As filed with the Securities and Exchange Commission on October 30, 1997
Registration No. 33-45890*
================================================================================
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 29, NEW YORK
NAVIGATOR INSURED SERIES 11 & NEW JERSEY NAVIGATOR INSURED
SERIES 8, SERIES 30 & NEW YORK NAVIGATOR INSURED SERIES 12 AND
NEW YORK NAVIGATOR INSURED SERIES 15 & NEW JERSEY NAVIGATOR
INSURED SERIES 11
B. Name of depositors: REICH & TANG DISTRIBUTORS L.P.
GRUNTAL & CO., L.L.C.
C. Complete address of depositor's principal executive office:
Reich & Tang Distributors L.P. Gruntal & Co., L.L.C.
600 Fifth Avenue 14 Wall Street
New York, New York 10020 New York, New York 10005
D. Name and complete address of agent for service:
PETER J. DeMARCO LEE FENSTERSTOCK Copy of comments to:
Executive Vice President President MICHAEL R. ROSELLA, ESQ.
Reich & Tang Gruntal & Co., L.L.C. Battle Fowler LLP
Distributors L.P. 14 Wall Street 75 East 55th Street
600 Fifth Avenue New York, NY 10005 New York, NY 10022
New York, New York 10020 (212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485.
/x/ on (October 31, 1997) pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a) of Rule 485.
/ / on ( date ) pursuant to paragraph (a) of Rule 485.
================================================================================
* The Prospectus included in this Registration Statement 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 29, New York Navigator Insured Series 11 & New
Jersey Navigator Insured Series 8, Series 30 & New York Navigator Insured
Series 12, and New York Navigator Insured Series 15 & New Jersey Navigator
Insured Series 11 covered by prospectuses heretofore filed as part of
separate registration statements on Form S-6 (Registration Nos. 33-45890,
33-53124, and 33-50891 respectively) under the Act. This filing constitutes
Post- Effective Amendment No. 5 for Insured Municipal Securities Trust,
Series 29, New York Navigator Insured Series 11 & New Jersey Navigator
Insured Series 8 and Series 30 & New York Navigator Insured Series 12 and
Post-Effective Amendment No. 4 for Insured Municipal Securities Trust, New
York Navigator Insured Series 15 & New Jersey Navigator Insured Series 11.
138866.1
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
SERIES 29
- -------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 29
("Insured Municipal Trust") with an underlying portfolio of long-term insured
tax-exempt bonds issued by or on behalf of states, municipalities and public
authorities and was formed to preserve capital and to provide interest income
(including, where applicable, earned original issue discount) which, in the
opinions of bond counsel to the respective issuers, is, with certain exceptions,
currently exempt from regular federal income tax under existing law but may be
subject to state and local taxes. There can be no assurance that the Trust's
investment objectives will be achieved. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. In addition, capital gains are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsors
are Reich & Tang Distributors L.P. and Gruntal & Co., L.L.C. (sometimes referred
to as the "Sponsor" or the "Sponsors"). The value of the Units of the Trust will
fluctuate with the value of the under lying bonds. Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation at the time originally deposited in the Trust. The
"AAA" rating results from insurance relating only to the Bonds in the Trust and
not to Units of the Trust. The insurance does not remove market risk, as it does
not guarantee the market value of the Units. For a discussion of the
significance of such ratings, see "Description of Bond Ratings" in Part B of
this Prospectus, and for a list of ratings on the Evaluation Date see the
"Portfolio."
Some of the Bonds may be "Zero Coupon Bonds", which are
original issue discount bonds that provide for payment at maturity at par value,
but do not provide for the payment of any current interest. Some of the Bonds in
the Trust have been issued with optional refunding or refinancing provisions
("Refunded Bonds") whereby the issuer of the Bond has the right to call such
Bond prior to its stated maturity date (and other than pursuant to sinking 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
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the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the call
price for such bonds but will cease receiving interest income with respect to
them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of the
Evaluation Date, see "Notes to Financial Statements" in this Part A. Some of the
Bonds in the portfolio may have been purchased at an aggregate premium over par.
The payment of interest and preservation of capital are, of course, dependent
upon the continuing ability of issuers of the Bonds or the insurers thereof to
meet their obligations.
Investment in the Trust should be made with an understanding
of the risks which an investment in long-term fixed rate debt obligations may
entail, including the risk that the value of the underlying portfolio will
decline with increases in interest rates, and that the value of Zero Coupon
Bonds is subject to greater fluctuation than coupon bonds in response to changes
in interest rates. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/4640th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "Organization" in Part B of this Prospectus.) The Units being
offered hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a
municipal bond guaranty insurance policy obtained by either the Sponsor
("Sponsor-Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall become
due for payment but shall not have been paid by the issuer or any other insurer
thereof. None of the insurance will cover accelerated payments of principal or
penalty interest or premiums unrelated to taxability of interest on the Bonds
(although the insurance, including insurance obtained by MBIA Corp., does
guarantee payment of principal and interest in such amounts and at such times as
such amounts would have been due absent such acceleration). The insurance
relates only to the prompt payment of principal of and interest on the
securities in the portfolio, and does not remove market risks or guarantee the
market value of the Units in the Trust. The terms of the insurance are more
fully described under "Insurance on the Bonds" in Part B of this Prospectus. For
a discussion of the effect of an occurrence of nonpayment of principal or
interest on any Bonds in the Trust, see "Portfolio Supervision" in Part B of
this Prospectus. No representation is made herein as to any Bond insurer's
ability to meet its obligations under a policy of insurance relating to any of
the Bonds. In addition, investors should be aware that, subsequent to the Date
of Deposit, the rating of the claims paying ability of the insurer of an
underlying Bond may be downgraded, which may result in a downgrading of the
rating of the Units in the Trust. The approximate percentage of the aggregate
principal amount of the portfolio that is insured by each insurance company is
as follows: AMBAC Indemnity Corp. ("AMBAC"), 45.9%; Financial Guaranty Insurance
Company ("Financial Guaranty"), 23%; Financial Security Assurance, Inc.
("Financial Security"), 25.7%; and MBIA Corp., 5.4%.
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 4.48% of the
Public Offering Price, or 4.691% of the net amount invested in Bonds per Unit.
The sales charge for secondary market purchases is based upon the number of
years remaining to maturity of each bond in the Trust's portfolio. (See "Public
Offering" in Part B of this Prospectus.) In addition, accrued interest to the
expected date of settlement is added to the Public Offering Price. If Units had
been purchased on the Evaluation Date, the Public Offering Price per Unit would
have been $1,086.82 plus accrued interest of $9.88 under the monthly
distribution plan, $14.43 under the semi-annual distribution plan and $42.83
under the annual distribution plan, for a total
A-2
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<PAGE>
of $1,096.70, $1,101.25 and $1,129.65, respectively. The Public Offering Price
per Unit can vary on a daily basis in accordance with fluctuations in the
aggregate bid price of the Bonds. (See "Public Offering--Offering Price" in Part
B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash
flow. Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
the changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A 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-3
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MARKET FOR UNITS. The Sponsor, although not obligated to do
so, intends to maintain a secondary market for the Units at prices based on the
aggregate bid price of the Bonds in the Trust portfolio. The reoffer price will
be based on the aggregate bid price of the Bonds plus a sales charge of 4.48% of
the Public Offering Price (4.691% 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.) The Plan is not designed to be a complete investment program.
A-4
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<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 29
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
<TABLE>
<S> <C>
Date of Deposit*: July 23, 1992 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,785,000 $1.00 per Unit.
Number of Units ............. 4,640 Weighted Average Life to Maturity:
Fractional Undivided Inter- 9.5 Years.
est in Trust per Unit ..... 1/4640 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value
Bonds per Unit ............ $1,031.25 of Trust is less than $2,400,000
Secondary Market Public in principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2041
of Bonds in Trust ....... $4,816,898+++ or the disposition of the last
Divided by 4,640 Units .... $1,038.12 Bond in the Trust.
Plus Sales Charge of 4.48% Trustee***: The Chase Manhattan
of Public Offering Price. $48.70 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $1,086.82+ plan $1.00 per $1,000; semi-annual
Redemption and Sponsor's plan $.52 per $1,000; and annual
Repurchase Price plan is $.33 per $1,000.
per Unit .................. $1,038.12+ 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
Sponsor's Repurchase separate maturities as separate
Price per Unit ............$48.70++++ issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and Gruntal &
and Principal Amount per Co., L.L.C.
Unit Premium/(Discount) ...$55.57 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
<TABLE>
<CAPTION>
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $56.19 $56.19 $56.19
Less estimated annual fees and
expenses ............................ 2.00 1.53 1.78
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $54.19 $54.66 $54.41
Estimated interest distribution# ...... 4.51 27.33 54.41
Estimated daily interest accrual# ..... .1505 .1518 .1511
Estimated current return#++ ........... 4.99% 5.03% 5.17%
Estimated long term return++ .......... 4.03% 4.08% 4.05%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
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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.
Certain amounts distributable as of June 30, 1997 may be reported at
the Summary of Essential Information as if they had been distributed at
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $9.88 monthly, $14.43
semi-annually and $42.83 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price
and Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 5,422 $1,030.19 $55.68 $56.39 -0- -0-
June 30, 1996 5,312 1,040.81 55.60 56.23 -0- -0-
June 30, 1997 4,640 1,052.20 54.67 55.18 $57.16 $1.93
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
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INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 11 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. None of the Bonds are obligations of state and local housing
authorities; none are hospital revenue bonds; none were issued in connection
with the financing of nuclear generating facilities; and none are "mortgage
subsidy" bonds. All of the Bonds in the Trust are subject to redemption prior to
their stated maturity dates pursuant to sinking fund or optional call
provisions. The Bonds may also be subject to other calls, which may be permitted
or required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or unanticipated
revenues). Four issues representing $1,905,000 of the aggregate principal amount
of the Bonds are general obligation bonds. All seven of the remaining issues
representing $2,880,000 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: Education Facility 1, Highway 1, Lease Revenue 1, Solid Waste 1,
Student Loan 1, Transportation 1 and Utilities 1. For an explanation of the
significance of these factors see "The Trust-Portfolio" in Part B of this
Prospectus.
As of June 30, 1997, $1,290,000 (approximately 27% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $590,000 (approximately 12.3% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. None of the aggregate principal amount
of the Bonds in the Trust were purchased at a "market" discount from par value
at maturity, approximately 43.6% were purchased at a premium and approximately
29.4% were purchased at par. For an explanation of the significance of these
factors see "Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1997 to September 15,
1997, $40,000 of the principal amount of the Bond in portfolio no. 3a
and $40,000 of the principal amount of the Bond in portfolio no. 9 were
sold and are no longer contained in the Trust. 66 Units were redeemed
from the Trust.
A-7
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<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 29
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
Series 29 (the "Trust") at June 30, 1997, the results of its operations, the
changes in its net assets and the financial highlights for the two years then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1997 by correspondence with the Trustee, provide a reasonable basis for the
opinion expressed above. The financial statements for the year ended June 30,
1995 were audited by other independent accountants, whose report dated September
15, 1995, except as to Note 7 as to which the date is September 28, 1995,
expressed an unqualified opinion on those financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust, Series 29
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $700,000 Alaska Student Ln. Corp. AAA 6.125% No Sinking Fund $726,334
State Asstd. Rev. Bonds 7/01/2005 07/01/02 @ 100 Ref.
1992 Series A (AMT)
(AMBAC)
2 600,000 Adams Cnty. Co. Schl. AAA 6.125 No Sinking Fund 640,596
District No. 12 Genl. 12/15/2007 12/15/03 @ 100 Ref.
Oblig. Rfndg. Rev. Bonds
Series 1992 (Financial
Guaranty)
3a 60,000 Escambia Cnty. Fla. Schl. AAA 6.250 2/01/05 @ 100 S.F. 64,459
Bd. Certs. of Part. 2/01/2007 2/01/02 @ 100 Ref.
Series 1992 (Financial
Security)
3b 70,000 Escambia Cnty. Fla. Schl. AAA 6.250 2/01/05 @ 100 S.F. 73,895
Bd. Certs. Of Part. 2/01/2007 2/01/02 @ 100 Ref.
Series 1992 (Financial
Security)
4 25,000 Lee Cnty. Fla. Solid AAA 6.900 No Sinking Fund 27,464
Waste Sys. Rev. Bonds 10/01/2003 10/01/01 @ 102 Ref.
Series 1991 A (AMT)(MBIA Corp.)
5 500,000 St. John's Cnty. Fla. AAA 6.000 10/01/04 @ 100 S.F. 525,315
Trans. Imprvmnt. Rfndg. 10/01/2007 10/01/00 @ 102 Ref.
Rev. Bonds Series 1992
(Financial Guaranty)
6 205,000 Will Cnty. Ill. Forest AAA 6.000 No Sinking Fund 215,709
Preserve Genl. Oblig. 12/01/2007 12/01/02 @ 100 Ref.
Rfndg. Rev. Bonds Series
1992 (AMBAC)
7 700,000 State of Iowa Certs. of AAA 6.500 7/01/03 @ 100 S.F. 762,433
Part. Series 1992A (AMBAC) 07/01/2006 7/01/02 @ 102 Ref.
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
8 $700,000 Parish of Iberville La. AAA 6.000% No Sinking Fund $745,738
Genl. Oblig. Schl. Rfndg. 12/01/2007 10/01/02 @ 102 Ref.
Bonds Cnsldtd. Schl.
Dstrct. No. 5 Series 1992
(Financial Security)
9 400,000 West Ouchita Parish La. AAA 6.700 No Sinking Fund 434,520
Sch. Dstrct. Genl. Oblig. 3/01/2006 3/01/01 @ 102 Ref.
Rev. Rfndg. Bonds Series
1991 (Financial Security)
10 235,000 Brownsville Tx. Utils. AAA 6.250 No Sinking Fund 250,639
Sys. Priority Rev. Rfndg. 9/01/2007 9/01/02 @ 100 Ref.
Bonds Series 1992 (MBIA
Corp.)
11 590,000 Mi. State Trunk Line Fund AAA 0.000 No Sinking Fund 351,705
Rev. Bonds Series 1992 A 10/01/2007 None
(AMBAC)
-------------- -----------------
$4,785,000 Total Investments (Cost (3) $4,569,574) $4,818,807
============== =================
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized appreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $249,233
Gross unrealized depreciation -
------------------
Net unrealized appreciation $249,233
==================
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Statement of Net Assets
June 30, 1997
- -------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $4,569,574) $ 4,818,807
--------------
Other Assets
Accrued Interest 81,768
--------------
Total Other Assets 81,768
--------------
Liabilities
Advance from Trustee 18,354
--------------
Total Liabilities 18,354
--------------
Excess of Other Assets over Total Liabilities 63,414
--------------
Net Assets (4,640 Units of Fractional Undivided
Interest Outstanding, $1,052.20 per Unit) $ 4,882,221
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Statement of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Investment Income
Interest $ 290,454 $ 325,653 $ 329,964
----------- ----------- ----------
Expenses
Trustee's Fees 6,797 6,372 6,369
Evaluator's Fees 2,182 2,200 2,200
Sponsor's Advisory Fee 1,361 1,384 1,384
----------- ----------- ----------
Total Expenses 10,340 9,956 9,953
----------- ----------- ----------
Net Investment Income 280,114 315,697 320,011
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain on
Investments 4,894 1,541 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 39,994 41,477 125,174
----------- ----------- ----------
Net Gain on Investments 44,888 43,018 125,174
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 325,002 $ 358,715 $ 445,185
=========== =========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Operations
Net Investment Income $ 280,114 $ 315,697 $ 320,011
Realized Gain
on Investments 4,894 1,541 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 39,994 41,477 125,174
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 325,002 358,715 445,185
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 261,284 299,660 302,923
Principal 9,270 ---- ----
Redemptions
Interest 10,174 1,162 61
Principal 690,842 114,793 4,961
------------- ------------- -------------
Total Distributions
and Redemptions 971,570 415,615 307,945
------------- ------------- -------------
Total Increase (Decrease) (646,568) (56,900) 137,240
Net Assets
Beginning of Year 5,528,789 5,585,689 5,448,449
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $147,458, $138,802
and $123,927, Respectively) $ 4,882,221 $ 5,528,789 $ 5,585,689
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 29
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 29, (the "Trust") was
organized on July 23, 1992 by Bear, Stearns & Co. Inc. and Gruntal &
Co., LLC under the laws of the State of New York by a Trust Indenture
and Agreement, and is registered under the Investment Company Act of
1940. The Trust was formed to preserve capital and to provide interest
income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust, Series 29
Notes to Financial Statements
- -------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1997, 1996 and 1995, 672,
110 and 5 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.33 to $1.00 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $4,763 and $4,829 and other expenses of
$2,034 and $1,543, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust, Series 29
Notes to Financial Statements
- -------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 6,165,855
Less Initial Gross Underwriting Commission 302,127
---------------
5,863,728
Accumulated Cost of Securities Sold,
Matured or Called (1,376,287)
Net Unrealized Appreciation 249,233
Undistributed Net Investment Income 147,458
Distribution in Excess of Proceeds from Investments (1,911)
---------------
Total $ 4,882,221
===============
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 $82,133.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust, Series 29
Notes to Financial Statements
- -------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 1,040.81 $ 1,030.19
------------ ------------
Interest Income 58.37 60.68
Expenses (2.08) (1.86)
------------ ------------
Net Investment Income 56.29 58.82
------------ ------------
Net Gain or Loss on Investments(1) 11.51 7.85
------------ ------------
Total from Investment Operations 67.80 66.67
------------ ------------
Less Distributions
to Certificateholders
Income 52.51 55.83
Principal 1.86 ----
for Redemptions
Interest 2.04 .22
------------ ------------
Total Distributions 56.41 56.05
------------ ------------
Net Asset Value, End of Year** $ 1,052.20 $ 1,040.81
============ ============
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1996 and 1995, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 4,976 ([5,312 + 4,640]/2) for 1997 and of 5,367 ([5,422 +
5,312]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 11
- --------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 11
("New York Navigator Trust") with an underlying portfolio of long-term insured
tax-exempt bonds 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. There can be no assurance
that the Trust's investment objectives will be achieved. Although the Supreme
Court has determined that Congress has the authority to subject 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 those Bonds which pay interest income
subject to the federal individual alternative minimum tax. In addition, 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. and Gruntal
& Co., L.L.C. (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 June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation. 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.
A-1
144657.1
<PAGE>
For a discussion of the significance of such ratings, see "Description of Bond
Ratings" 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). 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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. (See
"Portfolio" in Part B of this Prospectus.)
Each Unit in the Trust represents a 1/3531st 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. 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. 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.
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").
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
A-2
144657.1
<PAGE>
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 58.9% 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: AMBAC
Indemnity Corp. ("AMBAC"), 29.9%; Financial Guaranty Insurance Company
("Financial Guaranty"), 10.7%; Financial Security Assurance Inc. ("Financial
Security"), 7.6%; and MBIA Corp., 10.7.
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 4.673%
of the Public Offering Price, or 4.903% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) In addition, accrued interest
to the expected date of settlement is added to the Public Offering Price. If
Units had been purchased for sale on the Evaluation Date, the Public Offering
Price per Unit would have been $1,041.78 plus accrued interest of $6.93 under
the monthly distribution plan, $11.77 under the semi-annual distribution plan
and $41.17 under the annual distribution plan, for a total of $1,048.71,
$1,053.55 and $1,082.95, respectively. The Public Offering Price per Unit can
vary on a daily basis in accordance with fluctuations in the aggregate bid price
of the Bonds. (See "Public Offering-- Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
A-3
144657.1
<PAGE>
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, intend 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 4.673%
of the Public Offering Price (4.903% 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,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of this
Prospectus.) The Plan is not designed to be a complete investment program.
A-4
144657.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 11
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
----------------------------------------------------
<TABLE>
<CAPTION>
Date of Deposit*: July 23, 1992 Weighted Average Life to
<S> <C> <C>
Principal Amount of Bonds. $3,270,000 Maturity: 14.9 Years.
Number of Units .......... 3,531 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .. 1/3531 value of Trust is less than
Principal Amount of $1,600,000 in principal amount
Bonds per Unit ......... $926.08 of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2041 or the disposition of the
of Bonds in Trust .... $3,506,607++++ last Bond in the Trust.
Divided by 3,531 Units.. $993.09 Trustee***: The Chase Manhattan
Plus Sales Charge Bank.
of 4.673% of Public Trustee's Annual Fee: Monthly
Offering Price........ $48.69 plan $1.14 per $1,000; semi-
Public Offering Price annual plan $.67 per $1,000;
per Unit ............. $1,041.78+ and annual plan is $.40 per
Redemption and Sponsors' $1,000.
Repurchase Price Evaluator: Kenny S&P Evaluation
per Unit ............... $993.09+ 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 ......... $48.69++++ Sponsors: Reich & Tang
Difference between Public Distributors L.P. and Gruntal &
Offering Price per Unit Co., L.L.C.
and Principal Amount per Sponsors' Annual Fee: Maximum
Unit Premium/(Discount) $115.70 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.
</TABLE>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
------------------------------------------------------------------
<TABLE>
<CAPTION>
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $59.61 $59.61 $59.61
Less estimated annual fees and
expenses ............................ 2.28 1.86 1.54
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $57.33 $57.75 $58.07
Estimated interest distribution# ...... 4.77 28.87 58.07
Estimated daily interest accrual# ..... .1592 .1604 .1613
Estimated current return#++ ........... 5.50% 5.54% 5.57%
Estimated long term return++ .......... 4.16% 4.20% 4.23%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
144657.1
<PAGE>
Footnotes to Summary of Essential Information
---------------------------------------------
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in
the Summary of Essential Information as if they had been distributed as
of year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $6.93 monthly, $11.77
semi-annually and $41.17 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 3,968 $1,012.96 $58.95 $59.45 -0- $ 1.03
June 30, 1996 3,880 1,008.58 61.35 61.93 $62.26 -0-
June 30, 1997 3,531 1,055.88 58.22 58.78 59.57 14.00
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
144657.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 12 issues representing
obligations of 8 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 none of the initial aggregate principal amount
of the Bonds were acquired. Approximately 7.6% of the Bonds are obligations of
state and local housing authorities; approximately 6.7% are hospital revenue
bonds; none were issued in connection with the financing of nuclear generating
facilities; and none were "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 issues representing $600,000 of the
principal amount of the Bonds are general obligation bonds. All ten of the
remaining issues representing $2,670,000 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: Bridge and Tunnel 2, Commuter Facility 2, Hospital
2, Multi-Family Housing 1, Transit 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 June 30, 1997, $200,000 (approximately 6.1% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, none 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 26% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 58% were purchased at a premium and
approximately 9.9% were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1997 to September 15,
1997. 23 Units were redeemed from the Trust.
A-7
<PAGE>
144657.1
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, New York Navigator Insured Series 11
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
New York Navigator Insured Series 11 (the "Trust") at June 30, 1997, the results
of its operations, the changes in its net assets and the financial highlights
for the two years then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the Trustee,
provide a reasonable basis for the opinion expressed above. The financial
statements for the year ended June 30, 1995 were audited by other independent
accountants, whose report dated September 15, 1995, except as to Note 7 as to
which the date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Portfolio
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Amount Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $525,000 N.Y. State Dorm. Auth. AAA 6.750% 5/15/19 @ 100 S.F. $586,325
State Univ. Ed. Facs. 5/15/2021 5/15/02 @ 102 Ref.
Rev. Bonds Series 1991
A (MBIA Corp.)
2 250,000 N.Y. State Hsg. Finc. AAA 7.650 No Sinking Fund 280,015
Agncy. Serv. Cntrct. 3/15/2005 3/15/01 @ 102 Ref.
Oblig. Rev. Bonds 1991
Series A (MBIA Corp.)
3 120,000 N.Y. State Med. Care AAA 7.750 2/15/11 @ 100 S.F. 132,437
Facs. Finc. Agncy. 2/15/2022 2/15/00 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds 1990 Series A
(MBIA Corp.)
4 100,000 N.Y. State Med. Care AAA 6.200 No Sinking Fund 104,252
Facs. Finc. Agncy. 8/15/2022 8/15/02 @ 102 Ref.
Hosp. & Nrsg. Home FHA
Insrd. Mtg. Rev. Bonds
1992 Series B (MBIA
Corp.)
5 275,000 Metro. Trans. Auth. of AAA 6.000 7/01/10 @ 100 S.F. 280,280
N.Y. Trans. Facs. Rev. 7/01/2011 7/01/00 @ 100 Ref.
Bonds 1990 Series I
(MBIA Corp.)
6 50,000 Metro. Trans. Auth. of AAA 6.125 7/01/10 @ 100 S.F. 52,254
N.Y. Cmmtr. Facs. Rev. 7/01/2012 7/01/02 @ 102 Ref.
Bonds 1992 Series A
(MBIA Corp.)
7 300,000 Metro. Trans. Auth. of AAA 6.250 7/01/18 @ 100 S.F. 318,111
N.Y. Cmmtr. Facs. Rev. 7/01/2022 7/01/02 @ 102 Ref.
Bonds Series 1992 B
(MBIA Corp.)
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Portfolio
June 30, 1997
- --------------------------------------------------------------------------------
8a $205,000 N.Y. City Genl. Oblig. AAA 6.250% No Sinking Fund $224,276
Rev. Bonds Fiscal 1992 8/01/2010 8/01/02 @ 101.5 Ref.
Series C Subseries C-1 (MBIA Corp.)
8b 45,000 N.Y. City Genl. Oblig. AAA 6.250 No Sinking Fund 47,938
Rev. Bonds Fiscal 1992 8/01/2010 8/01/02 @ 101.5 Ref.
Subs series C-1 (MBIA Corp.)
9 350,000 N.Y. City Genl. Oblig. AAA 7.000 No Sinking Fund 383,142
Rev. Bonds Fiscal 1992 2/01/2022 2/01/02 @ 101.5 Ref.
Series H (MBIA Corp.)
10 350,000 N.Y. City Muni. Wtr. AAA 6.000 6/15/15 @ 100 S.F. 356,376
Finc. Auth. Wtr. & Swr. 6/15/2016 6/15/99 @ 100 Ref.
Sys. Rev. Bonds Series
A (MBIA Corp.)
11 500,000 Triborough Bridge & AAA 6.000 1/01/13 @ 100 S.F. 513,785
Tunnel Auth. of N.Y. 1/01/2015 1/01/02 @ 101.5 Ref.
Spec. Oblig. Rev. 1992
Bonds (MBIA Corp.)
12 200,000 Triborough Bridge & AAA 5.500 1/01/16 @ 100 S.F. 196,946
Tunnel Auth. of N.Y. 1/1/2017 1/01/02 @ 100 Ref.
Spec. Oblig. Rev. 1989
Bonds (MBIA Corp.)
------------------ -----------------
$3,270,000 Total Investments (Cost (3) $3,357,115) $3,476,137
------------------ -----------------
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized appreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $120,731
Gross unrealized depreciation (1,709)
------------------
Net unrealized appreciation $119,022
==================
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Statement of Net Assets
June 30, 1997
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $3,357,115) $ 3,476,137
--------------
Other Assets
Accrued Interest 72,739
Cash 2,890
--------------
Total Other Assets 75,629
--------------
Net Assets (3,531 Units of Fractional Undivided
Interest Outstanding, $1,005.88 per Unit) $ 3,551,766
--------------
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
Investment Income
<S> <C> <C> <C>
Interest $ 222,804 $ 243,312 $ 244,402
----------- ----------- ----------
Expenses
Trustee's Fees 5,013 4,986 4,906
Evaluator's Fees 2,182 2,200 2,382
Sponsor's Advisory Fee 983 983 991
----------- ----------- ----------
Total Expenses 8,178 8,169 8,279
----------- ----------- ----------
Net Investment Income 214,626 235,143 236,123
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss) on
Investments (3,714) 136 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 46,866 (9,065) 111,906
----------- ----------- ----------
Net Gain (Loss) on Investments 43,152 (8,929) 111,906
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 257,778 $ 226,214 $ 348,029
----------- ----------- ----------
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
Operations
<S> <C> <C> <C>
Net Investment Income $ 214,626 $ 235,143 $ 236,123
Realized Gain (Loss)
on Investments (3,714) 136 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 46,866 (9,065) 111,906
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 257,778 226,214 348,029
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 223,108 242,559 229,712
Principal 39,581 ---- 4,087
Redemptions
Interest 4,940 1,406 ----
Principal 351,671 88,368 ----
------------- ------------- -------------
Total Distributions
and Redemptions 619,300 332,333 233,799
------------- ------------- -------------
Total Increase (Decrease) (361,522) (106,119) 114,230
Net Assets
Beginning of Year 3,913,288 4,019,407 3,905,177
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $45,160, $58,582
and $67,404, Respectively) $ 3,551,766 $ 3,913,288 $ 4,019,407
============ ============ ============
The accompanying notes form an integral part of the financial statements.
</TABLE>
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, New York Navigator Insured Series
11, (the "Trust") was organized on July 23, 1992 by Bear, Stearns & Co.
Inc. and Gruntal & Co., LLC under the laws of the State of New York by
a Trust Indenture and Agreement, and is registered under the Investment
Company Act of 1940. The Trust was formed to preserve capital and to
provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1997 and 1996, 349 and 88
units were redeemed, respectively. No units were redeemed during the
year ended June 30, 1995.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.40 to $1.14 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $3,349 and $3,360 and other expenses of
$1,664 and $1,626, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 4,110,490
Less Initial Gross Underwriting Commission 201,414
---------------
3,909,076
Accumulated Cost of Securities Sold,
Matured or Called (551,961)
Net Unrealized Appreciation 119,022
Undistributed Net Investment Income 45,160
Undistributed Proceeds From Investments 30,469
---------------
Total $ 3,551,766
===============
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 4,000 units of
fractional undivided interest of the Trust as of the date of deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 1,008.58 $ 1,012.96
------------ ------------
Interest Income 60.13 62.01
Expenses (2.21) (2.08)
------------ ------------
Net Investment Income 57.92 59.93
------------ ------------
Net Gain or Loss on Investments(1) 11.60 (2.14)
------------ ------------
Total from Investment Operations 69.52 57.79
------------ ------------
Less Distributions
to Certificateholders
Income 60.20 61.81
Principal 10.69 ----
for Redemptions
Interest 1.33 .36
------------ ------------
Total Distributions 72.22 62.17
------------ ------------
Net Asset Value, End of Year** $ 1,005.88 $ 1,008.58
============ ============
(1) Net gain or loss on investments is a result of changes in outstanding units since July 1, 1996 and 1995,
respectively, and the dates of net gain and loss on investments.
</TABLE>
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 3,706 ([3,880 + 3,531]/2) for 1997 and of 3,924 ([3,968 +
3,880]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
NEW JERSEY NAVIGATOR INSURED
SERIES 8
The Trust is a unit investment trust designated Series 8 ("New
Jersey Navigator Trust") with an underlying portfolio of long-term insured
tax-exempt bonds 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 Jersey gross income tax. There can be no assurance that the Trust's
investment objectives will be achieved. Although the Supreme Court has
determined that Congress has the authority to subject 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 those Bonds which pay interest income
subject to the federal individual alternative minimum tax.) In addition, 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. and Gruntal
& Co., L.L.C.(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 June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation. 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
A-1
144658.1
<PAGE>
Ratings" 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 the Trust, and the cost of such Bonds to the Trust, see "Description of
Portfolio" in this Part A). 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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. (See
"Portfolio" in Part B of this Prospectus.)
Each Unit in the Trust represents a 1/3426th 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 Jersey 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. For discussion of the effect of an occurrence of non-payment of
principal or interest on any Bonds in the New Jersey Navigator Trust see
"Portfolio Supervision" in Part B of this Prospectus. The premiums for the
Navigator Sponsor-Insured Bonds are obligations of the Sponsors. Additionally,
some of the Bonds in the New Jersey Navigator Trust may be PreInsured 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.
Some of the Bonds in the New Jersey 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.
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 under "Insurance on the Bonds" in Part B of
this Prospectus. No representation is made herein as to any Bond
A-2
144658.1
<PAGE>
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 Jersey Navigator Trust are covered
by insurance obtained by the Sponsors from MBIA Corp. and 89.8% of the Bonds in
the New Jersey Navigator Trust are Pre-Insured Bonds. The approximate percentage
of the aggregate principal amount of the Trust that is insured by each Insurance
Company with respect to Pre-Insured Bonds is as follows: AMBAC Indemnity Corp.
("AMBAC"), 27.5%; and MBIA Corp., 62.3%.
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 5.50%
of the Public Offering Price, or 5.820% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) In addition, accrued interest
to the expected date of settlement is added to the Public Offering Price. If
Units had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $877.26 plus accrued interest of $8.48 under the monthly
distribution plan, $12.36 under the semi-annual distribution plan and $40.21
under the annual distribution plan, for a total of $885.74, $889.62 and $917.47,
respectively. The Public Offering Price per Unit can vary on a daily basis in
accordance with fluctuations in the aggregate bid price of the Bonds. (See
"Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast
A-3
144658.1
<PAGE>
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, intend 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 5.50% of
the Public Offering Price (5.820% of the net amount invested), plus net accrued
interest. If a market is not maintained a Certificateholder will be able to
redeem his 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,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of this
Prospectus.) The Plan is not designed to be a complete investment program.
A-4
144658.1
<PAGE>
INSURED MUNICIPAL SECURITIES TRUST
NEW JERSEY NAVIGATOR INSURED
SERIES 8
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
Date of Deposit*: July 23, 1992 Minimum Principal Distribution:
<S> <C> <C>
Principal Amount of Bonds.. $2,805,000 $1.00 per Unit.
Number of Units ........... 3,426 Weighted Average Life to Maturity:
Fractional Undivided Inter- 23.7 Years.
est in Trust per Unit ... 1/3426 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value of
Bonds per Unit .......... $818.74 Trust is less than $1,400,000 in
Secondary Market Public principal amount of Bonds.
Offering Price** Mandatory Termination Date:
Aggregate Bid Price The earlier of December 31, 2041 or
of Bonds in Trust ..... $2,840,186+++ the disposition of the last Bond in
Divided by 3,426 Units .. $829.01 the Trust.
Plus Sales Charge Trustee***: The Chase Manhattan
of 5.50% of Public Bank.
Offering Price......... $48.25 Trustee's Annual Fee: Monthly
--------------------
Public Offering Price plan $1.12 per $1,000; semi-annual
per Unit .............. $877.26+ plan $.65 per $1,000; and annual
Redemption and Sponsors' plan is $.38 per $1,000.
Repurchase Price Evaluator: Kenny S&P Evaluation
per Unit ................ $829.01+ 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 .......... $48.25++++ Sponsors: Reich & Tang
Difference between Public Distributors L.P. and Gruntal &
Offering Price per Unit Co., L.L.C.
and Principal Amount per Sponsors' Annual Fee: Maximum of
Unit Premium/(Discount) . $58.52 $.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).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
--------------------------------------------------------------------------------
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $48.39 $48.39 $48.39
Less estimated annual fees and
expenses ............................ 2.34 1.83 .52
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $46.05 $46.56 $47.87
Estimated interest distribution# ...... 3.83 23.28 47.87
Estimated daily interest accrual# .... .1279 .1293 .1329
Estimated current return#+ ............ 5.25% 5.31% 5.46%
Estimated long term return++ .......... 4.21% 4.27% 4.43%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
144658.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in
the Summary of Essential Information as if they had been distributed as
of year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $8.48 monthly, $12.36
semi-annually and $40.21 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 3,500 $1,008.94 $57.72 $58.22 $58.44 -0-
June 30, 1996 3,490 1,004.91 58.65 59.22 59.67 -0-
June 30, 1997 3,426 841.08 55.69 56.25 59.65 $182.28
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
144658.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 10 issues representing
obligations of 9 issuers located in the state of New Jersey. The Sponsor has
participated as a sole underwriter or manager, co-manager or member of an
underwriting syndicate from which none of the initial aggregate principal amount
of the Bonds were acquired. None of the Bonds are obligations of state and local
housing authorities; approximately 40% are hospital revenue bonds; none were
issued in connection with the financing of nuclear generating facilities; and
none are "mortgage subsidy" bonds. All of the Bonds in the Trust are subject to
redemption prior to their stated maturity dates pursuant to sinking fund or
optional call provisions. The Bonds may also be subject to other calls, which
may be permitted or required by events which cannot be predicted (such as
destruction, condemnation, termination of a contract, or receipt of excess or
unanticipated revenues). None of the Bonds are general obligation bonds. Ten
issues representing $2,805,000 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: Educational Facility 1, Hospital 2, Lease Revenue 1, Parking 1, Port
Authority 1, Sewer Revenue 1, Turnpike 1, Utilities 1 and Water Supply 1. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1997, $530,000 (approximately 18.9% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $155,000 (approximately 5.5% 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 18.7% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 62.4% were purchased at a premium and
none were purchased at par. For an explanation of the significance of these
factors see "Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1997 to September 15,
1997, $35,000 of the principal amount of the Bond in portfolio no. 2 was
sold and is no longer contained in the Trust. 26 Units were redeemed from
the Trust.
A-7
144658.1
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, New Jersey Navigator Insured Series 8
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8 (the "Trust") at June 30, 1997, the
results of its operations, the changes in its net assets and the financial
highlights for the two years then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the Trustee,
provide a reasonable basis for the opinion expressed above. The financial
statements for the year ended June 30, 1995 were audited by other independent
accountants, whose report dated September 15, 1995, except as to Note 7 as to
which the date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $235,000 N.J. Ed. Fac. Auth. AAA 6.500% 7/01/12 @ 100 S.F. 251,513
Rev. Bonds Montclair 7/01/2021 7/01/01 @ 101 Ref.
State Cllg. Issue
Series 1991 E (MBIA Corp.)
2 600,000 N.J. Hlth. Care Facs. AAA 6.500 7/01/03 @ 100 S.F. 631,938
Fincg. Auth. Rev. Bonds 7/01/2020 7/01/99 @ 102 Ref.
Bayshore Cmmnty. Hosp.
Issue Series 1989 B
(MBIA Corp.)
3 525,000 N.J. Hlth. Care Facs. AAA 6.000 7/01/19 @ 100 S.F. 534,886
Fincg. Auth. Rev. Bonds 7/01/2023 7/01/99 @ 100 Ref.
St. Barnabas Med. Cntr.
Issue Series 1989 B
(MBIA Corp.)
4 320,000 N.J. Tnpke. Auth. AAA 6.500 1/01/12 @ 100 S.F. 361,267
Tnpke. Rev. Bonds 1/01/2016 None
Series 1991C (MBIA Corp.)
5 130,000 Essex Cnty. N.J. AAA 6.200 7/01/13 @ 100 S.F. 136,902
Imprvmnt. Auth. Pkg. 7/01/2022 7/01/02 @ 101 Ref.
Fac. Rev. Bonds Series
1992 (MBIA Corp.)
6 375,000 New Brunswick N.J. Hsg. AAA 5.750 7/01/13 @ 100 S.F. 378,004
& Urb. Dev. Auth. Lease 7/01/2024 7/01/02 @ 102 Ref.
Rev. Bonds Series 1992
(MBIA Corp.)
7 250,000 No. Jersey Dstrct. Wtr. AAA 6.250 11/15/12 @ 100 S.F. 267,890
Supl. Comm. Wanaque No. 11/15/2017 11/15/01 @ 102 Ref.
Project Rev. Rfndg.
Bonds Series 1991 B
(MBIA Corp.)
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
8 $215,000 Port. Auth. of N.Y. & AAA 6.500% 7/15/13 @ 100 S.F. $228,586
N.J. Cnsldtd. Rev. 1/15/2026 1/15/01 @ 101 Ref.
Bonds 1991
Seventy-first Series
(MBIA Corp.)
9 100,000 Camden Cnty. N.J. Muni. AAA 0.000 No Sinking Fund 32,500
Utils. Auth. Cnty. 9/01/2016 None
Agreement Swr. Rev.
Cap. Apprec. Bonds
Series 1990 A (MBIA
Corp.)
10 55,000 Camden Cnty. N.J. Muni. AAA 0.000 No Sinking Fund 16,693
Utils. Auth. Cnty. 9/01/2017 None
Agreement Swr. Rev.
Cap. Apprec. Bonds
Series 1990 A (MBIA
Corp.)
-------------- -----------------
$2,805,000 Total Investments (Cost (3) $2,735,412) $2,840,179
============== ================
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized appreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $104,767
Gross unrealized depreciation --
------------------
Net unrealized appreciation $104,767
==================
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Statement of Net Assets
June 30, 1997
- -------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $2,735,412) $ 2,840,179
--------------
Other Assets
Accrued Interest 76,078
--------------
Total Other Assets 76,078
--------------
Liabilities
Advance from Trustee 34,716
--------------
Total Liabilities 34,716
--------------
Excess of Other Assets over Total Liabilities 41,362
--------------
Net Assets (3,426 Units of Fractional Undivided
Interest Outstanding, $841.08 per Unit) $ 2,881,541
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Statement of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Investment Income
Interest $ 203,642 $ 212,569 $ 212,412
----------- ----------- ----------
Expenses
Trustee's Fees 3,959 7,152 5,814
Evaluator's Fees 2,182 2,200 2,191
Sponsor's Advisory Fee 875 875 875
----------- ----------- ----------
Total Expenses 7,016 10,227 8,880
----------- ----------- ----------
Net Investment Income 196,626 202,342 203,532
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized (Loss) on
Investments (14,695) ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 76,268 (10,649) 111,930
----------- ----------- ----------
Net Gain (Loss) on Investments 61,573 (10,649) 111,930
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 258,199 $ 191,693 $ 315,462
=========== =========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Operations
Net Investment Income $ 196,626 $ 202,342 $ 203,532
Realized (Loss)
on Investments (14,695) ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 76,268 (10,649) 111,930
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 258,199 191,693 315,462
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 193,759 205,665 202,927
Principal 629,893 ---- ----
Redemptions
Interest 1,777 116 ----
Principal 58,370 10,055 ----
------------- ------------- -------------
Total Distributions
and Redemptions 883,799 215,836 202,927
------------- ------------- -------------
Total Increase (Decrease) (625,600) (24,143) 112,535
Net Assets
Beginning of Year 3,507,141 3,531,284 3,418,749
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $53,543, $52,453
and $55,892, Respectively) $ 2,881,541 $ 3,507,141 $ 3,531,284
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, New Jersey Navigator Insured Series
8, (the "Trust") was organized on July 23, 1992 by Bear, Stearns & Co.
