AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1996
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
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:
Glickenhaus Special Situations Trust, Series 1
B. NAME OF DEPOSITORS:
Glickenhaus & Co.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
COPY OF COMMENTS TO:
SETH M. GLICKENHAUS MICHAEL R. ROSELLA, Esq.
Glickenhaus & Co. Battle Fowler LLP
6 East 43rd Street Park Avenue Tower
New York, New York 10017 75 East 55th Street
New York, New York 10022
(212) 856-6858
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
290 Units of Glickenhaus Special Situations Trust, Series 1 is being
registered under the Securities Act of 1933 and the Investment
Company Act of 1940, as amended.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED: $290,000*
G. AMOUNT OF FILING FEE:
$100
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration
Statement.
_____ Check if it is proposed that this filing will become effective
immediately upon filing pursuant to Rule 487.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
- --------
* Estimated solely for purposes of calculating filing fee.
394861.1
<PAGE>
<TABLE>
GLICKENHAUS SPECIAL SITUATIONS TRUST,
SERIES 1
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
Under the Securities Act of 1933
<CAPTION>
(Form N-8B-2 Items Required by Instruction as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C>
1. (a) Name of trust..................................... Front cover of Prospectus
(b) Title of securities issued........................ Front cover of Prospectus
2. Name and address of each depositor..................... Back cover of Prospectus
3. Name and address of trustee............................ Back cover of Prospectus, Trustee
4. Name and address of principal underwriter.............. Underwriting, Back cover of Prospectus
5. State of organization of trust......................... Front Cover of Prospectus, The
Trust--Organization
6. Execution and termination of trust agreement.......... Summary of Essential Financial Information,
the Trust, Amendment and Termination of
the Trust Agreement
7. Changes of name....................................... Not Applicable
8. Fiscal year........................................... Not Applicable
9. Litigation............................................ None
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer securities..................... Rights of Unit Holders
(b) Cumulative or distributive securities............... Rights of Unit Holders
(c) Redemption.......................................... Rights of Unit Holders
(d) Conversion, transfer, etc........................... Rights of Unit Holders
(e) Periodic payment plan............................... Not Applicable
(f) Voting rights....................................... Amendment and Termination of the Trust
Agreement
(g) Notice to certificateholders........................ Right of Unit Holders--Reports and
Records, Sponsor--Responsibility, Trustee--Resignation,
Amendment and Termination
of the Trust Agreement
(h) Consents required................................... Sponsor--Responsibility, Amendment and
Termination of the Trust Agreement
(i) Other provisions.................................... The Trust, Tax Status
11. Type of securities comprising units...................... The Trust--Objectives, The Trust--Portfolio
12. Certain information regarding periodic payment
certificates............................................. Not Applicable
i
394861.1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C>
13. (a) Load, fees, expenses, etc.............................. Summary of Essential Information, Public
Offering--Offering Price, Public Offering--
Market for Units, Public Offering--Sponsor's
and Underwriter's Profits
(b) Certain information regarding periodic
payment certificates................................... Not Applicable
(c) Certain percentages.................................... Public Offering--Offering Price
(d) Other loads, fees, expenses............................ Rights of Unit Holders--Certificates
(e) Certain profits receivable by depositors,
principal underwriters, trustee or
affiliated persons..................................... Public Offering--Offering Price, Public
Offering--Sponsor's and Underwriter's
Profits, Rights of Unit Holders--
Redemption--Purchase by the Sponsor of
Units Tendered for Redemption
(f) Ratio of annual charges to income...................... Not Applicable
14. Issuance of trust's securities.............................. The Trust, Rights of Unit Holders--Certificates
15. Receipt and handling of payments from purchasers............ Public Offering--Offering Price, Public
Offering--Sponsor's and Underwriter's
Profits, Amendment and Termination of the
Trust Agreement
16. Acquisition and disposition of underlying
securities.................................................. The Trust--Organization, The Trust--
Objectives, The Trust--Portfolio, Sponsor--Responsibility
17. Withdrawal or redemption.................................... Public Offering--Market for Units, Rights
of Unit Holders--Redemption
18. (a) Receipt, custody and disposition of income............. The Trust--General Considerations,
Insurance on the Bonds, Public Offering--
Offering Price, Rights of Unit Holders--
Distribution of Interest and Principal, Rights
of Unit Holders--Reports and Records,
Amendment and Termination of the Trust
Agreement
(b) Reinvestment of distributions.......................... Automatic Accumulation Account
(c) Reserves or special funds.............................. Rights of Unit Holders--Distribution of
Interest and Principal, Amendment and
Termination of the Trust Agreement
(d) Schedule of distributions.............................. Not Applicable
19. Records, accounts and reports............................... Rights of Unit Holders--Reports and
Records, Rights of Unit Holders--
Distribution of Interest and Principal,
Amendment and Termination of the Trust
Agreement
ii
394861.1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C>
20. Certain miscellaneous provisions of trust
agreement
(a) Amendment.............................................. Sponsor--Resignation, Trustee--Resignation,
Trustee--Limitations on Liability,
Amendment and Termination of the Trust
Agreement
(b) Termination............................................ Sponsor--Resignation, Trustee--Resignation,
Trustee--Limitations on Liability,
Amendment and Termination of the Trust
Agreement
(c) and (d) Trustee, removal and successor.................. Sponsor--Resignation, Trustee--Resignation,
Trustee--Limitations on Liability,
Amendment and Termination of the Trust
Agreement
(e) and (f) Depositor, removal and successor................ Sponsor--Resignation, Trustee--Resignation,
Trustee--Limitations on Liability,
Amendment and Termination of the Trust
Agreement
21. Loans to security holders................................... Not Applicable
22. Limitations on liability.................................... Sponsor--Limitations on Liability,
Trustee--Limitations on Liability,
Evaluator-- Limitations on Liability
23. Bonding arrangements........................................ Additional Information--Item A
24. Other material provisions of trust agreement................ Not Applicable
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor................................... Sponsor
26. Fees received by depositor.................................. Not Applicable
27. Business of depositor....................................... Sponsor
28. Certain information as to officials and affiliated
persons of depositor........................................ Contents of Registration Statement
29. Voting securities of depositor.............................. Not Applicable
30. Persons controlling depositor............................... Not Applicable
31. Payments by depositor for certain services
rendered to trust........................................... Not Applicable
32. Payments by depositor for certain other services
rendered to trust........................................... Not Applicable
33. Remuneration of employees of depositor for
certain services rendered to trust.......................... Not Applicable
34. Remuneration of other person for certain services
rendered to trust........................................... Not Applicable
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's securities by states................ Public Offering--Distribution of Units
iii
394861.1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C>
36. Suspension of sales of trust's securities................... Not Applicable
37. Revocation of authority to distribute....................... Not Applicable
38. (a) Method of distribution................................. Public Offering--Distribution of Units,
Underwriting, Public Offering--Sponsor's
and Underwriter's Profits
(b) Underwriting agreements................................ Public Offering--Distribution of Units,
Underwriting, Public Offering--Sponsor's
and Underwriter's Profits
(c) Selling agreements..................................... Public Offering--Distribution of Units,
Underwriting, Public Offering--Sponsor's
and Underwriter's Profits
39. (a) Organization of principal underwriters................. Sponsor
(b) N.A.S.D. membership of principal
underwriters........................................... Sponsor
40. Certain fees received by principal underwriters............. Not Applicable
41. (a) Business of principal underwriters..................... Sponsor
(b) Branch offices of principal underwriters............... Not Applicable
(c) Salesmen of principal underwriters..................... Not Applicable
42. Ownership of trust's securities by certain persons.......... Not Applicable
43. Certain brokerage commissions received by
principal underwriters...................................... Not Applicable
44. (a) Method of valuation.................................... Public Offering--Market for Units, Public
Offering--Offering Price, Public Offering--
Distribution of Units
(b) Schedule as to offering price.......................... Not Applicable
(c) Variation in offering price to certain
persons................................................ Public Offering--Offering Price, Public
Offering--Distribution of Units
45. Suspension of redemption rights............................. Not Applicable
46. (a) Redemption valuation................................... Rights of Unit Holders--Redemption--
Computation of Redemption Price per Unit
(b) Schedule as to redemption price........................ Not Applicable
47. Maintenance of position in underlying securities............ Public Offering--Market for Units, Public
Offering--Sponsor's and Underwriter's
Profits, Rights of Unit Holders--
Redemption--Purchase by the Sponsor of
Units Tendered for Redemption, Rights of
Unit Holders--Redemption--Computation of
Redemption Price per Unit
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of trustee...................... Trustee
49. Fees and expenses of trustee................................ Rights of Unit Holders--Distribution of
Interest and Principal
</TABLE>
iv
394861.1
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<S> <C>
50. Trustee's lien.............................................. The Trust--Expenses and Charges--Other
Charges, Rights of Unit Holders--
Distribution of Interest and Principal
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's securities.................. Not Applicable
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement with respect
to selection or elimination of underlying
securities............................................. The Trust--Objectives, The
Trust--Portfolio, Sponsor--Responsibility
(b) Transactions involving elimination of
underlying securities.................................. Not Applicable
(c) Policy regarding substitution or elimination
of underlying securities............................... The Trust--Substitution of Bonds,
....................................................... Sponsor--Responsibility
(d) Fundamental policy not otherwise covered............... Not Applicable
53. Tax status of trust......................................... Tax Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years.................... Not Applicable
55. Hypothetical account for issuers of periodic
payment plans............................................... Not Applicable
56. Certain information regarding periodic payment
certificates................................................ Not Applicable
57. Certain information regarding periodic payment
plans.........................................Not Applicable
58. Certain other information regarding periodic
payment plans............................................... Not Applicable
59. Financial statements (Instruction 1(c) to Form S-6)......... Statement of Condition
v
394861.1
</TABLE>
<PAGE>
Subject to Completion Dated August 16, 1996
Units
Dated: August , 1996
DUKE & COMPANY TAX FREE PORTFOLIOS - NATIONAL INSURED TRUST
The Glickenhaus Special Situations Trust, Series 1 consisting of the underlying
unit investment trust designated Duke & Company Tax Free Portfolios - National
Insured Trust, was formed for the purpose of obtaining tax-exempt interest
income through investment in a fixed insured portfolio of long-term bonds,
including contracts and funds for the purchase thereof, issued by or on behalf
of states, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions, including Puerto
Rico, and their public authorities (the "Bonds" or the "Securities"). The
Sponsor of the Trust is Glickenhaus & Co. On the Date of Deposit, all of the
Bonds in the Trust were irrevocably insured and therefore are rated in the
category "AAA" by Standard & Poor's Corporation, "Aaa" by Moody's Investors
Service, Inc. or "AAA" by Fitch Investors Service, Inc. The value of the Units
of the Trust will fluctuate with the value of the underlying Bonds. Minimum
purchase: 1 Unit.
In the opinion of counsel, under existing law, interest income to the Trust,
and, with certain exceptions, to Unit Holders is exempt from all regular
Federal income taxes, but may be subject to state and local taxes. Capital
gains, if any, are subject to tax. Interest on the Bonds will not be subject to
the federal alternative minimum tax. See "The Trust--Tax Status" in Part B of
this Prospectus.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust, the Statement
of Condition of the Trust and the Portfolio. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied
by Part B. Please read and retain both parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED AUGUST __, 1996
<PAGE>
<TABLE>
DUKE & COMPANY TAX FREE PORTFOLIOS -
NATIONAL INSURED TRUST
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT AUGUST __, 1996 (1):
SPONSOR: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
DATE OF DEPOSIT: August __, 1996
<S> <C>
Aggregate Principal Amount of Bonds in Trust: $ (2)
Number of Units:
Fractional Undivided Interest in Trust Per Unit:
Total Value of Securities in Portfolio (Based on Offering Side Valuations of Securities): $
Sponsors' Initial Repurchase Price Per Unit (Total Value of Securities divided by Units): $ (3)
Plus Sales Charge of % (on sales of fewer than 250 Units) of Public Offering Price (4):
Public Offering Price Per Unit: $ (5)
==================
Redemption Price Per Unit: $ (6)
Excess of Public Offering Price Over Redemption Price Per Unit: $
Excess of Public Offering Price Over Sponsors' Initial Repurchase Price Per Unit: $ 48.99
</TABLE>
<TABLE>
<S> <C>
Weighted Average Maturity of
Bonds in the Trust: years
Evaluation Time: 12:00 P.M. New York Time on the initial Date of Deposit and 2:00 P.M. New York
Time thereafter.
Evaluator's Fee: $ per Bond for each valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds in the Trust, $ under the monthly and
$ under the semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $0.25 per $1,000 principal amount of underlying Securities. See "The
Trust--Expenses and Charges."
Sponsors' Profit (Loss) on Deposit: $
Mandatory Termination Date: December 31, 2045
First Settlement Date: August __, 1996
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust under which Trust
Agreement May be Terminated: $ or 20% of the principal amount of the Bonds deposited
in Trust, whichever is lower.
</TABLE>
<TABLE>
Monthly Semi-Annual
<S> <C> <C>
Estimated Annual Interest Income
(includes cash income accrued only): $ $
P
E Less Organizational Expenses (7):
R Less Estimated Annual Expenses:
Estimated Net Annual Interest Income: $ $
======= =
U Estimated Interest Distribution (8): $ $
N
I Estimated Current Return Based
on Public Offering Price (includes
cash income accrual only) (9): % %
T Estimated Long-Term Return (10): % %
Estimated Daily Rate of Net Interest
Accrual: $ $
Record Dates: 15th Day of Month 15th Day of
May and November
Payment Dates: 1st Day of Month 1st Day of
June and December
(continued on following page)
</TABLE>
A-2
388575.1
<PAGE>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) The business day prior to the date of this Prospectus. The date of
this Prospectus is the date on which the Trust Agreement was signed and the
deposit with the Trustee was made.
(2) If a Replacement Bond is not acquired when a contract for the purchase
of Bonds fails, the aggregate principal amount of the Bonds may be reduced. See
"The Trust--Portfolio--General Considerations" in Part B.
(3) Based, during the initial offering period, solely upon the offering
prices of the Securities and thereafter on the bid prices of such Securities.
See "The Trust--Market for Units" in this Part A.
(4) After the initial offering period, Units may be available for purchase
from the Sponsor at a price based upon the aggregate bid price of the Bonds in
the Trust (as determined by the Evaluator) plus a sales charge determined in
accordance with the schedule set forth in "Public Offering--Offering Price" in
Part B of this Prospectus, which is based upon the maturities of each Bond in
the Trust.
(5) No accrued interest will be added to the Public Offering Price in
connection with purchases of Units contracted for on August __, 1996. With
respect to purchases contracted for after such date, accrued interest from
August __, 1996 to, but not including, the date of settlement (normally three
business days after order) will be added to the Public Offering Price.
(6) Based solely upon the bid prices of the Securities. Upon tender for
redemption, the price to be paid will include accrued interest as described in
"Rights of Unit Holders--Redemption--Computation of Redemption Price per Unit"
in Part B.
(7) Although historically the sponsors of unit investment trusts ("UITs")
have paid all the costs of establishing such UITs, this Trust (and therefore
the Unit holders) will bear all or a portion of its organizational costs. Such
organizational costs include: the cost of preparing and printing the
registration statement, the trust indenture and other closing documents; and
the initial audit of the Trust. Total organizational expenses will be amortized
over a five year period. See "Rights of Unit Holders--Expenses and
Charges--Initial Expenses" in Part B.
(notes continued on next page)
A-3
388575.1
<PAGE>
(notes continued from preceding pages)
(8) The first monthly interest distribution of $____ per Unit will be made
on _____ 1, 1996 (the "First Distribution Date") to all monthly
certificateholders of record on _____ 15, 1996 (the "First Record Date"). The
regular monthly payment will be $_____ on _____ 1, 1996 and thereafter. The
first semi-annual interest distribution of $_____ per Unit will be made on
_____ 1, 1996 to all semi-annual certificateholders of record on _____ 15,
1996. The regular semi-annual payment will be $_____ on December 1, 1996 and
thereafter. In order to reduce the amount of accrued interest investors have to
pay in addition to the Public Offering Price, the Trustee has agreed to advance
to the Trust the amount of accrued interest due on Securities through and
including August __, 1996. This accrued interest will be paid to the Sponsor as
the holder of record of all Units on such date. Consequently, when the Sponsor
sells Units, the amount of accrued interest to be added to the Public Offering
Price of the Units purchased by an investor will include only accrued interest
from August __, 1996 to but not including the date of settlement of the
investor's purchase (normally three business days after the purchase contract),
less any distributions from the Interest Account. Since a person who contracts
to purchase Units on August __, 1996 will settle his purchase on August __,
1996, no accrued interest will be added to the Public Offering Price of Units
settled on that date. The Trustee will recover its advancements (without
interest or other cost to the Trust) from interest received on the Securities
deposited in the Trust. See "Rights of Unit Holders--Redemption--Computation at
Redemption Price per Unit in Part B."
