be facsimiles. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
Section 6.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate of stock theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen or destroyed certificate, or such
owner's legal representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it or on account of
the alleged loss, theft or destruction of any such certificate or the issuance
of such new Certificate.
Section 6.3. Registered Stockholders. The
Corporation shall be entitled to recognize the exclusive right of
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a person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and to hold liable for calls and assessments a
person registered on its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the
Corporation shall end upon such date as is determined by the
Board of Directors from time to time.
Section 7.2. Seal. The Corporation shall have a corporate seal
which shall have the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
Section 7.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Whenever notice is required to be given by law or
under any provision of the certificate of incorporation or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, directors, or members of a committee of directors
need to be specified in any written waiver of notice unless so required by the
certificate of incorporation or these by-laws.
Section 7.4. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more if its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of Directors
or committee thereof which authorizes the contract or transaction, or solely
because his or her or their
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votes are counted for such purpose, if: (1) the material facts as to his or
her or their relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of the committee, and the Board or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (2) the material facts
as to his or her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders; or (3) the contract or transaction is fair
as to the Corporation as of the time it is authorized, approved or ratified,
by the Board, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board or of a committee which authorizes the contract or transaction.
Section 7.5. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into
clearly legible form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person entitled to inspect
the same.
Section 7.6. Voting Shares in Other Corporations. Unless otherwise
directed by the Board, shares in other corporations which are held by the
Corporation shall be represented and voted only by the President or by a proxy
or proxies appointed by him.
Section 7.7. Amendment of By-laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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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, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Gruntal & Co., Inc.
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust
Series 20
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-28384 for the above-captioned trust. We hereby
acknowledge that Kenny S&P Evaluation Services, a division of J.J. Kenny Co.,
Inc. is currently acting as the evaluator for the trust. We hereby consent to
the use in the Amendment of the reference to Kenny S&P Evaluation Services, a
division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny 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, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Gruntal & Co., Inc.
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust
Series 22 and New York Navigator Insured Series 1
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-29467 for the above-captioned trust. We hereby acknowledge
that Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny 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, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Gruntal & Co., Inc.
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust
49th Discount Series, Series 23
and New York Navigator Insured Series 2
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-31426 for the above-captioned trust. We hereby acknowledge
that Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
J.J. Kenny 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, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, NY 10020
Gruntal & Co., Inc.
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust
Series 24 and New York Navigator Insured Series 3
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-34944 for the above-captioned trust. We hereby acknowledge
that Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Amendment of the reference to Kenny S&P Evaluation Services, a division of
J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registration Statement for the respective
bonds comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
<PAGE>
Managed Fund Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
STANDARD & POOR'S
A division of The McGraw-Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020
Gruntal Co., Incorporated
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust, Series 20
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-28384.
Since the portfolio is composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities for so long as they remain outstanding and such
policies have been issued by one or more insurance companies which have been
assigned "AAA" claims paying ability ratings by Standard & Poor's, we reaffirm
the assignment of a "AAA" rating to the units of the trust and a "AAA" rating to
the securities contained in the trust.
You have permission to use the name of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. and the above-assigned
ratings in connection with your dissemination of information relating to these
units, provided that it is understood that the ratings are not "market" ratings
nor recommendations to buy, hold or sell the units of the trust or the
securities in the trust. Further, it should be understood that the rating on the
units does not take into account the extent to which fund expenses or portfolio
asset sales for less than the fund's purchase price will reduce payment to the
unit holders of the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on the
sponsor and its counsel, accountants and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
Standard & Poor's does not independently verify the truth or accuracy of any
such information.
The letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the amendment referred to
above. However, this letter should not be construed as a consent by us, within
the meaning of Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
/l
<PAGE>
Managed Fund Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
STANDARD & POOR'S
A division of The McGraw-Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020
Gruntal Co., Incorporated
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust, Series 22 and New York Navigator
Insured Series 1
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-29467.
Since the portfolio is composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities for so long as they remain outstanding and such
policies have been issued by one or more insurance companies which have been
assigned "AAA" claims paying ability ratings by Standard & Poor's, we reaffirm
the assignment of a "AAA" rating to the units of the trust and a "AAA" rating to
the securities contained in the trust.