Inc. and Gruntal & Co., LLC under the laws of the State of New York by
a Trust Indenture and Agreement, and is registered under the Investment
Company Act of 1940. The Trust was formed to preserve capital and to
provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Notes to Financial Statements
- -------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1997 and 1996, 64 and 10
units were redeemed, respectively. No units were redeemed during the
year ended June 30, 1995.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.38 to $1.12 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $3,247 and $3,170 and other expenses of
$712 and $3,982, respectively. The other expenses include professional,
printing and miscellaneous fees.
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Notes to Financial Statements
- -------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 3,613,295
Less Initial Gross Underwriting Commission 177,051
---------------
3,436,244
Accumulated Cost of Securities Sold,
Matured or Called (713,020)
Net Unrealized Appreciation 104,767
Undistributed Net Investment Income 53,543
Undistributed Proceeds From Investments 7
---------------
Total $ 2,881,541
===============
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 3,500 units of
fractional undivided interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $12,188.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 8
Notes to Financial Statements
- -------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 1,004.91 $ 1,008.94
------------ ------------
Interest Income 58.89 60.82
Expenses (2.03) (2.93)
------------ ------------
Net Investment Income 56.86 57.89
------------ ------------
Net Gain or Loss on Investments(1) 18.01 (3.04)
------------ ------------
Total from Investment Operations 74.87 54.85
------------ ------------
Less Distributions
to Certificateholders
Income 56.03 58.85
Principal 182.16 ----
for Redemptions
Interest .51 .03
------------ ------------
Total Distributions 238.70 58.88
------------ ------------
Net Asset Value, End of Year** $ 841.08 $ 1,004.91
============= ============
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1996 and 1995, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 3,458 ([3,490 + 3,426]/2) for 1997 and of 3,495 ([3,500 +
3,490]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
SERIES 30
The Trust is a unit investment trust designated Series 30
("Insured Municipal Trust") with an underlying portfolio of long-term insured
tax-exempt bonds issued by or on behalf of states, municipalities and public
authorities and was formed to preserve capital and to provide interest income
(including, where applicable, earned original issue discount) which, in the
opinions of bond counsel to the respective issuers, is, with certain exceptions,
currently exempt from regular federal income tax under existing law but may be
subject to state and local taxes. There can be no assurance that the Trust's
investment objectives will be achieved. Although the Supreme Court has
determined that Congress has the authority to subject interest on bonds such as
the Bonds in the Trust to regular federal income taxation, existing law excludes
such interest from regular federal income tax. Such interest income may,
however, be subject to the federal corporate alternative minimum tax and to
state and local taxes. In addition, capital gains are subject to tax. (See "Tax
Status" and "The Trust--Portfolio" in Part B of this Prospectus.) The Sponsors
are Reich & Tang Distributors L.P. and Gruntal & Co., L.L.C. (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 June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation at the time originally deposited in the Trust. The
"AAA" rating results from insurance relating only to the Bonds in the Trust and
not to Units of the Trust. The insurance does not remove market risk, as it does
not guarantee the market value of the Units. For a discussion of the
significance of such ratings, see "Description of Bond Ratings" in Part B of
this Prospectus, and for a list of ratings on the Evaluation Date see the
"Portfolio."
Some of the Bonds may be "Zero Coupon Bonds", which are
original issue discount bonds that provide for payment at maturity at par value,
but do not provide for the payment of any current interest. Some of the Bonds in
the Trust have been issued with optional refunding or refinancing provisions
("Refunded Bonds") whereby the issuer of the Bond has the right to call such
Bond prior to its stated maturity date (and other than pursuant to sinking 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
A-1
144363.1
<PAGE>
Refunding Bonds are typically invested in government securities in escrow for
the benefit of the holders of the Pre-Refunded Bonds until the refunding call
date. Usually, Pre-Refunded Bonds will bear a triple-A rating because of this
escrow. The issuers of Pre-Refunded Bonds must call such Bonds on their
refunding call date. Therefore, as of such date, the Trust will receive the call
price for such bonds but will cease receiving interest income with respect to
them. For a list of those Bonds which are Pre-Refunded Bonds, if any, as of the
Evaluation Date, see "Notes to Financial Statements" in this Part A. Some of the
Bonds in the portfolio may have been purchased at an aggregate premium over par.
The payment of interest and preservation of capital are, of course, dependent
upon the continuing ability of issuers of the Bonds or the insurers thereof to
meet their obligations.
Investment in the Trust should be made with an understanding
of the risks which an investment in long-term fixed rate debt obligations may
entail, including the risk that the value of the underlying portfolio will
decline with increases in interest rates, and that the value of Zero Coupon
Bonds is subject to greater fluctuation than coupon bonds in response to changes
in interest rates. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years.
Each Unit in the Trust represents a 1/4159th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "Organization" in Part B of this Prospectus.) The Units being
offered hereby are issued and outstanding Units which have been purchased by the
Sponsor in the secondary market.
INSURANCE. Each of the Bonds in the Trust is insured by a
municipal bond guaranty insurance policy obtained by either the Sponsor
("Sponsor-Insured Bonds") or the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall become
due for payment but shall not have been paid by the issuer or any other insurer
thereof. None of the insurance will cover accelerated payments of principal or
penalty interest or premiums unrelated to taxability of interest on the Bonds
(although the insurance, including insurance obtained by MBIA Corp., does
guarantee payment of principal and interest in such amounts and at such times as
such amounts would have been due absent such acceleration). The insurance
relates only to the prompt payment of principal of and interest on the
securities in the portfolio, and does not remove market risks or guarantee the
market value of the Units in the Trust. The terms of the insurance are more
fully described under "Insurance on the Bonds" in Part B of this Prospectus. For
a discussion of the effect of an occurrence of nonpayment of principal or
interest on any Bonds in the Trust, see "Portfolio Supervision" in Part B of
this Prospectus. No representation is made herein as to any Bond insurer's
ability to meet its obligations under a policy of insurance relating to any of
the Bonds. In addition, investors should be aware that, subsequent to the Date
of Deposit, the rating of the claims paying ability of the insurer of an
underlying Bond may be downgraded, which may result in a downgrading of the
rating of the Units in the Trust. The approximate percentage of the aggregate
principal amount of the portfolio that is insured by each insurance company is
as follows: AMBAC Indemnity Corp. ("AMBAC"), 28.4%; Connie Lee Insurance Company
("Connie Lee"), 11.9%; Financial Guaranty Insurance Company ("Financial
Guaranty"), 20.4%; Financial Security Assurance Inc. ("Financial Security"),
33.5%; and MBIA Corp., 5.8%.
PUBLIC OFFERING PRICE. The secondary market Public Offering
Price of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 4.852% of the
Public Offering Price, or 5.100% of the net amount invested in Bonds per Unit.
The sales charge for secondary market purchases is based upon the number of
years remaining to maturity of each bond in the Trust's portfolio. (See "Public
Offering" in Part B of this Prospectus.) In addition, accrued interest to the
expected date of settlement is added to the Public Offering Price. If Units had
been purchased on the Evaluation Date, the Public
A-2
144363.1
<PAGE>
Offering Price per Unit would have been $1,079.56 plus accrued interest of $9.30
under the monthly distribution plan, $14.25 under the semi-annual distribution
plan and $45.13 under the annual distribution plan, for a totalof $1,088.86,
$1,093.81 and $1,124.69, respectively. The Public Offering Price
per Unit can vary on a daily basis in accordance with fluctuations in the
aggregate bid price of the Bonds. (See "Public Offering--Offering Price" in Part
B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of 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
A-3
144363.1
<PAGE>
"Rights of Certificateholders--Interest and Principal Distributions" in Part B
of this Prospectus. For estimated monthly, semi-annual and annual interest
distributions, see "Summary of Essential Information".)
MARKET FOR UNITS. The Sponsor, although not obligated to do
so, intends to maintain a secondary market for the Units at prices based on the
aggregate bid price of the Bonds in the Trust portfolio. The reoffer price will
be based on the aggregate bid price of the Bonds plus a sales charge of 4.852%
of the Public Offering Price (5.100% 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.) The Plan is not designed to be a complete investment program.
A-4
144363.1
<PAGE>
<TABLE>
<CAPTION>
INSURED MUNICIPAL SECURITIES TRUST
SERIES 30
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
<S> <C> <C>
Date of Deposit:* November 6, 1992 Minimum Principal Distribution:
Principal Amount of Bonds ... $4,215,000 $1.00 per Unit.
Number of Units ............. 4,159 Weighted Average Life to Maturity:
Fractional Undivided Inter- 17.5 Years.
est in Trust per Unit ..... 1/4159 Minimum Value of Trust:
Principal Amount of Trust may be terminated if. value of
Bonds per Unit ............ $1,013.47 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, 2041 or
of Bonds in Trust ....... $4,271,995+++ the disposition of the last Bond in
Divided by 4,159 Units .... $1,027.17 the Trust.
Plus Sales Charge of 4.852% Trustee***: The Chase Manhattan
of Public Offering Price. $52.39 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $1,079.56+ plan $1.00 per $1,000; semi-annual
Redemption and Sponsor's plan $.52 per $1,000; and annual plan
Repurchase Price is $.33 per $1,000.
per Unit .................. $1,027.17+ Evaluator: Kenny S&P
+++ Evaluation Services.
++++ Evaluator's Fee for Each
Excess of Secondary Market Evaluation: Minimum of $8 plus $.25
Public Offering Price per each issue of Bonds in excess of
over Redemption and 50 issues (treating separate
Sponsor's Repurchase maturities as separate issues).
Price per Unit ............ $52.39++++ Sponsors: Reich & Tang
Difference between Public Distributors L.P. and Gruntal &
Offering Price per Unit Co., L.L.C.
and Principal Amount per Sponsors' Annual Fee: Maximum
Unit Premium/(Discount) ... $66.09 of $.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).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $61.55 $61.55 $61.55
Less estimated annual fees and
expenses ............................ 2.10 2.07 .59
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $59.45 $59.48 $60.96
Estimated interest distribution# ...... 4.95 29.74 60.96
Estimated daily interest accrual# ..... .1651 .1652 .1693
Estimated current return#++ ........... 5.51% 5.51% 5.65%
Estimated long term return++ .......... 3.76% 3.76% 3.90%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
144363.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in
the Summary of Essential Information as if they had been distributed at
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $9.30 monthly, $14.25
semi-annually and $45.13 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 4,486 $1,023.96** $60.24 $60.73 -0- -0-
June 30, 1996 4,471 1,024.86 60.19 60.37 $61.23 -0-
June 30, 1997 4,159 1,040.47 60.00 60.05 61.59 $2.56
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
** Net Asset Value has been restated to properly reflect principal and
interest due to redemptions. See Note 2 to the Financial Statements.
A-6
144363.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO
- ------------------------
The portfolio of the Trust consists of 12 issues representing
obligations of issuers located in 9 states. The Sponsor has not participated as
a sole underwriter or manager, co-manager or member of an underwriting syndicate
from which any of the initial aggregate principal amount of the Bonds were
acquired. None of the Bonds are obligations of state and local housing
authorities; approximately 25.2% 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). None of the Bonds are general obligation bonds. Twelve
issues representing $4,215,000 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: Civic Center 1, Education 1, Environmental 1, Hospital 5, Power 1,
Utility 1, Water 1, and Water and Sewer 1. For an explanation of the
significance of these factors see "The Trust--Portfolio" in Part B of this
Prospectus.
As of June 30, 1997, $1,250,000 (approximately 29.7% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $350,000 (approximately 8.3% 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 5.9% of the aggregate
principal amount of the Bonds in the Trust were purchased at a "market" discount
from par value at maturity, approximately 43.4% were purchased at a premium and
approximately 21% were purchased at par. For an explanation of the significance
of these factors see "Discount and Zero Coupon Bonds" in Part B of this
Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
A-7
144363.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, Series 30
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
Series 30 (the "Trust") at June 30, 1997, the results of its operations, the
changes in its net assets and the financial highlights for the two years then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1997 by correspondence with the Trustee, provide a reasonable basis for the
opinion expressed above. The financial statements for the year ended June 30,
1995 were audited by other independent accountants, whose report dated September
15, 1995, except as to Note 7 as to which the date is September 28, 1995,
expressed an unqualified opinion on those financial statements.
As discussed in Note 2, the financial statements for June 30, 1996 and 1995 have
been restated to reflect retroactive application of recognizing redemptions on
the payable date. We have audited the adjustments described in Note 2 that were
applied to restate the 1996 and 1995 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied to the 1996 and 1995
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust, Series 30
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $500,000 Volusia Cnty. Fla. Ed. AAA 6.625% 10/15/16 @ 100 S.F. $535,595
Fac. Auth. Rev. 1992 10/15/2022 10/15/02 @ 102 Ref.
Bonds (Embry-Riddle
Aeronautical Univ.)
(Connie Lee)
2 400,000 Iowa Finc. Auth. Hosp. AAA 6.250 2/15/09 @ 100 S.F. 417,564
Rev. Bonds (Sisters of 2/15/2022 2/15/02 @ 102 Ref.
Mercy Hlth. Corp. Oblig.
Group) 1992 Series N
(Financial Security)
3 250,000 Me. Hlth. & Hghr. Ea. AAA 6.375 10/01/12 @ 100 S.F. 266,555
Facs. Auth. Hosp. Rev. 10/01/2021 10/01/01 @ 102 Ref.
Bonds Ea. Me. Hlthcare.
Issue Series 1991
(Financial Guaranty)
4 220,000 Humbolt Cnty. Nv. Poll. AAA 6.550 No Sinking Fund 238,528
Control Rfndg. Rev. 10/01/2013 5/28/02 @ 102 Ref.
Bonds (Sierra Pacific
Pwr. Co. Project) Series
1987 (AMBAC)
5 500,000 Sand Springs Ok. Muni. AAA 6.500 5/01/08 @ 100 S.F. 543,075
Auth. Wtr. & Swr. Sys. 5/01/2012 5/01/02 @ 102 Ref.
Rev. Rfdg. Series 1992
Bonds (AMBAC)
6 450,000 R.I. Depositors Econom. AAA 6.625 8/01/14 @ 100 S.F. 500,630
Protection Corp. Spec. 8/01/2019 8/01/02 @ 102 Ref.
Oblig. Bonds 1992 Series
A (Financial Security)
7 5,000 City of Bristol Tn. AAA 7.000 9/01/12 @ 100 S.F. 5,522
Hlth. & Ed. Facs. Bd. 9/01/2021 3/01/01 @ 102 Ref.
Hosp. Rev. Bonds
(Bristol Mem. Hosp.)
Series 1991 (Financial
Guaranty)
8 375,000 Tx. Wtr. Res. Finc. AAA 7.500 2/15/09 @ 100 S.F. 398,231
Auth. Rev. Bonds Series 8/15/2013 8/15/99 @ 100 Ref.
1989 (AMBAC)
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
9 $560,000 Montgomery Cnty. Tx. AAA 6.625% 4/01/10 @ 100 S.F. $619,170
Hosp. District Rev. 4/01/2017 4/01/02 @ 102 Ref.
Bonds (Financial
Security)
10 605,000 Sabine Rvr. Auth. Tx. AAA 6.550 No Sinking Fund 657,714
Colltzd. Poll. Control 10/01/2022 10/01/02 @ 102 Ref.
Rev. Rfdg. Bonds (Tx.
Utils. Elec. Co.
Project) Series 1992
(Financial Guaranty)
11 250,000 Mo. Hlth. & Ed. Facs. AAA 0.000 No Sinking Fund 67,525
Auth. Hlth. Facs. Rev. 9/01/2020 None
Bonds (Lester E. Cox
Med. Centers Project)
Series 1992-H (MBIA
Corp.)
12 100,000 City of Dallas Tx. AAA 0.000 No Sinking Fund 21,881
(Dallas, Denton & Collin 01/01/2021 1/01/06 @ 34.967 Ref.
Cntys.) Civic Center
Cnvntn. Cmplx. Sr. Lien
Rev. Bonds Series 1991
(AMBAC)
-------------- --------------
$4,215,000 Total Investments (Cost (3) $3,946,050) $4,271,990
============== ===============
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized appreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $325,940
Gross unrealized depreciation --
------------------
Net unrealized appreciation $325,940
==================
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Statement of Net Assets
June 30, 1997
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $3,946,050) $ 4,271,990
--------------
Other Assets
Accrued Interest 71,075
--------------
Total Other Assets 71,075
--------------
Liabilities
Advance from Trustee 15,766
--------------
Total Liabilities 15,766
--------------
Excess of Other Assets over Total Liabilities 55,309
--------------
Net Assets (4,159 Units of Fractional Undivided
Interest Outstanding, $1,040.47 per Unit) $ 4,327,299
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Statement of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Investment Income
Interest $ 272,291 $ 283,026 $ 296,968
----------- ----------- ----------
Expenses
Trustee's Fees 7,797 7,209 7,448
Evaluator's Fees 2,182 2,200 2,200
Sponsor's Advisory Fee 1,134 1,185 1,250
----------- ----------- ----------
Total Expenses 11,113 10,594 10,898
----------- ----------- ----------
Net Investment Income 261,178 272,432 286,070
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain on
Investments 13,970 17,612 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 60,767 (15,462) 124,449
----------- ----------- ----------
Net Gain on Investments 74,737 2,150 124,449
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 335,915 $ 274,582 $ 410,519
=========== =========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Statement of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Operations
Net Investment Income $ 261,178 $ 272,432 $ 286,070
Realized Gain
on Investments 13,970 17,612 ----
Change in Unrealized Appreciation
(Depreciation) on Investments 60,767 (15,462) 124,449
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 335,915 274,582 410,519
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 258,768 270,420 283,788
Principal 10,647 ---- ----
Redemptions (Note 2)
Interest 3,391 203 2,266
Principal 317,958 15,301 225,182
------------- ------------- -------------
Total Distributions
and Redemptions 590,764 285,924 511,236
------------- ------------- -------------
Total (Decrease) (254,849) (11,342) (100,717)
Net Assets
Beginning of Year (Note 2) 4,582,148 4,593,490 4,694,207
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $75,271, $76,252
and $74,443, Respectively) $ 4,327,299 $ 4,582,148 $ 4,593,490
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust, Series 30
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, Series 30, (the "Trust") was
organized on November 6, 1992 by Bear, Stearns & Co. Inc. and Gruntal &
Co., LLC under the laws of the State of New York by a Trust Indenture
and Agreement, and is registered under the Investment Company Act of
1940. The Trust was formed to preserve capital and to provide interest
income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust, Series 30
Notes to Financial Statements
- -------------------------------------------------------------------------------
Retroactive Restatement
The amounts of interest and principal redemptions for 1996 and 1995
have been restated from amounts previously reported to recognize
redemptions on the payable date in 1995. These retroactive adjustments
increased redemptions in 1995 by $219,438 and reduced redemptions in
1996 by $219,438.
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1997, 1996 and 1995, 312,
15 and 222 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.33 to $1.00 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $4,090 and $4,029 and other expenses of
$3,707 and $3,180, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust, Series 30
Notes to Financial Statements
- -------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 4,981,213
Less Initial Gross Underwriting Commission 244,079
---------------
4,737,134
Accumulated Cost of Securities Sold,
Matured or Called (811,053)
Net Unrealized Appreciation 325,940
Undistributed Net Investment Income 75,271
Undistributed Proceeds From Investments 7
---------------
Total $ 4,327,299
===============
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 $19,969.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust, Series 30
Notes to Financial Statements
- -------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** (Note 2) $ 1,024.86 $ 1,023.96
- ------------ ------------
Interest Income 63.10 63.20
Expenses (2.58) (2.37)
- ------------ ------------
Net Investment Income 60.52 60.83
- ------------ ------------
Net Gain or Loss on Investments(1) 18.32 .50
- ------------ ------------
Total from Investment Operations 78.84 61.33
- ------------ ------------
Less Distributions
to Certificateholders
Income 59.97 60.38
Principal 2.47 ----
for Redemptions
Interest .79 .05
- ------------ ------------
Total Distributions 63.23 60.43
- ------------ ------------
Net Asset Value, End of Year** $ 1,040.47 $ 1,024.86
============ ============
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1996 and 1995, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 4,315 ([4,471 + 4,159]/2) for 1997 and of 4,479 ([4,486 +
4,471]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 12
The Trust is a unit investment trust designated Series 12
("New York Navigator Trust") with an underlying portfolio of long-term insured
tax-exempt bonds 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. There can be no assurance
that the Trust's investment objectives will be achieved. Although the Supreme
Court has determined that Congress has the authority to subject 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 those Bonds which pay interest income
subject to the federal individual alternative minimum tax.) In addition, 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. and Gruntal
& Co., L.L.C. (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 June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation. 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.
A-1
144372.1
<PAGE>
For a discussion of the significance of such ratings, see "Description of Bond
Ratings" 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). 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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. (See
"Portfolio" in Part B of this Prospectus.)
Each Unit in the Trust represents a 1/4746th 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. 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. 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.
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").
None of the insurance will cover accelerated payments of
principal or penalty interest or premiums unrelated to taxability of interest on
the Bonds. The insurance relates only to the prompt payment of principal of and
interest on the securities in the portfolios, and does not remove market risks
nor does it guarantee the market value of Units in the Trusts. The terms of the
insurance are more fully described herein. No representation is made herein as
to any Bond insurer's ability to meet its obligations under a policy of
insurance relating to any of the Pre-Insured Bonds. In addition, investors
should be aware that subsequent to the Date of Deposit the rating of the
claims-paying ability of the insurer of an underlying Pre-Insured Bond may be
downgraded.
A-2
144372.1
<PAGE>
All of the Bonds in the New York Navigator Trust are covered
by insurance obtained by the Sponsors from MBIA Corp. and 5.6% 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: Financial
Guaranty Insurance Company ("Financial Guaranty"), 5.6%.
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 4.798%
of the Public Offering Price, or 5.040% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) In addition, accrued interest
to the expected date of settlement is added to the Public Offering Price. If
Units had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $1,058.51 plus accrued interest of $7.66 under the monthly
distribution plan, $12.64 under the semi-annual distribution plan and $42.52
under the annual distribution plan, for a total of $1,066.17, $1,071.15 and
$1,101.03, respectively. The Public Offering Price per Unit can vary on a daily
basis in accordance with fluctuations in the aggregate bid price of the Bonds.
(See "Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash
flow. Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will
A-3
144372.1
<PAGE>
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, intend 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 4.798%
of the Public Offering Price (5.040% 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,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of this
Prospectus.) The Plan is not designed to be a complete investment program.
A-4
144372.1
<PAGE>
<TABLE>
<CAPTION>
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 12
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
<S> <C> <C>
Date of Deposit*: November 6, 1992 Weighted Average Life to
Principal Amount of Bonds $4,490,000 Maturity: 19.3 Years.
Number of Units .......... 4,746 Minimum Value of Trust:
Fractional Undivided Inter- Trust may be terminated if
est in Trust per Unit .. 1/4746 value of Trust is less than
Principal Amount of $2,000,000 in principal
Bonds per Unit ......... $946.07 amount of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31,
Aggregate Bid Price 2041 or the disposition of
of Bonds in Trust .... $4,782,662+++ the last Bond in the Trust.
Divided by 4,746 Units . $1,007.72 Trustee***: The Chase
Plus Sales Charge of Manhattan Bank.
4.798% of Public Trustee's Annual Fee:Monthly
Offering Price........ $50.79 plan $1.04 per $1,000; semi-
Public Offering Price annual plan $.56 per $1,000;
per Unit ............. $1,058.51+ and annual plan is $.37 per
Redemption and Sponsors' $1,000.
Repurchase Price Evaluator: Kenny S&P
per Unit ............... $1,007.72+ Evaluation Services.
+++ Evaluator's Fee for Each
++++ Evaluation: Minimum of $8
Excess of Secondary Market plus $.25 per each issue of
Public Offering Price Bonds in excess of 50 issues
over Redemption and (treating separate
Sponsors' Repurchase maturities as separate
Price per Unit ......... $50.79++++ issues).
Difference between Public Sponsors: Reich & Tang
Offering Price per Unit Distributors L.P. and
and Principal Amount per Gruntal & Co., L.L.C.
Unit Premium/(Discount) $112.44 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
<S> <C> <C> <C>
Gross annual interest income# ......... $61.17 $61.17 $61.17
Less estimated annual fees and
expenses ............................ 2.00 1.50 1.44
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $59.17 $59.67 $59.73
Estimated interest distribution# ...... 4.93 29.83 59.73
Estimated daily interest accrual# ..... .1643 .1657 .1659
Estimated current return#++ ........... 5.59% 5.64% 5.64%
Estimated long term return++ .......... 4.25% 4.30% 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
</TABLE>
A-5
144372.1
<PAGE>
Footnotes to Summary of Essential Information
---------------------------------------------
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in
the Summary of Essential Information as if they had been distributed as
of year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $7.66 monthly, $12.64
semi-annually and $42.52 annually.
++ The estimated current return and estimated long term return are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash from the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 4,955 $1,016.54 $59.67 $60.11 $60.60 $4.01
June 30, 1996 4,940 1,015.15 61.85 62.40 62.57 -0-
June 30, 1997 4,746 1,020.11 59.27 59.83 60.19 9.87
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
144372.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO*
The portfolio of the Trust consists of 10 issues representing
obligations of 8 issuers located in the state of New York. 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 15.4% 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 issues representing $1,050,000 of the principal
amount of the Bonds are general obligation bonds. All eight of the remaining
issues representing $3,440,000 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: Assistance Corporation 1, Convention Center 1, Hospital 1, Thruway 1,
Transit Authority 1, University 2 and Water Development 1. For an explanation of
the significance of these factors see "The Trust--Portfolio" in Part B of this
Prospectus.
As of June 30, 1997, $2,230,000 (approximately 49.7% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, none were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. None of the aggregate principal amount
of the Bonds in the Trust were purchased at a "market" discount from par value
at maturity, approximately 31.8% were purchased at a premium and approximately
18.5% were purchased at par. For an explanation of the significance of these
factors see "Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1997 to September 15,
1997, $45,000 principal amount of the Bond in portfolio no. 2 was sold
and is no longer contained in the Trust. 31 Units were redeemed from
the Trust.
A-7
144372.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, New York Navigator Insured Series 12
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
New York Navigator Insured Series 12 (the "Trust") at June 30, 1997, the results
of its operations, the changes in its net assets and the financial highlights
for the two years then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the Trustee,
provide a reasonable basis for the opinion expressed above. The financial
statements for the year ended June 30, 1995 were audited by other independent
accountants, whose report dated September 15, 1995, except as to Note 7 as to
which the date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Portfolio
June 30, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Title Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount of Bonds (1) Maturity (2) Ref.-Refunding Value (3)
<S> <C> <C> <C> <C> <C> <C> <C>
1 $240,000 N.Y. State Dorm. Auth. AAA 7.250% 5/15/09 @ 100 S.F. $263,530
Rev. Rfndg. Bonds State 5/15/2015 5/15/00 @ 102 Ref.
Univ. Ed. Facs. Series
1989 B (MBIA Corp.)
2 500,000 N.Y. State Dorm. Auth. AAA 6.500 5/15/14 @ 100 S.F. 530,115
State Univ. Ed. Facs. 5/15/2019 5/15/00 @ 100 Ref.
Rev. Bonds Series 1990 A
(MBIA Corp.)
3 690,000 N.Y. State Med. Care AAA 6.875 No Sinking Fund 749,878
Facs. Finc. Agency Hosp. 2/15/2032 2/15/02 @ 102 Ref.
& Nrsg. Home Insrd. Mtg.
Rev. Bonds Series 1992 A
(MBIA Corp.)
4 250,000 N.Y. State Thruway Auth. AAA 5.500 1/01/20 @ 100 S.F. 242,340
Genl. Rev. Bonds Series 1/01/2023 1/01/02 @ 100 Ref.
1992 A (MBIA Corp.)
5 500,000 Metro Trans. Auth. Of AAA 6.000 7/01/16 @ 100 S.F. 507,975
N.Y. Transit Facs. 1987 7/01/2021 7/01/01 @ 101.5 Ref.
Serv. Cntrct. Rev. Bonds
Series 6 (MBIA Corp.)
6 550,000 N.Y. City Genl. Oblig. AAA 6.250 No Sinking Fund 582,604
Rev. Bonds Fiscal 1993 8/01/2017 8/01/02 @ 101.5 Ref.
Series A (MBIA Corp.)
7a 400,000 N.Y. City Genl. Oblig. AAA 7.000 No Sinking Fund 437,876
Rev. Bonds Fiscal 1992 2/01/2016 2/01/02 @ 101.5 Ref.
Series H (MBIA Corp.)
7b 100,000 N.Y. City Genl. Oblig. AAA 7.000 No Sinking Fund 110,717
Rev. Bonds Fiscal 1992 6/01/2013 6/01/01 @ 101.5 Ref.
Series H (MBIA Corp.)
8 330,000 N.Y. Local Gov. Assis. AAA 6.500 4/01/19 @ 100 S.F. 354,548
Corp. (A Pub. Benefit 4/01/2020 4/01/01 @ 102 Ref.
Corp. of the State of
N.Y.) Rev. Bonds Series
1991 A (MBIA Corp.)
See accompanying footnotes to portfolio and notes to financial statements.
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Portfolio
June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
9a $210,000 N.Y. City Muni. Wtr. AAA 6.375% 6/15/21 @ 100 S.F. $229,690
Finc. Auth. Wtr. & Swr. 6/15/2022 6/15/02 @ 101 Ref.
Sys. Rev. Bonds Fiscal
1993 Series B (MBIA
Corp.)
9b 485,000 N.Y. City Muni. Wtr. AAA 6.375 6/15/21 @ 100 S.F. 518,853
Finc. Auth. Wtr. & Swr. 6/15/2022 6/15/02 @ 101 Ref.
Sys. Rev. Bonds Fiscal
1993 Series B (MBIA
Corp.)
10 235,000 Triborough Bridge & AAA 6.000 1/01/04 @ 100 S.F. 254,503
Tunnel Auth. of N.Y. 1/01/2011 None
Convntn. Center Project
Bonds Series 1990 E
(MBIA Corp.)
-------------- ------------------
$4,490,000 Total Investments (Cost (3) $4,438,931) $4,782,629
-------------- ------------------
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized appreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $343,698
Gross unrealized depreciation --
------------------
Net unrealized appreciation $343,698
==================
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Statement of Net Assets
June 30, 1997
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $4,438,931) $ 4,782,629
--------------
Other Assets
Accrued Interest 86,320
--------------
Total Other Assets 86,320
--------------
Liabilities
Advance from Trustee 27,530
--------------
Total Liabilities 27,530
--------------
Excess of Other Assets over Total Liabilities 58,790
--------------
Net Assets (4,746 Units of Fractional Undivided
Interest Outstanding, $1,020.11 per Unit) $ 4,841,419
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
Investment Income
<S> <C> <C> <C>
Interest $ 297,078 $ 307,437 $ 307,253
----------- ----------- ----------
Expenses
Trustee's Fees 6,835 5,963 5,549
Evaluator's Fees 2,182 2,200 2,200
Sponsor's Advisory Fee 1,226 1,226 1,241
----------- ----------- ----------
Total Expenses 10,243 9,389 8,990
----------- ----------- ----------
Net Investment Income 286,835 298,048 298,263
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized Gain on
Investments 12,941 ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 59,105 2,968 130,865
----------- ----------- ----------
Net Gain on Investments 72,046 2,968 130,865
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 358,881 $ 301,016 $ 429,128
----------- ----------- ----------
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
Operations
<S> <C> <C> <C>
Net Investment Income $ 286,835 $ 298,048 $ 298,263
Realized Gain
on Investments 12,941 ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 59,105 2,968 130,865
------ ----- -------
Net Increase in
Net Assets Resulting
From Operations 358,881 301,016 429,128
------- ------- -------
Distributions to Certificateholders
Investment Income 294,428 307,909 296,822
Principal 37,140 ---- 19,870
Redemptions
Interest 4,162 157 315
Principal 196,567 15,089 16,754
------- ------- -------
Total Distributions
and Redemptions 532,297 323,155 333,761
------- ------- -------
Total Increase (Decrease) (173,416) (22,139) 95,367
Net Assets
Beginning of Year 5,014,835 5,036,974 4,941,607
--------- --------- ---------
End of Year (Including
Undistributed Net Investment
Income of $58,756, $70,511
and $80,529, Respectively) $ 4,841,419 $ 5,014,835 $ 5,036,974
-------- ------------ ------------ ------------
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, New York Navigator Insured Series
12, (the "Trust") was organized on November 6, 1992 by Bear, Stearns &
Co. Inc. and Gruntal & Co., LLC under the laws of the State of New York
by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. The Trust was formed to preserve
capital and to provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended June 30, 1997, 1996 and 1995, 194,
15 and 17 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.37 to $1.04 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $3,969 and $3,829 and other expenses of
$2,866 and $2,134, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders 4,980,572
Less Initial Gross Underwriting Commission 244,048
---------
4,736,524
Accumulated Cost of Securities Sold,
Matured or Called (297,593)
Net Unrealized Appreciation 343,698
Undistributed Net Investment Income 58,756
Undistributed Proceeds From Investments 34
---------
Total 4,841,419
---------
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.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 12
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 1,015.15 $ 1,016.54
------------ ------------
Interest Income 61.34 62.14
Expenses (2.12) (1.90)
------------ ------------
Net Investment Income 59.22 60.24
------------ ------------
Net Gain or Loss on Investments(1) 15.06 .64
------------ ------------
Total from Investment Operations 74.28 60.88
------------ ------------
Less Distributions
to Certificateholders
Income 60.79 62.24
Principal 7.67 ----
for Redemptions
Interest .86 .03
------------ ------------
Total Distributions 69.32 62.27
------------ ------------
Net Asset Value, End of Year** $ 1,020.11 $ 1,015.15
------------ ------------
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1996 and 1995, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 4,843 ([4,940 + 4,746]/2) for 1997 and of 4,947.50 ([4,955
+ 4,940]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 15
- --------------------------------------------------------------------------------
The Trust is a unit investment trust designated Series 15
("New York Navigator Trust") with an underlying portfolio of long-term insured
tax-exempt bonds 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. There can be no assurance
that the Trust's investment objectives will be achieved. Although the Supreme
Court has determined that Congress has the authority to subject 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 those Bonds which pay interest income
subject to the federal individual alternative minimum tax.) In addition, 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. and Gruntal
& Co., L.L.C. (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 June 30, 1997 (the "Evaluation Date"), a
summary of certain specific information regarding the Trust and audited
financial statements of the Trust, including the related portfolio, as of the
Evaluation Date. Part B of this Prospectus contains a general summary of the
Trust. Part A of this Prospectus may not be distributed unless accompanied by
Part B. Investors should retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
insured bonds (the "Bonds") issued by or on behalf of states, municipalities and
public authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation. 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.
A-1
217480.1
<PAGE>
For a discussion of the significance of such ratings, see "Description of Bond
Ratings" 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). 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.
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. A Trust designated as a long-term trust must have a
dollar-weighted average portfolio maturity of more than ten years. (See
"Portfolio" in Part B of this Prospectus.)
Each Unit in the Trust represents a 1/3340th 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. 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. 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.
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").
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
A-2
217480.1
<PAGE>
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 5.2% 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:
MBIA Corp., 5.2%.
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 5.5% of
the Public Offering Price, or 5.820% of the net amount invested in Bonds per
Unit. The sales charge for secondary market purchases is based upon the number
of years remaining to maturity of each bond in the Trust's portfolio. (See
"Public Offering" in Part B of this Prospectus.) In addition, accrued interest
to the expected date of settlement is added to the Public Offering Price. If
Units had been purchased on the Evaluation Date, the Public Offering Price per
Unit would have been $1,004.21 plus accrued interest of $5.70 under the monthly
distribution plan, $9.94 under the semi-annual distribution plan and $35.89
under the annual distribution plan, for a total of $1,009.91, $1,014.15 and
$1,040.10, 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.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash flow.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast
to the Estimated Long Term Return, the Estimated Current Return does not take
A-3
217480.1
<PAGE>
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, intend 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 5.5% of
the Public Offering Price (5.820% of the net amount invested), plus net accrued
interest. If a market is not maintained a Certificateholder will be able to
redeem his 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,
reinvested in available series of "Insured Municipal Securities Trust" or
"Municipal Securities Trust." (See "Total Reinvestment Plan" in Part B of this
Prospectus.) The Plan is not designed to be a complete investment program.
A-4
217480.1
<PAGE>
<TABLE>
<CAPTION>
INSURED MUNICIPAL SECURITIES TRUST
NEW YORK NAVIGATOR INSURED
SERIES 15
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
<S> <C> <C>
Date of Deposit*: December 9, 1993 Minimum Principal Distribution:
Principal Amount of Bonds.. $3,350,000 $1.00 per Unit.
Number of Units............ 3,340 Weighted Average Life to
Fractional Undivided Inter- Maturity: 21 Years.
est in Trust per Unit.... 1/3340 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit .......... $1,003.00 value of Trust is less than
Secondary Market Public $1,400,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust...... $3,169,577+++ The earlier of December 31,
Divided by 3,340 Units .. $948.98 2043 or the disposition of the
Plus Sales Charge of last Bond in the Trust.
5.5% of Public Trustee***: The Chase Manhattan
Offering Price ........ $55.23 Bank.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit .............. $1,004.21+ plan $1.13 per $1,000; semi-
Redemption and Sponsors' annual plan $.66 per $1,000;
Repurchase Price and annual plan is $.39 per
per Unit ................ $948.98+ $1,000.
+++ Evaluator: Kenny S&P Evaluation
++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $8 plus
over Redemption and $.25 per each issue of Bonds in
Sponsors' Repurchase excess of 50 issues (treating
Price per Unit .......... $55.23++++ separate maturities as separate
Difference between Public issues).
Offering Price per Unit Sponsors: Reich & Tang
and Principal Amount per Distributors L.P. and Gruntal &
Unit Premium/(Discount).. $1.21 Co., L.L.C.
Evaluation Time: 4:00 p.m. Sponsors' Annual Fee: Maximum of
New York Time. $.25 per $1,000 principal
amount of Bonds (see "Trust
Expenses and Charges" in Part B
of this Prospectus).
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $52.60 $52.60 $52.60
Less estimated annual fees and
expenses ............................ 2.39 1.86 .98
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $50.21 $50.74 $51.62
Estimated interest distribution# ...... 4.18 25.37 51.62
Estimated daily interest accrual# ..... .1394 .1409 .1433
Estimated current return#++ ........... 5.00% 5.05% 5.14%
Estimated long term return++ .......... 4.99% 5.04% 5.13%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
217480.1
<PAGE>
Footnotes to Summary of Essential Information
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan"
in Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in
the Summary of Essential Information as if they had been distributed at
year-end.
*** The Trustee maintains its principal executive office at 270 Park
Avenue, New York, New York 10017 and its unit investment trust office
at 4 New York Plaza, New York, New York 10004 (tel. no.:
1-800-882-9898). For information regarding redemption by the Trustee,
see "Trustee Redemption" in Part B of this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $5.70 monthly, $9.94
semi-annually and $35.89 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, Sponsors' Repurchase Price and
Redemption Price" in Part B of this Prospectus.
# Does not include income accrual from original issue discount bonds, if
any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 3,500 $919.63 $50.52 $51.10 $38.54 -0-
June 30, 1996 3,500 933.84 53.32 53.86 54.32 -0-
June 30, 1997 3,340 958.48 50.55 51.07 52.03 $1.11
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-6
217480.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO*
- -------------------------
The portfolio of the Trust consists of 10 issues representing
obligations of 8 issuers located in the state of New York and 1 in Puerto Rico.
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 9.6% are hospital revenue
bonds; none were issued in connection with the financing of nuclear generating
facilities; and approximately 14.9% 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). Two of the issues
representing $300,000 of the principal amount of the Bonds are general
obligation bonds. All eight of the remaining issues representing $3,050,000 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: Civic Facility 1,
Correctional Facility 1, Dormitory Authority 1, Health and Education 1, Hospital
1, Housing 1, Transit Facility 1 and Water and Sewer 1. For an explanation of
the significance of these factors see "The Trust--Portfolio" in Part B of this
Prospectus.
