<PAGE>
Insured California Intermediate Term Portfolio Series 11
File No. 33-49703
Delaware Portfolio Series 13
File No. 33-49595
Maryland Portfolio Series 15
File No. 33-40710
Investment Company Act No. 811-3676
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 3
TO FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact name of Trust:
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO
SERIES 11
DELAWARE PORTFOLIO SERIES 13
MARYLAND PORTFOLIO SERIES 15
B. Name of Depositor:
DEAN WITTER REYNOLDS INC.
C. Complete address of Depositor's principal executive
office:
DEAN WITTER REYNOLDS INC.
Two World Trade Center
New York, New York 10048
D. Name and complete address of agent for service:
Mr. Michael D. Browne
Dean Witter Reynolds Inc.
Unit Trust Department
Two World Trade Center, 59th Floor
New York, New York 10048
Copy to:
Kenneth W. Orce, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
<PAGE>
Check box if it is proposed that this filing should
/x/ become effective immediately upon filing pursuant to
paragraph(b) of Rule 485.
Pursuant to Rule 429(b) under the Securities Act of 1933, the
Registration Statement and prospectus contained herein relates
to Registration Statements Nos.:
33-49703
33-49595
33-40710
<PAGE>
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction 1
as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Trust Front Cover
(b) Title of securities issued
2. Name and address of Depositor Table of Contents
3. Name and address of Trustee Table of Contents
4. Name and address of principal Table of Contents
Underwriter
5. Organization of Trust Introduction
6. Execution and termination of Introduction; Amendment
Indenture and Termination of the
Indenture
7. Changes of name *50
8. Fiscal Year Included in Form N-8B-2
9. Litigation *50
II. General Description of the Trust
and Securities of the Trust
10. General Information regarding
Trust's Securities and Rights
of Holders
(a) Type of Securities Rights of Unit Holders
(Registered or Bearer)
(b) Type of Securities Administration of the
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
(Cumulative or Trust-Distribution
Distributive)
(c) Rights of Holders as to Redemption; Public
Withdrawal or Redemption Offering of Units-Secondary
Market
(d) Rights of Holders as to Public Offering of Units-
conversion, transfer, etc. Secondary Market; Exchange
Option; Redemption; Rights of
Unit Holders-Certificates
(e) Lapses or defaults with *50
respect to periodic payment
plan certificates
(f) Voting rights as to Rights of Unit Holder-
Securities under the Certain Limitations
Indenture
(g) Notice to Holders as to Amendment and Termina-
change in: tion of the Indenture
1) Assets of Trust Administration of the Trust-
Reports to Unit Holders; The
Trust-Summary Description of
the Portfolios
2) Terms and Conditions Amendment and Termination
of Trust's Securities of the Indenture
3) Provisions of Trust Amendment and Termination of
the Indenture
4) Identity of Depositor Sponsor; Trustee
and Trustee
(h) Security Holders consent
required to change:
1) Composition of assets Amendment and Termination
of Trust of the Indenture
2) Terms and conditions Amendment and Termination
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
of Trust's Securities of the Indenture
3) Provisions of Indenture Amendment and Termination of
the Indenture
4) Identity of Depositor *50
and Trustee
(i) Other Provisions Cover of Prospectus; tax
status
11. Type of securities comprising The Trust-Summary
units Description of the Portfolios;
Objectives and Securities
Selection; The Trust-Special
Considerations
12. Type of securities comprising *50
periodic payment certificates
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public Offering
of Units-Public Offering
Price;-Profit of
Sponsor;-Volume Discount;
Expenses and Charges
(b) Certain information *50
regarding periodic payment
certificates
(c) Certain percentages Summary of Essential
Information; Public Offering
of Units-Public Offering
Price;
-Profit of Sponsor;
-Volume Discount
(d) Price differentials Public Offering of Units -
Public Offering Price
(e) Certain other fees, etc. Rights of Unit Holders -
payable by holders Certificates
(f) Certain profits receivable Redemption -- Purchase by
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
by depositor, principal the Sponsors of Units
underwriters, trustee or Tendered for Redemption
affiliated persons
(g) Ratio of annual charges *50
to income
14. Issuance of trust's securities Introduction; Rights of Unit
Holders - Certificates
15. Receipt and handling of Public Offering of Units-
payments from purchasers Profit of Sponsor
16. Acquisition and disposition Introduction; Amendment
of underlying securities and Termination of the
Indenture; Objectives and
Securities Selection; The
Trust-Summary Description of
the Portfolio; Sponsor-
Responsibility
17. Withdrawal or redemption Redemption; Public Offer-
by Security Holders ing of Units-Secondary Market
18. (a) Receipt and disposition Administration of the
of income Trust; Reinvestment Programs
(b) Reinvestment of Reinvestment Programs
distributions
(c) Reserves or special fund Administration of the Trust-
Distribution
(d) Schedule of distribution *50
19. Records, accounts and report Administration of the Trust-
Records and Accounts;-Reports
to Unit Holders
20. Certain miscellaneous Amendment and Termination
provisions of the Indenture of the Indenture; Sponsor
- Limitation on Liability
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
- Resignation; Trustee -
- Limitation on Liability
- Resignation
21. Loans to security holders *50
22. Limitations on liability Sponsor, Trustee; Evaluator -
Limitation on Liability
23. Bonding arrangements Included on Form N-8B-2
24. Other material provisions of *50
the Indenture
III. Organization Personnel and
Affiliated Persons of Depositor
25. Organization of Depositor Sponsor
26. Fees received by Depositor Expenses and Charges - fees;
Public Offering of Units-
Profit of Sponsor
27. Business of Depositor Sponsor and Included in Form
N-8B-2
28. Certain information as to Included in Form N-8B-2
officials and affiliated
persons of Depositor
29. Voting securities of Depositor Included in Form N-8B-2
30. Persons controlling Depositor *50
31. Payments by Depositor for *50
certain other services
32. Payments by Depositor for *50
certain other services
rendered to trust
33. Remuneration of employees of *50
Depositor for certain services
rendered to trust
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
34. Remuneration of other *50
persons for certain services
rendered to trust
IV. Distribution and Redemption of Securities
35. Distribution of trust's Public Offering of Units-
securities by states Public Distribution
36. Suspension of sales of *50
trust's securities
37. Revocation of authority to *50
distribute
38. (a) Method of distribution Public Offering of Units
(b) Underwriting agreements
(c) Selling agreements
39. (a) Organization of principal Sponsor
underwriter
(b) N.A.S.D. membership of
principal underwriter
40. Certain fees received by Public Offering of Units-
principal underwriter Profit of Sponsor
41. (a) Business of principal Sponsor
underwriter
(b) Branch officers of principal *50
underwriter
(c) Salesman of principal *50
underwriter
42. Ownership of trust's securities *50
by certain persons
43. Certain brokerage commissions *50
received by principal underwriter
44. (a) Method of valuation Public Offering of Units
(b) Schedule as to offering *50
price
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
(c) Variation in offering Public Offering of Units-
price to certain persons -Volume Discount; Exchange
Option
45. Suspension of redemption rights *50
46. (a) Redemption valuation Public Offering of Units-
Secondary Market; Redemption
(b) Schedule as to redemption *50
price
47. Maintenance of position in See items 10(d), 44 and
underlying securities 46
V. Information concerning the Trustee or Custodian
48. Organization and regulation Trustee
of Trustee
49. Fees and expenses of Trustee Expenses and Charges
50. Trustee's lien Expenses and Charges
VI. Information concerning Insurance
of Holders of Securities
51. (a) Name and address of *50
Insurance Company
(b) Type of policies *50
(c) Type of risks insured and *50
excluded
(d) Coverage of policies *50
(e) Beneficiaries of policies *50
(f) Terms and manner of *50
cancellation
(g) Method of determining *50
premiums
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
(h) Amount of aggregate *50
premiums paid
(i) Who receives any part of *50
premiums
(j) Other material provisions *50
of the Trust relating to
insurance
VII. Policy of Registrant
52. (a) Method of selecting and Introduction; Objectives
eliminating securities and Securities Selection;
from the Trust The Trust - Summary
Description of the Portfolio;
Sponsor - Responsibility
(b) Elimination of securities *50
from the Trust
(c) Policy of Trust regarding Introduction; Objectives
substitution and and Securities Selection;
elimination of securities Sponsor - Responsibility
(d) Description of any *50
fundamental policy of the
Trust
53. Taxable status of the Cover of Prospectus; Tax
Trust Status
VIII. Financial and Statistical Information
54. Information regarding the *50
Trust's past ten fiscal years
55. Certain information regarding *50
periodic payment plan
certificates
56. Certain information regarding *50
periodic payment plan
certificates
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
57. Certain information regarding *50
periodic payment plan
certificates
58. Certain information regarding *50
periodic payment plan
certificates
59. Financial statements Statement of Financial
(Instruction 1(c) to Form S-6) Condition
____________________
*50 Not applicable, answer negative or not required.
<PAGE>
LOGO
DEAN WITTER SELECT
MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
Standard & Poor's Corporation Rating: AAA
DELAWARE PORTFOLIO SERIES 13
(Intermediate-Long Term Maturity)
MARYLAND PORTFOLIO SERIES 15
(Intermediate-Long Term Maturity)
(Unit Investment Trusts)
_______________________________________________________________
These Trusts were formed for the purpose of providing interest income which
in the opinion of bond counsel is, under existing law, excludable from
gross income for Federal income tax purposes (except in certain instances
depending on the Unit Holders) and, in the case of a State Trust, is exempt
from state income taxes to individual Unit Holders resident in the state
for which the State Trust is named, through investment in a fixed portfolio
consisting primarily of investment grade intermediate-long term (or
intermediate term, in the case of the Insured California Intermediate Term
Trust) state, municipal and public authority debt obligations. The value
of the Units of each of the Trusts will fluctuate with the value of the
portfolio of underlying Securities. The portfolio of the Insured
California Intermediate Term Trust was structured as of the Date of Deposit
to return to Unit Holders each year beginning in 2001, approximately 20% of
the per Unit principal amount of the Securities included in the Trust.
(See: "Schedule of Portfolio Securities".) The Units of the Insured
California Intermediate Term Trust only are rated AAA by Standard & Poor's
Corporation because all of the Securities in such Trust have been
irrevocably insured by insurance either provided by the respective Issuers
thereof or obtained by third parties. Minimum Purchase: 1 Unit for the
Delaware Uninsured and Maryland Uninsured Trusts and $1,000 for the Insured
California Intermediate Term Trust.
_______________________________________________________________
<PAGE>
This Prospectus consists of two parts. Part A contains a Summary of
Essential Information and descriptive material relating to the Trusts, and
the portfolio and financial statements of each Trust. Part B contains a
general description of the Trusts. Part A may not be distributed unless
accompanied by Part B.
_______________________________________________________________
The Initial Public Offering of Units in the Trusts has been completed. The
Units offered hereby are issued and outstanding Units which have been
acquired by the Sponsor either by purchase from the Trustee of Units
tendered for redemption or in the Secondary Market.
_______________________________________________________________
Sponsor: LOGO DEAN WITTER REYNOLDS INC.
_______________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
_______________________________________________________________
Read and retain both parts of this Prospectus for future reference.
Units of the Trusts are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the Units are not federally insured by the
Federal Deposit Insurance Corporation, Federal Reserve Board, or any other
agency.
Prospectus Part A dated November 14, 1996
<PAGE>
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION WITH RESPECT TO THE
INVESTMENT COMPANY SET FORTH IN ITS REGISTRATION STATEMENT AND EXHIBITS
RELATING THERETO WHICH HAVE BEEN 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 HEREBY MADE.
THE USE OF THE TERM "INSURED" IN THE NAME OF A TRUST DOES NOT MEAN THAT THE
TRUST UNITS ARE INSURED BY ANY GOVERNMENTAL OR PRIVATE ORGANIZATION. THE
TRUST UNITS ARE NOT INSURED.
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
DELAWARE PORTFOLIO SERIES 13
MARYLAND PORTFOLIO SERIES 15
TABLE OF CONTENTS
PART A Page
Table of Contents........................................... A-1
Summary of Essential Information............................ A-3
The Insured California Intermediate
Term Trust......................................... A-13
The Delaware Uninsured Trust........................ A-22
The Maryland Uninsured Trust........................ A-33
Independent Auditor's Report................................ F-1
PART B
Introduction................................................ 1
The Trust................................................... 2
Special Considerations.............................. 2
Summary Description of the Portfolios............... 3
Insurance on the Securities in an Insured Trust............. 21
Objectives and Securities Selection......................... 25
The Units................................................... 26
Tax Status.................................................. 27
Public Offering of Units.................................... 32
Public Offering Price............................... 32
Public Distribution................................. 33
Secondary Market.................................... 34
Profit of Sponsor................................... 35
Volume Discount..................................... 35
Exchange Option............................................. 36
Reinvestment Programs....................................... 37
Redemption.................................................. 38
Tender of Units..................................... 38
Computation of Redemption Price per Unit............ 39
Purchase by the Sponsor of Units
Tendered for Redemption........................... 39
A-1
<PAGE>
Page
Rights of Unit Holders..................................... 40
Certificates........................................ 40
Certain Limitations................................. 40
Expenses and Charges....................................... 40
Initial Expenses.................................... 40
Fees................................................ 40
Other Charges....................................... 41
Administration of the Trust................................ 42
Records and Accounts................................ 42
Distribution........................................ 42
Distribution of Interest and Principal.............. 42
Reports to Unit Holders............................. 44
Sponsor.................................................... 45
Trustee.................................................... 47
Evaluator.................................................. 48
Amendment and Termination of the Indenture................. 49
Legal Opinions............................................. 50
Auditors................................................... 50
Bond Ratings............................................... 50
Federal Tax Free vs. Taxable Income......................... 54
Sponsor:
Dean Witter Reynolds Inc.
Two World Trade Center
New York, New York 10048
Evaluator:
Kenny S&P Evaluation Services
A Division of J.J. Kenny Co., Inc.
65 Broadway
New York, New York 10006
Trustee:
The Bank of New York
101 Barclay Street
New York, New York 10286
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THIS INVESTMENT COMPANY NOT CONTAINED IN
THIS PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 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.
A-2
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
As of September 30, 1996
<S> <C> <S> <C>
FACE AMOUNT OF SECURITIES $3,500,000.00 DAILY RATE AT WHICH ESTIMATED NET
INTEREST ACCRUES PER 1,000 UNITS .0116%
NUMBER OF UNITS 3,496,000
ESTIMATED CURRENT RETURN (based on
FRACTIONAL UNDIVIDED INTEREST IN THE Public Offering Price)<F2> 4.192%
TRUST REPRESENTED BY EACH UNIT 1/3,496,000th
ESTIMATED LONG TERM RETURN (based on
PUBLIC OFFERING PRICE Public Offering Price)<F2> 4.268%
Aggregate bid side evaluation MONTHLY INTEREST DISTRIBUTIONS
of Securities in the Trust $3,385,712.00
Estimated net annual interest rate
Divided by 3,496,000 Units per 1,000 Units times $1,000 $41.81
multiplied by 1,000 $ 968.45 Divided by 12 $ 3.48
Plus sales charge of 2.893% of RECORD DATE: The ninth day of each month
Public Offering Price (2.979%
of net amount invested in DISTRIBUTION DATE: The fifteenth
Securities) 28.85 day of each month
Public Offering Price per 1,000 Units 997.30 MINIMUM PRINCIPAL DISTRIBUTION: No
distribution need be made from the
Plus undistributed net investment Principal Account if balance therein
income and accrued interest 12.87<F1> is less than $1 per 1,000 Units
outstanding
Adjusted Public Offering Price
(per 1,000 Units) $ 1,010.17 TRUSTEE'S ANNUAL FEE AND EXPENSES
(including estimated expenses and
Evaluator's fee) $1.76 per $1,000
SPONSOR'S REPURCHASE PRICE AND face amount of underlying Securities $ 1.76
REDEMPTION PRICE PER 1,000 UNITS
(based on bid side evaluation of SPONSOR'S ANNUAL PORTFOLIO SUPERVISION
underlying Securities, $28.85 FEE: Maximum of $.25 per $1,000
less than Adjusted Public Offering face amount of underlying Securities .25
Price per 1,000 Units) $ 981.32
TOTAL ESTIMATED ANNUAL EXPENSES PER
1,000 UNITS $ 2.01
CALCULATION OF ESTIMATED NET
ANNUAL INTEREST RATE PER 1,000 UNITS EVALUATOR'S FEE FOR EACH EVALUATION:
(based on face amount of $1 per Unit) $.40 per issue of Security
Annual interest rate per 1,000 Units 4.382% EVALUATION TIME: 4:00 P.M. New York Time
Less estimated annual expenses per MANDATORY TERMINATION DATE: December 31, 2033
1,000 Units ($2.01) expressed as
a percentage .201% DISCRETIONARY LIQUIDATION AMOUNT: The Trust
may be terminated by the Sponsor if the
Estimated net annual interest rate value of the portfolio of the Trust at any
per 1,000 Units 4.181% time is less than $1,500,000.
<F1>Figure shown includes interest accrued (net of expenses) on the underlying Securities to the expected
date of settlement (normally three business days after purchase) for Units purchased on September 30, 1996.
<F2>The estimated current return and estimated long term return are increased for transactions entitled to a
reduced sales charge. (See "The Units - Estimated Annual Income and Current Return" and "Public Offering of
Units - Volume Discount" in Part B of this Prospectus.)
A-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
As of September 30, 1996
<S> <C> <S> <C>
FACE AMOUNT OF SECURITIES $2,085,000.00 DAILY RATE AT WHICH ESTIMATED NET
INTEREST ACCRUES PER UNIT .0122%
NUMBER OF UNITS 2,085
ESTIMATED CURRENT RETURN (based on
Public Offering Price)<F13> 4.441%
FRACTIONAL UNDIVIDED INTEREST IN THE
TRUST REPRESENTED BY EACH UNIT 1/2,085th ESTIMATED LONG TERM RETURN (based on
Public Offering Price)<F13> 4.589%
PUBLIC OFFERING PRICE
MONTHLY INTEREST DISTRIBUTIONS
Aggregate bid side evaluation
of Securities in the Trust $1,984,177.00 Estimated net annual interest rate
per Unit times $1,000 $43.98
Divided by 2,085 Units $ 951.64 Divided by 12 $ 3.66
Plus sales charge of 3.901% of RECORD DATE: The ninth day of each month
Public Offering Price (4.059%
of net amount invested in DISTRIBUTION DATE: The fifteenth
Securities) 38.63 day of each month
Public Offering Price per Unit 990.27 MINIMUM PRINCIPAL DISTRIBUTION: No
distribution need be made from the
Plus undistributed net investment Principal Account if balance therein
income and accrued interest 14.83<F12> is less than $1 per Unit outstanding
Adjusted Public Offering Price $ 1,005.10 TRUSTEE'S ANNUAL FEE AND EXPENSES
(including estimated expenses and
Evaluator's fee) $2.48 per $1,000
SPONSOR'S REPURCHASE PRICE AND face amount of underlying Securities $ 2.48
REDEMPTION PRICE PER UNIT
(based on bid side evaluation of SPONSOR'S ANNUAL PORTFOLIO SUPERVISION
underlying Securities, $38.63 FEE: Maximum of $.25 per $1,000
less than Adjusted Public Offer- face amount of underlying Securities .25
ing Price per Unit) $ 966.47
TOTAL ESTIMATED ANNUAL EXPENSES
PER UNIT $ 2.73
CALCULATION OF ESTIMATED NET
ANNUAL INTEREST RATE PER UNIT EVALUATOR'S FEE FOR EACH EVALUATION:
(based on face amount of $1,000 Minimum of $.40 per issue of Security
per Unit)
Annual interest rate per Unit 4.671% EVALUATION TIME: 4:00 P.M. New York Time
Less estimated annual expenses per MANDATORY TERMINATION DATE: December 31, 2033
Unit ($2.73) expressed as a
percentage .273% DISCRETIONARY LIQUIDATION AMOUNT: The Trust
may be terminated by the Sponsor if the
Estimated net annual interest rate value of the portfolio of the Trust at any
per Unit 4.398% time is less than $834,000.
<F12>Figure shown includes interest accrued (net of expenses) on the underlying Securities to the expected
date of settlement (normally three business days after purchase) for Units purchased on September 30,.1996.
<F13>The estimated current return and estimated long term return are increased for transactions entitled to a
reduced sales charge. (See "The Units - Estimated Annual Income and Current Return" and "Public Offering of
Units - Volume Discount" in Part B of this Prospectus.)
A-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF ESSENTIAL INFORMATION
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
As of September 30, 1996
<S> <C> <S> <C>
FACE AMOUNT OF SECURITIES $3,015,000.00 DAILY RATE AT WHICH ESTIMATED NET
INTEREST ACCRUES PER UNIT .0118%
NUMBER OF UNITS 3,015 ESTIMATED CURRENT RETURN (based on
Public Offering Price)<F22> 4.344%
FRACTIONAL UNDIVIDED INTEREST IN THE
TRUST REPRESENTED BY EACH UNIT 1/3,015th ESTIMATED LONG TERM RETURN (based on
Public Offering Price)<F22> 4.537%
PUBLIC OFFERING PRICE
MONTHLY INTEREST DISTRIBUTIONS
Aggregate bid side evaluation
of Securities in the Trust $2,858,786.00 Estimated net annual interest rate
per Unit times $1,000 $42.63
Divided by 3,015 Units $ 948.19 Divided by 12 $ 3.55
Plus sales charge of 3.364% of RECORD DATE: The ninth day of each month
Public Offering Price (3.482%
of net amount invested in DISTRIBUTION DATE: The fifteenth
Securities) 33.02 day of each month
Public Offering Price per Unit 981.21 MINIMUM PRINCIPAL DISTRIBUTION: No
distribution need be made from the
Plus undistributed net investment Principal Account if balance therein
income and accrued interest 16.13<F21> is less than $1 per Unit outstanding
Adjusted Public Offering Price $ 997.34 TRUSTEE'S ANNUAL FEE AND EXPENSES
(including estimated expenses and
Evaluator's fee) $1.79 per $1,000
SPONSOR'S REPURCHASE PRICE AND face amount of underlying Securities $ 1.79
REDEMPTION PRICE PER UNIT
(based on bid side evaluation of SPONSOR'S ANNUAL PORTFOLIO SUPERVISION
underlying Securities, $33.02 FEE: Maximum of $.25 per $1,000
less than Adjusted Public Offering face amount of underlying Securities .25
Price per Unit) $ 964.32
TOTAL ESTIMATED ANNUAL EXPENSES
CALCULATION OF ESTIMATED NET PER UNIT $ 2.04
ANNUAL INTEREST RATE PER UNIT
(based on face amount of $1,000 EVALUATOR'S FEE FOR EACH EVALUATION:
per Unit) $.40 per issue of Security
Annual interest rate per Unit 4.467% EVALUATION TIME: 4:00 P.M. New York Time
Less estimated annual expenses per MANDATORY TERMINATION DATE: December 31, 2033
Unit ($2.04) expressed as a
percentage .204% DISCRETIONARY LIQUIDATION AMOUNT: The Trust
may be terminated by the Sponsor if the
Estimated net annual interest rate value of the portfolio of the Trust at any
per Unit 4.263% time is less than $1,206,000.
<F21>Figure shown includes interest accrued (net of expenses) on the underlying Securities to the expected
date of settlement (normally three business days after purchase) for Units purchased on September 30, 1996.
<F22>The estimated current return and estimated long term return are increased for transactions entitled to a
reduced sales charge. (See "The Units - Estimated Annual Income and Current Return" and "Public Offering of
Units - Volume Discount" in Part B of this Prospectus.)
A-5
</TABLE>
<PAGE>
SUMMARY OF ESSENTIAL INFORMATION
(Continued)
THE TRUSTS -- The Dean Witter Select Municipal Trust, Insured
California Intermediate Term Portfolio Series 11 (the "Insured California
Intermediate Term Trust"), Delaware Portfolio Series 13 (Intermediate-Long
Term Maturity) (the "Delaware Uninsured Trust") and Maryland Portfolio
Series 15 (Intermediate-Long Term Maturity) (the "Maryland Uninsured
Trust") are three separate unit investment trusts (collectively, the
"Trusts" or the "State Trusts") created on October 18, 1993 (the "Date of
Deposit") under the laws of the State of New York pursuant to an Indenture
as defined in Part B. Each of the Trusts is composed of "investment grade"
intermediate-long term or, in the case of the Insured California
Intermediate Term Trust, intermediate term, interest-bearing municipal
bonds (the "Securities"). (For a description of the meaning of "investment
grade" securities, see: "Bond Ratings", in Part B.) The objectives of
each Trust are: (1) the receipt of income which, under existing law, is
excludable from gross income for Federal income tax purposes (except in
certain instances depending on the Unit Holders) and, in the case of a
State Trust, is exempt from state income taxation to individual Unit
Holders resident in the state for which the State Trust is named; and
(2) the conservation of capital. The portfolio of the Insured California
Intermediate Term Trust was structured as of the Date of Deposit to return
to Unit Holders each year beginning in 2001, approximately 20% of the per
Unit principal amount of the Securities included in the Trust. (See:
"Schedule of Portfolio Securities".) The payment of interest and the
preservation of principal of the Trusts is dependent on the continuing
ability of the respective Issuers of the Securities or the bond insurers
thereof to meet their obligations to pay principal and interest on the
Securities. Therefore, there is no guarantee that the objectives of the
Trusts will be achieved. All of the Securities in each of the Trusts are
obligations of the state for which such State Trust is named or of the
counties, municipalities or public authorities thereof, or of the
Commonwealth of Puerto Rico. Interest on the Securities, in the opinion of
bond counsel or special tax counsel to the Issuers thereof, under existing
law, is excludable from gross income for Federal income tax purposes
(except in certain instances depending on the Unit Holders) and, in the
case of a State Trust, is exempt from state income taxes when owned by
individual Unit Holders resident in the state for which the State Trust is
named. (For a discussion of certain tax aspects of the Trusts, see: "Tax
Status", in Part B. For a discussion of certain state tax aspects of a
particular Trust, see: "Special Considerations Regarding California
Securities -- California Tax Status", "Special Considerations Regarding
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Delaware Securities -- Delaware Tax Status" and "Special Considerations
Regarding Maryland Securities -- Maryland Tax Status", herein.)
OFFERS TO SELL OR THE SOLICITATION OF ORDERS TO BUY MAY ONLY BE
MADE IN THOSE JURISDICTIONS IN WHICH THE UNITS OF EACH TRUST HAVE BEEN
REGISTERED. INVESTORS SHOULD CONTACT ACCOUNT EXECUTIVES OF THE SPONSOR TO
DETERMINE WHETHER THE UNITS OF A PARTICULAR TRUST HAVE BEEN REGISTERED FOR
SALE IN THE STATE IN WHICH THEY RESIDE.
INSURANCE -- A policy of insurance guaranteeing the scheduled
payment of principal and interest ("Bond Insurance") has been obtained from
the bond insurers indicated on the respective "Schedule of Portfolio
Securities", herein, and paid for by the Issuers of the Securities, or by
third parties, for all the Securities in the Insured California
Intermediate Term Trust. The policies of Bond Insurance are non-
cancellable and cover default in the payment of principal and interest on
the Securities so insured so long as such Securities remain outstanding,
whether they are held in the Insured California Intermediate Term Trust or
not. Bond Insurance on all Securities in the Insured California
Intermediate Term Trust relates only to the Securities in such Insured
California Intermediate Term Trust and not to the Units offered hereby. No
representation is made herein as to any bond insurer's ability to meet its
obligations under a policy of Bond Insurance relating to a Security in the
Insured California Intermediate Term Trust. However, as a result of such
Bond Insurance, the Securities, as well as the Units of the Insured
California Intermediate Term Trust only, are rated "AAA" by Standard &
Poor's Corporation. There can be no assurance that such "AAA" ratings will
be retained. (See: "Insurance on the Securities in an Insured Trust", in
Part B.)
MONTHLY DISTRIBUTIONS -- Monthly distributions of principal,
premium, if any, and interest received by each Trust will be made, on or
shortly after the fifteenth day of each month to Unit Holders of record on
the ninth day of such month. Alternatively, Unit Holders may elect to have
their monthly distributions reinvested in either of the Reinvestment
Programs of the Sponsor, neither of which are insured. (See:
"Reinvestment Programs", in Part B.)
PUBLIC OFFERING PRICE -- The Public Offering Price per Unit of
each Trust is calculated daily, and is equal to the aggregate bid side
evaluation of the underlying securities, divided by the number of Units
outstanding, plus a sales charge which may be calculated by reference to
"Sales Charge/Volume Discount", below, plus the per Unit balance in the
Interest and Principal Accounts. Units are offered at the Public Offering
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Price, plus accrued interest. (See: "Public Offering of Units", in
Part B.)
ESTIMATED CURRENT RETURN -- The Estimated Current Return shows
the return based on the Public Offering Price and is computed by
multiplying the estimated net annual interest rate per Unit (which shows
the return based on a $1,000 face amount) by $1,000 and dividing the result
by the Public Offering Price (not including accrued interest). The net
annual interest rate per Unit will vary with changes in the fees and
expenses of the Trustee, the Sponsor and the Evaluator and with the
exchange, redemption, sale or maturity of the underlying Securities. In
addition, the Public Offering Price will also vary with fluctuations in the
bid side evaluation of the underlying Securities. Therefore, it can be
expected that the Estimated Current Return will fluctuate in the future.
(See: "The Units -- Estimated Annual Income and Current Return", in
Part B.)
MARKET FOR UNITS -- The Sponsor, though not obligated to do so,
intends to maintain a market for the Units based on the aggregate bid side
evaluation of the underlying Securities, as more fully described in Part B
- -- "Public Offering of Units -- Secondary Market". If such market is not
maintained, a Unit Holder will be able to dispose of its Units through
redemption at prices based on the aggregate bid side evaluation of the
underlying Securities. (See: "Redemption", in Part B.) Market conditions
may cause such prices to be greater or less than the amount paid for Units.