You have permission to use the name of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. and the above-assigned
ratings in connection with your dissemination of information relating to these
units, provided that it is understood that the ratings are not "market" ratings
nor recommendations to buy, hold or sell the units of the trust or the
securities in the trust. Further, it should be understood that the rating on the
units does not take into account the extent to which fund expenses or portfolio
asset sales for less than the fund's purchase price will reduce payment to the
unit holders of the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on the
sponsor and its counsel, accountants and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
Standard & Poor's does not independently verify the truth or accuracy of any
such information.
The letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the amendment referred to
above. However, this letter should not be construed as a consent by us, within
the meaning of Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
/l
<PAGE>
Managed Fund Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
STANDARD & POOR'S
A division of The McGraw-Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020
Gruntal Co., Incorporated
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust, 49th Discount Series, Series 23 and New
York Navigator Insured Series 2
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-31426.
Since the portfolio is composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities for so long as they remain outstanding and such
policies have been issued by one or more insurance companies which have been
assigned "AAA" claims paying ability ratings by Standard & Poor's, we reaffirm
the assignment of a "AAA" rating to the units of the trust and a "AAA" rating to
the securities contained in the trust.
You have permission to use the name of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. and the above-assigned
ratings in connection with your dissemination of information relating to these
units, provided that it is understood that the ratings are not "market" ratings
nor recommendations to buy, hold or sell the units of the trust or the
securities in the trust. Further, it should be understood that the rating on the
units does not take into account the extent to which fund expenses or portfolio
asset sales for less than the fund's purchase price will reduce payment to the
unit holders of the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on the
sponsor and its counsel, accountants and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
Standard & Poor's does not independently verify the truth or accuracy of any
such information.
The letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the amendment referred to
above. However, this letter should not be construed as a consent by us, within
the meaning of Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
/l
<PAGE>
Managed Fund Ratings
25 Broadway
New York, NY 10004-1064
Tel 212 208 8000
Fax 212 208 8034
STANDARD & POOR'S
A division of The McGraw-Hill Companies
April 30, 1996
Reich & Tang Distributors L.P.
600 5th Avenue
New York, NY 10020
Gruntal Co., Incorporated
14 Wall Street
New York, NY 10005
Re: Insured Municipal Securities Trust, Series 24 and New York Navigator
Insured Series 3
It is our understanding that you have filed with the Securities and
Exchange Commission a Post Effective Amendment to the above captioned fund, SEC
file number 33-34944.
Since the portfolio is composed solely of securities covered by bond
insurance policies that insure against default in the payment of principal and
interest on the securities for so long as they remain outstanding and such
policies have been issued by one or more insurance companies which have been
assigned "AAA" claims paying ability ratings by Standard & Poor's, we reaffirm
the assignment of a "AAA" rating to the units of the trust and a "AAA" rating to
the securities contained in the trust.
You have permission to use the name of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. and the above-assigned
ratings in connection with your dissemination of information relating to these
units, provided that it is understood that the ratings are not "market" ratings
nor recommendations to buy, hold or sell the units of the trust or the
securities in the trust. Further, it should be understood that the rating on the
units does not take into account the extent to which fund expenses or portfolio
asset sales for less than the fund's purchase price will reduce payment to the
unit holders of the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on the
sponsor and its counsel, accountants and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
Standard & Poor's does not independently verify the truth or accuracy of any
such information.
The letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the amendment referred to
above. However, this letter should not be construed as a consent by us, within
the meaning of Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. in connection with the ratings assigned to the securities contained in the
trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Managing Director
GRUNTAL & CO., INCORPORATED
SECRETARY'S CERTIFICATE
OF
BOARD OF DIRECTOR'S RESOLUTIONS
I, Lionel G. Hest, DO HEREBY CERTIFY, that I am the Secretary of
Gruntal & Co., Incorporated, a Delaware corporation (the "Corporation"), and
that I am the keeper of the records and seal thereof; that the attached is a
true, correct and compared copy of the resolutions duly adopted by the Board of
Directors at a meeting thereof held May 18, 1989, and that resolutions remain in
full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the corporation this 18th day of May 1989.