As of June 30, 1997, $1,395,000 (approximately 41.6% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $175,000 (approximately 5.2% of the
aggregate principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon
Bonds do not provide for the payment of any current interest and provide for
payment at maturity at par value unless sooner sold or redeemed. The market
value of Zero Coupon Bonds is subject to greater fluctuations than coupon bonds
in response to changes in interest rates. None of the aggregate principal amount
of the Bonds in the Trust were purchased at a "market" discount from par value
at maturity, approximately 58.4% were purchased at a premium and none were
purchased at par. For an explanation of the significance of these factors see
"Discount and Zero Coupon Bonds" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From July 1, 1997 to September 15,
1997, 15 Units were redeemed from the Trust.
A-7
217480.1
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, New York Navigator Insured Series 15
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
New York Navigator Insured Series 15 (the "Trust") at June 30, 1997, the results
of its operations, the changes in its net assets and the financial highlights
for the two years then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the Trustee,
provide a reasonable basis for the opinion expressed above. The financial
statements for the year ended June 30, 1995 were audited by other independent
accountants, whose report dated September 15, 1995, except as to Note 7 as to
which the date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Portfolio
June 30, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Amount Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C>
1 $400,000 N.Y. State Dorm. Auth. AAA 5.000% No Sinking Fund $370,184
(St. Univ. Ed. Facs.) 5/15/2018 5/15/00 @ 100 Ref.
Rev. Bonds Series 1989
B (MBIA Corp.)
2 500,000 N.Y. State Hsg. Finc. AAA 5.375 3/15/14 @ 100 S.F. 477,520
Agncy. Serv. Contrct. 3/15/2023 9/15/03 @ 102 Ref.
Oblig. Rev. Bonds
Series 1993 D (MBIA Corp.)
3 320,000 N.Y. State Med. Care AAA 5.250 2/15/14 @ 100 S.F. 300,122
Facs. Finc. Agncy. 8/15/2023 8/15/03 @ 102 Ref.
Mental Hlth. Servs.
Facs. Imprvmnt. Rev.
Bonds Series 1993 D
(MBIA Corp.)
4 500,000 N.Y. State Urban Dev. AAA 5.750 1/01/11 @ 100 S.F. 510,060
Corp. Correc. Cap. 1/01/2013 1/01/03 @ 102 Ref.
Facs. Rev. Rfng. Bonds
Series 1993 (MBIA Corp.)
5 605,000 Metro. Trans. Auth. AAA 5.750 7/01/13 @ 100 S.F. 613,905
N.Y. Serv. Cntrct. Rev. 7/01/2015 7/01/03 @ 101.5 Ref.
Bonds Trans. Facs.
Series P 1993 (MBIA
Corp.)
6 200,000 N.Y. City Genl. Oblig. AAA 6.250 No Sinking Fund 211,488
Rev. Bonds Fiscal 1993 8/01/2016 8/01/03 @ 101.5 Ref.
Series A (MBIA Corp.)
7 100,000 N.Y. City Genl. Oblig. AAA 5.750 No Sinking Fund 101,352
Rev. Bonds Fiscal 1994 8/15/2015 8/15/03 @ 101.5 Ref.
Series D (MBIA Corp.)
8 250,000 N.Y. City Muni. Wtr. AAA 5.500 6/15/18 @ 100 S.F. 240,543
Finc. Auth. Wtr. & Swr. 6/15/2020 6/15/02 @ 100 Ref.
Sys. Rev. Rfndg. Bonds
Series 1992 A (MBIA Corp.)
See accompanying footnotes to portfolio and notes to financial statements.
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Portfolio
June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
9 $300,000 P.R. Pub. Bldgs. Auth. AAA 5.500% 7/01/17 @ 100 S.F. $295,677
Pub. Ed. & Hlth. Facs. 7/01/2021 7/01/03 @ 101.5 Ref.
Rev. Rfndg. Bonds Gtd.
By The Cmmnwlth. of
P.R. Series 1993 M
(MBIA Corp.)
10 175,000 Glencove N.Y. Ind. Dev. AAA 0.000 No Sinking Fund 48,713
Agncy. Civic Fac. Rev. 10/15/2019 None
Bonds (Regency at
Glencove) Series 1992 B (MBIA Corp.)
------------------ -----------------
$3,350,000 Total Investments (Cost (3) $3,251,401) $3,169,564
------------------ -----------------
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Footnotes to Portfolio
- -------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized depreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $ -
Gross unrealized depreciation (81,837)
----------------
Net unrealized depreciation $(81,837)
----------------
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Statement of Net Assets
June 30, 1997
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $3,251,401) $ 3,169,564
--------------
Other Assets
Accrued Interest 64,338
--------------
Total Other Assets 64,338
--------------
Liabilities
Advance from Trustee 32,565
--------------
Total Liabilities 32,565
--------------
Excess of Other Assets over Total Liabilities 31,773
--------------
Net Assets (3,340 Units of Fractional Undivided
Interest Outstanding, $958.48 per Unit) $ 3,201,337
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
Investment Income
<S> <C> <C> <C>
Interest $ 183,702 $ 187,030 $ 186,951
----------- ----------- ----------
Expenses
Trustee's Fees 4,562 4,364 4,247
Evaluator's Fees 2,182 2,200 2,204
Sponsor's Advisory Fee 875 875 875
----------- ----------- ----------
Total Expenses 7,619 7,439 7,326
----------- ----------- ----------
Net Investment Income 176,083 179,591 179,625
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
Realized (Loss) on
Investments (4,372) ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 93,060 57,955 130,953
----------- ----------- ----------
Net Gain on Investments 88,688 57,955 130,953
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 264,771 $ 237,546 $ 310,578
----------- ----------- ----------
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Years Ended June 30,
1997 1996 1995
Operations
Net Investment Income $ 176,083 $ 179,591 $ 179,625
------------- ------------- -------------
Realized (Loss)
on Investments (4,372) ---- ----
Change in Unrealized Appreciation
(Depreciation) on Investments 93,060 57,955 130,953
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 264,771 237,546 310,578
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 175,635 187,790 178,007
Principal 3,707 ---- ----
Redemptions
Interest 1,044 ---- ----
Principal 151,492 ---- ----
------------- ------------- -------------
Total Distributions
and Redemptions 331,878 187,790 178,007
------------- ------------- -------------
Total Increase (Decrease) (67,107) 49,756 132,571
Net Assets
Beginning of Year 3,268,444 3,218,688 3,086,117
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $38,607, $39,203
and $47,403, Respectively) $ 3,201,337 $ 3,268,444 $ 3,218,688
============ ============ ============
The accompanying notes form an integral part of the financial statements.
</TABLE>
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, New York Navigator Insured Series
15, (the "Trust") was organized on December 9, 1993 by Bear, Stearns &
Co. Inc. and Gruntal & Co., LLC under the laws of the State of New York
by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. The Trust was formed to preserve
capital and to provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the year ended June 30, 1997, 160 units were
redeemed. No units were redeemed during the years ended June 30, 1996
and 1995.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.39 to $1.13 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $2,987 and $2,936 and other expenses of
$1,575 and $1,428, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
Original cost to Certificateholders $ 3,579,535
Less Initial Gross Underwriting Commission 175,397
--------------
3,404,138
Accumulated Cost of Securities Sold,
Matured or Called (159,584)
Net Unrealized Depreciation (81,837)
Undistributed Net Investment Income 38,607
Undistributed Proceeds From Investments 13
--------------
Total $ 3,201,337
==============
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 3,500 units of
fractional undivided interest of the Trust as of the date of deposit.
Undistributed net investment income includes accumulated accretion of
original issue discount of $6,847.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust,
New York Navigator Insured Series 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 933.84 $ 919.63
------------- -------------
Interest Income 53.71 53.44
Expenses (2.23) (2.13)
------------- -------------
Net Investment Income 51.48 51.31
------------- -------------
Net Gain or Loss on Investments(1) 25.91 16.55
------------- -------------
Total from Investment Operations 77.39 67.86
------------- -------------
Less Distributions
to Certificateholders
Income 51.36 53.65
Principal 1.08 ----
for Redemptions
Interest .31 ----
------------- -------------
Total Distributions 52.75 53.65
------------- -------------
Net Asset Value, End of Year** $ 958.48 $ 933.84
============= =============
(1) Net gain or loss on investments is a result of changes in outstanding units since July 1, 1996 and 1995,
respectively, and the dates of net gain and loss on investments.
</TABLE>
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 3,420 ([3,500 + 3,340]/2) for 1997 and of 3,500 ([3,500 +
3,500]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Prospectus Part A Dated October 31, 1997
INSURED MUNICIPAL SECURITIES TRUST
NEW JERSEY NAVIGATOR INSURED
SERIES 11
The Trust is a unit investment trust designated Series 11 ("New
Jersey Navigator Trust") with an underlying portfolio of long-term insured
tax-exempt bonds 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 Jersey gross income tax. There can be no assurance that the Trust's
investment objectives will be achieved. Although the Supreme Court has
determined that Congress has the authority to subject 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 those Bonds which pay interest income
subject to the federal individual alternative minimum tax.) In addition, 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. and Gruntal
& Co., L.L.C. (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 June 30, 1997 (the "Evaluation Date"), a summary
of certain specific information regarding the Trust and audited financial
statements of the Trust, including the related portfolio, as of the Evaluation
Date. Part B of this Prospectus contains a general summary of the Trust. Part A
of this Prospectus may not be distributed unless accompanied by Part B.
Investors should retain both parts of this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE TRUST. The Trust seeks to achieve its investment objectives
through investment in a fixed, diversified portfolio of long-term insured bonds
(the "Bonds") issued by or on behalf of states, municipalities and public
authorities which, because of irrevocable insurance, were rated "AAA" by
Standard & Poor's Corporation. 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.
A-1
217484.1
<PAGE>
For a discussion of the significance of such ratings, see
"Description of Bond Ratings" 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 the Trust, and the cost of such Bonds to the
Trust, see "Description of Portfolio" in this Part A). 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.
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. A Trust designated as a long-term trust must have a dollar-weighted
average portfolio maturity of more than ten years. (See "Portfolio" in Part B of
this Prospectus.)
Each Unit in the Trust represents a 1/2991st 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 Jersey 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.
For discussion of the effect of an occurrence of non-payment of principal or
interest on any Bonds in the New Jersey Navigator Trust see "Portfolio
Supervision" in Part B of this Prospectus. The premiums for the Navigator
Sponsor-Insured Bonds are obligations of the Sponsors. Additionally, some of the
Bonds in the New Jersey 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.
Some of the Bonds in the New Jersey 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.
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 under "Insurance on the Bonds" in
A-2
217484.1
<PAGE>
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 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 Jersey Navigator Trust are covered by
insurance obtained by the Sponsors from MBIA Corp. and 85.2% of the Bonds in the
New Jersey Navigator Trust are Pre-Insured Bonds. The approximate percentage of
the aggregate principal amount of the Trust that is insured by each Insurance
Company with respect to Pre-Insured Bonds is as follows: Financial Guaranty
Insurance Company ("Financial Guaranty"), 5%; Financial Security Assurance Inc.
("Financial Security"), 16.7%; and MBIA Corp., 63.5%.
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 5.50% of the
Public Offering Price, or 5.820% of the net amount invested in Bonds per Unit.
The sales charge for secondary market purchases is based upon the number of
years remaining to maturity of each bond in the Trust's portfolio. (See "Public
Offering" in Part B of this Prospectus.) In addition, accrued interest to the
expected date of settlement is added to the Public Offering Price. If Units had
been purchased on the Evaluation Date, the Public Offering Price per Unit would
have been $992.69 plus accrued interest of $5.83 under the monthly distribution
plan, $10.04 under the semi-annual distribution plan and $36.07 under the annual
distribution plan, for a total of $998.52, $1,002.73 and $1,028.76,
respectively. The Public Offering Price per Unit can vary on a daily basis in
accordance with fluctuations in the aggregate bid price of the Bonds. (See
"Public Offering--Offering Price" in Part B of this Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units of
each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering--Offering Price" in Part B)
as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
A-3
217484.1
<PAGE>
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,
intend 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 5.50% of
the Public Offering Price (5.820% of the net amount invested), plus net accrued
interest. If a market is not maintained a Certificateholder will be able to
redeem his 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, reinvested in
available series of "Insured Municipal Securities Trust" or "Municipal
Securities Trust." (See "Total Reinvestment Plan" in Part B of this Prospectus.)
The Plan is not designed to be a complete investment program.
A-4
217484.1
<PAGE>
<TABLE>
<CAPTION>
INSURED MUNICIPAL SECURITIES TRUST
NEW JERSEY NAVIGATOR INSURED
SERIES 11
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 30, 1997
<S> <C> <C>
Date of Deposit*: December 9, 1993 Minimum Principal Distribution:
Principal Amount of Bonds . $3,000,000 $1.00 per Unit.
Number of Units ........... 2,991 Weighted Average Life to Maturity:
Fractional Undivided Inter- 26.6 Years.
est in Trust per Unit ... 1/2991 Minimum Value of Trust:
Principal Amount of Trust may be terminated if value of Trust is less
Bonds per Unit .......... $1,003.00 than $1,200,000 in principal amount of Bonds.
Secondary Market Public Mandatory Termination Date:
Offering Price** The earlier of December 31, 2043 or the disposition
Aggregate Bid Price of the last Bond in the Trust.
of Bonds in Trust ..... $2,805,840+++ Trustee***: The Chase Manhattan Bank.
Divided by 2,991 Units .. $938.09 Trustee's Annual Fee: Monthly
Plus Sales Charge of plan $1.13 per $1,000; semi-annual plan $.66 per
5.50% of Public $1,000; and annual plan is $.39 per $1,000.
Offering Price.......... $54.60 Evaluator: Kenny S&P Evaluation
Public Offering Price Services.
per Unit .............. $992.69+ Evaluator's Fee for Each
Redemption and Sponsors' Evaluation: Minimum of $8 plus $.25 per each issue
Repurchase Price of Bonds in excess of 50 issues (treating separate
per Unit ................ $938.09+ maturities as separate issues).
+++ Sponsors: Reich & Tang Distributors
++++ L.P. and Gruntal & Co., L.L.C.
Excess of Secondary Market Sponsors' Annual Fee: Maximum of
Public Offering Price $.25 per $1,000 principal amount of Bonds (see "Trust
over Redemption and Expenses and Charges" in Part B of this Prospectus).
Sponsors' Repurchase
Price per Unit .......... $54.60++++
Difference between Public
Offering Price per Unit
and Principal Amount per
Unit Premium/(Discount) . $10.31
Evaluation Time: 4:00 p.m.
New York Time.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
<S> <C> <C> <C>
Gross annual interest income# ......... $52.43 $52.43 $52.43
Less estimated annual fees and
expenses ............................ 2.58 2.01 .59
Estimated net annual interest _____ ______ ______
income (cash)# ...................... $49.85 $50.42 $51.84
Estimated interest distribution# ...... 4.15 25.21 51.84
Estimated daily interest accrual# ..... .1384 .1400 .1440
Estimated current return#++ ........... 5.02% 5.08% 5.22%
Estimated long term return++ .......... 5.10% 5.16% 5.31%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-5
217484.1
<PAGE>
Footnotes to Summary of Essential Information
---------------------------------------------
* The Date of Deposit is the date on which the Trust Agreement was signed and
the deposit of the Bonds with the Trustee made.
** For information regarding offering price per Unit and applicable sales
charge under the Total Reinvestment Plan, see "Total Reinvestment Plan" in
Part B of this Prospectus.
Certain amounts distributable as of June 30, 1997 may be reported in the
Summary of Essential Information as if they had been distributed at year-end.
*** The Trustee maintains its principal executive office at 270 Park Avenue, New
York, New York 10017 and its unit investment trust office at 4 New York
Plaza, New York, New York 10004 (tel. no.: 1-800-882-9898). For information
regarding redemption by the Trustee, see "Trustee Redemption" in Part B of
this Prospectus.
+ Plus accrued interest to the expected date of settlement (approximately
three business days after purchase) of $5.83 monthly, $10.04 semi-annually
and $36.07 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.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995 3,000 $910.00 $49.68 $50.26 $37.91 -0-
June 30, 1996 3,000 925.40 52.01 52.63 53.21 -0-
June 30, 1997 2,991 947.91 50.07 50.67 52.04 -0-
</TABLE>
- --------------------
* Net Asset Value per Unit is calculated by dividing net assets as disclosed
in the "Statement of Net Assets" by the number of Units outstanding as of
the date of the Statement of Net Assets. See Note 5 of Notes to Financial
Statements for a description of the components of Net Assets.
A-6
217484.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF JUNE 30, 1997
DESCRIPTION OF PORTFOLIO
The portfolio of the Trust consists of 9 issues representing
obligations of 8 issuers located in the state of New Jersey and 1 in Puerto
Rico. The Sponsor has not participated as a sole underwriter or manager,
co-manager or member of an underwriting syndicate from which any of the initial
aggregate principal amount of the Bonds were acquired. None of the Bonds are
obligations of state and local housing authorities; none are hospital revenue
bonds; none were issued in connection with the financing of nuclear generating
facilities; and approximately 4.2% 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 $100,000 of the principal amount of the Bonds is a general
obligation bond. All eight of the remaining issues representing $2,900,000 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: Convention Center 1,
Health and Education 1, Housing 1, Pollution Control 2 and Utilities 3. For an
explanation of the significance of these factors see "The Trust--Portfolio" in
Part B of this Prospectus.
As of June 30, 1997, $175,000 (approximately 5% of the
aggregate principal amount of the Bonds) were original issue discount bonds. Of
these original issue discount bonds, $175,000 (approximately 5% of the aggregate
principal amount of the Bonds) were Zero Coupon Bonds. Zero Coupon Bonds do not
provide for the payment of any current interest and provide for payment at
maturity at par value unless sooner sold or redeemed. The market value of Zero
Coupon Bonds is subject to greater fluctuations than coupon bonds in response to
changes in interest rates. None of the Bonds in the Trust were purchased at a
"market" discount from par value at maturity, approximately 90.8% were purchased
at a premium and approximately 4.2% 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.
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
Insured Municipal Securities Trust, New Jersey Navigator Insured Series 11
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11 (the "Trust") at June 30, 1997, the
results of its operations, the changes in its net assets and the financial
highlights for the two years then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1997 by correspondence with the Trustee,
provide a reasonable basis for the opinion expressed above. The financial
statements for the year ended June 30, 1995 were audited by other independent
accountants, whose report dated September 15, 1995, except as to Note 7 as to
which the date is September 28, 1995, expressed an unqualified opinion on those
financial statements.
PRICE WATERHOUSE LLP
Boston, MA 02110
September 15, 1997
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Portfolio
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
1 $525,000 N.J. Econ. Dev. Auth. AAA 5.375% No Sinking Fund $502,635
Nat. Gas. Facs. Rfndg. 8/01/2023 8/01/03 @ 102 Opt.
Rev. Bonds (N.J. Nat.
Gas Co. Prjt.) Series
1993A (MBIA Corp.)
2 125,000 N.J. Hsg. & Mtg. Finc. AAA 5.350 4/01/08 @ 100 S.F. 122,003
Agncy. Home Buyer Rev. 10/01/2015 10/01/03 @ 102 Opt.
Bonds 1993 Series G
(MBIA Corp.)
3 525,000 N.J. Sports & Expo AAA 5.500 7/01/21 @ 100 S.F. 510,578
Auth. Cnvntn. Cntr. 7/01/2022 7/01/02 @ 102 Opt.
Luxury Tax Bonds Series
1992A (MBIA Corp.)
4 100,000 Borough of Avalon N.J. AAA 5.400 7/01/06 @ 100 S.F. 100,931
In The Cnty. of Cape 7/01/2013 7/01/03 @ 102 Ref.
May Genl. Oblig. Rfndg.
Bonds 1993 (MBIA Corp.)
5 150,000 Camden Cnty. N.J. Muni. AAA 0.000 No Sinking Fund 40,449
Utils. Auth. Cnty. 9/01/2019 None
Agreement Swr. Rev.
Cap. Apprec. Bonds
Series 1990 A (MBIA
Corp.)
6 105,000 Cape May N.J. Muni. AAA 5.750 1/01/12 @ 100 S.F. 106,467
Utils. Auth. Rev. 1/01/2016 1/01/03 @ 102 Ref.
Rfndg. Bonds Series
1992 A (MBIA Corp.)
7 500,000 Salem Cnty. N.J. Poll. AAA 5.600 No Sinking Fund 478,765
Cntrl. Fincg. Auth. 11/01/2025 11/01/03 @ 102 Ref.
Poll. Cntrl. Rev. Bonds
(Atlantic City Elec.
Co. Prjt.) Series 1993
A (AMT) (MBIA Corp.)
</TABLE>
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Portfolio
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund Market
No. Amount Title of Bonds (1) Maturity(2) Ref.-Refunding Value(3)
<S> <C> <C> <C> <C> <C> <C>
8 $525,000 Salem Cnty. N.J. Poll. AAA 5.500% No Sinking Fund $513,833
Cntrl. Fincg. Auth. 11/01/2033 11/01/03 @ 102 Opt.
Poll. Cntrl. Rev.
Rfndg. Bonds (Pub.
Serv. Elec. & Gas Co.
Prjt.) Series 1993 C
(MBIA Corp.)
9 445,000 P.R. Pub. Bldgs. Auth. AAA 5.500 7/01/17 @ 100 S.F. 438,588
Pub. Ed. & Hlth. Facs. 7/01/2021 7/01/03 @ 101.5 Opt.
Rev. Rfndg. Bonds Gtd.
By The Cmnwlth. of P.R.
Series 1993 M (MBIA
Corp.)
---------- ----------
$3,000,000 Total Investments (Cost (3) $2,927,635) $2,814,249
========== ==========
</TABLE>
`See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Footnotes to Portfolio
- --------------------------------------------------------------------------------
(1) All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc. A brief description of the ratings symbols and their meanings is
set forth under "Description of Bond Ratings" in Part B of the
Prospectus.
(2) See "The Trust -- Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
(3) At June 30, 1997, the net unrealized depreciation of all bonds was
comprised of the following:
Gross unrealized appreciation $79
Gross unrealized depreciation (113,465)
--------
Net unrealized depreciation $(113,386)
=========
(4) The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Statement of Net Assets
June 30, 1997
- --------------------------------------------------------------------------------
Investments in Securities,
at Market Value (Cost $2,927,635) $ 2,814,249
--------------
Other Assets
Accrued Interest 54,911
--------------
Total Other Assets 54,911
--------------
Liabilities
Advance from Trustee 33,957
--------------
Total Liabilities 33,957
--------------
Excess of Other Assets over Total Liabilities 20,954
--------------
Net Assets (2,991 Units of Fractional Undivided
Interest Outstanding, $947.91 per Unit) $ 2,835,203
==============
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Investment Income
Interest $ 158,591 $ 158,494 $ 158,425
----------- ----------- ----------
Expenses
Trustee's Fees 4,133 4,114 4,001
Evaluator's Fees 2,182 2,200 2,204
Sponsor's Advisory Fee 750 750 750
----------- ----------- ----------
Total Expenses 7,065 7,064 6,955
Net Investment Income 151,526 151,430 151,470
----------- ----------- ----------
Unrealized Gain (Loss)
Change in Unrealized Appreciation
(Depreciation) on Investments 67,081 51,908 137,293
----------- ----------- ----------
Net Gain on Investments 67,081 51,908 137,293
----------- ----------- ----------
Net Increase
in Net Assets
Resulting From Operations $ 218,607 $ 203,338 $ 288,763
=========== =========== ==========
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Operations
Net Investment Income $ 151,526 $ 151,430 $ 151,470
Change in Unrealized Appreciation
(Depreciation) on Investments 67,081 51,908 137,293
------------- ------------- -------------
Net Increase in
Net Assets Resulting
From Operations 218,607 203,338 288,763
------------- ------------- -------------
Distributions to Certificateholders
Investment Income 151,099 157,161 149,891
Redemptions
Interest 87 ---- ----
Principal 8,408 ---- ----
------------- ------------- -------------
Total Distributions
and Redemptions 159,594 157,161 149,891
------------- ------------- -------------
Total Increase 59,013 46,177 138,872
Net Assets
Beginning of Year 2,776,190 2,730,013 2,591,141
------------- ------------- -------------
End of Year (Including
Undistributed Net Investment
Income of $35,222, $34,882
and $40,613, Respectively) $ 2,835,203 $ 2,776,190 $ 2,730,013
============ ============ ============
</TABLE>
The accompanying notes form an integral part of the financial statements.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Organization
Insured Municipal Securities Trust, New Jersey Navigator Insured Series
11, (the "Trust") was organized on December 9, 1993 by Bear, Stearns &
Co. Inc. and Gruntal & Co., LLC under the laws of the State of New York
by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. The Trust was formed to preserve
capital and to provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor. Effective September 2, 1995, United States Trust Company of
New York was merged into The Chase Manhattan Bank ("Chase" or the
"Trustee"). Accordingly, Chase is the successor trustee of the Trust.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest Income
Interest income is recorded 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.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost (including accumulated accretion of
original issue discount on zero-coupon bonds) and market value is
reflected as unrealized appreciation (depreciation) of investments.
Securities transactions are recorded on the trade date. Realized gains
(losses) from securities transactions are determined on the basis of
average cost of the securities sold or redeemed.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Trustee has custody of assets and responsibility for the accounting
records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control related
thereto. The Trustee is also responsible for all estimates of expenses
and accruals reflected in the Trust's financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the year ended June 30, 1997, 9 units were
redeemed. No units were redeemed during the years ended June 30, 1996
and 1995.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.37 to $1.13 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $8.00 is paid to a
service bureau for each portfolio valuation. A maximum fee of $.25 per
$1,000 of outstanding investment principal is paid to the Sponsor. For
the years ended June 30, 1997 and 1996, the "Trustee's Fees" are
comprised of Trustee fees of $2,683 and $2,588 and other expenses of
$1,450 and $1,526, respectively. The other expenses include
professional, printing and miscellaneous fees.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Net Assets
At June 30, 1997, the net assets of the Trust represented the interest
of Certificateholders as follows:
<TABLE>
<S> <C>
Original cost to Certificateholders $ 3,072,319
Less Initial Gross Underwriting Commission 150,544
---------------
2,921,775
Net Unrealized Depreciation (113,386)
Undistributed Net Investment Income 35,222
Distribution in Excess of Proceeds from Investments (8,408)
---------------
Total $ 2,835,203
===============
</TABLE>
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 3,000 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 $5,860.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
Insured Municipal Securities Trust,
New Jersey Navigator Insured Series 11
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
<S> <C> <C>
Net Asset Value, Beginning of Year** $ 925.40 $ 910.00
------------- -------------
Interest Income 52.94 52.83
Expenses (2.36) (2.35)
------------- -------------
Net Investment Income 50.58 50.48
------------- -------------
Net Gain or Loss on Investments(1) 22.40 17.31
------------- -------------
Total from Investment Operations 72.98 67.79
------------- -------------
Less Distributions
to Certificateholders
Income 50.44 52.39
for Redemptions
Interest .03 ----
------------- -------------
Total Distributions 50.47 52.39
------------- -------------
Net Asset Value, End of Year** $ 947.91 $ 925.40
============= =============
</TABLE>
(1) Net gain or loss on investments is a result of changes in outstanding
units since July 1, 1996 and 1995, respectively, and the dates of net
gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 2,996 ([3,000 + 2,991]/2) for 1997 and of 3,000 ([3,000 +
3,000]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
Note: Part B of This Prospectus May Not Be Distributed
Unless Accompanied by Part A.
Please Read and Retain Both Parts
of This Prospectus For Future Reference.
INSURED MUNICIPAL SECURITIES TRUST
Prospectus Part B
Dated: October 31, 1997
THE TRUST
Organization. "Insured Municipal Securities Trust" (the "Trust")
------------
consists of the "unit investment trust" designated as set forth in Part A.* The
Trust was created under the laws of the State of New York pursuant to the Trust
Indenture and Agreement** (collectively, the "Trust Agreement"), dated the Date
of Deposit, among Reich & Tang Distributors L.P. (successor Sponsor to Bear
Stearns & Co. Inc.) or, depending on the particular Trust, among Reich & Tang
Distributors L.P. and Gruntal & Co., L.L.C., as Co-Sponsors (the Sponsor or
Co-Sponsors, if applicable, are referred to herein as the "Sponsor"), Kenny S&P
Evaluation Services, a business unit of J.J. Kenny Company, Inc., a subsidiary
of The McGraw-Hill Companies, as Evaluator and The Chase Manhattan Bank, as
Trustee. The name of the Sponsor for a particular Trust is contained in the
"Summary of Additional Information" in Part A.
On the Date of Deposit, the Sponsor deposited with the Trustee
long-term insured bonds, and/or delivery statements relating to contracts for
the purchase of certain such bonds (the "Bonds") and cash or an irrevocable
letter of credit issued by a major commercial bank in the amount required for
such purchases. Thereafter, the Trustee, in exchange for the Bonds so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all Units
of the Trust. The Trust consists of the Bonds described under "The Trust" in
Part A, the interest (including, where applicable, earned original issue
discount) on which, in the opinions of bond counsel to the respective issuers
given at the time of original delivery of the Bonds, is exempt from regular
federal income tax under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the
- ----------------
* This Part B relates to the outstanding series of Insured Municipal
Securities Trust, Insured Municipal Securities Discount Trust, Insured
Municipal Securities New York Navigator Insured Trust, Insured Municipal
Securities Pennsylvania Navigator Insured Trust and/or Insured Municipal
Securities New Jersey Navigator Insured Trust as reflected in Part A
attached hereto.
** References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Indenture and Agreement which is incorpo rated
herein.
112677.6
<PAGE>
Trust in the ratio of one Unit to the principal amount of Bonds in the Trust on
such date as specified in Part A of this Prospectus. To the extent that any
Units are redeemed by the Trustee, the fractional undivided interest or pro rata
share in the Trust represented by each unredeemed Unit will increase, although
the actual interest in the Trust represented by such fraction will remain
unchanged. Units will remain outstanding until redeemed upon tender to the
Trustee by 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 Ratings Services, a division of The McGraw-Hill Companies ("Standard &
Poor's") at the time originally deposited in the Trust. (See "Insurance on the
Bonds.") The "AAA" rating was assigned to the Bonds by Standard & Poor's because
each Bond was insured by a municipal bond guaranty insurance policy issued by a
company whose claims-paying ability was rated "AAA" by Standard & Poor's at that
time. In the event of a downgrading of the claims-paying ability of one of the
insurers, as of the Evaluation Date, the Bonds in the Trust which are insured by
that company would no longer be rated
-2-
112677.6
<PAGE>
"AAA" by Standard & Poor's. The Units of Trusts containing the downgraded
bonds are no longer rated "AAA."
For information regarding (i) the number of issues in the Trust, (ii)
the range of fixed maturities of the Bonds, (iii) the number of issues payable
from the income of a specific project or authority and (iv) the number of issues
constituting general obligations of a government entity, see "Information
Regarding the Trust" and "Portfolio" in Part A of this Prospectus.
When selecting Bonds for a Trust, the following factors, among others,
were considered by the Sponsor: (a) the quality of the Bonds and whether such
Bonds, whether Sponsor-Insured or Pre-Insured, were rated "AAA" by Standard &
Poor's, (b) the yield and price of the Bonds relative to other tax-exempt
securities of comparable quality and maturity, (c) income to the
Certificateholders of the Trust, (d) whether a bond was insured, or insurance
was available for the Bonds at a reasonable cost, (e) in connection with Bonds
for which bond insurance was obtained by the Sponsor, the quality of the Bonds
and whether they were rated, without regard to such bond insurance, "A" or
better by either Standard & Poor's or Moody's Investors Service, Inc.
("Moody's"), and (f) the diversification of the Trust portfolio, as to purpose
of issue and location of issuer, taking into account the availability in the
market of issues which meet the Trust's quality, rating, yield and price
criteria. Subsequent to the Date of Deposit, a Bond may cease to be rated or its
rating may be reduced below that specified above. Neither event requires an
elimination of such Bond from a Trust but may be considered in the Sponsor's
determination to direct the Trustee to dispose of the Bond. (See "Portfolio
Supervision".) For an interpretation of the bond ratings see "Description of
Bond Ratings".
Housing Bonds. Some of the aggregate principal amount of the Bonds may
-------------
consist of obligations of state and local housing authorities whose revenues are
primarily derived from mortgage loans to rental housing projects for low to
moderate income families. Since such obligations are usually not general
obligations of a particular state or municipality and are generally payable
primarily or solely from rents and other fees, adverse economic developments
including failure or inability to increase rentals, fluctuations of interest
rates and increasing construction and operating costs may reduce revenues
available to pay existing obligations. See "Description of Portfolio" in Part A
for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds. Some of the aggregate principal amount of the
----------------------
Bonds may consist of hospital revenue bonds. Ratings of hospital bonds are often
initially based on feasibility studies which contain projections of occupancy
levels, revenues and expenses. Actual experience may vary considerably from such
projections. A hospital's gross receipts and net income will be affected by
future events and conditions including, among other things, demand for hospital
services and the ability of the hospital to provide them, physicians' confidence
in hospital management capability, economic developments in the service area,
competition, actions by insurers and governmental agencies and the increased
cost and possible unavailability of malpractice insurance. Additionally, a major
portion of hospital revenue typically is derived from third-party payors and
government programs such as Medicare and Medicaid. Both private third-party
payors and government programs have undertaken cost containment measures
designed to limit payments. Furthermore, government programs are subject to
statutory and regulatory changes, retroactive rate adjustments, administrative
rulings and government funding restrictions, all of which may materially
decrease the rate of program
-3-
112677.6
<PAGE>
payments for health care facilities. There can be no assurance that payments
under governmental programs will remain at levels comparable to present levels
or will, in the future, be sufficient to cover the costs allocable to patients
participating in such programs. In addition, there can be no assurance that a
particular hospital or other health care facility will continue to meet the
requirements for participation in such programs.
The health care delivery system is undergoing considerable alteration
and consolidation. Consistent with that trend, the ownership or management of a
hospital or health care facility may change, which could result in (i) an early
redemption of bonds, (ii) alteration of the facilities financed by the Bonds or
which secure the Bonds, (iii) a change in the tax exempt status of the Bonds or
(iv) an inability to produce revenues sufficient to make timely payment of debt
service on the Bonds. Future legislation or changes in the areas noted above,
among other things, would affect all hospitals to varying degrees and,
accordingly, any adverse change in these areas may affect the ability of such
issuers to make payment of principal and interest on such bonds. See
"Description of Portfolio" in Part A for the amount of hospital revenue bonds
contained therein.
Nuclear Power Facility Bonds. Certain Bonds may have been issued in
----------------------------
connection with the financing of nuclear generating facilities. Electric
utilities which own or operate nuclear power plants are exposed to risks
inherent in the nuclear industry. These risks include exposure to new
requirements resulting from extensive federal and state regulatory oversight,
public controversy, decommissioning costs, and spent fuel and radioactive waste
disposal issues. While nuclear power construction risks are no longer of
paramount concern, the emerging issue is radioactive waste disposal. In
addition, nuclear plants typically require substantial capital additions and
modifications throughout their operating lives to meet safety, environmental,
operational and regulatory requirements and to replace and upgrade various plant
systems. The high degree of regulatory monitoring and controls imposed on
nuclear plants could cause a plant to be out of service or on limited service
for long periods. When a nuclear facility owned by an investor-owned utility or
a state or local municipality is out of service or operating on a limited
service basis, the utility operator or its owners may be liable for the recovery
of replacement power costs. Risks of substantial liability also arise from the
operation of nuclear facilities and from the use, handling, and possible
radioactive emissions associated with nuclear fuel. Insurance may not cover all
types or amounts of loss which may be experienced in connection with the
ownership and operation of a nuclear plant and severe financial consequences
could result from a significant accident or occurrence. The Nuclear Regulatory
Commission has promulgated regulations mandating the establishment of funded
reserves to assure financial capability for the eventual decommissioning of
licensed nuclear facilities. These funds are to be accrued from revenues in
amounts currently estimated to be sufficient to pay for decommissioning costs.
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
-4-
112677.6
<PAGE>
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 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
-5-
112677.6
<PAGE>
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.
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
-6-
112677.6
<PAGE>
court assistance in reorganizing their debts in the future and, therefore, what
effect, if any, the applicable federal bankruptcy law provisions will have on
the Trusts.
The Trust may also include "moral obligation" bonds. Under statutes
applicable to such bonds, if any issuer is unable to meet its obligations, the
repayment of such bonds becomes a moral commitment but not a legal obligation of
the state or municipality in question. See "Description of Portfolio" in Part A
of this Prospectus for the amount of moral obligation bonds contained therein.
Certain of the Bonds in the Trust are subject to redemption prior to
their stated maturity dates pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund appropriated specifically toward the retirement
of a debt. A callable bond is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is a method by which
a bond is redeemed at or before maturity from the proceeds of a new issue of
bonds. In general, call provisions are more likely to be exercised when the
offering side evaluation of a bond is at a premium over par than when it is at a
discount from par. A listing of the sinking fund and call provisions, if any,
with respect to each of the Bonds is contained under "Portfolio".
Certificateholders will realize a gain or loss on the early redemption of such
Bonds, depending upon whether the price of such Bonds is at a discount from or
at a premium over par at the time Certificateholders purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds. Because certain of the Bonds
from time to time may be redeemed or will mature in accordance with their terms
or may be sold under certain circumstances, no assurance can be given that a
Trust will retain its present size and composition for any length of time. The
proceeds from the sale of a Bond or the exercise of any redemption or call
provision will be distributed to Certificateholders on the next distribution
date, except to the extent such proceeds are applied to meet redemptions of
Units. (See "Trustee Redemption".)
Puerto Rico Bonds. Certain of the Bonds in the Trust may be general
-----------------
obligations and/or revenue bonds of issuers located in Puerto Rico which will be
affected by general economic conditions in Puerto Rico. The economy of Puerto
Rico is closely integrated with that of the mainland United States. During
fiscal year 1995, approximately 89% of Puerto Rico's exports were to the United
States mainland, which was also the source of 65% of Puerto Rico's imports. In
fiscal 1995, Puerto Rico experienced a $4.6 billion positive adjusted trade
balance. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. The manufacturing sector has experienced a basic change over
the years as a result of increased emphasis on higher wage, high technology
industries such as pharmaceuticals, electronics, computers, microprocessors,
professional and scientific instruments, and certain high technology machinery
and equipment. The service sector, including finance, insurance and real estate,
wholesale and retail trade, and hotel and related services, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to and paralleling the expansion of the manufacturing sector. Since fiscal 1985,
personal income, both aggregate and per capita, has increased consistently in
each fiscal year. In fiscal 1995, aggregate personal income was $27.0 billion
($22.5 billion in 1987 prices) and personal income per capita was $7,296 ($6,074
in 1987
-7-
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<PAGE>
prices). Personal income includes transfer payments to individuals in Puerto
Rico under various social programs. Total federal payments to Puerto Rico, which
include many types in addition to federal transfer payments, are lower on a per
capita basis in Puerto Rico than in any state. Transfer payments to individuals
in fiscal 1995 were $5.9 billion, of which $4.0 billion, or 67.6%, represent
entitlement to individuals who had previously performed services or made
contributions under programs such as Social Security, Veterans Benefits and
Medicare. The number of persons employed in Puerto Rico during fiscal 1996
averaged 1,092,300, an increase of 3.9% over fiscal 1995. The unemployment rate
in Puerto Rico for fiscal 1996 remained the same. The Puerto Rico Planning
Board's most recent gross product forecast for fiscal 1997, made in February
1996, showed an increase of 2.7%. The Planning Board's Economic Activity Index,
a composite index for thirteen economic indicators, increased 1.6% for fiscal
1996 compared to fiscal 1995, and 2.0% for fiscal 1995, compared to fiscal 1994.
During the first three months of fiscal 1997 the Index decreased 0.9% compared
to the same period of fiscal 1996, which period showed an increase of 1.7% over
the same period of fiscal 1995. Growth in the Puerto Rico economy in fiscal 1997
depends on several factors, including the state of the United States economy and
the relative stability in the price of oil imports, the exchange value of the
U.S. dollar, the level of federal transfers and the cost of borrowing.
Discount And Zero Coupon Bonds. Some of the Bonds in a Trust may be
------------------------------
original issue discount bonds. The original issue discount, which is the
difference between the initial purchase price of the Bonds and the face value,
is deemed to accrue on a daily basis and the accrued portion will be treated as
tax-exempt interest income for regular federal income tax purposes. Upon sale or
redemption, any gain realized that is in excess of the earned portion of
original issue discount will be taxable as capital gain. (See "Tax Status".) The
current value of an original issue discount bond reflects the present value of
its face amount at maturity. The market value tends to increase more slowly in
early years and in greater increments as the Bonds approach maturity. Of these
original issue discount bonds, some of the aggregate principal amount of the
Bonds in the Trust may be Zero Coupon Bonds. (See "Description of Portfolio" in
Part A.) Zero Coupon Bonds do not provide for the payment of any current
interest and provide for payment at maturity at face value unless sooner sold or
redeemed. The market value of Zero Coupon Bonds is subject to greater
fluctuations than coupon bonds in response to changes in interest rates. Zero
Coupon Bonds generally are subject to redemption at compound accredit value
based on par value at maturity. Because the issuer is not obligated to make
current interest payments, Zero Coupon Bonds may be less likely to be redeemed
than coupon bonds issued at a similar interest rate, although certain zero
coupon housing bonds may be subject to mandatory call provisions.