SPECIAL CONSIDERATIONS -- An investment in Units of the Trusts
should be made with an understanding of the risks which an investment in
fixed rate intermediate-long term or intermediate term debt obligations may
entail, including the risk that the value of the Units will decline with
increases in interest rates. The Maryland Uninsured Trust is considered to
be concentrated in General Obligation Securities and Health Care and
Hospital Securities (41.71% and 27.30%, respectively, of the aggregate
market value of the Maryland Uninsured Trust Portfolio). (See: "The Trust
- -- Special Considerations" and "The Trust -- Summary Description of the
Portfolios", in Part B. See also: "The Insured California Intermediate
Term Trust", "The Delaware Uninsured Trust" or "The Maryland Uninsured
Trust", herein, for a discussion of additional risks relating to Units of
such Trust.)
LADDERED MATURITIES -- The portfolio of the Insured California
Intermediate Term Trust was structured as of the Date of Deposit to return
to Unit Holders each year beginning in 2001, approximately 20% of the per
Unit principal amount of the Securities included in the Trust. (See:
"Schedule of Portfolio Securities".) If interest rates rise, Unit Holders
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may be able to reinvest their principal distributions as received in
higher-yielding obligations. Conversely, however, if interest rates
decline, Unit Holders will be receiving payments of principal at times when
only lower-yielding investments of comparable quality are available.
Reinvesting at such time may result in an over-all lower yield than would
result from a single investment maturing at the close of the life of the
Trust. Such return of 20% of principal each year may not be achieved due
to various factors including the sale of bonds by the Trust to meet
redemptions of Units or for other permitted reasons, and the bankruptcy of
an issuer where the insurance company insuring the bond does not make the
scheduled principal payment. Consequently, a Unit Holder may receive less
than 20% of the principal amount in one or more years.
PUBLIC DISTRIBUTION -- Sales of Units may be made pursuant to
distribution arrangements with certain banks and/or other entities subject
to regulation by the Office of the Comptroller of the Currency which are
acting as agents for their customers. These banks and/or entities are
making Units of the Trust available to their customers on an agency basis.
A portion of the sales charge paid by these customers is retained by or
remitted to such banks or entities in an amount equal to the fee
customarily received by an agent for acting in such capacity in connection
with the purchase of Units. The Glass Steagall Act prohibits banks from
underwriting certain securities, including Units of the Trust; however,
this Act does permit certain agency transactions, and banking regulators
have not indicated that these particular agency transactions are
impermissible under this Act. In Texas, as well as certain other states,
any bank making Units available must be registered as a broker-dealer in
that State.
OTHER INFORMATION -- The Securities in the Portfolio of each
Trust were chosen in part on the basis of their respective maturity dates.
An intermediate-term Trust contains obligations maturing in 3 to 10 years
from the Date of Deposit and on intermediate-long term trust contains
obligations maturing in 10 to 15 years from the Date of Deposit. The
maturity date of each of the Trusts is December 31, 2033. The latest
maturity of a Security in the Insured California Intermediate Term Trust is
September 2005; and the average life to maturity (or date of pre-refunding
of a bond) of the Portfolio of Securities therein is 6.814 years. The
latest maturity of a Security in the Delaware Uninsured Trust is January
2009; and the average life to maturity (or date of pre-refunding of a bond)
of the Portfolio of Securities therein is 10.366 years. The latest
maturity of a Security in the Maryland Uninsured Trust is September 2007;
and the average life to maturity (or date of pre-refunding of a bond) of
the Portfolio of Securities therein is 8.798 years. The actual maturity
dates of each of the Securities contained in each
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Trust are shown on the respective "Schedule of Portfolio Securities",
herein.
The range of maturities of Securities in the Insured California
Intermediate Term Trust is from September 1, 2001 to September 1, 2005.
The dollar weighted average portfolio maturity of the Trusts in the Dean
Witter Select Municipal Trust, Insured California Intermediate Term Series
is more than three years but not more than 10 years. The range of
maturities of Securities in the Delaware Uninsured Trust is from July 1,
2004 to January 15, 2009. The range of maturities of Securities in the
Maryland Uninsured Trust is from July 1, 2003 to September 1, 2007.
The Trustee shall receive annually 72 cents per $1,000
principal amount of Securities in each Trust for its services as Trustee.
See: "Expenses and Charges", in Part B, for a description of other fees
and charges which may be incurred by a Trust.
SALES CHARGE/VOLUME DISCOUNT -- The Public Offering Price per
Unit will be computed by dividing the aggregate of the bid prices of the
Securities in a Trust by the number of Units outstanding and then adding
the appropriate sales charge described below.
The sales charge will reflect different rates depending upon
the maturities of the various underlying Securities. The sales charge per
Unit in the secondary market (the "Effective Sales Charge") will be
computed by multiplying the Evaluator's determination of the bid side
evaluation of each Security by a sales charge determined in accordance with
the table set forth below based upon the number of years remaining to the
maturity of each such Security, totalling all such calculations, and
dividing this total by the number of Units then outstanding. In
calculating the date of maturity, a Security will be considered to mature
on its stated maturity date unless: (a) the Security has been called for
redemption or funds or securities have been placed in escrow to redeem it
on an earlier call date, in which case the call date will be deemed the
date on which such Security matures; or (b) the Security is subject to a
mandatory tender, in which case the mandatory tender date will be deemed
the date on which such Security matures.
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(as % of bid (as % of Public
Time to Maturity side evaluation) Offering Price)
Less than one year.................. 0% 0%
1 year to less than 2 years......... 0.756% 0.75%
2 years to less than 4 years........ 1.523% 1.50%
4 years to less than 7 years........ 2.564% 2.50%
7 years to less than 11
years............................. 3.627% 3.50%
11 years to less than 15
years............................. 4.712% 4.50%
15 years and greater................ 5.820% 5.50%
The Effective Sales Charge per Unit for a sale in the secondary
market, as determined above, will be reduced on a graduated scale for sales
to any single purchaser on a single day of the specified number of Units
(or dollar amount with respect to the Insured California Intermediate Term
Trust) of a Trust set forth below.
Delaware Uninsured
and Insured California
Maryland Uninsured Intermediate Term Dealer Concession
Trusts Trust % of Effective as % of Effective
Number of Units Dollar Amount Sales Charge Sales Charge
1-99............. $1-$99,999............ 100% 65%
100-249.......... $100,000-$249,999..... 95% 62%
250-499.......... $250,000-$499,999..... 85% 55%
500-999.......... $500,000-$999,999..... 70% 45%
1,000 or more.... $1,000,000 or more.... 55% 35%
To qualify for the reduced sales charge and concession
applicable to quantity purchases, the selling dealer must confirm that the
sale is to a single purchaser, as described in "Volume Discount" in Part B
of the Prospectus.
Units purchased at an Effective Sales Charge (before volume
purchase discount) of less than 3.00% of the Public Offering Price (3.093%
of the bid side evaluation of the Securities) will not be eligible for
exchange at a reduced sales charge described under the Exchange Option.
Dealers purchasing certain dollar amounts of Units during the
life of the Trusts may be entitled to additional concessions. The Sponsor
reserves the right, at any time and from time to time, to change the level
of dealer concessions.
For further information regarding the volume discount, see:
"Public Offering of Units -- Volume Discount", in Part B.
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Note: "Auditors" in Part B is amended so that "Deloitte &
Touche" is replaced with "Deloitte & Touche LLP", and "Evaluator" in Part B
is amended so that "Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc." is replaced with "Kenny S&P Evaluation Services,
a Division of J.J. Kenny Co., Inc." The reference to the fifth and five
business day in "Redemption -- Computation of Redemption Price per Unit"
and "Administration of the Trust -- Distribution of Interest and Principal"
in Part B is amended to read third and three, respectively.
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THE INSURED CALIFORNIA INTERMEDIATE TERM TRUST
The Portfolio of the Insured California Intermediate Term Trust
consists of eight issues of Securities, all of which were issued by Issuers
located in California. Two issues of Securities are each a general
obligation of an Issuer. Six issues of Securities, while not backed by the
taxing power of the Issuer, are payable from revenues or receipts derived
from specific projects or other available sources. The Insured California
Intermediate Term Trust contains the following categories of Securities:
Percentage of Aggregate
Market Value of Trust Portfolio
Category of Security (as of November 1, 1996)
Electric and Power ................. 16.72%
General Obligation ................. 8.04%
General Revenue Lease
Payment .......................... 20.08%
Higher Education ................... 20.26%
State Budget Appropriation* ........ 20.49%
Tax Allocation ..................... 11.50%
Water and Sewer .................... 2.90%
Original Issue Discount ............ 25.34%
See: "The Trust -- Summary Description of the Portfolios", in
Part B, for a summary of the investment risks associated with the type of
Securities contained in the Insured California Intermediate Term Trust.
See: "Tax Status", in Part B, for a discussion of certain tax
considerations with regard to Original Issue Discount.
Of the Original Issue Discount bonds in the Insured California
Intermediate Term Trust, approximately 3.57% of the aggregate principal
amount of the Securities in the Insured California Intermediate Term Trust
(or 2.36% of the market value of all Securities in the Insured California
Intermediate Term Trust on November 1, 1996) are zero coupon bonds
(including bonds known as multiplier bonds, money multiplier bonds, capital
accumulator bonds, compound interest bonds and discount maturity payment
bonds).
_________________________
* The bonds in this category are issued by various state agencies and
authorities and are payable from amounts to be appropriated by the
state legislature from available state revenue.
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On November 1, 1996, based on the bid side of the market, the
aggregate market value of the Securities in the Insured California
Intermediate Term Trust was $3,420,982.40.
The Securities in the Insured California Intermediate Term
Trust are insured to maturity by the insurance obtained by the Issuers or
by third parties from the following insurance companies: AMBAC: 2.90%;
FSA: 11.50%*; FGIC: 8.04%; and
MBIA: 77.55%.**
On November 1, 1996, all of the Securities in the Insured
California Intermediate Term Trust were rated "AAA" by Standard & Poor's
Corporation because of the Bond Insurance policies issued in respect of
such Securities. (See: the respective "Schedule of Portfolio Securities",
herein, and "Bond Ratings", in Part B.) A Security in the Portfolio may
subsequently cease to be rated or the rating assigned may be reduced below
the minimum requirements of the Insured California Intermediate Term Trust
for the acquisition of Securities. While such events may be considered by
the Sponsor in determining whether to direct the Trustee to dispose of the
Security (see: "Sponsor -- Responsibility", in Part B), such events do not
automatically require the elimination of such Security from the Portfolio.
SPECIAL CONSIDERATIONS REGARDING CALIFORNIA SECURITIES
Since the start of the 1990-91 fiscal year, California (the
"State") has faced the worst economic, fiscal and budget conditions since
the 1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, have all been severely affected. Job
losses have been the worst of any post-war recession and have been
estimated to exceed 800,000. While the most severe point of the recession
has been estimated to have occurred in late 1993, pre-recession job levels
are not expected to be reached for several more years.
_________________________
* Percentage shown for FSA includes Securities originally insured by
CGIC. In December 1995, CGIC became a subsidiary of FSA, and all
policies issued by CGIC became covered by the intercompany pooling
agreement among the FSA group of insurance companies, as a result of
which all policies issued by CGIC are backed by the same claims-
paying resources as policies issued by FSA.
** Percentages computed on the basis on the aggregate bid side
evaluation of the Securities in the Insured California Intermediate
Term Trust on November 1, 1996.
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The recession has affected State tax revenues, which mirror
economic conditions. It has also caused increased expenditures for health
and welfare programs. The State has also been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health, welfare and corrections)
growing at rates higher than the growth rates for the principal revenue
sources of the General Fund. (The General Fund, the State's main operating
fund, consists of revenues which are not required to be credited to any
other fund.) As a result, the State has experienced recurring budget
deficits.
Employment, income, and retail sales in the State have shown
modest increases over the past two years, indicating some recovery from
recessionary conditions. These increases notwithstanding, pre-recession
job levels are not expected to be reached until 1997.
Together with the federal government, which is providing over
$9.5 billion in aid, the State is committed to assisting local governments,
individuals and businesses suffering damage caused by the Northridge
earthquake, as well as to assisting in the repair and replacement of
State-owned facilities.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "Pools"), filed for
protection under Chapter 9 of the federal Bankruptcy Code.
On May 2, 1995, the Bankruptcy Court approved a settlement
agreement covering claims of the other participating entities against the
County and the Pools. Most participants have received in cash 80% (90% for
school districts) of their Pools' investments with the balance to be paid
in the future.
The State bears no existing obligation in connection with any
of the outstanding obligations or securities of the County or any of the
other participating entities. It may, however, be necessary for the State
to intervene if the County lacks sufficient resources to maintain County
administered State programs. In this regard, the State cannot predict
what, if any, action may occur. The Legislature is considering the
County's new financial plan and other proposals relating to the County
bankruptcy, including possible State oversight of County finances. None of
the proposals, however, presently involve any direct State financial
support of the County.
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1995-96 Budget
The State began the 1995-96 fiscal year with strengthening
revenues based on an improving economy and the smallest nominal "budget
gap" to be closed in many years.
The 1995-96 Budget Act, signed by the Governor on August 3,
1995, projects General Fund revenues and transfers of $44.1 billion, about
$2.2 billion higher than projected revenues in 1994-95. The Budget Act
projects Special Fund revenues of $12.7 billion, an increase from $12.1
billion projected in 1994-95.
The 1995-96 Budget Act projects General Fund expenditures and
transfers of $43.4 billion, an increase of $168 million over 1994-95. The
Budget Act also projects Special Fund expenditures of $13.4 billion, a
decrease of $700 million from 1994-95 projected expenditures. The
principal features of the Budget Act were the following:
1. Proposition 98 funding for schools and community
colleges will increase by about $1 billion (General Fund) and $1.2 billion
total above revised 1994-95 levels. Because of higher than projected
revenues in 1994-95, an additional $543 million is appropriated to the
1994-95 Proposition 98 entitlement. A significant component of this amount
is a block grant of about $54 per pupil for any one-time purpose.
Per-pupil expenditures are projected to increase by another $126 in 1995-96
to $4,435. A full 2.7% cost of living allowance is funded for the first
time in several years. The budget compromise anticipates a settlement of
the CTA v. Gould litigation.
2. Cuts in health and welfare costs totaling about
$900 million, some of which would require federal legislative approval.
3. A 3.5% increase in funding for the University of
California ($90 million General Fund) and the California State University
system ($24 million General Fund).
4. The Budget assumes receipt of $473 million in new
federal aid for costs of illegal immigrants, in excess of federal
government commitments. This amount is considerably less than the summer
1994 two-year budget proposal estimate, and is somewhat lower than the
estimate in the January 1995 Governor's Budget.
5. General Fund support for the Department of
Corrections is increased by about 8 percent over 1994-95, reflecting
estimates of increased prison population. This amount is less than was
proposed in the Governor's Budget.
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THE FOREGOING DISCUSSION OF THE 1995-96 FISCAL YEAR BUDGET IS BASED IN
LARGE PART ON STATEMENTS MADE IN A RECENT "PRELIMINARY OFFICIAL STATEMENT"
DISTRIBUTED BY THE STATE OF CALIFORNIA. IN THAT DOCUMENT, THE STATE
INDICATED THAT ITS DISCUSSION OF THE FISCAL YEAR BUDGET IS BASED ON
ESTIMATES AND PROJECTIONS OF REVENUES AND EXPENDITURES FOR THE CURRENT
FISCAL YEAR AND MUST NOT BE CONSTRUED AS STATEMENTS OF FACT. THE STATE
NOTED FURTHER THAT THE ESTIMATES AND PROJECTIONS ARE BASED UPON VARIOUS
ASSUMPTIONS WHICH MAY BE AFFECTED BY NUMEROUS FACTORS, INCLUDING FUTURE
ECONOMIC CONDITIONS IN THE STATE AND THE NATION, AND THAT THERE CAN BE NO
ASSURANCE THAT THE ESTIMATES WILL BE ACHIEVED.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed
by Article XIIIB of the State Constitution (the "Appropriations Limit"),
and is prohibited from spending "appropriations subject to limitation" in
excess of the Appropriations Limit. Article XIIIB, originally adopted in
1979, was modified substantially by Propositions 98 and 111 in 1988 and
1990, respectively. "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes," which consist of tax revenues
and certain other funds, including proceeds from regulatory licenses, user
charges or other fees to the extent that such proceeds exceed the
reasonable cost of providing the regulation, product or service. The
Appropriations Limit is based on the limit for the prior year, adjusted
annually for certain changes, and is tested over consecutive two-year
periods. Any excess of the aggregate proceeds of taxes received over such
two-year period above the combined Appropriation Limits for those two years
is divided equally between transfers to K-14 districts and refunds to
taxpayers.
Exempted from the Appropriations Limit are debt service costs
of certain bonds, court or federally mandated costs, and, pursuant to
Proposition 111, qualified capital outlay projects and appropriations or
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels. Some recent initiatives were
structured to create new tax revenues dedicated to specific uses and
expressly exempted from the Article XIIIB limits. The Appropriations Limit
may also be exceeded in cases of emergency arising from civil disturbance
or natural disaster declared by the Governor and approved by two-thirds of
the Legislature. If not so declared and approved, the Appropriations Limit
for the next three years must be reduced by the amount of the excess.
Because of the complexities of Article XIIIB, the ambiguities
and possible inconsistencies in its terms, the applicability of its
exceptions and exemptions and the
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impossibility of predicting future appropriations, the Sponsor cannot
predict the impact of this or related legislation on the bonds in the
Insured California Trust Portfolio. Other Constitutional amendments
affecting state and local taxes and appropriations have been proposed from
time to time. If any such initiatives are adopted, the State could be
pressured to provide additional financial assistance to local governments
or appropriate revenues as mandated by such initiatives. Propositions such
as Proposition 98 and others that may be adopted in the future, may place
increasing pressure on the State's budget over future years, potentially
reducing resources available for other State programs, especially to the
extent that the Article XIIIB spending limit would restrain the State's
ability to fund such other programs by raising taxes.
State Indebtedness
As of August 1, 1995, the State had over $18.93 billion
aggregate amount of its general obligation bonds outstanding. General
obligation bond authorizations in an aggregate amount of approximately
$2.81 billion remained unissued as of August 1, 1995. The State also
builds and acquires capital facilities through the use of lease purchase
borrowing. As of August 1, 1995, the State had approximately $5.56 billion
of outstanding Lease-Purchase Debt.
In addition to the general obligation bonds, State agencies and
authorities had approximately $18.98 billion aggregate principal amount of
revenue bonds and notes outstanding as of June 30, 1995. Revenue bonds
represent both obligations payable from State revenue-producing enterprises
and projects, which are not payable from the General Fund, and conduit
obligations payable only from revenues paid by private users of facilities
financed by such revenue bonds. Such enterprises and projects include
transportation projects, various public works and exposition projects,
educational facilities (including the California State University and
University of California systems), housing, health facilities and pollution
control facilities.
Litigation
The State is a party to numerous legal proceedings, many of
which normally occur in governmental operations. In addition, the State is
involved in certain other legal proceedings that, if decided against the
State, might require the State to make significant future expenditures or
impair future revenue sources.
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Ratings
On July 15, 1994, Standard & Poor's Corporation ("Standard &
Poor's"), Moody's Investors Service, Inc. ("Moody's"), and Fitch Investors
Service, Inc. ("Fitch") all downgraded their ratings of California's
general obligation bonds. These bonds are usually sold in 20- to 30-year
increments and used to finance the construction of schools, prisons, water
systems and other projects. The ratings were reduced by Standard & Poor's
from "A+" to "A", by Moody's from "Aa" to "A1", and by Fitch from "AA" to
"A". Since 1991, when it had a "AAA" rating, the State's rating has been
downgraded three times by all three ratings agencies. All three agencies
cite the 1994-95 Budget Act's dependence on a "questionable" federal
bailout to pay for the cost of illegal immigrants, the Proposition 98
guaranty of a minimum portion of State revenues for kindergarten through
community college, and the persistent deficit requiring more borrowing as
reasons for the reduced rating. Another concern was the State's reliance
on a standby mechanism which could trigger across-the-board reductions in
all State programs, and which could disrupt State operations, particularly
in fiscal year 1995-96. However, a Standard & Poor's spokesman stated
that, although the lowered-ratings means California is a riskier borrower,
Standard & Poor's anticipates that the State will pay off its debts and not
default. There can be no assurance that such ratings will continue for any
given period of time or that they will not in the future be further
revised.
Fitch upgraded its rating of California's general obligation
bonds from "A" to "A+" on February 26, 1996. No rating change was made,
however, by either Moody's or Standard & Poor's as of that date.
As a result of Orange County's Chapter 9 bankruptcy filing on
December 6, 1994, Moody's suspended the county's bond ratings until January
6, 1995, when it reinstated them at a rating of "Caa." On December 6,
1994, Standard & Poor's cut its rating of all Orange County debt from "AA-"
to "CCC", a level below investment grade and an indication of high risk and
uncertainty, and on December 8, 1994, Standard & Poor's further reduced its
rating to "D" indicating default status. Fitch does not rate Orange County
bonds. It is anticipated that as Orange County's credit and bond ratings
fall, it will have difficulty in getting loans or selling its bonds to
raise money. Additionally, the County's bankruptcy filing could affect
about 180 municipalities, school districts, and other municipal entities
which entrusted billions of dollars to Orange County to invest. Standard &
Poor's has informed such entities that they have been placed on negative
credit watch, the usual step prior to a downgrade of credit rating.
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The Sponsor believes the information summarized above describes
some of the more significant aspects relating to the Insured California
Trust. The sources of such information are Preliminary Official Statements
and Official Statements relating to the State's general obligation bonds
and the State's revenue anticipation notes, or obligations of other issuers
located in the State of California, or other publicly available documents.
Although the Sponsor has not independently verified this information, it
has no reason to believe that such information is not correct in all
material respects.
California Tax Status
On the Date of Deposit, special California counsel for the
Sponsor rendered an opinion under the then existing California state income
tax law which read as follows:
The Insured Trust is not an association taxable as a
corporation under the income tax laws of the State of California;
The income, deductions and credits against tax of the Insured
Trust will be treated as the income, deductions and credits against
tax of the holders of Units in the Insured Trust under the income tax
laws of the State of California;
Interest on the bonds held by the Insured Trust to the extent
that such interest is exempt from taxation under California law will
not lose its character as tax-exempt income merely because that
income is passed through to the holders of Units; however, a
corporation subject to the California franchise tax is required to
include that interest income in its gross income for purposes of
determining its franchise tax liability;
Each holder of a Unit in the Insured Trust will have a taxable
event when the Insured Trust disposes of a bond (whether by sale,
exchange, redemption, or payment at maturity) or when the Unit holder
redeems or sells his Units. The total tax cost of each Unit to a
holder of a Unit in the Insured Trust is allocated among each of the
bond issues held in the Insured Trust (in accordance with the
proportion of the Insured Trust comprised by each bond issue) in
order to determine the holder's per Unit tax cost for each bond
issue, and the tax cost reduction requirements relating to
amortization of bond premium will apply separately to the per Unit
tax cost of each bond issue. Therefore, under some circumstances, a
holder of a Unit may realize taxable gain when the Insured Trust
disposes of a bond or the holder's Units are sold or
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redeemed for an amount equal to or less than his original cost of the
bond or Unit;
Each holder of a Unit in the Insured Trust is deemed to be the
owner of a pro rata portion of the Insured Trust under the personal
property tax laws of the State of California;
Each Unit holder's pro rata ownership of the bonds held by the
Insured Trust, as well as the interest income therefrom, is exempt
from California personal property taxes; and
Amounts paid in lieu of interest on defaulted bonds held by the
Trustee under policies of insurance issued with respect to such bonds
will be excludable from gross income for California income tax
purposes if, and to the same extent as, those amounts would have been
so excludable if paid as interest by the respective issuer.
In the opinion of Messrs. Kopesky & Welke, LLP, special
California counsel to the Sponsor, no change in law has occurred since the
Date of Deposit which would require a change in the above opinion.
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THE DELAWARE UNINSURED TRUST
The Portfolio of the Delaware Uninsured Trust consists of eight
issues of Securities, seven of which were issued by Issuers located in
Delaware and one of which (approximately 3.19% of the aggregate market
value of the Delaware Uninsured Trust Portfolio) was issued by authority of
the Commonwealth of Puerto Rico. Two issues of Securities are each a
general obligation of an Issuer. Six issues of Securities, while not
backed by the taxing power of the Issuer, are payable from revenues or
receipts derived from specific projects or other available sources. The
Delaware Uninsured Trust contains the following categories of Securities:
Percentage of Aggregate
Market Value of Trust Portfolio
Category of Security (as of November 1, 1996)
General Obligation ................. 19.28%
Health Care and Hospital ........... 19.88%
Higher Education ................... 18.00%
Highway and Transportation ......... 23.81%
Water and Sewer .................... 19.03%
Original Issue Discount ............ 41.07%
See: "The Trust -- Summary Description of the Portfolios", in
Part B, for a summary of the investment risks associated with the type of
Securities contained in the Delaware Uninsured Trust. See: "Tax Status",
in Part B, for a discussion of certain tax considerations with regard to
Original Issue Discount.
Of the Original Issue Discount bonds in the Delaware Uninsured
Trust, approximately 4.80% of the aggregate principal amount of the
Securities in the Delaware Uninsured Trust (or 3.19% of the market value of
all Securities in the Delaware Uninsured Trust on November 1, 1996) are
zero coupon bonds (including bonds known as multiplier bonds, money
multiplier bonds, capital accumulator bonds, compound interest bonds and
discount maturity payment bonds).
On November 1, 1996, based on the bid side of the market, the
aggregate market value of the Securities in the Delaware Uninsured Trust
was $2,008,856.20.
On November 1, 1996, Standard & Poor's Corporation rated five
of the Securities in the Delaware Uninsured Trust as follows: 43.69%-AAA,
18.00%-AA and 3.19%-A; and Moody's Investors Service rated three of the
Securities as follows: 35.12%-A. (See: the respective "Schedule of
Portfolio Securities", herein, and "Bond Ratings", in Part B.) A
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Security in the Portfolio may subsequently cease to be rated or the rating
assigned may be reduced below the minimum requirements of the Delaware
Uninsured Trust for the acquisition of Securities. While such events may
be considered by the Sponsor in determining whether to direct the Trustee
to dispose of the Security (see: "Sponsor -- Responsibility", in Part B),
such events do not automatically require the elimination of such Security
from the Portfolio.
Note: The second paragraph on page 16 in Part B is amended by
deleting the first four sentences and replacing them with the following:
The Puerto Rican economy is affected by a number of Commonwealth and
Federal investment incentive programs. For example, prior to 1996, Section
936 of the Internal Revenue Code generally provided deferral of Federal
income taxes for U.S. companies operating on the island until profits are
repatriated. Section 936 was repealed by the Small Business Job Protection
Act of 1996. It is expected that the repeal of Section 936 will have a
strongly negative impact on Puerto Rico's economy.
SPECIAL CONSIDERATIONS REGARDING DELAWARE SECURITIES
The Sponsor believes the information summarized below describes
some of the more significant developments relating to the general economic
conditions of the State of Delaware (the "State") and in particular to the
State government itself. This information may be relevant to the
Securities (i) of or supported by the State of Delaware; or (ii) of
municipalities or other political subdivisions or instrumentalities of the
State of Delaware that rely, in whole or in part, on ad valorem real
property taxes and other general or special funds of such municipalities or
political subdivisions. The sources of such information include publicly
available documents, including the Official Statements of the State. The
Sponsor has not independently verified any of the information contained in
such Official Statements and other publicly available documents, and is not
aware of any facts that would render such information inaccurate.
Economic Base
The growth experienced in most sectors of Delaware's economy
for the past ten years has been considerably greater than the average
growth rates in the other forty-nine states. Population grew by 16% in
Delaware, compared with the national growth of 11% and 4% in the other
states in the region (Maryland, New Jersey, New York, Pennsylvania).
Delaware's 1995 population exceeded the 1994 head count by 1.3%, the growth
rate for the U.S. was 0.9%, and the growth in the mideast region was 0.2%.
Similarly, Delaware's employment
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growth of 25% from 1985 through 1995 exceeded the 20% and 6% growth rates
of the nation and the region, respectively.
During the same period, unemployment rates declined from a
level higher than the national average, to a rate similar to the U.S. as a
whole. Delaware's September 1996 unemployment rate of 5.2% was the same as
the national rate. The average of the other states in the mideast region
was 5.6%. For 1995, Delaware's unemployment rate averaged 4.3%, lower than
the 5.6% rate for the U.S. and the 5.9% regional average rate for the same
year.
Personal income in the State advanced 90% from 1985 through
1995, compared with 80% for the nation and 78% in the region. The 1995
poverty rate in the State was 10.3%, considerably lower than the national
rate of 14.2%. In July 1995 State Policy Reports ranked states by gross
state product per capita. Delaware ranked second of all the states, with
Alaska as the only state that exceeded Delaware. Delaware exceeded the
average state in the value of per capita production by 46%.
These indicators of above average economic performance resulted
in part from financial decisions made by the State in the late 1970's and
early 1980's. They include 1) reducing the top marginal personal income
tax rate from 19.8% to 7.7%, and a further reduction enacted which began in
fiscal 1996 and lowered the top rate to 7.1%, 2) broadening the employment
base to reduce the influence of the manufacturing sector on Delaware's
economy (from 27% of all jobs in 1980 to 16% in 1995), 3) reducing
regulations on business - especially banking through the Financial Center
Development Act of 1981, and 4) following fiscally conservative taxing
policies. In 1993, further deregulatory legislation was enacted, which
increased competitive options for telecommunications providers and expanded
the powers of limited liability partnerships in Delaware.
The State did feel the impact of the national recession of
1990-91. Employment peaked at 355,900 in June 1990, reached its low point
in February 1992, and had recovered by 44,700 jobs to a level of 376,400
positions in September 1996. Compared with one year earlier, Delaware's
employment in September 1996 had increased by 6,200 (1.7%), while the
nation's employment grew by 2.2% and the other states in the region saw an
increase of 0.7%.
Delaware's manufacturing employment continues to be negatively
impacted by the downsizing and restructuring of the chemical industry. In
September 1996 there were 23,300 chemical workers in Delaware, 10,900 fewer
than in the peak year of 1990. When comparing September 1996 with
September
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1995, Delaware's loss of chemical employment was nearly 2%, the same as the
region, compared to a 1% loss in the nation. The General Motors assembly
plant in Northern Delaware will serve as an overflow facility starting
early in 1997, when it will produce the Chevrolet Malibu line for two
years. Their current employment is 2,900, with average wages of $19 per
hour. GM will then use the plant to build the Saturn Innovate. They
expect to assemble 250,000 cars annually and maintain their current
employment level.