_______________________________
Lionel G. Hest
Secretary
(Seal)
359861.1
<PAGE>
GRUNTAL & CO., INCORPORATED
RESOLUTIONS OF THE BOARD OF DIRECTORS
RESOLVED, that the Board of Directors of Gruntal & Co., Incorporated
(the "Corporation") deems it advisable and in the best interests of this
Corporation to sponsor and/or co-sponsor unit investment trusts of every kind
and nature, including, but not limited to, A Corporate Trust, Insured Municipal
Securities Trust, Municipal Securities Trust, and New York Municipal Securities
Trust, of various and successive series (collectively the "Series") the
portfolios of which will consist of various types of equity or debt obligations,
including, but not limited to, municipal bonds and corporate bonds, as the case
may be, and to continue to sponsor various series of unit investment trusts
previously sponsored by Bear Stearns & Co., Incorporated, a Delaware corporation
(the "Secondary Series"), and to sell units representing the ownership of
frictional undivided interests in the securities acquired and deposited in the
portfolio of such trusts; and be it further
RESOLVED, that any appropriate officer of this Corporation and any
person authorized by the Board of Directors or by the President or any Senior
Executive Vice President or Executive Vice President of this Corporation, or
member of the Management Committee, including:
Howard Silverman
Edward E. Bao
Barry Richter
Robert Sablowsky
James W. Wolitarsky
(each of which being hereinafter referred to in these resolutions as an
"Authorized Person"), be, and each of them hereby is, severally authorized on
behalf of the Corporation to prepare, execute, deliver and cause to be filed
with the Securities and Exchange Commission Registration Statements on Form S-6,
the Securities Act of 1933, as amended, or any successor form or forms,
amendments and post-effective amendments to said Registration Statements and to
take such further action as may be necessary to cause said Registration
Statements to become and to remain effective under the Securities Act of 1933,
as amended, and to make such changes therein and additions thereto as said
Authorized Person shall approve in connection with the issuance and sale of
units of undivided interests in connection with the unit investment trusts of
the Series and the Secondary Series, and that upon the proper registration and
qualification of a unit investment trust for any Series or Secondary Series, to
effect a public offering of the units in the manner and upon the terms and
-2-
359861.1
<PAGE>
conditions set forth in the Registration Statement and Prospectus
relating to the units of such Series; and be it further
RESOLVED, that any Authorized Person of the Corporation be and
hereby is authorized and empowered to prepare and cause to be filed with the
Securities and Exchange Commission under the Investment Company Act of 1940 the
following documents, and any other required documents, and amendments and
exhibits thereto relating to the issuance and sale from time to time of units of
undivided interests in the Series and, to the extent applicable,
(i) A Registration Statement on Form N-8B-2; and
(ii) A Notification of Registration on Form N-8A under said Act;
and be it further
RESOLVED, that any Authorized person be, and each of them is, hereby
severally authorized to take such further action and to do any and all things
necessary or proper under any applicable law, including the Investment Company
Act of 1940, the Securities Act of 1933 and the Securities Exchange Act of 1934,
including the submission and filing of any and all applications, necessary or
proper; and be it further
RESOLVED, that any Authorized Person be, and each of them hereby is,
severally authorized to execute and deliver in the name and on the behalf of the
Corporation, and to effect changes in or amendments to, any and all documents
necessary or appropriate to effect, facilitate or memorialize the creation of
the Series and, to the extent applicable, the Secondary Series, the deposit of
securities and other property in the Series and the issuance, offer and sale of
units of undivided interest in the Series, including, but not limited to,
Memoranda of Closing, Trust Indentures and Agreements, Reference Trust
Agreements, Agreements Among Sponsors, Agreements Among Underwriters, evidencing
undivided interests in the Series, in the form approved by the Authorized Person
executing said documents, his or her execution thereof to be conclusive evidence
of such approval; and be it further
RESOLVED, that any Authorized Person of the Corporation be, and each
of them is, hereby severally authorized to effect a name change in any Series or
Secondary Series authorized by the foregoing resolutions and to do all things
necessary or proper to effect any such name change; and be it further
RESOLVED, that any Authorized Person of the Corporation is hereby
authorized and directed to take such further action and to do any and all things
necessary or proper under said Trust Indentures and Agreements in order to
perform in all respects the
-3-
359861.1
<PAGE>
obligations and undertakings of the Corporation thereunder; and
be it further
RESOLVED, that it is desirable and in the best interests of the
Corporation that the securities of the Series be qualified or registered for
sale in various states and that such registration or qualification be kept
current and effective to the extent necessary to accomplish the intent of the