Some of the Bonds in the Trust may have been purchased at a "market"
discount from par value at maturity. This is because the coupon interest rates
on the discount bonds at the time they were purchased and deposited in each
Trust were lower than the current market interest rates for newly issued bonds
of comparable rating and type. At the time of issuance the discount bonds were
for the most part issued at then current coupon interest rates. The current
yields (coupon interest income as a percentage of market price) of discount
bonds will be lower than the current yields of comparably rated bonds of similar
type newly issued at current interest rates because discount bonds tend to
increase in market value as they approach maturity and the full principal amount
becomes payable. Gain on the disposition of a Bond purchased at a market
discount generally will be treated as ordinary income, rather than capital gain,
to the extent of accrued market discount. A
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<PAGE>
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 Deposit the rating of the
claims-paying ability of the insurer of an underlying Pre-Insured Bond may be
down-graded.
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<PAGE>
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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<PAGE>
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 Assurance Corporation
("AMBAC"), Bond Investors Guaranty ("BIG"), Capital Guaranty Insurance Company
("Capital Guaranty"), Connie Lee Insurance Company ("Connie Lee"), Financial
Guaranty Insurance Company ("Financial Guaranty"), Financial Security Assurance,
Inc. ("Financial Security"), Firemen's Insurance Co. ("Firemen's"), Industrial
Indemnity Company ("IIC") (which operates the Health Industry Board Insurance
Program ("HIBI Program"), Municipal Bond Insurance Association ("MBIA"), MBIA
Corp. or United States Fidelity and Guaranty Company ("USF&G Company")
(collectively the "Insurance Companies"). The cost of this insurance is borne by
the respective issuers, underwriters or prior owners of the Pre-Insured Bonds.
The percentage of each Portfolio insured by each insurance company, if any, is
set forth under "Insurance" in Part A of this Prospectus.
AMBAC is a Wisconsin-domiciled stock insurance corporation, regulated
by the Office of the Commissioner of Insurance of the State of Wisconsin and
licensed to do business in 50 states, the District of Columbia, the Territory of
Guam and the Commonwealth of Puerto Rico, with admitted assets (unaudited) of
approximately $2,736,000,000, and statutory capital (unaudited) of approximately
$1,548,000,000 as of June 30, 1997. Statutory capital consists of AMBAC's
policyholders' surplus and statutory contingency reserve. Standard & Poor's,
Moody's and Fitch Investors Service, L.P. ("Fitch") have each assigned a
triple-A claims paying ability rating to AMBAC.
AMBAC has obtained a ruling from the Internal Revenue Service to the
effect that the insuring of an obligation by AMBAC will not affect the treatment
for federal income tax purposes of interest on such obligation and that
insurance proceeds representing maturing interest paid by AMBAC under policy
provisions substantially identical to those contained in its municipal bond
insurance policy shall be treated for federal income tax purposes in the same
manner as if such payments were made by issuer of the Bonds.
Connie Lee Insurance Company, incorporated in Wisconsin, is a
wholly-owned subsidiary of Construction Loan Insurance Corporation (formerly
College Construction Loan Insurance Association), a stockholder-owned District
of Columbia insurance holding company whose creation was authorized by the 1986
amendments to the Higher Education Act to provide financial guaranties for
educational facilities. The Omnibus Consolidated Appropriations Act, 1997 (the
"Privatization Act"), enacted by Congress and signed by the President on
September 30, 1996, has repealed substantially all of the provisions of the
Higher Education Act which previously dictated the structure and operational
authorities of Connie Lee. Also in accordance with the Privatization Act,
Construction Loan Insurance Corporation repurchased on February 27, 1997 all of
the 1,914,800 shares (14% of total ownership) of the stock of Construction Loan
Insurance Corporation previously owned by the United States Department of
Education. Construction Loan Insurance Corporation is currently owned by a group
of stockholders that includes Student Loan Marketing Association ("Sallie Mae")
and various institutional investors. Construction Loan Insurance Corporation has
engaged the firm of Wasserstein Perella & Co., Inc. as its financial advisor to
assist it in exploring a range of strategic options, including a potential sale
that would include Connie Lee. It cannot be predicted whether a sale or similar
transaction, if pursued, will be accomplished. Any sale of Connie Lee would be
subject to the approval of the Commission of Insurance of the State of
Wisconsin. NEITHER CONNIE LEE NOR CONSTRUCTION LOAN INSURANCE CORPORATION IS AN
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES GOVERNMENT, AND THE UNITED STATES
GOVERNMENT IS NOT AN INVESTOR
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<PAGE>
IN CONNIE LEE OR CONSTRUCTION LOAN INSURANCE CORPORATION. THE OBLIGATIONS OF
CONNIE LEE ARE NOT OBLIGATIONS OF THE UNITED STATES GOVERNMENT OR GUARANTEED IN
ANY WAY BY THE FULL FAITH AND CREDIT OF THE UNITED STATES GOVERNMENT.
As of June 30, 1997, the total policyholders' surplus of Connie Lee
was $119,184,800 (unaudited) and total admitted assets were $237,343,071
(unaudited), as reported to the Commissioner of Insurance of the State of
Wisconsin.
As of the Evaluation Date, the claims-paying ability of Connie Lee has
been rated "AAA" by Standard & Poor's.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation
("FGIC"), a Delaware holding company. FGIC is a wholly-owned subsidiary of
General Electric Capital Corporation ("GECC"). Neither FGIC nor GECC is
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of June 30, 1997,
the total capital and surplus of Financial Guaranty was approximately
$1,164,694,536. In addition, Financial Guaranty is currently licensed to write
insurance in 50 states and the District of Columbia.
As of the Evaluation Date, the claims-paying ability of Financial
Guaranty has been rated "AAA" by Standard & Poor's.
Firemen's, which was incorporated in New Jersey in 1855, is a
wholly-owned subsidiary of The Continental Corporation ("CIC") and a member of
CNA, a group of life, property and casualty insurance companies. On May 10,
1995, CNA Financial Corporation purchased the outstanding shares of CIC.
Firemen's, among other policy types, provides unconditional and non-cancelable
insurance on industrial development revenue bonds. As of June 30, 1996,
Firemen's statutory surplus (audited) was $405,434,074.
As of the Evaluation Date, the claims-paying ability of Firemen's has
been rated "A-" by Standard & Poor's (see "Ratings" under "Insurance on the
Bonds" in this Part B).
Financial Security is a monoline insurance company incorporated in
1984 under the laws of the State of New York and is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of Columbia
and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
US WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd. No
shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or any of its domestic operating insurance company subsidiaries are reinsured
among such companies on an agreed upon percentage substantially proportional to
their respective capital, surplus and reserves, subject to applicable statutory
risk limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty
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<PAGE>
insurance policies with other reinsurers under various quota-share treaties and
on a transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy. As of June 30, 1997,
total shareholders equity of Financial Security and its wholly-owned
subsidiaries was (unaudited) $861,209,000 and total unearned premium reserves
was (unaudited) $401,251,000.
As of the Evaluation Date, Financial Security's claims-paying ability
has been rated "AAA" by Standard & Poor's, Fitch Investors Service, L.P., Nippon
Investors Service Inc. and Standard & Poor's (Australia) Pty. Ltd. and "Aaa" by
Moody's Investors Service.
On the original date of deposit, some of the Bonds in the Trusts may
have been pre-insured pursuant to the HIBI Program operated by IIC. IIC is a
wholly-owned subsidiary of Industrial Indemnity Holdings, Inc. In August, 1997,
Industrial Indemnity Holdings, Inc. was acquired by a subsidiary of Fremont
General Corporation. ICC is a California domestic stock property and casualty
insurance company that specializes in workers' compensation insurance. The
company's address is 500 N. Brand Blvd., Glendale, California 91203-3392. For
the six months ending June 30, 1997, the policy holders' surplus of ICC was
$249,289,548.
As of September 5, 1997, the claims-paying ability of IIC has been
rated "A" by Standard & Poor's. As a result of this rating, the ratings of all
Bonds in the Trusts insured by IIC, except pre-refunded bonds, are rated (see
"Ratings" under "Insurance on the Bonds" in this Part B).
MBIA is an association of five insurance companies which joined
together to insure severally (and not jointly) new issues of municipal bonds.
Each insurance company comprising Municipal Bond Insurance Association ("MBIA",
also known as the "Association") will be severally and not jointly obligated
under the MBIA policy in the following respective percentages: The Aetna
Casualty and Surety Company, 33%; Fireman's Fund Insurance Company, 30%; The
Travelers Indemnity Company, 15%; Aetna Insurance Company*, 12%; and The
Continental Insurance Company, 10%. As a several obligor, each such insurance
company will be obligated only to the extent of its percentage of any claim
under the MBIA policy and will not be obligated to pay any unpaid obligation of
any other member of MBIA. Each insurance company's participation is backed by
all of its assets. However, each insurance company is a multiline insurer
involved in several lines of insurance other than municipal bond insurance, and
the assets of each insurance company also secure all of its other insurance
policy and surety bond obligations.
Some of the members of the Association are among the shareholders of
MBIA, Inc. MBIA, Inc. is the parent of MBIA Insurance Corporation (formerly
known as Municipal Bond Investors Assurance Corporation) ("MBIA Corp.") and is
the principal operating subsidiary of MBIA Inc., a New York Stock Exchange
listed company. MBIA Corp. commenced municipal bond insurance operations on
January 5, 1987. MBIA Corp. is a separate and distinct entity from the
Association. MBIA Corp. has no liability to the bondholders for the obligations
of the Association.
- ------------------
* Now known as Cigna Property and Casualty Company.
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<PAGE>
The following table sets forth certain financial information with
respect to the five insurance companies comprising MBIA. The statistics, which
have been furnished by MBIA, are as reported by the insurance companies to the
New York State Insurance Department and are determined in accordance with
statutory accounting principals. No representation is made herein as to the
accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof. In addition,
these numbers are subject to revision by the New York State Insurance Department
which, if revised, could either increase or decrease the amounts.
MUNICIPAL BOND INSURANCE ASSOCIATION ("MBIA")
FIVE MEMBER COMPANIES ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF DECEMBER 31, 1996 (UNAUDITED)
(000's omitted)
<TABLE>
<CAPTION>
New York New York New York
Statutory Statutory Policyholder's
Assets Liabilities Surplus
--------- ----------- --------------
<S> <C> <C> <C>
The Aetna Casualty & Surety Company $11,550,399 $ 9,143,186 $2,407,213
Fireman's Fund Insurance Company 9,441,679 7,241,612 2,200,067
The Travelers Indemnity Company 10,737,808 8,538,425 2,199,383
Cigna Property and Casualty Company 2,533,882 1,809,370 724,512
(Formerly Aetna Insurance Company)
The Continental Insurance Company 2,663,233 1,994,375 668,858
----------- ----------- ----------
TOTAL $36,927,001 $28,726,968 $8,200,033
</TABLE>
MBIA Corp. is domiciled in the State of New York and licensed to do
business in and subject to regulation under the laws of all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. MBIA Corp. has two European branches, one in the Republic of
France and the other in the Kingdom of Spain.
As of December 31, 1997, MBIA Corp. had admitted assets of $4.4
billion (audited), total liabilities of $3.0 billion (audited), and total
capital and surplus of $1.4 billion (audited) prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1997, MBIA Corp. had admitted assets of $4.5
billion (unaudited), total liabilities of $3.0 billion (unaudited), and total
capital and surplus of $1.5 billion (unaudited).
As of the Evaluation Date, the claims-paying ability of MBIA Corp. has
been rated "AAA" by Standard & Poor's and Fitch, and Aaa by Moody's.
USF&G Company is the principal subsidiary of USF&G Corporation, a
holding company engaged primarily in the insurance business. USF&G Company,
founded in 1896, is the twenty-third largest property/casualty insurer in the
United States, based on Insurance Services Office's Top 100 Insurer net premiums
written for the year ended December 31, 1996. USF&G Company markets commercial
and personal insurance products, concentrating on targeted market segments,
through a distribution network of approximately 3,400 independent agents. USF&G
Corporation's life insurance subsidiary, F&G Life, markets life
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<PAGE>
insurance and annuity products through a network of wholesalers, brokers and
specialty marketing organizations. USF&G Company accounted for $3.1 billion (or
88%) of USF&G Corporation's approximately $3.5 billion total premiums earned for
the year ended December 31, 1996. As of the Evaluation Date, the claims-paying
ability of USF&G Company has been rated A by Standard & Poor's (see "Ratings"
under "Insurance on the Bonds" in this Part B).
Insured Municipal Securities Trust
Sponsor-Insured Bonds. For those Bonds which are not covered by an
---------------------
insurance policy obtained by the issuers of such Bonds, the Sponsor has obtained
bond insurance from either BIG, Financial Guaranty, MBIA or MBIA Corp. in an
effort to protect Certificateholders against nonpayment of principal and
interest in respect of such Bonds (the "Sponsor-Insured Bonds"). The bond
insurance on the Sponsor-Insured Bonds covers the Sponsor-Insured Bonds
deposited in a Trust at the time that they are physically delivered to the
Trustee (in the case of bearer bonds) or registered in the name of the Trustee
or its nominee or delivered along with an assignment (in the case of registered
bonds) or registered in the name of the Trustee or its nominee (in the case of
bonds held in book-entry form). Accordingly, although contracts to purchase
Sponsor-Insured Bonds are not covered by the bond insurance obtained by the
Sponsor, such Bonds will be insured when they are deposited in the Trust. When
selecting Bonds for a Trust prior to obtaining insurance thereon, the Sponsor
considers the factors listed under "Portfolio", among others. The insurers of
the Sponsor-Insured Bonds apply their own standards in determining whether to
insure the Sponsor-Insured Bonds. To the extent that the standards of such
insurers are more restrictive than those of the Sponsor, the Sponsor's
investment criteria have been limited to the more restrictive standards.
Pre-Insured Bonds. The Bonds which are insured under policies obtained
-----------------
by the Bond issuers are insured by AMBAC, BIG, Financial Guaranty, Firemen's,
MBIA, or MBIA Corp. (collectively, the "Insurance Companies") on the date the
Bonds were originally deposited in the Trust. The cost of this insurance is
borne by the respective issuers of the Pre-Insured Bonds. The percentage of the
Portfolio insured by each Insurance Company, if any, is set forth under
"Insurance" in Part A.
Ratings. As of the Date of Deposit for each of the respective Trusts,
-------
Standard & Poor's had rated the claims-paying ability of each of the above
insurance companies "AAA" and had rated each of the Bonds in the Portfolio "AAA"
because the insurance companies had insured the Bonds. The assignment of such
"AAA" ratings was due to Standard & Poor's assessment of the creditworthiness of
the insurance companies and their ability to pay claims on their policies of
insurance. Subsequently, the rating of the claims-paying ability of the insurer
of an underlying Bond may cease to be rated or may be downgraded which may
result in a downgrading of the rating of the Units in the Trust. For a
discussion of the rating of the claims-paying ability of each of the Bond
insurers see "Insurance On The Bonds". For a list of Bond Ratings as of the
Evaluation Date see the "Portfolio" in Part A of this Prospectus. For a
discussion of the rating assigned to the Units of the Trusts, see "the Trust" in
Part A of this Prospectus. The percentage of each Trust portfolio insured by
each Insurance Company, if any, is set forth under "Insurance" in Part A.
The foregoing information relating to the above insurance companies is
from published documents and other public sources and/or information provided by
such insurance companies. No representation is made
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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
Special Factors Affecting New York. The information set forth below is
----------------------------------
derived from the official statements and/or preliminary drafts of official
statements prepared in connection with the issuance of New York State and New
York City municipal bonds. The Sponsors have not independently verified this
information.
Economic Trends. Over the long term, the State of New York (the
"State") and the City of New York (the "City") face serious potential economic
problems. The City accounts for approximately 41% of the State's population and
personal income, and the City's financial health affects the State in numerous
ways. The State historically has been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation as
a whole, gradually eroding its relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration of the more
affluent to the suburbs and an influx of generally less affluent residents.
Regionally, the older Northeast cities have suffered because of the relative
success that the South and the West have had in attracting people and business.
The City has also had to face greater competition as other major cities have
developed financial and business capabilities which make them less dependent on
the specialized services traditionally available almost exclusively in the City.
The State has for many years had a very high State and local tax
burden relative to other states. The State and its localities have used these
taxes to develop and maintain their transportation networks, public schools and
colleges, public health systems, other social services and recreational
facilities. Despite these benefits, the burden of State and local taxation, in
combination with the many other causes of regional economic dislocation, has
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced budgets,
reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State and its localities.
New York City. The City, with a population of approximately 7.3
million, is an international center of business and culture.
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Its non-manufacturing economy is broadly based, with the banking and
securities, life insurance, communications, publishing, fashion design,
retailing and construction industries accounting for a significant portion of
the City's total employment earnings. Additionally, the City is the nation's
leading tourist destination. The City's manufacturing activity is conducted
primarily in apparel and printing.
The national economic downturn which began in July 1990 adversely
affected the local economy, which had been declining since late 1989. As a
result, the City experienced job losses in 1990 and 1991 and real Gross City
Product ("GCP") fell in those two years. Beginning in calendar year 1992, the
improvement in the national economy helped stabilize conditions in the City.
Employment losses moderated toward year-end and real GCP increased, boosted by
strong wage gains. After noticeable improvements in the City's economy during
calendar year 1994, economic growth slowed in calendar year 1995, and thereafter
improved during calendar year 1996, reflecting improved securities industry
earnings and employment in other sectors. The City's current four-year financial
plan assumes that moderate economic growth will continue through calendar year
2000, with moderating job growth and wage increases.
For each of the 1981 through 1996 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP"). The City was required to close substantial
budget gaps in recent years in order to maintain balanced operating results.
There can be no assurance that the City will continue to maintain a balanced
budget as required by State law without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
Pursuant to the laws of the State, the City prepares an annual
four-year financial plan, which is reviewed and revised on a quarterly basis and
which includes the City's capital, revenue and expense projections and outlines
proposed gap-closing programs for years with projected budget gaps. The City's
current four-year financial plan projects substantial budget gaps for each of
the 1998 through 2000 fiscal years. The City is required to submit its financial
plans to review bodies, including the New York State Financial Control Board
("Control Board").
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected or that State budgets in future fiscal years will be adopted
by the April 1 statutory deadline and that such reductions or delays will not
have adverse effects on the City's cash flow or expenditures. In addition, the
Federal Budget negotiation process could result in a reduction in or a delay in
the receipt of Federal grants in the City's 1997 fiscal year which could have
additional adverse effects on the City's cash flow or revenues.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1997 through 2000
fiscal years (the "1997-2000 Financial Plan" or "Financial Plan"). The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the condition of the
regional and local economies, the
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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 ability to implement proposed reductions in City personnel and other
cost reduction initiatives, which may require in certain cases the cooperation
of the City's municipal unions, the ability of the New York City Health and
Hospitals Corporation ("HHC") and the Board of Education ("BOE") to take actions
to offset reduced revenues, the ability to complete revenue generating
transactions and provision of State and Federal aid and mandate relief and the
impact on City revenues of proposals for Federal and State welfare reform and
any future legislation affecting Medicare or other entitlements.
Implementation of the Financial Plan is also dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 1998 through 2000 contemplates the issuance of $4.2 billion of
general obligation bonds and $4.2 billion of bonds to be issued by the proposed
New York City Infrastructure Finance Authority ("Finance Authority") to finance
City capital projects. The Finance Authority was created as part of the City's
effort to assist in keeping the City's indebtedness within the forecast level of
the constitutional restrictions on the amount of debt the City is authorized to
incur. 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, New York Municipal Water Finance Authority
("Water Authority") bonds and Finance Authority bonds will be subject to
prevailing market conditions, and no assurance can be given that such sales will
be completed. If the City were unable to sell its general obligation bonds and
notes or the Water Authority or the Finance Authority were unable to sell its
bonds, the City would be prevented from meeting its planned capital and
operating expenditures. Future developments concerning the City and public
discussion of such developments, as well as prevailing market conditions, may
affect the market for outstanding City general obligation bonds and notes.
The City has announced that it expects to sell approximately $200 to
$300 million of tax-exempt fixed rate bonds for capital purposes, on the basis
of competitive bids, in May or June 1997. In addition, depending on market
conditions, the City may sell approximately $875 million of tax-exempt fixed
rate bonds before the end of June 1997, most of which are expected to be used in
connection with a current refunding of certain outstanding City bonds.
The City's operating results for the 1996 fiscal year were balanced in
accordance with GAAP, after taking into account a discretionary transfer of $224
million, the sixteenth consecutive year of GAAP balanced results. On January 30,
1997, the City submitted to the Control Board the Financial Plan for the 1997
through 2000 fiscal years, which relates to the City, the BOE and the City
University of New York ("CUNY"). The Financial Plan is a modification to the
financial plan submitted to the Control Board on June 21, 1996 (the "June
Financial Plan").
The June Financial Plan identified actions to close a previously
projected gap of approximately $2.6 billion for the 1997 fiscal year. The
proposed actions in the June Financial Plan for the 1997 fiscal year included
(i) agency actions totaling $1.2 billion; (ii) a revised tax reduction program
which would increase projected tax revenues by $369 million due to the four year
extension of the 12.5% personal income tax surcharge and other actions; (iii)
savings resulting from cost containment in entitlement programs to reduce City
expenditures and additional proposed State aid of $75 million; (iv) the assumed
receipt of revenues relating to rent payments for the City's
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airports, which are currently the subject of a dispute with the Port Authority
of New York and New Jersey (the "Port Authority"); (v) the sale of the City's
television station for $207 million; and (vi) pension costs savings totaling
$134 million resulting from a proposed increase in the earnings assumption for
pension assets from 8.5% to 8.75%. In March 1997, the 12.5% personal income tax
surcharge was extended to December 31, 1998.
The 1997-2000 Financial Plan published on January 30, 1997 projects
revenues and expenditures for 1997 and 1998 fiscal years balanced in accordance
with GAAP, and projects gaps of $1.9 billion and $2.7 billion for the 1999 and
2000 fiscal years, respectively. Changes in forecast revenues and expenditures
since the June Financial Plan include (i) an increase in projected tax revenues
of $571 million, $207 million, $73 million and $56 million in fiscal years 1997
through 2000, respectively; (ii) a delay in the assumed receipt of $304 million
relating to projected rent payments for the City airports from the 1997 fiscal
year to the 1998 and 1999 fiscal years, and a $34 million reduction in assumed
State and Federal aid for the 1997 Fiscal year; (iii) an approximately $200
million to $300 million increase in projected overtime and other expenditures in
each of the fiscal years 1997 through 2000; (iv) a $250 million increase in
expenditures for BOE in the 1997 and 1998 fiscal years for school text books and
other initiatives, to be funded by savings from the refunding of outstanding
indebtedness of the Municipal Assistance Corporation for the City of New York;
(v) a reduction in projected pension costs of $34 million, $50 million, $49
million and $47 million in fiscal years 1997 through 2000, respectively; and
(vi) debt service savings of $44 million in the 1998 fiscal year resulting from
the refunding of outstanding City bonds consummated in the 1997 fiscal year.
In addition, the Financial Plan sets forth gap-closing actions to
eliminate a previously projected gap of $1.4 billion for the 1998 fiscal year,
and to reduce projected gaps for the 1999 and 2000 fiscal years. The gap-closing
actions for the 1998 through 2000 fiscal years include (i) additional agency
actions totaling $558 million, $488 million and $600 million in fiscal years
1998 through 2000; (ii) the prepayment in the 1997 fiscal year of $391 million
of debt service due in the 1998 fiscal year for $125 million; (iii) the proposed
sale of various assets including the U.N. Plaza Hotel in the 1998 fiscal year;
(iv) additional State aid of $210 million in the 1998 fiscal year and $85
million in each of the 1999 and 2000 fiscal years, including a proposal that the
State accelerate a $142 million revenue sharing payment to the City from March
1999; and (v) entitlement savings of $415 million in the 1998 fiscal year and
$364 million in each of the 1999 and 2000 fiscal years, which would result from
reductions in Medicaid spending for health care providers, reimbursement limits
and the State making available to the City $77 million of additional Federal
block grant aid, as proposed in the Governor's 1997-1998 Executive Budget on
January 14, 1997. The Financial Plan does not reflect the subsequent amendment
of the 1997-1998 Executive Budget by the Governor to restore part of the
proposed reductions in Medicaid spending for health care providers, which might
reduce the projected entitlement savings for the City, depending upon the method
by which such restoration is implemented. The gap-closing actions are partially
offset by a proposed tax reduction program totaling $250 million, $463 million
and $518 million in the 1998 through 2000 fiscal years, respectively, including
the proposed elimination of the 4% City sales tax on clothing items under $500
as of December 1, 1997, which is subject to State legislative approval.
The Financial Plan assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1997 and is projected to provide
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revenue of $169 million, $504 million and $534 million in the 1998 through 2000
fiscal years, respectively, and of the extension of the 12.5% personal income
tax surcharge, which is scheduled to expire on December 31, 1998 and is
projected to provide revenue of $190 million and $528 million in the 1999 and
2000 fiscal years, respectively; (ii) collection of the projected rent payments
for the City's airports, totaling $270 million and $180 million in the 1998 and
1999 fiscal years, respectively, which may depend on the successful completion
of negotiations with the Port Authority or the enforcement of the City's rights
under the existing leases through pending legal actions; (iii) the ability of
HHC and BOE to identify actions to offset substantial City and State revenue
reductions and the receipt by BOE of additional State aid; and (iv) State
approval of the cost containment initiatives and State aid proposed by the City
as gap-closing actions for the 1998 fiscal year, and $115 million in additional
State aid which is assumed in the Financial Plan but not provided for in the
Governor's 1997-1998 Executive Budget. The Financial Plan does not reflect any
increased costs which the City might incur as a result of welfare legislation
recently enacted by Congress or legislation proposed by the Governor, which
would, if enacted, implement such Federal welfare legislation, but does assume
the entitlement savings and additional Federal aid for localities provided in
the Governor's 1997-1998 Executive Budget. Moreover, certain proposed
entitlement cost containment and other initiatives have been previously
considered and rejected by the State Legislature. The nature and extent of the
impact on the City of the State budget, when adopted, is uncertain, and no
assurance can be given that the State actions included in the State adopted
budget may not have a significant adverse impact on the City's budget and its
Financial Plan. It can be expected that the proposals contained in the Financial
Plan to close the previously projected budget gap for the 1998 fiscal year will
engender substantial public debate which will continue through the time the
budget is scheduled to be adopted in June 1997. Accordingly, the Financial Plan
may be changed significantly by the time the budget for the 1998 fiscal year is
adopted. In addition, the economic and financial condition of the City may be
affected by various financial, social, economic and political factors which
could have a material effect on the City.
The projections for the 1997 through 2000 fiscal years reflect the
costs of the settlements with the United Federation of Teachers ("UFT") and a
coalition of unions headed by District Council 37 of the American Federation of
State, County and Municipal Employees, which together represent approximately
two-thirds of the City's workforce, and assume that the City will reach
agreement with its remaining municipal unions under terms which are generally
consistent with such settlements. The settlement provides for a wage freeze in
the first two years, followed by a cumulative effective wage increase of 11% by
the end of the five year period covered by the proposed agreements, ending in
fiscal years 2000 and 2001. Additional benefit increases would raise the total
cumulative effective increase to 13% above present costs. Costs associated with
similar settlements for all City-funded employees would total $49 million, $459
million and $1.2 billion in the 1997, 1998 and 1999 fiscal years, respectively,
and exceed $2 billion in each fiscal year after the 1999 fiscal year. There can
be no assurance that the City will reach an agreement with the unions that have
not yet reached a settlement with the City on the terms contained in the
Financial Plan.
In the event of a collective bargaining impasse, the terms of wage
settlements could be determined through statutory impasse procedures, which can
impose a binding settlement except in the case of collective bargaining with the
UFT, which may be subject to non-binding arbitration. On January 23, 1996, the
City requested the Office of Collective Bargaining to declare an
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impasse against the Patrolmen's Benevolent Association ("PBA") and the Uniformed
Firefighters Association ("UFA"). However, on April 7, 1997, the City reached a
tentative settlement with the UFA covering a 65-month period from January 1,
1995 to May 31, 2000. At the request of both the City and the PBA, the City's
Office of Collective Bargaining declared an impasse between the City and the PBA
on January 30, 1997. However, while the parties prepare for the impasse
proceeding, negotiations are continuing, which may eliminate the need for such a
proceeding.
On July 10, 1995, Standard & Poor's revised downward its rating on
City general obligation bonds from A- to BBB+ and removed City bonds from
CreditWatch. Standard & Poor's stated that "structural budgetary balance remains
elusive because of persistent softness in the City's economy, highlighted by
weak job growth and a growing dependence on the historically volatile financial
services sector". Other factors identified by Standard & Poor's in lowering its
rating on City bonds included a trend of using one-time measures, including debt
refinancings, to close projected budget gaps, dependence on unratified labor
savings to help balance the Financial Plan, optimistic projections of additional
federal and State aid or mandate relief, a history of cash flow difficulties
caused by State budget delays and continued high debt levels.
On March 1, 1996, Moody's stated that the rating for City general
obligation bonds remains under review pending the outcome of the adoption of the
City's budget for the 1997 fiscal year, and, in light of the status of the
debate on public assistance and Medicaid reform; the enactment of a State
budget, upon which major assumptions regarding State aid are dependent, which
may be extensively delayed; and the seasoning of the City's economy with regard
to its strength and direction in the face of a potential national economic
slowdown. Since July 15, 1993, Fitch Investors Service, L.P. ("Fitch") has rated
City bonds A-. On February 28, 1996, Fitch placed the City's general obligation
bonds on FitchAlert with negative implications. On November 5, 1996, Fitch
removed the City's general obligation bonds from FitchAlert, although Fitch
stated that the outlook remains negative.
New York State and its Authorities. The State's current fiscal year
commenced on April 1, 1996, and ends on March 31, 1997, and is referred to
herein as the State's 1996-97 fiscal year. The State's budget for the 1996-97
fiscal year was enacted by the Legislature on July 13, 1996, more than three
months after the start of the fiscal year. The State Financial Plan for the
1996-97 fiscal year was formulated on July 25, 1996 and is based on the State's
budget as enacted by the Legislature and signed into law by the Governor, as
well as actual results for the first quarter of the current fiscal year. The
State's prior fiscal year commenced on April 1, 1995, and ended on March 31,
1996, and is referred to herein as the State's 1995-96 fiscal year.
The State closed projected budget gaps of $5.0 billion and $3.9
billion for its 1995-96 and 1996-97 fiscal years, respectively. The 1997-98 gap
was projected at $1.44 billion, based on the Governor's proposed budget of
December 1995. As a result of changes made in the enacted budget, that gap is
now expected to be larger. However, the gap is not expected to be as large as
those faced in the prior two fiscal years. The Governor has indicated that he
will propose to close any potential imbalance primarily through General Fund
expenditure reductions and without increases in taxes or deferrals of scheduled
tax reductions.
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The State issued its first update to the cash-basis 1996-97 State
Financial Plan (the "Mid-Year Update") on October 25, 1996. The Mid-Year Update
reflects a balanced 1996-97 State Financial Plan, with a reserve for
contingencies in the General Fund of $300 million. This reserve will be utilized
to help offset a variety of potential risks and other unexpected contingencies
that the State may face during the balance of the 1996-97 fiscal year.
The State Financial Plan is based on a June 1996 projection by DOB of
national and State economic activity. The national economy has resumed a more
robust rate of growth after a "soft landing" in 1995, with over 11 million jobs
added nationally since early 1992. The State economy has continued to expand,
but growth remains somewhat slower than in the nation. Although the State has
added approximately 240,000 jobs since late 1992, employment growth in the State
has been hindered during recent years by significant cutbacks in the computer
and instrument manufacturing, utility, defense, and banking industries.
Government downsizing has also moderated these job gains.
In its Mid-Year Update the State revised its forecast of national and
State economic activity through the end of calendar year 1997 to reflect the
stronger-than-expected growth in the first half of 1996. The national economic
forecast has been changed slightly from the initial forecast on which the
original 1996-97 State Financial Plan was based. The revised forecast projects
real Gross Domestic Product growth in the nation of 2.5% for 1996 and 2.4% in
1997. The inflation rate is expected to be 3.0% in 1996 and 2.9% in 1997. The
annual rate of job growth is expected to slow gradually to about 1.8% in 1997,
down from 2.2% in 1996. Growth in personal income and wages is expected to slow
accordingly.
The State economic forecast has been changed slightly from the one
formulated with the July 1996-97 State Financial Plan. Moderate growth is
projected to continue through the second half of 1996, with employment, wages
and incomes continuing their modest rise. Personal income is projected to
increase by 5.2% in 1996 and 4.7% in 1997, reflecting robust projected wage
growth fueled in part by financial sector bonus payments. Overall employment
growth will continue as a modest rate, reflecting the slowdown in the national
economy, continued spending restraint in government, and restructuring in the
health care and financial sectors.
The forecast for continued moderate growth, and any resultant impact
on the State's 1996-97 Financial Plan, contains some uncertainties.
Stronger-than-expected gains in employment could lead to a significant
improvement in consumption spending. Investments could also remain robust.
Conversely, the prospect of a continuing deadlock on federal budget deficit
reduction or fears of excessively rapid economic growth could create upward
pressures on interest rates. In addition, the State economic forecast could
over- or underestimate the level of future bonus payments or inflation growth,
resulting in forecasted average wage growth that could differ significantly from
actual growth. Similarly, the State forecast could fail to correctly account for
expected declines in government and banking employment and the direction of
employment change that is likely to accompany telecommunications deregulation.
The 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,
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and those projections may be changed materially and adversely from time to
time.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the Federal government, that
are not under the control of the State. Because of the uncertainty and
unpredictability of changes in these factors, their impact cannot be fully
included in the assumptions underlying the State's projections. There can be no
assurance that the State economy will not experience results that are worse than
predicted, with corresponding material and adverse effects on the State's
financial projections.
The General Fund is the principal operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular purposes.
In the State's 1996-97 fiscal year, the General Fund is expected to account for
approximately 47% of total governmental-fund receipts and 71% of total
governmental-fund disbursements. General Fund moneys are also transferred to
other funds, primarily to support certain capital projects and debt service
payments in other fund types.
The General Fund is projected to be balanced on a cash basis for the
1996-97 fiscal year. Actual receipts through the first two quarters of the
1996-97 State fiscal year reflect stronger-than-expected growth in most taxes,
with actual receipts exceeding expectations by $276 million. Based on the
revised economic outlook and actual receipts for the first six months of
1996-97, projected General Fund receipts for the 1996-97 State fiscal year have
been increased by $420 million. Most of this projected increase is in the yield
of the personal income tax ($241 million), with additional increases now
expected in business taxes ($124 million) and other tax receipts ($49 million).
Projected collections from user taxes and fees have been revised downward
slightly ($5 million). Revisions were also made to both miscellaneous receipts
and in transfers from other funds (an $11 million combined projected increase).
Disbursements through the first six months of the fiscal year were
$415 million less than projected, primarily because of delays in processing
payments following delayed enactment of the State budget. As a result, no
savings are included in the Mid-Year Update from this slower-than-expected
spending. Projections of 1996-97 General Fund disbursements are increased by
$120 million, since increased General Fund disbursements for education are
required to replace a projected decrease in lottery receipts. This modification
is shown in the form of an increased transfer of General Fund monies to the
Lottery Fund in the Special Revenue fund type. The projected closing fund
balance in the General Fund of $337 million reflects a balance of $252 million
in the Tax Stabilization Reserve Fund (following a payment of $15 million during
the current fiscal year) and a deposit of $85 million to the Contingency Reserve
Fund.
On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26,
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1993, Standard & Poor's revised the rating outlook assessment to stable. On
February 14, 1994, Standard & Poor's raised its outlook to positive and, on
August 5, 1996, confirmed its A- rating. On January 6, 1992, Moody's reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On July 26, 1996, Moody's reconfirmed its A rating
on the State's general obligation long-term indebtedness.
Litigation. The court actions in which the State is a defendant
generally involve State programs and miscellaneous tort, real property, and
contract claims. While the ultimate outcome and fiscal impact, if any, on the
State of those proceedings and claims are not currently predictable, adverse
determinations in certain of them might have a material adverse effect upon the
State's ability to maintain a balanced 1996-97 State Financial Plan.
The claims involving the City other than routine litigation incidental
to the performance of their governmental and other functions and certain other
litigation arise out of alleged constitutional violations, torts, breaches of
contract and other violations of law and condemnation proceedings. While the
ultimate outcome and fiscal impact, if any, on the City of those proceedings and
claims are not currently predictable, adverse determinations in certain of them
might have a material adverse effect upon the City's ability to carry out the
1997-2000 Financial Plan. The City has estimated that its potential future
liability on account of outstanding claims against it as of June 30, 1996
amounted to approximately $2.8 billion.
New Jersey Navigator Trust
New Jersey Risk Factors
- -----------------------
State Finance. New Jersey is the ninth largest state in population and
the fifth smallest in land area. With an average of 1,062 people per square
mile, it is the most densely populated of all the states. The State's economic
base is diversified, consisting of a variety of manufacturing, construction and
service industries, supplemented by rural areas with selective commercial
agriculture. Historically, New Jersey's average per capita income has been well
above the national average, and in 1993 the State ranked second among the states
in per capital personal income ($27,742).
The Trust is susceptible to political, economic or regulatory factors
affecting issuers of the New Jersey securities. The following information
provides only a brief summary of some of the complex factors affecting the
financial situation in New Jersey (the "State") and is derived from sources that
are generally available to investors and is believed to be accurate. It is based
in part on information obtained from various State and local agencies in New
Jersey. No independent verification has been made of any of the following
information.
The New Jersey Economic Policy Council, a statutory arm of the New
Jersey Department of Commerce and Economic Development, has reported in New
Jersey Economic Indicators, a monthly publication of the New Jersey Department
of Labor, Division of Labor Market and Demographic Research, that in 1988 and
1989 employment in New Jersey's manufacturing sector failed to benefit from the
export boom experienced by many Midwest states and the State's service sectors,
which had fueled the State's prosperity since 1982, lost momentum. In the
meantime, the prolonged fast growth in the State in the mid 1980s resulted in a
tight labor market situation, which has led to relatively high wages and housing
prices. This means that, while the incomes of New Jersey
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residents are relatively high, the State's business sector has become more
vulnerable to competitive pressures.
The onset of the national recession (which officially began in July
1990 according to the National Bureau of Economic Research) caused an
acceleration of New Jersey's job losses in construction and manufacturing. In
addition, the national recession caused an employment downturn in such
previously growing sectors as wholesale trade, retail trade, finance, utilities
and trucking and warehousing. Reflecting the downturn, the rate of unemployment
in the State rose from a low of 3.6% during the first quarter of 1989 to an
estimated 6.4% in February 1996, which is above the national average of 5.5% in
February 1996. Economic recovery is likely to be slow and uneven in New Jersey,
with unemployment receding at a correspondingly slow pace, due to the fact that
some sectors may lag as a result of continued excess capacity. In addition,
employers even in rebounding sectors can be expected to remain cautious about
hiring until they become convinced that improved business will be sustained.
Also, certain firms will continue to merge or downsize to increase
profitability.
Debt Service. The primary method for State financing of capital
projects is through the sale of the general obligation bonds of the State. These
bonds are backed by the full faith and credit of the State tax revenues and
certain other fees are pledged to meet the principal and interest payments and,
if provided, redemption premium payments, if any, required to repay the bonds.
As of June 30, 1994, there was a total authorized bond indebtedness of
approximately $9.14 billion, of which $3.65 billion was issued and outstanding,
$4.0 billion was retired (including bonds for which provisions for payment have
been made through the sale and issuance of refunding bonds) and $1.49 billion
was unissued. The debt service obligation of such outstanding indebtedness is
$446.3 million for Fiscal Year 1996.
On June 25, 1997, the New Jersey Economic Development Authority (EDA)
issued State Pension Funding Bonds (PFB) in the amount of $2.803 billion to
finance a portion of the unfunded accrued liability of the State administered
retirement systems. Under the authorizing legislation the bonds are limited
obligations of the EDA and are not a legal debt or liability of the State. The
following section, New Jersey Budget and Appropriation System, contains a full
description of the PFB.
New Jersey Budget and Appropriation System. The State operates on a
fiscal year beginning July 1 and ending June 30. At the end of Fiscal Year 1989,
there was a surplus in the State's general fund (the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made) of $411.2 million. At the end of Fiscal Year 1990,
there was a surplus in the general funds of $1 million. At the end of Fiscal
Year 1991, there was a surplus in the general fund of $1.4 million. New Jersey
closed its Fiscal Year 1992 with a surplus of $760.8 million and fiscal year
1993 with a surplus of $937.4 million. In 1994, New Jersey closed its fiscal
year with a surplus of $926.0 million, in 1995 New Jersey closed its fiscal year
with a surplus of $563 million and in 1996 New Jersey closed its fiscal year
with a surplus of $882 million. It is estimated that New Jersey closed its
fiscal year 1997 with a surplus of approximately $1.1 billion.
In order to provide additional revenues to balance future budgets, to
redistribute school aid and to contain real property taxes, on June 27, 1990,
and July 12, 1990, former Governor Florio signed into law legislation which was
estimated to raise approximately $2.8 billion in additional taxes
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(consisting of $1.5 billion in sales and use taxes and $1.3 billion in income
taxes), the biggest tax hike in New Jersey history. There can be no assurance
that receipts and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990, with the
increase in the State's sales and use tax rate from 6% to 7% and the elimination
of exemptions for certain products and services not previously subject to the
tax, such as telephone calls, paper products (which has since been reinstated),
soaps and detergents, janitorial services, alcoholic beverages and cigarettes.