Chrysler, the owner of the only other auto assembly plant in
the State employs 2,900 workers. Chrysler is currently undergoing a $500
million retooling of its facility. In the Fall of 1997 that plant will
begin producing sport utility vehicles. September 1996 manufacturing
employment in Delaware declined by 6% compared with one year ago. The U.S.
lost 1% of its manufacturing jobs over the same period and the other states
in the region lost nearly 2%.
The State's per capita personal income of $24,124 in 1995 was
6% higher than the national average, ranking Delaware 11th in the U.S. For
1995, Delaware's total personal income advanced by 6.4%, relative to 1994,
compared with 6.0% in the U.S. and 4.5% in the region. For the year ended
with the first quarter of 1996, the State's personal income grew by 4.0%,
compared with national growth of 5.0% and regional growth of 3.7%.
Since 1980 there has been a 48% growth in net new business
firms established in Delaware, compared with 22% in the U.S. and 18% in the
region. The business failure numbers also paint Delaware as an attractive
place to own a successful company. In 1995, only 45 Delaware businesses
ceased to operate, the lowest number of failures since 1989. In 1995, only
22 businesses failed in Delaware for each 10,000 firms in existence,
compared with failure rates of 86 and 90 per 10,000 firms for the region
and the U.S., respectively.
Franchise tax revenue and fees derived from companies
incorporated in Delaware represents the second largest source (20%) of
State General Fund revenue (the largest contributor is the personal income
tax). There were 47,851 new incorporations in Delaware in 1995, bringing
the number of domestic corporations using the State as their legal home to
263,310. New incorporations in Delaware increased by 8% in the first nine
months of 1996, compared with the same nine months of 1995. Although the
State is the legal home of only 5% of the corporations in the U.S., among
those are half of the companies listed on the New York Stock Exchange.
Delaware was also the corporate home of 58% of the companies listed in the
"Fortune 500" in 1995.
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The value of Delaware's construction contracts (as measured by
McGraw-Hill) increased 18% in 1995 compared with 1994. This increase
compares favorably with the U.S. increase of 2%. Delaware's strengths were
in the nonresidential building (office space), nonbuilding (highway) and
government building categories. Construction employment in September 1996
was 8% higher than one year earlier, compared with 5% growth in the U.S.,
and a 1% increase in the region. For the first eight months of 1996,
overall construction contracts had fallen 12% in Delaware, compared with
the same period of 1995. However, after subtracting the new contracts for
the Route 1 from the 1995 data, the value of construction contracts through
August were 5% lower than one year earlier. Route 1 is a six to eight-lane
limited-access highway extending two-thirds the length of the State.
Delaware's new private housing authorizations decreased by 7%
in 1995, compared with 1994. U.S. and the region's single-family private
housing authorizations were 3% and 11% lower, respectively, for the same
period. There were 6% more Delaware home sales in 1995 than in 1994,
compared with 7% for the whole country. For the first nine months of 1996,
Delaware's new private housing authorizations were unchanged from one year
earlier, compared to an increase of 10% both in the U.S. and the other
states in the region.
Newly leased office space in the greater Wilmington market
increased by 3% in 1995 compared with 1994, but was slightly less than the
average of the last five years. The vacancy rate for Wilmington's Class
"A" buildings was 10% compared with the national average of 13% in June
1996. During the last year, the quoted rental price for this downtown
office space increased by 1% to $19.80 per square foot, compared to $24 in
the average central business district nationally. Operating costs on these
properties averaged $7.50 per square foot at the end of 1995, considerably
less than in neighboring cities. MBNA, one of the largest banks in the
State, has completed construction of a 355,000 square-foot building
adjacent to the central square in the City of Wilmington. MBNA is building
an adjoining parking garage and a 260,000 square-foot office building,
scheduled for completion in the fall of 1996.
The financial services industry continued to expand in
Delaware, employing 43,100 workers in September 1996. Those workers in
financial services held 1,600 more jobs than one year earlier, a
year-over-year growth rate of 4%, in spite of the ongoing bank
consolidations. The number of national finance-related jobs grew by 3% and
the number in the region advanced by 1%. In 1995, Delaware banks had the
third highest return on average assets in the nation, 2.39% compared with
the U.S. average of 1.16%. Banking institutions currently number
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forty-one, including half of the ten largest credit card companies in the
country. In June 1995, the State approved limited expansion powers for
out-of-state banks that want to establish operations in Delaware.
The Port of Wilmington (the "Port") handled 4.4 million tons of
waterborne cargo in fiscal 1996, an increase of of 15% compared with the
prior year. For fiscal 1996, gross Port revenue of $18.1 million was 4%
lower than the revenue in fiscal 1995. For the first three months of
fiscal 1997, Port tonnage increased 12%, compared to the comparable period
in fiscal 1996. The composition of the imports has changed since last
year, with increases in wet bulk imports and reductions in steel, dry bulk
and refrigerated cargo. The wet bulk (primarily oil) cargo pays a monthly
fee for Port usage, regardless of tonnage, while payment for the other
cargo is based on weight. Wilmington's Port exports more American-made
cars and imports more bananas than any other port in the U.S. New Port
contracts include substantial import tonnage of Chilean fruit and
Australian beef. In June 1995 the State agreed to purchase the Port for
$40 million, payable over 30 years. The State also agreed to invest $25
million in capital improvements in the Port over the next two years and to
assume $66 million of Port debt. The State assumed the full operating
responsibility for the Port in September 1996.
State Finances
Fiscal 1996. General Fund expenditures were $1,605 million, an
increase of 6% over the previous year, with the growth primarily for
mandated, caseload and inflation adjustments in social service programs.
One significant feature in the 1996 budget was an initiative to move
welfare recipients into the labor market. The fiscal 1996 revenue was
$1,656 million, an increase of 3%. After adjusting for the phased-in
personal income tax cut, the growth of General Fund revenue was 6% over the
prior year. The fiscal 1996 cumulative cash balance was $379 million, 24%
of the operating budget. Nationally, cash balances as a percent of
operating spending averaged 7%, according to the National Association of
State Budget Officers. The State's Budget Reserve Fund (see "Fiscal
Controls" below) remained fully funded at the 5% level and held balances of
$87 million.
Delaware finances transportation projects primarily through the
Transportation Trust Fund, created in 1987 and funded by dedicated revenue
sources including the motor fuel tax, Turnpike tolls and concessions, motor
vehicle document and registration fees, miscellaneous transportation
related revenue (titling fees, operator license fees, etc.), and investment
earnings on Transportation Trust Fund balances. Transportation operating
expenses and debt service were $162 million for
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fiscal 1996, a 1% increase over 1995. The capital program spent another
$124 million. The State enacted increases in motor vehicle gasoline and
diesel taxes, vehicle document fees, and tolls on Interstate 95 to replace
some of the anticipated bond-financed capital spending. These "user fees"
for transportation purposes are expected to provide $178 million of capital
for transportation projects through 1999, and became effective September
1993.
In 1993, the U.S. Supreme Court ruled in favor of Delaware in a
case involving intangible abandoned property, stating that Delaware is
entitled to receive abandoned property held by brokers incorporated in the
State. In 1994, Delaware negotiated a settlement with New York State which
allows Delaware to draw down the $220 million windfall during the next four
years. The fiscal 1996 budget authorized the use of these funds (named the
Twenty-first Century Fund) to create public/private partnerships to enhance
the competitiveness of the State. Specifically allocated in fiscal 1996
were $35 million for agricultural land preservation and a parks maintenance
endowment, $42 million for educational technology investments and economic
development projects and $33 million for housing, community development,
and sewer/water projects.
Fiscal 1997. The Delaware Economic and Financial Advisory
Council ("DEFAC"), composed of 33 private and public-sector members
appointed by the Governor, provides revenue and expenditure forecasts for
the General Assembly and the Governor a minimum of six times each year.
The most recent DEFAC forecast (September 1996) called for General Fund
revenue of $1,720 million for fiscal 1997, a growth of 4% over the fiscal
1996 revenue. (Adjusted for the decrease in personal income tax rates, the
growth estimate was 6%.) Fiscal 1997 expenditures are expected to be
$1,873, an increase of 13% compared with fiscal 1996. Operating
expenditures and debt service from the Transportation Trust Fund are
expected to be $162 million, the same as the previous year. The capital
spending budgets include $113 million for transportation projects and $164
million for other capital improvements supported by the General Fund and
the Twenty-first Century Fund.
Fiscal 1998. The September 1996 DEFAC estimate for revenue in
the General Fund is $1,720 million (+4%) and $238 million in the
Transportation Trust Fund (the same as last year).
Fiscal Controls. A State constitutional limit requires a
three-fifths vote of each house of the General Assembly to pass or increase
any tax or license fee. Appropriation of more than 98% of estimated
General Fund revenue plus unencumbered General Fund balances from the
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previous fiscal year also requires a three-fifths vote of both houses.
Excess unencumbered General Fund revenue at the end of a fiscal
year must be placed in a Budget Reserve Account, until that Account
accumulates to 5% of estimated General Fund revenue, according to the State
Constitution. That Account provides a cushion against unanticipated
revenue shortfalls and funds for tax reductions. The Budget Reserve
Account currently holds $87 million and is fully funded.
Until 1991 the authorization of additional General Fund debt
was restricted to 75% of the principal retirement of general obligation
debt in the prior fiscal year, plus any deauthorized debt in the same year.
Legislation effective in July 1991 replaced that debt limitation. The
revised limitations are three: a) annual tax supported debt authorizations
cannot exceed 5% of estimated General Fund revenue, b) debt service
payments of all tax supported debt (including the Transportation Authority,
certificates of participation and long-term leases) will be limited to 15%
of General Fund plus Transportation Trust Fund revenue, and c) General
Obligation debt service payments will be limited to the projected
cumulative cash balance for the same fiscal year. These debt limits
supported the reduction of per capita General Obligation debt from $757 in
fiscal 1986 to $636 in fiscal 1996.
Delaware Tax Status
On the date of the Prospectus, in the opinion of Potter
Anderson & Corroon, Wilmington, Delaware, Special Delaware counsel on tax
matters, with respect to the Delaware Trust:
1. So long as, for federal income tax purposes, the Delaware
Trust is treated as a grantor trust and its income is treated as the income
of the Unit Holders so that the Delaware Trust is not recognized as a
taxable entity, the Delaware Trust will not be subject to Delaware income
taxation and, for Delaware income tax purposes, the income of the Delaware
Trust will be treated as income of the Unit Holders.
2. The following discussion addresses the Delaware taxation
of the various potential Delaware Unit Holders.
a. The State of Delaware (sometimes the "State")
imposes an income tax upon the taxable income of resident individuals,
trust and estates. For purposes of this tax, the taxable income of a
resident individual, trust or estate is defined as the resident individual,
trust or estate's adjusted gross income for federal income tax purposes
subject
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to certain specified modifications. No such modification requires the
addition of interest on obligations of the State and its political
subdivisions or authorities thereof. Accordingly, so long as interest
income received by the Delaware Trust from obligations of the State and its
political subdivisions or authorities thereof is excluded from adjusted
gross income for federal income tax purposes, all such interest income will
be excluded from taxable income for the purposes of Delaware income taxes
on a resident individual, trust or estate. Such interest income may also
be excluded from taxable income of a Delaware resident, trust or estate
under the enabling legislation pursuant to which the obligation was issued.
Conversely, to the extent that any gain (or loss) from the sale of
obligations held by the Delaware Trust (whether as a result of the sale of
such obligations by the Delaware Trust or as the result of the sale of a
Unit by a Unit Holder) is includable in (or deductible in) the calculation
of a resident individual, trust or estate's adjusted gross income for
federal income tax purposes, any such gain (or loss) will be includable in
(or deductible in) the calculation of taxable income for the purposes of
Delaware income taxes on a resident individual, trust or estate.
b. The State of Delaware imposes an income tax upon
the taxable income of corporations which transact or conduct business
within the State. For purposes of this tax, the taxable income of a
corporation is defined as its "entire net income" allocable to business
activities carried on or property located within the State and its "entire
net income" is defined as its federal taxable income subject to certain
specified modifications. No such modification requires the addition of
interest on obligations of the State or its political subdivisions or
authorities thereof. Accordingly, so long as interest income received by
the Delaware Trust from obligations of the State and its political
subdivisions or authorities thereof is excluded from taxable income of a
corporation for federal income tax purposes, all such interest income will
be excluded from taxable income for the purposes of Delaware corporate
income taxes. Such interest income may also be excluded from taxable
income of a corporation under the enabling legislation pursuant to which
the obligation was issued. In addition, in determining a corporation's
entire net income, one of the modifications from federal taxable income is
the elimination of gains or losses from the sale or other disposition of
securities issued by the State or political subdivisions thereof. Thus,
any gain or loss from the sale of such obligations held by the Delaware
Trust (whether as the result of the sale of such obligations by the
Delaware Trust or as the result of the sale of a Unit by a Unit Holder) is
not includable in the calculation of taxable income for the purposes of
Delaware corporate income taxes.
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c. The State of Delaware requires every corporation
which transacts or conducts business within the State and which is an S
corporation for federal income tax purposes that has any shareholders who
are non-residents of the State to pay on behalf of each such non-resident
shareholder a tax in an amount equal to the highest rate of Delaware
personal income tax multiplied by such non-resident shareholder's
distributive share of the income of such corporation from Delaware sources
entering into his federal taxable income subject to certain specified
modifications. No such modification requires the addition of interest on
obligations of the State or its political subdivisions or authorities
thereof. Accordingly, so long as interest income received by the Delaware
Trust from obligations of the State and its political subdivisions or
authorities thereof is excluded from adjusted gross income for federal
income tax purposes, all such interest income will be excluded from taxable
income for the purposes of the Delaware income taxes that an S corporation
must pay on behalf of a non-resident shareholder. Such interest income may
also be excluded from taxable income of a non-resident shareholder of an S
corporation under the enabling legislation pursuant to which the obligation
was issued. Conversely, to the extent that any gain (or loss) from the
sale of obligations held by the Delaware Trust (whether as a result of the
sale of such obligations by the Delaware Trust or as the result of the sale
of a Unit by a Unit Holder) is includable in (or deductible in) the
calculation of a non-resident shareholder's distributive share of Delaware
sourced income of an S corporation for federal income tax purposes, any
such gain (or loss) will be includable in (or deductible in) the
calculation of taxable income for purposes of the Delaware income taxes
that an S corporation must pay on behalf of a non-resident shareholder.
d. 48 U.S.C. { 745 provides that all bonds issued by
the government of Puerto Rico, or by its authority, shall be exempt from
taxation by any state, or by any county, municipality or other municipal
subdivision of any state. Accordingly, interest income received by the
Delaware Trust from obligations issued by Puerto Rico, or by its authority,
would be exempt from the Delaware individual, trust and estate, and
corporate income taxes, including the income tax required to be paid by an
S corporation on behalf of certain non-resident shareholders as described
in paragraph c above. To the extent that any gain (or loss) from the sale
of such obligations held by the Delaware Trust (whether as a result of the
sale of such obligations by the Delaware Trust or as the result of the sale
of a Unit by a Unit Holder) is includable in (or deductible in) the
calculation of adjusted gross income (in the case of individual Unit
Holders) or taxable income (in the case of trust, estate and corporate Unit
Holders) for federal income tax purposes, any such gain (or loss) will be
includible
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in (or deductible in) the calculation of taxable income for purposes of (i)
Delaware income taxes on resident individuals, trusts and estates and (ii)
Delaware corporate income taxes including the income tax required to be
paid by an S corporation on behalf of certain non-resident shareholders as
described in paragraph c above.
No opinion is expressed regarding the Delaware tax consequences
of Unit Holders other than Delaware resident individuals, trusts and
estates, and corporations conducting or transacting business in Delaware.
Tax counsel should be consulted as to the other Delaware tax
consequences not specifically considered herein, such as the Delaware
franchise tax imposed upon the taxable income of certain banking
organizations and upon the net income of certain building and loan
associations. In addition, no opinion is being rendered as to the Delaware
consequences resulting from any proposed or future federal or State tax
legislation.
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THE MARYLAND UNINSURED TRUST
The Portfolio of the Maryland Uninsured Trust consists of nine
issues of Securities, all of which were issued by Issuers located in
Maryland. Four issues of Securities are each a general obligation of an
Issuer. Five issues of Securities, while not backed by the taxing power of
the Issuer, are payable from revenues or receipts derived from specific
projects or other available sources. The Maryland Uninsured Trust contains
the following categories of Securities:
Percentage of Aggregate
Market Value of Trust Portfolio
Category of Security (as of November 1, 1996)
General Obligation ................. 41.71%
Health Care and Hospital ........... 27.30%
Higher Education ................... 11.82%
Parking Revenue .................... 16.90%
Water and Sewer .................... 2.27%
Original Issue Discount ............ 29.57%
See: "The Trust -- Summary Description of the Portfolios", in
Part B, for a summary of the investment risks associated with the type of
Securities contained in the Maryland Uninsured Trust. See: "Tax Status",
in Part B, for a discussion of certain tax considerations with regard to
Original Issue Discount.
Of the Original Issue Discount bonds in the Maryland Uninsured
Trust, approximately 3.81% of the aggregate principal amount of the
Securities in the Maryland Uninsured Trust (or 2.27% of the market value of
all Securities in the Maryland Uninsured Trust on November 1, 1996) are
zero coupon bonds (including bonds known as multiplier bonds, money
multiplier bonds, capital accumulator bonds, compound interest bonds and
discount maturity payment bonds).
On November 1, 1996, based on the bid side of the market, the
aggregate market value of the Securities in the Maryland Uninsured Trust
was $2,895,062.55.
On November 1, 1996, Standard & Poor's Corporation rated seven
of the Securities in the Maryland Uninsured Trust as follows: 33.46%-AAA,
14.09%-AA and 25.43%-A; and Moody's Investors Service rated two of the
Securities as follows: 13.41%-Aa and 13.61%-A. (See: the respective
"Schedule of Portfolio Securities", herein, and "Bond Ratings", in Part B.)
A Security in the Portfolio may subsequently cease to be rated or the
rating assigned may be reduced below the minimum requirements of the
Maryland Uninsured Trust for the
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acquisition of Securities. While such events may be considered by the
Sponsor in determining whether to direct the Trustee to dispose of the
Security (see: "Sponsor -- Responsibility", in Part B), such events do not
automatically require the elimination of such Security from the Portfolio.
SPECIAL CONSIDERATIONS REGARDING MARYLAND SECURITIES
The Sponsor believes the information summarized below describes
some of the more significant developments relating to Securities of
(i) municipalities or other political subdivisions or instrumentalities of
the State of Maryland (the "State") which rely, in whole or in part, on ad
valorem real property taxes and other general funds of such municipalities
or political subdivisions or (ii) the State, which are general obligations
of the State payable from appropriations from the State's General Fund.
The sources of such information include the official statements of the
State, as well as other publicly available documents. The Sponsor has not
independently verified any of the information contained in such official
statements and other publicly available documents, but is not aware of any
facts which would render such information inaccurate.
Economic Factors. The principal sectors of the Maryland
economy are services, government and wholesale and retail trade and
manufacturing. While government employment grew at a rate about one-third
of total State employment from 1975 to 1995, it remains a significant
factor in the State economy. In contrast to the nation as a whole,
considerably more people in Maryland are employed in government than in
manufacturing, and manufacturing accounted for only 8.1% of personal income
in Maryland in 1995 (compared to 15.8% nationally). Food and kindred
products is the primary manufacturing industry. While the Port of
Baltimore is one of the larger foreign trade ports in the United States and
in the world, its operations are subject to fluctuations in general
economic conditions, and the demand for imported or exported goods.
Maryland's population in 1990 increased 13.8% from 1980.
State Finances. The consolidated balances of the State's
general, special revenue, debt service and capital projects funds were (on
a GAAP-basis) approximately $985 million, $246 million, $291 million, $529
million and $1.117 billion for the fiscal years ending June 30, 1991, 1992,
1993, 1994 and 1995, respectively.
On April 1, 1995, the General Assembly approved the Budget for
fiscal year 1996. The Budget includes, among other things: (i) sufficient
funds to meet all specific statutory funding requirements; (ii) sufficient
funds to meet the
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actuarily recommended contributions for the seven retirement systems,
determined on a basis consistent with prior years' practice;
(iii) sufficient general funds for the Annuity Bond Fund to maintain the
State property tax rate at 21 cents per $100 of assessed valuation;
(iv) $2.8 billion in aid to local governments (reflecting a $161 million
increase over 1995 which provides for substantial increases in education,
health and police aid); (v) a $270 million general fund appropriation to
the State Reserve Fund, $200 million of which is appropriated to the
Revenue Stabilization Account; and (vi) $134.1 million in general fund
deficiency appropriations for fiscal year 1995, of which $60 million is an
appropriation to the Revenue Stabilization Account of the State Reserve
Fund, as previously mandated by the General Assembly. The Budget includes
$39 million in general funds for a 2% employee cost-of-living adjustment.
The operating budget for fiscal year 1996 was funded with
$7,337 million in general funds, $3,726 million in special and higher
education funds, and $3,851 million in federal funds.
The State's fiscal year 1996 capital program was funded with
$390 million in general obligation bonds, $93.5 million in general funds
appropriated in the operating budget, $1,244.6 million in special and
federal funds (of which $1,055.2 million is appropriated to the Department
of Transportation), $131.9 million in revenue bonds, and $21.0 million in
reappropriated prior years' capital appropriations. The general obligation
bond financed program included $152 million for State facilities, $83
million for the construction and renovation of local elementary and
secondary schools, and $155 million for various other grants and loan
projects.
When the 1996 Budget was enacted, it was estimated that the
general fund balance on a budgetary basis on June 30,1996, would be
approximately $7.8 million; it was actually $13.1 million. At its
December 12, 1995, meeting, the Board of Revenue Estimates lowered the
estimate of fiscal year 1996 general fund revenues by $92 million. On
March 11, 1996, the Board further lowered the estimate for fiscal year 1996
by $56 million. The State addressed these changed and funded some required
General Fund deficiency appropriations with a plan that principally
included: (1) additional reversions for Medicaid and Nonpublic Special
Education Placements of $22 million; (2) reduction of current general fund
appropriations of $26 million; (3) transfer from the Revenue Stabilization
Account of $77 million; and (4) use of unanticipated fiscal year 1995
surplus of $26 million. Fiscal year 1996 revenues actually exceeded the
March 11, 1996 estimates by $21 million; this amount was returned to the
Revenue Stabilization Account.
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The net transfer from the Revenue Stabilization Account in fiscal year 1996
was $56 million.
On April 3, 1996, the General Assembly approved the budget for
fiscal year 1997. The budget includes, among other things: (i) sufficient
funds to meet all specific statutory funding requirements; (ii) sufficient
funds to meet the actuarial recommended contributions for the seven
retirement systems, determined on a basis consistent with prior years'
practice; (iii) sufficient general funds for the annuity Bond Fund to
maintain the State property tax rate at 21c/ per $100 of assessed valuation;
(iv) 2.9 billion in aid to local governments (reflecting a $121.5 million
increase over fiscal year 1996 that provides for increases in education,
health and police aid); and (v) $13.2 million in general fund deficiency
appropriations.
Legislation enacted by the 1996 General Assembly reorganized
the State's personnel system and reformed the welfare and Medicaid
programs. Estimated fiscal year 1997 savings of $29 million ($19.5 million
general funds) are incorporated into the fiscal year 1997 Budget. The
legislation establishes a decentralized personnel management system,
replacing the classified and unclassified services with skilled,
professional, management, and executive services; a pay for performance
plan, and early retirement during fiscal year 1997 for certain groups of
employees. The welfare reform legislation limits welfare recipients to 60
months of cumulative cash assistance and requires adults to be in a State-
defined work activity in order to receive more than 24 months of benefits;
federal permission must be obtained before the new welfare program can be
implemented. The Medicaid reform authorized the establishment of a
mandatory managed care program for Medicaid reform authorized the
establishment of a mandatory managed care program for Medicaid recipients
(consistent with federal law or federal waivers). The legislation requires
managed care organizations to meet certain performance, access, and quality
standards; it is anticipated the organizations will be paid prospectively.
The operating budget is to be funded with $7,413 million in
general funds, $4,105 million in special and higher education funds, and
$3,117 million in federal funds.
The State's fiscal year 1997 capital program is to be funded
with $400 million in general obligation bonds (net of $12.1 million of
prior year authorizations to be deauthorized), $66.8 million general funds
appropriated in the operating budget, $1,297 million in special and federal
funds (of which $1,099 million is appropriated to the Department of
Transportation, including $71 million for infrastructure, improvements
related to the construction of Redskins Stadium in
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Prince George's County) and $69.8 million in revenue bonds other than those
issued by the Department of Transportation. The general obligation bond
financed program includes $229 million for education, $23 million for the
environment, $41 million for business and job creation, $41 million for
public safety, and $63 million for various other projects.
Based on the 1997 Budget, it is estimated that the general fund
balance on a budgetary basis on June 30, 1997, will be approximately $22.5
million. It is also estimated that the balance in the Revenue
Stabilization Account of the State Reserve Fund on June 30, 1997, will be
$493.2 million.
At its 1986 session, the General Assembly enacted legislation
that established the State Reserve Fund. The fund was originally composed
of two accounts - the Revenue Stabilization Account (the "Account"), which
is established to retain State revenues for future needs and to reduce the
need for future tax increases, and the Dedicated Purpose Account, which is
established to retain appropriations for major multi-year expenditures and
to meet contingency requirements. Initially, an annual appropriation of $5
million to the Revenue Account was required until the balance in the
account reached 2% of general fund revenues; likewise, withdrawal of funds
from the Account was predicated on the existence of certain changes and
levels of unemployment. All interest earned on the State Reserve Fund is
credited to the Account.
Since the establishment of the Reserve Fund, two other accounts
have been created - the Economic Development Opportunities Program Fund,
which is to be used for extraordinary economic development opportunities as
a supplement to existing programs, and the Catastrophic Event Fund, which
is to be used to respond quickly to a natural disaster or other
catastrophic event that cannot be managed within existing appropriations.
At its 1993 session, the General Assembly increased the annual
appropriation to the Account to $50 million or whatever lesser amount is
necessary to bring the balance of the Account to 5% of estimated general
fund revenues, and changed the restriction on transfers from the Account to
only those authorized by an act of the General Assembly or specifically
authorized in the State Budget.
Legislation enacted by past General Assemblies directed the
Governor to include in the Budget submitted at the following year's
session, a proposed appropriation to the Reserve Fund in an amount
equivalent to the unappropriated General Fund Surplus realized in fiscal
years 1992-1995. Amounts equivalent to the surpluses in fiscal years 1993
and 1994 were appropriated to the Reserve Fund.
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The Transportation Trust Fund ("the Transportation Fund"),
administered by the Department of Transportation, is the largest of the
State's special funds. The Transportation Fund consolidates, into a single
fund, substantially all fiscal resources dedicated to transportation,
excluding the Maryland Transportation Authority; however, the
Transportation Fund includes the excise taxes on motor vehicle fuel and
motor vehicle titles, a portion of the corporate income tax, wharfage and
landing fees, rentals, and fare box revenues. All expenditures of the
Department of Transportation are made from the Transportation Fund. In
addition, the various categories of transportation bonds are serviced from
the Transportation Trust Fund, and the particular taxes and other
designated revenues are both dedicated to the payment of such indebtedness
and constitute the sole sources to which holders of transportation bonds
legally may look to for repayment.
Amounts in the Transportation Fund do not revert to the General
Fund if unexpended at the end of the fiscal year; however, the General
Assembly has enacted legislation requiring that certain unpledged funds in
the Transportation Fund be transferred to the General Fund. In some
instances, such legislation also has provided for the subsequent
retransfers from the General Fund to the Transportation Fund.
The Transportation Trust Fund had surpluses of approximately
$18 million, $129 million, $266 million, $282 million and $192 million
(unaudited) for the fiscal years ending June 30, 1992, 1993, 1994, 1995 and
1996, respectively.
The Maryland Transportation Authority (the "Authority") and the
Department of Transportation (the "Department") entered into an agreement
providing for the transfer from the Authority to the Department, from funds
not needed or pledged for bond payments, of $25 million in fiscal year
1991, $40 million in fiscal year 1992, and $10 million in fiscal year 1993
to be used by the Department for the Central Light Rail transportation
facility. The agreement also provides for the Department to retransfer to
the Authority $25 million annually for fiscal years 1995, 1996 and 1997.
As of June 30, 1996, $50 million has been retransferred to the Authority.
State Debt. The State Constitution prohibits the issuance of
State debt unless authorized by a law providing for the collection of an
annual tax or taxes sufficient to pay the interest when due and to
discharge the principal within 15 years of the date of issuance. As of
June 30, 1996, $2,860 million of the State's general obligation bonds were
outstanding. The State issued $170 million of its general obligation bonds
in October 1996. For fiscal year 1996, property taxes accounted for 60% of
the funds for general
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obligation debt service payments; substantially all of the remainder was
paid from general funds of the State. In addition, agencies of the State
had approximately $116 million in lease and conditional purchase
commitments outstanding as of June 30, 1996.
Consolidated Transportation Bonds are limited obligations
issued by the Department, the principal of which must be paid within 15
years from the date of issue, for highway, port, transit, rail, or aviation
facilities or any combination of such facilities. At its April, 1992,
special session, the General Assembly enacted legislation that limits the
outstanding aggregate principal amount of these bonds to $1,200 million;
under prior statute the limit was $950 million. The legislation also
provides that the General Assembly may establish in the Budget for any
fiscal year a $1,200 million maximum aggregate amount of these bonds, which
may be outstanding, as of June 30 of the fiscal year. For fiscal year 1997
the limit is $1,110 million. At June 30, 1996, the principal amount of
outstanding bonds was $977.6 million.
Debt service on Consolidated Transportation Bonds is payable
from the excise tax on each gallon of motor vehicle fuel, the motor vehicle
titling tax, all mandatory motor vehicle registration fees, motor carrier
fees, and such portion of the corporate income tax that is credited to the
Department, plus all departmental operating revenues and receipts. The
Department has covenanted with the holders of outstanding Consolidated
Transportation Bonds not to issue additional bonds unless certain revenue
adequacy tests are met.