foregoing resolutions; that any Authorized Person of the Corporation be, and
hereby is, authorized to determine the states in which appropriate action shall
be taken to qualify or register for sale all or such part of the securities of
the Series or Secondary Series as said Authorized Person may deem advisable;
that said Authorized Person is hereby authorized to perform on behalf of the
Corporation any and all such acts as he may deem necessary or advisable in order
to comply with the applicable laws of any such states; and in connection
therewith to execute and file all requisite papers and documents, including, but
not limited to, applications, reports, surety bonds, commitments, undertakings,
irrevocable consents and appointments of attorneys for service of process; and
the execution by such Authorized Person of any such paper or document or the
doing by him of any act in connection with the foregoing matters shall
conclusively establish his authority therefor from the Corporation and the
approval and ratification by the Corporation of the papers and documents so
executed and the action so taken; and be it further
RESOLVED, that the Corporation expressly assumes all duties and
obligations and accedes to all rights of the Sponsor under the respective Trust
Agreements and related Reference Trust Agreements with respect to all Secondary
Series; and be it further
-4-
359861.1
<PAGE>
RESOLVED, that any Authorized Person of the Corporation hereby is
authorized to do and perform all such further acts and things and execute and
deliver for and on behalf of the Corporation all such other documents,
instruments and certificates as such Authorized Person may deem necessary or
proper to execute and carry out the purpose and intent of the foregoing
resolutions; and be it further
RESOLVED, that each of such Authorized Persons is hereby appointed
agent and attorney-in-fact for the Corporation with full power to sign on the
Corporation's behalf Registration Statements under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, and any and all
amendments thereto, and to execute and deliver such other documents as may be
necessary and proper to execute and carry out the purpose and intent of the
foregoing resolutions, and the appropriate officers of the Corporation are
authorized to execute a Power of Attorney authorizing such appointment and to
certify and file with the Securities and Exchange Commission a copy of these
resolutions; and be it further
RESOLVED, that any action heretofore taken or omitted to be taken by
any Authorized Person of the Corporation in connection with the Series or
Secondary Series be, and the same hereby is, approved and ratified by the
Corporation; and the execution by such Authorized Person or other officer of the
Corporation of any paper or document or the doing by them of any act in
connection with the foregoing matters shall conclusively establish his approval
therefor from the Corporation and the approval and ratification by the
Corporation of the papers and documents so executed and the action so taken.
-5-
359861.1
MUNICIPAL SECURITIES TRUSTS
AGREEMENT AMONG CO-SPONSORS
AGREEMENT, dated as of the 9th day of June, 1989, by
and among Bear, Stearns & Co., Inc ("Bear Stearns"), Gruntal &
Co., Inc. ("Gruntal"), and Prescott, Ball & Turben, Inc. ("PB&T")
(individually, a "Co-Sponsor" and collectively, the "Co-
Sponsors").
WITNESSETH:
WHEREAS, Bear Stearns, Gruntal, and PB&T desire to co- sponsor a
series of unit investment trusts to be named Municipal Securities Trusts or
Insured Municipal Securities Trusts (collectively, "MSTs") and to offer units of
interest in such trusts to the public pursuant to registration statements to be
filed with the Securities and Exchange Commission ("SEC") under the Investment
Company Act of 1940 and the Securities Act of 1933;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Name. All unit investment trusts created after the date of this
agreement, and that are subject to the terms of this agreement, shall be
denominated under the umbrella name "Municipal Securities Trusts" or "Insured
Municipal Securities Trusts" (collectively, "MSTs"), which name shall cover all
discount, full-coupon, insured, navigator, state-specific and multi-state series
contemplated hereby.
2. Sponsorship. (a) Bear Stearns shall cause to be registered with
the SEC all MST trusts created after the date hereof, and that are subject to
the terms of this agreement, under the MST name, and all Co-Sponsors under this
agreement shall be designated as Co-Sponsors pursuant to such registration. PB&T
shall only be a co-sponsor of any "Navigator Series" of MST and this agreement
shall only apply to them with regard to such series. However, Bear Stearns shall
be permitted to register and sponsor any trust under the MST name without the
other Co- Sponsors.
(b) Each Co-Sponsor will supply all information and documentation
required for the filing with the SEC and/or any state securities regulatory
authority or authorities of all
360015.1
<PAGE>
applications, registration statements, exhibits and other documents required to
be so filed or reasonably deemed by any Co- Sponsor to be advisable to file.
Each Co-Sponsor will cause to be signed on its behalf any document referred to
in this Paragraph 2 (b) by such person and in such a manner that such signature
shall be the signature of the Co-Sponsor.
3. Accumulation Account. (a) Upon notice to the other Co-Sponsors,
Bear Stearns shall establish an Accumulation Account for each new series of MST.