(9) Estimated Current Return is calculated by dividing the estimated net
annual interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trust and the Evaluator, and with the redemption, maturity, exchange or sale of
Securities. This calculation, which includes cash income accrual only, does not
include discount accretion on original issue discount bonds or on zero coupon
bonds or premium amortization on bonds purchased at a premium. See "The
Trust--Tax Status" in Part B of this Prospectus and "The Trust--Estimated
Current Return and Estimated Long-Term Return to Unit Holders" in this Part A.
(10) Estimated Long-Term Return is calculated by using a formula that
takes into account the yields (including accretion of discounts and
amortization of premiums) of the individual Bonds in the Trust's portfolio,
weighted to reflect the market value and time to maturity (or, in certain
cases, to earlier call date) of such Bonds, adjusted to reflect the Public
Offering Price (including sales charge and expenses) per Unit. This calculation
does not take into account delays in payment to Unit holders for the first few
months of the Trust's operations, which reduces the Long-Term Return number.
See "The Trust--Estimated Current Return and Estimated Long-Term Return to Unit
Holders" in this Part A.
A-4
388575.1
<PAGE>
The Trust
Glickenhaus Special Situations Trust (the "Fund"), Series 1 consists of
the underlying unit investment trust designated Duke & Company Tax Free
Portfolios, National Insured Trust (the "Trust), which is created under the laws
of the State of New York by a Trust Indenture and Agreement* (the "Trust
Agreement"), dated the Date of Deposit, among Glickenhaus & Co., as sponsor
(the "Sponsor"), The Bank of New York, as trustee (the "Trustee"), and Muller
Data Corporation, as evaluator (the "Evaluator"). The objective of the Trust is
to obtain tax-exempt interest income through an investment in a fixed insured
portfolio consisting primarily of various long-term municipal bonds. No
assurance can be given that the Trust's objectives will be achieved as these
objectives are subject to the continuing ability of the respective issuers of
the bonds to meet their obligations. In addition, an investment in such
portfolio can be affected by fluctuations in interest rates. On the Date of
Deposit, all of the Bonds in the Trust were rated "AAA" by Standard & Poor's
Corporation ("Standard & Poor's"), "Aaa" by Moody's Investors Service, Inc.
("Moody's") or "AAA" by Fitch Investors Service, Inc. ("Fitch") (see "The
Portfolio"). These ratings result from insurance relating only to the Bonds and
not to Units in the Trust. The Units of the Trust are not insured. The
insurance does not therefore remove market risk, as it does not guarantee the
market value of the Units.
Certain of the Bonds in the Trust may be purchased at prices which result
in the portfolio as a whole being purchased at a discount due to original issue
discount, market discount or the inclusion of zero coupon bonds. Bonds selling
at market discount tend to increase in market value as they approach maturity
when the principal amount is payable, thus increasing the potential for gain
(all or a portion of which may be taxable as ordinary income). Any income other
than any earned original issue discount will be taxable and will not be
realized until maturity, redemption or sale of the underlying Bonds or Units of
the Trust. In the case of Bonds acquired at a market discount, gain will be
treated as ordinary income to the extent of accrued market discount. At the
time of the original issuance of the Bonds held by the Trust, opinions relating
to the validity of the Bonds and the exemption of interest thereon from Federal
income tax were (or with respect to "when-issued" Bonds will be) rendered by
bond counsel to the issuing governmental authority. The continued tax-exempt
status will depend upon the issuer's ability to comply with the provisions of
the Internal Revenue Code of 1986, as amended. See "The Trust--Tax Status" in
Part B of this Prospectus. On the Date of Deposit, the Sponsor deposited with
the Trustee delivery statements relating to contracts for the purchase of
$__________ aggregate principal amount for the interest-bearing obligations,
including funds (represented by cash, cash equivalents and/or an irrevocable
letter of credit issued by a major financial institution) for the purchase of
certain such obligations (the "Bonds" or the "Securities"). The Trustee
thereafter delivered to the Sponsor a registered certificate of _______ Units,
representing the entire ownership of the Trust, which Units are being offered
hereby.
In view of the Fund's objectives, the following factors, among others,
were considered in selecting the Bonds: (1) all the Bonds are obligations of
states and counties, municipalities, authorities or political subdivisions
thereof or issued by certain United States territories or possessions,
including Puerto Rico, and their public authorities so that the interest on
them will be exempt from Federal income tax under existing law; (2) the Bonds
are varied as to purpose of issue; (3) in the opinion of the Sponsor, the Bonds
are fairly valued relative to other bonds of comparable quality and maturity;
(4) whether such Bonds are rated AAA by a major bond rating agency; and (5) the
quality of the Bonds
- --------
* References in this Prospectus to the Trust Agreement are qualified in
their entirety by the Trust Agreement which is incorporated herein by
reference.
A-5
388575.1
<PAGE>
and whether such Bonds are insured (see "Insurance"). Subsequent to the Date of
Deposit, a Bond may cease to be rated or its rating may be reduced. In the
event a Bond's rating is downgraded to below investment grade (i.e., "high
yield" or "junk bond" status), such a Bond, as compared to an investment grade
bond, is subject to greater risk of downward price volatility in periods of
economic uncertainty. If a Bond in the Trust is downgraded to high yield bond
status, a decrease in the net asset value of the Trust may result. If such a
decrease in net asset value occurs and Units of the Trust are tendered for
redemption, the Trust may be forced to liquidate some of the Bonds at a loss.
If such redemptions are substantial enough, this could trigger a complete and
unexpected liquidation of the Trust before maturity, resulting in unanticipated
losses for investors. Notwithstanding such risk, neither the downgrading of a
Bond to below investment grade nor a Bond's ceasing to be rated, requires an
elimination of such Bond from the portfolio of the Trust, but such an event may
be considered in the Sponsor's determination to direct the Trustee to dispose
of the Bonds. See "Sponsor--Responsibility" in Part B.
Public Offering Price
The Public Offering Price of the Units of the Trust during the initial
offering period is equal to the aggregate offering price of the Securities in
the respective Trust's portfolio divided by the number of Units outstanding,
plus a sales charge equal to ___% of the Public Offering Price of the Trust on
sales of fewer than 250 Units. In addition, for Units ordered after the date
hereof, accrued interest will be payable from the First Settlement Date for
Units of the Trust (three business days from the date hereof) to the expected
date of settlement (three business days after order). For additional
information regarding the Public Offering Price, the descriptions of interest
and principal distributions, repurchase and redemption of Units and other
essential information regarding the Trust, see the "Summary of Essential
Information" in this Part A. During the initial public offering period, sales
of at least 250 Units will be entitled to a volume discount from the Public
Offering Price. See "Public Offering--Offering Price" in Part B. If the Units
of the Trust had been available for sale on August __, 1996, the Public
Offering Price per Unit would have been $______.
Estimated Current Return and Estimated Long-Term Return
Units of the Trust are offered to investors on a "dollar price" basis
(using the computation method previously described under "Public Offering
Price") as distinguished from a "yield price" basis often used in offerings of
tax exempt bonds (involving the lesser of the yield as computed to maturity of
bonds or to an earlier redemption date). Since they are offered on a dollar
price basis, the rate of return on an investment in Units of the Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return."
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust portfolio in accordance with accepted practices, which
practices take into account not only the interest payable on the Bonds 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 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 Unit holders. The resulting
Estimated Long Term Return represents a measure of the return to Unit holders
earned over the estimated life of the Trust. The Estimated Long Term Return as
of the day prior to the Date of Deposit is stated for the Trust under "Summary
of Essential Information" in Part A.
A-6
388575.1
<PAGE>
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 Securities are
redeemed prior to their maturity. On the day prior to the Date of Deposit, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for the Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the offering prices (bid prices in the case of the secondary market)
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.
Distributions
Distributions of interest received by the Trust, pro rated on an annual
basis, will be made semi-annually unless the Unit holder elects to receive them
monthly. The first monthly distribution will be $_____ for Units of the Trust
and will be made on _____ 1, 1996, to monthly Unit holders of record on _____
15, 1996, and $_____ thereafter. The first semi-annual distribution will be
$_____ for Units of the Trust and will be made on _____ 1, 1996, to semi-annual
Unit holders of record on _____ 15, 1996, and $_____ thereafter. See "Rights of
Unit Holders--Distribution of Interest and Principal" in Part B of this
Prospectus.
Each Unit of the Trust at the Date of Deposit represents 1/_____
fractional undivided interest in the $_________ face amount of underlying Bonds
and net income of the Trust in the ratio of 1 Unit for each $1,000 principal
amount of underlying Bonds (including contracts and funds for the purchase
thereof) in the Trust.
Automatic Accumulation Account
Distributions from the Trust are made semi-annually unless the Unit holder
elects to receive them monthly. Unit holders of the Trust have the option,
however, of either receiving their interest check, together with any principal
payments, from the Trustee or participating in the Automatic Accumulation
Account reinvestment program offered by the Sponsor (the "Plan"). Under the
Plan, a Unit holder may elect to have distributions from Units in the Trust
automatically reinvested in shares of an open-end mutual fund. For a
description of the fund involved see "Automatic Accumulation Account" in Part
B. Participation in the Plan is conditioned on the participating fund's lawful
qualification for sale in the state in which the Unit holder is a resident. The
Plan is not designed to be a complete investment program. See "Automatic
Accumulation Account" in Part B for details on how to enroll in the Plan and
how to obtain a prospectus.
A-7 388575.1
<PAGE>
Insurance
Each of the Bonds in the Trust is insured by a municipal bond guaranty
insurance policy obtained by the issuers of the Bonds ("Pre-Insured Bonds") and
issued by one of the insurance companies (the "Insurance Companies"), described
under "Insurance on the Bonds" in Part B of this Prospectus, covering scheduled
payment of principal thereof and interest thereon when such amounts shall
become due for payment but shall not have been paid by the issuer or any other
insurer thereof. The insurance will also cover any accelerated payments of
principal and the increase in interest payments or premiums, if any, payable
upon mandatory redemption of the Bonds if interest on any Bonds is ultimately
deemed to be subject to regular federal income tax. 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 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"), ___%; Financial Guaranty Insurance
Company ("Financial Guaranty"), ___%; Financial Security Assurance, Inc.
("Financial Security"), ___%; Municipal Bond Insurance Association ("MBIA"),
___%; and MBIA Insurance Corporation ("MBIA Corp."), ___%.
The Portfolio
The portfolio of the Trust contains contracts to purchase issues of Bonds
issued by entities located in ____ states. All such contracts are expected to
be settled by August __, 1996. The following information is being supplied to
inform Unit holders of circumstances affecting the Trust. ____% of the
aggregate principal amount of the Bonds in the portfolio are general
obligations of the governmental entity issuing them which are backed by the
taxing power thereof. None of the aggregate principal amount of the Bonds in
the portfolio are payable from appropriations. ____% of the aggregate principal
amount of the Bonds in the portfolio are payable from the income of specific
projects or authorities and are not supported by the issuers' power to levy
taxes. Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and purpose of issue are as follows: The Trust is deemed to be
concentrated in the ____________ categories.* Prior to their deposit in the
Trust, __ of the issues (____%) were rated AAA by Standard and Poor's
Corporation, __ issue (____%) were rated Aaa by Moody's Investors
- --------
* A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or
more of the aggregate face amount of the portfolio. See "The
Trust--General Considerations" in Part B of this Prospectus.
A-8 388575.1
<PAGE>
Service and __ of the issues (___%) were rated AAA by Fitch Investors Service.*
See "Description of Bond Ratings" in Part B of this Prospectus. For a more
detailed discussion, it is recommended that Unit holders consult the official
statements for each security in the portfolio of the Trust.
_____ of the Bonds initially deposited in the Trust have been purchased on
a "when issued" basis and _____ of the Bonds initially deposited in the Trust
has been purchased on a delayed settlement basis. Normally, delivery of "when
issued" Bonds and delayed settlement Bonds is expected to take place within 30
days after the First Settlement Date. Accordingly, delivery may be delayed or
may not occur. Interest on such Bonds begins accruing to the benefit of Unit
holders on the date of delivery. Holders of Units will be "at risk" with
respect to such Bonds (i.e., may derive either gain or loss from fluctuations
in the offering side valuation of such Bonds) from the date they commit for
Units. See "The Trust--Portfolio--General Considerations" in Part B.
____% of the aggregate principal amount of the Bonds in the Trust are
original issue discount bonds that have mandatory sinking fund installment
provisions at redemption prices equal to the compound accreted value on the
date of redemption. Of these original issue discount bonds, ____% are zero
coupon bonds. ____% of the aggregate principal amount of the Bonds in the Trust
are zero coupon bonds that do not have mandatory sinking fund installment
provisions. Zero coupon bonds do not provide for the payment of any current
interest and provide for payment and maturity at par value unless sooner sold
or redeemed. The market for zero coupon bonds is subject to greater
fluctuations than coupon bonds in response to changes in interest rates. (See
"Original Issue Discount and Zero Coupon Bonds" in Part B of this Prospectus).
On the Date of Deposit, ____% of the Bonds in the Trust were purchased at a
premium and are subject to retirement or refunding within ten years of the Date
of Deposit. On the Date of Deposit, based on the offering side valuation, none
of the aggregate principal amount of the Bonds were at par, ____% of the
aggregate principal amount of the Bonds were at a discount from par and ____%
of the aggregate principal amount of the Bonds were at a premium.
An investment in Units of the Trust should be made with an understanding
of the risks entailed in investments in fixed-rate bonds, including the risk
that the value of such bonds (and, therefore, of the Units) will decline with
increases in interest rates or a decrease in the federal income tax rate.
Inflation and recession, as well as measures implemented to address these and
other economic problems, contribute to fluctuations in interest rates and the
values of fixed-rate bonds generally. Additionally, changes in the tax
treatment of bonds may have an adverse impact on the value of the Units. The
Sponsor cannot predict future economic policies or their consequences, nor can
it predict the course or extent of such fluctuations in the future.
- --------
* For the meanings of ratings, including the symbols "p" and "Con. (. . .),"
see "Description of Bond Ratings" in Part B of this Prospectus. Security
letter ratings may be modified by the addition of a plus or minus sign,
when appropriate, to show relative standing within the major rating
categories. There can be no assurance that the economic and political
conditions on which the ratings of the Bonds in any Trust are based will
continue or that particular Bond issues may not be adversely affected by
changes in economic, political or other conditions that do not affect the
above ratings. See "The Trust--Special Factors Affecting New York" and
"The Trust--General Considerations" in Part B of this Prospectus.
A-9
388575.1
<PAGE>
Underwriting
Duke & Company Inc., ____________________, will act as sole underwriter
(the "Underwriter") for all of the Units of the Duke & Company Tax Free
Portfolios - National Insured Trust comprising Glickenhaus Special Situations
Trust, Series 1. See "Public Offering - Distribution of Units" in Part B.
A-10
388575.1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Trustee, and Unit Holders of Glickenhaus Special Situations Trust,
Series 1
We have audited the Statement of Condition of the Duke & Company Tax
Free Portfolios - National Insured Trust, comprising the Glickenhaus Special
Situations Trust, Series 1, including the Portfolio as of August __, 1996. This
financial statement is the responsibility of the Sponsor. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit 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. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion. An irrevocable letter of credit deposited on August __, 1996
in the amount required to purchase securities, as described in the Statement of
Condition, was confirmed to us by ____________.
In our opinion, the Statement of Condition referred to above presents
fairly, in all material respects, the financial position of the Duke & Company
Tax Free Portfolios - National Insured Trust, comprising the Glickenhaus
Special Situations Trust, Series 1 at August __, 1996 in conformity with
generally accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
August __, 1996
A-11
388575.1
<PAGE>
DUKE & COMPANY TAX FREE PORTFOLIOS - NATIONAL INSURED TRUST
Glickenhaus Special Situations Trust, Series 1
STATEMENT OF CONDITION AS OF DATE OF DEPOSIT
August __, 1996
TRUST PROPERTY
Investment in Securities:
Contracts to purchase underlying Securities (1)(2)........... $
Accrued interest receivable (2)................................
Organizational costs (3).......................................
-----------
Total.................................................... $
===========
LIABILITIES AND INTEREST OF UNIT HOLDERS
Liabilities:
Accrued interest receivable (2)............................. $
Accrued liability (3)....................................... -----------
Interest of Unit holders:
Units of fractional undivided interest outstanding (______):
Cost to investors (4)........................................ $
Less--gross underwriting commission (5)......................
-----------
Net interest of Unit holders....................................
-----------
Total...................................................
===========
(1) Aggregate cost to the Trust of the Securities listed under "Portfolio"
is based on offering side valuation determined by the Evaluator on the basis
set forth under "Public Offering--Offering Price" in Part B. The aggregate bid
side evaluation of the Securities in the portfolio, as determined by the
Evaluator, as of the Date of Deposit was $____________. An irrevocable letter
of credit issued by ___________, in an aggregate amount equal to or in excess
of $____________, has been deposited with the Trustee. The amount of such
letter of credit includes: $____________, the amount required to purchase the
tax-exempt securities listed in the related portfolio, plus $__________
covering accrued interest through expected dates of delivery.