At the time of enactment, it was projected that these taxes would raise
approximately $1.5 billion in additional revenue. Projections and estimates and
receipts from sales and use taxes, however, have been subject to variance in
recent fiscal years.
The second part of the tax hike took effect on January 1, 1991, in the
form of an increased state income tax on individuals. At the time of enactment,
it was projected that this increase would raise approximately $1.3 billion in
additional income taxes to fund a new school aid formula, a new homestead rebate
program and state assumption of welfare and social services costs. Projections
and estimates of receipts from income taxes, however, have also been subject to
variance in recent fiscal years. Under the legislation, income tax rates
increased from their previous range of 2% to 3.5% to a new range of 2% to 7%,
with the higher rates applying to married couples with incomes exceeding $70,000
who file joint returns, and to individuals filing single returns with incomes of
more than $35,000.
The Florio administration had contended that the income tax package
would help reduce local property tax increases by providing more state aid to
municipalities. Under the income tax legislation, the State would assume
approximately $289 million in social services costs that previously were paid by
counties and municipalities and funded by property taxes. In addition, under the
new formula for funding school aid, an extra $1.1 billion was proposed to be
sent by the State to school districts beginning in 1991, thus reducing the need
for property tax increases to support education programs.
Effective July 1, 1992, the State's sales and use tax rate decreased
from 7% to 6%. Effective January 1, 1994, an across-the-board 5% reduction in
the income tax rates was enacted and effective January 1, 1995, further
reductions ranging from 1% to 10% in income tax rates took effect. Governor
Whitman recently signed into law further reductions up to 15% for some taxpayers
effective January 1, 1996, thus reducing income taxes by up to 30% for most
taxpayers within three years.
On June 27, 1997, Governor Whitman signed the New Jersey Legislature's
$16.8 billion budget for Fiscal Year 1998. The balanced budget, which includes
$553 million in surplus, is approximately $300 million more than the 1997
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,
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sluggish employment and uncertainties in taxpayer behavior as a result of actual
and proposed changes in Federal tax laws.
On June 25, 1997, the New Jersey Economic Development Authority (EDA)
issued State Pension Funding Bonds (PFB) in the amount of $2.803 billion to
finance a portion of the unfunded accrued liability of the State-administered
retirement systems. Under the authorizing legislation, the bonds are limited
obligations of the EDA and contain a statement that they are not a legal debt or
liability of the State. This is true even though the principal and interest on
the bonds will be paid through annual State appropriations from the General
Fund. Because the pension bonds are issued by an authority, they are not General
Obligation (G.O.) Bonds which are backed by the "full faith and credit" of the
State. G.O. bonds would require voter approval.
The PFB sold at an average interest rate of 7.64% after the State
purchased insurance against default. In concept, the proceeds of the PFB are
invested with the anticipation that the interest rate on investment earnings
will at least equal and, hopefully, exceed the interest rate cost of the bonds,
thereby lowering future State costs to fund the retirement systems. However,
there is always a risk of uncertainty in investing funds.
The unfunded accrued liability of the several State-administered
retirement systems is $3.2 billion, according to the actuarial valuations
prepared by Fiscal Year 1998. Of that amount, $2.75 billion is funded from the
sale of the Pension Bonds. The balance, an estimated $450 million, was made
available through the passage of companion legislation. That law authorized a
one-time accounting change in the value of the assets of the retirement systems
to full-market value as of the valuation reports applicable to Fiscal Year 1998.
This one-time revaluation from the current market-related value of assets (which
recognizes 20% of full-market) to full-market value, immediately recognizes all
capital gains up to the validation date, resulting in an increased value of the
accumulated assets of the retirement systems. The assets of the retirement
systems at full-market value are approximately $2.4 billion greater than they
are when measured at their market-related value.
Debt Ratings. For many years, both Moody's Investors Service, Inc.,
and Standard & Poor's Corporation have rated New Jersey general obligation bonds
"Aaa" and "AAA", respectively. Currently, however, Moody's Investors Service,
Inc. rates New Jersey general obligation bonds Aa1 and Standard & Poor's Ratings
Group rates such bonds AA+ with outlook stable. On July 3, 1991, however,
Standard & Poor's Corporation downgraded New Jersey general obligation bonds to
"AA+." On June 4, 1992 Standard & Poor's Corporation placed New Jersey general
obligation bonds on Credit Watch with negative implications, citing as its
principal reason for its caution the unexpected denial by the Federal Government
of New Jersey's request for $450 million in retroactive Medicaid payments for
psychiatric hospitals. These funds were critical to closing a $1 billion gap in
the State's $15 billion budget for fiscal year 1992 which ended on June 30,
1992. Under New Jersey state law, the gap in the current budget must be closed
before the new budget year begins on July 1, 1992. Standard & Poor's Corporation
suggested the State could close fiscal 1992's budget gap and help fill fiscal
1993's hole by a reversion of $700 million of pension contributions to its
general fund under a proposal to change the way the State calculates its pension
liability. On July 6, 1992, Standard & Poor's Corporation reaffirmed its "AA+"
rating for New Jersey general obligation bonds and removed the debt from its
Credit Watch list, although it stated that New Jersey's long-term financial
outlook is negative. Standard & Poor's Corporation was concerned that the State
was
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entering the 1993 fiscal year that began July 1, 1992 with a slim $26 million
surplus and remained concerned about whether the sagging State economy would
recover quickly enough to meet lawmakers' revenue projections. It also remained
concerned about the recent federal ruling leaving in doubt how much the State
was due in retroactive Medicaid reimbursements and a ruling by a federal judge,
now on appeal, of the State's method for paying for uninsured hospital patients.
However, on July 27, 1994, Standard & Poor's announced that it was changing the
State's outlook from negative to stable due to a brightening of the State's
prospects as a result of Governor Whitman's effort to trim spending and cut
taxes, coupled with an improving economy. Standard & Poor's reaffirmed its "AA+"
rating at the same time. There can be no assurance that these ratings will
continue or that particular bond issues may not be adversely affected by changes
in the State or local economic and political conditions.
On August 24, 1992, Moody's Investors Service, Inc. downgraded New
Jersey general obligation bonds to "Aa1", stating that the reduction reflected a
developing pattern of reliance on nonrecurring measures to achieve budgetary
balance, four years of financial operations marked by revenue shortfalls and
operating deficits, and the likelihood that serious financial pressures would
persist. On August 5, 1994, Moody's reaffirmed its "Aa1" rating, citing on the
positive side New Jersey's broad-based economy, high income levels, history of
maintaining a positive financial position and moderate (although rising) debt
ratios, and, on the negative side, a continued reliance on one-time revenue and
a dependence on pension-related savings to achieve budgetary balance.
Capital Construction. In addition to payment from bond proceeds,
capital construction can also be funded by appropriation of current revenues on
a pay-as-you go basis. Capital Construction expenditures for Fiscal Year 1995
represent 1.9% of the total Fiscal Year 1995 expenditures. In Fiscal Year 1995,
total Capital Construction expenditures were $289.8 million, a decrease of $83.4
million from Fiscal Year 1994. This amount reflects a reduction of $136.4
million in capital projects and an increase of $53.0 million in expenditures to
the Transportation Trust Fund Authority.
All appropriations for capital projects and all proposals for State
bond authorizations are subject to the review and recommendation of the New
Jersey Commission on Capital Budgeting and Planning. This permanent commission
was established in November 1975, and is charged with the preparation of the
State Capital Improvement Plan, which contains proposals for State spending for
capital projects.
Lease Financing. The State has entered into a number of leases
relating to the financing of certain real property and equipment. The State
leases the State Tax Processing Building and the Richard J. Hughes Justice
Complex in Trenton, both from the Mercer County Improvement Authority (the
"Authority"). On August 8, 1991 the Authority defeased outstanding bonds
originally issued to finance construction of the Richard J. Hughes Justice
Complex through the issuance of custody receipts (the "Custody Receipts") in the
aggregate principal amount of $95,760,000. The rental is sufficient to cover the
debt service on the Authority's Custody Receipts. Maximum annual rental payments
on these leases, including debt service, maintenance and payments in lieu of
taxes, will be approximately $11 million. The State's obligation to pay the
rentals is subject to appropriations being made by the State Legislature. The
Custody Receipts will mature in the years 1992 through 2018.
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The State has also entered into a lease agreement, as lessee, with the
New Jersey Economic Development Authority, as lessor (the "EDA") to lease (i)
office buildings that are presently under construction and, when finished, are
expected to house the New Jersey Division of Motor Vehicles, New Jersey Network
(the State's public television station) and a branch of the United States Postal
Service and (ii) a parking facility that is also under construction, all of
which were financed by the EDA's $114,391,434.70 initial aggregate principal
amount of Trenton Office Complex Revenue Bonds, 1980 Series dated December 1,
1989. The State has also entered into a lease agreement, as lessee, with the EDA
to lease approximately 13 acres of real property and certain infrastructure
improvements thereon located in the City of Newark. This property is in a
geographical area generally bounded by McCarter Highway, Mulberry Street and
Saybrook Place and its purchase was financed by $21,510,000 aggregate principal
amount of New Jersey Economic Development Authority Revenue Bonds, New Jersey
Performing Arts Center Site Acquisition Project, 1991 Series, issued on August
20, 1991. The rental payments required to be made by the State under such lease
agreements are sufficient to cover debt service on such bonds and other amounts
payable to the EDA, including certain administrative expenses of the EDA, and
such rental payments are subject to annual appropriation by the State
Legislature. Maximum annual debt service on such bonds is approximately
$12,200,000. All of such bonds are still outstanding and mature in the years
1992 through 2012.
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
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Authority bonds are secured by annual rentals from the State which are subject
to annual appropriations by the State Legislature. The State's combined annual
rental payment for all leases with the Building Authority will be (i)
approximately $17.5 million per year for the years ending June 15, 1992 through
1998, 2012 and 2013 and (ii) approximately $31.0 million per year for the years
ending June 15, 1999 through 2011.
Beginning in April 1984, the State, acting through the Director of the
Division of Purchase and Property, entered into a series of lease purchase
agreements which provide for the acquisition of equipment and real property to
be used by various departments and agencies of the State. To date, the State has
completed nine lease purchase agreements which have resulted in issuance of
Certificates of Participation totaling $541,085,000. A Certificate of
Participation evidences a proportionate interest of the owner thereof in the
lease payments to be made by the State under the terms of the agreement. As of
December 31, 1991, $305,400,000 Certificates of Participation remain
outstanding. The agreements relating to these transactions provide for
semiannual rental payments. The State's obligation to pay rentals due under
these leases is subject to annual appropriations being made by the State
Legislature. The final maturity of the outstanding Certificates of Participation
is December 15, 2013. The majority of proceeds from these transactions have been
or will be used to acquire equipment for the State and its agencies. The rentals
payable by the State will be made from monies appropriated by the State
Legislature. The State intends to continue to use this financing technique for a
substantial portion of its future equipment requirements.
"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.
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<TABLE>
<CAPTION>
Appropriation for Appropriation for
Calendar Year Debt Service Property Tax
------------- ------------ -------------
<S> <C> <C>
1986......................................... $0 $1,647,216.00
1987......................................... 0 1,647,216.00
1988......................................... 0 1,647,216.00
1989......................................... 1,281,793.58 1,745,917.00
1990......................................... 2,362,850.67 1,850,000.00
1991......................................... 2,770,851.00 1,850,000.00
</TABLE>
On April 2, 1987, the Corporation issued $31,580,000 aggregate
principal amount of Revenue Bonds, 1987 Series C (the "Series C Bonds"), a
portion of the proceeds of which will be used (i) on January 1, 1995, to refund
all of the Corporation's Marine Terminal Revenue Bonds, 1985 Refunding Series
and (ii) to pay interest on the Series C Bonds until January 1, 1995. Because of
the funded escrow, it is expected that there will not be any need for the State
to provide funds to pay debt service on the Series C Bonds through January 1,
1995. Also, in addition to the bonded indebtedness of the Corporation set forth
above, on April 2, 1987, the Corporation issued $10,295,000 Marine Terminal
Revenue Bonds, 1987 Series D, to provide funds for financing a portion of the
costs of various capital improvements. On February 10, 1989, the Corporation
issued $4,085,000 Marine Terminal Revenue Bonds, 1989 Series E, to provide funds
for financing a portion of the costs of various capital improvements and
additions to the Corporation's marine terminal facilities. On November 21, 1989,
the Corporation issued $3,655,000 Marine Terminal Revenue Bonds, 1989 Series F,
to provide for the costs of acquiring land in the City of Camden, for the
purpose of expanding the Corporation's marine terminal facilities.
Municipal Finance. New Jersey's local finance system is regulated by
various statutes designed to assure that all local governments and their issuing
authorities remain on a sound financial basis. Regulatory and remedial statutes
are enforced by the Division of Local Government Services (the "Division") in
the State Department of Community Affairs.
Counties and Municipalities. The Local Budget Law (N.J.S.A. 40A:4-1 et
seq.) imposes specific budgetary procedures upon counties and municipalities
("local units"). Every local unit must adopt an operating budget which is
balanced on a cash basis, and items of revenue and appropriation must be
examined by the Director of the Division (the "Director"). The accounts of each
local unit must be independently audited by a registered municipal accountant.
State law provides that budgets must be submitted in a form promulgated by the
Division and further provides for limitations on estimates of tax collection and
for reserves in the event of any shortfalls in collections by the local unit.
The Division reviews all municipal and county annual budgets prior to adoption
for compliance with the Local Budget Law. The Director is empowered to require
changes for compliance with law as a condition of approval; to disapprove
budgets not in accordance with law; and to prepare the budget of a local unit,
within the limits of the adopted budget of the previous year with suitable
adjustments for legal compliance, if the local unit is unwilling to prepare a
budget in accordance with law. This process insures that every municipality and
county annually adopts a budget balanced on a cash basis, within limitations on
appropriations or tax levies, respectively, and making adequate provision for
principal of
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and interest on indebtedness falling due in the fiscal year, deferred charges
and other statutory expenditure requirements. The Director also oversees changes
to local budgets after adoption as permitted by law, and enforces regulations
pertaining to execution of adopted budgets and financial administration. In
addition to the exercise of regulatory and oversight functions, the Division
offers expert technical assistance to local units in all aspects of financial
administration, including revenue collection and cash management procedures,
contracting procedures, debt management and administrative analysis.
The local Government Cap Law (N.J.S.A. 40A:4-45.1 et seq.) (the "Cap
Law") generally limits the year-to-year increase of the total appropriations of
any municipality and the tax levy of any county to either 5% or an index rate
determined annually by the Director, whichever is less. However, where the index
percentage rate exceeds 5%, 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%, the Cap
Law also permits the governing body of any municipality or county to approve the
use of a higher percentage rate up to 5%. 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
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(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% of the equalized valuation basis in the case of municipalities
and 2% of the equalized valuation basis in the case of counties. The debt limit
of a county or municipality, with certain exemptions, may be exceeded only with
the approval of the Local Finance Board.
Chapter 75 of the Pamphlet Laws of 1991 signed into law on March 28,
1991 requires certain municipalities and permits all other municipalities to
adopt the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition budget
for January to June. Since expenditures would be expected to exceed revenues
primarily because state aid for the calendar year would not be received by the
municipality until after the end of the transition year budget, the act
authorizes the issuance of Fiscal Year Adjustment Bonds to fund the one time
deficit for the six month transition budget. The act provides that the deficit
in the six month transition budget may be funded initially with bond
anticipation notes based on the estimated deficit in the six month transition
budget. Notes issued in anticipation of Fiscal Year Adjustment Bonds, including
renewals, can only be issued for up to one year unless the Local Finance Board
permits the municipality to renew them for a further period of time. The Local
Finance Board must confirm the actual deficit experienced by the municipality.
The municipality then may issue Fiscal Year Adjustment Bonds to finance the
deficit on a permanent basis. The purpose of the Act is to assist municipalities
that are heavily dependent on state aid and that have had to issue tax
anticipation notes to fund operating cash flow deficits each year. While the act
does not authorize counties to change their fiscal years, it does provide that
counties with cash flow deficits may issue Fiscal Year Adjustment Bonds as well.
State law authorizes State officials to supervise fiscal
administration in any municipality which is in default on its obligations; which
experiences severe tax collection problems for two successive years; which has a
deficit greater than 4% 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% 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% of its tax levy. The number of
municipalities which have a cash deficit greater than 4% 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
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district, takes office. Type I school districts, most commonly found in cities,
have a board of education appointed by the mayor or the chief executive officer
of the municipality constituting the school district. In a Type II school
district, the board of education is elected by the voters of the district.
Nearly all regional and consolidated school districts are Type II school
districts.
School Budgets. In every school district having a board of school
estimate, the board of school estimate examines the budget request and fixes the
appropriation amounts for the next year's operating budget after a public
hearing at which the taxpayers and other interested persons shall have an
opportunity to raise objections and to be heard with respect to the budget. This
board, whose composition is fixed by statute, certifies the budget to the
municipal governing bodies and to the local board of education. If either
disagrees, they must appeal to the State Commissioner of Education (the
"Commissioner") to request changes.
The Quality Education Act of 1990 (N.J.S.A. 18A:7D-1 et seq.) limits
the annual increase of a school district's net current expense budget. The
Commissioner certifies the allowable amount of increase for each school district
but may grant a higher level of increase in certain limited instances. A school
district may also submit a proposal to the voters to raise amounts above the
allowable amount of increase. If defeated, such a proposal is subject to further
review or appeal only if the Commissioner determines that additional funds are
required to provide a thorough and efficient education.
The Quality Education Act has been declared unconstitutional by the
New Jersey Supreme Court in 1994. The Supreme Court, while retaining
jurisdiction over this issue, has stated that the State was required to address
the "special education needs" of 30 special needs districts for which funding
was required in addition to that necessary to achieve parity for richer
districts. The Supreme Court stated that it will not immediately intervene if
substantial equivalence of the special needs districts and wealthier districts
is achieved by the State for the 1997-1998 school year. The Court further
ordered the State to adopt a law assuring such substantial equivalence by
September 1996.
In May, 1997, in its further review of school funding, the Supreme
Court in Abbott by Abbott v. Burke, 149 N.J. 145 (1997), held that the
Comprehensive Educational Improvement and Financing Act ("Act") which was
enacted by the legislature in response to previous state Supreme Court orders
was unconstitutional as it applied to special needs districts.
The Court held that the Act's funding levels were insufficient and
failed to address problems of dilapidated, unsafe and overcrowded facilities. As
interim relief pending legislative solution, the Court ordered increased funding
on parity with per-pupil expenditures for regular education, required the State
Commissioner of Education to ensure that increased funding be put to optimal
educational use, required the State, commencing September 1997, to provide
special needs districts with money to enable such districts with sufficient
money to spend at the level of average budgeted per-pupil expenditures in
successful districts and remanded the case for a determination of immediate
implementation of programs to meet the needs of at-risk children.
As a result of this decision, the State's 1998 fiscal year budget
provided for an additional $246 million to special needs districts. Much of this
funding is attributable to the State Pension Fund Bonds sale.
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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% 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% 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% 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% of the aforesaid average equalized valuation.
School bonds are authorized by (i) an ordinance adopted by the
governing body of a municipality within a Type I school district; (ii) adoption
of a proposal by resolution by the board of education of a Type II school
district having a board of school estimate; or (iii) adoption of a proposal by
resolution by the board of education and approval of the proposal by the legal
voters of any other Type II school district. If school bonds will exceed the
school district borrowing capacity, a school district (other than a regional
school district) may use the balance of the municipal borrowing capacity. If the
total amount of debt exceeds the school district's borrowing capacity and any
available remaining municipal borrowing capacity, the Commissioner and the Local
Finance Board must approve the proposed authorization before it is submitted to
the voters. All authorizations of debt in a Type II school district without a
board of school estimate require an approving referendum, except where, after
hearing, the Commissioner and the State Board of Education determine that the
issuance of such debt is necessary to meet the constitutional obligation to
provide a thorough and efficient system of public schools. When such obligations
are issued, they are issued by, and in the name of, the school district.
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In Type I and II school districts with a board of school estimate,
that board examines the capital proposal of the board of education and certifies
the amount of bonds to be authorized. When it is necessary to exceed the
borrowing capacity of the municipality, the approval of a majority of the
legally qualified voters of the municipality is required, together with the
approval of the Commissioner and the Local Finance Board. When such bonds are
issued for a Type I school district, they are issued by the municipality and
identified as school bonds. When bonds are issued by a Type II school district
having a board of school estimate, they are issued by, and in the name of, the
school district.
All authorizations of debt must be reported to the Division of Local
Government Services by a supplemental debt statement prior to final approval.
School District Lease Purchase Financings. In 1982, school districts
were given an alterative to the traditional method of bond financing capital
improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase Law"). The
Lease Purchase Law permits school districts to acquire a site and school
building through a lease purchase agreement with a private lessor corporation.
For Type II school districts, the lease purchase agreement does not require
voter approval. The rent payments attributable to the lease purchase agreement
are subject to annual appropriation by the school district and are required,
pursuant to N.J.A.C. 6:22-A-1.2(h), to be included in the annual current expense
budget of the school district. Furthermore, the rent payments attributable to
the lease purchase agreement do not constitute debt of the school district and
therefore do not impact on the school district's debt limitation. Lease purchase
agreements in excess of five years require the approval of the Commissioner and
the Local Finance Board.
Qualified Bonds. In 1976, legislation was enacted (P.L. 1976, c. 38
and c. 39) which provides for the issuance by municipalities and school
districts of "qualified bonds." Whenever a local board of education or the
governing body of a municipality determines to issue bonds, it may file an
application with the Local Finance Board, and, in the case of a local board of
education, the Commissioner, to qualify bonds pursuant to P.L. 1976, c. 38 or c.
39. Upon approval of such an application and after receipt of a certificate
stating the name and address of the paying agent for such bonds, the maturity
schedule, interest rates and payment dates, the State Treasurer shall, in the
case of qualified bonds for school districts, withhold from the school aid
payable to such municipality or school district and in the case of qualified
bonds for municipalities, withhold from the amount of business personal property
tax replacement revenues, gross receipts; tax revenues, municipal purposes tax
assistance fund distributions, State urban aid, State revenue sharing, and any
other funds appropriated as State aid and not otherwise dedicated to specific
municipal programs, payable to such municipalities, an amount sufficient to
cover debt service on such bonds. These "qualified bonds" are not direct,
guaranteed or moral obligations of the State, and debt service on such bonds
will be provided by the State only if the above mentioned appropriations are
made by the State. Total outstanding indebtedness for "qualified bonds"
consisted of $103,720,500 by various school districts as of June 30, 1992 and
$830,037,105 by various municipalities as of June 30, 1992.
New Jersey School Bond Reserve Act. The New Jersey School Bond Reserve
Act (N.J.S.A. 18A:56-17 et seq.) establishes a school bond reserve within the
constitutionally dedicated Fund for the Support of Free Public Schools. Under
this law the reserve is maintained at an amount equal to 1.5%
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of the aggregate outstanding bonded indebtedness of counties, municipalities or
school districts for school purposes (exclusive of bonds whose debt service is
provided by State appropriations), but not in excess of monies available in such
Fund. If a municipality, county or school district is unable to meet payment of
the principal of or interest on any of its school bonds, the trustee of the
school bond reserve will purchase such bonds at the face amount thereof or pay
the holders thereof the interest due or to become due. On June 30, 1991, the
book value of the Fund's assets aggregated $59,352,429 and the reserve, computed
as of June 30, 1991, amounted to $19,668,349. There has never been an occasion
to call upon this Fund.
Local Financing Authorities. The Local Authorities Fiscal Control Law
(N.J.S.A. 40A:5A-l et seq.) provides for State supervision of the fiscal
operations and debt issuance practices of independent local authorities and
special taxing districts by the State Department of Community Affairs. The Local
Authorities Fiscal Control Law applies to all autonomous public bodies created
by counties or municipalities, which are empowered to issue bonds, to impose
facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, etc.). Authorities which are subject to differing State or federal
financial restrictions are exempted, but only to the extent of that difference.
Financial control responsibilities over local authorities and special
districts are assigned to the Local Finance Board and the Director of the
Division of Local Government Services. The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
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
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draft permit by the Department of Environmental Protection and Energy, the
adequacy of Medicaid reimbursement for services rendered by doctors and dentists
to Medicaid eligible children, the Commissioner of Health's calculation of the
hospital assessment required by the Health Care Cost Reduction Act of 1991,
refusal of the State to share with Camden County Federal funding the State
recently received for disproportionate share hospital payments made to county
psychiatric facilities, and the constitutionality of annual A-901 hazardous and
solid waste licensure renewal fees collected by the Department of Environmental
Protection and Energy. Adverse judgments in these and other matters could have
the potential for either a significant loss of revenue or a significant
unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases
pending against the State, State agencies and employees seeking recovery of
monetary damages that are primarily paid out of the fund created pursuant to the
New Jersey Tort Claims Act. In addition at any given time, there are various
numbers of contract claims against the State and State agencies seeking recovery
of monetary damages. The state is unable to estimate its exposure for these
claims.
Pennsylvania Trust
The following information constitutes only a brief summary of a number of the
complex factors which may impact issuers of Pennsylvania municipal securities
and does not purport to be a complete or exhaustive description of all
conditions to which issuers of Pennsylvania municipal securities may be subject.
Additionally, many factors, including national, economic, social and
environmental policies and conditions, which are not within the control of such
issuers, could have an adverse impact on the financial condition of such
issuers. The Pennsylvania Trust cannot predict whether or to what extent such
factors or other factors may affect the issuers of Pennsylvania municipal
securities, the market value or marketability of such securities or the ability
of the respective issuers of such securities held by the Pennsylvania Trust to
pay interest on or principal of such securities. The creditworthiness of
obligations issued by local Pennsylvania issuers may be unrelated to the
creditworthiness of obligations issued by the Commonwealth of Pennsylvania, and
there is no obligation on the part of the Commonwealth of Pennsylvania to make
payments on such local obligations. There may be specific factors that are
applicable in connection with investment in the obligations of particular
issuers located within Pennsylvania, and it is possible the Pennsylvania Trust
has invested in obligations of particular issuers as to which such specific
factors are applicable. However, the information set forth below is intended
only as a general summary and not as a discussion of any specific factors that
may affect any particular issuer of Pennsylvania municipal securities.
State Finance
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State Economy. The Commonwealth of Pennsylvania is one of the most
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populous states, ranking fifth behind California, New York, Texas and Florida.
Pennsylvania is an established yet growing state with a diversified economy. It
is the headquarters for 58 major corporations. Pennsylvania historically has
been identified as a heavy industry state although that reputation has changed
over the last thirty years as the industrial composition of the Commonwealth
diversified when the coal, steel and railroad industries began to decline. A
more diversified economy was necessary as the traditionally strong industries in
the Commonwealth declined due to a long-term shift in jobs, investment and
workers away from the northeast part of the nation. The major sources of growth
in Pennsylvania are in the service
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sector, including trade, medical and the health services, education and
financial institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, accounting for
more than $3.6 billion in crop and livestock products annually, while
agribusiness and food related industries support $39 billion in economic
activity annually.
Non-agricultural employment in Pennsylvania over the ten years ending
in 1995 increased at an annual rate of 1.02%. This rate compares to a 0.36% rate
for the Middle Atlantic region and 1.8% for the U.S. during the period 1986
through 1995. For the last three years, employment in the Commonwealth has
increased 3.4%. The growth in employment experienced in Pennsylvania during this
period is higher than the 2.9% growth in the Middle Atlantic region.
Non-manufacturing employment has increased in recent years to 82.1% of total
employment in 1995 and to 82.5% as of December 1996. Consequently, manufacturing
employment constitutes a diminished share of total employment within
Pennsylvania. Manufacturing, contributing 17.9% of 1995 non-agricultural
employment and 17.5% as of December 1996, has fallen behind both the services
sector and the trade sector as the largest single source of employment within
the Commonwealth. In 1991 the services sector accounted for 28.6% of all
non-agricultural employment while the trade sector accounted for 22.8%.
Pennsylvania's annual average unemployment rate was below the national
average from 1986 until 1990. Slower economic growth caused the unemployment
rate in the Commonwealth to rise to 6.9% in 1991 and 7.5% in 1992. The
resumption of faster economic growth resulted in a decrease in the
Commonwealth's unemployment rate to 7.1% in 1993. In 1994 and 1995,
Pennsylvania's annual average unemployment rate was below the Middle Atlantic
Region's average, but slightly higher than that of the United States. As of
January 1997, the most recent month for which data is available, the seasonally
adjusted unemployment rate for the Commonwealth was 4.7%, compared to 5.4% for
the United States.
The Commonwealth operates under an annual budget which is formulated
and submitted for legislative approval by the Governor each February. The
Pennsylvania Constitution requires that the Governor's budget proposal consist
of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, recommending specific
additional sources of revenue sufficient to pay the deficiency; (ii) a capital
budget setting forth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. A gubernatorial veto can be overridden only by a two-thirds
majority of all members of each house. The Commonwealth's fiscal year begins on
July 1 and ends on June 30.
The Constitution and the laws of the Commonwealth require all payments
from the treasury, with the exception of refunds of taxes, licenses, fees and
other charges, to be made only by duly enacted appropriations. Amounts
appropriated from a fund may not exceed its actual and estimated revenues for
the fiscal year plus any surplus available. Appropriations from the principal
operating funds of the Commonwealth (the General Fund, the Motor
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License Fund and the State Lottery Fund) are generally made for one fiscal year
and are returned to the unappropriated surplus of the fund (a lapse) if not
spent or encumbered by the end of the fiscal year.
Pennsylvania uses the "fund" method of accounting for receipts and
disbursements. For purposes of government accounting, a "fund" is an independent
fiscal and accounting entity with a self-balancing set of accounts, recording
cash and/or other resources together with all related liabilities and equities
which are segregated for the purpose of carrying on specific activities or
attaining certain objectives in accordance with the fund's special regulations,
restrictions or limitations. In the Commonwealth, funds are established by
legislative enactment or in certain cases by administrative action. Over 150
funds have been established for the purpose of recording the receipts and
disbursements of monies received by the Commonwealth. Annual budgets are adopted
each fiscal year for the principal operating funds of the Commonwealth and
several other special revenue funds. Expenditures and encumbrances against these
funds may only be made pursuant to appropriation measures enacted by the General
Assembly and approved by the Governor. The General Fund, the Commonwealth's
largest fund, receives all tax revenues, non-tax revenues and federal grants and
entitlements that are not specified by law to be deposited elsewhere. The
majority of the Commonwealth's operating and administrative expenses are payable
from the General Fund. Debt service on all bond indebtedness of the
Commonwealth, except that issued for highway purposes or for the benefit of
other special revenue funds, is payable from the General Fund.
Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting. Since 1984, the
Commonwealth has also prepared annual financial statements in accordance with
generally accepted accounting principles ("GAAP"). Financial statements prepared
in accordance with GAAP have been audited jointly by the Auditor General of the
Commonwealth and an independent public accounting firm each year since 1984.
Budgetary basis financial reports are based on a modified cash basis of
accounting as opposed to a modified accrual basis of accounting prescribed by
GAAP. The budgetary basis financial information maintained by the Commonwealth
to monitor and enforce budgetary control is adjusted at fiscal year-end to
reflect appropriate accruals for financial reporting in conformity with GAAP.
Financial Results for Recent Fiscal Years (GAAP Basis). The five year
------------------------------------------------------
period from fiscal 1992 through fiscal 1996 recorded a 4.6% average annual
increase in revenues and other sources, led by an average annual increase of
13.2% for intergovernmental revenues. The increase for intergovernmental
revenues in fiscal 1996 is partly due to an accounting change. Tax revenues
during the five year period increased an average of 2.5% as modest economic
growth, low inflation rates and several tax rate reductions and other tax
reduction measures constrained the growth of tax revenues. The tax reduction
measures followed a $2.7 billion tax increase measure adopted for the 1992
fiscal year.
Expenditures and other uses during the fiscal 1992 through fiscal 1996
period rose at an average annual rate of 67.0% led by increases of 14.2% for
protection of persons and property program costs. The costs of a prison
expansion program and other correctional program expenses are responsible for
the large percentage increase. A reduction in debt service costs at an average
annual rate of 29.1% over the five year period is a result of reduced short-term
borrowing for cash flow purposes. Improved financial results and structural cash
flow modifications contributed to the lower borrowing.
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Efforts to control costs for various social welfare programs and the presence of
favorable economic conditions have led to a modest 5.6% increase for public
health and welfare costs for the five year period. The fund balance at June 30,
1996 totaled $635.2 million, a $547.7 million increase from a balance of $87.5
million at June 30, 1992.
Fiscal 1995 Fiscal Results (GAAP Basis). Revenues and other sources
---------------------------------------
totaled $23,771.6 million, an increase of $1,135.0 million (0.5%) over the prior
fiscal year. The largest increase was $817.9 million in taxes which represents a
5.6% increase over taxes in the prior fiscal year. Expenditures and other uses
rose by $1,364.1 million to $23,821.4 million, an increase over the prior fiscal
year of 6.1%. Consequently, an operating deficit of $49.8 million was recorded
for the fiscal year and led to a decline in fund balance to $688.3 million at
June 30, 1995. Two items predominantly contributed to the fund balance decline.
First, a more comprehensive procedure was used for fiscal 1995 to compute the
liabilities for certain public welfare programs leading to an increase for the
year-end accruals. Second, a change to the methodology to calculate the year-end
accrual for corporate tax payables increased the tax refund liability by $72
million for the 1995 fiscal year when compared to the previous fiscal year.
The fund balance for June 30, 1994, was restated for the fiscal 1995
financial statements. That restatement totaled $116.7 million to recognize
previously unreported revenues and expenditures for fiscal 1994. The fund
balance for June 30, 1994, as restated, was $776.3 million.
Budgetary Basis. Commonwealth revenues for the fiscal year were above\
---------------
estimate and exceeded fiscal year expenditures and encumbrances. Fiscal 1995 was
the fourth consecutive fiscal year the Commonwealth reported an increase in the
fiscal year-end unappropriated balance. Prior to reserves for transfer to the
Tax Stabilization Reserve Fund, the fiscal 1995 closing unappropriated surplus
was $540.0 million, an increase of $204.2 million over the fiscal 1994 closing
unappropriated surplus prior to transfers.
Commonwealth revenues were $459.4 million, 2.9%, above the estimate of
revenues used at the time the budget was enacted. Corporation taxes contributed
$329.4 million of the additional receipts largely due to higher receipts from
the corporate net income tax. Fiscal 1995 revenues from the corporate net income
tax were 22.6% over collections in fiscal 1994 and include the effects of the
reduction of the tax rate from 12.25% to 11.99% that became effective with tax
years beginning on and after January 1, 1994. The sales and use tax and
miscellaneous revenues also showed strong year-over-year growth that produced
above-estimate revenue collections. Sales and use tax revenues were $5.526.9
million, $128.8 million above the enacted budget estimate and 7.9% over fiscal
1994 collections. Tax receipts from both motor vehicle and non-motor vehicle
sales contributed to the higher collections. Miscellaneous revenue collections
for fiscal 1995 were $183.5 million, $44.9 million above estimate and were
largely due to additional investment earnings, escheat revenues and other
miscellaneous revenues. Personal income tax receipts for fiscal 1995 were
slightly above the budgeted estimate. Receipts totaled $5,083.2 million, $5.1
million above the estimate and 4.3% over collections for fiscal 1994. The higher
than estimated revenues from tax sources were due to faster economic growth in
the national and state economy than had been projected when the budget was
adopted. The higher rate of economic growth for the nation and the state gave
rise to increases in employment, income and sales higher than expected which
translated into above-estimate tax revenues.
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Tax revenue refunds were also higher than estimated in the budget. The
reserve for tax refunds was increased during the fiscal year from $410 million
to $460 million, a 110% increase over refunds budgeted in fiscal 1994 which were
unusually low due to a carryover of $160 million of reserves for tax refunds
from fiscal 1993. An acceleration of the tax refund process for corporation
taxes, litigation settlements, and an increase in the personal income tax
poverty exemption contributed to tax refunds being higher than initially
budgeted.
Expenditures from Commonwealth revenues (excluding pooled financing
expenditures), including $65.5 million of supplemental appropriations enacted at
the close of the 1995 fiscal year, totaled $15,674.7 million, representing an
increase of 5% over spending during fiscal 1994.
Funds held in reserve at the end of fiscal 1995 for transfer to the
Tax Stabilization Reserve Fund totaled $111.0 million. Of this total, $54.0
million represents the 10% transfer of the fiscal year-end balance prescribed in
prior state law. The remaining $57.0 million represents an additional 5% of the
year-end balance and an additional $30 million proposed by the Governor to be
transferred to the Tax Stabilization Reserve Fund. These additional reserves for
transfer were authorized in legislation recently enacted by the General
Assembly. The Tax Stabilization Reserve Fund is anticipated to have an available
balance of $182.8 million at June 30, 1996, representing approximately 1.1% of
general fund annual commonwealth revenues.
Fiscal 1996 Financial Results (GAAP Basis). For fiscal 1996 the fund
------------------------------------------
balance was drawn down $53.1 million from the balance at the end of fiscal 1995
to $635.2 million. A planned drawdown of the budgetary unappropriated surplus
during fiscal 1996 contributed to expenditures and other uses exceeding revenues
and other sources by $28.0 million. Consequently, the unreserved fund balance
declined by $6.1 million, reducing the balance to $381.8 million at the end of
fiscal 1996. Total revenues and other sources increased by 8.7% for the fiscal
year led by a 24.2% increase in intergovernmental revenues. This increase was
due mainly to an accounting change in which food stamp coupon revenue received
from the federal government is not counted as income to the Commonwealth.
Increased participation in the federal Medicare program also contributed to the
increase. The reduction for the revenue source "operating transfers in" reflects
an accounting change that no longer recognizes the state police highway patrol
costs paid by the Motor License Fund as a transfer into the General Fund.
Expenditures and other uses increased by 8.6% for the fiscal year. The
24.8% increase for protection of persons and property program costs is due to
higher correctional program costs and a re-categorizing of expenditures. The
abolishment of the Department of Environmental Resources and the creation of the
Department of Environmental Protection and the Department of Conservation and
National Pressures resulted in a reclassification of expenditures from
conservation of natural resources to protection of persons and property. The
departmental changes were also responsible for the decline in costs for the
conservation of natural resources programs.
Budgetary Basis. The unappropriated surplus (prior to transfers to the
---------------
Tax Stabilization Reserve Fund) at the close of the 1996 fiscal year for the
General Fund was $183.8 million, $65.5 million above estimate. From Fiscal year
appropriations, net expenditures and encumbrances from Commonwealth revenues,
including $113.0 million of supplemental appropriations but excluding pooled
financing expenditures, totaled $16,162.9 million. Expenditures exceeded
available revenues and lapses by $253.2 million. The
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difference was funded from a planned partial drawdown of the $437.0 million
fiscal year adjusted beginning unappropriated surplus.
Commonwealth revenues (prior to tax refunds) for the 1996 fiscal year
increased by $113.9 million over the prior fiscal year to $16,338.5 million
representing a growth rate of 0.7%. Tax rate reductions and other tax law
changes substantially reduced the amount and rate of revenue growth for the
fiscal year. It is estimated that tax changes enacted for the fiscal year
reduced Commonwealth revenues by $283.4 million representing 1.7 percentage
points of fiscal 1996 growth in Commonwealth revenues. The most significant tax
changes enacted for the fiscal year were (i) a reduction of the corporate net
income tax rate to 9.99%; (ii) an increase in the maximum annual allowance for a
net operating loss deduction from $0.5 million to $1.0 million; (iv) an increase
in the basic exemption amount of the capital stock and franchise tax; (v) a
repeal of the tax on annuities; and (vi) a repeal of inheritance tax on
transfers of certain property to surviving spouses.
Among the major sources of Commonwealth revenues for the fiscal year,
corporate tax receipts declined $338.4 million from receipts in the prior fiscal
year, largely due to the various tax changes enacted for these taxes. Corporate
tax changes were enacted to reduce the cost of doing business in Pennsylvania
for the purpose of encouraging business to remain in Pennsylvania and to expand
employment opportunities within the state. Sales and use tax receipts for the
fiscal year increased $155.5 million, or 2.8%, over receipts during fiscal 1995.
All of the increase was produced by the non-motor vehicle portion of the tax as
receipts from the sale of motor vehicles declined slightly for fiscal 1996.
Personal income tax receipts for the fiscal year increased $291.1 million, or
5.7%, over receipts during fiscal 1995. Personal income tax receipts were aided
by a 10.2% increase in non-withholding tax payments which generally are
comprised of quarterly estimated and annual final return tax payments. Non-tax
receipts for the fiscal year increased $23.7 million for the fiscal year.
Included in that increase was $67 million in net receipts from a tax amnesty
program that was available for a portion of the 1996 fiscal year. Some portion
of the tax amnesty receipts represent normal collection of delinquent taxes. The
tax amnesty program is not expected to be repeated.
Transfers to the Tax Stabilization Reserve Fund from fiscal 1996
operations were $27.6 million. This amount represents the 15% of the fiscal year
ending unappropriated surplus transfer provided under current law. With the
addition of this transfer, the Tax Stabilization Reserve Fund balance is over
$215 million.