In its notice, Bear Stearns shall describe the kind of MST it proposes to create
and the types of securities it intends to include in the portfolio (depending
upon availability). Upon receipt of such notice, any Co-Sponsor other than Bear
Stearns shall have an opportunity to discuss the contents of any proposed MST
with Bear Stearns.
(b) Bear Stearns shall have the sole discretion to determine whether
to retain securities in the Accumulation Account for deposit into a new MST
series or to sell securities out of the Accumulation Account if it determines
that the inclusion of such securities in such new MST series would not be in the
best interests of the Co-Sponsors. In all cases, Bear Stearns shall communicate
to the other Co-Sponsors its actions with regard to any prospective MST.
(c) Profit or loss in the Accumulation Account shall be determined
by the difference between the purchase price paid for the securities by the
Accumulation Account and the price at which the securities are sold by the
Accumulation Account to the applicable MST trust on the date of deposit; the
latter price being determined by the Evaluator of the trust (as hereinafter
defined).
(d) Profit or loss and income or expense in the Accumulation Account
shall be allocated to each Co-Sponsor in the same proportion as the aggregate
number of units in the Trust underwritten by each Co-Sponsor bears to the
aggregate number of units in the applicable Trust.
4. Takedown Account. For each new series of MST, Bear Stearns shall
create a Takedown Account for the units of that series. All sales charges shall
be deposited into the Takedown Account and all expenses relating to the
formation of the series shall be deducted from the Takedown Account, including
Co-Sponsor and underwriter takedowns. All funds remaining in each Takedown
Account after the payment of all fees and expenses shall be divided among the
Co-Sponsors in accordance with their pro rata participation in the applicable
series. In each case, Bear Stearns shall exercise its best efforts to close out
the Takedown Account within 45 days of its establishment.
-2-
360015.1
<PAGE>
5. Participation. (a) Actual participation for each Co-Sponsor shall
be determined by Bear Stearns. However, each Co-Sponsor must take down a minimum
of 10% of the units of any new MST series if so directed by Bear Stearns. In
addition, it is anticipated that each Co-Sponsor shall take down at least 2,000
units of any NY Navigator series of MST and at least 1,500 units of any discount
or full-coupon national series of MST.
Underwriting of multi-state trusts by Co-Sponsors shall be in
accordance with their respective distribution capabilities.
(b) Each Co-Sponsor is expected to sell its underwriting commitment
of any MST series within a reasonable period of time, and Bear Stearns may
reduce the takedown of any Co-Sponsor which continually underperforms its
underwriting obligations. As each underwriting approaches its conclusion, Bear
Stearns shall have the right to require any Co-Sponsor with unsold MST units to
sell such unsold units back to Bear Stearns at the then-prevailing underwriting
concession.
(c) For MST underwriters which are not Co-Sponsors, underwriting
participation shall be in integral multiples of 50 units beginning with the
minimum underwriting commitment of 100 units.
6. Underwriting Profits/Losses. (a) Each Co-Sponsor
shall be given credit for all underwriting profits and shall
assume liability for all underwriting losses attributable to all
MST units actually underwritten by it.
(b) In addition to the underwriting credits and liabilities
allocable to Bear Stearns pursuant to (a) above, Bear Stearns shall also be
given full profit credit and shall assume full loss liability for all MST units
underwritten by firms other than the Co-Sponsors, except as provided in (c)
below.
(c) With respect to any new underwriters introduced to the MST
program by Gruntal, Bear Stearns and Gruntal shall share equally in all net
underwriting profits and in all underwriting losses attributable to all units
underwritten by such underwriters while this agreement remains in effect with
respect to Gruntal and Bear Stearns. This special arrangement with respect to
Gruntal introduced underwriters is due to and shall be coterminous with
Gruntal's agreement with Bear Stearns to actively market the MST program to such
new underwriters and to make available to the program certain proprietary
software/hardware relating to unit trust trading. Bear Stearns shall provide all
of the other Co-Sponsors with a list of securities firms that have underwritten
its unit investment trusts and which are therefore to be considered its
underwriters for all purposes of this agreement. Should any Co-Sponsor other
than Gruntal introduce a new underwriter to the MST program, Bear
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Stearns agrees to negotiate an appropriate arrangement consistent with that set
forth in this Paragraph (c) with such Co-Sponsor.