Various State Authorities are authorized to issue revenue bonds
which are not considered obligations of the State. At June 30, 1996,
outstanding revenue and enterprise debt of these authorities amounted to
approximately $3.576 billion in bonded indebtedness and $30.535 million in
lease and conditional purchase financings.
State Retirement Plans. The State contributes to the Maryland
State Retirement and Pension Systems, an agent multiple-employer public
employee retirement system established by the State to provide pension
benefits for State employees (other than employees covered by the Mass
Transit Administration Pension Plan) and employees of 127 participating
political subdivisions within the State. Additionally, the system provides
benefits for certain non-State entities. Retirement benefits are paid from
the State system's pooled assets rather than from assets relating to a
particular plan participant. The system is considered part of the State's
financial reporting entity and is included in the State's financial
statements as a pension trust fund. The "unfunded
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pension benefit obligation" was approximately $5.4 billion at June 30,
1995.
Litigation. The State and its units are parties to numerous
legal proceedings, many of which normally recur in governmental operations.
Baltimore City. The General Fund budget for fiscal year 1996,
adopted on June 27, 1995, was premised on the assumption that the Baltimore
area economy would see sluggish growth causing by diminished federal
spending, limited job growth, moderate wage growth, and continuing business
down-sizing, particularly in the health care industry. Budgeted revenues
were estimated at $1,147,318,000, which support $1.0 million net new
appropriations for the Capital Projects Fund for "pay-as-you-go" programs.
Overall, General Fund revenues compared to the prior year's initial adopted
budget were anticipated to increase $10.8 million or 0.9%. The
conservative revenue forecast assumed no net growth in local taxes. The
continuing effects of commercial property value appeals reductions were
reflected in the real property tax base which was estimated to decline
approximately $27.4 million or 0.4% on a budgetary basis. An allowance of
base loss of $105 million was made. The property tax rate was maintained
at $5.85 per $100 of assessed valuation.
Since the beginning of fiscal year 1996, Baltimore ("the City")
has experienced short-falls in several key revenues. State wide income tax
cash collections lagged behind State budget estimates and City income tax
receipts were anticipated to be about 1% or $1.2 million below budget
estimate. Larger than anticipated tax reductions from real property
appeals, and factors affecting personal property, resulted in current year
property tax collections falling short of budget estimates by approximately
$5.9 million. An enrollment undercount and a Maryland General Assembly
legislative decision to withhold $5.9 million pending resolution of certain
issues of management of the City school system resulted in a potential
revenue shortfall of about $8.0 million.
Offsetting the revenue shortfalls was a one time reimbursement
of expenditures associated with the settlement of actual health insurance
expenses incurred by the City for calendar year 1995. The expenditure
refund, approximately $20 million, offset the fiscal year 1996 revenue
shortfall in the General Fund and provided additional sources of funding to
help offset unanticipated 1996 blizzard expenses in a number of agencies.
Certain other one-time revenue helped the school system budget by funding
major computer and portable classroom purchases. In spite of the
additional revenue, the City is faced with certain agency appropriation
deficits, in particular
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in the City school system budget. These anticipated deficits required
revisions to budgetary plans and the imposition of the strictest
expenditure controls. The City has undertaken what it believes to be
timely alteration of its budgetary plans and has instituted expenditure
controls so as to end fiscal year 1996 with a balanced budget.
Prince George's County. Certain of the Securities in the
Portfolio may be obligations of Prince George's County, Maryland (the
"County"), which rely in whole or in part on property taxes levied by the
County as their source of payment. Limitations on property tax rates
resulting from County Charter provisions and a decision of the State's
highest court to limit the ad valorem tax rate applicable to personal
property to the real property tax rate impair the county's ability to raise
tax revenues.
At the November 1978 General Election, the voters of the County
adopted an amendment to the County Charter limiting future collection of
real property taxes. The amendment, which became effective in December
1978, added Section 817B to the Charter. It is generally referred to in
the County as "TRIM" (TRIM is an acronym for Tax Reform Initiative by
Marylanders). TRIM, as enacted in November 1978, provides that the County
Council shall not levy "a real property tax that would result in a total
collection of real property taxes greater than the amount collected in
fiscal year 1979" ($143.9 million). At the November 1984 General Election,
an amendment to TRIM (the "TRIM Amendment") was approved by the voters of
the County authorizing the County Council to levy taxes on a maximum rate
basis as an alternative to the maximum amount basis. The maximum rate
authorized was Two Dollars and Forty Cents ($2.40) for each One Hundred
Dollars ($100.00) of assessed value. Under the TRIM Amendment, the
County's tax collections are limited to the greater of (1) an amount equal
to the 1979 collection or (2) an amount produced by a tax levied at $2.40
per $100.00 of assessed value. If the tax collection levied at $2.40 per
$100.00 of assessed value in fact produces an excess, the excess must be
placed in the contingency fund and, if not used during that fiscal year,
must be included in the budget estimated for real property taxes in the
following fiscal year. Since fiscal 1986, the County Council has elected
to levy real property taxes calculated on the basis of the maximum rate.
The Attorney General of Maryland has opined that real property
taxes levied and collected by the County for the Washington Suburban
Sanitary Commission ("WSSC") and the Maryland National Capital Park and
Planning Commission ("M-NCPPC") are not subject to the limitation imposed
by TRIM. Although the Attorney General of Maryland has not ruled on the
impact of the TRIM Amendment, the County Attorney is of the opinion that
limitations imposed by the TRIM Amendment are not
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applicable to WSSC, M-NCPPC or the Washington Suburban Transit Commission.
In addition, according to State law, taxes levied by the County in its
Stormwater Special Taxing District and taxes levied by municipalities in
the County are not subject to the TRIM limitation.
The County caused to be filed a Declaratory Judgment suit on
April 3, 1992 in the Circuit Court for Prince George's County, Maryland
regarding the right of the County to levy a property tax rate in excess of
the TRIM limitation of Section 817B of the County Charter. The County
sought to levy in fiscal 1992 a property tax rate of $.08 per $100 of
assessed value in excess of the TRIM limitation to pay the principal and
interest on bonds outstanding prior to the effective date of TRIM. The
Court entered a final order on May 24, 1992 declaring that the County has
the authority. This order was appealed to the Court of Appeals of Maryland
and received a favorable ruling supporting the levy. The rate set for
fiscal 1997 is $.026 per $100 of assessed value.
County revenue grew by a net $139.2 million between fiscal 1992
and fiscal 1996, averaging 4.9% growth annually. This growth occurred
despite dramatic reductions in State aid in fiscal 1992 and 1993. In both
fiscal 1992 and fiscal 1993, State funding to the County was reduced three
separate times by the State after the State had adopted its budget.
Of the net growth, $121.8 million was derived principally from
taxes; non-tax sources increased by $17.4 million. The property tax
generated $64.7 million or almost 53% of the growth. Real property tax
receipts increased by an average of 5.2% annually, while personal property
tax increases averaged 2.4%. In fiscal 1994, fiscal 1995 and fiscal 1996,
the County felt the effects of market changes in the real property
assessable base, resulting in lower growth rates.
The fiscal 1996 estimated level of County expenditures was $351
million and other financing uses, primarily for education and debt service,
were estimated at $449.9 million. County expenditures were estimated to be
$49.4 million higher in fiscal 1996 than in fiscal 1992.
Fiscal 1997 cost of service levels are expected to grow by 2.3%
over the fiscal 1996 level, while revenue growth for the same period is
expected to grow by 1.6%. The shortfall will be overcome by using the $3.0
million of fund balance. The County continues to take a conservative
approach in projecting revenues. The fiscal 1997 Budget does not rely on
any additional State taxing authority. County agencies are prepared to
deal with inevitable cuts in Federal and State aid.
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The cap on assessment growth for owner-occupied residential
properties in fiscal 1994 was set at 5%. Homeowner-occupied residential
properties growth in assessment will be capped at 3% in fiscal 1997. This
cap recognizes the November 1994 ballot initiative which will cap the
growth at the lesser of 5% or the increase in the consumer price index of
the Washington metropolitan statistical area. This voluntary lowering of
the cap in fiscal 1997 reflects the County's commitment to the voters made
during the 1992 General Election with respect to the rate limitation.
Maryland Tax Status
In the opinion of Whiteford, Taylor & Preston L.L.P., special
Maryland Counsel on Maryland income tax matters, which relies on the
opinion of Cahill Gordon & Reindel regarding federal income tax matters
relating to the Maryland Trust, under existing Maryland income tax law
applicable to individuals who are Maryland residents and to subchapter C
corporations subject to the Maryland corporate income tax:
The Maryland Trust will be treated as a trust for Maryland
income tax purposes and not as an association taxable as a corporation.
Each transaction of the Maryland Trust will be treated for such purposes as
a transaction of the several Unit Holders and not as a transaction of the
Maryland Trust that could give rise to Maryland taxable income to the
Maryland Trust.
The Maryland corporate income tax is imposed at the rate of 7%
of the corporation's Maryland taxable income. The Maryland income tax is
imposed upon the taxable income of resident individuals. The counties and
City of Baltimore are required by State law to levy local income taxes that
"piggyback" the State income tax; i.e., these taxes are determined as a
percentage ranging from 20% to 60% of the liability of the resident for the
state income tax. The local income tax applies to individuals who are
residents of the local jurisdiction.
The State imposes a maximum 5% tax rate for taxable income of
individuals in excess of $3,000. The State permits local jurisdictions to
impose a "piggyback" tax rate on individuals of up to a maximum of 60% of
the State rate. For 1996 all counties and the City of Baltimore will
impose "piggyback" income taxes at a 50% rate except as follows: Worcester
County, 30%; Baltimore, Queen Anne's and Talbot Counties, 55%; Carroll
County, 58%; Allegany, Caroline, Montgomery, Prince George's, St. Mary's,
Somerset and Wicomico Counties, 60%. The counties and the City of
Baltimore may increase or decrease these rates in increments of 5% (or, at
the option of the county, by multiples of 2% where the county
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rate is in excess of 50% of the State rate) effective on January 1 of the
year that the county or City designates by giving notice to the State
Comptroller of the rate change and its effective date on or before July 1
prior to its effective date. Effective January 1, 1997, the piggyback tax
rate in Talbot County will be 40%. Otherwise the local rates set forth
above will remain in effect during 1997.
Individual Unit Holders who are residents of Maryland and Unit
Holders which are subchapter C corporations subject to the Maryland
corporate income tax are not required to include in their regular Maryland
taxable income their respective shares of interest earnings on obligations
of the State of Maryland, its agencies, authorities or political
subdivisions derived through the Maryland Trust to the extent that such
interest is excludable from gross income for federal income tax purposes.
In certain cases an exemption for interest on Maryland State, county and
municipal obligations and obligations of certain agencies thereof is
provided from Maryland income tax, whether or not the interest income is
exempt from federal income tax. Furthermore, Unit Holders are not required
to include in their regular Maryland taxable income their respective shares
of interest earnings on bonds issued by the government of Puerto Rico or by
its authority which is derived through the Maryland Trust to the extent
that such interest is excludable from gross income for federal income tax
purposes and is also excludable from any state income taxation under
federal law. Individual Unit Holders, however, may be subject to the
Maryland income tax on tax preferences with respect to 50% of any interest
derived through the Maryland Trust from non-Maryland obligations in excess
of a threshold amount and constituting a tax preference for federal income
tax purposes.
As a general rule, to the extent that gain from the sale,
exchange or other disposition of obligations held by the Maryland Trust
(whether as a result of a sale or exchange of such obligations by the
Maryland Trust or as a result of a sale or exchange of a Unit by a Unit
Holder) is includable in the federal adjusted gross income of a resident
individual, or taxable income of a corporation, such gain will be included
in the calculation of the Unit Holder's Maryland taxable income. Maryland
law does not generally exclude capital gains from income tax. However,
under Maryland law, any profit realized upon the sale or exchange of bonds
issued by the State of Maryland, its political subdivisions and certain
specified other Maryland issuers, is specifically excluded from the
computation of the Maryland taxable income of individuals and corporations.
Although there are no Maryland authorities on point, it is possible that
the taxing authorities in Maryland could take the position that the
statutory exclusion or exemption of profit on these obligations requires a
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disallowance in the calculation of Maryland income tax of any loss that may
be realized on such obligations.
With respect to the amount of Social Security benefits required
to be included in the calculation of federal adjusted gross income, a
subtraction modification is provided for under the Maryland income tax law
so that such amount is eliminated in determining Maryland taxable income.
Tax counsel should be consulted as to other Maryland tax
consequences not specifically considered herein, and as to the Maryland tax
status of Unit Holders in the Maryland Trust which are neither individuals
resident in Maryland nor subchapter C corporations. By way of example, no
opinion is expressed as to the tax consequences under the Maryland
franchise tax applicable to a financial institution which is a Unit Holder
in the Maryland Trust. However, it should be noted that, pursuant to
legislation passed in 1995, interest received by certain financial
institutions on certain government obligations will be subject to partial
exclusion from tax commencing in 1996. Beginning in 1998, certain
financial institutions will be subject to the Maryland corporate income tax
rather than the franchise tax. Further, no opinion is being rendered as to
the Maryland tax consequences resulting from any proposed or future tax
legislation.
Special Maryland counsel has not examined any of the
obligations deposited in the Maryland Trust, and expresses no opinion as to
whether the interest on any such obligations is, in fact, tax exempt upon
receipt by the Maryland Trust or would be tax exempt if directly received
by a Unit Holder; nor has special counsel made any review of the
proceedings relating to the issuance of Bonds or the basis of bond counsel
opinions.
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<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
THE UNIT HOLDERS, SPONSOR AND TRUSTEE
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
DELAWARE PORTFOLIO SERIES 13
MARYLAND PORTFOLIO SERIES 15
We have audited the statements of financial condition and schedules of
portfolio securities of the Dean Witter Select Municipal Trust Insured
California Intermediate Term Portfolio Series 11, Delaware Portfolio Series
13 and Maryland Portfolio Series 15 as of September 30, 1996, and the
related statements of operations and changes in net assets for the years
ended September 30, 1996 and 1995 and for the period from October 18, 1993
(date of deposit) to September 30, 1994. These financial statements are the
responsibility of the Trustee (see Footnote (a)(1)). Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of the securities owned as of
September 30, 1996 as shown in the statements of financial condition and
schedules of portfolio securities by correspondence with The Bank of New
York, the Trustee. An audit also includes assessing the accounting
principles used and the significant estimates made by the Trustee, as well
as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Dean Witter Select
Municipal Trust Insured California Intermediate Term Portfolio Series 11,
Delaware Portfolio Series 13 and Maryland Portfolio Series 15 as of
September 30, 1996, and the results of their operations and the changes in
their net assets for the years ended September 30, 1996 and 1995 and the
period from October 18, 1993 (date of deposit) to September 30, 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
November 5, 1996
New York, New York
F-1
</AUDIT-REPORT>
<PAGE>
STATEMENT OF FINANCIAL CONDITION
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
September 30, 1996
TRUST PROPERTY
Investments in municipal bonds at market value
(amortized cost $3,465,052) (Note (a) and
Schedule of Portfolio Securities Notes (4) and (5)) $3,385,712
Accrued interest receivable 31,549
Cash 16,787
Total 3,434,048
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued Trustee's fees and expenses 3,644
Accrued Sponsor's fees 919
Total liabilities 4,563
Net Assets:
Balance applicable to 3,496,000 Units of
fractional undivided interest outstanding
(Note (c)):
Capital, less unrealized market
depreciation of $79,340 $3,385,712
Undistributed net investment income
(Note (b)) 43,773
Net assets $3,429,485
Net asset value per 1,000 Units ($3,429,485 divided by
3,496,000 Units multiplied by 1,000) $ 980.97
See notes to financial statements
F-2
<PAGE>
STATEMENTS OF OPERATIONS
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Investment income - interest $165,019 $168,108 $ 158,681
Less Expenses:
Trustee's fees and expenses 6,471 6,337 5,212
Sponsor's fees 919 938 938
Total expenses 7,390 7,275 6,150
Investment income - net 157,629 160,833 152,531
Net gain (loss) on investments:
Realized loss on securities
sold or redeemed (11,031) - -
Net unrealized market appre-
ciation (depreciation) 47,008 246,604 (372,952)
Net gain (loss) on
investments 35,977 246,604 (372,952)
Net increase (decrease) in
net assets resulting from
operations $193,606 $407,437 $(220,421)
See notes to financial statements
F-3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Operations:
Investment income - net $ 157,629 $ 160,833 $ 152,531
Realized loss on securi-
ties sold or redeemed (11,031) - -
Net unrealized market
appreciation (depre-
ciation) 47,008 246,604 (372,952)
Net increase
(decrease)in
net assets
resulting from
operations 193,606 407,437 (220,421)
Less Distributions to Unit
Holders:
Investment income - net (154,286) (157,050) (102,213)
Total distributions (154,286) (157,050) (102,213)
Less Capital Share Transactions:
Redemption of 254,000 Units (239,941) - -
Accrued interest on
redemption (2,746) - -
Total capital share (242,687) - -
transactions
Net (decrease) increase in net
assets (203,367) 250,387 (322,634)
Net assets:
Beginning of period
(Note (c)) 3,632,852 3,382,465 3,705,099
End of period (including
undistributed net invest-
ment income of $43,773,
$47,053 and $46,878,
respectively) $3,429,485 $3,632,852 $3,382,465
See notes to financial statements
F-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
September 30, 1996
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of the Trust and is responsible for establishing and
maintaining a system of internal controls directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the
Trust's financial statements. The Evaluator determines the price
for each underlying Security included in the Trust's Portfolio of
Securities on the basis set forth in Part B of this Prospectus,
"Public Offering of Units - Public Offering Price". Under the
Securities Act of 1933 ("the Act"), as amended, the Sponsor is
deemed to be an issuer of the Trust Units. As such, the Sponsor
has the responsibility of an issuer under the Act with respect to
financial statements of the Trust included in the Trust's
Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations on the last day of
trading during the period, except that value on the date of
deposit (October 18, 1993) represents the cost of investments to
the Trust based on the offering side evaluations as of the day
prior to the date of deposit.
(3) Income Taxes
The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses,
Evaluator's fees, and annual Sponsor's portfolio supervision fees
and may incur additional charges as explained under "Expenses and
Charges - Fees" and "- Other Charges" in Part B of this
Prospectus.
(5) Reclassifications
Certain reclassifications have been made to the prior year's
financial statements to reflect current year presentation.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
September 30, 1996
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unit Holders on or
shortly after the fifteenth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Administration of the Trust - Distribution of Interest
and Principal" in Part B of this Prospectus.
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial public
offering price as of the date of deposit (October 18, 1993) exclusive
of accrued interest, computed on the basis set forth under "Public
Offering of Units - Public Offering Price" in Part B of this
Prospectus.
A reconciliation of the original cost of Units to investors to the net
amount applicable to investors as of September 30, 1996 follows:
Original cost to investors $3,819,713
Less: Gross underwriting commissions (sales charge) (114,614)
Net cost to investors 3,705,099
Cost of securities sold or redeemed (250,879)
Unrealized market depreciation (79,340)
Accumulated interest accretion 10,832
Net amount applicable to investors $3,385,712
(d) OTHER INFORMATION
Selected data for 1,000 Units of the Trust during each period:
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Net investment income
distributions during
period $ 41.85 $ 41.88 $ 27.26
Net asset value at end
of period $980.97 $968.76 $901.99
Trust Units outstanding
at end of period 3,496,000 3,750,000 3,750,000
F-6
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
September 30, 1996
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F3> Amount Rate Date Redemptions<F5> Redemptions<F4> Value<F6><F7>
<S><C> <C> <C> <C> <C> <C> <C> <C>
1. The Regents of the Univer-
sity of California Refund-
ing Revenue Bonds (Multi-
ple Purpose Projects),
Series B (MBIA Insured) <F8> AAA $ 700,000 4.300% 09/01/01 NONE NONE $ 690,949
2. California State Public
Works Board Lease Revenue
Refunding Bonds (Department
of Corrections), 1993
Series C (Del Norte) (MBIA
Insured) <F8> AAA 700,000 4.600 12/01/02 NONE NONE 694,694
3. California (State of),
Various Purpose General
Obligation Bonds (FGIC
Insured) <F10> AAA 200,000 4.300 09/01/03 NONE NONE 193,318
4. Fresno Sewer System Reve-
nue Bonds, 1993 Series A
(AMBAC Insured) <F9> AAA 100,000 4.500 09/01/03 NONE NONE 97,444
5. Redding Redevelopment
Agency, Canby-Hill-Top-
Cypress Redevelopment Proj-
ect Tax Allocation Refund-
ing Bonds, Series D (FSA
Insured) <F11> AAA 400,000 4.500 09/01/03 NONE NONE 388,408
6. Moreno Valley Refunding
Certificates of Participa-
tion (Capital Projects),
Series 1993 (MBIA Insured)
<F8> AAA 700,000 4.600 05/01/04 NONE NONE 678,265
7. Western Placer Unified
School District, General
Obligation Bonds, Election
of 1993, Series 1993A (FGIC
Insured) <F10> AAA 125,000 0.000 08/01/05 NONE NONE 79,007
8. Sacramento Municipal Util-
ity District Electric Reve-
nue Refunding Bonds, 1993
Series 6 (MBIA Insured) <F8> AAA 575,000 4.800 09/01/05 NONE 09/01/03@102 563,627
$3,500,000 $3,385,712
See notes to schedule of portfolio securities
F-7
</TABLE>
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM PORTFOLIO SERIES 11
September 30, 1996
[FN]
<F3> All ratings are provided by Standard & Poor's Corporation. A brief
description of applicable Security ratings is given under "Bond
Ratings" in Part B of this Prospectus.
<F4> There is shown under this heading the date on which each issue of
Securities is redeemable by the operation of optional call
provisions and the redemption price for that date; unless
otherwise indicated, each issue continues to be redeemable at
declining prices thereafter but not below par. Securities listed
as non-callable, as well as Securities listed as callable, may
also be redeemable at par under certain circumstances from special
redemption payments.
<F5> There is shown under this heading the date on which an issue of
Securities is subject to scheduled sinking fund redemption and the
redemption price of par.
<F6> The market value of the Securities as of September 30, 1996 was
determined by the Evaluator on the basis of bid side evaluations
for the Securities on such date.
<F7> At September 30, 1996, the unrealized market depreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ -
Gross unrealized market depreciation (79,340)
Unrealized market depreciation $(79,340)
The amortized cost of the Securities for Federal income tax
purposes was $3,465,052 at September 30, 1996.
<F8> Insured by Municipal Bond Insurance Association ("MBIA").
<F9> Insured by American Municipal Bond Assurance Corporation ("AMBAC").
<F10> Insured by Financial Guaranty Insurance Company ("FGIC").
<F11> Insured by Financial Security Assurance ("FSA").
F-8
<PAGE>
STATEMENT OF FINANCIAL CONDITION
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
TRUST PROPERTY
Investments in municipal bonds at market value
(amortized cost $2,070,321) (Note (a) and
Schedule of Portfolio Securities Notes (4)
and (5)) $1,984,177
Accrued interest receivable 26,802
Cash 5,489
Total 2,016,468
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued Trustee's fees and expenses 1,620
Accrued Sponsor's fees 521
Total liabilities 2,141
Net Assets:
Balance applicable to 2,085 Units of fractional
undivided interest outstanding (Note (c)):
Capital, less unrealized market depreciation
of $86,144 $1,984,177
Undistributed net investment income
(Note (b)) 30,150
Net assets $2,014,327
Net asset value per Unit ($2,014,327 divided by 2,085 Units) $ 966.10
See notes to financial statements
F-9
<PAGE>
STATEMENTS OF OPERATIONS
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Investment income - interest $100,429 $100,286 $ 95,321
Less Expenses:
Trustee's fees and expenses 5,170 3,817 3,815
Sponsor's fees 521 521 521
Total expenses 5,691 4,338 4,336
Investment income - net 94,738 95,948 90,985
Net unrealized market appreciation
(depreciation) 14,054 161,397 (261,595)
Net increase (decrease) in net
assets resulting from operations $108,792 $257,345 $(170,610)
See notes to financial statements
F-10
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Operations:
Investment income - net $ 94,738 $ 95,948 $ 90,985
Net unrealized market appre-
ciation (depreciation) 14,054 161,397 (261,595)
Net increase (de-
crease) in net
assets resulting
from operations 108,792 257,345 (170,610)
Less Distributions to Unit
Holders:
Investment income - net (92,511) (92,824) (57,464)
Total distributions (92,511) (92,824) (57,464)
Net increase (decrease) in net
assets 16,281 164,521 (228,074)
Net assets:
Beginning of period
(Note (c)) 1,998,046 1,833,525 2,061,599
End of period (including
undistributed net invest-
ment income of $30,150,
$30,972 and $30,753,
respectively) $2,014,327 $1,998,046 $1,833,525
See notes to financial statements
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of the Trust and is responsible for establishing and
maintaining a system of internal controls directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the
Trust's financial statements. The Evaluator determines the price
for each underlying Security included in the Trust's Portfolio of
Securities on the basis set forth in Part B of this Prospectus,
"Public Offering of Units - Public Offering Price". Under the
Securities Act of 1933 ("the Act"), as amended, the Sponsor is
deemed to be an issuer of the Trust Units. As such, the Sponsor
has the responsibility of an issuer under the Act with respect to
financial statements of the Trust included in the Trust's
Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations on the last day of
trading during the period, except that value on the date of
deposit (October 18, 1993) represents the cost of investments to
the Trust based on the offering side evaluations as of the day
prior to the date of deposit.
(3) Income Taxes
The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses,
Evaluator's fees, and annual Sponsor's portfolio supervision fees
and may incur additional charges as explained under "Expenses and
Charges - Fees" and "- Other Charges" in Part B of this
Prospectus.
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unit Holders on or
shortly after the fifteenth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Administration of the Trust - Distribution of Interest
and Principal" in Part B of this Prospectus.
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial public
offering price as of the date of deposit (October 18, 1993) exclusive
of accrued interest, computed on the basis set forth under "Public
Offering of Units - Public Offering Price" in Part B of this
Prospectus.
A reconciliation of the original cost of Units to investors to the net
amount applicable to investors as of September 30, 1996 follows:
Original cost to investors $2,145,256
Less: Gross underwriting commissions (sales charge) (83,657)
Net cost to investors 2,061,599
Unrealized market depreciation (86,144)
Accumulated interest accretion 8,722
Net amount applicable to investors $1,984,177
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during each period:
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Interest income $ 48.16 $ 48.10 $ 45.72
Expenses (2.73) (2.08) (2.08)
Investment income - net 45.43 46.02 43.64
Income distributions (44.37) (44.52) (27.56)
1.06 1.50 16.08
Net unrealized market
appreciation (depreci-
ation) 6.74 77.41 (125.47)
Net increase (decrease)
in net asset value 7.80 78.91 (109.39)
Net asset value - begin-
ning of period 958.30 879.39 988.78
Net asset value - end of
period $966.10 $958.30 $879.39
F-14
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F14> Amount Rate Date Redemptions<F16> Redemptions<F15> Value<F17><F18>
<S><C> <C> <C> <C> <C> <C> <C> <C>
1. Delaware Health Facilities
Authority, Kent General
Hospital Project, Series
1993 (MBIA Insured) <F20> AAA $ 185,000 4.700% 07/01/04 NONE 07/01/03@102 $ 180,690
2. Delaware Health Facili-
ties Authority, Kent Gene-
ral Hospital Project,
Series 1993 (MBIA Insured)
<F20> AAA 220,000 4.900 07/01/06 NONE 07/01/03@102 213,772
3. Delaware River and Bay
Authority Revenue Bonds,
Series 1993 (MBIA Insured)
<F20> AAA 500,000 4.800 01/01/08 NONE 01/01/04@102 472,005
4. Dover Water and Sewer Rev-
enue Bonds, 1993 Series A A<F19> 185,000 4.750 07/01/06 NONE 07/01/03@102 176,096
5. Dover Water and Sewer Rev-
enue Bonds, 1993 Series A A<F19> 210,000 4.875 07/01/07 NONE 07/01/03@102 199,926
6. Newark General Obligation
Bonds, Series of 1993 A1<F19> 335,000 4.875 01/15/09 NONE 01/15/99@100 318,166
7. University of Delaware
Revenue Bonds, Series 1993 AA+ 350,000 5.300 11/01/06 NONE 11/01/[email protected] 360,150
8. Puerto Rico Public Build-
ings Authority Public Edu-
cation and Health Facili-
ties Refunding Bonds,
Series I A 100,000 0.000 07/01/05 NONE NONE 63,372
$2,085,000 $1,984,177
See notes to schedule of portfolio securities
F-15
</TABLE>
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
September 30, 1996
[FN]
<F14> All ratings are provided by Standard & Poor's Corporation, unless
otherwise indicated. A brief description of applicable Security
ratings is given under "Bond Ratings" in Part B of this
Prospectus.
<F15> There is shown under this heading the date on which each issue of
Securities is redeemable by the operation of optional call
provisions and the redemption price for that date; unless
otherwise indicated, each issue continues to be redeemable at
declining prices thereafter but not below par. Securities listed
as non-callable, as well as Securities listed as callable, may
also be redeemable at par under certain circumstances from special
redemption payments.
<F16> There is shown under this heading the date on which an issue of
Securities is subject to scheduled sinking fund redemption and the
redemption price of par.
<F17> The market value of the Securities as of September 30, 1996 was
determined by the Evaluator on the basis of bid side evaluations
for the Securities on such date.
<F18> At September 30, 1996, the unrealized market depreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ -
Gross unrealized market depreciation (86,144)
Unrealized market depreciation $(86,144)
The amortized cost of the Securities for Federal income tax
purposes was $2,070,321 at September 30, 1996.
<F19> Moody's Investors, Inc. rating.
<F20> Insured by Municipal Bond Insurance Association ("MBIA").