Fiscal 1997 Budget: The enacted fiscal 1997 budget provides for
------------------
expenditures from Commonwealth revenues of $16,375.8 million, an increase of
0.6% over appropriated amounts from Commonwealth revenues for fiscal 1996. The
fiscal 1997 budget is based on anticipated Commonwealth revenues before refunds
of $16,744.5 million, an increase over actual fiscal 1996 revenues of 2.5%. The
revenue estimate for fiscal 1997 includes provisions for a $15 million tax
credit program enacted with the fiscal 1997 budget for businesses creating new
jobs. Staggered corporation tax years cause fiscal 1997 revenues to continue to
be affected by the business tax reductions enacted during the past two completed
fiscal years. These reductions, together with the new job creation tax credit,
cause revenue growth comparisons between fiscal 1996 and fiscal 1997 to be
understated. When taking into account the effect of the recent tax changes,
revenues are anticipated in the fiscal 1997 budget to increase at a rate of
3.0%. The fiscal 1997 revenue estimate is based on a forecast of the national
economy for real gross domestic product to slow to a
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growth rate of 2.0% for 1996 and below 1.5% for 1997. The expectation for
slowing economic growth is based on an assumption that the Federal Reserve Board
does not cut interest rates and an assumption that foreign economic growth is
weak. The consequence of this economic scenario is a U.S. economy with very low
growth, slow gains in consumer spending, declining inflation rates, but
increasing unemployment which raises the unemployment rate to over 6.0% by the
end of 1996.
Increased authorized spending for fiscal 1997 is driven largely by
increased costs of the corrections and the probation and parole program.
Continuation of the trend of a rapidly rising population increases operating
costs for correctional facilities and requires the opening of new facilities.
The fiscal 1997 budget contains an appropriation increase in excess of $110
million for these programs. The approved budget also contains some departmental
restructurings. The Department of Community Affairs was eliminated with certain
of its programs transferred to the Department of Commerce that has been re-named
the Department of Community and Economic Development. In addition to assuming
some of the community programs, a significant restructuring of the economic
development programs was completed with the establishment of the new Department
of Community and Economic Development. Although the departmental restructurings
are estimated to save approximately $8 million, a $25 million increase in funds
was committed to economic and community development programs for fiscal 1997.
Providing funding for these program in cases in a fiscal year budget
where appropriations increased by only $96.7 million, or 0.6%, required
reductions and savings in other programs funded from the General Fund. A major
reform of the current welfare system was enacted in May 1996 to encourage
recipients toward self-sufficiency through work requirements, to provide
temporary support for families showing personal responsibility and to maintain
safeguards for those who cannot help themselves. Net savings to the fiscal 1997
budget of $176.5 million is anticipated. Many of these savings are redirected in
the fiscal 1997 budget toward providing additional support services to those
working and seeking work. Of the net savings, $21 million is committed to job
training opportunities and an additional $69 million towards making day care
services available to welfare recipients for work opportunities. The fiscal 1997
budget also provides additional funding without requiring additional
appropriations. An actuarial reduction of 112 basis points in the employer
contribution rate is estimated to save school districts approximately $21
million for the fiscal year. Additional savings can be expected to be realized
by school districts from legislated changes to teach sabbatical leaves, worker's
compensation insurance and to revised prevailing wage surveys by the Department
of Labor and Industry. These savings and program funding increases to special
education and pupil transportation programs and an initiative for technology
improvements for schools are estimated to be equal to approximately $138 million
of increased funding to local schools, equivalent to a 4.5% increase in the
basic education funding for fiscal 1997.
The fiscal 1997 budget anticipated receiving $60 million of proceeds
from the securitization of $151.7 million of loans held by the Sunny Day Fund.
This fund was created to finance large-scale economic development loans to
attract significant employment opportunities to the Commonwealth. Its funding
was generally obtained from General Fund appropriations. The fund has been
abolished and its loans have been transferred to the Pennsylvania Industrial
Development Fund ("PIDA"). In September 1996, PIDA issued bonds secured by its
loan revenues, including the Sunny Day Fund loans. The bond proceeds were used
to refund outstanding debt of the Commonwealth. The effect
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of this transaction on the fiscal 1997 budget is a reduction of the amount of
debt service needed to be paid from the General Fund by $84.7 million, $24.7
million above the amount anticipated in the fiscal 1997 budget.
The fiscal 1997 budget is based on the presumption that federally
enacted reforms to Medicaid would raise the federal reimbursement percentage for
those costs to 57% from an approximate 53% % rate for fiscal 1996. The higher
reimbursement rate, expected to be effective in October 1996, was anticipated to
provide an additional $260 million of federal funds during fiscal 1997 and
enable the Commonwealth to reduce its appropriations for the medical assistance
program by a like amount for fiscal 1997. The U.S. Congress has not approved the
legislation making these changes. Current expectations are that the additional
federal funds will not be available at the time and in the amount as anticipated
in the approved fiscal 1997 budget. The Commonwealth expects to use
intergovernmental transfer funds obtained through a pooling transaction to help
make up the loss of this funding.
The fiscal 1997 budget assumes a drawdown of the $156.3 million fiscal
year beginning unappropriated surplus to fund the enacted level of
appropriations within the current estimate of revenues. The anticipated drawdown
of the balance does not consider the availability of appropriation lapses
normally occurring during a fiscal year that are used to fund supplemental
appropriations or increase unappropriated surplus.
Actual Commonwealth revenues for the fiscal year through January 1997
are $189.2 million above estimated levels. The higher than estimated revenues
have occurred generally because economic conditions in the nation and the state
have exceeded the projections used to project revenues. Collections from
corporate taxes, the sales tax, and the personal income tax are all above
estimate for the period. In a review of the trends for revenue and expenditure
for fiscal 1997 completed during January 1997 in preparation of its fiscal 1998
budget proposal to the General Assembly, the Commonwealth raised its estimate of
Commonwealth revenues for the fiscal year by $194.5 million, to raise the fiscal
year-over-year growth to 3.7%. In that review the potential for additional
appropriations for the fiscal year in the net amount of $89.5 million was
identified. Medical assistance costs represent $85.0 million of the amount,
largely to offset the portion, not otherwise covered, of an increase to the
federal participation rate anticipated in the budget that did not occur. Based
on these revisions and estimated appropriation lapses of $100 million, the
Commonwealth projects an unappropriated surplus balance of $209 million on June
30, 1997, prior to a projected $31.3 million transfer to the Tax Stabilization
Reserve Fund.
Proposed Fiscal 1998 Budget. On February 4, 1997, the governor
---------------------------
presented his proposed General Fund budget for fiscal 1998 to the General
Assembly. Revenue estimates in the proposed budget were developed using a
national economic forecast with projected annual growth rates below 2%. Total
Commonwealth revenues before reductions for refunds and proposed tax changes are
estimated to be $17,339.2 billion, 2.4% above revised estimates for fiscal 1997.
Proposed appropriations against those revenues total $16,915.7 million, a 2.7%
increase over currently estimated fiscal 1997 appropriations. As proposed, the
fiscal 1998 budget assumes the drawdown of the currently estimated $177.6
million unappropriated surplus at June 30, 1997; however, no appropriation
lapses are included in this projection. Four tax law proposals and a proposed
increase transfer of taxes to a special purpose are included in the proposed
budget. Together these items are estimated to reduce fiscal 1998 Commonwealth
revenues by $66.9 million. All require legislative enactment. The General
Assembly is reviewing the proposed budget in hearings before its
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committees. The General Assembly may change, eliminate or add amounts and items
to the Governor's proposed budget and there can be no assurance that the budget,
as prepared by the Governor, will be enacted into law.
Disaster Declaration. A disaster emergency was declared by the
--------------------
Governor and a federal major disaster declaration was made by the President of
the United States for certain counties in the Commonwealth for a blizzard and
subsequent flooding in January 1996. Substantial damage to public and private
facilities occurred and many municipalities' financial resources have been
strained by the costs of responding to these weather related conditions. A
special session of the General Assembly was convened by the Governor to consider
legislation to respond to those needs. Legislation was enacted that authorized
$110 million of general obligation debt to provide for the state's share of the
required match for federal public assistance and disaster mitigation funds,
appropriated $13 million from tax amnesty receipts to fund the state match for
the federal individual assistance program, and authorized the use of current
Motor License Fund revenues for capital projects to repair flood damaged state
highways and bridges.
Tax Structure. The Commonwealth, through its principal operating funds
-------------
- -- the General Fund, the Motor License Fund and the State Lottery Fund --
receives over 57% of its revenues from taxes levied by the Commonwealth.
Interest earnings, licenses and fees, lottery ticket sales, liquor store
profits, miscellaneous revenues, augmentations and federal government grants
supply the balance of receipts to these funds.
Tax and fee proceeds relating to motor fuels and vehicles are
constitutionally dedicated for highway purposes and are deposited into the Motor
License Fund. Lottery ticket sale revenues are deposited into the State Lottery
Fund and are reserved by statute for programs to benefit senior citizens.
Revenues, other than those specified to be deposited in a particular fund, are
deposited into the General Fund.
The major tax sources for the General Fund of the Commonwealth are the
sales tax enacted in 1953, the personal income tax enacted in 1971, and the
corporate net income tax which in its present form dates back to 1935. The last
restructuring of the Commonwealth's tax system occurred with the enactment of
the Tax Reform Code of 1971 that codified many of the taxes levied by the
Commonwealth.
The major tax sources for the Motor License Fund are the liquid fuels
taxes and the oil company franchise tax. The Motor License Fund also receives
revenues from fees levied on heavy trucks and from taxes on fuels used for
aviation purposes. Use of these revenues is restricted to the repair and
construction of highway bridges and aviation programs respectively.
The Tax Stabilization Reserve Fund was established in 1986 to provide
a source of funds that can be used to alleviate emergencies threatening the
health, safety or welfare of the Commonwealth's citizens or to offset
unanticipated revenue shortfalls due to economic downturns. Income to the fund
is provided by specific appropriation from available balances by the General
Assembly, from investment income and by the transfer to the Tax Stabilization
Reserve Fund of 15% of the budgetary basis operating surplus in the General Fund
at the close of any fiscal year. In addition, the proceeds received from the
disposition of assets of the Commonwealth not specified to be deposited
elsewhere are also to be deposited into the Tax Stabilization Reserve Fund. The
Commonwealth has not prepared estimates of such sales.
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Assets of the Tax Stabilization Reserve Fund may be used only upon the
recommendation by the Governor and approval by the vote of two-thirds of the
members of each house of the General Assembly. In February 1991, in response to
a projected fiscal 1991 General Fund budgetary deficit caused by lower revenues
and higher expenditures than budgeted, the Governor recommended, and the General
Assembly authorized, the available balance of $133.8 million in the Tax
Stabilization Reserve Fund be used to pay medical assistance and special
education costs not covered by budgeted funds. On June 30, 1996, the balance in
the Tax Stabilization Reserve Fund was $183.6 million and $27.6 million was in
the General Fund pending transfer to the Tax Stabilization Reserve Fund for
fiscal 1996. The transfer was completed in September 1996.
Debt Limits and Outstanding Debt. The Pennsylvania Constitution
--------------------------------
permits the Commonwealth to issue the following types of debt: (i) debt to
suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years, and (iv) tax anticipation notes payable in the
fiscal year of issuance. All debt except tax anticipation notes must be
amortized in substantial and regular amounts.
Outstanding general obligation debt totaled $5,054.5 million on June
30, 1996, an increase of $9.1 million from June 30, 1995. Over the 10-year
period ending June 30, 1996, total outstanding general obligation debt increased
at an annual rate of 1.1%. Within the most recent 5-year period, outstanding
general obligation debt has grown at an annual rate of 1.1%.
General obligation debt for non-highway purposes of $4,206.2 million
was outstanding on June 30, 1996. Outstanding debt for these purposes increased
$137.5 million since June 30, 1995, in large part due to the recent emphasis the
Commonwealth has placed on infrastructure investment as a means to spur economic
growth and to provide a higher quality of life for Commonwealth residents. For
the period ending June 30, 1996, the 10-year and 5-year average annual
compounded growth rate for total outstanding debt for non-highway purposes has
been 3.8% and 5.5%, respectively. In its current debt financing plan,
Commonwealth infrastructure investment projects include improvement and
rehabilitation of existing capital facilities, such as water supply systems and
construction of new facilities, such as roads, prisons and public buildings.
Outstanding general obligation debt for highway purposes was $848.3
million on June 30, 1996, a decrease of $128.4 million from June 30, 1995.
Highway outstanding debt has declined over the most recent 10-year and 5-year
periods ending June 30, 1996 by the annual average rates of 6.2% and 11.4%,
respectively.
During the period from 1980 through 1986, all of the Commonwealth's
highway investment was funded from current year revenues. From 1987 through
1994, a limited return to the issuance of long-term bonds was required to
finance immediately needed repairs to highway bridges. The highway bridge
bonding program is funded from the Highway Bridge Improvement Restricted Account
within the Motor License Fund. Revenues in this restricted account are derived
from a six cent per gallon surtax on motor fuel used on Commonwealth highways by
motor carriers and increased registration fees for trucks and truck tractors
weighing above 26,000 pounds. The two funding sources for the Highway Bridge
Improvement Restricted Account were enacted on
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July 13, 1987 to replace revenues from an axle tax on heavy trucks which was
declared unconstitutional by the United States Supreme Court.
The Commonwealth may incur debt to fund capital projects for community
colleges, highways, public improvements, transportation assistance, flood
control, redevelopment assistance, site development and the Pennsylvania
Industrial Development Authority. Before a project may be funded, it must be
itemized in a capital budget bill adopted by the General Assembly. An annual
capital budget bill states the maximum amount of debt for capital projects that
may be incurred during the current fiscal year for projects authorized in the
current or previous years' capital budget bills. Capital projects debt is
subject to a constitutional limit on debt. As of June 30, 1996, $3,909.8 million
of capital projects debt was outstanding.
The issuance of electorate approved debt is subject to the enactment
of legislation which places on the ballot the question of whether debt shall be
incurred. Such legislation must state the purposes for which the debt is to be
authorized and, as a matter of practice, includes a maximum amount of funds to
be borrowed. Upon electorate approval and enactment of legislation implementing
the proposed debt-funded program, bonds may be issued. As of June 30, 1996, the
Commonwealth had $903.5 million of electorate approved debt outstanding.
Debt issued to rehabilitate areas affected by disasters is authorized
by specific legislation. The Commonwealth had $40.2 million of disaster relief
debt outstanding as of June 30, 1996.
Due to the timing of major tax payment dates, the Commonwealth's cash
receipts are generally concentrated in the last four months of the fiscal year,
from March through June. Disbursements are distributed more evenly throughout
the fiscal year. As a result, operating cash shortages can occur during certain
months of the fiscal year. The Commonwealth engages in short-term borrowing to
fund expenses within the fiscal year through the sale of tax anticipation notes.
Pending the issuance of bonds, the Commonwealth may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may not
exceed three years. Currently, $60 million of bond anticipation notes are
authorized to be issued in the form of commercial paper notes. As of March 11,
1997, $24.7 million was issued and outstanding.
Certain state-created organizations have statutory authority to issue
debt for which state appropriations to pay debt service thereon are not
required. The debt of these organizations is supported by assets of, or revenues
derived from, the various projects financed and is not an obligation of the
Commonwealth. Some of these agencies, however, are indirectly dependent on
Commonwealth appropriations. These entities include: Delaware River Joint Toll
Bridge Commission, Delaware River Port Authority, Pennsylvania Energy
Development Authority, Pennsylvania Higher Education Assistance Agency,
Pennsylvania Higher Educational Facilities Authority, Pennsylvania Industrial
Development Authority, Pennsylvania Infrastructure Investment Authority,
Pennsylvania State Public School Building Authority, Pennsylvania Turnpike
Commission, the Philadelphia Regional Port Authority and the Pennsylvania
Economic Development Financing Authority. As of December 31, 1993, the aggregate
outstanding indebtedness of these entities was $8,356.1 million.
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The Pennsylvania Housing Finance Agency ("PHFA"), as of December 31,
1996, had $2,357.9 million of revenue bonds outstanding. The statute creating
PHFA provides that if there is a potential deficiency in the capital reserve
fund or if funds are necessary to avoid default on interest, principal or
sinking fund payments on bonds or notes of PHFA, the Governor, upon notification
from the PHFA, shall place in the budget of the Commonwealth for the next
succeeding year an amount sufficient to make up any such deficiency or to avoid
any such default. The budget as finally adopted by the General Assembly may or
may not include the amount so placed therein by the Governor. PHFA is not
permitted to borrow additional funds so long as any deficiency exists in the
capital reserve fund.
The Hospitals and Higher Education Facilities Authority of
Philadelphia, as of June 30, 1996, had $21.1 million of bonds outstanding which
benefit from a moral obligation of the Commonwealth's Department of Public
Welfare to request a budget appropriation to make up any deficiency in the debt
service reserve fund for said bonds. The budget as finally adopted may or may
not include the amount requested.
The Commonwealth, through several of its departments and agencies, has
entered into various agreements to lease, as lessee, certain real property and
equipment and to make lease rental payments. Some of those lease payments are
pledged as security for various outstanding debt obligations issued by certain
public authorities or other entities within the state. All lease payments due
from Commonwealth departments and agencies are subject to and dependent upon an
annual spending authorization approved through the Commonwealth's annual budget
process. The Commonwealth is not required by law to appropriate or otherwise
provide moneys from which the lease payments are to be paid. The obligations to
be paid from such lease payments are not bonded debt of the Commonwealth.
The Commonwealth maintains contributory benefit pension plans covering
all state employees, public school employees and employees of certain other
state-related organizations. Unfunded actuarial accrued liabilities for the
Public School Employees' Retirement Fund as of June 30, 1994 were $3,797
million, and for the State Employees' Retirement Fund were negative $249 million
as of December 31, 1994.
Municipal Finance
-----------------
Local Finance. The Local Government Unit Debt Act (Act 52 of 1978)
-------------
(the "Debt Act") establishes debt limits for local government units. Local
government units include municipalities (except a first class city or county),
school districts and intermediate units. The Act establishes three classes of
debt for a local government unit: (i) electoral debt (debt incurred with the
approval of the electors of the municipality for which there is no limitation on
the amount that may be incurred); (ii) nonelectoral debt (debt of a local
government unit not being electoral or lease rental debt); (iii) lease rental
debt (the principal amount of debt of an authority organized by a municipality
or debt of another local government unit, which debt is to be repaid by the
local government unit through a lease, subsidy contract, guarantee or other form
of agreement evidencing acquisition of a capital asset, payable or which may be
payable out of tax revenues and other general revenues. Each local government
unit is subject to a limitation as to the amount of class "ii" and class "iii"
debt which may be issued which is based upon such local government unit's
Borrowing Base.
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Borrowing Base is defined in the Debt Act as the annual arithmetic
average of the total revenues for the three full fiscal years ended next
preceding the date of the incurring of nonelectoral debt or lease rental debt.
Total revenues for the purposes of the Debt Act excludes, inter alia, certain
state and federal subsidies and reimbursements, certain pledged revenues,
interest on pledged funds and nonrecurring items.
The debt limitations applicable to the various local government units
are set forth below:
Nonelectoral plus
Nonelectoral Lease Rental
------------ -----------------
First Class
School District 100% of Borrowing Base 200% of Borrowing Base
County 300% of Borrowing Base 400% of Borrowing Base
Other 250% of Borrowing Base 350% of Borrowing Base
A county may utilize an additional debt limit of 100% of its Borrowing
Base for additional nonelectoral or additional lease rental debt, or both, if
such county has assumed countywide responsibility for hospitals and other public
health services, air and water pollution control, flood control, environmental
protection, water distribution and supply systems, sewage and refuse collection
and disposal systems, education at any level, highways, public transportation,
or port operations, but such additional debt limit may be so utilized only to
provide funds for and towards the costs of capital facilities for any or any
combination of the foregoing purposes.
City of Philadelphia. The City of Philadelphia ("Philadelphia") is the
--------------------
largest city in the Commonwealth, with an estimated population of 1,585,577
according to the 1990 Census. Philadelphia functions both as a city of the first
class and a county for the purpose of administering various governmental
programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt to liquidate budget deficits and to make factual
findings and recommendations to the assisted city concerning its budgetary and
fiscal affairs. At this time, Philadelphia is operating under a five year fiscal
plan approved by PICA on April 30, 1996.
PICA has issued $1,761,710,000 of its Special Tax Revenue Bonds in the
following series: Series of 1992 in the amount of $474,555,000; Series of 1993
in the amount of $643,430,000; and Series of 1993A in the amount of $178,675,000
(issued to advance refund a portion of the Series of 1992); Series of 1994 in
the amount of $122,020,000 and Series of 1996 in the amount of $343,030,000
(issued to advance refund the Series of 1994 and the remaining outstanding
portion of the Series of 1992). This financial assistance has included the
refunding of certain city general obligation bonds, the funding of capital
projects and the liquidation of the Cumulative General Fund balance deficit as
of June 30, 1992 of $224.9 million. The audited General Fund balance of the city
as of June 30, 1996, showed a surplus of approximately $118.5 million, up from
approximately $80.5 million as of June 30, 1995.
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No further bonds are to be issued by PICA for the purpose of financing
a capital project or deficit as the authority for such bond sales expired
December 31, 1994. PICA's authority to issue debt for the purpose of financing a
cash flow deficit expired on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA had $1,146.2 million in special revenue
bonds outstanding as of December 31, 1995.
Litigation. According to the Official Statement dated March 11, 1997
----------
describing General Obligation Bonds of the Commonwealth of Pennsylvania, the
Office of Attorney General and the Office of General Counsel have reviewed the
status of pending litigation against the Commonwealth, its officers and
employees, and have identified the following cases as ones where an adverse
decision could materially affect the Commonwealth's governmental operations.
Listed below are all litigation items so identified that may have a material
effect on government operations of the Commonwealth and consequently, the
Commonwealth's ability to pay debt service on its obligations.
Under Act No. 1978-152 approved September 28, 1978, as amended, the
General Assembly approved a limited waiver of sovereign immunity. Damages for
any loss are limited to $250,000 for each person and $1,000,000 for each
accident. The Supreme Court of Pennsylvania has held that this limitation is
constitutional. Approximately 3,500 suits against the Commonwealth remain open.
Tort claim payments for the departments and agencies, other than the Department
of Transportation, are paid from departmental and agency operating and program
appropriations. Tort claim payments for the Department of Transportation are
paid from an appropriation from the Motor License Fund. The Motor License Fund
tort claim appropriation for fiscal 1996 is $27.0 million.
Baby Neal v. Commonwealth. In April of 1990, the American Civil
-------------------------
Liberties Union ("ACLU") and various named plaintiffs filed a lawsuit against
the Commonwealth in federal court seeking an order requiring the Commonwealth to
provide additional funding for child welfare services. No figures for the amount
of funding sought are available. A similar lawsuit filed in the Commonwealth
Court, captioned as The City of Philadelphia, Hon. Wilson Goode v. Commonwealth
of Pennsylvania, Hon. Robert P. Casey et al., was resolved through a court
approved settlement providing, inter alia, for more Commonwealth funding for
these services for fiscal year 1991 as well as a commitment to pay to counties
$30.0 million over five years. The Commonwealth then sought dismissal of the
federal action based on, among other things, the settlement of the Commonwealth
Court case.
In January of 1992, the U.S. District Court, per Judge Kelly, denied
the ACLU's motion for class certification and held that the "next friends"
seeking to represent the interests of the 16 minor plaintiffs in the case were
inadequate representatives. The Commonwealth filed a motion for summary judgment
on most of the counts in the ACLU's complaint on the basis of, among other
things, Suter v. Artist M.. After the motion for summary judgment was filed, the
ACLU filed a renewed motion to certify sub-classes.
In December of 1994, the Third Circuit reversed Judge Kelly's ruling,
finding that he erred in refusing to certify the class. Consistent with the
Third Circuit's ruling, the District Court certified the class, and the parties
have resumed discovery.
County of Allegheny v. Commonwealth of Pennsylvania. On December 7,
---------------------------------------------------
1987, the Supreme Court of Pennsylvania held in County of Allegheny v.
Commonwealth of Pennsylvania, that the statutory scheme for
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county funding of the judicial system is in conflict with the Pennsylvania
Constitution. However, the Supreme Court of Pennsylvania stayed its judgment to
afford the General Assembly an opportunity to enact appropriate funding
legislation consistent with its opinion and ordered that the prior system of
county funding shall remain in place until this is done.
On December 7, 1992, the State Association of County Commissioners
filed a new action in mandamus seeking to compel the Commonwealth to comply with
the decision in County of Allegheny. The Court issued the writ on July 26, 1996,
and appointed retired Justice and Senior Judge Frank J. Montemuro, Jr. as
special master to devise and submit a plan for implementation. The Court
indicated that it intends to require implementation by January 1, 1998.
On January 28, 1997, the Supreme Court granted Justice Montemuro's
request for a 90-day extension of time within to file his report. The Court also
announced the establishment of a tripartite committee, including representatives
of the Executive Department, the Legislative Department and Justice Montemuro,
to develop an implementation plan. Following issuance of the writ, the President
Pro Tempore of the Senate and the Speaker of the House filed a petition seeking
reconsideration from the Court.
Fidelity Bank v. Commonwealth of Pennsylvania. On November 30, 1989,
---------------------------------------------
Fidelity Bank, N.A. ("Fidelity") filed a declaratory judgment action in the
Commonwealth Court of Pennsylvania in which Fidelity raised various challenges
to the constitutional validity of the Amended Bank Shares Act (Act No. 1989-21)
and related legislation. After the Commonwealth Court ruled in favor of the
Commonwealth, finding no constitutional deficiencies, Fidelity, the
Commonwealth, and certain intervenor banks filed Notices of Appeal to the
Pennsylvania Supreme Court on August 5, 1994.
Pursuant to a Settlement Agreement dated as of April 21, 1995, the
Commonwealth agreed to enter a credit in favor of Fidelity in the amount of
$4,100,000 in settlement of the constitutional and non-constitutional issues,
including interest. This credit represents a credit of approximately five % (5%)
of the potential claim of Fidelity, had the constitutional issues been resolved
in favor of Fidelity.
Pursuant to a separate Settlement Agreement dated as of April 21,
1995, the Commonwealth settled with the intervening banks, referred to as "New
Banks," in connection with issues concerning the New Bank Tax Credit law which
were raised in the above-referenced Pennsylvania Supreme Court appeal. As part
of the settlement, the Commonwealth agreed neither to assess nor attempt to
recoup any new bank tax credits which had been granted or taken by any of the
intervening banks. No expenditure of Commonwealth funds is required in order to
implement this aspect of the settlement with the intervening banks, since the
credits have already been claimed by said banks.
Although the described settlements have eliminated the Commonwealth's
exposure to Fidelity and the intervening banks, other banks have filed petitions
which are currently pending with the Commonwealth Court. One or more of these
banks may seek to raise the issues which were advanced by Fidelity, although not
brought to final resolution by the Pennsylvania Supreme Court.
Pennsylvania Association of Rural and Small Schools (PARSS) v. Casey.
--------------------------------------------------------------------
This action was filed in January, 1991 by an association of rural and small
schools, several individual school districts, and a group of parents and
students, against Governor Robert P. Casey and Secretary of Education Donald
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M. Carroll, Jr. The action challenges the constitutionality of the
Commonwealth's system for funding local school districts. The action consists of
two parallel cases, one in the Commonwealth Court of Pennsylvania, and one in
the United States District Court for the Middle District of Pennsylvania. The
federal court case has been indefinitely stayed, pending resolution of the state
court case. The state court case has been assigned to Judge Pellegrini. Trial
was held in January 1997. The record remains open to permit respondents to
cross-examine a surprise expert witness presented by petitioners, and to permit
respondents to present their own expert. The parties expect to complete all
testimony in the Spring of 1997. A briefing schedule will be established after
the record closes.
Austin v. Department of Corrections, et al. In November 1990, the
------------------------------------------
American Civil Liberties Union ("ACLU") brought a class action lawsuit on behalf
of the inmate populations in thirteen Commonwealth correctional institutions.
The lawsuit challenged the conditions of confinement at each
institution and included specified allegations of overcrowding, deficiencies in
medical and mental health services, inadequate environmental conditions,
disparate treatment of HIV positive prisoners and other assorted claims.
No damages are sought. The ACLU sought injunctive relief which would
modify conditions, change practices and procedures and increase the number of
staff deployment. On August 1, 1994, the parties submitted a proposed settlement
agreement to the Court for its review. The Court held hearings on the proposed
Settlement Agreement in December 1994. The Court approved the Settlement
Agreement with a January 17, 1995 Memorandum. On February 3, 1995, the
Commonwealth paid $1.3 million in attorneys' fees to the plaintiffs' attorneys
in accordance with the Agreement. The remaining $100,000 in attorneys' fees were
paid in January 1997.
The parties are currently complying with monitoring provisions
outlined in the Agreement. The monitoring phase will expire on January 6, 1998.
The attorneys' fees for the 3-year monitoring period will not exceed $60,000 in
any one year.
Envirotest/Synterra Partners. On November 11, 1993, the Commonwealth
of Pennsylvania, Department of Transportation and Envirotest/Synterra Partners
("Envirotest"), a partnership, entered into a "Contract for Centralized
Emissions Inspection Facilities." Thereafter, Envirotest acquired certain land
and constructed approximately 85 automobile emissions inspection facilities
throughout various regions of the Commonwealth.
By Act of the General Assembly in October 1994 (Act No. 1994-95), the
emissions testing program was suspended and the Department of Transportation was
directed to consider other alternatives to the centralized testing program.
Former Governor Robert P. Casey vetoed the legislation and the General Assembly
overrode the veto in November 1994. As a result, the program was suspended and
the Department of Transportation was prohibited from expending funds to
implement the program.
On December 15, 1995, Envirotest Systems Corporation, Envirotest
Partners (successor to Envirotest/Synterra Partners) and the Commonwealth of
Pennsylvania entered into a Settlement Agreement ("Agreement") pursuant to which
the parties settled all claims which Envirotest might have had against the
Commonwealth arising from the suspension of the emissions testing program.
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Under the Agreement, Envirotest is to receive $145 million, with interest at 6%
per annum, payable $25 million in 1995, $40 million each in 1996, 1997, and
1998. An additional $11 million may be required to be paid in 1998, depending
upon the results of property liquidations by Envirotest.
Pennsylvania Human Relations Commission v. School District of
-------------------------------------------------------------
Philadelphia, et al. v. Commonwealth of Pennsylvania, et al. On November 3,
- -----------------------------------------------------------
1995, the Commonwealth of Pennsylvania and the Governor of Pennsylvania, along
with the City of Philadelphia and the Mayor of Philadelphia, were joined as
additional respondents in an enforcement action commenced in Commonwealth Court
in 1973 by the Pennsylvania Human Relations Commission against the School
District of Philadelphia pursuant to the Pennsylvania Human Relations Act. The
enforcement action was pursued to remedy unintentional conditions of segregation
in the public schools of Philadelphia. The Commonwealth and the City were joined
in the "remedial phase" of the proceeding "to determine their liability, if any,
to pay additional costs necessary to remedy the unlawful conditions found to
exist in the Philadelphia public schools." The Commonwealth and the City sought
to appeal their joinders to the Supreme Court of Pennsylvania, but the Court
denied the petitions without comment.
On February 28, 1996, the School District of Philadelphia filed a
third-party complaint against the Commonwealth of Pennsylvania asking
Commonwealth Court to require the Commonwealth to "supply such funding as is
necessary for full compliance with the November 28, 1994 and other remedial
Orders of the Commonwealth Court." In addition, a group of intervenors on March
4, 1996 filed a third party complaint against the Commonwealth of Pennsylvania
and the City of Philadelphia requesting Commonwealth Court to declare that "it
is the obligation of the Commonwealth and the City to supply the additional
funds identified as necessary for the District to fully comply with the orders
of the Commonwealth Court," and to require the Commonwealth and the City to
supply such additional funding as is necessary for the District to comply with
the orders.
By order dated April 30, 1996, Judge Doris A. Smith of Commonwealth
Court overruled the Commonwealth's and the City's preliminary objections seeking
dismissal of the claims against them. The Commonwealth and the City thereafter
filed answers to the complaints, asserting numerous defenses. The Commonwealth
also asserted a cross-claim against the City of Philadelphia claiming that if
any party is liable, sole liability rests with the City; in the alternative, the
Commonwealth argued that if it is held to be liable, it has a right of indemnity
or contribution against the City. Trial commenced on May 30, 1996. During the
course of the trial, upon motion of the Commonwealth, the Supreme Court of
Pennsylvania on July 3, 1996 assumed extraordinary plenary jurisdiction and
directed Judge Smith to conclude the proceedings within 60 days and to file with
the Supreme Court findings of fact, conclusions of law and a final opinion. The
Supreme Court retained jurisdiction. The evidence in the trial was concluded on
July 11, 1996, after 19 days of trial. On August 20, 1996, Judge Smith issued an
Opinion and Order. Judge Smith specifically found that "[b]ecause of the lack of
adequate funds to comply with the remedial order, the School District is
entitled to additional resources for 1996-1997 of $45.1 million." In filings
made on August 30, 1996, the Commonwealth requested the Supreme Court to enter
judgments in favor of the Commonwealth and the Governor on all claims. On
September 10, 1996, the Supreme Court of Pennsylvania issued an order granting
the Commonwealth's Motion to Vacate. The Court directed its Prothonotary to
establish a briefing schedule and a date for oral argument and indicated that it
would issue a further order limiting the issue to be addressed. Finally, the
Supreme Court stated that Commonwealth Court "is divested of jurisdiction
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of th[e] matter..., and all further proceedings in the Commonwealth Court are
stayed pending further order of th[e Supreme] Court." The Supreme Court again
retained jurisdiction. On January 28, 1997, the Supreme Court issued an order
directing the parties to brief certain issues. The Commonwealth's brief was due
March 19, 1997. Responsive briefs must be filed within 30 days thereafter.
Ridge v. State Employee's Retirement Board. On August 1, 1983, the
------------------------------------------
United States Supreme Court in Arizona Governing Committee v. Norris, 463 U.S.
1073 (1983) held that the use of gender distinct actuarial factors to calculate
pension benefits violated federal civil rights laws. Norris and the subsequent
Florida v. Long, 487 U.S. 223 (1988) limited required application of gender
neutral actuarial factors to benefits based on service credited on or after
August 1, 1983. Benefits based upon service credited before August 1, 1983,
could continue to be calculated using gender distinct actuarial factors. The
State Employee's Retirement Board and its sister agency, the Public School
Employee's Retirement Board, have been in full compliance with Norris, using
gender neutral factors for benefits based upon post-July 31, 1983 service and
gender distinct actuarial factors for benefits based upon pre-August 1, 1983
service. On December 29, 1993, Joseph H. Ridge, former judge of the Allegheny
Court of Common Pleas, filed in the Commonwealth Court a Petition for Review in
the Nature of Complaint in Mandamus and for a Declaratory Judgment against the
State Employee's Retirement Board. Judge Ridge filed an amended Petition for
Review on February 7, 1995. Judge Ridge alleges that the Retirement Board's use
of gender distinct actuarial factors for benefits based upon his pre-August 1,
1983 service violates Article I, Section 26 (equal protection) and Article I,
Section 28 (equal rights) of the Pennsylvania Constitution. He seeks "topped up"
benefits equal to those that a similarly situated female would be receiving. Due
to the constitutional nature of the claim, it is possible that a decision
adverse to the Retirement Board would be applicable to other members of the
State Employee's Retirement System and Public School Employee's Retirement
System who accrued service between the effective date of the state
constitutional provisions and before August 1, 1983, and who have received, are
receiving, or will receive benefits less than those received by other members of
the systems because of their sex or the sex of their survivors' annuitants. The
Commonwealth Court granted the Retirement Board's preliminary objections to
Judge Ridge's claims for punitive damages, attorneys' fees and compensatory
damages other than a recalculation of his pension benefits should he prevail.
The Commonwealth Court also denied Judge Ridge's preliminary objections to the
Retirement Board's New Matter. On November 20, 1996, the Commonwealth Court
heard oral argument en banc on Judge Ridge's motion for judgment of the
pleadings. A decision on that motion is pending.
Yesenia Marrero, et al. v. Commonwealth, et al. On February 24, 1997,
----------------------------------------------
five residents of the City of Philadelphia, on their own behalf and on behalf of
their school-aged children, joined by the City of Philadelphia, the School
District of Philadelphia, and two non-profit organizations, ASPIRA, Inc. of
Pennsylvania and the Philadelphia Branch of the NAACP, filed in the Commonwealth
Court of Pennsylvania a civil action for declaratory judgment against the
Commonwealth of Pennsylvania, the General Assembly of Pennsylvania, the
presiding officers of the General Assembly, the Governor of Pennsylvania, the
State Board of Education, the Department of Education, and the Secretary of
Education. Citing the Education Clause of the Constitution of Pennsylvania, as
well as provisions of the Declaration of Rights under the Pennsylvania
Constitution, the petitioners claim, inter alia, that Pennsylvania's "statutory
education financing system is unconstitutional as applied to the School District
[of Philadelphia]"; that "[t]he system of
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funding public education violated the constitutional mandate to provide a
thorough and efficient system of public education in the City [of
Philadelphia]"; that "[t]he scheme for financing public education precludes the
Commonwealth from providing the constitutionally required thorough and efficient
system of public education in the circumstances faced by the School District [of
Philadelphia]"; and that "Defendants have failed to provide the School District
[of Philadelphia] with the resources and other assistance necessary to provide
all of its students with the quality of education to which they are
[c]onstitutionally entitled." The respondents will have thirty (30) days from
the date of service to respond to the petition for review.
PUBLIC OFFERING
---------------
Offering Price. The secondary market Public Offering Price per Unit is
--------------
computed by adding to the aggregate bid price of the Bonds in the Trust divided
by the number of Units outstanding, an amount based on the applicable sales
charge times the aggregate offering price of the Bonds (see "Public Offering
Price" in Part A for the applicable sales charge for the Trust). A proportionate
share of accrued interest on the Bonds to the expected date of settlement for
the Units is added to the Public Offering Price. Accrued interest is the
accumulated and unpaid interest on a Bond from the last day on which interest
was paid and is accounted for daily by the Trust at the initial daily rate set
forth under "Summary of Essential Information" in Part A of this Prospectus.
This daily rate is net of estimated fees and expenses. The Public Offering Price
can vary on a daily basis from the amount stated in Part A in accordance with
fluctuations in the prices of the Bonds and the price to be paid by each
investor will be computed as of the date the Units are purchased. The aggregate
bid price evaluation of the Bonds is determined in the manner set forth under
"Trustee Redemption."
The Evaluator may obtain current bid or offering prices for the Bonds
from investment dealers or brokers (including the Sponsor) that customarily deal
in tax-exempt obligations or from any other reporting service or source of
information which the Evaluator deems appropriate.
The sales charge computed by the Evaluator is based upon the number of
years remaining to maturity of each Bond. Bonds will be deemed to mature on
their stated maturity dates unless bonds have been called for redemption, funds
have been placed in escrow to redeem them on an earlier call date or are subject
to a "mandatory put," in which case the maturity will be deemed to be such other
date.
The table below sets forth the various sales charges based on the
length of maturity of each Bond:
As Percent of Public
Time to Maturity Offering Price
- ---------------- --------------------
less than 6 months 0%
6 mos. to 1 year 1%
over 1 yr. to 2 yrs. 1 1/2%
over 2 yrs. to 4 yrs. 2 1/2%
over 4 yrs. to 8 yrs. 3 1/2%
over 8 yrs. to 15 yrs. 4 1/2%
over 15 years 5 1/2%
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<PAGE>
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 Certifi cateholder will receive his
proportionate share of the accrued interest computed to the settlement date in
the case of a sale or termination and to the date of tender in the case of
redemption.
Employee Discounts. Employees (and their immediate families) of Reich
------------------
& Tang Distributors L.P. and its affiliates, Gruntal & Co., L.L.C. and of any
underwriter of a Trust, pursuant to employee benefit arrangements, may purchase
Units of a Trust at a price equal to the offering side evaluation of the
underlying securities in a Trust during the initial offering period and at the
bid side thereafter, divided by the number of Units outstanding plus a reduced
charge. Such arrangements result in less selling effort and selling expenses
than sales to employee groups of other companies. Resales or transfers of Units
purchased under the employee benefit arrangements may only be made through the
Sponsor's secondary market, so long as it is being maintained.
Distribution Of Units. Certain banks and thrifts will make Units of
---------------------
the Trust available to their customers on an agency basis. A portion of the
sales charge paid by their customers is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Units;
however, the Glass-Steagall Act does permit certain agency transactions and the
banking regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Sponsor intends to qualify the Units for sale in substantially all
States through the Underwriters and through dealers who are members of the
National Association of Securities Dealers, Inc. Units may be sold to dealers at
prices which represent a concession of up to (a) 4% of the Public Offering Price
for the Insured Municipal Securities Trust Series, (b) $25.00 per Unit for the
Insured Municipal Securities Trust Discount Series or (c) $33.00 per Unit, for
the Insured Municipal Securities Navigator Trust, subject to the Sponsor's right
to change the dealers' concession from time to time. In addition, for
transactions of 1,000,000 Units or more, the Sponsor intends to negotiate the
applicable sales charge and such charge will be disclosed to any such purchaser.
Such Units may then be distributed to the public by the dealers at the Public
Offering Price then in effect. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units. The Sponsor reserves the
right to change the discounts from time to time.
Sponsor's Profits. The Sponsor will receive a gross commission on all
-----------------
Units sold in the secondary market equal to the applicable sales charge on each
transaction. (See "Offering Price".) In addition, in maintaining a market for
the Units (see "Sponsor Repurchase") the Sponsor will realize profits or sustain
losses in the amount of any difference between the price at which they buy Units
and the price at which they resell such Units.