7. Underwriting Concessions. (a) For all full-coupon MSTs where the
sales charge is 4.9%, each Co-Sponsor shall take down units from the Takedown
Account at a concession of $38.00 per unit.
(b) For all discount MSTs, each Co-Sponsor shall take down units
from the Takedown Account at a concession of $22.50 per unit.
(c) For all MST series where the sales charge is less than 4.9% and
the trust is a full-coupon series, each Co-Sponsor shall take down units from
the Takedown Account at the then applicable concession as determined by Bear
Stearns.
8. Secondary Market Account. (a) Bear Stearns shall maintain a
Secondary Market Account for all units of MST issued after the date of this
agreement and, in support thereof, shall monitor portfolios, adjust prices and
par values, maintain a sales and service desk and update trust registration
statements and prospectuses.
(b) Secondary market activity in MST units shall be recorded in a
Secondary Market Account to be maintained by Bear Stearns. Profits and losses in
the Secondary Market Account shall be determined on the basis of resales of MST
units from such account less a ticket charge of $35.00 (based upon present costs
and to be adjusted accordingly), cost of carry (to be fixed at the broker loan
rate) and a pro rata percentage of additional staff (if needed and discussed
with the other Co-Sponsors) added to the secondary unit trading department. Bear
Stearns shall make profit/loss adjustments to the Secondary Market Account on a
quarterly basis and each Co-Sponsor shall make all of its applicable expense and
trading records available to the other Co- Sponsors upon their reasonable
request.
(c) On any day in which it receives a sell order for MST units, a
Co-Sponsor shall sell such units back to the Secondary Market Account on that
date at the bid side of the market for such units.
(d) Credit for profits and liability for losses in the Secondary
Market Account shall be fixed initially at 15% for each Co-Sponsor other than
Bear Stearns and the balance in each case for the account of Bear Stearns.
Beginning 6 months after the execution of this agreement, and for each 6 month
period thereafter, the credit of each Co-Sponsor for profits and the liability
of each Co-Sponsor for losses in the Secondary Market Account shall be based on
its pro rata participation in the primary distribution of the applicable MST
series.
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9. Reinvestment Account. (a) All MSTs created after this agreement
shall have a reinvestment option for unitholders which would include the
possibility of reinvestment of MST dividends in a mutual fund or funds selected
by Bear Stearns.
(b) Revenues to be included in determining profits and losses in the
Reinvestment Account shall include commissions, management fee rebates,
designated business, 12b-1 fees and all other revenues attributable to the
reinvestment option.
(c) Profits and losses generated in the Reinvestment Account shall
be divided among the Co-Sponsors in the same manner as secondary market profits
and losses are allocated pursuant to Paragraph 8(d) above.
10. Update Escrow Account. In order to fund future updates of MST
registration statements and prospectuses, Bear Stearns shall create an
interest-bearing Update Escrow Account to be funded by withdrawing $1.00 per
unit from the Accumulation Account of each new MST series created after the date
hereof for deposit into the Update Escrow Account. Whenever available funds in
the Update Escrow Account fall short of necessary expenses, each Co-Sponsor
shall contribute to the Update Escrow Account its pro rata share of the
shortfall. Any surplus funds in the Update Escrow Account shall remain therein.
11. Advertising Account. (a) In order to fund future promotions of
MSTs, Bear Stearns shall create an Advertising Account which shall be funded by
withdrawing $1.00 per unit from the Takedown Account for each new MST series
created after the date hereof for deposit into the Advertising Account.
(b) In all advertising and promotional literature where the
Co-Sponsors are listed, they shall be listed in the following order: Bear
Stearns, Gruntal, and PB&T; and such names shall be printed in the same type,
style and size.
12. Fees to Bear Stearns. (a) Upon execution of this agreement,
Gruntal shall purchase from Bear Stearns an MST CoSponsorship for the purchase
price of $250,000 which shall entitle it to all of the benefits and subject it
to all of the liabilities of participating in the creation, marketing and
trading of all MSTs covered by this agreement. Similarly, upon the execution of
this agreement, PB&T shall purchase from Bear Stearns its MST, Co-Sponsorship
only for the N.Y. Navigator series for the purchase price of $50,000. However,
nothing herein shall give the other Co-Sponsors any right or interest in any MST
created by Bear Stearns prior to the date hereof. Gruntal may discharge its
obligations under this paragraph 12 by paying Bear Stearns the sum of $50,000
upon execution of this agreement and making eight subsequent quarterly payments
to Bear
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Stearns in the amount of $25,000 (plus interest on the outstanding balance at
the prevailing broker call rate).