(2) On the basis set forth under "Rights of Unit Holders--Distribution of
Interest and Principal" in Part B the Trustee will advance an amount equal to
the accrued interest on the Securities as of August __, 1996 (the "First
Settlement Date") plus any cash received by the Trustee with respect to
interest on the Securities prior to such date, and the same will be distributed
to the Sponsors on the First Settlement Date. Consequently, the amount of
interest accrued on a Unit to be added to the public offering price thereof
will include only such accrued interest from the First Settlement Date to the
date of settlement, less all withdrawals and deductions from the Interest
Account subsequent to the First Settlement Date made with respect to the Unit.
(3) Organizational costs incurred by the Trust have been deferred and will
be amortized over a five year period. The Trust will reimburse the Sponsors for
actual organizational costs incurred.
(4) Aggregate public offering price (exclusive of interest) is computed on
_____ Units on the basis set forth above under "Public Offering-- Offering
Price" in Part B.
(5) A sales charge of ____% computed on ______ Units. See "Public
Offering--Offering Price" in Part B for volume discounts on sales of 250 Units
or more.
A-12
388575.1
<PAGE>
<TABLE>
<CAPTION>
DUKE & COMPANY TAX FREE PORTFOLIOS - NATIONAL INSURED TRUST
Glickenhaus Special Situations Trust, Series 1
Portfolio as of Date of Deposit, August __, 1996
<S> <C> <C> <C> <C> <C> <C>
Redemption Features
Port- Coupon Ant.--Anticipated Yield Cost of
folio Rating Principal Represented by Contracts to Rate and S.F.--Sinking Fund to Securities
No. (1) Amount (3) Purchase Securities (4) Maturity Opt.--Optional (5) Maturity to Trust(6)(7)
- --------- ------------- --------------- ----------------------------- -------- ------------------- -------- --------------
A-13
388575.1
</TABLE>
<PAGE>
FOOTNOTES TO PORTFOLIO
The symbol "NR" denotes a non-rated issue of Bonds.
(1) All ratings are by Standard & Poor's except those identified by an
asterisk (*) are by Moody's and those identified by a double asterisk (**) are
by Fitch. A brief description of the rating symbols and their meanings is set
forth under "Description of Bond Ratings" in Part B.
(2) All Bonds are represented by contracts to purchase.
(3) All contracts to purchase the Bonds were entered into from August __,
1996 to August __, 1996. All contracts are expected to be settled prior to or
on the First Settlement Date of the Trust which is expected to be August __,
1996. These bonds are expected to be settled (and interest begins accruing on
these bonds to the benefit of Unit holders of the Trust) within 30 days after
the First Settlement Date.
(4) Unless otherwise indicated, there is shown under this heading the year
in which each issue of bonds initially is redeemable and the redemption price
for that year. Each such issue continues to be redeemable at declining prices
thereafter, but not below par. "S.F." indicates a sinking fund has been or will
be established with respect to an issue of Bonds. In addition, certain Bonds in
the Trust may be redeemed in whole or in part other than by operation of the
stated optional call or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the
terms and provisions of such Bonds. A sinking fund is a reserve fund
accumulated over a period of time for retirement of debt. "Ant." indicates the
existence of anticipated redemptions at a price of 100%. Under certain
circumstances, these anticipated redemptions can be altered. 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 issue is redeemed before
maturity by the proceeds of a new bond issue.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have an offering side valuation which represents a premium over par. To the
extent that the Bonds were deposited in the Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital when
generally be reduced by the amount of the income which would otherwise have
been paid with respect to redeemed Bonds and there will be distributed to Unit
holders the principal amount and any premium received on such redemption. The
estimated current return in this event may be affected by such redemptions. The
Federal tax effect on Unit holders of such redemptions and resultant
distributions is described in the section entitled "The Trust--Tax Status" in
Part B.
(5) See Note (1) to "Statement of Condition as of Date of Deposit"
regarding cost of Bonds. The offering prices are greater than the current bid
prices of the Bonds which is the basis on which Redemption Price per Unit is
determined for purposes of redemption of Units (see the first paragraphs under
"Public Offering--Offering Price" and "Rights of Unit
Holders--Redemption--Computation of Redemption Price Per Unit" in Part B). On
the business day prior to the Date of Deposit the aggregate bid side valuation
of the Securities in the Trust was lower than the aggregate offering side
valuation by ____%. Yield of Bonds was computed on the basis of offering prices
on the Date of Deposit.
Bonds identified as escrowed to maturity under "Portfolio" for the Trust
in this Part A are priced to the maturity date not the call date.
(7) Annual interest income to the Trust is $____________.
(8) Yield calculated based on a call date prior to stated maturity.
A-14
388575.1
<PAGE>
TAX EQUIVALENT YIELDS
FEDERAL TAX FREE VS. TAXABLE INCOME
This table show the approximate yields which taxable securities must earn
in various income brackets to produce, after Federal income tax, returns
equivalent to specified tax-exempt bond yields. The table is computed on the
theory that the taxpayer's highest bracket tax rate is applicable to the entire
amount of any increase or decrease in his taxable income resulting from a
switch from taxable to tax-exempt securities or vice versa. The table reflects
projected Federal income tax rates and the tax brackets for the 1996 taxable
year. Because the Federal rate brackets are subject to adjustment based on
changes in the Consumer Price Index, the taxable equivalent yields for
subsequent years may vary somewhat from those indicated in the table. Use this
table to find your tax bracket. Read across to determine the approximate
taxable yield you would need to equal a return free of Federal income tax.
<TABLE>
<CAPTION>
1995 Tax Year
- -----------------------------------------------------------------------------------------------------------------------------------
Taxable Income Bracket Tax Exempt Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal
Joint Return Single Return Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
Taxable Equivalent Yield
- -------------------------------------------------------------------------------------------------------------------------------
$ 0-40,100 $ 0-24,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 40,101-96,900 $ 24,001-58,150 28.00% 5.56 6.25 6.94 7.64 8.33 9.03
$ 96,901-117,950 $ 58,151-117,950 31.00% 5.80 6.52 7.25 7.97 8.70 9.42
$117,951-147,700 $117,951-121,300 31.93% 5.88 6.61 7.35 8.08 8.81 9.55
$147,701-263,750 $121,301-263,750 37.08% 6.36 7.15 7.95 8.74 9.54 10.33
Over $263,750 Over $263,750 40.79% 6.76 7.60 8.44 9.29 10.13 10.98
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: This table reflects the following:
1. Taxable income, as reflected in the above table, equals Federal
adjusted gross income (AGI), less personal exemptions and itemized
deductions. However, certain itemized deductions are reduced by the
lesser of (i) three percent of the amount of the taxpayer's AGI over
$117,950, or (ii) 80 percent of the amount of such itemized
deductions otherwise allowable. The effect of the three percent phase
out on all itemized deductions and not just those deductions subject
to the phase out is reflected above in the combined Federal and state
tax rates through the use of higher effective Federal tax rates. In
addition, the effect of the 80 percent cap on overall itemized
deductions is not reflected on this table. Federal income tax rules
also provide that personal exemptions are phased out at a rate of two
percent for each $2,550 (or fraction thereof) of AGI in excess of
$176,950 for married taxpayers filing a joint tax return and $117,950
for single taxpayers. The effect of the phase out of personal
exemptions is not reflected in the above table.
2. Interest earned on municipal obligations may be subject to the
federal alternative minimum tax. This provision is not incorporated
into the table.
3. The taxable equivalent yield table does not incorporate the effect
of graduated rate structures in determining yields. Instead, the tax
rates used are the highest marginal tax rates applicable to the
income levels indicated within each bracket.
4. Interest earned on all municipal obligations may cause certain
investors to be subject to tax on a portion of their Social Security
and/or railroad retirement benefits. The effect of this provision is
not included in the above table.
A-15
388575.1
<PAGE>
DUKE & COMPANY TAX FREE PORTFOLIOS -
NATIONAL INSURED TRUST
Glickenhaus Special Situations Trust, Series 1
Prospectus Part B
Part B of this Prospectus may not be Distributed Unless Accompanied by Part A
THE TRUST
Organization
Glickenhaus Special Situations Trust (the "Fund"), Series 1 consisting
of the underlying unit investment trust designated Duke & Company Tax Free
Portfolios - National Insured Trust (the "Trust") was created under the laws of
the State of New York by a Trust Indenture and Agreement* (the "Trust
Agreement"), dated the Date of Deposit, among Glickenhaus & Co. as sponsor (the
"Sponsor"), The Bank of New York, as trustee (the "Trustee"), and Muller Data
Corporation, as evaluator (the "Evaluator").
On the date of this Prospectus each Unit represented the fractional
undivided interest in the Trust set forth under "Summary of Essential Financial
Information" in Part A. Thereafter, if any Units of the Trust are redeemed by
the Trustee, the fractional undivided interest in the Trust represented by each
unredeemed Unit will increase, although the actual interest in the Trust
represented by each such Unit will remain essentially the same. Units will
remain outstanding until redeemed upon tender to the Trustee by any Unit
holder, which may include the Sponsor, or until the termination of the Trust
Agreement for the related Trust. See "Rights of Unit Holders--Redemption" in
this Part B.
Objectives
The objective of the Fund is to obtain tax-exempt interest income
through an investment in a fixed portfolio consisting primarily of various
intermediate or long-term municipal bonds. No assurance can be given that the
Fund's objectives will be achieved as these objectives are subject to the
continuing ability of the respective issuers of the bonds to meet their
obligations. In addition, an investment in such portfolio can be affected by
fluctuations in interest rates.
Portfolio
The portfolio of the Trust consists of the Bonds described in "The
Portfolio" in Part A and are represented by the Sponsor's contracts to
purchase, which are expected to be settled by the date set forth in Part A. The
Trust may
- --------
* References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
388740.3
<PAGE>
contain Bonds which have been purchased on a when, as, and if issued basis.
Accordingly, the delivery of such Bonds may be delayed or may not occur. (See
"The Portfolio" in Part A.) Interest on these Bonds begins accruing to the
benefit of Unit holders on their respective dates of delivery. Unit holders
will be "at risk" with respect to these Bonds (i.e., may derive either gain or
loss from fluctuations in the offering side evaluation of the Bonds) from the
date they commit for Units. (See "The Portfolio" in Part A.) For a discussion
of the Sponsor's obligations in the event of the failure of any contract for
the purchase of any of the Bonds and limited right to substitute other bonds to
replace any failed contract, see "Substitution of Bonds" in this Part B. On the
Date of Deposit, all of the Bonds in the Trust were rated "AAA" by Standard &
Poor's, "Aaa" by Moody's or "AAA" by Fitch because each Bond was insured by a
municipal bond guaranty insurance policy (see "Insurance On the Bonds" in this
Part B).
In view of the Fund's objectives, the following factors, among others,
were considered in selecting the Bonds: (1) All the Bonds are obligations of
states and counties, municipalities, authorities or political subdivisions
thereof or issued by certain United States territories or possessions,
including Puerto Rico, and their public authorities so that the interest on
them will be exempt from Federal income tax under existing law; (2) the Bonds
are varied as to purpose of issue; (3) in the opinion of the Sponsor, the Bonds
are fairly valued relative to other bonds of comparable quality and maturity;
(4) whether such Bonds are rated AAA by a major bond rating agency; and (5) the
quality of the Bonds and whether such Bonds are insured. Subsequent to the Date
of Deposit, a Bond may cease to be rated or its rating may be reduced. Neither
event requires an elimination of such Bond from the portfolio, but such an
event may be considered in the Sponsor's determination to direct the Trustee to
dispose of the Bonds. See "Sponsor--Responsibility" in Part B. See "The
Trust--Portfolio--General Considerations" in this Part B.
General Considerations
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with their terms
and the proceeds from such events will be distributed to Unit holders and will
not be reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Except as described in
footnotes to "Summary of Essential Financial Information" for the Trust
interest accrues to the benefit of Unit holders commencing with the expected
date of settlement for purchase of the Units. If a Replacement Bond is not
acquired, accrued interest (at the coupon rate of the Failed Bonds or earned
original issue discount in the case of original issue discount and zero coupon
Bonds) will be paid to Unit holders (from the Deposit Date to the date the
Trustee is notified of the failure of the Sponsors to purchase a Replacement
Bond). All such interest paid to Unit holders which accrued after the date of
settlement for a purchase of Units will be paid by the Sponsor and accordingly
will not be treated as tax-exempt income. In the event a Replacement Bond is
not acquired by the Trust, the net annual interest income per Unit for the
Trust would be reduced and the estimated current return might be lowered.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event that any contract for
the purchase of Securities in the Trust fails and no Replacement Bond as
hereinafter defined is acquired, the Sponsor shall refund to all Unit holders
the sales charge attributable to such failed contract, and the principal and
accrued interest (at the coupon rate of the relevant Security or earned
original issue discount in the case of original issue discount and zero coupon
Bonds to the date the Sponsor is notified of the failure) which are
attributable to such failed contract, shall be distributed at the next Monthly
Payment Date which is more than 30 days after the failure to purchase
Replacement Bonds. The portion of such interest paid to a Unit holder which
accrued after the expected date of settlement for purchase of his Units will be
paid by the Sponsor and accordingly will not be treated as tax-exempt income.
B-2
388740.3
<PAGE>
The following paragraphs discuss the characteristics of the Bonds in
the Trust and of certain types of issuers of the Bonds in the Trust. These
paragraphs discuss, among other things, certain circumstances which may
adversely affect the ability of such issuers to make payment of principal of
and interest on Bonds held in the portfolio of the Trust or which may adversely
affect the ratings of such Bonds. An investment in Units of the Trust should be
made with an understanding of the risks that such an investment may entail,
certain of which are described below. Unit holders may obtain additional
information concerning a particular Bond by requesting an official statement
from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest. The
taxing power of any governmental entity may be limited, however, by provisions
of state constitutions or laws, and an entity's credit will depend on many
factors, including potential erosion of the tax base due to population
declines, natural disasters, declines in the state's industrial base or
inability to attract new industries; economic limits on the ability to tax
without eroding the tax base; state legislative proposals or voter initiatives
to limit ad valorem real property taxes; and the extent to which the entity
relies on Federal or state aid, access to capital markets or other factors
beyond the state or entity's control.
Appropriations Bonds
Many state or local governmental entities enter into lease purchase
obligations as a means for financing the acquisition of capital projects (e.g.,
buildings or equipment, among other things). Such obligations are often made
subject to annual appropriations. Certain Bonds in the Trust may be Bonds that
are, in whole or in part, subject to and dependent upon (i) the governmental
entity making appropriations from time to time or (ii) the continued existence
of special temporary taxes which require legislative action for their
reimposition. The availability of any appropriation is subject to the
willingness of the governmental entity to continue to make such special
appropriations or to reimpose such special taxes. The obligation to make lease
payments exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental entity beyond
the monies so appropriated. Subject to the foregoing, once an annual
appropriation is made, the governmental entity's obligation to make lease
rental payments is absolute and unconditional without setoff or counterclaim,
regardless of contingencies, whether or not a given project is completed or
used by the governmental entity and notwithstanding any circumstances or
occurrences which might arise. In the event of non-appropriation,
certificateholders' or bondowners' sole remedy (absent credit enhancement)
generally is limited to repossession of the collateral for resale or releasing,
and the obligation of the governmental lessee is not backed by a pledge of the
general credit of the governmental lessee. In the event of non-appropriation,
the Sponsors may instruct the Trustee to sell such Bonds.
Moral Obligation Bonds. Certain of the Bonds in the Trust may be
secured by pledged revenues and additionally by the so-called "moral
obligations" of a State or a local governmental body. Should the pledged
revenues prove insufficient, the payment of such Bonds is not a legal
obligation of a State or local government, and is subject to its willingness to
appropriate funds therefor.
Revenue Bonds
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"
B-3
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<PAGE>
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 Bonds 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 "Original Issue Discount and Zero
Coupon Bonds").
Housing Bonds. Some of the aggregate principal amount of Bonds of the
Trust may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to housing projects for low
to moderate income families. Since such obligations are 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.
The housing bonds in the Trust, despite their optional redemption
provisions which generally do not take effect until ten 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 housing bonds pursuant to such redemption provisions. In
addition, the housing bonds in the Trust are also subject to mandatory
redemption in part at par at any time that voluntary or involuntary prepayments
of principal on the underlying mortgages are made to the trustee for such Bonds
or that the mortgages are 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 housing bond to be redeemed
substantially prior to its stated maturity date, earliest call date or sinking
fund redemption date.
Public Power Revenue Bonds. General problems of the electric utility
industry include difficulty in financing large construction programs during an
inflationary period; restrictions on operations and increased costs and delays
attributable to environmental considerations; the difficulty of the capital
markets in absorbing utility debt and equity securities; the availability of
fuel for electric generation at reasonable prices, including among other
considerations the potential rise in fuel costs and the costs associated with
conversion to alternate fuel sources such as coal; technical cost factors and
other problems associated with construction, licensing, regulation and
operation of nuclear facilities for electric generation, including among other
considerations the problems associated with the use of radioactive materials
and the disposal of radioactive waste; and the effects of energy conservation.