F-16
<PAGE>
STATEMENT OF FINANCIAL CONDITION
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
TRUST PROPERTY
Investments in municipal bonds at market value (amortized
cost $2,965,246) (Note (a) and Schedule of Portfolio
Securities Notes (4) and (5)) $2,858,786
Accrued interest receivable 32,202
Cash 18,541
Total 2,909,529
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued Trustee's fees and expenses 2,434
Accrued Sponsor's fees 754
Total liabilities 3,188
Net Assets:
Balance applicable to 3,015 Units of fractional
undivided interest outstanding (Note (c)):
Capital, less unrealized market
depreciation of $106,460 $2,858,786
Undistributed net investment income
(Note (b)) 47,555
Net assets $2,906,341
Net asset value per Unit ($2,906,341 divided by 3,015 Units) $ 963.96
See notes to financial statements
F-17
<PAGE>
STATEMENTS OF OPERATIONS
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Investment income - interest $137,876 $137,723 $ 129,461
Less Expenses:
Trustee's fees and expenses 5,397 5,397 4,733
Sponsor's fees 754 754 754
Total expenses 6,151 6,151 5,487
Investment income - net 131,725 131,572 123,974
Net unrealized market appreciation
(depreciation) 23,334 209,712 (339,506)
Net increase (decrease) in net
assets resulting from operations $155,059 $341,284 $(215,532)
See notes to financial statements
F-18
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Operations:
Investment income - net $ 131,725 $ 131,572 $ 123,974
Net unrealized market appre-
ciation (depreciation) 23,334 209,712 (339,506)
Net increase
(decrease) in net
assets resulting
from operations 155,059 341,284 (215,532)
Less Distributions to Unit
Holders:
Investment income - net (128,439) (128,439) (73,673)
Total distributions (128,439) (128,439) (73,673)
Net increase (decrease) in net
assets 26,620 212,845 (289,205)
Net assets:
Beginning of period
(Note (c)) 2,879,721 2,666,876 2,956,081
End of period (including
undistributed net invest-
ment income of $47,555,
$47,474 and $47,394,
respectively) $2,906,341 $2,879,721 $2,666,876
See notes to financial statements
F-19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting
and financial books, records, financial statements and related
data of the Trust and is responsible for establishing and
maintaining a system of internal controls directly related to, and
designed to provide reasonable assurance as to the integrity and
reliability of, financial reporting of the Trust. The Trustee is
also responsible for all estimates and accruals reflected in the
Trust's financial statements. The Evaluator determines the price
for each underlying Security included in the Trust's Portfolio of
Securities on the basis set forth in Part B of this Prospectus,
"Public Offering of Units - Public Offering Price". Under the
Securities Act of 1933 ("the Act"), as amended, the Sponsor is
deemed to be an issuer of the Trust Units. As such, the Sponsor
has the responsibility of an issuer under the Act with respect to
financial statements of the Trust included in the Trust's
Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the
Evaluator based on the bid side evaluations on the last day of
trading during the period, except that value on the date of
deposit (October 18, 1993) represents the cost of investments to
the Trust based on the offering side evaluations as of the day
prior to the date of deposit.
(3) Income Taxes
The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision is required
for such taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses,
Evaluator's fees, and annual Sponsor's portfolio supervision fees
and may incur additional charges as explained under "Expenses and
Charges - Fees" and "- Other Charges" in Part B of this
Prospectus.
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unit Holders on or
shortly after the fifteenth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Administration of the Trust - Distribution of Interest
and Principal" in Part B of this Prospectus.
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial public
offering price as of the date of deposit (October 18, 1993) exclusive
of accrued interest, computed on the basis set forth under "Public
Offering of Units - Public Offering Price" in Part B of this
Prospectus.
A reconciliation of the original cost of Units to investors to the net
amount applicable to investors as of September 30, 1996 follows:
Original cost to investors $3,076,039
Less: Gross underwriting commissions (sales charge) (119,958)
Net cost to investors 2,956,081
Unrealized market depreciation (106,460)
Accumulated interest accretion 9,165
Net amount applicable to investors $2,858,786
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during each period:
For the period from
For the years ended October 18, 1993
September 30, (date of deposit) to
1996 1995 September 30, 1994
Interest income $ 45.73 $ 45.68 $ 42.94
Expenses (2.04) (2.04) (1.82)
Investment income - net 43.69 43.64 41.12
Income distributions (42.60) (42.60) (24.44)
1.09 1.04 16.68
Net unrealized market
appreciation
(depreciation) 7.74 69.55 (112.60)
Net increase (decrease)
in net asset value 8.83 70.59 (95.92)
Net asset value - begin-
ning of period 955.13 884.54 980.46
Net asset value - end
of period $963.96 $955.13 $884.54
F-22
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
Port- Optional
folio Rating Face Coupon Maturity Sinking Fund Refunding Market
No. Title of Securities <F23> Amount Rate Date Redemptions<F25> Redemptions<F24> Value<F26><F27>
<S><C> <C> <C> <C> <C> <C> <C> <C>
1. Baltimore Refunding Reve-
nue Bonds (Baltimore City
Parking System Facilities),
Series 1993 (FGIC Insured)
<F29> AAA $ 500,000 4.650% 07/01/05 NONE 07/01/03@102 $ 481,845
2. Baltimore County Metropol-
itan District Bonds (64th
Issue), General Obliga-
tions AAA 500,000 4.500 08/01/06 NONE 08/01/03@102 473,285
3. Calvert County General
Obligation Bonds, Series
1993 Aa<F28> 400,000 4.800 07/15/07 NONE 07/15/03@102 382,236
4. Maryland Health and High-
er Educational Facilities
Authority, Peninsula
Regional Medical Center
Issue, Series 1993 A 400,000 4.900 07/01/05 NONE 07/01/03@102 391,176
5. Maryland Health and High-
er Educational Facilities
Authority, Suburban Hospi-
tal Issue, Series 1993 A1<F28> 400,000 4.750 07/01/03 NONE NONE 388,720
6. Maryland Water Quality
Financing Administration
Revolving Loan Fund Reve-
nue Bonds, Series 1992A AA 115,000 0.000 09/01/07 NONE NONE 65,027
7. St. Mary's County General
Obligation Bonds, Series
1993 A+ 185,000 4.400 09/01/04 NONE 09/01/03@102 176,780
8. St. Mary's County General
Obligation Bonds, Series
1993 A+ 165,000 4.700 09/01/07 NONE 09/01/03@102 160,326
9. University of Maryland
System Auxiliary Facility
and Tuition Revenue Bonds,
1993 Refunding Series C AA+ 350,000 4.350 10/01/03 NONE NONE 339,391
$3,015,000 $2,858,786
See notes to schedule of portfolio securities
F-23
</TABLE>
<PAGE>
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
September 30, 1996
[FN]
<F23> All ratings are provided by Standard & Poor's Corporation, unless
otherwise indicated. A brief description of applicable Security
ratings is given under "Bond Ratings" in Part B of this Prospectus.
<F24> There is shown under this heading the date on which each issue of
Securities is redeemable by the operation of optional call
provisions and the redemption price for that date; unless otherwise
indicated, each issue continues to be redeemable at declining
prices thereafter but not below par. Securities listed as non-
callable, as well as Securities listed as callable, may also be
redeemable at par under certain circumstances from special
redemption payments.
<F25> There is shown under this heading the date on which an issue of
Securities is subject to scheduled sinking fund redemption and the
redemption price of par.
<F26> The market value of the Securities as of September 30, 1996 was
determined by the Evaluator on the basis of bid side evaluations
for the Securities on such date.
<F27> At September 30, 1996, the unrealized market depreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ -
Gross unrealized market depreciation (106,460)
Unrealized market depreciation $(106,460)
The amortized cost of the Securities for Federal income tax
purposes was $2,965,246 at September 30, 1996.
<F28> Moody's Investors, Inc. rating.
<F29> Insured by Financial Guaranty Insurance Company ("FGIC").
F-24
<PAGE>
PROSPECTUS PART B
DEAN WITTER SELECT MUNICIPAL TRUST
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS ACCOMPANIED BY PART A.
________________
INTRODUCTION
Each Trust described in Part A of this Prospectus is one of a series
in the Dean Witter Select Municipal Trust, each of which is a separate and
distinct unit investment trust. Each trust may be singularly referred to
as the "Trust" and collectively referred to as the "Trusts". Certain
series of the Trusts may be designated as an "Insured Trust", a "State
Trust", a combination thereof or other appropriate designation. Each Trust
was created under the laws of the State of New York pursuant to a Trust
Indenture and Agreement and a related Reference Trust Agreement
(collectively, the "Indenture"), among Dean Witter Reynolds Inc. (the
"Sponsor"), United States Trust Company of New York or The Bank of New York
as specified in Part A of this Prospectus (the "Trustee") and Kenny S&P
Evaluation Services, a division of Kenny Information Systems, Inc. (the
"Evaluator"). The Sponsor is a principal operating subsidiary of Dean
Witter, Discover & Co., a publicly-held corporation ("DWDC"). (See
"Sponsor".) The objectives of each Trust are to provide interest income
which is exempt, in the opinion of counsel, from Federal income tax under
existing law (except in certain cases depending on the Unit Holder) and to
conserve capital through investment in a fixed portfolio of Securities (the
"Portfolio") consisting primarily of investment-grade state, municipal and
public authority debt obligations. Part A of the Prospectus indicates the
extent, if any, to which interest income on the Securities held or
contracted to be purchased on the Date of Deposit is subject to alternative
minimum tax. There can be no assurances, however, that the above
objectives will be achieved because they are subject to the continuing
ability of the issuers of the Securities held in the Trust to meet their
obligations to pay principal and interest.
On the date of creation of the Trust (the "Date of Deposit"), the
Sponsor deposited with the Trustee certain debt obligations and contracts
and funds (represented by irrevocable letter(s) of credit issued by major
commercial bank(s)) for the purchase of such debt obligations
(collectively, the "Securities"). Each Trust was created simultaneously
with the execution of the Indenture and the deposit of the Securities with
the Trustee. The Trustee then immediately delivered to the Sponsor
certificates of beneficial interest (the "Certificates") representing the
units (the "Units") comprising the entire ownership of each Trust. Through
this Prospectus, the Sponsor is offering the Units, including Additional
Units, as defined below, for sale to the public. On the Date of Deposit,
the Evaluator evaluated the Securities at prices equal to the evaluation of
______________
1 Reference is hereby made to said Indenture and any statements contained
herein are qualified in their entirety by the provisions of said
Indenture.
1
<PAGE>
such Securities on the offering side of the market. (See Part A--"Schedule
of Portfolio Securities".) The holders of Certificates (the "Unit
Holders") will have the right to have their Units redeemed at a price based
on the aggregate bid side evaluation of the Securities (the "Redemption
Price") if they cannot be sold in the secondary market which the Sponsor,
although not obligated to do so, proposes to maintain. In addition, the
Sponsor may offer for sale, through this Prospectus, Units which the
Sponsor may have repurchased in the secondary market or upon the tender of
such Units for redemption.
Notwithstanding the availability of the above-mentioned irrevocable
letter(s) of credit, it is expected that the Sponsor will pay for the
Securities as the contracts for their purchase become due. A substantial
portion of such contracts have not become due by the date of the initial
Date of Deposit. To the extent Units are sold prior to the settlement of
such contracts, the Sponsor will receive the purchase price of such Units
prior to the time at which it pays for Securities pursuant to such
contracts and have the use of such funds during this period.
During the 90-day period following the first deposit of Securities in
the Trust, the Sponsor may deposit in the Trust additional Securities and
cash, if required. Any such Securities deposited shall be substantially
similar to the initially deposited Securities held in the Trust immediately
prior to the deposit. Among other things, a failure to meet the
proportionality requirements due to establishment by the Sponsor of a
minimum amount of a particular Security to be included in a deposit or the
fact that a Security identical to a Security in the Trust immediately prior
to the deposit is not readily obtainable will be considered as justifying a
variation in such requirements. Any deposit made after the close of such
90-day period must exactly replicate the Securities and any cash (other
than cash distributable only to the Sponsor or to Unit Holders who were
Unit Holders prior to the date of deposit of the additional Securities)
held in the Trust immediately prior to the deposit. As additional Units
are issued by the Trust as a result of the deposit of additional Securities
by the Sponsor (the "Additional Units"), the aggregate value of the
Securities in the Trust will be increased and the fractional undivided
interest in the Trust represented by each Unit will be decreased.
THE TRUST
Special Considerations
An investment in Units of a Trust should be made with an
understanding of the risks which an investment in fixed rate debt
obligations of the term and type set forth in Part A--"Summary of Essential
Information" and "Schedule of Portfolio Securities" may entail, including
the risk that the value of the Portfolios and hence of the Units will
decline with increases in interest rates. In recent years, the national
economy has experienced significant variations in rates of inflation and
economic growth, substantial increases in the national debt and in reliance
upon foreign investors to finance it, and material reformulations of
Federal tax, monetary and regulatory policies. These conditions have been
associated with wide fluctuations in interest rates and thus in the value
of fixed rate obligations. The Sponsor cannot predict whether such
fluctuations will continue in the future. In addition, a regional or
national economic recession would increase the risk that certain issuers
(or the obligors of the Securities, in the case of a conduit financing) may
experience a revenue shortfall adversely affecting their ability to pay
principal or interest.
2
<PAGE>
Summary Description of the Portfolios
Each Portfolio consists of the Securities listed under Part A--
"Schedule of Portfolio Securities" as long as such Securities may continue
to be held from time to time in the Trust (including certain obligations
deposited in a Trust in exchange or substitution for any Securities
pursuant to the Indenture), together with accrued and undistributed
interest thereon and undistributed and uninvested cash realized from the
disposition of Securities.
The Securities have been issued by or on behalf of states or
territorial possessions or commonwealths of the United States, or the
municipalities, counties, public authorities or other political
subdivisions or instrumentalities thereof (the "Issuers"). The interest on
such Securities, in each instance, in the opinion of bond counsel or
special tax counsel to the Issuer of such Securities or by ruling of the
Internal Revenue Service (the "IRS") is not included in gross income for
Federal income tax purposes under existing law (but may be subject to state
and local taxation). In addition, in the opinion of counsel, interest
income of each State Trust is exempt, to the extent indicated, from state
and any local income taxes in the State for which such State Trust is
named. Capital gains, if any, will be subject to Federal income tax and,
generally, to state and/or local income tax. (See "Tax Status". Part A
may contain a discussion of certain special tax considerations applicable
to a particular Trust.)
The yields on Securities of the type deposited in a Trust are
dependent on a variety of factors, including general money market
conditions, interest rates, general conditions of the municipal bond
market, size of a particular offering, the maturity of the obligation and
rating of the issue. The ratings represent the opinions of the rating
organizations as to the quality of the obligations which they undertake to
rate. It should be emphasized, however, that ratings are general and are
not absolute standards of quality. Consequently, debt obligations with the
same maturity, coupon and rating may have different yields, while debt
obligations of the same maturity and coupon with different ratings may have
the same yield.
All of the Securities in the Portfolio were, as of the Date of
Deposit of the Trust, rated "BBB" or better by Standard & Poor's
Corporation or "Baa" or "MIG 2" or better by Moody's Investors Service or
had, in the opinion of the Sponsor, credit characteristics comparable to
Securities so rated. No assurance can be given that such ratings would be
issued if the Securities were reevaluated by Standard & Poor's Corporation
or Moody's Investors Service. Subsequent to the Date of Deposit, a
Security in the Trust may cease to be rated or the rating assigned may be
reduced below the minimum requirements of such Trust for the acquisition
of Securities. Although such events may be considered by the Sponsor in
determining whether to direct the Trustee to dispose of the Security (see
"Sponsor--Responsibility"), such events do not automatically require the
elimination of such Security from the Portfolio.
On the Date of Deposit, a Unit of the Trust represented the
fractional undivided interest in the Securities and net income of such
Trust set forth under Part A--"Summary of Essential Information" in the
ratio of 1 Unit for each approximately $1,000 face amount of Securities
initially deposited in such Trust ($1.00 per unit in the case of certain
Trusts (see Part A--"Summary of Essential Information")). If any Units are
redeemed by the Trustee, the face amount of Securities in the Trust will be
3
<PAGE>
reduced by an amount allocable to redeemed Units and the fractional
undivided interest in such Trust represented by each unredeemed Unit will
be increased. 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 pursuant to the Indenture.
Because certain of the Securities from time to time may be redeemed or
will mature in accordance with their terms or may be sold under certain
circumstances described herein, no assurance can be given that a Trust will
retain for any length of time its present size and composition. The
Trustee has not participated in the selection of Securities for the Trust,
and neither the Sponsor nor the Trustee will be liable in any way for any
default, failure or defect in any Securities.
Under certain circumstances described in "Sponsor--Responsibility",
the Sponsor may direct the Trustee to dispose of a Security. No assurance
can be given that a sale of any Security under such circumstances would
yield proceeds equivalent to the face amount or purchase price of such
Security. In addition, such a sale may reduce the average life of the
Portfolio and may adversely affect the Estimated Annual Income and
Estimated Current Return and Estimated Long-Term Return of the Trust.
Certain of the Securities in the Portfolio of the Trust are valued at
prices in excess of prices at which such Securities may be redeemed in the
future. (See Part A--"Schedule of Portfolio Securities" for information
relating to the particular series described therein on the Date of
Deposit.) To the extent that a Security is redeemed (or sold) at a price
which is less than the valuation of such Security on the date a Unit Holder
acquired his Units, the proceeds distributable to such Unit Holder in
respect of such redemption (or sale) will be less than that portion of the
purchase price for such Units which was attributable to such Security
(representing a loss of capital to such Unit Holder). Such proceeds,
however, may be more or less than the valuation of such Security at the
time of such redemption (or sale). Similarly, certain of the Securities in
the Trust may be valued at a price in excess of their face value at
maturity (i.e., such Securities were valued at a premium above face
amount). (See Part A--"Schedule of Portfolio Securities" for information
relating to the particular series described therein on the Date of
Deposit.) The proceeds distributable to a Unit Holder upon the maturity of
a Security which was valued at a premium on the date such Unit Holder
acquired Units will be less than that portion of the purchase price for
such Units which was attributable to such Security (representing a loss of
capital to such Unit Holder).
The Portfolio of the Trust may consist of Securities the current
market value of some of which were below face value. A primary reason for
the market value of such Securities being less than face value at maturity
is that the interest coupons of such Securities are at lower rates than the
current market interest rate for comparably rated debt securities, even
though at the time of the issuance of such Securities the interest coupons
thereon represented then prevailing interest rates on comparably rated debt
securities then newly issued. The current yields (coupon interest income
as a percentage of market price, ignoring any original issue discount) of
such Securities are lower than the current yields (computed on the same
basis) of comparably rated debt securities of similar type newly issued at
currently prevailing interest rates. Securities selling at market
discounts tend to increase in market value as they approach maturity when
the principal amount is payable. A market discount tax-exempt Security
held to maturity will have a larger portion of its total return in the form
4
<PAGE>
of taxable ordinary income and less in the form of tax-exempt income than a
comparable Security bearing interest at current market rates. Under the
provisions of the Internal Revenue Code in effect on the date of this
Prospectus, any ordinary income attributable to market discount will be
taxable but will not be realized until maturity, redemption or sale of the
Securities or Units. The current yield of such discounted securities
carrying the same coupon interest rate and which are otherwise comparable
tends to be higher for securities with longer periods to maturity than it
is for those with shorter periods to maturity because the market value of
such securities with a longer period to maturity tends to be less than the
market value of such a bond with a shorter period to maturity. If
currently prevailing interest rates for newly issued and otherwise
comparable securities increase, the market discount of previously issued
bonds will become deeper and if such currently prevailing interest rates
for newly issued comparable securities decline, the market discount of
previously issued securities will be reduced, other things being equal.
Market discount attributable to interest rate changes does not indicate a
lack of market confidence in the issue.
The following description of the major categories in which Securities
in the Portfolios may be classified is provided by the Sponsor for general
information purposes only, and does not purport to be complete. This
Prospectus does not provide detailed information with respect to any
Security or to any Issuer, or with respect to any rights or obligations,
legal, financial or otherwise, arising thereunder or related thereto. Each
Security is subject to the terms and conditions, and to the actual
performance of tax and other covenants, contained in the legal documents
governing such Security. The special risk considerations listed are among
the factors which may result in the inability of an Issuer to make
scheduled payments of interest and principal.
General Obligation Securities
A Portfolio may contain Securities that are general obligations of
governmental entities and/or bonds that are guaranteed by governmental
entities. Such general obligations and guarantees are backed by the taxing
power of the respective entities. The ability of the issuer of a general
obligation bond to meet its obligation depends largely upon its economic
condition. Many issuers rely upon ad valorem real property taxes as a
source of revenue. Proposals in the form of state legislative or voter
initiatives to limit ad valorem real property taxes have been introduced in
various states. It is not presently possible to predict the impact of
these or future proposals, if adopted, on states, local governments or
school districts or on their abilities to make future payments of their
outstanding debt obligations. The remaining issues are payable from the
income of specific projects or authorities and are not supported by the
issuer's power to levy taxes. This latter group of issues contains
Securities that are also supported by the moral obligations of governmental
entities. In the event of a deficiency in the debt service reserve funds
of moral obligation Securities, the governmental entity having the moral
commitment may (but is not legally obligated to) satisfy such deficiency.
However, in the event of a deficiency in the debt service reserve funds of
Securities not backed by such moral obligations, no such moral commitment
of a governmental entity exists.
The fiscal condition of an Issuer that is a governmental entity (such
as a county, city, school district or other entity providing public
services) is related to the size and diversification of its tax and revenue
base and to such other factors as: the effect of inflation on the general
5
<PAGE>
operating budget and of other costs, including salaries and fringe
benefits, energy and solid waste disposal; changes in state law and
statutory interpretations affecting traditional home rule powers (which
vary from state to state); levels of unrestricted state aid or
revenue-sharing programs and state categorical grants subject to annual
appropriation by a state legislature; increased expenditures mandated by
state law or judicial decree; and disallowances for expenses incurred under
Federal or state categorical grant programs. The local economy may be or
become concentrated (i) in a single industry, which may be affected by
natural or other disasters or by fluctuations in commodity prices, or (ii)
in a particular company, the operations of which may be impaired due to
labor disputes, relocation, bankruptcy or corporate takeover. Such
economic factors may, in turn, affect local tax collections and service
demands. The ability of an Issuer to levy additional taxes may be subject
to state constitutional provisions, assent of the state legislature or
voter approval in a local referendum, or constrained by economic or
political considerations. (See also "Additional Securities Considerations-
- -Issuer Default" and "--Issuer Bankruptcy".)
The fiscal condition of an Issuer may be negatively impacted by
socio-economic factors beyond the Issuer's control (which may hinder the
collection of economically sensitive taxes or entail additional
expenditures) or may be affected by other unanticipated events, including:
imposition of tax rate decreases or appropriations limitations by
legislation or voter initiative; revenue shortfalls due to the imprecise
nature of forecasting actual collections; increased expenditures mandated
by Federal law or by judicial decree; reduction of Federal aid due to
subsequent legislative changes in appropriations or aid formulas;
disallowances by the Federal government for expenses incurred in
connection with categorical grants; or the outcome of litigation.
Zero Coupon Bonds
The Portfolio of the Trust may contain zero coupon bond(s) (including
bonds known as multiplier bonds, money multiplier bonds, capital
appreciation bonds, capital accumulator bonds, compound interest bonds, and
discount maturity payment bonds) or one or more other Securities which were
issued with an "original issue discount". "Original issue discount" bonds
are issued at prices which represent a discount from face amount,
principally because such bonds bear current interest at rates which have
lower than prevailing market rates at the time of issuance. (See Part A--
"Summary of Essential Information--Portfolio Summary as of Date of Deposit"
for information relating to the particular series described therein.) Zero
coupon bonds do not provide for the payment of any current interest and
provide for payment at maturity at face value unless sooner sold or
redeemed. Zero coupon bonds may be subject to more price volatility than
conventional bonds, i.e., the market value of zero coupon bonds is subject
to greater fluctuation in response to changes in interest rates than is the
market value of bonds which pay interest currently. Due to such
volatility, in the event that the zero coupon bonds are sold prior to
maturity (in order to satisfy redemptions, due to early termination of the
Trust or for credit reasons), such sale may result in a loss to Unit
Holders. Zero coupon bonds generally are subject to redemption at compound
accreted value based on par value at maturity. Because the Issuer is not
obligated to make current interest payments, zero coupon bonds may be less
likely to be redeemed than coupon bonds issued at a similar interest rate.
While some types of zero coupon bonds, such as multipliers and capital
appreciation bonds, define par as the initial offering price rather than
the maturity value, they share the basic zero coupon bond features of
6
<PAGE>
(1) not paying interest on a semi-annual basis and (2) providing for the
reinvestment of the bond's semiannual earnings at the bond's stated yield
to maturity.
Revenue Securities
Many of the Securities in the Portfolios are limited obligations,
payable solely from (i) revenues or receipts derived from operation of a
facility acquired or constructed from the proceeds of the obligation or
(ii) special taxes, the receipts from which have been dedicated to the
payment of the obligations. Neither the "full faith and credit" of the
Issuer nor its general taxing power, if any, is pledged to pay the debt
service on such obligations. The availability of revenues to pay debt
service on such Securities may be subject to the prior payment of operating
costs. Prior to commencement of operations, Securities for which the
proceeds are used to construct a facility are subject to the risks
typically associated with construction projects, which include: cost
overruns, delays in their timely completion (due to litigation, labor
disputes or other construction problems) and the ability to obtain
necessary operating permits. Thereafter, the operation of a facility could
be impaired by labor disputes, or by damage or destruction of the facility,
or interruption of essential utilities, due to natural or other disasters.
Collection of revenues necessary to pay debt service could be affected,
among other factors, by: (a) economic factors beyond the Issuer's control
(such as relocation, cessation of operations or bankruptcy of a major
employer or customer) impacting upon demand for services, delinquency rates
for payments or collection of dedicated taxes; (b) the availability and
cost of insurance, which may be required under bond covenants; or (c)
compliance with Federal and state operating or licensing permits, health,
safety and environmental standards or other regulations. The ability of an
Issuer to set rates for its charges and fees and to recover fully its
capital costs through incorporation of such costs in its rate structure, or
to levy special taxes, may be constrained by legal requirements (such as
Federal or state regulatory approval) or by economic, competitive or
political considerations.
Significant changes in intergovernmental relations have occurred in
recent decades. Most, if not all, Issuers (or the obligors in conduit
financings) of Securities in the Portfolios receive either significant
direct Federal financial assistance for operating or capital purposes or
necessary licenses or operating permits, authorized pursuant to various
legislation. Tax-exempt obligors of Securities (including colleges,
non-profit hospitals and museums) may be affected financially by changes in
the Internal Revenue Code of 1986, as amended (the "Code" or the "1986
Code"), or the regulations thereunder, affecting their qualification as a
tax-exempt entity, the deductibility of charitable contributions or the
operation of certain unrelated business activities, such as gift shops.
Such legislation and the regulations promulgated thereunder have been the
subject of extensive amendment in recent years, and no assurance can be
given that further amendment will not materially change the provisions or
effect thereof. The availability of monies in connection with the programs
authorized by such legislation is subject to annual Congressional
appropriation and the budgetary process, and to the application of
provisions of the Balanced Budget and Emergency Deficit Control Act of
1985, popularly known as the Gramm-Rudman-Hollings Act and/or the Budget
Reconciliation Act of 1990.
In addition, institutions reliant upon state financial assistance may
be subject to significant reductions in funding in the event such state
7
<PAGE>
experiences fiscal difficulties. No assurance can be given that existing
forms and levels of state aid will be maintained.
Income to pay debt service on revenue securities may be derived from
more than one source. The primary source of income and the additional
related considerations regarding certain categories of revenue securities,
which may be included in the Portfolio, are further described below.
Airport Securities. These Securities are typically secured by
revenues derived from fees received from use agreements (which consist of
payments for landing fees, terminal rental and other charges) and from
parking facilities, service fees, concessions and other lease rents. The
ability of airports to set landing fees is regulated by the U.S. Department
of Transportation; other aspects of operations are subject to regulation by
the Federal Aviation Administration ("FAA") or, in certain cases, pursuant
to the terms of a court stipulation to abate noise or mitigate traffic.
Special risk considerations include: local economic conditions; chronic
congestion at many major airports, which may affect future revenues if
traffic is diverted or a competitive airport developed; and costs to
install enhanced security measures. Recent developments affecting the
financial condition of a signatory airline (and its ability to meet its
obligations under an existing use agreement) include: corporate
consolidations through mergers and acquisitions; labor disputes including
major strikes; fare competition; excess industry capacity; fluctuations in
fuel costs; and increased capital costs to remain competitive
technologically or to comply with FAA schedules to retrofit aircraft to
comply with operating noise and safety standards. Cumulatively, in 1992
the domestic airline industry lost over 2 billion dollars. Several
airlines are experiencing severe financial difficulty and others have filed
for bankruptcy. The ability of an Issuer to renew a use agreement may be
additionally affected by the increased flexibility granted to airlines to
terminate service under the Airline Deregulation Act and by the development
at certain airports of a monopoly in air carrier service.
Convention Facilities Securities. These Securities include special
limited obligation securities issued to finance convention and sports
facilities and are typically secured by rental payments and annual
governmental appropriations. The governmental agency is not obligated to
make payments in any year in which the monies have not been appropriated to
make such payments. In addition, these facilities are limited use
facilities that may not be used for purposes other than as convention or
sports facilities.
Electric and Power Securities. These Securities are typically secured
by revenues derived from power generating facilities, which generally
include revenues from the sale of electricity generated and distributed by
power agencies using hydro-electric, nuclear, fossil fuel or other power
sources. Certain aspects of the operation of such facilities, particularly
with regard to generation and transmission at the wholesale level, are
regulated by the Federal Energy Regulatory Commission ("FERC"); more
extensive regulation (affecting retail rate structures) is provided by
state public service commissions. Special risk considerations include:
restrictions on operations and increased costs and delays attributable to
environmental statutes and regulations; the difficulties of the utilities
in financing or refinancing large construction programs and of the capital
markets in absorbing utility debt and equity securities; fluctuations in
fuel supplies and costs, and costs associated with conversion to alternate
fuel sources; uncertainties with regard to demand projections due to
changing economic conditions, implementation of energy conservation
8
<PAGE>
measures and competitive cogeneration projects; and other technical and
cost factors. Scientific breakthroughs in fusion energy and
superconductive materials could cause current technologies for the
generation and transmission of electricity to become obsolete during the
life of the Securities. Issuers relying upon hydroelectric generation may
encounter contests when applying for periodic renewal of licenses from FERC
to operate dams. Issuers relying upon coal as a fuel source may be subject
to significant costs and operating restrictions to comply with emission
standards which may be adopted to alleviate the problems associated with
acid rain. Issuers relying upon fossil fuel sources and located in air
quality regions designated as nonattainment areas may become subject to
pollution control measures (which could include abandonment of construction
projects in progress, plant shutdowns or relocation of facilities) ordered
pursuant to the Clean Air Act. In addition, such Securities are sometimes
secured by payments to be made to state and local joint action power
agencies pursuant to "take or pay" agreements. The inability of an Issuer
to pass on certain of its costs to its customers, whether due to government
regulation, judicial decisions or for other reasons, may have a negative
impact on the financial standing of such Issuer and, therefore, may have a
negative impact on the Securities of such Issuer contained in the Trust.