(b) For its services as administrator of the various MST series,
Bear Stearns shall be entitled to an annual administrative fee from each MST in
an amount disclosed in the prospectus for that MST series.
(c) Bear Stearns shall be entitled to a cumulative fee for
accumulating the bonds for each MST series as follows:
Size of Trust Per Unit Fee
between 0 to 11,999 units $.60
between 12,000 to 14,999 units .50
between 15,000 to 19,999 units .40
between 20,000 to 49,999 units .30
50,000 or more units .10
For this purpose each MST Multi-State series shall be considered one
series. Such fee shall be payable from the Takedown Account.
13. Co-Sponsor Withdrawal: Non-Competition. (a) If a Co-Sponsor
other than Bear Stearns elects to withdraw from this agreement, Bear Stearns
shall have a right of first refusal with respect to all of the right, title and
interest of such withdrawing Co-Sponsor under this agreement. The remaining Co-
Sponsors along with Bear Stearns or by themselves shall have the right of second
refusal with respect to all of the right, title and interest of such withdrawing
Co-Sponsor under this agreement. If Bear Stearns or Bear Stearns along with the
remaining Co- Sponsors or the remaining Co-Sponsors should elect not to exercise
such right of first or second refusal, the withdrawing Co-Sponsor shall have 90
days from the date on which Bear Stearns, or Bear Stearns together with the
remaining Co-Sponsors, or the remaining Co-Sponsors notifies it of their
decision not to exercise their right of first or second refusal within which to
assign its Co-Sponsorship to an assignee other than another Co- Sponsor under
this agreement. Any such assignee must make a non-refundable, good faith deposit
in the amount of [$] [25% of] which is to be held by the then current Trustee of
the MST series. If the withdrawing Co-Sponsor is unable to assign its
Co-Sponsorship in accordance with the foregoing conditions, then such
Co-Sponsorship shall revert to Bear Stearns without any compensation to the
withdrawing Co-Sponsor. The right to be a Co-Sponsor under this agreement shall
not be transferable to any successor to a Co-Sponsor without the prior written
consent of Bear Stearns.
(b) If a Co-Sponsor other than Bear Stearns wishes to
terminate this agreement for any reason, all of its applicable
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obligations hereunder shall continue for a period of 2 years from the date of
such termination regardless of whether its CoSponsorship has been assigned to
another party pursuant to (a) above. In addition, no Co-Sponsor other than Bear
Stearns who voluntarily withdraws from this agreement shall be entitled to
sponsor or co-sponsor any new unit investment trust for a period of one year
from the date of its withdrawal herefrom. If a Co- Sponsor voluntarily withdraws
from this agreement for the purpose of sponsoring its own unit investment trust,
it shall not be subject to the above mentioned one-year restriction against
cosponsorship if notice of such voluntary withdrawal by any Co- Sponsor shall be
made in writing to all other Co-Sponsors at least 60 days prior to the date of
withdrawal. Any Co-Sponsor withdrawing from this agreement in order to sponsor
its own unit investment trust shall not be entitled to any compensation for such
withdrawal pursuant to (a) or (c) herein and all of its interest as Co-Sponsor
shall revert to Bear Stearns upon such withdrawal.
(c) Bear Stearns, at any time and for any reason, may withdraw from
this agreement. If Bear Stearns at any time and for any reason withdraws from
this agreement, this agreement shall automatically terminate and the
non-competition provisions of (b) above shall not apply to any Co-Sponsor
serving as such at the time of such withdrawal. If such withdrawal of Bear
Stearns occurs within one year from the date of this agreement, each of the
Co-Sponsors shall receive from Bear Stearns a full refund of the amount actually
paid to Bear Stearns pursuant to Paragraph 12(a) hereof; if such withdrawal
occurs after the end of the first year of this agreement but before the end of
the second year, each other Co-Sponsor shall receive from Bear Stearns a 50%
refund of the amount actually paid to Bear Stearns pursuant to Paragraph 12(a)
hereof.
(d) During the pendency of this agreement, no Co- Sponsor other than
Bear Stearns shall sponsor or co-sponsor any other unit investment trust
identical or similar in character to any MST being co-sponsored (or contemplated
for co-sponsorship) under this agreement. A Co-Sponsor, however, may sponsor or
co- sponsor any non-competing unit investment trust product with the written
permission of Bear Stearns and may underwrite any other competitive or
non-competitive unit investment trust products at minimal underwriting levels.