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Participants in the Total Reinvestment Plan can designate a broker as
the recipient of a dealer concession (see "Total Reinvestment Plan").
Comparison of Public Offering Price, Sponsor's Repurchase Price And
-------------------------------------------------------------------
Redemption Price. The secondary market Public Offering Price of Units will be
- ----------------
determined on the basis of the current bid prices of the Bonds in the Trust,
plus the applicable sales charge. The value at which Units may be resold in the
Secondary Market or redeemed will be determined on the basis of the current bid
prices of the Bonds without any sales charge. On the Evaluation Date, the Public
Offering Price and the Sponsor's initial Repurchase Price per Unit (each based
on the bid side evaluation of the Bonds in the Trust) each exceeded the
Redemption Price and the Sponsor's secondary market Repurchase Price per Unit
(based upon the current bid side evaluation of the Bonds in the Trust) by the
amounts shown under "Summary of Essential Information" in Part A of this
Prospectus. For this reason, among others (including fluctuations in the market
prices of such Bonds and the fact that the Public Offering Price includes the
applicable sales charge), the amount realized by a Certificateholder upon any
redemption of Sponsor repurchase of Units may be less than the price paid for
such Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
-------------------------------------------------------
The rate of return on an investment in Units of the Trust is measured
in terms of "Estimated Current Return" and "Estimated Long Term Return".
Estimated Long Term Return is calculated by: (1) computing the yield
to maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in a Trust's portfolio in accordance with accepted bond practices,
which practices take into account not only the interest payable on the Bond but
also the amortization of premiums or accretion of discounts, if any; (2)
calculating the average of the yields for the Bonds in each Trust's portfolio by
weighing each Bond's yield by the market value of the Bond and by the amount of
time remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of each Trust); and (3) reducing the average yield for
the portfolio of each Trust in order to reflect estimated fees and expenses of
that Trust and the maximum sales charge paid by Unitholders. The resulting
Estimated Long Term Return represents a measure of the return to Unitholders
earned over the estimated life of each Trust. The Estimated Long Term Return as
of the day prior to the Evaluation Date is stated for the Trust under "Summary
of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
any, on the Bonds in the portfolios of the Trust. Moreover, because interest
rates on Bonds purchased at a premium are generally higher than current interest
rates on newly issued bonds of a similar type with comparable rating, the
Estimated Current Return per Unit may be affected adversely if such Bonds are
redeemed prior to their maturity. On the day prior to the Evaluation Date, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for the Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of the Trust will
vary with changes in the fees and expenses of the Trustee and the
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<PAGE>
Evaluator applicable to the Trust and with the redemption, maturity, sale or
other disposition of the Bonds in the Trust. The Public Offering Price will vary
with changes in the bid prices of the Bonds. Therefore, there is no assurance
that the present Estimated Current Return or Estimated Long Term Return will be
realized in the future.
A schedule of cash flow projections is available from the Sponsor upon
request.
RIGHTS OF CERTIFICATEHOLDERS
----------------------------
Certificates. Ownership of Units of the Trust is evidenced by
------------
registered Certificates executed by the Trustee and the Sponsor. Certificates
may be issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been selected
by the Certificateholder. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and/or accompanied by a written
instrument or instruments of transfer. Although no such charge is presently made
or contemplated, the Trustee may require a Certificateholder to pay $2.00 for
each Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
Interest And Principal Distributions. Interest received by the Trust
------------------------------------
is credited by the Trustee to an Interest Account and a deduction is made to
reimburse the Trustee without interest for any amounts previously advanced.
Proceeds representing principal received from the maturity, redemption, sale or
other disposition of the Bonds are credited to a Principal Account.
Distributions to each Certificateholder from the Interest Account are
computed as of the close of business on each Record Date for the following
Payment Date and consist of an amount substantially equal to one-twelfth,
one-half or all of such Certificateholder's pro rata share of the Estimated Net
Annual Interest Income in the Interest Account, depending upon the applicable
plan of distribution. Distributions from the Principal Account (other than
amounts representing failed contracts, as previously discussed) will be computed
as of each semi-annual Record Date, and will be made to the Certifi cateholders
on or shortly after the next semi-annual Payment Date. Proceeds representing
principal received from the disposition of any of the Bonds between a Record
Date and a Payment Date which are not used for redemptions of Units will be held
in the Principal Account and not distributed until the second succeeding
semi-annual Payment Date. No distributions will be made to Certificateholders
electing to participate in the Total Reinvestment Plan. Persons who purchase
Units between a Record Date and a Payment Date will receive their first
distribution on the second Payment Date after such purchase.
Because interest payments are not received by the Trust at a constant
rate throughout the year, interest distributions may be more or less than the
amount credited to the Interest Account as of a given Record Date. 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
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<PAGE>
prior to distribution to Certificateholders may be of benefit to the Trustee
and do not bear interest to Certificateholders.
As of the first day of each month, the Trustee will deduct from the
Interest Account, and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Expenses and Charges"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In addition,
the Trustee may withdraw from the Interest and Principal Accounts such amounts
as may be necessary to cover purchases of Replacement Bonds and redemptions of
Units by the Trustee.
The estimated monthly, semi-annual or annual interest distribution per
Unit will initially be in the amount shown under Summary of Essential
Information and will change and may be reduced as Bonds mature or are redeemed,
exchanged or sold, or as expenses of the Trust fluctuate. No distribution need
be made from the Principal Account until the balance therein is an amount
sufficient to distribute $1.00 per Unit.
Distribution Elections. Interest is distributed monthly, semi-annually
----------------------
or annually, depending upon the distribution plan applicable to the Unit
purchased. Record Dates are the first day of each month for monthly
distributions, the first day of each June and December for semi-annual
distributions and the first day of each December for annual distributions.
Payment Dates will be the fifteenth day of each month following the respective
Record Dates.
Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Every October each Certificateholder may change his distribution election
by notifying the Trustee in writing of such change between October 1 and
November 1 of each year. (Certificateholders deciding to change their election
should contact the Trustee by calling the number listed on the back cover hereof
for information regarding the procedures that must be followed in connection
with this written notification of the change of election.) Failure to notify the
Trustee on or before November 1 of each year will result in a continuation of
the plan for the following 12 months.
Records. The Trustee shall furnish Certificateholders in connection
-------
with each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed in each
case as a dollar amount per Unit. Within a reasonable time after the end of each
calendar year the Trustee will furnish to each person who at any time during the
calendar year was a Certificateholder of record, a statement showing (a) as to
the Interest Account: interest received (including amounts representing interest
received upon any disposition of Bonds and earned original issue discount, if
any), amounts paid for purchases of Replacement Bonds and redemptions of Units,
if any, deductions for applicable taxes and fees and expenses of the Trust, and
the balance remaining after such distributions and deductions, expressed both as
a total dollar amount and as a dollar amount representing the pro rata share of
each Unit outstanding on the last business day of such calendar year; (b) as to
the Principal Account: the dates of disposition of any Bonds and the net
proceeds received therefrom (including any unearned original issue discount but
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<PAGE>
excluding any portion representing accrued interest), deductions for payments of
applicable taxes and fees and expenses of the Trust, amounts paid for purchases
of Replacement Bonds and redemptions of Units, if any, and the balance remaining
after such distributions and deductions, expressed both as a total dollar amount
and as a dollar amount representing the pro rata share of each Unit outstanding
on the last business day of such calendar year; (c) a list of the Bonds held and
the number of Units outstanding on the last business day of such calendar year;
(d) the Redemption Price per Unit based upon the last computation thereof made
such calendar year; and (e) amounts actually distributed to Certificateholders
during such calendar year from the Interest and Principal Accounts, separately
stated, expressed both as total dollar amounts representing the pro rata share
of each Unit outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate holders
at all reasonable times during usual business hours, books of record and account
of its transactions as Trustee, including records of the names and addresses of
Certificateholders, Certificates issued or held, a current list of Bonds in the
portfolio and a copy of the Trust Agreement.
TAX STATUS
----------
All Bonds acquired by each Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax. Such interest may, however, be
subject to the federal corporate alternative minimum tax and to state and local
taxes. Neither the Sponsor nor the Trustee nor their respective counsel have
made any review of the proceedings relating to the issuance of the Bonds or the
bases for such opinion and express no opinion as to these matters, and neither
the Trustee nor the Sponsor nor their respective counsel has made an independent
examination or verification that the federal income tax status of the Bonds has
not been altered since the time of the original delivery of those opinions.
In rendering the opinion set forth below, counsel has examined the
Agreement, the final form of Prospectus dated the date hereof (the "Prospectus")
and the documents referred to therein, among others, and has relied on the
validity of said documents and the accuracy and completeness of the facts set
forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor, under
existing law:
The Trusts are not associations taxable as corporations for federal
income tax purposes under the Internal Revenue Code of 1986 (the "Code"),
and income received by the Trusts that consists of interest excludable from
federal gross income under the Code will be excludable from the federal
gross income of the Certificateholders of such Trusts.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer
tificateholder will be considered to have received his pro rata share of
Bond interest when it is received by that Trust, and the net income
distributable to Certificateholders that is exempt from federal income tax
when received by that Trust will constitute tax-exempt income when received
by the Certificateholders.
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<PAGE>
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-,
mid- or short-term depending on the facts and circumstances. Capital losses
are deductible to the extent of capital gains; in addition, up to $3,000 of
capital losses of non-corporate Certificateholders may be deducted against
ordinary income. Capital assets held by individuals will qualify for
mid-term or long-term capital gain treatment if held for more than 12
months, and more than 18 months, respectively, and will be subject to
reduced tax rates of 28% and 20%, respectively, rather than the "regular"
maximum tax rate of 39.6%.
Each Certificateholder will realize taxable gain or loss when the
Trust disposes of a Bond (whether by sale, exchange, redemption or payment
at maturity), as if the Certificateholder had directly disposed of his pro
rata share of such Bond. The gain or loss is measured by the difference
between (i) the tax cost of such pro rata share and (ii) the amount
received therefor. For this purpose, a Certificateholder's per Unit tax
cost for each Bond is determined by allocating the total tax cost of each
Unit among all the Bonds held in the Trust (in accordance with the portion
of the Trust comprised by each Bond). In order to determine the amount of
taxable gain or loss, the Certificateholder's amount received is similarly
allocated at that time. The 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
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<PAGE>
amounts attributable to market discount). The return of a Certificate
holder's tax cost is otherwise a tax-free return of capital.
A portion of social security benefits is includable in gross income
for taxpayers whose "modified adjusted gross income" combined with a portion of
their benefits exceeds a base amount. The base amount is $25,000 for an
individual, $32,000 for a married couple filing a joint return and zero for
married persons filing separate returns. Interest on tax-exempt bonds is to be
added to adjusted gross income for purposes of computing the amount of Social
Security benefits that are includable in gross income and determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75% of the amount by which the
adjusted current earnings (which will include tax-exempt interest) of the
corporation exceeds alternative minimum taxable income (determined without
regard to this item). In addition, in certain cases, Subchapter S corporations
with accumulated earnings and profits from Subchapter C years will be subject to
a minimum tax on excess "passive investment income" which includes tax-exempt
interest.
Under federal law, interest on Navigator Trust-held Bonds issued by
authority of the Government of Puerto Rico is exempt from regular federal income
tax, and state and local income tax in the United States and Puerto Rico. The
New York Navigator Insured Trust is not subject to the New York State Franchise
Tax on Business Corporations or the New York City General Corporation Tax. Under
the personal income tax laws of the State and City of New York, the income of
the New York Navigator Insured Trust will be treated as the income of the
Certificateholders. Interest on the Bonds of the New York Navigator Insured
Trust that is exempt from tax under the laws of the State and City of New York
when received by the Trust will retain its status as tax-exempt interest to its
Certificateholders. In addition, non-residents of New York City will not be
subject to the New York City personal income tax on gains derived with respect
to their Units of the New York Navigator Insured Trust. Non-residents of New
York State will not be subject to New York State personal income tax on such
gains unless the Units are employed in a business, trade or occupation carried
on in New York State. A New York State or New York City resident should
determine his basis and holding periods for his Units in the same manner for New
York State and New York City tax purposes as for federal tax purposes. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and instrumentalities,
must be included in calculating New York State and New York City entire net
income for purposes of calculating New York State and New York City franchise
(income) tax.
The Insured Municipal Securities Trust is not subject to the New York
State Franchise Tax on Business Corporations or the New York City General
Corporation Tax. For a Certificateholder who is a New York resident, however, a
pro rata portion of all or part of the income of the Trust will be treated as
the income of the Certificateholder under the income tax laws of the State and
City of New York. Similar treatment may apply in other states.
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The exemption of interest on municipal obligations for federal income
tax purposes does not necessarily result in exemption under the income tax laws
of any state or political subdivision. In general, municipal bond interest
exempt from federal income tax is taxable income to residents of the State or
City of New York under the tax laws of those jurisdictions unless the bonds are
issued by the State of New York or one of its political subdivisions or by the
Commonwealth of Puerto Rico or one of its political subdivisions. For
corporations doing business in New York State, interest earned on state and
municipal obligations that are exempt from federal income tax, including
obligations of New York State, its political subdivisions and instrumental
ities, must be included in calculating New York State and New York City entire
net income for purposes of calculating New York State and New York City
franchise (income) tax. The laws of the several states and local taxing
authorities vary with respect to the taxation of such obligations and each
Certificateholder is advised to consult his own tax advisor as to the tax
consequences of his Certificates under state and local tax laws.
Any proceeds received pursuant to the terms of the insurance on the
Bonds that represent maturing interest on defaulted obligations will be
excludable from federal gross income if, and to the same extent that, such
interest would have been so excludable if paid by the issuers of such
defaulted obligations.
In the opinion of Zeller and Bryant, special counsel to the Sponsor on
New Jersey tax matters, which opinion is made in reliance upon certain
information and based on certain assumptions respecting the New Jersey Navigator
Trust, under existing New Jersey law applicable to individuals who are New
Jersey residents and New Jersey estates and trusts:
(1) The New Jersey Navigator Trust will be recognized as a trust
and not as an association taxable as a corporation. The New Jersey
Navigator Trust will not be subject to the New Jersey Corporation
Business Tax or the New Jersey Corporation Income Tax.
(2) The income of the New Jersey Navigator Trust will be treated
as income of the Certificateholders who are individuals, estates or
trusts under the New Jersey Gross Income Tax Act, N.J.S.A. 54A: 1-1 et
seq. (the "Act"). Interest on the Bonds that is exempt from tax under
the Act when received by the New Jersey Navigator Trust will retain
its status as tax-exempt interest under the Act when distributed to
Certificateholders who are individuals, estates or trusts.
(3) Certificateholders, who are individuals, estates, or trusts
will not be subject to the Act on any gain realized when the New
Jersey Navigator Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity). Any loss realized on such
disposition may not be utilized to offset gains realized by such
Certificateholder on the disposition of assets the gain on which is
subject to the New Jersey Gross Income Tax.
(4) The sale, exchange or redemption of a Unit by a
Certificateholder shall be treated as a sale or exchange of a
Certificateholder's pro rata interest in the assets in the New Jersey
Navigator Trust at the time of the transaction and
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any gain will be exempt from tax under the Act to the extent that
the price received by the selling Certificate-holder who is an
individual, estate or trust does not exceed the Redemption Price. To
the extent that the amount received by the Certificateholder exceeds
the Redemption Price, any such gain will not be exempt from tax under
the Act.
(5) All proceeds representing interest on defaulted obligations
derived by Certificateholders who are individuals, estates or trusts
from an insurance policy, either paid directly to the
Certificateholder or through the New Jersey Navigator Trust, are
exempt from tax under the Act.
(6) The Units of the New Jersey Navigator Trust may be taxable in
the estates of New Jersey residents under the New Jersey Transfer
Inheritance Tax Law or the New Jersey Estate Tax Laws.
(7) If a Certificateholder is a corporation subject to the New
Jersey Corporation Business Tax or New Jersey Corporation Income Tax,
interest from the Bonds in the New Jersey Navigator Trust which is
allocable to such corporation will be includable in its entire net
income for purposes of the New Jersey Corporation Business Tax or New
Jersey Corporation Income Tax, less any interest expense incurred to
carry such investment to the extent such interest expense has not been
deducted in computing Federal taxable income. Net gains derived by
such corporation on the disposition of the Bonds by the New Jersey
Navigator Trust or on the disposition of its Units will be included in
its entire net income for purposes of the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax. Any proceeds paid
under the insurance policy issued to the Trustee of the New Jersey
Navigator Trust with respect to the Bonds or under individual policies
obtained by issuers of Bonds which represent maturing interest or
maturing principal on defaulted obligations held by the Trustee will
be included in its entire net income for purposes of the New Jersey
Corporation Business Tax or New Jersey Corporation Income Tax if, and
to the same extent as, such interest or proceeds would have been so
included if paid by the issuer of the defaulted obligations.
In the opinion of Saul, Ewing, Remick & Saul, special counsel
to the Sponsor on Pennsylvania tax matters, under existing law:
(1) Units evidencing fractional undivided interests in the Trust, to
the extent represented by obligations issued by the Commonwealth of
Pennsylvania, any public authority, commission, board or other agency
created by the Commonwealth of Pennsylvania, any political subdivision of
the Commonwealth of Pennsylvania or any public authority created by any
such political subdivision, or by the Government of Puerto Rico or its
public authorities, are not taxable under any of the personal property
taxes presently in effect in Pennsylvania;
(2) Distributions of interest income to Certificateholders that would
not be taxable if received directly by a Pennsylvania resident are
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not subject to personal income tax under the Pennsylvania Tax Reform
Code of 1971; nor will such interest be taxable under Philadelphia School
District Investment Income Tax imposed on Philadelphia resident
individuals;
(3) A Certificateholder which is an individual, estate or trust will
have a taxable event under the Pennsylvania state and local income tax
referred to in the preceding paragraph upon the redemption or sale of
Units;
(4) A Certificateholder which is a corporation will have a taxable
event under the Pennsylvania Corporate Net Income Tax or, if applicable,
the Mutual Thrift Institutions Tax, upon the redemption or sale of its
Units. Interest income distributed to Certificateholders which are
corporations is not subject to Pennsylvania Corporate Net Income Tax or
Mutual Thrift Institutions Tax. However, banks, title insurance companies
and trust companies may be required to take the value of Units into account
in determining the taxable value of their shares subject to Shares Tax;
(5) Under Act No. 68 of December 3, 1993, gains derived by the Trust
from the sale, exchange or other disposition of Pennsylvania Bonds may be
subject to Pennsylvania personal or corporate income taxes. Those gains
which are distributed by the Trust to Certificateholders who are
individuals will be subject to Pennsylvania Personal Income Tax and, for
residents of Philadelphia, to Philadelphia School District Investment
Income Tax. For Certificateholders which are corporations, the distributed
gains will be subject to Corporate Net Income Tax or Mutual Thrift
Institutions Tax;
(6) For Pennsylvania Bonds, gains which are not distributed by the
Trust will nevertheless be taxable to Certificateholders if derived by the
Trust from the sale, exchange or other disposition of these Bonds issued on
or after February 1, 1994. Such gains which are not distributed by the
Trust will remain nontaxable to Certificateholders if derived by the Trust
from the sale, exchange or other disposition of Bonds issued prior to
February 1, 1994. However, for gains from the sale, exchange or other
disposition of these Bonds to be taxable under the Philadelphia School
District Investment Income Tax, the Bonds must be held for six months or
less;
(7) Gains from the sale, exchange or other disposition of Puerto Rico
Bonds will be taxable to Certificateholders if distributed or retained by
the Trust. However, for gains from the sale, exchange or other disposition
of these Bonds to be taxable under the Philadelphia School District
Investment Income Tax, the Bonds must be held for six months or less;
(8) Units are subject to Pennsylvania inheritance and estate taxes;
(9) Any proceeds paid under insurance policies issued to the Trustee
or obtained by issuers or the underwriters of the Bonds, the Sponsor or
others which represent interest on defaulted obligations held by the
Trustee will be excludable from Pennsylvania gross income if, and to the
same extent as, such interest would have been so excludable if paid in the
normal course by the issuer of the defaulted obligations; and
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(10) The Trust is not taxable as a corporation under Pennsylvania tax
laws applicable to corporations.
In the case of Bonds that are Industrial Revenue Bonds ("IRBs") or
certain types of private activity bonds, the opinions of bond counsel to the
respective issuing authorities indicate that interest on such Bonds is exempt
from regular federal income tax. However, interest on such Bonds will not be
exempt from regular federal income tax for any period during which such Bonds
are held by a "substantial user" of the facilities financed by the proceeds of
such Bonds or by a "related person" thereof within the meaning of the Code.
Therefore, interest on any such Bonds allocable to a Certificateholder who is
such a "substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of IRBs that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of the
IRBs plus certain capital expenditures exceeds $10,000,000.
In addition, a Bond can lose its tax-exempt status as a result of
other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current or
future owners or users of the facilities financed by the Bonds, the amount of
such persons' outstanding tax-exempt IRBs, or the facilities themselves, and no
assurance can be given that future events will not affect the tax-exempt status
of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
Interest on indebtedness incurred or continued to purchase or carry
the Units is not deductible for regular federal income tax purposes. However,
such interest is deductible for New York State and New York City income tax
purposes by corporations that are required to include interest on the Bonds in
New York State and New York City entire net income for purposes of calculating
New York State and City franchise (income) taxes. In addition, under rules used
by the Internal Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying particular assets, the
purchase of Units may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the purchase of Units.
Also, in the case of certain financial institutions that acquire Units, in
general no deduction is allowed for interest expense allocable to the Units.
From time to time proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on debt
obligations similar to the Bonds in the Trust, and it can be expected that
similar proposals may be introduced in the future. In particular, Congress may
consider the adoption of some form of "flat tax," which could have an adverse
impact on the value of tax-exempt bonds.
In South Carolina v. Baker, the U.S. Supreme Court held that the
-----------------------
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
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registered, and that there is no constitutional prohibition against the federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the federal government to
regulate and control bonds such as the Bonds in the Trust and to tax interest on
such bonds in the future. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Bonds in the Trust in
accordance with Section 103 of the Code.
The opinions of bond counsel or special tax counsel to the issuing
governmental authorities to the effect that interest on the Bonds is exempt from
regular federal income tax may be limited to law existing at the time the Bonds
were issued, and may not apply to the extent that future changes in law,
regulations or interpretations affect such Bonds. Investors are advised to
consult their own tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
---------
Sponsor Repurchase. The Sponsor, although not obligated to do so,
------------------
intends to maintain a secondary market for the Units and continuously to offer
to repurchase the Units. The Sponsor's secondary market repurchase price, after
the initial public offering is completed, will be based on the aggregate bid
price of the Bonds in the Trust portfolio, determined by the Evaluator on a
daily basis, and will be the same as the redemption price. The aggregated bid
price, determined by the Evaluator on a daily basis, is computed on the basis
set forth under "Trustee Redemption". Certificateholders who wish to dispose of
their Units should inquire of the Sponsor as to current market prices prior to
making a tender for redemption. The Sponsor may discontinue repurchase of Units
if the supply of Units exceeds demand, or for other business reasons. The date
of repurchase is deemed to be the date on which Certificates representing Units
are physically received in proper form by Reich & Tang Distributors L.P., 600
Fifth Avenue, New York, New York 10020 on behalf of the Sponsor. Units received
after 4 P.M., New York Time, will be deemed to have been repurchased on the next
business day. In the event a market is not maintained for the Units, a
Certificateholder may be able to dispose of Units only by tendering them to the
Trustee for redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsor, subject to change, to repurchase units on
the basis of a price higher than the bid prices of the bonds in the trusts.
Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of this Trust,
although in all bond trusts, the purchase price of a unit depends primarily on
the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
re-offered for sale by the Sponsor at a price based on the aggregate bid price
of the Bonds in the Trust plus the applicable sales charge (see "Public Offering
Price" in Part A) plus net accrued interest. Any Units that are 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
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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 canceled.
Certificates representing Units to be redeemed must be delivered to
the Trustee and must be properly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in the case of lost, stolen or mutilated Certificates). Thus, redemptions of
Units cannot be effected until Certificates representing such Units have been
delivered by the person seeking redemption. (See "Certificates".)
Certificateholders must sign exactly as their names appear on the faces of their
Certificates. In certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of death,
appointments as executor or administrator or certificates of corporate
authority.
Within three business days following a tender for redemption, the
Certificateholder will be entitled to receive in cash an amount for each Unit
tendered equal to the Redemption Price per Unit computed as of the Evaluation
Time set forth under "Summary of Essential Information" in Part A on the date of
tender. The "date of tender" is deemed to be the date on which Units are
received by the Trustee, except that with respect to Units received after the
close of trading on the New York Stock Exchange, the date of tender is the next
day on which such Exchange is open for trading, and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the Redemption
Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account, or, if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. The Trustee is empowered to sell Bonds in order to make funds
available for redemptions. Such sales, if required, could result in a sale of
Bonds by the Trustee at a loss. To the extent Bonds are sold, the size and
diversity of the Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each Unit in
the Trust determined by the Trustee on the basis of (i) the cash on hand in the
Trust or moneys in the process of being collected, (ii) the value of the Bonds
in the Trust based on the bid prices of such Bonds and (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of the Trust, (b) the accrued expenses of the Trust and (c) cash
allocated for the distribution to Certificateholders of record as of the
business day prior to the evaluation being made. The Evaluator may 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
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basis of bid prices for bonds comparable to any Bonds for which bid prices are
not available, (3) by determining the value of the Bonds by appraisal, or (4) by
any combination of the above. The Evaluator will determine the aggregate current
bid price evaluation of the Bonds in the Trust, taking into account the market
value of the Bonds insured under the Bond Insurance Policy, in the manner
described as set forth under "Public Offering--Offering Price". Insurance does
not guarantee the market value of the Bonds or the Units, and while Bond
insurance represents an element of market value in regard to insured Bonds, its
exact effect, if any, on market value cannot be predicted.
The Trustee is irrevocably authorized in its discretion, if the
Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer
tificateholder at prices which will return to the Certificateholder an amount in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
The Trustee reserves the right to suspend the right of redemption and
to postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on that Exchange is restricted or during which
(as determined by the Securities and Exchange 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 may elect to have all interest and principal
distributions, if any, with respect to their Units reinvested either in units of
various series of "Insured Municipal Securities Trust" or "Municipal Securities
Trust" which will have been created shortly before each semi-annual or annual
Payment Date (a "Primary Series") or, if units of a Primary Series are not
available, in units of a previously formed series of the Trust which have been
repurchased by the Sponsor in the secondary market or which constitute a portion
of the Units of the Trust not sold by the Sponsor prior to such Payment Date (a
"Secondary Series") (Primary Series and Secondary Series are hereafter
collectively referred to as "Available Series"). Series of "Municipal Securities
Trust" do not have insurance. The first interest distribution to
Certificateholders cannot be reinvested unless such distribution is scheduled
for June 15 or December 15 in the case of semi-annual Certificateholders or
December 15 in the case of annual Certificateholders (each such date being
referred to herein as the "Plan Reinvestment Date").
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Under the Plan (subject to compliance with applicable blue sky laws),
fractional units ("Plan Units") will be purchased from the Sponsor at a price
equal to the aggregate offering price per Unit of the bonds in the Available
Series portfolio during the initial offering of the Available Series or at the
aggregate bid price per Unit of the Available Series if its initial offering has
been completed, plus a sales charge equal to 3.627% of the net amount invested
in such bonds or 3.50% of the Reinvestment Price per Plan Unit, plus accrued
interest, divided by one hundred (the "Reinvestment Price per Plan Unit"). All
Plan Units will be sold at this reduced sales charge of 3.50% in comparison to
the regular sales charge on primary and secondary market sales of Units in any
series of "Municipal Securities Trust". Participants in the Plan will have the
opportunity to designate, in the Authorization Form for the Plan, the name of a
broker to whom the Sponsor will allocate a sales commission of 1.50% of the
Reinvestment Price per Plan Unit, payable out of the 3.50% sales charge. If no
such designation is made, the Sponsor will retain the sales commission.
Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder who
is entitled to receive $130.50 interest income from the Trust would acquire
13.05 Plan Units assuming that the Reinvestment Price per Plan Unit, plus
accrued interest, approximated $10.
A semi-annual or annual Certificateholder may join the Plan at the
time he invests in Units of the Trust or any time thereafter by delivering to
the Trustee an Authorization Form which is available from brokers, any
Underwriter of the Units or the Sponsor. In order that distributions may be
reinvested on a particular Plan Reinvestment Date, the Authorization Form must
be received by the Trustee not later than the 15th day of the month preceding
such Date. Authorization Forms not received in time for a particular Plan
Reinvestment Date will be valid only for the second succeeding Plan Reinvestment
Date. Similarly, a participant may withdraw from the program at any time by
notifying the Trustee (see below). However, if written confirmation of
withdrawal is not given to the Trustee prior to a particular distribution, the
participant will be deemed to have elected to participate in the Plan with
respect to that particular distribution and his withdrawal would become
effective for the next succeeding distribution.
Once delivered to the Trustee, an Authorization Form will constitute a
valid election to participate in the Plan with respect to Units purchased in the
Trust (and with respect to Plan Units purchased with the distributions from the
Units purchased in the Trust) for each subsequent distribution so long as the
Certificateholder continues to participate in the Plan. However, if an Available
Series should materially differ from the Trust in the opinion of the Sponsor,
the authorization will be voided and participants will be provided with both a
notice of the material change and a new Authorization Form which would have to
be returned to the Trustee before the Certificateholder would again be able to
participate in the Plan. The Sponsor anticipates that a material difference
which would result in a voided authorization would include such facts as the
inclusion of bonds in the Available Series portfolio the interest income on
which was not exempt from all federal income tax, or the inclusion of bonds
which were not rated "A" or better by Standard & Poor's Corporation or Moody's
Investors Service, Inc. on the date such bonds were initially deposited in the
Available Series portfolio.
The Sponsor has the option at any time to use units of a Secondary
Series to fulfill the requirements of the Plan in the event units of a Primary
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Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not declared
effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that the
quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of this Trust.
It is the Sponsor's intention that Plan Units will be offered on or
about each semi-annual and annual Record Date for determining who is eligible to
receive distributions on the related Payment Date. Such Record Dates are June 1
and December 1 of each year for semi-annual Certificateholders, and December 1
of each year for annual Certificateholders. On each Record Date the Sponsor will
send a current Prospectus relating to the Available Series being offered for the
next Plan Reinvestment Date along with a letter which reminds each participant
that Plan Units are being purchased for him as part of the Plan unless he
notifies the Trustee in writing by that Plan Reinvestment Date that he no longer
wishes to participate in the Plan. In the event a Primary Series has not been
declared effective in sufficient time to distribute a final Prospectus relating
thereto and there is no Secondary Series as to which a registration statement is
currently effective, it is the Sponsor's intention to suspend the Plan and
distribute to each participant his regular semi-annual or annual distribution.
If the Plan is so suspended, it will resume in effect with the next Plan
Reinvestment Date assuming units of an Available Series are then being offered.
To aid a participant who might desire to withdraw either from the Plan
or from a particular distribution, the Trustee has established a toll free
number (see "Summary of Essential Information" in Part A) for participants to
use for notification of withdrawal, which must be confirmed in writing prior to
the Plan Reinvestment Date. Should the Trustee be so notified, it will make the
appropriate cash disbursement. Unless the withdrawing participant specifically
indicates in his written confirmation that (a) he wishes to withdraw from the
Plan for that particular distribution only, or (b) he wishes to withdraw from
the Plan for less than all units of each series of "Municipal Securities Trust"
or "Insured Municipal Securities Trust" which he might then own (and
specifically identifies which series are to continue in the Plan), he will be
deemed to have withdrawn completely from the Plan in all respects. Once a
participant withdraws completely, he will only be allowed to again participate
in the Plan by submitting a new Authorization Form. A sale or redemption of a
portion of a participant's Plan Units will not constitute a withdrawal from the
Plan with respect to the remaining Plan Units owned by such participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual 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
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the Units of the Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "Municipal Securities Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "Municipal Securities
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor intends to maintain a
market for the Plan Units and continuously to offer to purchase Plan Units at
prices based upon the aggregate offering price of the Bonds in the Available
Series portfolio during the initial offering of the Available Series, or at the
aggregate bid price of the Bonds of the Available Series after its initial
offering has been completed. The Sponsor may discontinue such purchases at any
time. The aggregate bid price of the underlying bonds may be expected to be less
than the aggregate offering price. In the event that a market is not maintained
for Plan Units, a participant desiring to dispose of his Plan Units may be able
to do so only by tendering such Plan Units to the Trustee for redemption at the
Redemption Price of the full units in the Available Series corresponding to such
Plan Units, which is based upon the aggregate bid price of the underlying bonds
as described in the "Insured Municipal Securities Trust" Prospectus for the
Available Series in question. If a participant wishes to dispose of his Plan
Units, he should inquire of the Sponsor as to current market prices prior to
making a tender for redemption to the Trustee.
Any participant may tender his Plan Units for redemption to the
Available Series Trust. Participants may redeem Plan Units by making a written
request to the Trustee, at the address listed in the "Summary of Essential
Information" in Part A, on the Redemption Form supplied by the Trustee. The
redemption price per Plan Unit will be determined as set forth in the "Insured
Municipal Securities Trust" Prospectus of the Available Series from which such
Plan Unit was purchased following receipt of the request and adjusted to reflect
the fact that it relates to a Plan Unit. There is no charge for the redemption
of Plan Units.
The Trust Agreement requires that the Trustee notify the Sponsor of
any tender of Plan Units for redemption. So long as the Sponsor is maintaining a
bid in the secondary market, the Sponsor will purchase any Plan Units tendered
to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such Plan
Units on the date of tender not later than the day on which such Plan Units
otherwise would have been redeemed by the Trustee.
Participants in the Plan will not receive individual certificates for
their Plan Units unless the amount of Plan Units accumulated represents $1,000
principal amount of bonds underlying such Units and, in such case, a written
request for certificates is made to the Trustee. All Plan Units will be
accounted for by the Trustee on a book entry system. Each time Plan Units are
purchased under the Plan, a participant will receive a confirmation stating his
cost, number of Units purchased and estimated current return. Questions
regarding a participant's statements should be directed to the Trustee by
calling the Trustee at the number set forth under "Summary of Essential
Information" in Part A of this Prospectus.
All expenses relating to the operation of the Plan will be borne by
the Sponsor. The Sponsor and the Trustee reserve the right to suspend, modify or
terminate the Plan at any time for any reason, including the right to suspend
the Plan if the Sponsor is unable or unwilling to establish a Primary Series or
is unable to provide Secondary Series Units. All
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participants will receive notice of any such suspension, modification or
termination.
TRUST ADMINISTRATION
--------------------
Portfolio Supervision. Except for the purchase of Replacement Bonds or
---------------------
as discussed herein, the acquisition of any Bonds for the Trust other than Bonds
initially deposited by the Sponsor is prohibited. Although it is the Sponsor's
and Trustee's intention not to dispose of Bonds insured pursuant to the Bond
Insurance in the event of default, nevertheless, the Sponsor may direct the
Trustee to dispose of Bonds upon (i) default in payment of principal or interest
on such Bonds, (ii) institution of certain legal proceedings with respect to the
issuers of such Bonds, (iii) default under other documents adversely affecting
debt service on such Bonds, (iv) default in payment of principal or interest on
other obligations of the same issuer or guarantor, (v) with respect to revenue
Bonds, decline in revenues and income of any facility or project below the
estimated levels calculated by proper officials charged with the construction or
operation of such facility or project or (vi) decline in price or the occurrence
of other market or credit factors that in the opinion of the Sponsor would make
the retention of such Bonds in the Trust detrimental to the interests of the
Certificateholders. If a default in the payment of principal or interest on any
of the Bonds occurs and if the Sponsor fails to instruct the Trustee to sell or
hold such Bonds, the Trust Agreement provides that the Trustee may sell such
Bonds. The Trustee shall not be liable for any depreciation or loss by reason of
any sale of bonds or by reason of the failure of the Sponsor to give directions
to the Trustee.
The Sponsor is authorized by the Trust Agreement to direct the Trustee
to accept or reject certain plans for the refunding or refinancing of any of the
Bonds. Any bonds received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Agreement to the same extent
as the Bonds originally deposited. Within five days after such deposit, notice
of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the Bonds substituted therefor.
Trust Agreement, Amendment And Termination. The Trust Agreement may be
------------------------------------------
amended by the Trustee, the Sponsor and the Evaluator without the consent of any
of the Certificateholders: (1) to cure any ambiguity or to correct or supplement
any provision which may be defective or inconsistent; (2) to change any
provision thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency; or (3) to make such other provisions in
regard to matters arising thereunder as shall not adversely affect the interests
of the Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent of
the holders of Certificates evidencing 66-2/3% of the Units then outstanding for
the purpose of modifying the rights of 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,
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except in accordance with the provisions of the Trust Agreement. The Trustee
shall promptly notify Certificateholders, in writing, of the substance of
any such amendment.
The Trust Agreement provides that the Trust shall terminate upon the
maturity, redemption or other disposition, as the case may be, of the last of
the Bonds held in the Trust but in no event is it to continue beyond the end of
the calendar year preceding the fiftieth anniversary of the execution of the
Trust Agreement. If the value of the Trust shall be less than the minimum amount
set forth under "Summary of Essential Information" in Part A, the Trustee may,
in its discretion, and shall when so directed by the Sponsor, terminate the
Trust. The Trust may also be terminated at any time with the consent of the
holders of Certificates representing 100% of the Units then outstanding. In the
event of termination, written notice thereof will be sent by the Trustee to all
Certificateholders. Within a reasonable period after termination, the Trustee
must sell any Bond remaining in the Trust, and, after paying all expenses and
charges incurred by the Trust, distribute to each Certificateholder, upon
surrender for cancellation of his Certificate for Units, his pro rata share of
the Interest and Principal Accounts.
The Sponsors. The Sponsor, Reich & Tang Distributors L.P. ("Reich &
------------
Tang") (successor to the Unit Investment Trust division of Bear, Stearns & Co.
Inc.), a Delaware limited partnership, is engaged in the brokerage business and
is a member of the National Association of Securities Dealers, Inc. Reich & Tang
is also a registered investment adviser. Reich & Tang maintains its principal
business offices at 600 Fifth Avenue, New York, New York 10020. Reich & Tang
Asset Management L.P. ("RTAM LP"), a registered investment adviser, having its
principal place of business at 399 Boylston Street, Boston, MA 02116, is the 99%
limited partner of the Sponsor. RTAM LP is 99.5% owned by New England Investment
Companies, LP ("NEIC LP") and Reich & Tang Asset Management, Inc., a wholly
owned subsidiary of NEIC LP, owns the remaining .5% interest of RTAM LP and is
its general partner. NEIC LP's general partner is New England Investment
Companies, Inc. ("NEIC"), a holding company offering a broad array of investment
styles across a wide range of asset categories through twelve subsidiaries,
divisions and affiliates offering a wide array of investment styles and products
to institutional clients. These affiliates in the aggregate are investment
advisers or managers to over 43 registered investment companies. Reich & Tang is
the successor sponsor for numerous series of unit investment trusts, including:
New York Municipal Trust, Series 1 (and Subsequent Series); Municipal Securities
Trust, Series 1 (and Subsequent Series), 1st Discount Series (and Subsequent
Series); Multi-State Series 1 (and Subsequent Series); Mortgage Securities
Trust, Series 1 (and Subsequent Series); Insured Municipal Securities Trust,
Series 1 (and Subsequent Series), 5th Discount Series (and Subsequent Series),
and Equity Securities Trust, Series 1, Signature Series, Gabelli Communications
Income Trust (and Subsequent Series).
On August 30, 1996, the merger of New England Mutual Life Insurance
Company and Metropolitan Life Insurance Company ("MetLife") became effective,
with MetLife being the continuing company. RTAM LP remains a wholly-owned
subsidiary of NEIC LP, but its sole general partner is now an indirect
subsidiary of MetLife. Also, MetLife New England Holdings, Inc., a wholly-owned
subsidiary of MetLife, owns 51% of the outstanding limited partnership interest
of NEIC LP. MetLife is a mutual life insurance company with assets of $298
billion at December 31, 1996. It is the second largest life insurance company in
the United States in terms of total assets. MetLife provides a wide range of
insurance and investment products and services to individuals and groups and is
the leader among United States life insurance
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companies in terms of total life insurance in force, which exceeded $1.6
trillion at December 31, 1996 for MetLife and its insurance affiliates. MetLife
and its affiliates provide insurance or other financial services to
approximately 36 million people worldwide.
For certain other Trusts as set forth in the "Summary of Essential
Information" in Part A, the Sponsors are Reich & Tang and Gruntal & Co., L.L.C.,
both of whom have entered into an Agreement Among Co-Sponsors pursuant to which
both parties have agreed to act as Co-Sponsors for the Trust. Reich & Tang has
been appointed by Gruntal & Co., L.L.C. as agent for purposes of taking any
action required or permitted to be taken by the Sponsor under the Trust
Agreement. If the Sponsors are unable to agree with respect to action to be
taken jointly by them under the Trust Agreement and they cannot agree as to
which Sponsor shall act as sole Sponsor, then Reich & Tang shall act as sole
Sponsor. If one of the Sponsors fails to perform its duties under the Trust
Agreement or becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, that Sponsor may be discharged under the Trust
Agreement and a new Sponsor may be appointed or the remaining Sponsor may
continue to act as Sponsor.