In addition, the Clean Air Act, affects nearly all electric power
facilities that burn oil or coal. Current and future environmental
legislation, regulations or other governmental actions may increase the
cost of utility service. The Sponsor is unable to predict the ultimate
form that any such future legislation, regulations or other governmental
action may take or the resulting impact on the Securities.
Some of the Issuers of Securities in the Portfolios own, operate or
participate on a contractual basis with nuclear generating facilities,
which are licensed and regulated by the Nuclear Regulatory Commission (the
"NRC"). Nuclear generating projects have experienced substantial cost
increases, construction delays and licensing difficulties. Issuers of
Securities may incur substantial expenditures as a result of complying with
NRC requirements. Additional considerations include: the frequency and
duration of plant shutdowns and associated costs due to maintenance or
safety considerations; the problems and associated costs related to the use
and disposal of radioactive materials and wastes in compliance with Federal
and local law; the implementation of emergency evacuation plans for areas
surrounding nuclear facilities; and other issues associated with
construction, licensing, regulation, operation and eventual decommissioning
of such facilities. These Securities may be subject to industry-wide
fluctuations in market value as a consequence of market perception of
certain highly publicized events, as in the Washington Public Power Supply
System's defaults on its Project 4 and 5 revenue bonds and the 1988
bankruptcy filing by the Public Service Corporation of New Hampshire.
Federal, state or municipal governmental authorities, or voters by
initiative, may from time to time impose additional regulations or take
such other governmental action which might cause delays in the licensing,
construction or operation of nuclear power plants, or the suspension or
cessation of operations of facilities which have been or are being financed
by proceeds of certain Securities. Such delays, suspensions or other
action may affect the payment of interest on, or the repayment of the
principal amount of, such Securities.
Health Care and Hospital Securities. These Securities are typically
secured by revenues derived from health care and hospital facilities, which
are subject to extensive Federal and state regulations affecting
construction, licensing, acquisition of equipment, standards of care,
disposal of medical wastes, and participation in reimbursement programs
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under Medicare and Medicaid. Health care and hospital facilities are
subject to extreme cost-containment pressures. Special risk considerations
include: increased competition among health care facilities to sell their
services more cheaply to third-party insurers and to offer new services;
the availability and cost of malpractice and other insurance; shortages in
qualified nursing and other health care professional staff; the rising
caseload of indigent, uninsured patients with aggravated symptoms;
demographic trends, such as an increased elderly population; and the
unpredictable effects of the AIDS epidemic (which may have a
disproportionate impact on certain communities). Utilization rates are a
major factor in hospital revenue projections and can be affected by cost
containment measures implemented by governmental or private insurers,
long-term advances in health care delivery reducing demand for in-patient
services, technological developments which may be rationed by scarcity of
equipment or specialists and requirements for state approval, and the
facility's reputation in the community. A number of legislative proposals
concerning health care are typically under review by Congress or the
various state legislatures at any given time, including national health
insurance, cost control, incentives for competition in the provision of
health care services, tax incentives and penalties related to health care
insurance premiums, and promotion of prepaid health care plans.
Additionally, the current administration has promised to substantially
reform the health care system. The Sponsor is unable to predict the effect
of these proposals, if enacted, on any of the Securities. Hospital revenue
securities issued by or on behalf of teaching facilities may also share the
characteristics of Higher Education Securities, described below.
Many hospitals, which may include certain Issuers (or the conduit
obligors) of Securities, have been experiencing significant financial
difficulties in recent years. The number of hospital closings increased
during the late 1980s, particularly among smaller institutions located in
rural or inner-city areas. Hospital revenues nationwide are primarily
derived from private insurers, many of which have experienced significant
operating losses in recent years. The Medicare program accounts for an
increasing share of hospital revenues nationwide, and is financed by the
Hospital Insurance Trust Fund through payroll taxes. The Fund's trustees
have projected, based on current trends, that expenditures will exceed tax
revenues by 1995 and that the Fund will be insolvent before 1999. The
Social Security Act Amendments of 1983 mandated implementation of a
prospective payment system, based upon diagnosis related groups ("DRGs"),
for most in-patient services. DRG reimbursement rates are pre-set and may
not fully cover the actual cost of furnishing services by any particular
facility, and Federal law prohibits health care providers from passing
along the excess costs to Medicare beneficiaries. Additionally, many
states have implemented prospective payment systems for their Medicaid
programs, and have adopted other changes, including enrollment
restrictions. Several states, from time to time, have exhausted their
Medicaid appropriations during their fiscal years, and temporarily
suspended reimbursements.
States regulate the operation of nursing facilities and may implement
guidelines having an adverse impact on their finances, and under certain
circumstances states may cause a facility to be placed under receivership.
DRG reimbursement rates for hospitals have resulted in increased transfers
of acute care patients to nursing homes, causing higher in-patient costs
and greater potential malpractice exposure. Medicare nursing home
reimbursement, now provided on a cost recovery basis (rather than the DRG
system), may be curtailed due to budgetary restrictions.
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Higher Education Securities. These Securities are typically secured
by revenues derived from the operations of public or private institutions
of higher education, and may include student tuition payments, student
activities fees, student or faculty housing charges, parking facility fees
and/or other sources of income such as grants, unrestricted gifts or
endowment income. Special risk considerations include: the projected
decline of the traditional college-aged population in the early 1990s;
increases in tuition which may cause a competitive disadvantage in
recruitment; the rising cost of faculty salaries; the size of the
institution's endowment and investment return; the reputation and
competitive position of an institution; levels of Federal and state direct
operating assistance, research grants and student aid; and the costs of
complying with Federal and state laws and regulations, especially those
concerning access to the handicapped.
Highway Securities. These Securities are typically secured by
revenues derived from motor fuel taxes, vehicle registration fees, license
fees and fines and/or vehicular tolls or concession lease rentals derived
from the operation of road, bridge or tunnel facilities. Revenue sources
for such facilities are economically sensitive, particularly with regard to
fluctuations in fuel supply, costs and Federal supply allocation or
rationing policies; and are also sensitive to local demographic trends with
respect to the size and income characteristics of the driving age
population. Issuers may incur substantial unanticipated remedial repair
expenses as a result of regular safety inspections mandated by Federal or
state law. Issuers located in air quality regions designated as
nonattainment areas may become subject to stringent transportation control
measures ordered pursuant to the Clean Air Act. Revenues of a vehicular
toll facility may additionally be affected by lower cost of alternative
modes of transportation or the construction and operation in its vicinity
of another transportation facility, which could alter established traffic
patterns.
Housing Securities. These Securities are issued by housing
authorities payable from revenues derived by state housing finance agencies
or municipal housing authorities from repayments on mortgage and home
improvement loans made by such agencies. Since housing authority
obligations, which are not general obligations of a particular state, are
generally supported to some extent by Federal, state or local housing
subsidy programs, budgetary constraints, the failure of a housing authority
to meet the qualifications required for coverage under the Federal
programs, or any legal or administrative determination that the coverage of
such Federal programs is not available to a housing authority could result
in a decrease or elimination of subsidies available for payment of
principal and interest on such housing authority's obligations. Weaknesses
in Federal housing subsidy programs and their administration may result in
a decrease of subsidies available for payment of principal and interest on
housing authority bonds. Repayment of housing loans and home improvement
loans in a timely manner is dependent on many factors affecting the housing
market generally and upon the underwriting and management ability of the
individual agencies (i.e., the initial soundness of the loan and the
effective use of available remedies should there be a default in loan
payments). Economic developments, including failure or inability to
increase rentals, fluctuations in interest rates and increasing
construction and operating costs may also have an adverse impact on
revenues of housing authorities. In the case of some housing authorities,
inability to obtain additional financing could also reduce revenues
available to pay existing obligations.
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The Portfolio of the Trust may contain Securities which are subject to
the requirements of Section 103A of the Internal Revenue Code of 1954, as
amended (the "1954 Code"), or Section 143 of the Internal Revenue Code of
1986, as amended (the "1986 Code" or the "Code"). Sections 103A and 143
provide that obligations issued to provide single family housing will be
exempt from Federal income taxation if all of the proceeds of the issue
(exclusive of issuance costs and a reasonably required reserve) are used to
make or acquire loans which meet requirements including certain
requirements which must be satisfied after issuance. If proceeds of the
issue are not used to acquire such loans, the issuer may be required to
redeem all or a portion of such issue from such uncommitted proceeds to
maintain the issue's tax exemption. Bond counsel to each such issuer has
issued an opinion that the interest on such Securities was exempt from
Federal income tax at the time the Securities were issued. The failure of
the issuers of such Securities to meet certain ongoing compliance
requirements imposed by Sections 103A and 143 could render the interest on
such Securities subject to Federal income taxation, possibly from the date
of their issuance. If interest on such Securities in a Trust is deemed to
be subject to Federal income taxation, the loss of tax-exempt status can be
expected to adversely affect the market value of such Securities. In this
event and under the terms of the Indenture the Sponsor may direct the sale
of such Securities. The sale of such Securities in such circumstances is
likely to result in a loss to the Trust.
The Portfolio of the Trust may include certain housing authority
obligations whose tax exemption depends upon qualification under Section
103(b)(4)(A) of the 1954 Code or Section 142 of the 1986 Code and
appropriate Treasury Regulations. Both Sections require that specified
minimum percentages of the units in each rental housing project financed
by tax-exempt debt are to be continuously occupied by low or moderate
income tenants for specified periods. Department of the Treasury
Regulations issued under Section 103(b)(4)(A) of the 1954 Code provide that
in order to prevent possible retroactive Federal income taxation of
interest on such Securities certain conditions must be met. The
regulations provide, however, that such retroactive taxation will not occur
if the issuer corrects any non-compliance occurring after the issuance of
the Securities within a reasonable period after such non-compliance is
first discovered or should have been discovered by the issuer. Similar
regulations are expected to be issued under 1986 Code Section 142. If the
interest on any of the Securities in the Trust that are housing securities
should ultimately be deemed to be taxable, the Sponsor may instruct the
Trustee to sell such Securities and, since they would be sold as taxable
securities, it is expected that such Securities would have to be sold at a
substantial discount from current market price of a comparable tax-exempt
security.
The Portfolio of the Trust may contain Securities which contain
provisions which require the issuer to redeem such obligations at par from
unused proceeds of the issue within a stated period which typically does
not exceed three years from the date of issuance of such Securities. In
periods in which interest rates decline there may be increased redemptions
of housing securities pursuant to such redemption provisions. Such an
increase in redemptions may occur because conventional mortgage loans may
have become available at interest rates equal to or less than the interest
rates charged on the mortgage loans previously made available from the
proceeds of such housing securities. Therefore, some issuers of such
housing securities may have experienced insufficient demand to complete
mortgage loan originations for all of the money made available from such
securities. In addition, mortgage loans made with the proceeds of housing
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securities, in general, do not carry prepayment penalties and therefore
certain mortgage loans may be prepaid earlier than their maturity dates.
If the issuers of such housing securities are unable to or choose not to
reloan these monies, they will generally redeem housing securities in an
amount approximately equal to such prepayments. The Sponsor is unable to
predict at this time whether such redemptions will be made at a high rate.
The disposition of such Securities may result in a loss to the Trust.
Industrial Development/Pollution Control Securities. These Securities
were generally issued prior to the enactment of 1986 Code restrictions, and
are typically secured by payments made under a loan agreement entered into
between the Issuer and the obligor. In some cases, the Securities were
additionally secured by guarantees provided by corporate guarantors or by a
stand-by letter of credit issued by a bank. Special risk considerations
include: the financial condition of the corporate obligor (or guarantor),
especially as it may be affected by subsequent corporate restructuring or
changes in corporate control.
Mass Transit Securities. These Securities are typically secured by
revenues derived from fares, dedicated sales or property tax revenues, and
intergovernmental subsidies. (See also "Special Tax Securities", below.)
Most mass transit systems in the country depend upon Federal and state
operating subsidies and capital grants. The Federal government
significantly reduced its mass transit assistance during the 1980s.
Special risk considerations include: ridership and fare levels, quality of
services, maintenance and capital construction needs, the commitment and
reliability of intergovernmental financial support, and the stability of
local tax sources.
Port Securities. These Securities are typically secured by revenues
derived from the operation of port facilities and related commercial
activities. Certain port districts have taxing powers granted under
interstate compacts or authorizing statutes. Special considerations
include: the proximity to major markets, the access and cost of intermodal
truck and rail transportation, the type and diversity of the cargo mix,
currency and commodity price fluctuations, international trade and tariff
policies. Port operations have been sensitive to technological
developments, as in the development of containerized shipping, which have
led to changes in the competitive position of different ports. No
assurance can be given that the Federal government will not impose an
embargo on exports to or imports from any current trading partner or that
current international trading patterns and policies will not otherwise
materially change in the future.
Public Facilities Securities. These Securities are typically secured
by revenues derived from either (i) payments appropriated by governmental
entities for the use of equipment or facilities, such as administrative or
correctional buildings, or (ii) user charges or other revenues derived
from such operations as parking facilities, convention centers or sports
arenas. In the first instance, the pledged revenues may be subject to
annual appropriation by a legislative body. (See also "Additional
Securities Considerations--Non-Obligatory Appropriations", below.) In the
latter case, the collection of revenues may be dependent upon the
reliability of feasibility forecasts and assumptions concerning utilization
rates.
Resource Recovery/Solid Waste Securities. These Securities are
typically secured by revenues derived from the sale of electricity or steam
generated as a by-product of the process of incinerating solid waste, and
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from contractual tipping fees, user charges and ancillary recycling
earnings. Special risk considerations include: the supply of solid waste
at levels sufficient for the facility to operate at design capacity; the
frequency and duration of plant shutdowns for maintenance; the treatment
and disposal of fly ash which contains toxic substances, especially dioxin;
compliance with air pollution control standards; unanticipated problems
associated with the use of developing technologies; and the continuation of
FERC policies facilitating cogeneration and its certification of any
particular qualifying facility. Governmental service contract payments may
be subject to annual appropriation by a legislative body. (See also
"Additional Securities Considerations--Non-Obligatory Appropriations",
below.) Older facilities may require retrofitting to accommodate new
technological developments or to comply with environmental standards. In
addition, there may be technological risks that become apparent in the long
run that are not presently apparent because of the relatively short history
of these facilities, which risks may affect the successful construction or
operation of such facilities.
Special Tax Securities. These Securities are typically secured by
revenues derived from specific taxes levied by an Issuer and dedicated to
the payment of debt service, such as special levies on retail sales, hotel
occupancy or mortgage recordation, or special assessments on real property.
Special risk considerations include: the economic sensitivity of the type
of tax, the stability of the tax base and any restrictions on the ability
of the Issuer to increase tax rates in the event of a shortfall of
revenues.
Student Loan Securities. These Securities are typically secured by
revenues derived from payments on student loans; Federal interest subsidies
and special allowance payments made to the holders of eligible student
loans; insurance payments made on defaulted loans by state guarantee
agencies or the Federal government; and proceeds from the sale of the
Securities themselves. Eligible loans may be guaranteed by an eligible
guarantee agency, typically a state agency or non-profit corporation (the
"Guarantor"), which is responsible for servicing the loans and enforcing
collections. The obligation of such Guarantor is reinsured by the U.S.
Secretary of Education or the U.S. Secretary of Health and Human Services
from 80% to 100% of the value of the loan, depending upon the Guarantor's
overall default rate. In addition, some loans may be insured directly by
the Federal government. Special risk considerations include: high default
levels in the underlying student loan notes and reduction or disallowance
of reimbursements by the Federal government due to improper servicing and
enforcement by the Guarantor. Additionally, the financial condition of a
Guarantor may have a direct effect on its ability to make guaranty payments
on defaulted student loans, to operate at reduced reimbursement levels and
to perform its servicing duties. The credit of certain Student Loan
Securities may have been enhanced by a letter of credit. (See "Additional
Securities Considerations--Letter of Credit Securities", below.)
Tax Allocation Securities. These Securities are typically secured by
incremental tax revenues collected on property within the areas where
redevelopment projects, financed by bond proceeds, are located ("project
areas"). Such payments are expected to be made from projected increases in
tax revenues derived from higher assessed values of property resulting from
development in the particular project area and not from an increase in tax
rates. Special risk considerations include: reduction of, or a less than
anticipated increase in, taxable values of property in the project area,
caused either by economic factors beyond the Issuer's control (such as a
relocation out of the project area by one or more major property owners) or
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by destruction of property due to natural or other disasters; successful
appeals by property owners of assessed valuations; substantial
delinquencies in the payment of property taxes; or imposition of any
constitutional or legislative property tax rate decrease.
Water and Sewer Securities. These Securities are typically secured by
revenues derived from connection fees and user charges imposed by the
enterprise. Water system finances may be additionally affected by the
terms of supply allocations and of service agreements with major wholesale
customers, the imposition of mandatory conservation measures in response
to drought and the costs to comply with Federal or state health and
environmental standards. Water systems, particularly those located in
Western states, may also be financially affected by changes in Federal
water policies. A significant number of Federal water contracts with such
water systems are scheduled for renewal through the 1990s, and may be
subject to increased environmental scrutiny. Sewer systems may be
financially affected by costs to comply with Federal or state environmental
standards for secondary or tertiary sewage treatment, the pretreatment of
toxic industrial wastes prior to discharge into sewer systems, and for
municipal storm sewer systems. Special risk considerations include:
failure of municipalities to utilize fully the facilities constructed by
the authorities; economic or population decline; the difficulty of
obtaining or discovering new supplies of fresh water; the effects of
conservation programs and the impact of "no growth" zoning ordinances.
Puerto Rico. The Portfolio of the Trust may contain obligations of
Issuers located in the Commonwealth of Puerto Rico. (See Part A--"Summary
of Essential Information--Portfolio Summary as of Date of Deposit".) The
ability of the issuers of such bonds to meet their obligations may be
affected by the economic and social problems facing Puerto Rico.
Unemployment in Puerto Rico remains high by United States standards. The
island's per capita personal income has been lower than in any state of the
United States. Transfer payments from the United States Government under
various social welfare programs (such as food stamps, social security and
veterans' benefits) contribute significantly to personal income.
The economy of Puerto Rico is closely integrated with that of the
mainland United States and is largely dependent for its development on U.S.
policies and programs that could be eliminated by the U.S. Congress. Aid
for Puerto Rico's economy has traditionally depended heavily on Federal
programs, which aid may not always be available. An adverse effect on the
Puerto Rican economy could result from other U.S. policies, including a
reduction of tax benefits for distilled products, further reduction in
transfer payment programs such as food stamps, curtailment of military
spending and policies which could lead to a stronger dollar.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar), tourism and the service sector (including finance, insurance, and
real estate). Since Puerto Rico is an island and is heavily dependent upon
imports and exports, maritime and air transportation are of basic
importance to its economy. The manufacturing and service sectors generate
the largest portion of gross product. Most of the island's manufacturing
output is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. The finance,
insurance and real estate components of this sector have recently
experienced the most growth.
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The government sector of the Commonwealth plays an important role in
the economy of the island. Since World War II, the economic importance of
agriculture for Puerto Rico, particularly in the dominance of sugar
production, has declined. Nevertheless, the Commonwealth-controlled sugar
monopoly remains an important economic factor and is largely dependent upon
Federal maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rican sugar production. The level of tourism is
affected by various factors, including the strength of the U.S. dollar.
During periods when the dollar is strong, tourism in foreign countries
becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth and
Federal investment incentive programs. For example, Section 936 of the
1986 Code generally provides deferral of Federal income taxes for U.S.
companies operating on the island until profits are repatriated. No
assessment can be made at this time as to whether or not Section 936 and
other incentive programs will be continued. It is expected that the
elimination of Section 936, if it occurred, would have a strongly negative
impact on Puerto Rico's economy. In 1993, the United States, Mexico and
Canada entered into the North American Free Trade Agreement ("NAFTA"). If
ratified by Congress, NAFTA would permit the duty-free entry of low-wage
Mexican goods into the United States. This additional competition for
sales in the U.S. market could have an adverse effect on Puerto Rican
exports and the Puerto Rican economy.
There have for many years been three major viewpoints in Puerto Rico
with respect to the island's relationship to the United States, one
essentially favoring the existing Commonwealth status (but with
modifications providing for greater local autonomy), another favoring
statehood and a third seeking independence from the United States. The
Sponsor cannot predict what effect, if any, a change in the relationship
between Puerto Rico and the United States would have on the Issuers'
ability to meet their obligations.
Additional Securities Considerations
Non-Obligatory Appropriations/Lease Payment Securities. A Trust may
contain Securities secured in whole or in part by governmental payments,
pursuant to a lease agreement, service contract, installment sale or other
agreement. A governmental entity that enters into such an agreement cannot
obligate future governments to make payments thereunder, but generally has
covenanted to take such action as is necessary to include all such payments
due under such agreement in its annual budgets and to make the
appropriations therefor. However, a budgetary imbalance in future fiscal
years could affect the ability and willingness of the governing legislative
body to appropriate, and the availability of monies to make, the payments
provided for under such agreement. The leases backing the Securities could
be cancelled resulting in a cessation of interest payments to
securityholders. If interest payments are discontinued, the
securityholders have recourse only to the equipment or property that is
being leased. There is no guarantee that a foreclosure on the equipment or
property securing the leases would provide sufficient funds to fully repay
investors. (For a discussion of additional considerations affecting the
financial condition of an Issuer, see: "General Obligation Securities,"
above.)
Letter of Credit Securities. A Trust may contain Securities that are
additionally secured by letters of credit issued by commercial or savings
banks which may be drawn upon (i) if an Issuer fails to make payments of
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principal of, premium, if any, or interest on a Security backed by such a
letter of credit or (ii) if interest on a Security is deemed to be taxable
and full payment of principal and any premium due is not made by the
Issuer. The letters of credit are irrevocable obligations of the issuing
banks. Certain of these letters of credit and guarantees may, in time, be
secured by a security interest in collateral. The profitability of the
banking industry is largely dependent upon the availability and cost of
capital funds for the purpose of financing lending operations under
prevailing money market conditions, and is affected by general economic
conditions. While banks are subject to extensive governmental regulations,
exposure to credit losses arising from possible financial difficulties of
borrowers or other issuers having letters of credit might affect a bank's
credit rating or ability to meet its obligations under a letter of credit.
Bond Insurance. A Trust may contain Securities that were insured
under a policy of insurance ("Bond Insurance") guaranteeing the scheduled
payment of interest and principal by the Issuer. Payment under a policy of
Bond Insurance will be made in respect of principal of and interest on
Securities which shall be due for payment, but which shall be unpaid by
reason of nonpayment by the Issuer. All such policies provide for payment
of the principal or interest due to a bond trustee or paying agent on the
date such payment is due or on the business day following receipt by the
bond insurer of notice of nonpayment. In turn, such bond trustee or paying
agent will make payment to the securityholder (in this case, the Trustee of
the Trust) upon presentation of satisfactory evidence of such
securityholder's right to receive such payment. Bond Insurance will
provide payment only on scheduled maturity dates and sinking fund payment
dates, in the case of principal, and on scheduled dates for payment, in the
case of interest. It will not insure payment on acceleration, as a result
of a call for redemption (other than sinking fund redemption) or as a
result of any other advancement of maturity, nor will it insure the payment
of any redemption, prepayment or acceleration premium or any risk other
than nonpayment. In the event of any acceleration of the principal of the
obligation, the insurance payments will be made at such times and in such
amounts as would have been made had there not been an acceleration. Bond
Insurance will not insure against nonpayment of principal or interest
caused by the insolvency, fraud or negligence of any trustee or paying
agent. Bond Insurance does not guarantee the market value of the
Securities or the value of the Units. However, any such Bond Insurance
represents an element of market value in regard to the Securities thus
insured, but the exact effect, if any, of Bond Insurance on such market
value cannot be predicted. No assurance can be given that the rating
assigned to the claims-paying ability of a bond insurer will not be
withdrawn or reduced subsequent to the date of this Prospectus. While Bond
Insurance is non-cancelable, no assurance can be given that a bond insurer
will be able to perform on its contracts of Bond Insurance in the event a
claim should be made thereunder at some time in the future.
State Guaranty/Insurance. A Trust may contain Securities that were
guaranteed or insured as to the scheduled payment of interest and
principal by the Issuer, by a state, commonwealth or territorial
government, or by an agency thereof. Special considerations include
whether the nature of the pledge under the guaranty or insurance agreement
is of the "full faith and credit" of the state, and the financial condition
of the state. Any such guaranty or insurance policy represents an element
of market value in regard to the Security thus guaranteed, but the exact
effect, if any, of such guaranty or insurance policy on market value cannot
be predicted. (For a discussion of additional considerations affecting the
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financial condition of a governmental entity providing such guaranty or
insurance policy, see "General Obligation Securities", above.)
Refunded/Escrowed to Maturity/Crossover Refunding Securities. A Trust
may contain Securities that have been refunded through the issuance of
refunding obligations. Principal and interest payments on such Securities
are no longer derived from the revenues or other monies originally pledged
for debt service. Instead, principal and interest are payable from the
proceeds of the refunding obligations, which monies are held in an escrowed
trust fund in amounts sufficient to pay principal and interest on the
originally issued Securities when due. These monies are typically held in
the form of direct obligations of the United States. "Escrowed to Maturity
Securities" are required to be paid at the scheduled sinking fund payment
or maturity date, at which time such Escrowed to Maturity Securities will
be paid or redeemed at par. "Refunded Securities" will be redeemed prior
to their stated maturity date, but only on the earlier of any scheduled
sinking fund payment date or the optional redemption date. "Crossover
Refunding Securities" become secured by the revenues or other monies
originally pledged to secure an earlier bond issue at a predetermined time
in the future. Prior to such time, the proceeds from the sale of these
crossover refunding bonds are placed in an escrow fund and secure the
bonds.
Redemption of Securities. Most of the Securities are subject to
redemption prior to their stated maturity dates, pursuant to optional
redemption and/or sinking fund payments by the Issuers. In general,
optional redemption provisions are more likely to be exercised when the bid
side evaluation is at a premium over par value than when it is at a
discount from par. Generally, the bid side evaluation of Securities will
be at a premium over par when market interest rates fall below the stated
interest rate on such Securities. Certain Securities may be subject to
redemption at par pursuant to sinking fund provisions. Such provisions
are designed to redeem a significant portion of such obligations gradually
over the life of such Securities. Particular bonds of an issue of
Securities to be redeemed are generally chosen by lot. The Part A--
"Schedule of Portfolio Securities", contains a listing of the optional
redemption and sinking fund payment provisions, if any, with respect to
each of the Securities. Certain Securities, identified in Part A--"Summary
of Essential Information", are subject to redemption early in the life of
the Trust; the redemption price for such Securities may be less than the
market price at the time a Unit Holder purchased Units, which may result in
a loss. Most of the Securities are also subject to "special" or
"extraordinary" mandatory redemption provisions and calls resulting from
certain events, including (but not limited to) unexpended proceeds, the
receipt of excess revenues or casualty insurance proceeds, or failure to
renew any required letter of credit. Securities so redeemed will reduce
the average life of the Portfolio, and will cease to bear interest after
their redemption and such redemption, at a price less than the price paid
therefor, will result in a loss.
BECAUSE THE REDEMPTION PRICE AND THE SPONSOR'S REPURCHASE PRICE ARE
BASED ON BID PRICES FOR THE SECURITIES, THEY MAY BE LESS THAN THE PRICE
PAID BY A PURCHASING UNIT HOLDER (OFFERING PRICES ARE NORMALLY HIGHER THAN
BID PRICES). DUE TO FLUCTUATIONS IN THE MARKET PRICE OF THE SECURITIES IN
THE PORTFOLIO AND THE FACT THAT THE PUBLIC OFFERING PRICE INCLUDES A SALES
CHARGE, AMONG OTHER FACTORS, THE AMOUNT REALIZED BY A UNIT HOLDER UPON THE
REDEMPTION OR SALE OF UNITS MAY BE LESS THAN THE PRICE PAID FOR SUCH UNITS
BY THE HOLDER. (SEE "REDEMPTION--COMPUTATION OF REDEMPTION PRICE PER
UNIT".)
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Issuer Default. Although the Sponsor has selected the Securities in
the Portfolios in a manner consistent with each Trust's objectives, and
taking into consideration the factors listed in "Objectives and Securities
Selection," herein, it is possible that one or more of the Securities may
experience an event of default in the payment of principal or interest.
Should that occur, the bond trustee for such Securities is empowered to
protect and enforce its rights and the rights of the Unit Holders
(including the Trust) by suits, legal actions and proceedings deemed
advisable and expedient, usually including declaring an acceleration of all
outstanding principal and interest. However, the enforceability of
covenants and agreements of an Issuer, including the pledge to deposit
into and retain monies in a debt service fund, may be subject to
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights and may also be subject to sovereign immunity, the
exercise of the state's police powers, and judicial discretion in
appropriate cases. It is therefore possible that bankruptcy proceedings,
other legal actions, the limited alternative uses to which certain
facilities may be put in the event of an asset sale, or other events may
limit the bond trustee's recovery of total principal and interest owed on
such defaulted Securities (if any) and, hence, the monies paid to the
Trustee for distribution to Unit Holders. (See "Issuer Bankruptcy".) The
Sponsor is permitted to direct the Trustee to dispose of any Security in a
Trust upon default in the payment of principal or interest, when due. (See
"Sponsor--Responsibility".) No assurance can be given that a sale under
such circumstances would yield proceeds equivalent to the par amount or
purchase price of such Security.