Certain Bonds may have been issued in connection with the financing of nuclear
generating facilities. In view of recent developments in connection with such
facilities, legislative and administrative actions have been taken and proposed
relating to the development and operation of nuclear generating facilities. The
Sponsor is unable to predict whether any such actions or whether any such
proposals or litigation, if enacted or instituted, will have an adverse impact
on the revenues available to pay the debt service on the Bonds in the portfolio
issued to finance such nuclear projects.
Each of the problems referred to above could adversely affect the
ability of the issuers of public power revenue bonds to make payments of
principal of and/or interest on such bonds. Certain municipal utilities or
agencies may have
B-4
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<PAGE>
entered into contractual arrangements with investor-owned utilities and large
industrial users and consequently may be dependent in varying degrees on the
performance of such contracts for payment of bond debt service.
Health Care Revenue Bonds. Some of the aggregate principal amount of
Bonds of the Trust may consist of hospital revenue bonds. Ratings of hospital
bonds are often initially based on feasibility studies which contain
projections of occupancy levels, revenues and expenses. Actual experience may
vary considerably from such projections. A hospital's gross receipts and net
income will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to provide
them, physicians' confidence in hospital management capability, economic
developments in the service area, competition, actions by insurers and
governmental agencies and the increased cost and possible unavailability of
malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
Proposals for significant changes in the health care system and the
present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse change in these areas may affect the
ability of such issuers to make payment of principal and interest on such
bonds.
Higher Education Revenue Bonds. Higher education revenue bonds include
debt of state and private colleges, universities and systems, and parental and
student loan obligations. The ability of universities and colleges to meet
their obligations is dependent upon various factors, including the revenues,
costs and enrollment levels of the institutions. In addition, their ability may
be affected by declines in Federal, state and alumni financial support,
fluctuations in interest rates and construction costs, increased maintenance
and energy costs, failure or inability to raise tuition or room charges and
adverse results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution
control facilities category include securities issued on behalf of a private
corporation,* including utilities, to provide facilities for the treatment of
air, water and solid waste pollution. Repayment of these bonds is dependent
upon income from the specific pollution control facility and/or the financial
condition of the project corporation.
Other Utility Revenue Bonds. Bonds in this category include securities
issued to finance natural gas supply, distribution and transmission facilities,
public water supply, treatment and distribution facilities, and sewage
collection, treatment and disposal facilities. Repayment of these bonds is
dependent primarily on revenues derived from the billing of residential,
commercial and industrial customers for utility services, as well as, in some
instances, connection fees and hook-up charges. Such utility revenue bonds may
be adversely affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this
category include securities issued to finance facilities for removal and
disposal of solid municipal waste. Repayment of these bonds is dependent on
factors which may include revenues from appropriations from a governmental
entity, the financial condition of the private project corporation and revenues
derived from the collection of charges for disposal of solid waste. Repayment
of resource
- --------
* For purposes of the description of users of facilities, all references to
"corporations" shall be deemed to include any other nongovernmental person
or entity.
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<PAGE>
recovery bonds may also be dependent to various degrees on revenues from the
sale of electric energy or steam. Bonds in this category may be subject to
mandatory redemption in the event of project non-completion, if the project is
rendered uneconomical or if it is considered an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds
issued for airport facilities, bridges, turnpikes, port authorities, railroad
systems, or mass transit systems. Generally, airport facility revenue bonds are
payable from and secured by the revenues derived from the ownership and
operation of a particular airport. Payment on other transportation bonds is
often dependent primarily or solely on revenues from financed facilities,
including user fees, charges, tolls and rents. Such revenues may be adversely
affected by increased construction and maintenance costs or taxes, decreased
use, competition from alternative facilities, scarcity of fuel, reduction or
loss of rents or the impact of environmental considerations. Other
transportation bonds may be dependent primarily or solely on Federal, state or
local assistance including motor fuel and motor vehicle taxes, fees, and
licenses and, therefore, may be subject to fluctuations in such assistance.
Private Activity Bonds. The portfolio of the Trust may contain other
Bonds that are "private activity bonds," which would be primarily of two types:
(1) Bonds for a publicly owned facility that 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) Bonds for facilities deemed owned or beneficially owned by a
private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first type,
receipts or revenues of the Issuer are derived from the project or the operator
or from the unexpended proceeds of the bonds. Such revenues include user fees,
service charges, rental and lease payments, and mortgage and other loan
payments.
The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of the
project or corporate guarantor.
The private activity bonds in the Trust have generally been issued
under bond resolutions, agreements or trust indentures pursuant to which the
revenues and receipts payable under the issuer's arrangements with the users or
the corporate operator of a particular project have been assigned and pledged
to the holders of the private activity bonds. In certain cases a mortgage on
the underlying project has been assigned to the holders of the private activity
bonds or a trustee as additional security. In addition, private activity bonds
are frequently directly guaranteed by the corporate operator of the project or
by another affiliated company.
Special Tax Revenue Bonds. Bonds in this category are bonds secured
primarily or solely by receipt of certain state or local taxes, including sales
and use taxes or excise taxes. Consequently, such bonds may be subject to
fluctuations in the collection of such taxes. Such bonds do not include tax
increment bonds or special assessment bonds.
Other Revenue Bonds. Certain of the Bonds in the Trust may be revenue
bonds which are payable from and secured primarily or solely by revenues from
the ownership and operation of particular facilities, such as correctional
facilities, parking facilities, convention centers, arenas, museums and other
facilities owned or used by a charitable
B-6
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<PAGE>
entity. Payment on bonds related to such facilities is, therefore, primarily or
solely dependent on revenues from such projects, including user fees, charges
and rents. Such revenues may be affected adversely by increased construction
and maintenance costs or taxes, decreased use, competition from alternative
facilities, reduction or loss of rents or the impact of environmental
considerations.
Certain of the Bonds in the Trust are secured by direct obligations of
the U.S. Government, or in some cases, obligations guaranteed by the U.S.
Government, placed in an escrow account maintained by an independent trustee
until maturity or a predetermined redemption date. In a few isolated instances
to date, bonds which were thought to be escrowed to maturity have been called
for redemption prior to maturity.
Puerto Rico Bonds
Certain of the Bonds in the Trust may be general obligations and/or
revenue bonds of issuers located in Puerto Rico which will be affected by
general economic conditions in Puerto Rico. The economy of Puerto Rico is
closely integrated with that of the mainland United States. During fiscal year
1994, approximately 87% of Puerto Rico's exports were to the United States
mainland, which was also the source of 69% of Puerto Rico's imports. In fiscal
1994, Puerto Rico experienced a $4.3 billion positive adjusted trade balance.
The economy of Puerto Rico is dominated by the manufacturing and service
sectors. The manufacturing sector has experienced a basic change over the years
as a result of increased emphasis on higher wage, high technology industries
such as pharmaceuticals, electronics, computers, microprocessors, professional
and scientific instruments, and certain high technology machinery and
equipment. The service sector, including finance, insurance and real estate,
also plays a major role in the economy. It ranks second only to manufacturing
in contribution to the gross domestic product and leads all sectors in
providing employment. In recent 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 1994,
aggregate personal income was $25.7 billion ($21.6 billion in 1987 prices) and
personal income per capita was $7,047 ($5,902 in 1987 prices). Personal income
includes transfer payments to individuals in Puerto Rico under various social
programs. Total federal payments to Puerto Rico, which include 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 1994
were $5.7 billion, of which $3.9 billion, or 68.9%, represent entitlement to
individuals who had previously performed services or made contributions under
programs such as Social Security, veterans benefits and Medicare. The number of
persons employed in Puerto Rico during fiscal 1994 averaged 1,011,000.
Unemployment, although at a low level compared to the late 1970s, remains above
the average for the United States. At fiscal year end June 30, 1994, the
unemployment rate in Puerto Rico was 16.0%. Puerto Rico's decade-long economic
expansion continued throughout the five-year period from fiscal 1990 through
fiscal 1994. Almost every sector of its economy was affected and record levels
of employment were achieved. Factors behind this expansion include Commonwealth
sponsored economic development programs, the relatively stable prices of oil
imports, the continued growth of the United States economy, periodic declines
in exchange value of the United States dollar and the relatively low cost of
borrowing during the period. The Puerto Rico Planning Board's most recent Gross
Product forecast for fiscal 1995 and fiscal 1996, made in February 1995, shows
increases of 2.9% and 2.7%, respectively. The Planning Board's economic
activity index, a composite index for thirteen economic indicators, increased
2.7% for the first seven months of fiscal 1995 compared to the same period of
fiscal 1994, which period showed an increase of 1.3% over the same period of
fiscal 1993. Growth in the Puerto Rico economy in fiscal 1996 depends on
several factors, including the state of the United States economy and the
relative stability in the price of oil imports, the exchange value of the U.S.
dollar and the cost of borrowing.
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<PAGE>
Original Issue Discount Bonds and Zero Coupon Bonds
Certain of the Bonds in the Trust may be original issue discount bonds
and/or zero coupon bonds. Original issue discount bonds are bonds that were
originally issued at less than the market interest rate. Zero coupon bonds are
original issue discount bonds that do not provide for the payment of current
interest. For Federal income tax purposes, original issue discount on such
bonds must be amortized over the term of such bonds. On sale or redemption, the
difference between the (i) the amount realized (other than amounts treated as
tax-exempt income as described below) and (ii) the tax basis of such bonds
(properly adjusted, in the circumstances described below, for amortization of
original issue discount) will be treated as taxable income or loss. See "The
Trust--Tax Status" in this Part B. The Code requires holders of tax-exempt
obligations issued with original issue discount, such as the Trust, to accrue
tax-exempt original issue discount by using the constant interest method
provided for the holders of taxable obligations. In addition, the Code provides
that the basis of a tax-exempt obligation is increased by the amount of accrued
tax-exempt original issue discount. These provisions are applicable to
obligations issued after September 3, 1982 and acquired after March 1, 1984.
Each Trust's tax basis in a Bond is increased by any accrued original issue
discount as is a Unit holder's tax basis in his Units. For Bonds issued after
June 9, 1980 that are redeemed prior to maturity, the difference between the
Trust's basis, as adjusted, and the amount received will be taxable gain or
loss to the Unit holders. All or a portion of any gain may be taxable as
ordinary income.
There can be no assurance that additional Federal legislation will not
be enacted or that existing legislation will not be amended hereafter with the
effect that interest on bonds becomes subject to Federal income taxation. If
the interest on the Bonds in the Trust should ultimately be deemed to be
taxable, the Trustee may sell them and, since they would be sold as taxable
securities, it is expected that they would have to be sold at a substantial
discount from current market prices.
Bonds Subject to Sinking Fund Provisions
Most of the Bonds in the Trust are subject to redemption prior to
their stated maturity date pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. Sinking fund provisions are designed to redeem a significant portion
of an issue gradually over the life of the issue. Obligations to be redeemed
are generally chosen by lot. On the Date of Deposit, the offering valuations of
some of the Bonds in the Trust may have been at a premium and subject to
retirement or refunding within ten years of the Date of Deposit. A callable
debt obligation is one which is subject to redemption prior to maturity at the
option of the issuer. To the extent that obligations are deposited in the Trust
at a price higher than their par value, such redemption at par would result in
a loss of capital to a purchaser of Units at their original public offering
price. The estimated current return of the Units might also be adversely
affected if the return on the retired Bonds is greater than the average return
on the Bonds in the Trust. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when
it is at a discount from par. See "The Portfolio" in Part A for a list of
original issue discount and/or zero coupon bonds and for a breakdown of the
percentage of Bonds in the Trust with offering side valuations at a premium,
discount or at par. See also "Estimated Current Return and Estimated Long Term
Return" in Part A. The portfolio contains a listing of the sinking fund and
call provisions, if any, with respect to each of the Bonds therein.
B-8
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<PAGE>
Substitution of Bonds
In the event of a failure to deliver any Bond that has been purchased
for the Trust under a contract, including those Bonds purchased on a "when, as
and if issued" basis ("Failed Bonds"), the Sponsor is authorized to purchase
other bonds ("Replacement Bonds") which the Trustee shall pay for out of funds
held in connection with the Failed Bonds and to accept delivery of the
Replacement Bonds to make up the original corpus of the Trust. The Replacement
Bonds must be purchased within 20 days after delivery of the notice of the
failed contract, and the purchase price (exclusive of accrued interest) may not
exceed the principal attributable to the Failed Bonds. The Replacement Bonds
(i) must be tax-exempt bonds issued by states or counties, municipalities,
authorities or political subdivisions thereof or issued by certain United
States territories or possessions or their public authorities as described in
the first paragraph under "Portfolio," (ii) must have a fixed maturity date not
exceeding the maturity date of the Failed Bonds and not less than ten years
after the date of purchase, (iii) shall be purchased at a price that results in
a yield to maturity and a current return, in each case as of the Date of
Deposit, at least equal to the yield to maturity and the current return of the
Failed Bonds, (iv) shall not be "when issued" bonds, and (v) must be rated at
least equal to the Failed Bonds. Whenever a Replacement Bond has been acquired
for the Trust, the Trustee shall, within five days thereafter, notify all Unit
holders of the Trust of the acquisition of the Replacement Bond and shall, on
the next monthly Payment Date which is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of the
Failed Bond exceeded the cost of the Replacement Bond. Once the original corpus
of the Trust is acquired, the Trustee will have no power to vary the investment
of the Trust, i.e., the Trustee will have no managerial power to take advantage
of market variations to improve a Unit holder's investment.
If the right of limited substitution described in the preceding
paragraph shall not be utilized to acquire Replacement Bonds in the event of a
failed contract, the Sponsor will refund the sales charge attributable to such
Failed Bonds to all Unit holders of the Trust, and distribute the principal and
accrued interest (at the coupon rate of such Failed Bond, or earned original
issue discount in the case of zero coupon bonds, from the Deposit Date to the
date the Sponsor notifies the Trustee that it will not purchase Replacement
Bonds) attributable to such Failed Bonds on the next monthly Payment Date which
is more than 30 days thereafter. In the event a Replacement Bond is not
acquired by the Trust, the Estimated Net Annual Interest Income per Unit for
the Trust would be reduced and the Estimated Current Return thereon might be
lowered.
Other Matters
An amendment to the Federal Bankruptcy Act relating to the adjustment
of indebtedness owed by any political subdivision or public agency or
instrumentality of any state, including municipalities, became effective in
1979. Among other things, this amendment facilitates the use of proceedings
under the Federal Bankruptcy Act by any such entity to restructure or otherwise
alter the terms of its obligations, including those of the type comprising the
Trust's portfolio. The Sponsor is unable to predict at this time what effect,
if any, this legislation will have on the Trust.
To the best knowledge of the Sponsor, there is no litigation pending
as of the Date of Deposit in respect of any Securities which might reasonably
be expected to have a material adverse effect upon the Trust. At any time after
the Date of Deposit, litigation may be initiated on a variety of grounds with
respect to Securities in the 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
Securities or the tax-free nature of the interest thereon. While the outcome of
such litigation can never be entirely predicted with certainty, bond counsel
has given or will give opinions to the issuing authorities of each Bond on the
date of issuance to the effect that such Securities have been validly issued
and that the interest thereon is exempt from regular Federal income tax. In
addition, other litigation or
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<PAGE>
other factors may arise from time to time which potentially may impair the
ability of issuers to meet obligations undertaken with respect to Securities.
PUBLIC OFFERING
Offering Price
The price of the Units of the Trust as of the Date of Deposit was
determined by adding to the Evaluator's determination of the aggregate offering
price of the Securities per Unit a sales charge of % thereof equal to % of the
Public Offering Price. During the initial public offering period, sales of at
least 250 Units will be entitled to a volume discount from the Public Offering
Price as described below. For purchases settling after the First Settlement
Date, a proportionate share of accrued and undistributed interest on the
Securities at the date of delivery of the Units to the purchaser is also added
to the Public Offering Price.
During the initial offering period the aggregate offering price of the
Securities in the Trust is determined by the Evaluator (1) on the basis of
current offering prices for the Securities,* (2) if offering prices are not
available for any Securities, on the basis of current offering prices for
comparable securities, (3) by making an appraisal of the value of the
Securities on the basis of offering prices in the market, or (4) by any
combination of the above. Such determinations are made each business day during
the initial public offering period as of the Evaluation Time set forth in the
"Summary of Essential Financial Information" in Part A, effective for all sales
made subsequent to the last preceding determination. For information relating
to the calculation of the Redemption Price, which is based upon the aggregate
bid price of the underlying Securities and which may be expected to be less
than the aggregate offering price, see "Rights of Unit Holders--Redemption" in
Part B. See also "Rights of Unit Holders--Certificates" and "Rights of Unit
Holders--Redemption" in Part B for information relating to redemption of Units.
The secondary market Public Offering Price of the Units of the Trust
is based on the aggregate bid price of the Bonds in the Trust (as determined by
the Evaluator) plus a sales charge determined in accordance with the schedule
set forth below, which is based upon the maturities of each Bond in the Trust.