(e) In the event that any Co-Sponsor other than Bear Stearns wishes
to create a unit investment trust product different in character from the unit
trusts contemplated hereby, such Co-Sponsors shall offer the other Co-Sponsors a
right of first refusal to participate in the underwriting thereof on terms
similar to those contained herein.
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(f) With regard to the assignment by a Co-Sponsor other than Bear
Stearns of its Co-Sponsorship under this agreement, its percentage ownership of
the MSTs co-sponsored by it hereunder shall be determined by dividing the total
number of MST units underwritten by it from the date of execution of this
agreement by the total number of MST units brought to market since October 23,
1978.
(g) Each Co-Sponsor acknowledges and agrees that it shall obtain
hereby no rights whatsoever relative to any present or future series of MST
other than as specifically provided in this agreement; including, but not
limited to, any rights to use the names "Municipal Securities Trust," "Insured
Municipal Securities Trust," "MST," "IMST" or any work product generated for or
in furtherance of MST, or to participate in the creation or distribution of
units of any subsequent series of MST. The Co-Sponsors acknowledge and agree
that the names referred to in this Paragraph (g) are proprietary to Bear Stearns
and that Bear Stearns has the exclusive right at any time to the use of said
names during and after the term of this agreement.
14. Evaluator. (a) The evaluator of each MST series
shall be as Bear Stearns shall determine. The Evaluator shall
evaluate units in both the primary and secondary markets.
(b) After being notified by Bear Stearns that all units of a new MST
series have initially been sold, the Evaluator shall begin pricing such series
on the bid side of the market.
15. Trustee. The Trustee of each MST series shall be
as Bear Stearns shall determine.
16. Books and Records. Bear Stearns shall maintain
all books and records pertaining to the MST units issued pursuant
to this agreement. Each other Co-Sponsor may examine such books
and records upon reasonable request and notice.
17. Co-Sponsor Liability. (a) Each Co-Sponsor shall
indemnify and hold harmless all other Co-Sponsors with respect to
any litigation or other proceeding resulting from its negligence,
willful misconduct or breach of this agreement.
(b) All of the Co-Sponsors, jointly and severally, shall indemnify
and hold harmless Bear Stearns with respect to any litigation or other
proceeding relating to the activities contemplated under this agreement except
where Bear Stearns is proven to have been grossly negligent, guilty of willful
misconduct or in breach of this agreement.
(c) The maximum liability of a Co-Sponsor hereunder shall be equal
to its accumulated, pro rata average participation in all MSTs covered by this
agreement.
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(d) Each Co-Sponsor agrees to act with regard to the co-sponsorship
of MST in a commercially reasonable manner. Any willful breach of this
agreement, the Master Agreement Among Underwriters executed in connection with
MST, or the provisions of the appropriate prospectus applicable to MST, as
determined by a majority of the Co-Sponsors (not including the Co-Sponsor in
question), by a Co-Sponsor other than Bear Stearns will allow Bear Stearns to
cause the immediate withdrawal of such Co-Sponsor from this agreement. In this
instance, the interest of such withdrawing Co-Sponsor shall revert to Bear
Stearns without any compensation to the Co-Sponsor.
18. Compliance with Law. Each Co-Sponsor covenants
with the other Co-Sponsors to comply in all respects with all
federal and state laws and regulations applicable to the
activities contemplated hereby.
19. Arbitration. Any dispute arising under this
agreement shall be submitted to arbitration in accordance with
the Constitution and Rules of the New York Stock Exchange, Inc.
20. Amendment. This agreement may be amended only by
written agreement among all of the Co-Sponsors.
21. Governing Law. This agreement shall be governed
by and construed in accordance within the laws of the State of
New York.
22. Counterparts. This agreement may be executed in
one or more counterparts all of which shall constitute but one
and the same instrument.
23. Termination. This agreement shall remain in full force for two
years from the date of its execution, and will automatically renew subject to
any modifications made by the Co- Sponsors every two-year period from then on.
There shall be no further fees imposed upon the Co-Sponsors.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed as of the date first above written.
BEAR, STEARNS & CO. INC. GRUNTAL & CO., INC.
_____________________________ ________________________________
By: Authorized Officer By: Authorized Officer
PRESCOTT, BALL & TURBEN INC.
________________________________
By: Authorized Officer
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