Gruntal & Co., L.L.C., a Delaware limited liability company, operates
a regional securities broker/dealer from its main office in New York City and
branch offices in nine states. The firm is very active in the marketing of
investment companies and has signed dealer agreements with many mutual fund
groups. Further, through its Syndicate Department, Gruntal & Co., L.L.C. has
underwritten a large number of Closed-End Funds and has been Co-Manager on the
following offerings: Cigna High Income Shares; Dreyfus New York Municipal
Income, Inc.; Franklin Principal Maturity Trust and Van Kampen Merritt Limited
Term High Income Trust. The Sponsor is liable for the performance of its
obligations arising from its responsibilities under the Trust Agreement, but
will be under no liability to Certificateholders for taking any action, or
refraining from taking any action, in good faith pursuant to the Trust
Agreement, or for errors in judgment except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The information included herein is only for the purpose of informing
investors as to the financial responsibility of the Sponsor and its ability to
carry out its contractual obligations. The Sponsor 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 wilful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Unless the Sponsor otherwise directs, the accounts of the Trust shall
be audited not less than annually by independent public accountants selected by
the Sponsor. The expenses of the audit shall be an expense of the Trust. So long
as the Sponsor maintains a secondary market, the Sponsor will bear any audit
expense which exceeds $.50 per 1,000 Units. Certificateholders covered by the
audit during the year may receive a copy of the audited financials upon request.
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
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may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement
and liquidate the Trust; or (c) continue to act as Trustee without terminating
the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be
satisfactory to the Trustee and, at the time of appointment, shall have a net
worth of at least $1,000,000.
The Trustee. For certain of the Trusts, as set forth in the "Summary
-----------
of Essential Information" in Part A, the Trustee is The Chase Manhattan Bank
with its principal executive office located at 270 Park Avenue, New York, New
York 10017 (800) 428-8890 and its unit investment trust office at 4 New York
Plaza, New York, New York 10004. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit Insurance
Corporation and the Board of Governors of the Federal Reserve System.
The Trustee must be a banking corporation organized under the laws of
the United States or any state which is authorized under such laws to exercise
corporate trust powers and must have at all times an aggregate capital, surplus
and undivided profits of not less than $5,000,000. The duties of the Trustee are
primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for the portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for taking
any action, or for refraining from taking any action, in good faith pursuant to
the Trust Agreement, or for errors in judgment; or for any disposition of any
moneys, bonds or Certificates in accordance with the Trust Agreement, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties; provided, however, that the Trustee
shall not in any event be liable or responsible for any evaluation made by the
Evaluator. In addition, the Trustee shall not be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or the Trust which
it may be required to pay under current or future law of the United States or
any other taxing authority having jurisdiction. The Trustee shall not be liable
for depreciation or loss incurred by reason of the sale by the Trustee of any of
the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Certificateholders".
The Trustee may resign by executing an instrument in writing and
filing the same with the Sponsor, and mailing a copy of a notice of resignation
to all Certificateholders. In such an event the Sponsor is obligated to appoint
a successor Trustee as soon as possible. In addition, if
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the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Trust Agreement. Notice of such removal and
appointment shall be mailed to each Certificateholder by the Sponsor. If upon
resignation of the Trustee no successor has been appointed and has accepted the
appointment within thirty days after notification, the retiring Trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of the Trustee becomes effective only when the
successor Trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor Trustee. Upon execution of a written
acceptance of such appointment by such successor Trustee, all the rights,
powers, duties and obligations of the original Trustee shall vest in the
successor.
Any corporation into which the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
The Evaluator. The Evaluator is Kenny S&P Evaluation Services, a
-------------
division of a business unit of J.J. Kenny Company, Inc., a subsidiary of The
McGraw-Hill Companies, with main offices located at 65 Broadway, New York, New
York 10006. The Evaluator is a wholly-owned subsidiary of McGraw Hill, Inc. The
Evaluator is a registered investment advisor and also provides financial
information services.
The Trustee, the Sponsor and the Certificateholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available to
it, provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsor or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and Trustee,
and the Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Evaluator. If upon resignation of
the Evaluator no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
TRUST EXPENSES AND CHARGES
--------------------------
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
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,
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however, incurred during the initial public offering are paid directly by the
Trust.
The Sponsor will not charge the Trust a fee for its services as such.
(See "Sponsor's Profits".)
The Sponsor will receive for portfolio supervisory services to the
Trust an Annual Fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. The Sponsor's fee may exceed the
actual cost of providing portfolio supervisory services for this Trust, but at
no time will the total amount received for portfolio supervisory services
rendered to all series of the Municipal Securities Trust in any calendar year
exceed the aggregate cost to the Sponsor of supplying such services in such
year. (See "Portfolio Supervision".)
The Trustee will receive for its ordinary recurring services to the
Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A of this Prospectus. For a discussion of the services
performed by the Trustee pursuant to its obligations under the Trust Agreement,
see "Trust Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the Bonds in
the Trust after the initial public offering is completed, a fee in the amount
set forth under "Summary of Essential Information" in Part A of this Prospectus.
The Trustee's and Evaluator's fees are payable monthly as of the
Record Date from the Interest Account to the extent funds are available and then
from the Principal Account. Both fees may be increased without approval of the
Certificateholders by amounts not exceeding proportionate increases in consumer
prices for services as measured by the United States Department of Labor's
Consumer Price Index entitled "All Services Less Rent".
The following additional charges are or may be incurred by the Trust:
all expenses (including counsel fees) of the Trustee incurred and advances made
in connection with its activities under the Trust Agreement, including the
expenses and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Certificateholders; fees of the Trustee for
any extraordinary services performed under the Trust Agreement; indemnification
of the Trustee for any loss or liability accruing to it without gross
negligence, bad faith or willful misconduct on its part, arising out of or in
connection with its acceptance or administration of the Trust; indemnification
of the Sponsor for any losses, liabilities and expenses incurred in acting as
Sponsor of the Trust without gross negligence, bad faith or willful misconduct
on its part; and all taxes and other governmental charges imposed upon the Bonds
or any part of the Trust (no such taxes or charges are being levied, made or, to
the knowledge of the Sponsor, contemplated). The above expenses, including the
Trustee's fees, when paid by or owing to the Trustee are secured by a first lien
on the Trust. In addition, the Trustee is empowered to sell Bonds in order to
make funds available to pay all expenses.
The accounts of the Trust shall be audited not less than annually by
independent public accountants selected by the Sponsor. So long as the Sponsor
maintains a secondary market, the Sponsor will bear any audit expense which
exceeds 50 cents per Unit. Certificateholders covered by the audit during the
year may receive a copy of the audited financials upon request.
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EXCHANGE PRIVILEGE AND CONVERSION OFFER
---------------------------------------
Certificateholders will be able to elect to exchange any or all of
their Units of this Trust for Units of one or more of any available series of
Equity Securities Trust, Insured Municipal Securities Trust, Municipal
Securities Trust, New York Municipal Trust or Mortgage Securities Trust (the
"Exchange Trusts") subject to a reduced sales charge as set forth in the
prospectus of the Exchange Trust (the "Exchange Privilege"). Unit owners of any
registered unit investment trust for which there is no active secondary market
in the units of such trust (a "Redemption Trust") will be able to elect to
redeem such units and apply the proceeds of the redemption to the purchase of
available Units of one or more series of an Exchange Trust (the "Conversion
Trusts") at the Public Offering Price for units of the Conversion Trust subject
to a reduced sales charge as set forth in the prospectus of the Conversion Trust
(the "Conversion Offer"). Under the Exchange Privilege, the Sponsor's repurchase
price during the initial offering period of the Units being surrendered will be
based on the market value of the Securities in the Trust portfolio or on the
aggregate offer price of the Bonds in the other Trust Portfolios; and, after the
initial offering period has been completed, will be based on the aggregate bid
price of the securities in the particular Trust portfolio. Under the Conversion
Offer, units of the Redemption Trust must be tendered to the trustee of such
trust for redemption at the redemption price determined as set forth in the
relevant Redemption Trust's prospectus. Units in an Exchange or Conversion Trust
will be sold to the Certificateholder at a price based on the aggregate offer
price of the securities in the Exchange or Conversion trust portfolio (or for
units of Equity Securities Trust, based on the market value of the underlying
securities in the trust portfolio) during the initial public offering period of
the Exchange or Conversion Trust; and after the initial public offering period
has been completed, based on the aggregate bid price of the securities in the
Exchange or Conversion Trust Portfolio if its initial offering has been
completed plus accrued interest (or for units of Equity Securities Trust, based
on the market value of the underlying securities in the trust portfolio) and a
reduced sales charge.
Except for Certificateholders who wish to exercise the Exchange
Privilege or Conversion Offer within the first five months of their purchase of
Units of the Exchange or Redemption Trust, any purchaser who purchases Units
under the Exchange Privilege or Conversion Offer will pay a lower sales charge
than that which would be paid for the Units by a new investor. For
Certificateholders who wish to exercise the Exchange Privilege or Conversion
Offer within the first five months of their purchase of Units of the Exchange or
Redemption Trust, the sales charge applicable to the purchase of units of an
Exchange or Conversion Trust shall be the greater of (i) the reduced sales
charge or (ii) an amount which when coupled with the sales charge paid by the
Certificateholder upon his original purchase of Units of the Exchange or
Redemption Trust would equal the sales charge applicable in the direct purchase
of units of an Exchange Trust.
In order to exercise the Exchange Privilege the Sponsor must be
maintaining a secondary market in the units of the available Exchange Trust. The
Conversion Offer is limited only to unit owners of any Redemption Trust.
Exercise of the Exchange Privilege and the Conversion Offer by
Certificateholders is subject to the following additional conditions: (i) at the
time of the Certificateholder's election to participate in the Exchange
Privilege or Conversion Offer, there must be units of the Exchange or Conversion
Trust available for sale, either under the initial primary distribution or in
the Sponsor's secondary market, (ii) exchanges will be
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effected in whole units only, (iii) Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 Units and (iv) Units of the Equity
Securities Trust may only be acquired in blocks of 100 Units. Certificate
holders will not be permitted to advance any funds in excess of their redemption
in order to complete the exchange. Any excess proceeds received from a
Certificateholder for exchange or from units being redeemed per conversion will
be remitted to such Certificateholder.
The Sponsor reserves the right to suspend, modify or terminate the
Exchange Privilege and/or the Conversion Offer. The Sponsor will provide
Certificateholders of the Trust with 60 days' prior written notice of any
termination or material amendment to the Exchange Privilege and/or the
Conversion Offer, 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 the Conversion Offer, to add any new unit investment trust
sponsored by Reich & Tang or a sponsor controlled by or under common control
with Reich & Tang or to delete a series which has been terminated from
eligibility for the Exchange Privilege and/or the Conversion Offer, (ii) there
is a suspension of the redemption of units of an Exchange or Conversion 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.
To exercise the Exchange Privilege, a Certificateholder should notify
the Sponsor of his desire to exercise his Exchange Privilege. To exercise the
Conversion Offer, a unit owner of a Redemption Trust should notify his retail
broker of his desire to redeem his Redemption Trust Units and use the proceeds
from the redemption to purchase Units of one or more of the Conversion Trusts.
If Units of a designated, outstanding series of an Exchange or Conversion 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
or Conversion 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. The conversion transaction will be handled entirely
through the unit owner's retail broker. The retail broker must tender the units
to the trustee of the Redemption Trust for redemption and then apply the
proceeds to the redemption toward the purchase of units of a Conversion Trust at
a price based on the aggregate offer or bid side evaluation per Unit of the
Conversion Trust, depending on which price is applicable, plus accrued interest
and the applicable sales charge. The certificates must be surrendered to the
broker at the time the redemption order is placed and the broker must specify to
the Sponsor that the purchase of Conversion Trust Units is being made pursuant
to the Conversion Offer. The unit owner's broker will be entitled to retail a
portion of the sales charge.
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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 Internal
Revenue Code. The Certificateholder will realize a tax gain or loss that will be
of a long-, mid- or short-term capital or ordinary income nature dependent on
the length of time the Units have been held and other factors. (See "Tax
Status".) A Certificateholder's tax basis in the Units acquired pursuant to the
Exchange Privilege or Conversion Offer will be equal to the purchase price of
such Units. Investors should consult their own tax advisors as to the tax
consequences to them of exchanging or redeeming units and participating in the
Exchange Privilege or Conversion Offer.
OTHER MATTERS
-------------
Legal Opinions. The legality of the Units offered hereby and certain
--------------
matters relating to federal tax law have been passed upon by Battle Fowler LLP,
75 East 55th Street, New York, New York 10022, as counsel for the Sponsor.
Carter, Ledyard & Milburn, Two Wall Street, New York, New York 10005 have acted
as counsel for The Chase Manhattan Bank. Certain matters relating to New Jersey
tax law have been passed upon by Zeller and Bryant, as special New Jersey
counsel to the Sponsor. Certain matters relating to Pennsylvania tax law have
been passed upon by Saul, Ewing, Remick & Saul, special Pennsylvania counsel to
the Sponsor.
Independent Accountants. The financial statements of the Trusts for
-----------------------
the year ended June 30, 1997 included in Part A of this Prospectus have been
examined by Price Waterhouse LLP, independent accountants. The financial
statements have been so included in reliance on their report given upon the
authority of said firm as experts in accounting and auditing. KPMG Peat Marwick
LLP has consented to the incorporation by reference of their report on the
statements of operations and changes in net assets for the Trusts included in
Part A of this Prospectus for the period ended June 30, 1995.
Performance Information. Total returns, average annualized returns or
-----------------------
cumulative returns for various periods of this Trust may be included from time
to time in advertisements, sales literature and reports to current or
prospective investors. Total return shows changes in Unit price during the
period plus reinvestment of dividends and capital gains, divided by the original
public offering price as of the date of calculation. Average annualized returns
show the average return for stated periods of longer than a year. Sales material
may also include an illustration of the cumulative results of like annual
investments during an accumulation period and like annual withdrawals during a
distribution period. Figures for actual portfolios will reflect all applicable
expenses and, unless otherwise stated, the maximum sales charge. No provision is
made for any income taxes payable. Returns may also be shown on a combined
basis. Trust performance may be compared to performance on a total return basis
of the Dow Jones Industrial Average, the S&P 500 Composite Price Stock Index, or
performance data from Lipper Analytical Services, Inc. and Morningstar
Publications, Inc. or from publications such as Money, The New York Times, U.S.
News and World Report, Business Week, Forbes or Fortune. As with other
performance data, performance comparisons should not be considered
representative of a Trust's relative performance for any future period.
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DESCRIPTION OF BOND RATINGS*
----------------------------
Standard & Poor's Ratings Services. A brief description of the
----------------------------------
applicable Standard & Poor's rating symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment of creditworthiness may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation.
II. Nature of and provisions of the obligation.
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and they differ from AAA
issues only in small degrees.
A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "BB" may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
- --------
* As described by Standard & Poor's.
-83-
112677.6
<PAGE>
Provisional Ratings (Prov.) following a rating indicates the rating is
provisional, which assumes the successful completion of the project being
financed by the issuance of the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. Accordingly, the
investor should exercise his own judgment with respect to such likelihood and
risk.
DESCRIPTION OF RATING ON THE UNITS*
-----------------------------------
A Standard & Poor's rating on the units of an investment trust
(hereinafter referred to collectively as "units" and "fund") is a current
assessment of creditworthiness with respect to the investments held by such
fund. This assessment takes into consideration the financial capacity of the
issuers and of any guarantors, insurers, lessees, or mortgagors with respect to
such investments. The assessment, however, does not take into account the extent
to which fund expenses or portfolio asset sales for less than the fund's
purchase price will reduce payment to the unit holder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell, or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a particular
investor.
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.
-84-
112677.6
<PAGE>
FOR USE WITH INSURED MUNICIPAL SECURITIES TRUST
9TH - 50TH DISCOUNT SERIES
SERIES 3 - 32
NEW YORK NAVIGATOR INSURED SERIES 1 - 17
----------------------------------------
NEW JERSEY NAVIGATOR INSURED SERIES 1 - 13
------------------------------------------
================================================================================
AUTHORIZATION FOR INVESTMENT IN INSURED MUNICIPAL SECURITIES TRUST
-- DISCOUNT SERIES/SERIES --
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of _____ units
___ Discount Series/Series _______.
I hereby authorize The Chase Manhattan Bank, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Chase Manhattan Bank, as TRP Plan Agent, who shall immediately
invest the distributions in units of the available series of Insured Municipal
Securities Trust above or, if unavailable, of other available series of
Municipal Securities Trust.
The foregoing authorization is subject in Date ______________, 19__
all respects to the terms and conditions of
participation set forth in the prospectus
relating to such available series.
- ------------------------------------------- --------------------------------
Registered Holder (Print) Registered Holder (Print)
- ------------------------------------------- --------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State and Zip Code ____________________________________________________
Salesman's Name ___________________________ Salesman's No. _________________
UNIT HOLDERS NEED ONLY SIGN AND DATE THIS FORM.
================================================================================
MAIL TO YOUR BROKER
OR
THE CHASE MANHATTAN BANK
ATTN: THE UNIT INVESTMENT DEPARTMENT, UNIT A
4 NEW YORK PLAZA
NEW YORK, NEW YORK 10004
112677.6
<PAGE>
<TABLE>
<CAPTION>
INDEX INSURED
-----
MUNICIPAL SECURITIES TRUST
Title Page (Unit Investment Trust)
- ----- ----
<S> <C> <C>
Prospectus
----------
Summary of Essential Information..................................A-5
Financial and Statistical Information.............................A-6 Dated: October 31, 1997
Information Regarding the Trust...................................A-7
Audit and Financial Information...................................F-1 Sponsor:
Reich & Tang Distributors L.P.
The Trust........................................................ 1 600 Fifth Avenue
Risk Considerations............................................... 16 New York, New York 10020
Public Offering................................................... 56 (212) 830-5200
Estimated Long Term Return and
Estimated Current Return........................................ 58
Rights of Certificateholders...................................... 59 (and for certain Trusts:)
Tax Status........................................................ 61 Gruntal & Co., L.L.C.
Liquidity......................................................... 68 14 Wall Street
Total Reinvestment Plan........................................... 70 New York, New York 10005
Trust Administration.............................................. 75 212-267-8800
Trust Expenses and Charges........................................ 79
Exchange Privilege and Conversion Trustee:
Offer........................................................... 81
Other Matters..................................................... 83 The Chase Manhattan Bank
Description of Bond Ratings....................................... 84 4 New York Plaza
Description of Rating on the Units................................ 85 New York, New York 10004
800-882-9898
Parts A and B of this Prospectus do not contain all of the information set
forth in the registration statement and exhibits relating thereto, filed with
the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, and to which reference is made.
* * *
Evaluator:
Kenny S&P
Evaluation Services
65 Broadway
New York, New York 10006
</TABLE>
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
* * *
No person is authorized to give any information or to make any
representations not contained in Parts A and B of this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the Sponsor.
The Trust is registered as a unit investment trust under the Investment Company
Act of 1940. Such registration does not imply that the Trust or any of its Units
have been guaranteed, sponsored, recommended or approved by the United States or
any state or any agency or officer thereof.
112677.6
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Post-Effective
Amendment to Form S-6 Registration No. 33-45890, filed on October 29,
1996).
The Prospectus consisting of pages.
Signatures.
Consent of Independent Accountants.
Consent of Counsel (included in Exhibit 99.3.1).
Consent of New Jersey Counsel (included in Exhibit 99.3.2). Consents of the
Evaluator (included in Exhibit 99.5.1).
The following exhibits:
99.1.1 -- Reference Trust Agreements including certain Amendments to the
Trust Indenture and Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 1.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-50891 of Insured Municipal
Securities Trust, New York Navigator Insured Series 15 & New
Jersey Navigator Insured Series 11, respectively, on
December 9, 1993, and incorporated herein by reference).
99.1.2 -- Reference Trust Agreements including certain Amendments to the
Trust Indenture and Agreement referred to under Exhibit 1.1.1
below (filed as Exhibit 99.1.2 to Post-Effective Amendment
No. 4 to Form S-6 Registration Statement Nos. 33-45890 and
33-53124 of Insured Municipal Securities Trust, Series 29, New
York Navigator Insured Series 11 & New Jersey Navigator Insured
Series 8 and Series 30 & New York Navigator Insured Series 12,
respectively, on October 29, 1996 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) dated June 16, 1989 (filed as Exhibit
99.1.1.1 to Post-Effective Amendment No. 7 to Form S-6
Registration Statement No. 33-28384 of Insured Municipal
Securities Trust, Series 20 on April 25, 1996 and
incorporated herein by reference).
99.1.3.4 -- Certificate of Formation and Agreement among Limited Partners,
as amended, of Reich & Tang Distributors L.P. (filed as Exhibit
99.1.3.4 to Post-Effective Amendment No. 10 to Form S-6
Registration Statements Nos. 2-98914, 33-00376, 33-00856 and
II-1
138866.1
<PAGE>
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 Formation of Gruntal & Co., L.L.C. (filed as
Exhibit 99.1.3.6 to the Post-Effective Amendment to Form S-6
Registration Statement No. 33-31426 on April 25, 1997 and
incorporated herein by reference).
99.1.4 -- Form of Agreement Among Underwriters dated June 16, 1989 (filed
as Exhibit 99.1.4 to Post-Effective Amendment No. 7 to
Registration Statement Nos. 33-29313 and 33-30144 of Municipal
Securities Trust, Series 45 and Series 46 on October 25, 1996
and incorporated herein by reference).
99.1.5 -- Form of Insurance Policy of Financial Guaranty Insurance Company
for Sponsor-Insured Bonds (filed as Exhibit 99.1.5 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 99.1.5.1 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 99.1.5.2 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 dated June 16, 1989 (filed as Exhibit 99.2.1
to Post-Effective Amendment No. 7 to Registration Statement Nos.
33-29313 and 33-30144 of Municipal Securities Trust, Series 45
and Series 46 on October 25, 1996 and incorporated herein by
reference).
99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to the
filing of their opinion regarding tax status of the Trust (filed
as Exhibit 3.1 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-50891 of Insured Municipal Securities Trust,
New York Navigator Insured Series 15 & New Jersey Navigator
Insured Series 11, on December 9, 1993, and incorporated herein
by reference).
II-2
138866.1
<PAGE>
99.3.1.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered, including their consent to the
filing thereof and to the use of their name under the headings
"Tax Status" and "Legal Opinions" in the Prospectus, and to the
filing of their opinion regarding tax status of the Trust (filed
as Exhibit 99.3.1.1 to Post-Effective Amendment No. 4 to Form
S-6 Registration Statement Nos. 33-45890 and 33-53124 of Insured
Municipal Securities Trust, Series 29, New York Navigator
Insured Series 11 & New Jersey Navigator Insured Series 8, and
Series 30 & New York Navigator Insured Series 12, respectively,
on October 29, 1996 and incorporated herein by reference).
99.3.2 -- Opinion of Freeman, Zeller & Bryant, Special New Jersey Counsel
including their consent to the filing thereof and to the use of
their name in the Prospectus (filed as Exhibit 3.2 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-50891 of
Insured Municipal Securities Trust, New York Navigator Insured
Series 15 & New Jersey Navigator Insured Series 11, on
December 9, 1993, and incorporated herein by reference).
99.3.2.1 -- Opinion of Freeman, Zeller & Bryant, Special New Jersey Counsel
including their consent to the filing thereof and to the use of
their name in the Prospectus (filed as Exhibit 99.3.2.1 to
Post-Effective Amendment No. 4 to Form S-6 Registration
Statement No. 33-45890 of Insured Municipal Securities Trust,
Series 29, New York Navigator Insured Series 11 & New Jersey
Navigator Insured Series 8, on October 29, 1996 and
incorporated herein by reference).
*99.5.1 -- Consent of the Evaluator.
99.6.0 -- Power of Attorney of Reich & Tang Distributors L.P., the
Depositor, by its officers and a majority of its Directors
(filed as Exhibit 6.0 to Amendment No. 1 to Form S-6
Registration Statement No. 33-62627 of Equity Securities Trust,
Series 6, Signature Series, Gabelli Entertainment and Media
Trust on November 16, 1995 and incorporated herein by
reference).
99.6.1 -- Power of Attorney of Gruntal & Co., L.L.C., by its
officers and a majority of its Directors of the Executive
Committee (filed as Exhibit 99.6.1 to the Post-Effective
Amendment to Form S-6 Registration Statement No. 33-31426
of Insured Municipal Securities Trust, Series 23 on April
25, 1997 and incorporated herein by reference).
- --------
* Being filed by this Amendment.
II-3
138866.1
<PAGE>
99.7.0 -- Form of Agreement Among Co-Sponsors dated June 9, 1989 (filed
as Exhibit 7.0 to Post-Effective Amendment No. 7 to Form S-6
Registration Statement No. 33-28384 of Insured Municipal
Securities Trust, Series 20 on April 25, 1996 and incorporated
herein by reference).
*99.8.0 -- Independent Auditor's Report prepared by KPMG Marwick LLP.
*27 -- Financial Data Schedules (for EDGAR filing only).
- -------
* Being filed by this Amendment.
II-4
138866.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrants, Insured Municipal Securities Trust, Series 29, New York
Navigator Insured Series 11 & New Jersey Navigator Insured Series 8, Series 30 &
New York Navigator Insured Series 12 and New York Navigator Insured Series 15 &
New Jersey Navigator Insured Series 11 certify that they have 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 registrants have duly caused this Post-Effective Amendment to the
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
24th day of October, 1997.
INSURED MUNICIPAL SECURITIES TRUST, SERIES 29, NEW YORK
NAVIGATOR INSURED SERIES 11 & NEW JERSEY NAVIGATOR INSURED
SERIES 8, SERIES 30 & NEW YORK NAVIGATOR INSURED SERIES 12 AND
NEW YORK NAVIGATOR INSURED SERIES 15 & NEW JERSEY NAVIGATOR
INSURED SERIES 11
(Registrants)
GRUNTAL & CO., L.L.C.
(Depositor)
By: /s/LEE FENSTERSTOCK
-----------------------
Lee Fensterstock
(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 Gruntal & Co., L.L.C., the Depositor, in the
capacities and on the dates indicated.
Name Title Date
ROBERT P. RITTEREISER Chief Executive Officer and )
Chairman of the Board of ) October 24, 1997
Directors )
LEE FENSTERSTOCK President and Director )
JOANNE T. MARREN Executive Vice President, ) By: /s/LEE FENSTERSTOCK
-------------------
General Counsel, Secretary ) Lee Fensterstock
and Director ) Attorney-in-Fact*
BARRY RICHTER Vice Chairman and Director )
STEPHEN DITURSI Executive Vice President and )
Director )
HENRY D. GOTTMANN Executive Vice President and )
Director )
JOSEPH V. BATTIPAGLIA Executive Vice President and )
Director )
JOHN FEENEY Director and President of GMS )
JOHN CIRRITO Executive Vice President and )
Director )
RALPH H. BRADLEY, JR. Executive Vice President and )
Director )
- ---------------
* An executed copy of the power of attorney was filed as Exhibit 99.6.1 to the
Post-Effective Amendment to Registration Statement No. 33-31426 on April 25,
1997.
II-5
138866.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrants, Insured Municipal Securities Trust, Series 29, New York
Navigator Insured Series 11 & New Jersey Navigator Insured Series 8, Series 30 &
New York Navigator Insured Series 12 and New York Navigator Insured Series 15 &
New Jersey Navigator Insured Series 11 certify that they have met all of the
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statements pursuant to Rule 485(b) under the Securities Act of
1933. The registrants have duly caused this Post-Effective Amendment to the
Registration Statements to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
24th day of October, 1997.
INSURED MUNICIPAL SECURITIES TRUST, SERIES 29, NEW YORK
NAVIGATOR INSURED SERIES 11 & NEW JERSEY NAVIGATOR INSURED
SERIES 8, SERIES 30 & NEW YORK NAVIGATOR INSURED SERIES 12 AND
NEW YORK NAVIGATOR INSURED SERIES 15 & NEW JERSEY NAVIGATOR
INSURED SERIES 11
(Registrants)
REICH & TANG DISTRIBUTORS L.P.
(Depositor)
By: Reich & Tang Asset Management, Inc.,
as general partner
By: /s/PETER J. DEMARCO
----------------------
Peter J. DeMarco
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement has been signed
below by the following persons who constitute the principal officers and a
majority of the directors of Reich & Tang Asset Management, Inc., the general
partner of Reich & Tang Distributors L.P., the Depositor, in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
Name Title Date
PETER S. VOSS President, Chief Executive Officer )
and Director )
G. NEAL RYLAND Executive Vice President, Treasurer ) October 24, 1997
and Chief Financial Officer )
EDWARD N. WADSWORTH Clerk )
RICHARD E. SMITH III Director )By: /s/PETER J. DEMARCO
-------------------
STEVEN W. DUFF Director ) Peter J. DeMarco
BERNADETTE N. FINN Vice President ) Attorney-in-Fact*
LORRAINE C. HYLSLER Secretary )
RICHARD DE SANCTIS Vice President and Treasurer )
</TABLE>
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.0 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-62627 on November 16, 1995.
II-6
138866.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment to the registration statement on Form S-6 of our report
dated September 15, 1997, relating to the financial statements and financial
highlights for the year ended June 30, 1997 of the Insured Municipal Securities
Trust, Series 29; Insured Municipal Securities Trust, New York Navigator Insured
Series 11; Insured Municipal Securities Trust, New Jersey Navigator Insured
Series 8; Insured Municipal Securities Trust, Series 30; Insured Municipal
Securities Trust, New York Navigator Insured Series 12; Insured Municipal
Securities Trust, New York Navigator Insured Series 15; and Insured Municipal
Securities Trust, New Jersey Navigator Insured Series 11, which appear in such
Prospectus. We also consent to the reference to us under the heading
"Independent Accountants" in the Prospectus.
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 28, 1997
Independent Auditors' Consent
Re: Insured Municipal Securities Trust, Series 29
Insured Municipal Securities Trust, New York Navigator Insured Series 11
Insured Municipal Securities Trust, New Jersey Navigator Insured Series 8
Insured Municipal Securities Trust, New York Navigator Insured Series 12
Insured Municipal Securities Trust, New York Navigator Insured Series 15
Insured Municipal Securities Trust, New Jersey Navigator Insured Series 11
We consent to the incorporation by reference of our reports dated September 15,
1995, except as to note 7 which is as of September 28, 1995, with respect to the
statements of operations and changes in net assets of the subject trusts for the
year ended June 30, 1995, and to the reference to our firm under the heading
"Independent Accountants" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
October 23, 1997
<PAGE>
Independent Auditors' Consent
Re: Insured Municipal Securities Trust, Series 30
We consent to the incorporation by reference of our reports dated September 15,
1995, except as to notes 2 and 7, which are as of September 15, 1997 and
September 28, 1995, respectively, with respect to the statements of operations
and changes in net assets of the subject trusts for the year ended June 30,
1995, and to the reference to our firm under the heading "Independent
Accountants" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
October 23, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial
information extracted from the financial
statements and supporting schedules as of the
end of the most current period and is qualified
in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000884185
<NAME> IMST, Series 29
<SERIES>
<NUMBER> 1
<NAME> IMST, Series 29
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 4,569,574
<INVESTMENTS-AT-VALUE> 4,818,807
<RECEIVABLES> 81,768
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,900,575
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,354
<TOTAL-LIABILITIES> 18,354
<SENIOR-EQUITY> 4,882,221
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 147,458
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,911)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 249,233
<NET-ASSETS> 4,882,221
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 290,454
<OTHER-INCOME> 0
<EXPENSES-NET> 10,340
<NET-INVESTMENT-INCOME> 280,114
<REALIZED-GAINS-CURRENT> 4,894
<APPREC-INCREASE-CURRENT> 39,994
<NET-CHANGE-FROM-OPS> 325,002
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 271,458
<DISTRIBUTIONS-OF-GAINS> 700,112
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 672
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (646,568)
<ACCUMULATED-NII-PRIOR> 138,802
<ACCUMULATED-GAINS-PRIOR> (14,460)
<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> 1,040.81
<PER-SHARE-NII> 56.29
<PER-SHARE-GAIN-APPREC> 11.51
<PER-SHARE-DIVIDEND> 54.55
<PER-SHARE-DISTRIBUTIONS> 1.86
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,052.20
<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> 0000884185
<NAME> IMST-NY NAV SERIES 11
<SERIES>
<NUMBER> 2
<NAME> IMST-NY NAV SERIES 11
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 3,357,115
<INVESTMENTS-AT-VALUE> 3,476,137
<RECEIVABLES> 72,739
<ASSETS-OTHER> 2,890
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,551,766
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 3,551,766
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 45,160
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 30,469
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 119,022
<NET-ASSETS> 3,551,766
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222,804
<OTHER-INCOME> 0
<EXPENSES-NET> 8,178
<NET-INVESTMENT-INCOME> 214,626
<REALIZED-GAINS-CURRENT> (3,714)
<APPREC-INCREASE-CURRENT> 46,866
<NET-CHANGE-FROM-OPS> 257,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 288,048
<DISTRIBUTIONS-OF-GAINS> 391,252
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 349
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (361,522)
<ACCUMULATED-NII-PRIOR> 58,582
<ACCUMULATED-GAINS-PRIOR> (1,109)
<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> 1,008.58
<PER-SHARE-NII> 57.92
<PER-SHARE-GAIN-APPREC> 11.60
<PER-SHARE-DIVIDEND> 61.53
<PER-SHARE-DISTRIBUTIONS> 10.69
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,005.88
<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> 0000884185
<NAME> IMST-NJ NAV SERIES 8
<SERIES>
<NUMBER> 3
<NAME> IMST-NJ NAV SERIES 8
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2,735,412
<INVESTMENTS-AT-VALUE> 2,840,179
<RECEIVABLES> 76,078
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,916,257
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,716
<TOTAL-LIABILITIES> 34,716
<SENIOR-EQUITY> 2,881,541
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 53,543
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 104,767
<NET-ASSETS> 2,881,541
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 203,642
<OTHER-INCOME> 0
<EXPENSES-NET> 7,016
<NET-INVESTMENT-INCOME> 196,626
<REALIZED-GAINS-CURRENT> (14,695)
<APPREC-INCREASE-CURRENT> 76,268
<NET-CHANGE-FROM-OPS> 258,199
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 195,536
<DISTRIBUTIONS-OF-GAINS> 688,263
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 64
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (625,600)
<ACCUMULATED-NII-PRIOR> 52,453
<ACCUMULATED-GAINS-PRIOR> (10,055)
<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> 1,004.91
<PER-SHARE-NII> 56.86
<PER-SHARE-GAIN-APPREC> 18.01
<PER-SHARE-DIVIDEND> 56.54
<PER-SHARE-DISTRIBUTIONS> 182.16
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 841.08
<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> 0000892871
<NAME> IMST, Series 30
<SERIES>
<NUMBER> 1
<NAME> IMST, Series 30
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 3,946,050
<INVESTMENTS-AT-VALUE> 4,271,990
<RECEIVABLES> 71,075
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,343,065
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,766
<TOTAL-LIABILITIES> 15,766
<SENIOR-EQUITY> 4,327,299
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 75,271
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 325,940
<NET-ASSETS> 4,327,299
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 272,291
<OTHER-INCOME> 0
<EXPENSES-NET> 11,113
<NET-INVESTMENT-INCOME> 261,178
<REALIZED-GAINS-CURRENT> 13,970
<APPREC-INCREASE-CURRENT> 60,767
<NET-CHANGE-FROM-OPS> 335,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 262,159
<DISTRIBUTIONS-OF-GAINS> 328,605
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 312
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (254,849)
<ACCUMULATED-NII-PRIOR> 76,252
<ACCUMULATED-GAINS-PRIOR> (14,187)
<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> 1,024.86
<PER-SHARE-NII> 60.52
<PER-SHARE-GAIN-APPREC> 18.32
<PER-SHARE-DIVIDEND> 60.76
<PER-SHARE-DISTRIBUTIONS> 2.47
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,040.47
<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> 0000892871
<NAME> IMST-NY NAV SERIES 12
<SERIES>
<NUMBER> 2
<NAME> IMST-NY NAV SERIES 12
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 4,438,931
<INVESTMENTS-AT-VALUE> 4,782,629
<RECEIVABLES> 86,320
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,841,419
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,530
<TOTAL-LIABILITIES> 27,530
<SENIOR-EQUITY> 4,841,419
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 58,756
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 343,698
<NET-ASSETS> 4,841,419
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 297,078
<OTHER-INCOME> 0
<EXPENSES-NET> 10,243
<NET-INVESTMENT-INCOME> 286,835
<REALIZED-GAINS-CURRENT> 12,941
<APPREC-INCREASE-CURRENT> 59,105
<NET-CHANGE-FROM-OPS> 358,881
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 298,590
<DISTRIBUTIONS-OF-GAINS> 233,707
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 194
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (173,416)
<ACCUMULATED-NII-PRIOR> 70,511
<ACCUMULATED-GAINS-PRIOR> (15,073)
<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> 1,015.15
<PER-SHARE-NII> 59.22
<PER-SHARE-GAIN-APPREC> 15.06
<PER-SHARE-DIVIDEND> 61.65
<PER-SHARE-DISTRIBUTIONS> 7.67
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1,020.11
<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> 0000908910
<NAME> IMST-NY NAV SERIES 15
<SERIES>
<NUMBER> 1
<NAME> IMST-NY NAV SERIES 15
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 3,251,401
<INVESTMENTS-AT-VALUE> 3,169,564
<RECEIVABLES> 64,338
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,233,902
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,565
<TOTAL-LIABILITIES> 32,565
<SENIOR-EQUITY> 3,201,337
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 38,607
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (81,837)
<NET-ASSETS> 3,201,337
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 183,702
<OTHER-INCOME> 0
<EXPENSES-NET> 7,619
<NET-INVESTMENT-INCOME> 176,083
<REALIZED-GAINS-CURRENT> (4,372)
<APPREC-INCREASE-CURRENT> 93,060
<NET-CHANGE-FROM-OPS> 264,771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 176,679
<DISTRIBUTIONS-OF-GAINS> 155,199
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 160
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (67,107)
<ACCUMULATED-NII-PRIOR> 39,203
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 933.84
<PER-SHARE-NII> 51.48
<PER-SHARE-GAIN-APPREC> 25.91
<PER-SHARE-DIVIDEND> 51.67
<PER-SHARE-DISTRIBUTIONS> 1.08
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 958.48
<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> 0000908910
<NAME> IMST-NJ NAV SERIES 11
<SERIES>
<NUMBER> 2
<NAME> IMST-NJ NAV SERIES 11
<S> <C>
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 2,927,635
<INVESTMENTS-AT-VALUE> 2,814,249
<RECEIVABLES> 54,911
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,869,160
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,957
<TOTAL-LIABILITIES> 33,957
<SENIOR-EQUITY> 2,835,203
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 35,222
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,408)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (113,386)
<NET-ASSETS> 2,835,203
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 158,591
<OTHER-INCOME> 0
<EXPENSES-NET> 7,065
<NET-INVESTMENT-INCOME> 151,526
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 67,081
<NET-CHANGE-FROM-OPS> 218,607
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 151,186
<DISTRIBUTIONS-OF-GAINS> 8,408
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 9
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 59,013
<ACCUMULATED-NII-PRIOR> 34,882
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 925.40
<PER-SHARE-NII> 50.58
<PER-SHARE-GAIN-APPREC> 22.40
<PER-SHARE-DIVIDEND> 50.47
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 947.91
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
J.J. Kenny Frank A. Ciccotto, Jr.
65 Broadway Vice President
New York, NY 10006-2551 Tax-Exempt Evaluations
Tel 212 770 4422
Fax 212 797 8681
Standard & Poor's
A Division of The McGraw-Hill Companies
October 31, 1997
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 29, New York Navigator Insured Series 11
and New Jersey Navigator Insured Series 8
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-45890 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Amendment of the reference to Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective bonds
comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange 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
October 31, 1997
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 30 and New York Navigator Insured Series 12
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-53124 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Amendment of the reference to Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective bonds
comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange 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
October 31, 1997
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,
New York Navigator Series 15
and New Jersey Navigator Insured Series 11
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-50891 for the above-captioned trust. We hereby acknowledge that
Kenny S&P Evaluation Services, a division of J.J. Kenny Co., Inc. is currently
acting as the evaluator for the trust. We hereby consent to the use in the
Amendment of the reference to Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above-referenced Amendment to the Registratin Statement for the respective bonds
comprising the trust portfolio are the ratings indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely,
Frank A. Ciccotto
FAC/trh
Independent Auditors' Report
The Sponsor, Trustee, and Certificateholders
Insured Municipal Securities Trust, Series 30:
We have audited the accompanying statement of net assets, including the
portfolio, of Insured Municipal Securities Trust, Series 30 as of June 30, 1995,
and the related statements of operations and changes in net assets for the years
ended June 30, 1995, June 30, 1994, and the period November 6, 1992 (date of
deposit) to June 30, 1993, before the restatement described in Note 2 to the
financial statements. These financial statements are the responsibility of the
Trustee. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 1995 by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insured Municipal Securities
Trust, Series 30 as of June 30, 1995, and the results of its operations and the
changes in its net assets for the years ended June 30, 1995 and 1994, and the
period November 6, 1992 to June 30, 1993 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
September 15, 1995
except as to Notes 2 and 7, which are as of
September 15, 1997 and September 28, 1995,
respectively