The Sponsor has implemented this variable format as a more equitable method of
assessing the sales charge for secondary market purchases. For purposes of
computation, Bonds will be deemed to mature on their expressed maturity dates
unless the Evaluator evaluates the price of the Bonds to a different date such
as a call date or a mandatory tender date, in which case the maturity will be
deemed to be such other date.
This method of sales charge computation will apply different sales
charge rates to each Bond in the Trust based upon the maturity of each such
Bond in accordance with the following schedule:
- --------
* With respect to the evaluation of Bonds during the initial syndicate
offering period for such Bonds, the "current offering price," as determined
by the Evaluator, will normally be equal to the syndicate offering price as
of the Evaluation Time, unless the Evaluator determines that a material
event has occurred which it believes may result in the syndicate offering
price not accurately reflecting the market value of such Bonds, in which
case the Evaluator, in making its determination with respect to such Bonds,
will consider not only the syndicate offering price but also the factors
described in (2) and (3) herein.
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<TABLE>
<CAPTION>
Secondary Market
Period Sales Change
-------------------------------------------------
Percentage of Percentage of
Public Offering Net Amount
Per Bond Price Invested
----------------------- ---------------------
Years to Maturity Per Bond
<S> <C> <C>
0 Months to 2 years..................................... % %
2 but less than 3....................................... % %
3 but less than 4....................................... % %
4 but less than 8....................................... % %
8 but less than 12...................................... % %
12 but less than 15..................................... % %
15 or more.............................................. % %
</TABLE>
A minimum sales charge of % of the Public Offering Price will be
applied to all secondary market unit purchases.
During the initial public offering period, purchasers of 250 Units or
more will be entitled to a volume discount from the Public Offering Price as
set forth in the table below:
Discount From
Public Offering
Number of Units Price Per Unit
--------------- ---------------
250-499................................................ $
500-999................................................
1,000-1,999............................................
2,000 or more..........................................
Except as discussed under "Distribution of Units" below, the above
volume discount will be the responsibility of the Selling Underwriter or dealer
and will apply on all purchases at any one time by the same person of Units in
the Trust in the amounts stated. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed for the purposes hereof to be registered in the name of the purchaser.
The graduated sales charges are also applicable to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
Certain commercial banks are making Units of the Trust available to
their customers on an agency basis. A portion of the sales charge discussed
above is retained by or remitted to the banks. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the Glass-Steagall
Act does permit certain agency transactions, and banking regulators have not
indicated that these particular agency transactions are not permitted under
such Act.
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<PAGE>
Market for Units
Although it is not obligated to do so, the Sponsor intends to maintain
a market for the Units of the Trust and continuously to offer to purchase Units
of the Trust during the initial offering period at prices based upon the
aggregate offering price of the Securities in the Trust; and thereafter at
prices based on the aggregate bid price of the related Securities. After the
initial offering period the Sponsor's Repurchase Price shall be not less than
the Redemption Price plus accrued interest through the expected date of
settlement. (See "Rights of Unit Holders--Redemption--Computation of Redemption
Price per Unit" in Part B). There is no sales charge incurred when a Unit
holder sells Units back to the Sponsors. Any Units repurchased by the Sponsor
may be reoffered to the public by the Sponsor at the Public Offering Price at
the time, plus accrued interest.
If the supply of Units of any Series exceeds demand, or for some other
business reason, the Sponsor may discontinue purchases of Units of such Series
at prices based on the aggregate bid price of the Securities. The Sponsor does
not in any way guarantee the enforceability, marketability, or price of any
Security in the portfolio or of the Units of the Trust. In the event that a
market is not maintained for the Units of the Trust, a Unit holder desiring to
dispose of his Units may be able to do so only by tendering such Units to the
Trustee for redemption at the Redemption Price, which is based upon the
aggregate bid price of the underlying Securities. The aggregate bid price of
the Securities in the Trust may be expected to be less than the aggregate
offering price. If a Unit holder wishes to dispose of his Units, he should
inquire of the Sponsor as to current market prices prior to making a tender for
redemption to the Trustee. See "Rights of Unit Holders--Redemption" and
"Sponsors" in Part B.
Employees (and their immediate families) of Glickenhaus & Co. and the
Underwriter may, pursuant to employee benefit arrangements, purchase Units of
the Trust at a price equal to the offering side evaluation of the underlying
securities in the Trust during the initial offering period and at the bid side
thereafter, divided by the number of Units outstanding plus a reduced sales
charge of % of the Public Offering Price. 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
It is the Underwriter's intention to qualify Units of the Trust for
sale in certain of the states and to effect a public distribution of the Units
solely through its own organization. However, Units may be sold to dealers who
are members of the National Association of Securities Dealers, Inc. at prices
which represent a concession equal to $ per Unit from the related Public
Offering Price applicable to sales of fewer than Units subject in each case to
change from time to time by the Sponsor. Any volume discount (see "Offering
Price" in Part B) offered to investors will be borne by the Underwriter or
dealer except that, during the initial public offering period, the Sponsor may
pay the Underwriter or dealer $ per Unit for individual sales of more than
Units.
Sales will be made only with respect to whole Units, and the Sponsor
reserves the right to reject, in whole or in part, any order for the purchase
of Units.
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Sponsor's and Underwriter's Profits
As set forth under "Public Offering--Offering Price" in Part B, the
Underwriter will receive gross commissions equal to the specified percentages
of the Public Offering Price of the Units of the Trust. The Sponsor will
receive from the Underwriter the excess of such gross sales commission over $
per Unit.
In addition, the Sponsor realizes a profit or sustain a loss, as the
case may be, in the amount of any difference between the cost of the Securities
to the Trust (which is based on the aggregate offering price of the Securities
on the Date of Deposit) and the purchase price of such Securities to the
Sponsor (which is the cost of such Securities at the time they were acquired
for the account of the Trust). The Underwriters share in the profits, if any,
described in the preceding sentence. See "Summary of Essential Financial
Information" in Part A. In addition, the Sponsor may realize profits or sustain
losses with respect to Bonds deposited in the Trust which were acquired from
the Sponsor or from underwriting syndicates of which it was a member. During
the initial offering period, the Underwriters also may realize profits or
sustain losses as a result of fluctuations after the Date of Deposit in the
offering prices of the Securities and hence in the Public Offering Price
received by the Underwriters for Units. Cash, if any, made available to the
Sponsor prior to the settlement date for the purchase of Units of the Trust may
be used in the Sponsor's businesses, subject to the limitations of the
Securities Exchange Act of 1934 and may be of benefit to the Sponsor.
The Sponsor may have participated as underwriter or as manager or
member of underwriting syndicates from which some of the aggregate principal
amount of the Bonds were acquired for the Trust in the amounts set forth in
Part A. The Sponsor has not purchased any of the Securities in the Trust from
their managed accounts.
In maintaining a market for the Units of the Trust (see "Market for
Units") the Sponsor and the Underwriter will also 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 or redeem such Units and to the extent
they earn sales charges on resales.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO UNIT HOLDERS
Units of the Trust are offered on a "dollar price" basis. In contrast,
tax-exempt bonds customarily are offered on a "yield price" basis. Therefore,
the rate of return on each Unit is measured in terms of both Estimated Current
Return and Estimated Long-Term Return. Estimated Current Return based on the
Public Offering Price per Unit and Estimated Long-Term Return per Unit, each as
of the business day prior to the Date of Deposit, is set forth under "Summary
of Essential Financial Information " in Part A. Information regarding the
estimated monthly distributions of principal and interest to Unit holders of
the Trust is available from the Sponsor on request.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. Estimated Net
Interest Income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator and with principal prepayment, redemption, maturity,
exchange or sale of Bonds. The Public Offering Price per Unit will vary with
changes in the offering price of the Bonds. Estimated Current Return takes into
account only the interest payable on the Bonds and does not involve a
computation of yield to maturity or to an earlier redemption date nor does it
reflect any amortization of premium or discount from par value in the Bond's
purchase price. 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 ratings, the Estimated Current Return per
Unit may be affected adversely if such Bonds are redeemed prior to their
maturity. Therefore, there is no assurance that the
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<PAGE>
Estimated Current Return as set forth under "Summary of Essential Financial
Information" in Part A will be realized in the future.
Estimated Long-Term Return is calculated using a formula that (i)
takes into consideration, and determines and factors in the relative weightings
of, the market values, yields (taking into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all the Bonds in
the Trust and (ii) takes into account the expenses and sales charge associated
with each Unit of the Trust. The Estimated Long-Term Return assumes that each
Bond is retired on its pricing life date (i.e., that date which produces the
lowest dollar price when yield price calculations are done for each optional
call date and the maturity date of a callable security). If the Bond is retired
on any optional call or maturity date other than the pricing life date, the
yield to the holder of that Bond will be greater than the initial quoted yield.
Since the market values and estimated retirements of the Bonds, the expenses of
the Trust and the Net Annual Interest Income and Public Offering Price per Unit
may change, there is no assurance that the Estimated Long-Term Return as set
forth under "Summary of Essential Financial Information" in Part A will be
realized in the future.
INSURANCE ON THE BONDS
Each of the Bonds in the Trust is insured by a municipal bond guaranty
insurance policy obtained by the issuer, underwriter or prior owner of the
Bonds ("Pre-Insured Bonds"), and issued by one of the insurance companies
described below (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 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. 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.
All of the Bonds in the Trust which are insured under policies
obtained by the Bond issuers, underwriters or prior owners of the Bonds are
insured either by AMBAC Indemnity Corporation ("AMBAC"), Connie Lee Insurance
Company ("Connie Lee"), Financial Guaranty Insurance Company ("Financial
Guaranty"), Financial Security Assurance, Inc. ("Financial Security"),
Municipal Bond Insurance Association ("MBIA") or MBIA Insurance Corporation
("MBIA Corp.") (collectively the "Insurance Companies"). The cost of this
insurance is borne by the
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<PAGE>
respective issuers, underwriters or prior owners of the Pre-Insured Bonds. The
percentage of each Portfolio insured by each insurance company, if any, is set
forth under "Insurance" in Part A of this Prospectus.
AMBAC is a Wisconsin-domiciled stock insurance company, regulated by
the Insurance Department of the State of Wisconsin, and licensed to do business
in 50 states, the District of Columbia, the Territory of Guam and the
Commonwealth of Puerto Rico, with admitted assets (unaudited) of approximately
$2,439,000,000, and statutory capital (unaudited) of approximately
$1,378,000,000 as of December 31, 1995. Statutory capital consists of the
statutory contingency reserve and policyholders' surplus of the insurance
company. AMBAC is a wholly owned subsidiary of AMBAC Inc., a 100% publicly-held
company.
AMBAC has entered into pro rata reinsurance agreements under which a
percentage of the insurance underwritten pursuant to certain municipal bond
insurance programs of AMBAC has been and will be assumed by a number of foreign
and domestic unaffiliated reinsurers.
AMBAC has obtained a ruling from the Internal Revenue Service to the
effect that the insuring of an obligation by AMBAC will not affect the
treatment for federal income tax purposes of interest on such obligation and
that insurance proceeds representing maturing interest paid by AMBAC under
policy provisions substantially identical to those contained in its municipal
bond insurance policy shall be treated for federal income tax purposes in the
same manner as if such payments were made by issuer of the Bonds.
As of the Evaluation Date the claims-paying ability of AMBAC has been
rated "AAA" by Standard & Poor's.
Connie Lee, a stock insurance company incorporated in Wisconsin, is a
wholly-owned subsidiary of College Construction Loan Insurance Association, a
stockholder-owned District of Columbia insurance holding company whose creation
was authorized by the 1986 amendments to the Higher Education Act. The United
States Department of Education and Student Loan Marketing Association are
founding shareholders of College Construction Loan Insurance Association. As a
federally authorized company, Connie Lee's structure and operational
authorities are subject to revision by amendments to the Higher Education Act
or other federal enactments. CONNIE LEE IS NOT AN AGENCY OR INSTRUMENTALITY OF
THE UNITED STATES GOVERNMENT, ALTHOUGH THE UNITED STATES GOVERNMENT IS A
STOCKHOLDER OF COLLEGE CONSTRUCTION LOAN INSURANCE ASSOCIATION. THE OBLIGATIONS
OF CONNIE LEE ARE NOT OBLIGATIONS OF THE UNITED STATES GOVERNMENT.
As of December 31, 1995, the total policyholders' surplus of Connie
Lee was $110,443,108 (unaudited) and total admitted assets were $214,031,429
(unaudited), as reported to the Commissioner of Insurance of the State of
Wisconsin.
As of the Evaluation Date, the claims-paying ability of Connie Lee has
been rated "AAA" by Standard & Poor's.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation
("FGIC"), a Delaware holding company. FGIC is a wholly-owned subsidiary of
General Electric Capital Corporation ("GECC"). Neither FGIC nor GECC is
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of December 31,
1995, the total capital and surplus of Financial Guaranty was approximately
$1,000,520,000. In addition, Financial Guaranty is currently licensed to write
insurance in 50 states and the District of Columbia.
B-15
388740.3
<PAGE>
As of the Evaluation Date, the claims-paying ability of Financial
Guaranty has been rated "AAA" by Standard & Poor's.
Financial Security is a monoline insurance company incorporated on
March 16, 1984 under the laws of the State of New York and is licensed,
directly or through its subsidiaries, to engage in the financial guaranty
insurance business in all 50 states, the District of Columbia and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Holdings is owned approximately 51% by US WEST Capital Corporation ("US WEST"),
8% by Fund American Enterprises Holdings, Inc. ("Fund American"), and 6% by The
Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine"). US WEST is a
subsidiary of US WEST, Inc., which operates businesses involved in
communications, data solutions, marketing services and capital assets,
including the provision of telephone services in 14 states in the western and
midwestern United States. Fund American is a financial services holding company
whose principal operating subsidiary is one of the nation's largest mortgage
servicers. Tokio Marine is a major Japanese property and casualty insurance
company. US WEST has announced its intention to dispose of its remaining
interest in Holdings as part of its strategic plan to withdraw from businesses
not directly involved in telecommunications. Fund American has certain rights
to acquire and vote additional shares of Holdings from US WEST and Holdings. No
shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make
any additional contribution to the capital of Financial Security.
On December 20, 1995, Capital Guaranty Corporation ("CGC") merged with
a subsidiary of Holdings, and Capital Guaranty Insurance Company ("CGIC"),
CGC's principal operating subsidiary, became a wholly owned subsidiary of
Financial Security Assurance. CGIC was a financial guaranty insurer of
municipal bonds in the domestic market.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or any of its subsidiaries are
reinsured among such companies on an agreed upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with other reinsurers under various quota-share treaties and
on a transaction-by-transaction basis. Such reinsurance is utilized by
Financial Security as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit Financial
Security's obligations under any financial guaranty insurance policy. As of
December 31, 1995, total shareholder equity of Financial Security and its
wholly-owned subsidiaries was (unaudited) $789,986,000 and total unearned
premium reserves was (unaudited) $330,349,000.
As of the Evaluation Date, Financial Security's claims-paying ability
has been rated "AAA" by Standard & Poor's Corporation.
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%;
B-16
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<PAGE>
The Travelers Indemnity Company, 15%; Aetna Insurance Company*, 12%; and The
Continental Insurance Company, 10%. As a several obligor, each such insurance
company will be obligated only to the extent of its percentage of any claim
under the MBIA policy and will not be obligated to pay any unpaid obligation of
any other member of MBIA. Each insurance company's participation is backed by
all of its assets. However, each insurance company is a multiline insurer
involved in several lines of insurance other than municipal bond insurance, and
the assets of each insurance company also secure all of its other insurance
policy and surety bond obligations.
The following table sets forth certain financial information with respect
to the five insurance companies comprising MBIA. The statistics, which have
been furnished by MBIA, are as reported by the insurance companies to the New
York State Insurance Department and are determined in accordance with statutory
accounting principals. No representation is made herein as to the accuracy or
adequacy of such information or as to the absence of material adverse changes
in such information subsequent to the date thereof. In addition, these numbers
are subject to revision by the New York State Insurance Department which, if
revised, could either increase or decrease the amounts.
<TABLE>
MUNICIPAL BOND INSURANCE ASSOCIATION ("MBIA")
FIVE MEMBER COMPANIES ASSETS, LIABILITIES
AND POLICYHOLDERS' SURPLUS
AS OF MARCH 31, 1995
(000's omitted)
<CAPTION>
New York New York New York
Statutory Statutory Policyholder's
Assets Liabilities Surplus
<S> <C> <C> <C>
The Aetna Casualty & Surety Company $10,225,604 $ 8,312,158 $1,913,446
Fireman's Fund Insurance Company 7,126,217 5,116,059 2,010,158
The Travelers Indemnity Company 10,461,356 8,654,130 1,807,226
Cigna Property and Casualty Company 4,260,177 3,637,513 622,664
(Formerly Aetna Insurance Company)
The Continental Insurance Company 3,060,583 2,380,723 679,860
----------- ----------- ----------
TOTAL $35,133,937 $28,100,583 $7,033,354
</TABLE>
- --------
* Now known as Cigna Property and Casualty Company.
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<PAGE>
MBIA Insurance Corporation (formerly known as Municipal Bond
Investors Assurance Corporation) ("MBIA Corp.") is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Corp.
commenced municipal bond insurance operations on January 5, 1987. Some of the
members of the Association are among the shareholders of MBIA, Inc. MBIA Inc.
is not obligated to pay the debts of or claims against the Insurer. MBIA Corp.
is a limited liability corporation rather than a several liability association.
MBIA Corp. is domiciled, in the State of New York and licensed to do business
in all 50 states, the District of Columbia and the Commonwealth of Puerto Rico.
MBIA Corp. is a separate and distinct entity from the Association. MBIA Corp.
has no liability to the bondholders for the obligations of the Association
under the Policy.
As of September 30, 1995, MBIA Corp. had admitted assets of $3.7
billion (unaudited), total liabilities of $2.5 billion (unaudited), and total
capital and surplus of $1.2 billion (unaudited) prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIA Corp. had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited).
As of the Evaluation Date, the claims-paying ability of MBIA and MBIA
Corp. has been rated "AAA" by Standard & Poor's.
The foregoing information relating to the above insurance companies is
from published documents and other public sources and/or information provided
by such insurance companies. No representation is made herein as to the
accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the dates thereof, but the
Sponsor is not aware that the information herein is inaccurate or incomplete.
TAX STATUS
Interest income on the Bonds contained in the portfolio of the Trust
is, in the opinion of bond counsel to the issuing governmental authorities,
which opinion was rendered at the time of original issuance of the Bonds,
excludible from gross income under the Code. See "The Trust" in Part A.
Gain (or loss) realized on sale, maturity, or redemption of the Bonds
or on sale or redemption of a Unit is, however, includible in gross income as
capital gain (or loss) for Federal, state and local income tax purposes
assuming that the Unit is held as a capital asset. Such gain (or loss) does not
include any amount received in respect of accrued interest. In addition, such
gain (or loss) may be long or short term depending on the holding period of the
Units. Bonds selling at a market discount tend to increase in market value as
they approach maturity when the principal amount is payable, thus increasing
the potential for taxable gain (or reducing the potential for loss) on their
redemption, maturity, or sale. 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. The deductibility of
capital losses is limited to the amount of capital gain; in addition, up to
$3,000 of capital losses of noncorporate Unit holders may be deducted against
ordinary income. Since the proceeds from sales of Bonds, under certain
circumstances, may not be distributed pro-rata, the Unit holder's taxable
income for any year may exceed their actual cash distributions in that year.
In the opinion of Battle Fowler LLP, special counsel for the Sponsor,
under existing law:
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<PAGE>
The Trust is not an association taxable as a corporation for
Federal income tax purposes, and interest on the Bonds which is
excludible from regular Federal gross income under the Code, when
received by the Trust, will be excludible from the regular Federal
gross income of the Unit holders of the Trust. Any proceeds paid under
the insurance policy described above issued to the Trust with respect
to the Bonds and any proceeds paid under individual policies obtained
by issuers of Bonds or other parties which represent maturing interest
on defaulted obligations held by the Trust will be excludible from
Federal gross income if, and to the same extent as, such interest
would have been so excludible if paid in the normal course by the
issuer of the defaulted obligations.
Each Unit holder will be considered the owner of a pro rata
portion of the Bonds and any other assets held in the Trust under the
grantor trust rules of Code Sections 671-679. Each Unit holder will be
considered to have received his pro rata share of income from Bonds
held by the Trust on receipt (or earlier accrual, depending on the
Unit holder's method of accounting and depending on the existence of
any original issue discount) by the Trust, and each Unit holder will
have a taxable event when an underlying Bond is disposed of (whether
by sale, redemption, or payment at maturity) or when the Unit holder
redeems or sells his Units. Gain from a sale will be treated as short
term or long term capital gain depending on how long the Bond was held
by the Trust. The total tax basis (i.e., cost) of each Unit to a Unit
holder is allocated among each of the Bonds held in the Trust (in
accordance with the proportion of the Trust comprised by each such
Bond) in order to determine his per Unit tax basis for each Bond, and
the tax basis reduction requirements of the Code relating to
amortization of bond premium will apply separately to the per Unit
cost of each such Bond. Therefore, under some circumstances, a Unit
holder may realize taxable gain when his Units are sold or redeemed
for an amount equal to his original cost. No deduction is allowed for
the amortization of bond premium on tax-exempt bonds such as the
Bonds. None of the interest received from the portfolio is subject to
the alternative minimum tax for individuals; however, some or all of
the interest received from the portfolio may be includible in the
calculation of a corporation's alternative minimum tax.
For Federal income tax purposes, when a Bond is sold, a Unit
holder may exclude from his share of the amount received any amount
that represents accrued interest but may not exclude amounts
attributable to market discount. Thus, when a Bond is sold by the
Trust, taxable gain or loss will equal the difference between (i) the
amount received (excluding the portion representing accrued interest)
and (ii) the adjusted basis (including any accrued original issue
discount, limited in the case of Bonds issued after June 8, 1980 to
the portion earned from the date of acquisition, as discussed below).
In the case of Bonds acquired at a market discount, gain will be
treated as ordinary income to the extent of accrued market discount.
A Unit holder may also realize taxable gain or loss when a
Unit is sold or redeemed. Taxable gain will result if a Unit is sold
or redeemed for an amount greater than its adjusted basis to the Unit
holder. The amount received when a Unit is sold or redeemed is
allocated among all the Bonds in the Trust in the same manner as when
the Trust disposes of Bonds, and the Unit holder may exclude accrued
interest, including the earned portion of any original issue discount,
but not amounts attributable to market discount. In the case of Bonds
acquired at a market discount gain will be treated as ordinary income
to the extent of accrued market discount. The return of a Unit
holder's tax basis is otherwise a tax-free return of capital.
If the Trust purchases any units of a previously issued
series then, based on the opinion of counsel with respect to such
series, the Trust's pro rata ownership interest in the bonds of such
series (or any previously issued series) will be treated as though it
were owned directly by the Trust.
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<PAGE>
Under the income tax laws of the State and City of New York,
the Trust is not an association taxable as a corporation and the
income of the Trust will be treated as the income of the Unit holders.
The above opinion of Battle Fowler LLP as to the tax status of the
Trust is not affected by the provision of the Trust Agreement that authorizes
the acquisition of Replacement Bonds or by the implementation of the option
automatically to reinvest principal and interest distributions from the Trust
pursuant to the Automatic Accumulation Plan, described under "Automatic
Accumulation Account" in this Part B.
Among other things, the Code provides for the following: (1) interest
on certain private activity bonds issued after August 7, 1986 is included in
the calculation of the individual's alternative minimum tax (currently taxed at
a rate of up to 28%); none of the Bonds in the Trust is a Private Activity Bond
the interest on which is subject to the alternative minimum tax; (2) interest
on certain Private Activity Bonds issued after August 7, 1986 is included in
the calculation of the corporate alternative minimum tax and 75% of the amount
by which adjusted current earnings (including interest on all tax-exempt bonds,
such as the Bonds) exceed alternative minimum taxable income, as modified for
this calculation, will be included in alternative minimum taxable income.
Interest on the Bonds is includible in the adjusted current earnings of a
corporation for purposes of such alternative minimum tax. The Code does not
otherwise require corporations, and does not require taxpayers other than
corporations, including individuals, to treat interest on the Bonds as an item
of tax preference in computing an alternative minimum tax; (3) subject to
certain exceptions, no financial institution is allowed a deduction for that
portion of the institution's interest expense allocable to tax-exempt interest
on tax-exempt bonds acquired after August 7, 1986; (4) the amount of the
deduction allowed to property and casualty insurance companies for underwriting
loss is decreased by an amount determined with regard to tax-exempt interest
income and the deductible portion of dividends received by such companies; (5)
all taxpayers are required to report for informational purposes on their
Federal income tax returns the amount of tax-exempt interest they receive; (6)
an issuer must meet certain requirements on a continuing basis in order for
interest on a tax-exempt bond to be tax-exempt, with failure to meet such
requirements resulting in the loss of tax exemption; and (7) a branch profits
tax on U.S. branches of foreign corporations is implemented which, because of
the manner in which the branch profits tax is calculated, may have the effect
of subjecting the U.S. branch of a foreign corporation to Federal income tax on
the interest on bonds otherwise exempt from such tax.
Section 86 of the Code provides that a portion of social security
benefits is includible in taxable income for taxpayers whose "modified adjusted
gross income" combined with a portion of their social security 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. Under Section 86 of the Code, interest on tax-exempt bonds is
to be added to adjusted gross income for purposes of determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax.
In addition, certain "S Corporations", with accumulated earnings and
profits from Subchapter C years, may be subject to minimum tax on excess
passive income, including tax-exempt interest, such as interest on the Bonds.
At the time of the original issuance of the Bonds held by the Trust,
opinions relating to the validity of the Bonds and the exemption of interest
thereon from regular Federal income tax were or (with respect to "when issued"
Bonds) were to be rendered by bond counsel to the issuing governmental
authorities. Neither the Sponsor nor its special counsel have made any review
of proceedings relating to the issuance of such Bonds or the basis for bond
counsel's opinions.
B-20
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<PAGE>
Under Section 265 of the Code, if borrowed funds are used by a Unit
holder to purchase or carry Units of the Trust, interest on such indebtedness
will not be deductible for Federal income tax purposes. Under rules used by the
Internal Revenue Service, 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. Similar rules are applicable for purposes
of state and local taxation. Also, under Section 291 of the Code, certain
financial institutions that acquire Units may be subject to a reduction in the
amount of interest expense that would otherwise be allowable as a deduction for
Federal income tax purposes. Investors with questions regarding this issue
should consult with their tax advisors.
The Trust may contain Bonds issued with original issue discount. The
Code requires holders of tax-exempt obligations issued with original issue
discount, such as the Trust, to accrue tax-exempt original issue discount by
using the constant interest method provided for the holders of taxable
obligations and to increase the basis of a tax-exempt obligation by the amount
of accrued tax-exempt original issue discount. These provisions are applicable
to obligations issued after September 3, 1982 and acquired after March 1, 1984.
The Trust's tax basis in a Bond is increased by any accrued original issue
discount as is a Unit holder's tax basis in his Units. For Bonds issued after
June 9, 1980 that are redeemed prior to maturity, the difference between the
Trust's basis, as adjusted, and the amount received will be taxable gain or
loss to the Unit holders.
Unit holders should consult their own tax advisors with respect to the
state and local tax consequences of owning original issue discount bonds. It is
possible that under applicable provisions governing determination of such state
and local taxes, interest on tax-exempt bonds such as any Bonds issued with
original issue discount may be deemed to be received in the year of accrual
even though there is no corresponding cash payment.
If a Unit holder's tax cost for his pro rata interest in a Bond
exceeds his pro rata interest in the Bond's face amount, the Unit holder will
be considered to have purchased his pro rata interest in the Bond at a
"premium." The Unit holder will be required to amortize any premium relating to
his pro rata interest in a Bond prior to the maturity of the Bond. Amortization
of premium on a Bond will reduce a Unit holder's tax basis for his pro rata
interest in the Bond, but will not result in any deduction from the Unit
holder's income. Thus, for example, a Unit holder who purchases a pro rata
interest in a Bond at a premium and resells it at the same price will recognize
taxable gain equal to the portion of the premium that was amortized during the
period the Unit holder is considered to have held such interest.
Bond premium must be amortized under the method the Unit holder
regularly employs for amortizing bond premium (assuming such method is
reasonable). With respect to a callable bond, the premium must be computed with
respect to the call price and be amortized to the first call date (and
successively to later call dates based on the call prices for those dates).
In the case of Bonds that are 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 Unit holder
who is such a "substantial user" or "related person" thereof will not be
tax-exempt. Furthermore, in the case of Bonds 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 was determined
to have exceeded $40,000,000 on the date of issue. In the case of Bonds issued
under the
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$10,000,000 "small issue" exemption, interest on such Bonds will become taxable
if the face amount of the Bonds plus certain capital expenditures exceeds
$10,000,000 within 3 years of the date of issue of such Bonds.
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 private activity bonds, 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.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME
TAX PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME TAX LAWS
OF ANY STATE OR LOCAL GOVERNMENT. INTEREST INCOME DERIVED FROM THE BONDS IS NOT
EXCLUDED FROM NET INCOME IN DETERMINING NEW YORK STATE OR NEW YORK CITY
FRANCHISE TAXES ON CORPORATIONS OR FINANCIAL INSTITUTIONS. THE LAWS OF SUCH
STATES AND LOCAL GOVERNMENTS VARY WITH RESPECT TO THE TAXATION OF SUCH
OBLIGATIONS.
From time to time, proposals have been introduced before Congress, the
purpose of which is 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, including proposals for a "flat tax" or
"consumption tax", may be introduced in the future. The Sponsor cannot predict
whether additional legislation, if any, in respect of the Federal income tax
status of interest on debt obligations may be enacted and what the effect of
such legislation would be on Bonds in the Trust.
The Revenue Reconciliation Act of 1993 increases maximum marginal tax
rates for individuals and corporations, extends the authority to issue certain
categories of tax-exempt bonds (qualified small issue bonds and qualified
mortgage bonds), expands a category of qualified tax-exempt bonds (bonds for
high-speed intercity rail facilities), limits the availability of capital gain
treatment for tax-exempt bonds purchased at a market discount, and makes a
variety of other changes. Prospective investors are urged to consult their own
tax advisors as to the effect of this Act on a possible investment in the
Trust.
In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the federal government to
regulate and control bonds such as the Bonds in the Trust and to tax interest
on such bonds in the future. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Bonds in the Trust in
accordance with Section 103 of the Code.
The opinions of 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 advisors for advice with
respect to the effect of any legislative changes.
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RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units of the Trust is evidenced by registered
certificates executed by the Trustee and the Sponsor. The Trustee is authorized
to treat as the record owner of Units that person who is registered as such
owner on the books of the Trustee. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed and accompanied by
a written instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any
multiple thereof. A Unit holder may be required to pay $2.00 per certificate
reissued or transferred and to pay any governmental charge that may be imposed
in connection with each such transfer or interchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit holder must
furnish indemnity satisfactory to the Trustee and must pay such expenses as the
Trustee may incur. Mutilated certificates must be surrendered to the Trustee
for replacement.
Distribution of Interest and Principal
While interest will be distributed semi-annually or monthly, depending
on the method of distribution chosen, principal, including capital gains, will
be distributed only semi-annually; provided, however, that, other than for
purposes of redemption, no distribution need be made from the Principal Account
if the balance therein is less than $1.00 per Unit then outstanding, and that,
if at any time the pro rata share represented by the Units of cash in the
Principal Account exceeds $10.00 as of a Monthly Record Date, the Trustee
shall, on the next succeeding Monthly Distribution Date, distribute the Unit
holder's pro rata share of the balance of the Principal Account. Interest
(semi-annually or monthly) and principal, including capital gains, if any
(semi-annually), received by the Trust will be distributed on each Distribution
Date to Unit holders of record of the Trust as of the preceding Record Date who
are entitled to such distributions at that time under the plan of distribution
chosen. All distributions will be net of applicable expenses and funds required
for the redemption of Units. See "Summary of Essential Financial Information"
in Part A, "The Trust--Expenses and Charges" and "Rights of Unit
Holders--Redemption" in Part B.
The Trustee will credit to the Interest Account for the Trust all
interest received by the Trust, including that part of the proceeds of any
disposition of Securities which represents accrued interest. Other receipts of
the Trust will be credited to the Principal Account for the Trust. The pro rata
share of the Interest Account of the Trust and the pro rata share of cash in
the Principal Account (other than amounts representing failed contracts as
previously discussed) represented by each Unit thereof will be computed by the
Trustee each month as of the Record Date. See "Summary of Essential Financial
Information" in Part A. Proceeds received from the disposition of any of the
Securities subsequent to a Record Date and prior to the next succeeding
Distribution Date will be held in the Principal Account for the Trust and will
not be distributed until the second succeeding Distribution Date. Because
interest on the Securities is not received by the Trust at a constant rate
throughout the year, any particular interest distribution may be more or less
than the amount credited to the Interest Account of the Trust as of the Record
Date. See "Summary of Essential Financial Information" in Part A. Persons who
purchase Units between a Record Date and a Distribution Date will receive their
first distribution on the second Distribution Date following their purchase of
Units under the applicable plan of distribution. No distribution need be made
from the Principal Account if the balance therein is less than an amount
sufficient to distribute $1.00 per Unit.
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The difference between the estimated net interest accrued to the first
Record Date and to the related Distribution Date is an asset of the respective
Unit holder and will be realized in subsequent distributions or upon the
earlier of the sale of such Units or the maturity, redemption or sale of
Securities in the Trust.
Purchasers of Units who desire to receive distributions on a monthly
basis may elect to do so at the time of purchase during the initial public
offering period. Those indicating no choice will be deemed to have chosen the
semi-annual distribution plan. Record dates for monthly distributions will be
the fifteenth day of the preceding month and record dates for semi-annual
distributions will be the fifteenth day of May and November.
Details of estimated interest distributions under the payment plans,
on a per Unit basis, appear in footnote 9 to the "Summary of Essential
Financial Information" in Part A.
The plan of distribution selected by a Unit holder will remain in
effect until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of the
prior owner. Each April, the Trustee will furnish each Unit holder a card to be
returned together with the Certificate by May 15 of such year if the Unit
holder desires to change his plan of distribution, and the change will become
effective on May 16 of such year for the ensuing twelve months. For a
discussion of redemption of Units, see "Rights of Unit
Holders--Redemption--Tender of Units" in Part B.
The Trustee will, as of the fifteenth day of each month, 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 of
the first day of such month. See "The Trust--Expenses and Charges" in Part B.
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any governmental charges 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 account. In addition, the Trustee may withdraw
from the Interest Account and the Principal Account such amounts as may be
necessary to cover redemption of Units by the Trustee. See "Rights of Unit
Holders--Redemption" in Part B. Funds which are available for future
distributions, payments of expenses and redemptions are in accounts which are
non-interest bearing to the Unit holders and are available for use by the
Trustee pursuant to normal banking procedures.
Because interest on Securities in the Trust is payable at varying
intervals, usually in semi-annual installments, the interest accruing to the
Trust will not be equal to the amount of money received and available monthly
for distribution from the Interest Account to Unit holders choosing the monthly
payment plan. Therefore, on each monthly Distribution Date, the amount of
interest actually deposited in the Interest Account and available for
distribution may be slightly more or less than the monthly interest
distribution made. In order to eliminate fluctuations in monthly interest
distributions resulting from such variances during the first year of the Trust,
the Trustee is required by the Trust Agreement to advance such amounts as may
be necessary to provide monthly interest distributions of approximately equal
amounts. In addition, the Trustee has agreed to advance sufficient funds to the
Trust in order to reduce the amount of time before monthly distributions of
interest to Unit holders commence. The Trustee will be reimbursed, without
interest, for any such advances from funds available from the Interest Account
of the Trust. The Trustee's fee takes into account the costs attributable to
the outlay of capital needed to make such advances.
In order to acquire certain of the Securities subject to contract, it
may be necessary to pay on the settlement dates for delivery of such Securities
amounts covering accrued interest on such Securities which exceed the amounts
paid by Unit holders (which excess will be made available under a letter of
credit furnished by the Sponsor on the Date of Deposit). The Trustee has agreed
to pay for any amounts necessary to cover any such excess and will be
reimbursed
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<PAGE>
therefor (without interest) when funds become available from interest payments
on the particular Securities with respect to which such payments may have been
made. Also, since interest on such Securities in the portfolio of the Trust
(see "The Portfolio" in Part A) does not begin accruing as tax-exempt interest
income to the benefit of Unit holders until such Bonds' respective dates of
delivery (accrued interest prior to delivery being treated under the Code as a
return of principal), the Trustee will, in order to cover interest treated as a
return of principal, adjust its fee downward in an amount equal to the amount
of interest that would have so accrued as tax-exempt interest (if not treated
as a return of principal) on such Securities between the date of settlement for
the Units and such dates of delivery.
In addition, because of the varying interest payment dates of the
Securities comprising the Trust portfolio, accrued interest at any point in
time, subsequent to the recovery of any advancements of interest made by the
Trustee, will be greater than the amount of interest actually received by the
Trust and distributed to Unit holders. Therefore, there will usually remain an
item of accrued interest that is added to the value of the Units. If a Unit
holder sells all or a portion of his Units he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his Units.
Similarly, if a Unit holder redeems all or a portion of his Units, the
Redemption Price per Unit which he is entitled to receive from the Trustee will
also include accrued interest on the Securities. Thus, the accrued interest
attributable to a Unit will not be entirely recovered until the Unit holder
either redeems or sells such Unit or until the Trust is terminated.
Expenses and Charges
Initial Expenses
All or a portion of the expenses incurred in creating and establishing
the Trust, including the cost of the initial preparation and execution of the
Trust Agreement, the initial fees and expenses of the Trustee, legal expenses
and other actual out-of-pocket expenses, will be paid by the Trust and
amortized over a five year period. All advertising and selling expenses, as
well as any organizational expenses not paid by the Trust, will be borne by the
Sponsor at no cost to the Trust.
Fees
The Trustee's, Sponsor's and Evaluator's fees are set forth under the
"Summary of Essential Financial Information" in Part A. The Sponsor's fee,
which is earned for portfolio supervisory services, is based on the face amount
of Securities in the Trust at December 1 of each year. The Sponsor's fee, which
is not to exceed the maximum amount set forth under the "Summary of Essential
Financial Information" for the Trust, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount the Sponsor receives for portfolio supervisory services rendered to all
series of Empire State Municipal Exempt Trust in any calendar year exceed the
aggregate cost to them of supplying such services in such year.
The Trustee will receive for its ordinary recurring services to the
Trust an annual fee in the amount set forth in the "Summary of Essential
Financial Information" for the Trust; provided, however, that such fees may be
adjusted as set forth under the "Summary of Essential Financial Information".
There is no minimum fee and, except as hereinafter set forth, no maximum fee.
For a discussion of certain benefits derived by the Trustee from the Trust's
funds, see "Rights of Unit Holders--Distribution of Interest and Principal" in
Part B. For a discussion of the services performed by the Trustee pursuant to
its obligations under the Trust Agreement, reference is made to the material
set forth under "Rights of Unit Holders" in Part B.
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<PAGE>
The Trustee's and Evaluator's fees are payable monthly on or before
each Distribution Date and the Sponsor's annual fee is payable annually on
December 1, each from the Interest Account to the extent funds are available
and then from the Principal Account. These fees may be increased without
approval of the Unit holders 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"; except no such
increase in the Trustee's fee will be so made for the sole purpose of making up
any downward adjustment therein as described in "Summary of Essential Financial
Information". If the balances in the Principal and Interest Accounts are
insufficient to provide for amounts payable by the Trust, or amounts payable to
the Trustee which are secured by its prior lien on the Trust, the Trustee is
permitted to sell Bonds to pay such amounts.
Other Charges
The following additional charges are or may be incurred by the Trust:
all expenses (including audit and counsel fees) of the Trustee incurred in
connection with its activities under the Trust Agreement, including annual
audit expenses 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), the expenses and costs of any
action undertaken by the Trustee to protect the Trust and the rights and
interests of the Unit holders; 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 willful misconduct, bad faith,
or gross negligence on its part, arising out of or in connection with its
acceptance or administration of the Trust; and all taxes and other governmental
charges imposed upon the Securities or any part of the Trust (no such taxes or
charges are being levied or made or, to the knowledge of the Sponsor,
contemplated). The above expenses, including the Trustee's fee, when paid by or
owing to the Trustee, are secured by a lien on the Trust. In addition, the
Trustee is empowered to sell Securities in order to make funds available to pay
all expenses.
Reports and Records
The Trustee shall furnish Unit holders of the Trust 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 Unit holder of record, a statement providing the
following information: (1) as to the Interest Account: interest received
(including amounts representing interest received upon any disposition of
Securities and any earned original issue discount), and, if the issuers of the
Securities are located in different states or territories, the percentage of
such interest by such states or territories, deductions for payment of
applicable taxes and for fees and expenses of the Trust, redemptions of Units
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;
(2) as to the Principal Account: the dates of disposition of any Securities and
the net proceeds received therefrom (including any unearned original issue
discount but excluding any portion representing interest and any related
custodial fee), deductions for payments of applicable taxes and for fees and
expenses of the Trust, purchase of Replacement Bonds, redemptions of Units, the
amount of any "when issued" interest treated as a return of capital 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; (3) a
list of the Securities held and the number of Units outstanding on the last
business day of such calendar year; (4) the Redemption Price per Unit based
upon the last computation thereof made during such calendar year; and (5)
amounts actually distributed during such
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<PAGE>
calendar year from the Interest Account and from the Principal Account,
separately stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
The Trustee shall keep available for inspection by Unit 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
Unit holders of the Trust, certificates issued or held, a current list of
Securities in the Trust and a copy of the Trust Agreement.
Redemption
Tender of Units
While it is anticipated that Units can be sold in the secondary
market, Units may also be tendered to the Trustee for redemption at its
corporate trust office at 101 Barclay Street, New York, New York 10286, upon
payment of any applicable tax. At the present time there are no specific taxes
related to the redemption of the Units. No redemption fee will be charged by
the Sponsor or the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates for Units to be redeemed must be delivered to the Trustee
and must be properly endorsed and accompanied by a written instrument of
transfer. Thus, redemption of Units cannot be effected until certificates
representing such Units have been delivered to the person seeking redemption
(see "Rights of Unit Holders--Certificates" in Part B). Unit holders must sign
exactly as their names appear on the face of the certificate with signature(s)
guaranteed by an officer of a national bank or trust company, a member firm of
either the New York, Midwest or Pacific Stock Exchange, or in such other manner
as may be acceptable to the Trustee. In certain instances the Trustee may
require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority.
Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto,
the Unit holder 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 in the "Summary of Essential Financial Information" as of the
next subsequent Evaluation Time. See "Redemption--Computation of Redemption
Price per Unit." The "date of tender" is deemed to be the date on which Units
are received by the Trustee, except that as regards Units received after the
Evaluation Time on the New York Stock Exchange, the date of tender is the next
day on which such Exchange is open for trading or the next day on which there
is a sufficient degree of trading in Units of the Trust, 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. For information relating to the purchase
by the Sponsor of Units tendered to the Trustee for redemption at prices in
excess of the Redemption Price, see "Redemption--Purchase by the Sponsor of
Units Tendered for Redemption" in Part B.
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 Securities in order to
make funds available for redemption. Such sales, if required, could result in a
sale of Securities by the Trustee at a loss. To the extent Securities are sold,
the size and diversity of the Trust will be reduced.
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 weekend
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<PAGE>
and holiday closings, or during which trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission by rule
or regulation) an emergency exists as a result of which disposal or evaluation
of the underlying Bonds is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission has by order permitted.
Computation of Redemption Price per Unit
The Redemption Price per Unit is determined by the Trustee on the
basis of the bid prices of the Securities in the Trust, while the Public
Offering Price of Units during the initial offering period is determined on the
basis of the offering prices of the Securities, both as of the Evaluation Time
on the day any such determination is made. The bid prices of the Securities may
be expected to be less than the offering prices. This Redemption Price per Unit
is each Unit's pro rata share, determined by the Trustee, of: (1) the aggregate
value of the Securities in the Trust (determined by the Evaluator as set forth
below), (2) cash on hand in the Trust (other than cash covering contracts to
purchase Securities), and (3) accrued and unpaid interest on the Securities as
of the date of computation, less (a) amounts representing taxes or governmental
charges payable out of the Trust, (b) the accrued expenses of the Trust, and
(c) cash held for distribution to Unit holders of record as of a date prior to
the evaluation. The Evaluator may determine the value of the Securities in the
Trust (1) on the basis of current bid prices for the Securities, (2) if bid
prices are not available for any Securities, on the basis of current bid prices
for comparable bonds, (3) by appraisal, or (4) by any combination of the above.
The difference between the bid and offering prices of the Securities
may be expected to average 1 1/2% of face amount. In the case of actively
traded bonds, the difference may be as little as 1/2 of 1%, and in the case of
inactively traded bonds such difference usually will not exceed 3%. On the
business day prior to the date of this Prospectus, the aggregate bid side
evaluation was lower than the aggregate offering side evaluation by the amount
set forth in footnote 6 to the "Portfolio". For this reason, among others, the
price at which Units may be redeemed could be less than the price paid by the
Unit holder. On the Date of Deposit the aggregate current offering price of
such Securities per Unit exceeded the bid price of such Securities per Unit by
the amount set forth under "Summary of Essential Financial Information".
Purchase by the Sponsor of Units Tendered for Redemption
The Trust Agreement requires that the Trustee notify the Sponsor of
any tender of Units for redemption. So long as the Sponsor is maintaining a bid
in the secondary market, the Sponsor, prior to the close of business on the
second succeeding business day, will purchase any Units tendered to the Trustee
for redemption at the price so bid by making payment therefor to the Unit
holder in an amount not less than the Redemption Price on the date of tender
not later than the day on which the Units would otherwise have been redeemed by
the Trustee (see "Public Offering--Market for Units" in this Part B). Units
held by the Sponsor may be tendered to the Trustee for redemption as any other
Units, provided that the Sponsor shall not receive for Units purchased as set
forth above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsor will be the
Public Offering Price determined in the manner provided in this Prospectus (see
"Public Offering--Offering Price" in Part B). Any profit resulting from the
resale of such Units will belong to the Sponsor which likewise will bear any
loss resulting from a lower offering or redemption price subsequent to its
acquisition of such Units (see "Public Offering--Sponsor" and Underwriters"
Profits" in this Part B).
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AUTOMATIC ACCUMULATION ACCOUNT
The Sponsor has entered into an arrangement (the "Plan") with
______________________________ (the "Fund") which permits Unit holders of the
Trust to elect to have distributions from Units in the Trust automatically
reinvested in shares of the Fund. The Fund is an open-end, non-diversified
investment company whose investment objective is to seek as high a level of
current income exempt from Federal income tax, as is believed to be consistent
with preservation of capital. It is the policy of the Fund to invest primarily
in debt securities the interest income from which is exempt from such taxes.
The Fund has an investment objective which differs in certain respects
from that of the Trust. The bonds purchased by the Fund will be of "investment
grade" quality--that is, at the time of purchase by the Fund, such bonds either
will be rated not lower than the four highest ratings of either Moody's (Aaa,
Aa, A or Baa) or Standard & Poor's (AAA, AA, A or BBB) or will be unrated bonds
which at the time of purchase are judged by the Fund's investment advisor to be
of comparable quality to bonds rated within such four highest grades. It is a
fundamental policy of the Fund that under normal market conditions at least 90%
of the income distributed to its shareholders will be exempt from Federal
income tax. Glikenhaus & Co. ("Glickenhaus"), the sponsor of the Trust, acts as
the investment adviser and distributor for the Fund.
Each Unit holder may request from The Bank of New York (the "Plan Agent"),
a copy of the current prospectus relating to the Fund (the "Fund Prospectus")
describing the Fund and a form by which such Unit holder may elect to become a
participant ("Participant") in the Plan. Thereafter, as directed by such
person, distributions on the Participant's Units will, on the applicable
distribution date, automatically be applied as of that date by the Trustee to
purchase shares (or fractions thereof) of the Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such
date, as described in the Fund Prospectus. Unless otherwise indicated, new
Participants in the Fund Plan will be deemed to have elected the monthly
distribution plan with respect to their Units. Confirmations of all
transactions undertaken for each Participant in the Plan will be mailed to each
Participant by the Plan Agent indicating distributions and shares (or fractions
thereof) of the Fund purchased on his behalf. A Participant may at any time
prior to ten days preceding the next succeeding distribution date, by so
notifying the Plan Agent in writing, elect to terminate his participation in
the Plan and receive future distributions on his Units in cash. There will be
no charge or other penalty for such termination. The Sponsor, the Trustee, the
Fund and Glickenhaus, as investment advisor for the Fund, each will have the
right to terminate this Plan at any time for any reason. The reinvestment of
distributions from the Trust through the Plan will not affect the income tax
status of such distributions. For more complete information about investing in
the Fund through the Plan, including charges and expenses, return the enclosed
card for a copy of the Fund Prospectus. Read it carefully before you decide to
participate.
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<PAGE>
SPONSOR
Glickenhaus is the Sponsor of Glickenhaus Special Situations Trust,
Series 1 and all subsequent series.
Glickenhaus, a New York limited partnership, is engaged in the
underwriting and securities brokerage business, and in the investment advisory
business. It is a member of the New York Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. and is an associate member of the
American Stock Exchange. Glickenhaus acts as a sponsor for successive Series of
The Municipal Insured National Trusts and for the prior series of Empire State
Municipal Exempt Trust including those sold under the name of Municipal Exempt
Trust, New York Exempt Series 1, New York Series 2 and New York Series 3.
Glickenhaus, in addition to participating as a member of various selling groups
of other investment companies, executes orders on behalf of investment
companies for the purchase and sale of securities of such companies and sells
securities to such companies in its capacity as a broker or dealer in
securities.
Limitations on Liability
The Sponsor is liable for the performance of its obligations arising
from their responsibilities under the Trust Agreement, but will be under no
liability to the Unit holders for taking any action or refraining from any
action in good faith or for errors in judgment; nor will it be responsible in
any way for depreciation or loss incurred by reason of the sale of any Bonds,
except in cases of their willful misconduct, bad faith, gross negligence or
reckless disregard for their obligations and duties. See "The Trust--Portfolio"
and "Sponsor--Responsibility" in Part B.
Responsibility
The Trustee shall sell, for the purpose of redeeming Units tendered by
any Unit holder and for the payment of expenses for which funds are not
available, such of the Bonds in a list furnished by the Sponsor as the Trustee
in its sole discretion may deem necessary.
It is the responsibility of the Sponsor to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
obligations in exchange and substitution for any Securities pursuant to a
refunding or refinancing plan, except that the Sponsor may instruct the Trustee
to accept such an offer or to take any other action with respect thereto as the
Sponsor may deem proper if the issuer is in default with respect to such
Securities or in the judgment of the Sponsor the issuer will probably default
in respect to such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be held
by the Trustee subject to the terms and conditions of the Trust Agreement to
the same extent as Securities originally deposited thereunder. Within five days
after the deposit of obligations in exchange or substitution for underlying
Securities, the Trustee is required to give notice thereof to each Unit holder,
identifying the obligations eliminated and the Securities substituted therefor.
Except as stated in this and the preceding paragraph and in the discussion
under "Portfolio--General Considerations" in Part B regarding the substitution
of Replacement Bonds for Failed Bonds, the acquisition by the Trust of any
securities other than the Securities initially deposited is prohibited.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor within 30 days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails to
instruct the Trustee to sell or to hold such Bond within 30 days after
notification by the Trustee to the Sponsor of such default,
B-30
388740.3
<PAGE>
the Trustee may in its discretion sell the defaulted Bond and not be liable
for any depreciation or loss thereby incurred. See "The Trust--Insurance on
the Bonds" in Part B.
The Sponsor may direct the Trustee to dispose of Bonds upon default in
the payment of principal or interest, institution of certain legal proceedings
or the existence of certain other impediments to the payment of Bonds, default
under other documents which may adversely affect debt service, default in the
payment of principal or interest on other obligations of the same issuer,
decline in projected income pledged for debt service on revenue Bonds, or
decline in price or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsor the retention of such Bonds in
the Trust would be detrimental to the interest of the Unit holders. The
proceeds from any such sales will be credited to the Principal Account for
distribution to the Unit holders.
Resignation
If, at any time, the Sponsor shall resign or fail to perform any of
its duties thereunder or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may appoint a
successor sponsor or terminate the Trust Agreement and liquidate the Trust.
Financial Information
At September 30, 1995, the total partners' capital of Glickenhaus was
$146,106,000 (audited).
The foregoing information with regard to the Sponsor relates to the
Sponsor only, and not to any series of the Glickenhaus Special Situations
Trust. Such information is included in this Prospectus only for the purpose of
informing investors as to the financial responsibility of the Sponsor and its
ability to carry out its contractual obligations shown herein. More
comprehensive financial information can be obtained upon request from the
Sponsor.
TRUSTEE
The Trustee is The Bank of New York, a trust company organized under
the laws of New York, having its offices at 101 Barclay Street, New York, New
York 10286 (212) 495-1784. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The Trustee must be a banking corporation organized under the laws of the
United States or any state which is authorized under such laws to exercise
corporate trust powers and must have at all times an aggregate capital, surplus
and undivided profits of not less than $5,000,000. The duties of the Trustee
are primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for the Trust.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the disposition of any monies,
Securities or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents except
in cases of its willful misconduct, bad faith, gross negligence or reckless
disregard for its obligations and duties. In addition, the Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or
in respect of the Trust which the Trustee may be required
B-31
388740.3
<PAGE>
to pay under current or future law of the United States or any other taxing
authority having jurisdiction. See "The Trust-- Portfolio" in Part A.
Responsibility
For information relating to the responsibilities of the Trustee under
the Trust Agreement, reference is made to the material set forth under "Rights
of Unit Holders," "Sponsor--Responsibility" and "Sponsor--Resignation" in this
Part B.
Resignation
By executing an instrument in writing and filing the same with the
Sponsor, the Trustee and any successor may resign. In such an event the Sponsor
is obligated to appoint a successor trustee as soon as possible. If the Trustee
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, or if the Sponsor deems it to be in the best interest of
the Unit holders, the Sponsor may remove the Trustee and appoint a successor as
provided in the Trust Agreement. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee. If, upon
resignation or removal of a 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 a trustee becomes effective only when
the successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
Both during and after the initial offering period, the Evaluator shall
be Muller Data Corporation ("Muller Data"), a New York corporation with main
offices located at 395 Hudson Street, New York, New York 10014. Muller Data is
a wholly owned subsidiary of Thomson Publishing Corporation, a Delaware
corporation.
Limitations on Liability
The Trustee and the Sponsor 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 Unit holders for errors in judgement. But this provision shall not
protect the Evaluator in cases of its willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Responsibility
The Trust Agreement requires the Evaluator to evaluate the Securities
on the basis of their bid prices on each business day after the initial
offering period, when any Unit is tendered for redemption and on any other day
such evaluation is desired by the Trustee or is requested by the Sponsor. For
information relating to the responsibility of the Evaluator to evaluate the
Securities on the basis of their offering prices, see "Public
Offering--Offering Price" in Part B.
B-32
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<PAGE>
Resignation
The Evaluator may resign or may be removed by the Sponsor and the
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.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
The Sponsor and the Trustee have the power to amend the Trust
Agreement without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision of the
Trust Agreement which may be defective or inconsistent with any other provision
contained therein, or (2) to make such other provisions as shall not adversely
affect the interest of the Unit holders; and the Sponsor and the Trustee may
amend the Trust Agreement with the consent of the holders of Certificates
evidencing 66 2/3% of the Units then outstanding, provided that no such
amendment will reduce the interest in the Trust of any Unit holder without the
consent of such Unit holder or reduce the percentage of Units required to
consent to any such amendment without the consent of all the Unit holders. In
no event shall the Trust Agreement be amended to increase the number of Units
issuable thereunder or to permit the deposit or acquisition of securities
either in addition to or in substitution for any of the Bonds initially
deposited in the Trust, except in accordance with the provisions of each Trust
Agreement. In the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
The Trust shall terminate upon the maturity, redemption, sale or other
disposition, as the case may be, of the last of the Securities. The Trustee
shall notify all Unit holders when the value of the Trust as shown by any
evaluation is less than $2,000,000 or less than 20% of the value of the Trust
as of the date hereof, whichever is lower, at which time the Trust may be
terminated (i) by the consent of 66 2/3% of the Units or (ii) by the Trustee;
provided, however, that upon affirmative written notice to the Sponsor and the
holders at least 33 1/3% of the Units may instruct the Trustee not to terminate
the Trust. In no event, however, may the Trust continue beyond the Mandatory
Termination Date set forth in Part A; provided, however, that prior to such
date, the Trustee shall not dispose of any Bonds if the retention of such
Bonds, until due, shall be deemed to be in the best interest of the Unit
holders. In the event of termination, written notice thereof will be sent by
the Trustee to all Unit holders. Within a reasonable period after termination,
the Trustee will sell any remaining Securities, and, after paying all expenses
and charges incurred by the Trust, will distribute to each Unit holder, upon
surrender for cancellation of his certificate for Units, his pro rata share of
the balances remaining in the Interest and Principal Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters will be passed upon by Battle Fowler LLP, 75
East 55th Street, New York, New York 10022, as special counsel for the Sponsor,
and Kroll & Tract, 520 Madison Avenue, New York, New York 10022, acting as
counsel for the Trustee.
B-33
388740.3
<PAGE>
AUDITORS
The statement of condition of the Trust included in this Prospectus
has been audited by BDO Seidman, LLP, independent certified public auditors, as
stated in their report appearing herein, and has been so included in reliance
upon such report given upon the authority of that firm as experts in accounting
and auditing.
DESCRIPTION OF BOND RATINGS
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. Standard & Poor"s does not perform an audit in connection
with any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of changes in,
or unavailability of, such information or for other circumstances.
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--Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): to provide more detailed indications of credit
quality, the ratings from "AA" to "B" may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
B-34
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<PAGE>
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by 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 of the project, 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.
NR--Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest. SP-3:
Speculative capacity to pay principal and interest.
* Moody's Investors Service rating. A summary of the meaning of the
applicable rating symbols as published by Moody's follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Con. (. . .)--Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by: (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
B-35
388740.3
<PAGE>
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from "Aa" through "B" in its corporate rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the security ranks in the lower end of its generic rating
category.
**Fitch Investors Service Rating. A summary of the meaning of the
applicable rating symbols as published by Fitch follows:
AAA--These bonds are considered to be investment grade and of the
highest quality. The obligor has an extraordinary ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--These bonds are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue.
A--These bonds are considered to be investment grade and of good
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--These bonds are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.
A "+" or a "--" sign after a rating symbol indicates relative standing
in its rating.
B-36
388740.3
<PAGE>
<TABLE>
<S> <C>
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 DUKE & COMPANY TAX FREE
Investment Company Act of 1940. Such registration does not PORTFOLIOS - NATIONAL INSURED
imply that the Trust or any of its Units have been guaranteed, TRUST
sponsored, recommended or approved by the United States or
any state or any agency or officer thereof. Glickenhaus Special Situations Trust, Series 1
-------------------------
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.
TABLE OF CONTENTS
Title Page
PART A
Summary of Essential Information........................A-2 Sponsor:
Independent Auditors' Report...........................A-11 Glickenhaus & Co.
Statements of Condition................................A-12 6 East 43rd Street
Portfolio..............................................A-13 New York, New York 10017
PART B (212) 953-7532
The Trust...............................................B-1
Public Offering........................................B-10 Underwriter:
Estimated Current Return and
Estimated Long Term .................................B-13 Duke & Company Inc.
Insurance on the Bonds.................................B-14 909 Third Avenue
Tax Status.............................................B-18 New York, New York 10022
Rights of Unit Holders.................................B-23
Automatic Accumulation Account.........................B-29
Sponsor................................................B-30
Trustee................................................B-31 ___________
Evaluator .............................................B-32
Amendment and Termination of the Trust
Agreement.............................................B-33
Legal Opinions.........................................B-33
Auditors...............................................B-34
Description of Bond Ratings............................B-34
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 the Investment Company Act of 1940, and to
which reference is made.
388740.3
</TABLE>
<PAGE>
PART II--ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A--BONDING ARRANGEMENTS
The employees of Glickenhaus & Co. are covered under Brokers' Blanket
Policy, Standard Form 14, in the amount of $5,000,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers
and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 3.1)
BDO Seidman, LLP
The following exhibits:
*1.1 -- Reference Trust Agreement including certain Amendments to
the Trust Indenture and Agreement referred to under Exhibit
1.1.1 below.
1.1.1 -- Trust Indenture and Agreement (filed as Exhibit 1.1.1 to
Amendment No. 1 to Form S-6 Registration Statement No.
33-33746 of Empire State Municipal Exempt Trust, Guaranteed
Series 66 on December 18, 1990, and incorporated herein by
reference).
1.6 -- Restated Agreement of Limited Partnership of Glickenhaus &
Co. (filed as Exhibit 1.3 to Form S-6 Registration Statement
No. 2-95041 of Municipal Insured National Trust Series 1 on
December 21, 1984, and incorporated herein by reference).
1.6(a) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(a) to
Form S-6 Registration Statement No. 2-95041 of Municipal
Insured National Trust Series 1 on December 21, 1984, and
incorporated herein by reference).
1.6(b) -- Certificate of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(b) to
Form S-6 Registration Statement No. 2-95041 of Municipal
Insured National Trust Series 1 on December 21, 1984, and
incorporated herein by reference).
1.6(c) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(c) to
Form S-6 Registration Statement No. 2-95041 of Municipal
Insured National Trust Series 1 on December 21, 1984, and
incorporated herein by reference).
1.6(d) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co.(filed as Exhibit 1.2(d)
to Amendment No. 1 to Form S-6 Registration Statement No.
33-814 of
- --------
* To be filed by Amendment.
II-i
394861.1
<PAGE>
Empire State Municipal Exempt Trust, Guaranteed Series 23 on
April 11, 1986, and incorporated herein by reference).
*2.1 -- Form of Certificate.
*3.1 -- Opinion of Battle Fowler LLP as to the legality of
the securities being registered.
4.1 -- Information as to Partners of Glickenhaus & Co. (filed
as Exhibit 4.1 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-26577 of Empire State Municipal Exempt Trust,
Guaranteed Series 46 on April 19, 1989, and incorporated
herein by reference).
4.3 -- Affiliations of Sponsor with other investment companies
(filed as Exhibit 4.6 to Amendment No. 1 to Form S-6
Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on
March 21, 1985, and incorporated herein by reference).
4.4 -- Stockbrokers' Bond and Policy, Form B for Glickenhaus & Co.
(filed as Exhibit 4.7 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on
December 21, 1984, and incorporated herein by reference).
6.0 -- Copies of Powers of Attorney of General Partners of Glickenhaus
& Co. (filed as Exhibit 6.0 to Form S-6 Registration Number
33-64155 of Glickenhaus Value Portfolios, The 1996 Equity
Collection on November 13, 1995, and incorporated herein by
reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by Amendment.
II-ii
394861.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Glickenhaus Special Situations Trust, Series 1 has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York and State of New
York on the 16th day of August, 1996.
GLICKENHAUS SPECIAL SITUATIONS TRUST,
SERIES 1
By: GLICKENHAUS & CO.
(Sponsor)
By: /s/ BRIAN C. LAUX
Brian C. Laux, Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
NAME TITLE DATE
ALFRED FEINMAN* General Partner
(Alfred Feinman)
SETH M. GLICKENHAUS* General Partner,
(Seth M. Glickenhaus) Chief Investment Officer
STEVEN B. GREEN* Chief Financial
(Steven B. Green) Officer
*By: /s/ BRIAN C. LAUX August 16, 1996
(Brian C. Laux, Attorney-in-Fact)
- --------
* Executed copies of Powers of Attorney filed as Exhibit 6.0 to
Registration Statement No. 33-64155 on November 13, 1995.
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of their name in the Prospectus included
in this Registration Statement is contained in their opinion filed as Exhibit
3.1 to this Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
The Sponsor and Trustee of Glickenhaus Special Situations Trust, Series 1
We hereby consent to the use in this Registration Statement No. 333-_____ of
our report dated August __, 1996, relating to the Statement of Condition of
Glickenhaus Special Situations Trust, Series 1 and to the reference to our firm
under the heading "Auditors" in the Prospectus which is a part of such
Registration Statement.
BDO SEIDMAN, LLP
New York, New York
August __, 1996
II-iv
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number DESCRIPTION PAGE
<S> <C> <C>
*1.1 -- Reference Trust Agreement including certain Amendments to the
Trust Indenture and Agreement referred to under Exhibit 1.1.1
1.1.1 -- Trust Indenture and Agreement (filed as Exhibit 1.1.1 to
Amendment No. 1 to Form S-6 Registration Statement No.
33-33746 of Empire State Municipal Exempt Trust, Guaranteed
Series 66 on December 18, 1990, and incorporated herein by
reference).
1.6 -- Restated Agreement of Limited Partnership of Glickenhaus & Co.
(filed as Exhibit 1.3 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on
December 21, 1984, and incorporated herein by
reference).
1.6(a) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(a) to
Form S-6 Registration Statement No. 2-95041 of Municipal
Insured National Trust Series 1 on December 21, 1984, and
incorporated herein by reference).
1.6(b) -- Certificate of Amendment to Restated Agreement of
Limited Partnership of Glickenhaus & Co. (filed as Exhibit
1.3(b) to Form S-6 Registration Statement No. 2-95041 of
Municipal Insured National Trust Series 1 on December 21, 1984,
and incorporated herein by reference).
1.6(c) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(c) to
Form S-6 Registration Statement No. 2-95041 of Municipal
Insured National Trust Series 1 on December 21, 1984, and
incorporated herein by reference).
1.6(d) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.2(d) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-814
of Empire State Municipal Exempt Trust, Guaranteed Series 23
on April 11, 1986, and incorporated herein by reference).
*2.1 -- Form of Certificate.
*3.1 -- Opinion of Battle Fowler LLP as to the legality of the
securities being registered.
4.1 -- Information as to Partners of Glickenhaus & Co. (filed as
Exhibit 4.1 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-26577 of Empire State Municipal Exempt
Trust, Guaranteed Series 46 on April 19, 1989, and
incorporated herein by reference).
4.3 -- Affiliations of Sponsor with other investment companies
(filed as Exhibit 4.6 to Amendment No. 1 to Form S-6
Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on March 21, 1985, and incorporated
herein by reference).
4.4 -- Stockbrokers' Bond and Policy, Form B for Glickenhaus & Co.
(filed as Exhibit 4.7 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on
December 21, 1984, and incorporated herein by reference).
- --------
* To be filed by Amendment.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number DESCRIPTION PAGE
<S> <C> <C>
6.0 -- Copies of Powers of Attorney of General Partners of
Glickenhaus & Co. (filed as Exhibit 6.0 to Form S-6
Registration Statement Number 33-64155 of Glickenhaus Value
Portfolios, The 1996 Equity Collection on November 13, 1995,
and incorporated herein by reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* To be filed by Amendment.
</TABLE>
-2-