Issuer Bankruptcy. Under Chapter 9 of the Federal Bankruptcy Code, a
petition may be filed by a political subdivision or agency of a state which
is insolvent or unable to meet its obligations as they mature. Generally,
the filing of such a petition operates as a stay of any proceeding to
enforce a claim against the debtor. The Federal Bankruptcy Code also
requires the debtor to file a plan for the adjustment of its debts which
may modify or alter the rights of creditors. Under such a plan the Federal
bankruptcy court may permit the debtor to issue certificates of
indebtedness which have priority over existing creditors and which could be
secured. Any plan of reorganization confirmed by the Federal bankruptcy
court would be binding upon all creditors affected by it. The right of the
owners of Securities to receive interest, principal payments and redemption
premium from any such entity could be adversely affected by a restructuring
of such petitioner's debt under Chapter 9. It is possible that recipients
of debt service payments made by such entity within ninety days of the
filing of a petition could be required to refund them, and their claims
would then be treated as if such payments had not been made. No assurance
can be given that any priority of holders of securities to payment from
monies retained in a debt service reserve fund or from other cash resources
would be recognized if a petition were filed under Chapter 9 or pursuant to
other subsequently enacted law relating to creditors' rights; such monies
might, under such circumstances, be available for the payment of all such
entity's creditors generally. Certain Issuers of Securities in the
Portfolios have the legal capacity pursuant to state law to file a petition
under Chapter 9 without prior state approval.
No assurance can be given that any obligor of a Security (under the
legal documents governing such Security, including any related loan
agreement) will not file a voluntary petition or be subject to involuntary
reorganization under the Federal Bankruptcy Code.
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Litigation Affecting Securities. To the best knowledge of the
Sponsor, there is no material 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, including the validity or tax status of the
Securities. While the outcome of litigation of such nature cannot be
predicted, an opinion of bond counsel has been delivered with respect to
each Security on the date of its issuance to the effect that such Security
has been validly issued and that the interest thereon is not included in
gross income for Federal income tax purposes under existing law. Such
opinion may or may not deal with the status of interest on the Security for
alternative minimum tax purposes. If legal proceedings are instituted
after the Date of Deposit seeking, among other things, to restrain or
enjoin the payment of any of the Securities or attacking their validity or
the authorization or existence of an Issuer, the Sponsor may, in accordance
with the Indenture, direct the Trustee to dispose of such Security. (See
"Sponsor--Responsibility".) No assurance can be given that a sale under
such circumstances would yield proceeds equivalent to the par amount or
purchase price of such Security.
Contract Obligations
Certain Securities in each Trust may be purchased by the Sponsor on a
"when, as and if issued" or "delayed delivery" basis; that is, they may not
yet be issued by their governmental entities on the Date of Deposit
(although such governmental entities are committed to issue such
Securities). Contracts relating to such "when, as and if issued"
Securities may not settle by the first settlement date for Units.
Moreover, the delivery of such Securities may be delayed or may not occur.
Unit Holders who purchase Units prior to settlement of such Securities will
be "at risk" with respect to these Securities (i.e., they may derive either
gain or loss from changes in the prices of the Securities) from the date
they commit to purchase such Units. Interest on such Securities begins
accruing to the benefit of Unit Holders as tax-exempt interest on the
respective delivery dates of such Securities. In order to provide level
interest payments to Unit Holders where the Trust purchases Securities
which will settle after the settlement date for Units, the Trustee will
reduce its fee over a period of time in an amount equal to the amount of
interest that would have so accrued, on such Securities between the initial
settlement date for the Units and the delivery date of any such Securities
as if such Securities had been delivered prior to purchase of the Units.
The reduction of the Trustee's fee eliminates the necessity of reducing
regular monthly interest distributions until such Securities are delivered.
The Trustee will be reimbursed for the reduction in its fee by the Sponsor.
To the extent that the delivery of such Securities is delayed beyond their
respective expected delivery dates, the Estimated Current Return and
Estimated Long-Term Return for the first year may be lower than indicated
in Part A--"Summary of Essential Information."
Replacement Securities
In the event that any contract for the purchase of any Security fails,
the Sponsor is authorized under the Indenture, subject to the conditions
set forth below, to instruct the Trustee to acquire other securities (the
"Replacement Securities") for inclusion in the Portfolio of a Trust. Any
Replacement Securities must be deposited not later than the earlier of (i)
the first monthly Distribution Date of the Trust or (ii) 90 days after the
Trust was established. The cost and aggregate principal amount of the
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Replacement Securities may not exceed the cost and aggregate principal
amount of the Securities which they replace. In addition, the Replacement
Securities must (1) be tax-exempt bonds; (2) have a fixed maturity date in
the same category as the Security replaced; (3) be purchased at a price
that results in a yield to maturity and in a current return, in each case
as of the execution and delivery of the Indenture, which is approximately
equivalent to the yield to maturity and current return of the Securities
which they replace; (4) be purchased within 20 days after delivery of
notice of the failed contracts; and (5) have a rating that is investment
grade by at least one national rating organization or have, in the opinion
of the Sponsor, comparable credit characteristics. Whenever a Replacement
Security has been acquired for the Trust, the Trustee will, within five
days thereafter, notify all Unit Holders of the acquisition of the
Replacement Security.
In the event a contract to purchase Securities fails and Replacement
Securities are not acquired, the Trustee will, not later than the second
monthly Distribution Date, distribute to Unit Holders the funds
attributable to the failed contract. The Sponsor will, in such a case,
refund the sales charge applicable to the failed contract. If less than
all the funds attributable to a failed contract are applied to purchase
Replacement Securities, the remaining moneys will be distributed to Unit
Holders not later than the second monthly Distribution Date. Moreover, the
failed contract will reduce the Estimated Net Annual Income per Unit, and
may lower the Estimated Current Return and Estimated Long-Term Return.
INSURANCE ON THE SECURITIES IN AN INSURED TRUST
The Securities in the Portfolio of a Trust designated in Part A as an
Insured Trust, including a State Trust designated as an Insured State
Trust, are each covered by a policy of Bond Insurance. (See "Additional
Securities Considerations--Bond Insurance".) The information contained
herein relating to the insurance companies providing Bond Insurance is from
published documents and other public sources. 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. Regulation of an insurance company by a state is
no guarantee that such insurance company will be able to perform on its
contracts of Bond Insurance in the event a claim should be made thereunder
at some time in the future.
AMBAC INDEMNITY--AMBAC Indemnity Corporation ("AMBAC Indemnity") is a
Wisconsin-domiciled stock insurance company, regulated by the Insurance
Department of the State of Wisconsin, and is licensed to do business in all
50 states, the District of Columbia and the Commonwealth of Puerto Rico
with admitted assets of approximately $1.936 billion (unaudited) and
statutory capital of approximately $1.096 million (unaudited) as of
September 30, 1993. Statutory capital consists of statutory contingency
reserve and AMBAC Indemnity's policyholders surplus. AMBAC Indemnity is a
wholly owned subsidiary of AMBAC Inc., a 100% publicly-held financial
holding company. AMBAC Inc. is not obligated to pay the debts of or
claims against AMBAC Indemnity Corporation. Standard & Poor's Corporation
has rated the claims-paying ability of AMBAC Indemnity "AAA".
CAPITAL MARKETS ASSURANCE--Capital Markets Assurance Corporation
("CapMAC") is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety insurance.
CapMAC is licensed in 49 states in addition to the District of Columbia,
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the Commonwealth of Puerto Rico and the territory of Guam. Neither CapMAC
Holdings Inc. nor any of its stockholders is obligated to pay any claims
under any surety bond issued by CapMAC or any debts of CapMAC or to make
additional capital contributions. CapMAC is wholly owned by CapMAC
Holdings Inc., a company that is owned by a group of institutional and
other investors, including CapMAC's management and employees. As at
December 31, 1992 and 1991, CapMAC had statutory capital and surplus of
approximately $148 million and $232 million, respectively. CapMAC's
claims-paying is rated "AAA" by Standard & Poor's Corporation.
CAPITAL GUARANTY--Capital Guaranty Insurance Company ("Capital
Guaranty" or "CGIC") is a monoline stock insurance company incorporated in
the State of Maryland, and is a wholly owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company (herein, the
"Corporation"). Approximately 82.7% of the Corporation is owned by the
public as a result of the recent initial public offering on October 6,
1993. The remaining 17.3% Corporation is owned by the following investors:
Constellation Investments, Inc., an affiliate of Baltimore Gas and
Electric; Safeco Corporation; and Sibag Finance Corporation, an affiliate
of Siemens A.G.. Other than their capital commitment to the Corporation,
the investors of the Corporation are not obligated to pay the debts of, or
the claims against, Capital Guaranty. As of September 30, 1993, the total
policyholders' surplus of Capital Guaranty was approximately $159.9 million
(unaudited) and total admitted assets were approximately $270.0 million
(unaudited), as reported to the Insurance Department of the State of
Maryland. Standard & Poor's Corporation has rated the claims-paying
ability of Capital Guaranty "AAA".
CONNIE LEE--Connie Lee Insurance Co. ("ConnieLee"), a Wisconsin stock
insurance company, is a wholly owned subsidiary of the College Construction
Loan Insurance Association, an insurance holding company authorized and
established by Congress as a private corporation under the laws of the
District of Columbia. The enabling legislation calls for ConnieLee to
provide credit enhancement services to colleges, universities, teaching
hospitals, and other educational institutions. As of September 30, 1993,
policyholders' surplus (unaudited) was $103,869,000, stockholders' equity
(unaudited) was $140,343,000 and total assets (unaudited) were
$209,600,000. Standard & Poor's Corporation has rated the claims-paying
ability of ConnieLee "AAA."
FINANCIAL SECURITY ASSURANCE-- Financial Security Assurance ("FSA")
is a monoline insurance company incorporated on March 16, 1984 under the
laws of the State of New York. FSA is approximately 92.5% owned by US WEST
Capital Corporation and 7.5% owned by Tokio Marine and Fire Insurance Co.,
Ltd. ("Tokio Marine"). No shareholder of FSA is obligated to pay any debt
of FSA or any claim under any insurance policy issued by FSA or to make any
additional contribution to the capital of FSA. FSA and its two wholly
owned subsidiaries are licensed to engage in financial guaranty insurance
business in 49 states, the District of Columbia and Puerto Rico. As of
December 31, 1993, the unearned premium reserve of FSA was $200,316,000
(audited) and its total shareholder's equity was $542,468,000 (audited).
FSA's claims-paying ability is rated "AAA" by Standard & Poor's
Corporation.
FINANCIAL GUARANTY--Financial Guaranty Insurance Company ("Financial
Guaranty") is a wholly owned subsidiary of FGIC Corporation, a Delaware
holding company. FGIC Corporation is a wholly owned subsidiary of General
Electric Capital Corporation. Neither FGIC Corporation nor General
Electric Capital Corporation is obligated to pay the debts of or the claims
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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, 1993, the total capital and surplus of
Financial Guaranty was approximately $777 million, as reported to the State
of New York Insurance Department. Financial Guaranty is currently
authorized to write insurance in 49 states and the District of Columbia.
Standard & Poor's Corporation has rated the claims-paying ability of
Financial Guaranty "AAA".
MBIA--Each insurance company comprising Municipal Bond Insurance
Association ("MBIA") will be severally and not jointly obligated under MBIA
policies in the following respective percentages: The Aetna Casualty and
Surety Company (33%); Fireman's Fund Insurance Company (30%); The Travelers
Indemnity Company (15%); Cigna Property and Casualty Insurance Company,
formerly known as Aetna Insurance Company (12%); and The Continental
Insurance Company (10%). Each insurance company comprising MBIA is
licensed to do business in various states. 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.
As reported to the New York State Insurance Department in accordance with
statutory accounting principles, the total assets of the participating
insurance companies as of June 30, 1993, were $35.2 billion. Some of the
members of MBIA are among the shareholders of MBIA, Inc. MBIA, Inc. is the
parent of the Municipal Bond Investors Assurance Corporation ("MBIAC").
MBIAC is a separate and distinct entity from MBIA. MBIAC has no liability
to the bondholders for the obligations of MBIA under its policy of Bond
Insurance. Standard & Poor's Corporation has rated the claims-paying
ability of MBIA "AAA".
MBIAC--Municipal Bond Investors Assurance Corporation ("MBIAC") is the
principal operating subsidiary of MBIA, Inc. The principal shareholders of
MBIA, Inc. are Aetna Casualty and Surety Company, The Fund American
Companies, subsidiaries of CIGNA Corporation, The Continental Insurance
Company and one of its affiliates, and Credit Local de France, CAECL S.A.,
and they own approximately 35% of the outstanding common stock of MBIA,
Inc. Neither MBIA, Inc. nor its shareholders are obligated to pay the
debts of or claims against MBIAC. MBIAC, which commenced municipal bond
insurance operations on January 5, 1987, is a limited liability corporation
rather than a several liability association. MBIAC 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. Effective
December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, MBIAC acquired all the outstanding stock of Bond Investors
Group, Inc., the parent of Bond Investors Guaranty Insurance Company
("BIG"). Through a reinsurance agreement, BIG has ceded all of its net
insured risks, as well as its unearned premium and contingency reserves, to
MBIAC and MBIAC has reinsured BIG's net outstanding exposure. As of
September 30, 1993, MBIAC had admitted assets of approximately $3.0
billion (unaudited), total liabilities of $2.0 billion (unaudited) and
total capital and surplus of approximately $951 million (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. Standard & Poor's
Corporation rates all new issues insured by MBIAC "AAA" Prime Grade.
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RATINGS OF THE SECURITIES IN AN INSURED TRUST--On the Date of Deposit,
all of the Securities in the Insured Trust were rated "AAA" by Standard &
Poor's Corporation because of the Bond Insurance policies issued in respect
of such Securities. (See Part A--"Schedule of Portfolio Securities," and
"Bond Ratings" herein.) Subsequent to the Date of Deposit, a Security may
cease to be rated or the rating assigned may be reduced below the minimum
requirements of the Insured Trust for the acquisition of Securities. Such
reduction would most likely occur if Standard & Poor's Corporation reduced
its rating of any of the bond insurers, and, hence, the rating on the
Securities insured by such bond insurer. While such events may be
considered by the Sponsor in determining whether to direct the Trustee to
dispose of the Security (see "Sponsor--Responsibility," herein), such
events do not automatically require the elimination of such Security from
the Portfolio.
RATING OF THE UNITS OF AN INSURED TRUST--Standard & Poor's Corporation
has rated the Units of an Insured Trust "AAA" because the bond insurers
have issued Bond Insurance policies to insure each of the Securities in the
Insured Trust. This is the highest rating assigned by Standard & Poor's
Corporation. (See "Description of Rating".) The obtaining of this rating
by the Insured Trust should not be construed as an approval of the offering
of the Units by Standard & Poor's Corporation or as a guarantee of the
market value of the Insured Trust or of the Units. Standard & Poor's
Corporation has been compensated by the Sponsor for its services in rating
Units of the Insured Trusts. There can be no assurance that Units of an
Insured Trust will retain the AAA rating.
DESCRIPTION OF RATING (as described by Standard & Poor's Corporation)-
- -A Standard & Poor's Corporation rating on the units of an investment trust
(hereinafter referred to collectively as "units" and "fund") is a current
assessment of creditworthiness with respect to the investments held by such
fund. This assessment takes into consideration the financial capacity of
the issuers and of any guarantors, insurers, lessees, or mortgagors with
respect to such investments. The assessment, however, does not take into
account the extent to which fund expenses or portfolio asset sales for less
than the fund's purchase price will reduce payment to the unit holder of
the interest and principal required to be paid on the portfolio assets. In
addition, the rating is not a recommendation to purchase, sell, or hold
units, inasmuch as the rating does not comment as to market price of the
units or suitability for a particular investor.
REGULATION OF INSURANCE COMPANIES--Insurance companies are subject to
regulation and supervision in the jurisdictions in which they do business
under statutes which delegate regulatory, supervisory and administrative
powers to state insurance commissioners. This regulation, supervision and
administration relate, among other things, to: the standards of solvency
which must be met and maintained; the licensing of insurers and their
agents; the nature of and limitations on investments; deposits of
securities for the benefit of policyholders; approval of policy forms and
premium rates; periodic examinations of the affairs of insurance companies;
annual and other reports required to be filed on the financial condition of
insurers or for other purposes; and requirements regarding reserves for
unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies is required by law to be held in reserve
against potential claims on policies and is not available to general
creditors.
Although the Federal government does not regulate the business of
insurance, Federal initiatives, such as ERISA regulations on pensions,
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medical care cost restrictions, no-fault automobile insurance standards,
changes in the antitrust exception for insurance businesses and changes in
the tax laws, can significantly impact the insurance business. In
addition, the Federal government operates in some cases as a co-insurer
with the private sector insurance companies.
Insurance companies are also affected by a variety of state and
Federal regulatory measures and judicial decisions that define and extend
the risks and benefits for which insurance is sought and provided. These
include judicial decisions on risk exposure in areas such as products
liability and state and Federal extension and protection of employee
benefits, including pension, workers' compensation, and disability
benefits. These developments may result in short-term adverse effects on
the profitability of various lines of insurance. Longer-term adverse
effects can often be minimized through prompt repricing of coverages and
revision of policy terms. In some instances these developments may create
new business opportunities. All insurance companies write policies and set
premiums based on actuarial assumptions about mortality, injury, the
occurrence of accidents and other insured events. These assumptions, while
well supported by past experience, necessarily do not take account of
future events. The occurrence in the future of unforeseen circumstances
could affect the financial condition of one or more insurance companies.
The insurance business is highly competitive and with the deregulation of
financial service businesses, it should become more competitive. In
addition, insurance companies may expand into non-traditional lines of
business which may involve different types of risks.
INSURANCE RISK--There is no guarantee that the objectives of an
Insured Trust will be achieved since an issuer may be unable to meet its
principal and interest payment obligations and, in such event, the
insurance company issuing the Bond Insurance may be unable to satisfy its
insurance obligation. Insurance is not a substitute for the basic credit
of an issuer. NO REPRESENTATION IS MADE AS TO THE ABILITY OF THE INSURANCE
COMPANIES TO MEET THEIR COMMITMENTS.
EVALUATION OF THE SECURITIES--Insurance does not guarantee the market
value of the Securities or the value of the Units. However, any such Bond
Insurance represents an element of market value in regard to the Securities
thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted. The evaluation of the Securities covered
by Bond Insurance was determined in the manner set forth in "Public
Offering of Units--Public Offering Price".
OBJECTIVES AND SECURITIES SELECTION
The objectives of each Trust are the providing of interest income
which is exempt, in the opinion of counsel, from Federal income taxes under
existing law (with certain exceptions depending on the Unit Holder) and the
conservation of capital through an investment in a diversified portfolio of
municipal and public authority debt obligation Securities. The extent, if
any, to which interest income of the Trust is subject to alternative
minimum tax is stated in Part A--"Schedule of Portfolio Securities." There
is, of course, no guarantee that a Trust's objectives will be achieved.
In selecting Securities for each Trust, the following factors, among
others, were considered by the Sponsor: (a) rating of the Securities of no
less than "BBB" by Standard & Poor's Corporation or "Baa" or "MIG 2" by
Moody's Investors Service, or, if unrated, the Securities must have, in the
opinion of the Sponsor, comparable credit characteristics, (b) maturities
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or mandatory payment dates consistent with the life of the Trust, (c)
prices of the Securities relative to prices of other securities of
comparable quality and maturity, (d) diversification of the Securities as
to purpose and location of Issuer (purpose only in the case of a State
Trust) and (e) in the case of an Insured Trust, whether or not a Security
is insured or insurable. Subsequent to the date specified in Part A of
this Prospectus, a Security may cease to be rated or its rating may be
reduced below the minimum required as of the Date of Deposit.
THE UNITS
On the date specified in Part A of this Prospectus, each Unit
represented the fractional undivided interest in each Trust set forth under
Part A--"Summary of Essential Information". The present size and
composition of each Trust may be reduced through the maturity, redemption,
sale or other disposition of Securities in each Trust, and, as the proceeds
of such dispositions are distributed to Unit Holders, the principal amount
of Securities represented by each Unit will be reduced. If any Units are
redeemed by the Trustee, the fractional undivided interest represented by
each Unit still outstanding will be increased although the actual interest
in each Trust represented by each such Unit will remain unchanged. (See:
"Redemption".) Units will remain outstanding until tendered for redemption
by any Unit Holder (including the Sponsor) or until the termination of the
Trust itself. No assurance can be given that a Trust will maintain, for
any length of time, its present size and composition. (See "Amendment and
Termination of the Indenture--Termination".)
Estimated Annual Income and Current Return
On the date specified in Part A of this Prospectus, the estimated net
annual interest income per Unit of a Trust (or per 1,000 Units in the case
of certain Trusts) was the amount set forth under Part A--"Summary of
Essential Information" in Part A. This figure is computed by dividing the
estimated total gross annual interest income to the Trust (based upon a
360-day year) by the number of Units outstanding on such date, less
estimated annual fees and expenses of the Sponsor (if any), the Trustee,
counsel and the Evaluator (multiplied by 1,000 Units in the case of certain
Trusts). Thereafter, the net annual interest income will change whenever
Securities mature, are redeemed or are sold, as the expenses of the
respective Trust change. The fees of the Sponsor (if any), the Trustee,
counsel and the Evaluator are subject to change without the consent of Unit
Holders, to the extent provided under "Expenses and Charges". Interest on
the Securities, less estimated expenses of the respective Trust, is
expected to accrue at the daily rate shown under Part A--"Summary of
Essential Information". This rate will change as Securities mature, are
redeemed or are sold, or as the expenses or income of the respective Trust
change and if an issuer defaults in the payment of interest.
The Public Offering Price will vary due to fluctuations in the
offering and/or bid prices of the Securities and the net annual interest
income per Unit may change as Securities mature, are redeemed or are sold,
and/or as the expenses of the Trust change.
The Estimated Current Return is calculated by dividing the Estimated
Net Annual Income per Unit by the Public Offering Price per Unit. The
Estimated Net Annual Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Securities while the
Public Offering Price will vary with changes in the offering price of the
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underlying Securities; therefore, there is no assurance that the present
Estimated Current Return indicated in Part A will be realized in the
future. The Estimated Long-Term Return is calculated using a formula which
(1) takes into consideration, and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of all
of the Securities in the Trust and (2) takes into account the expenses and
sales charge associated with each Unit. Since the market values and
estimated retirements of the Securities and the expenses of the Trust will
change, there is no assurance that the present Estimated Long-Term Return
as indicated in Part A will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated Current
Return calculations include only Net Annual Interest Income and Public
Offering Price as of the Date of Deposit. The Estimated Current Return and
the Estimated Long-Term Return will be higher for those Unit Holders paying
a reduced sales charge.
TAX STATUS
The following discussion applies to each Trust offered by this
Prospectus.
In the opinion of bond counsel to the issuing governmental
authorities, interest income on the Securities comprising the Portfolio of
the Trust is (except in certain instances depending upon the Unit Holder,
as described below) exempt from Federal income tax under the provisions of
the Internal Revenue Code as in effect at the date of issuance. In the
case of Securities issued at a time when the 1954 Code was in effect,
redesignation of the Code as the Internal Revenue Code of 1986 (the "Code"
or the "1986 Code") has not adversely affected the exemption from Federal
income tax of interest income on such Securities. Gain (exclusive of any
earned original issue discount) realized on sale or redemption of the
Securities or on sale of a Unit is, however, includable in gross income for
Federal income tax purposes and for state and local income tax purposes
generally. (It should be noted in this connection that such gain does not
include any amounts received in respect of accrued interest.) Such gain
may be capital gain or ordinary income and, if capital gain, may be long or
short-term depending upon the facts and circumstances. Securities 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 taxable gain on their maturity, redemption or sale.
In the opinion of Cahill Gordon & Reindel, special counsel to the
Sponsor, under existing law:
The Trust is not an association taxable as a corporation for
Federal income tax purposes, and interest on an underlying Security
which is exempt from Federal income tax under the Code when received
by the Trust will retain its status as tax-exempt interest for Federal
income tax purposes to the Unit Holders.
Each Unit Holder will be considered the owner of a pro rata
portion of the Trust's assets under Sections 671-678 of the Code.
Each Unit Holder will be considered to have received a pro rata share
of interest derived from the Trust's assets when it is received by the
Trust and each Unit Holder will have a taxable event when an
underlying Security is disposed of (whether by sale, exchange,
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redemption, or payment at maturity) or when the Unit Holder redeems or
sells Units. The total tax cost of each Unit to a Unit Holder is
allocated among each of the underlying Securities (in accordance with
the proportion of the Trust's assets comprised by each Security) in
order to determine the Unit Holder's per Unit tax cost for each
Security, and the tax cost reduction requirements of the Code relating
to amortization of bond premium will apply separately to the per Unit
tax cost of each Security. Therefore, under some circumstances a Unit
Holder may realize taxable gains when Units are sold or redeemed for
an amount equal to or less than the Unit Holder's original cost.
When a contract to acquire an underlying Security is settled
after the Unit Holder's settlement date for a Unit, the Unit Holder's
proportionate share of the interest accrued on the underlying Security
on the Security settlement date will exceed the portion of the
purchase price that was allocable to interest accrued on the Unit
settlement date. A Unit Holder will not be subject to Federal income
tax on the Unit Holder's proportionate share of the interest which
accrues during the period between the Unit settlement date and the
Security settlement date either when such interest is received by the
Trust or when it is distributed to the Unit Holder.
Under the income tax laws of the State and City of New York,
the income of the Trust will be treated as the income of its Unit
Holders.
If the proceeds received by the Trust upon the sale or redemption of
an underlying Security exceed a Unit Holder's adjusted tax cost allocable
to the Security disposed of, that Unit Holder will realize a taxable gain
to the extent of such excess. Conversely, if the proceeds received by the
Trust upon the sale or redemption of an underlying Security are less than a
Unit Holder's adjusted tax cost allocable to the Security disposed of, that
Unit Holder will realize a loss for tax purposes to the extent of such
difference.
Any gain recognized on a sale or exchange of a Unit Holder's pro rata
interest in a Security, and not constituting a realization of accrued
"market discount", and any loss will be a capital gain or loss, except in
the case of a dealer or financial institution. Gain realized on the
disposition of the interest of a Unit Holder in a market discount Security
is treated as ordinary income to the extent the gain does not exceed the
accrued market discount. A Unit Holder has an interest in a market
discount Security in a case in which the Unit Holder's tax cost for the
Unit Holder's pro rata interest in the Security is less than the stated
redemption price thereof at maturity (or the issue price plus original
issue discount accrued up to the acquisition date, in the case of an
original issue discount Security). Any capital gain or loss arising from
the disposition of a Unit Holder's pro rata interest in a Security will be
a long-term capital gain or loss if the Unit Holder has held his or her
Units and the Trust has held the Security for more than one year. Under
the Code, net capital gain (i.e., the excess of net long-term capital gain
over net short-term capital loss) of individuals, estates and trusts is
subject to a maximum nominal tax rate of 28%. Such net capital gain may,
however, result in a disallowance of itemized deductions and/or affect a
personal exemption phase-out.
Opinions relating to the validity of the underlying Securities and the
exemption of interest thereon from Federal income tax are rendered by bond
counsel to the issuing governmental authorities. It is the view of the
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Sponsor that interest on the Securities will not be a tax preference item
for purposes of the alternative minimum tax unless the "Schedule of
Portfolio Securities" indicates that the interest on a particular Security
is, in the opinion of bond counsel, to be treated as a tax preference item
for alternative minimum tax purposes. See Part A--"Schedule of Portfolio
Securities". Neither the Sponsor nor its counsel have made any review of
proceedings relating to the issuance of underlying Securities or the bases
for bond counsel's opinions. The Sponsor and its counsel are, however,
aware of nothing which would indicate to the contrary.
Furthermore, exemption of interest on a Security from Federal income
tax may require that the issuer of the Security (or other user of the
Security proceeds) meet certain ongoing compliance requirements. Failure
to meet these requirements could result in loss of the exemption and such
loss of exemption could apply retroactively from the date of issuance. A
Security may provide that if a loss of exemption is determined to have
occurred, the Security is immediately due and payable; and, in the case of
a Security which is a secured obligation, that the security can be reached
if the Security is not then paid. If such a loss of exemption were to
occur and the Security did not contain such an acceleration clause, or if
the acceleration did not in fact result in payment of the Security, the
affected Security would likely be sold as a taxable bond. Sale of a
Security as a taxable bond would likely result in a realization of proceeds
less than the cost of the Security.
In the case of certain of the underlying Securities comprising the
Portfolio of the Trust, the opinions of bond counsel indicate that although
interest on such underlying Securities is generally exempt from Federal
income tax, such underlying Securities are "industrial development bonds"
under the 1954 Code or "private activity bonds" under the 1986 Code as
those terms are defined in the relevant Code provisions, and interest on
such underlying Securities will not be exempt from Federal income tax for
any period during which such underlying Securities are held by a
"substantial user" of the facilities financed by the proceeds of such
underlying Securities (or a "related person" to such a "substantial user").
In the opinion of Messrs. Cahill Gordon & Reindel, interest attributable to
such underlying Securities (although not subject to Federal income tax to
the Trust), if received by the Trust for the account of a Unit Holder who
is such a "substantial user" or "related person," will be taxable (i.e.,
not tax exempt) to the same extent as if such underlying Securities were
held by the Unit Holder directly as owner. No investigation as to the
users or of the facilities financed by the underlying Securities has been
made by the Sponsor or its counsel. Investors should consult their tax
counsel for advice with respect to the effect of these provisions on their
particular tax situations.
In the case of an Insured Trust, assuming that the insurance policies
described in "Insurance on the Securities in an Insured Trust" have been
validly issued, are of standard form with respect to subrogation and do not
relieve the issuer of the Security of its obligations thereunder, Messrs.
Cahill Gordon & Reindel are of the opinion that proceeds received under the
insurance policies representing matured interest on a defaulted obligation
will be excludable from Federal gross income if, and to the same extent,
such interest would have been so excludable if paid by the issuer of such
defaulted obligation.
Persons in receipt of Social Security benefits should be aware that a
portion of such Social Security benefits may be includible in gross income.
For a taxpayer whose modified adjusted gross income plus one-half of his or
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her Social Security benefits does not exceed $34,000 ($44,000 for married
taxpayers filing a joint return), the includible amount is the lesser of
(i) one-half of the Social Security benefits or (ii) one-half of the amount
by which the sum of "modified adjusted gross income" plus one-half of the
Social Security benefits exceeds $25,000 in the case of unmarried taxpayers
and $32,000 in the case of married taxpayers filing a joint return. All
other taxpayers receiving Social Security benefits are required to include
up to 85% of their Social Security benefits in income.
Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions
from gross income, plus tax-exempt interest on municipal obligations
including interest on the Securities. To the extent that Social Security
benefits are includible in gross income they will be treated as any other
item of gross income and therefore may be taxable.
Investors should also consult their tax counsel for advice with
respect to the effect, if any, on the tax cost of Units to a Unit Holder in
cases in which a contract to acquire a Security is settled after the
settlement date for such Units and the Unit Holder's proportionate share of
the interest accrued on the underlying Security on the Security settlement
date will exceed the portion of the purchase price allocable to interest
accrued on the Unit settlement date. In such cases, the Unit Holder may
have an adjustment to his tax basis in his Units for interest accruing on
such Securities during the interval between purchase of Units and delivery
of Securities.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME
TAX PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER ANY OTHER
FEDERAL TAX LAW OR UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE OR CITY.
THE LAWS OF THE SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF SUCH
OBLIGATIONS. (See "Administration of the Trust--Reports to Unit Holders".)
The Portfolio of the Trust may contain zero coupon bond(s) or one or
more other Securities which were originally issued at a discount ("original
issue discount"). In general, original issue discount can be defined as
the difference between the price at which a Security was issued and its
stated redemption price at maturity. In the case of a Security issued
before September 4, 1982, original issue discount is deemed to accrue (be
"earned") as tax-exempt interest ratably over the period from the date of
issuance of the Security to the date of maturity and is apportioned among
the original holder of the obligation and subsequent purchasers in
accordance with a ratio the numerator of which is the number of calendar
days the obligation was owned by the holder and the denominator of which is
the total number of calendar days from the date of issuance of the
obligation to its date of maturity. Gain or loss upon the disposition of
an original issue discount Security in a Portfolio is measured by the
difference between the amount realized upon disposition of and the amount
paid for such obligation. A holder is entitled, however, to exclude from
gross income that portion of such gain attributable to accrued interest and
the "earned" portion of original issue discount.
In the case of a Security issued after September 3, 1982, original
issue discount is deemed to accrue on a constant interest method which
corresponds, in general, to the economic accrual of interest (adjusted to
eliminate proportionately on an elapsed-time basis any excess of the amount
paid for the Security over the sum of the issue price and the accrued
original issue discount on the acquisition date). The tax basis in the
Security is increased by the amount of original issue discount that is
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deemed to accrue while the Security is held. The difference between the
amount realized on a disposition of the Security (ex currently accrued
interest) and the adjusted tax basis of the Security will give rise to
taxable gain or deductible loss upon a disposition of the Security by the
Trust (or a sale or redemption of Units by a Unit Holder).
The Code provides, generally, that adjustments to taxable income to
produce alternative minimum taxable income for corporations will include
75% of the amount by which adjusted current earnings (which would include
tax-exempt interest) of the taxpayer exceeds the alternative minimum
taxable income of the taxpayer before any amount is added to alternative
minimum taxable income because of this adjustment.
For Federal income tax purposes, Trust expenses allocable to producing
or collecting Trust interest income are not deductible because the interest
income derived by the Trust is exempt from Federal income tax. A state or
local income tax may provide for a deduction for the portion of such Trust
expenses attributable to the production or collection of income derived by
the Trust and taxed by the state or locality. The effect on any such
deductions of the Code rules whereby investment expenses and other
miscellaneous deductions are deductible only to the extent in excess of 2%
of adjusted gross income would depend upon the law of the particular state
or locality involved.
The Code also imposes an additional 12/100% ($12.00 per $10,000)
environmental tax on the alternative minimum taxable income (determined
without regard to any alternative tax net operating loss deduction) of a
corporation in excess of $2,000,000 for each taxable year beginning before
January 1, 1996. The environmental tax is an excise tax and is deductible
for Federal income tax purposes (but not for purposes of the environmental
tax itself). Although the environmental tax is based on alternative
minimum taxable income, the environmental tax must be paid in addition to
any Federal income taxes payable by the corporation.
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 securities similar to the Securities in the
Trust or to require treatment of such interest as a "tax preference" for
alternative minimum tax purposes, and it can be expected that similar
proposals may be introduced in the future. The Trust and the Sponsor
cannot predict what legislation, if any, in respect of the tax status of
interest on Securities may be proposed by the Executive Branch or by
members of Congress, nor can they predict which proposals, if any, might be
enacted or whether any legislation if enacted would apply to the Securities
in the Trust.
In addition, investors should be aware that no deduction is allowed
for Federal income tax purposes for interest on indebtedness incurred or
continued to purchase or carry Units in the Trust. Under rules used by the
Internal Revenue Service for determining when borrowed funds are considered
used for the purpose of purchasing or carrying particular assets, the
purchase of Units may be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to the purchase
of the Units.
All taxpayers are required to report for informational purposes on
their Federal income tax returns the amount of tax-exempt interest they
receive.
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INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICABILITY OF THE FOREGOING GENERAL COMMENTS TO THEIR OWN PARTICULAR
SITUATIONS AND AS RESPECTS STATE AND LOCAL TAX CONSEQUENCES OF AN
INVESTMENT IN UNITS.
PUBLIC OFFERING OF UNITS
Public Offering Price
The Public Offering Price of Units, including Additional Units, during
the initial public offering period is computed by adding to the aggregate
offering price of the Securities in a Trust, and thereafter, by adding to
the aggregate bid price of the Securities in the Trust, any money in the
Principal Account other than money required to redeem previously tendered
Units and money to be distributed to the Sponsor or solely to Unit Holders
other than the purchasing Unit Holders, dividing such sum by the number of
Units outstanding, and then adding a sales charge (as shown in Part A-
- -"Summary of Essential Information--Special Considerations"). For the
short and short intermediate term Trusts, this Sales Charge will be reduced
over the life of the Trust, as set forth under Part A--"Summary of
Essential Information--Public Offering Price". For purchases settling
after the first settlement date (including purchases of Units created after
the initial date of deposit) a proportionate share of accrued and
undistributed interest on the Securities from the purchase date to, but not
including, the settlement date for Units purchased is also added to the
Public Offering Price. The Public Offering Price on the date specified in
this Prospectus or on any subsequent date will vary in accordance with
fluctuations in the evaluation of the underlying Securities in each Trust.
During the initial public offering period and thereafter, the
aggregate bid or offering prices of the Securities in the Trust, as is
appropriate, shall be determined for the Trust by the Evaluator in the
following manner: (a) on the basis of current bid or offering prices for
the Securities as obtained from investment dealers or brokers (including
the Depositor), (b) if bid or offering prices are not available for the
Securities, on the basis of current bid or offering prices for comparable
securities, (c) by determining the value of the Securities on the bid or
offering side of the market by appraisal, or (d) by any combination of the
above. The value of insurance obtained by the issuer of a Security is
reflected and included in the market value of such Security. With respect
to the initial evaluation of the offering prices of Securities which at the
Date of Deposit were subject to syndicate offering period pricing
restrictions, it is the practice of the Evaluator to determine such
evaluation on the basis of the syndicate offering price, unless factors
cause the Evaluator to conclude that such syndicate offering price does not
then accurately reflect the fair market value of such Securities, in which
case the Evaluator will also take into account the other criteria described
above for the purpose of making its determination. Such evaluations and
computations will be made during the initial public offering period on the
offering side of the market as of the close of business on each day
commencing with the Date of Deposit of the Securities, and will be
effective for all sales of Units made during the preceding 24-hour period.
Following the initial public offering period, evaluations made for purposes
of secondary market transactions by the Sponsor will be made on the bid
side of the market on each business day as of the Evaluation Time,
effective for all sales made during the preceding 24-hour period.
Evaluations for purposes of redemptions by the Trustee will be made each
business day as of the Evaluation Time, effective for all redemptions made
subsequent to the last preceding determination. The price at which Units
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may be repurchased by the Sponsor in the secondary market could be less
than the price paid by the Unit Holder. For information relating to the
calculation of the Redemption Price, which, like the Public Offering Price
in the secondary market, 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 "Redemption".
In addition to the Public Offering Price, the price of a Unit includes
accrued interest on the Securities for purchase of Units which settle after
the first settlement date for Units. Because of the varying interest
payment dates of the Securities, accrued interest on the Securities at any
point in time will be greater than the amount of interest actually received
by the respective Trust and distributed to Unit Holders. Therefore,
accrued interest is added to the value of the Units. If a Unit Holder
sells all or a portion of his or her Units, such Unit Holder will
ordinarily receive a proportionate share of the accrued interest from the
purchaser of such Units. Similarly, if a Unit Holder redeems all or a
portion of its Units, the Redemption Price per Unit will include accrued
interest on the Securities.
Securities deposited in a Trust on the Date of Deposit include an item
of accrued but unpaid interest up to the Date of Deposit. Unless otherwise
indicated in Part A--"Summary of Essential Information--Public Offering
Price," in an effort to reduce the amount of accrued interest which
investors would have to pay in addition to the Public Offering Price, the
Trustee may advance to the Trust the amount of interest accrued on the
Securities up to and including the first settlement date for Units; thus,
the Sponsor can sell the Units at a price which includes accrued interest
only from the day after the Date of Deposit. In such case, the Trustee
will recover the amount of this advance from interest payments received on
the Securities deposited in each Trust. Unless otherwise indicated in
Part A--"Summary of Essential Information--Public Offering Price", the
amount of accrued interest to be added to the Public Offering Price of
Units purchased by Unit Holders will include accrued interest from the
first settlement date for Units to, but not including, the settlement date
of the investor's purchase, less any distributions from the Interest
Account. Such proportionate share will be an asset of the Unit Holder and
will be received in subsequent distributions or upon the sale of its Units.
On the Date of Deposit, the Public Offering Price per Unit and the
Sponsor's Initial Repurchase Price per Unit (based on the offering side
evaluation of the Securities in a Trust) each exceeded the Redemption and
Sponsor's Secondary Market Repurchase Price per Unit (based upon the bid
side evaluation of the Securities in a Trust) by the amounts set forth in
Part A--"Summary of Essential Information".
Public Distribution
During the initial public offering period, Units, including Additional
Units, will be distributed to the public by the Sponsor and through dealers
at the Public Offering Price, calculated on each business day, plus accrued
interest for Units which settle after the first settlement date. The
initial public offering period is 30 days, unless all Units are sold prior
thereto whereupon the initial public offering period will terminate. The
initial public offering period may be extended by the Sponsor for as long
as Units remain unsold. Upon the termination of the initial public
offering period, unsold Units or Units acquired by the Sponsor in the
secondary market referred to below may be offered to the public by this
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Prospectus at the then current Public Offering Price calculated daily, plus
accrued interest.
The Sponsor intends to qualify Units in states selected by the Sponsor
for sale by the Sponsor, and from time to time may offer Units for sale
through dealers who are members of the National Association of Securities
Dealers, Inc.
Secondary Market
While not obligated to do so, it is the Sponsor's present intention to
maintain a secondary market for Units of the Trust and to offer
continuously to repurchase Units from Unit Holders at the applicable
Sponsor's Repurchase Price. During the initial public offering period, the
Sponsor's Repurchase Price is computed by adding to the aggregate of the
offering prices of the Securities in the Trust any money in the Principal
Account other than money required to redeem tendered Units, plus accrued
interest, deducting therefrom expenses of the Trustee, Evaluator, Sponsor
and counsel, and taxes, if any, and then dividing the resulting sum by the
number of Units outstanding, as of the date of such computation. After the
initial public offering period, the Sponsor's Repurchase Price is based on
the aggregate of the bid prices of the Securities in the Trust. There is
no refund of the sales charge, nor is there any additional sales charge
incurred, when a Unit Holder sells Units back to the Sponsor. Any Units
repurchased by the Sponsor at the Sponsor's Repurchase Price may be
reoffered to the public by the Sponsor at the then current Public Offering
Price, plus accrued interest. Any profit or loss resulting from the resale
of such Units will belong to the Sponsor.
If the supply of Units exceeds demand (or for any other business
reason), the Sponsor may, at any time, occasionally, from time to time, or
permanently, discontinue the repurchase of Units. In such event, although
under no obligation to do so, the Sponsor may, as a service to Unit
Holders, offer to repurchase Units at the Redemption Price, a price based
on the current bid prices for the Securities, plus accrued interest.
Alternatively, Unit Holders may redeem their Units through the Trustee.
The Redemption Price per Unit is computed based on the bid side evaluation
of the Securities, not the offering side evaluation. There is no refund of
the sales charge, nor is any additional sales charge incurred, when a Unit
Holder tenders Units for redemption. If the Sponsor repurchases Units in
the secondary market at the Redemption Price, it may reoffer these Units in
the secondary market at the Public Offering Price, or the Sponsor may
tender Units so purchased to the Trustee for redemption. In no event will
the price offered by the Sponsor for the repurchase of Units be less than
the current Redemption Price for those Units. (See "Redemption".)
The bid prices for the Securities may be expected to be less than the
offering prices. In the past, bid prices of securities similar to those in
a short or short intermediate term trust have been lower than the offering
prices thereof by as much as 1-1/4% of principal amount for inactively traded
securities and as little as 1/4 of 1% in the case of actively traded issues.
It can be expected that the difference between the bid and offering prices
in a short or short intermediate term trust will average about 1/2% to 1% of
principal amount. Bid prices of securities similar to those in an
intermediate or intermediate long term trust have been lower than the
offering prices thereof by as much as 2-1/2% and as little as 1/2 of 1%; the
difference between the bid and offering prices will average about 1% to 2%.
Bid prices of securities similar to those in a long term trust have been
lower than the offering prices thereof by as much as 3-1/2% of principal
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amount for inactively traded securities and as little as 1/2 of 1% in the
case of actively traded issues. It can be expected that the difference
between the bid and offering prices will average about 1-1/2% to 2% of
principal amount. All of the ranges discussed above are estimates only;
the actual difference for a particular Security or Trust may be greater or
less, depending on market conditions. For this reason, among others
(including the fact that the Public Offering Price includes a sales
charge), the amount realized by a Unit Holder upon redemption or sale of
Units may be less than the price paid by the Unit Holder for such Units.
Profit of Sponsor
The Sponsor receives a sales charge on Units sold to the public. On
the sale of Units to dealers, the Sponsor will retain the difference
between the dealer concession and the sales charge. The Sponsor may have
also realized a profit (or sustained a loss) on the deposit of the
Securities in each Trust, representing the difference between the cost of
the Securities to the Sponsor and the cost of the Securities to the Trust.
In addition, the Sponsor may receive placement fees or may realize profits
or sustain losses with respect to Securities acquired from underwriting
syndicates of which the Sponsor is a member. The Trust may contain
Securities which were acquired through the Sponsor's participation as sole
underwriter or manager or as a member of the underwriting syndicate for
such Securities. (See Part A--"Summary of Essential Information--Portfolio
Summary as of Date of Deposit".) An underwriter typically purchases
securities, such as the Securities in each Trust, from the issuer on a
negotiated or competitive bid basis in order to market such securities to
investors at a profit. The Sponsor may realize additional profit (or
sustain a loss) due to daily fluctuations in the prices of the Securities
in each Trust and, thus, in the Public Offering Price of Units received by
the Sponsor during the initial offering period and during the maintenance
of a secondary market, if any. Cash, if any, received by the Sponsor from
the Unit Holders prior to the settlement date for purchase of Units or
prior to the payment for Securities upon their delivery may be used in the
Sponsor's business to the extent permitted by applicable regulations and
may be of benefit to the Sponsor.
The Sponsor may also realize profits (or sustain losses) while
maintaining a secondary market in the Units, in the amount of any
difference between the prices at which the Sponsor buys Units (based on the
bid side of the Securities in each Trust) and the prices at which the
Sponsor resells such Units (such prices include the sales charge) or the
prices at which the Sponsor redeems such Units (also based on the bid side
of the Securities in each Trust), as the case may be.
Volume Discount
Although under no obligation to do so, the Sponsor intends to permit
volume purchasers of Units to purchase Units at a reduced sales charge.
The volume discount is available due to the realization of economies of
scale in sales effort and sales-related expenses involved in volume
purchases. The Sponsor may at any time change the amount by which the
sales charge is reduced, or may discontinue the discount altogether.
The reduced sales charges, as shown on the chart in Part A of this
Prospectus, will apply to all purchases of Units of a particular Trust on
any one day by the same person, partnership or corporation (other than a
dealer) in the amounts stated herein. Purchases of Units of a particular
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Trust will not be aggregated with concurrent purchases of Units of any
other trust that may be offered by the Sponsor.
Units held in the name of the purchaser's spouse or in the name of a
purchaser's child under the age of 21 are deemed for volume discount
purposes to be registered in the name of the purchaser. The reduced sales
charges are also applicable to a trustee or other fiduciary, including a
partnership or corporation, purchasing Units for a single trust estate or
single fiduciary account.
EXCHANGE OPTION
Unit Holders of any Dean Witter sponsored unit investment trust or any
holders of units of any other unit investment trust (collectively, "Unit
Holders") may elect to exchange any or all of their units for units of one
or more of any series of the Dean Witter Select Municipal Trust or for
units of any other Dean Witter sponsored unit investment trust that may
from time to time be made available for such exchange by the Sponsor (the
"Exchange Trusts"). Such units may be acquired at prices based on reduced
sales charges per unit. The purpose of such reduced sales charge is to
permit the Sponsor to pass on to the Unit Holder who wishes to exchange
units the cost savings resulting from such exchange. The cost savings
result from reductions in time and expense related to advice, financial
planning and operational expense required for the Exchange Option. Series
of the following Exchange Trusts are currently available: the Dean Witter
Select Municipal Trust, the Dean Witter Select Government Trust, the Dean
Witter Select Equity Trust, the Dean Witter Select Investment Trust and the
Dean Witter Select Corporate Trust.
Each Exchange Trust has different investment objectives; a Unit Holder
should read the Prospectus for the applicable Exchange Trust carefully to
determine the investment objective prior to exercise of this option.
This option will be available provided the Sponsor maintains a
secondary market in units of the applicable Exchange Trust and provided
that units of the applicable Exchange Trust are available for sale and are
lawfully qualified for sale in the state in which the Unit Holder is a
resident. While it is the Sponsor's present intention to maintain a
secondary market for the units of Exchange Trusts, there is no obligation
on its part to do so. Therefore, there is no assurance that a market for
units will in fact exist on any given date on which a Unit Holder wishes to
sell or exchange Units; thus, there is no assurance that the Exchange
Option will be available to any Unit Holder. The Sponsor reserves the
right to modify, suspend or terminate this option at any time without
further notice to Unit Holders. In the event the Exchange Option is not
available to a Unit Holder at the time such Unit Holder wishes to exercise
such option, the Unit Holder will be immediately notified and no action
will be taken with respect to such tendered Units without further
instruction from the Unit Holder.
Exchanges will be effected in whole units only. Any excess proceeds
from the surrender of a Unit Holder's Units will be returned.
Alternatively, Unit Holders will be permitted to make up any difference
between the amount representing the Units being submitted for exchange and
the amount representing the units being acquired up to the next highest
number of whole units.
An exchange of Units pursuant to the Exchange Option will generally
constitute a "taxable event" under the Code, i.e., a Unit Holder will
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recognize a gain or loss at the time of exchange. However, an exchange of
Units of this Series of the Dean Witter Select Municipal Trust for units of
any other series of the Exchange Trusts which are grantor trusts for U.S.
federal income tax purposes will not constitute a taxable event to the
extent that the underlying securities in each trust do not differ
materially either in kind or in extent. Unit Holders are urged to consult
their own tax advisors as to the tax consequences of exchanging Units in
their particular cases.
To exercise the Exchange Option, a Unit Holder should notify the
Sponsor of the desire to acquire units of one or more of the Exchange
Trusts. If units of the applicable outstanding series of the Exchange
Trust are at that time available for sale, the Unit Holder may select the
series or group of series for which its Units are to be exchanged. The
Unit Holder will be provided with a current prospectus or prospectuses
relating to each series in which interest is indicated.
The exchange transaction will operate in a manner essentially
identical to any secondary market transaction, i.e., Units will be
repurchased at a price equal to the aggregate bid side evaluation per Unit
of the Securities in the Portfolio, plus accrued interest. Units of the
Exchange Trust will be sold to the Unit Holder at a price equal to the
offering or bid side evaluation (as applicable) per unit of the securities
in the Exchange Trust's Portfolio, plus accrued interest and the applicable
sales charge of $25 per unit ($25 per 1,000 units in the case of a short
term or a short intermediate term Exchange Trust or 2.5% of the Public
Offering Price where the cost per unit is significantly less than $1.00).
If a Unit Holder has held its Units for less than a five-month period the
sales charge shall be the greater of (i) $25 or (ii) the difference between
the sales charge on the Exchange Trust and the sales charge on the Trust
currently held.
REINVESTMENT PROGRAMS
Distributions of interest and principal, if any, from the intermediate
term Trusts and the long term Trusts are made monthly, and distributions of
interest from the short or short intermediate term Trusts are made to Unit
Holders semiannually. Distributions of principal from the short or short
intermediate term Trust may be made more frequently than semiannually.
(See "Administration of the Trust--Distributions from the Interest and
Principal Accounts".) The Unit Holder has the option, however, of either
receiving an interest check, together with any principal payments, from the
Trustee or participating in a choice of reinvestment programs offered by
the Sponsor: (i) the Dean Witter Select Municipal Reinvestment Fund, an
open-end investment company whose investment objective is to provide a high
level of current income which is not included in gross income for Federal
income tax purposes, or (ii) the Active Assets Account. The Unit Holder
may not choose reinvestment for Units of a Trust in both the Dean Witter
Select Municipal Reinvestment Fund and the Active Assets Account.
Participation in the reinvestment programs is conditioned on such programs'
lawful qualification for sale in the state in which the Unit Holder is a
resident. Upon enrollment in a reinvestment program, the Trustee will
direct interest distributions and principal distributions, if any, to the
chosen fund. The Dean Witter Select Municipal Reinvestment Fund is
composed primarily of high yielding, long term bonds, the interest on which
is not included in gross income for Federal tax purposes, that are managed
by the InterCapital Division of the Sponsor. The Active Assets Account
offers a choice of four funds as well as check writing and a variety of
other privileges; there is an initial minimum requirement of a deposit with
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the InterCapital Division of $20,000 worth of cash or marginable securities
upon enrollment. For more information concerning these funds, the Unit
Holder should fill out and mail the attached card. The appropriate
prospectus or prospectuses will be sent to the Unit Holder according to the
indicated choice. A Unit Holder's election to participate in either
reinvestment program will apply to all Units of each Trust owned by such
Unit Holder. A Unit Holder should read the prospectus for the reinvestment
program carefully before deciding to participate.
REDEMPTION
Tender of Units
Units may be tendered to the Trustee for redemption at its unit
investment trust office upon payment of any relevant tax. (See "Trustee".)
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 canceled.
Certificates for Units to be redeemed must be properly endorsed or
accompanied by a written instrument of transfer, although redemptions
without the necessity of certificate presentation will be effected for
record Unit Holders for whom Certificates have not been issued. Unit
Holders must sign exactly as their name appears on the face of the
Certificate with the signature guaranteed by an officer of a national bank
or trust company or by a member firm of either the New York, Midwest or
Pacific Stock Exchanges. 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 Part A--"Summary of Essential Information"
on the date of tender. (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, the date of tender is the first day after such date on
which the New York Stock Exchange is open for trading, and such Units will
be deemed to have been tendered to the Trustee on such day for redemption
at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the
Interest Account, or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell 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 and holiday closings, or 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
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evaluation of the underlying Securities is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission has by
order permitted. The Trustee is not liable to any person or in any way for
any loss or damage that may result from any such suspension or
postponement.
Computation of Redemption Price per Unit
The Redemption Price per Unit of the Trust is determined by the
Trustee on the basis of the bid prices of the Securities in the Trust (or
contracts for Securities to be acquired by the Trust) as of the Evaluation
Time on the date any such determination is made. The 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 (or contracts for securities
to be acquired by the Trust) on the bid side of the market (determined by
the Evaluator as set forth below), (2) cash on hand in the Trust, and
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. Accrued interest payable in respect of the Units from the
date of tender to, but not including, the fifth business day thereafter
also comprises a part of the Redemption Price per Unit. 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
securities, (3) by appraisal, or (4) by any combination of the above.
Securities insured under a policy obtained by the issuer thereof are
entitled to the benefits of such insurance at all times and such benefits
are reflected and included in the market value of such Securities.
Purchase by the Sponsor of Units
Tendered for Redemption
The Indenture 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, may 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 not later
than the day on which the Units would otherwise have been redeemed by the
Trustee. (See "Public Offering of Units--Secondary Market".) Units held
by the Sponsor may be tendered to the Trustee for redemption as any other
Units.
The 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 of Units--Public Offering Price".) Any profit resulting
from the resale of such Units will belong to the Sponsor which likewise
will bear any loss resulting from a lower Public Offering or Redemption
Price subsequent to its acquisition of such Units. (See "Public Offering
of Units--Profit of Sponsor".)
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RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates issued in
denominations of one or more Units, which have been executed by the Trustee
and the Sponsor. These Certificates are transferable or exchangeable upon
presentation at the corporate trust office of the Trustee, properly
endorsed or accompanied by an instrument of transfer satisfactory to the
Trustee and executed by the Unit Holder or its authorized attorney,
together with the payment of $2.00, if required by the Trustee (or such
other amount as may be determined by the Trustee and approved by the
Sponsor) and any other tax or governmental charge imposed upon the transfer
of Certificates. The Trustee will replace any mutilated, lost, stolen or
destroyed Certificate upon proper identification, satisfactory indemnity
and payment of charges incurred. Any mutilated Certificate must be
presented to the Trustee before any substitute Certificate will be issued.
Certain Limitations
No Unit Holder shall have the right to vote except with respect to
removal of the Trustee, certain amendments of the Indenture, or termination
of a Trust. (See "Amendment and Termination of the Indenture".) Unit
Holders shall have no right to control the operation or administration of a
Trust in any manner, except upon the vote of 51% of the Unit Holders
outstanding at any time for purposes of amendment, or termination of a
Trust or discharge of the Trustee, all as provided in the Indenture.
The death or incapacity of any Unit Holder (or the dissolution of the
Sponsor) will not operate to terminate a Trust, nor entitle the legal
representatives or heirs of such Unit Holder to claim an accounting or to
take any other action or proceeding in any court for a partition or winding
up of a Trust.
EXPENSES AND CHARGES
Initial Expenses
All expenses and charges incurred prior to or in the establishment of
each Trust, including the cost of bond insurance premiums for Securities
for which the Sponsor has obtained bond insurance (if any), the initial
preparation, printing and execution of the Indenture and the Certificates,
the initial fees of the Evaluator, initial legal and auditing expenses, the
cost of the preparation and printing of this Prospectus and all other
advertising and selling expenses, have been or will be, paid by the Sponsor
or the members of the underwriting account.
Fees
The Sponsor's fee is set forth in Part A--"Summary of Essential
Information--Sponsor's Annual Portfolio Supervision Fee". Such fee, earned
for Portfolio supervisory services, is based upon the aggregate face amount
of Securities in each Trust at the beginning of each calendar year and may
exceed the actual costs of providing Portfolio supervisory services for
these Trusts, but at no time will the total amount the Sponsor receives for
Portfolio supervisory services rendered to all series of the Dean Witter
Select Municipal Trust in any calendar year exceed the aggregate cost to
the Sponsor of supplying such services in such year.
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For its services as Trustee under the Indenture, the Trustee receives
annually the amount set forth under Part A--"Summary of Essential
Information", computed monthly on the basis of the largest principal amount
of Securities in each Trust at any time during the preceding month.
Certain regular and recurring expenses of a Trust, including certain
mailing and printing expenses, are borne by the Trust. The Trustee also
receives benefits to the extent that it holds funds on deposit in various
non-interest bearing accounts created under the Agreement.
For each evaluation of the Securities in each Trust, the Evaluator
shall receive a fee, payable monthly, set forth under Part A--"Summary of
Essential Information".
The Sponsor's fee accrues monthly but is paid quarterly, and the
Trustee's fees and the Evaluator's fees are payable semiannually in short
and short intermediate term trusts (monthly in intermediate, intermediate
long and long term trusts) on or before each Distribution Date from the
Interest Account, to the extent funds are available and thereafter from the
Principal Account. Any of such fees may be increased without approval of
the Unit Holders in accordance with the terms of the Indenture.
Other Charges
The following additional charges are or may be incurred by the Trusts,
as more fully described in the Indenture: (a) fees of the Trustee for
extraordinary services, (b) expenses of the Trustee (including legal
expenses and the cost of an annual audit of the accounts of a Trust by an
independent public accountant selected by the Sponsor) and of counsel
designated by the Sponsor, (c) various governmental charges, (d) expenses
and costs of any action taken by the Trustee to protect the Trust and the
rights and interests of the Unit Holders, (e) indemnification of the
Trustee for any loss, liability or expenses incurred by it in the
administration of the Trust without gross negligence, bad faith, willful
misfeasance or willful misconduct on its part or reckless disregard of its
obligations and duties, (f) indemnification of the Sponsor for any losses,
liabilities and expenses incurred in acting as Sponsor or Depositor under
the Indenture without gross negligence, bad faith, willful misfeasance or
willful misconduct or reckless disregard of its obligations and duties,
(g) expenditures incurred in contacting Unit Holders upon termination of
the Trust and (h) to the extent then lawful, expenses (including legal,
auditing and printing expenses) of maintaining registration or
qualification of the Units and/or the Trust under Federal or state
securities laws so long as the Sponsor is maintaining a market for the
Units.
The fees and expenses set forth herein are payable out of each Trust
and when so paid by or owing to the Trustee are secured by a lien on that
Trust. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by each Trust, the Trustee has
the power to sell Securities to pay such amounts. To the extent Securities
are sold, the size of such Trust will be reduced and the proportions of the
types of Securities will change. Such sales might be required at a time
when Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized. Moreover, due to the minimum
principal amount in which Securities may be required to be sold, the
proceeds of such sales may exceed the amount necessary for the payment of
such fees and expenses.
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ADMINISTRATION OF THE TRUST
Records and Accounts
The Trustee will keep records and accounts of all transactions of each
Trust at its unit investment trust office. (See "Trustee".) These records
and accounts and executed copies of the Indenture will be available for
inspection by Unit Holders at reasonable times during normal business
hours. The Trustee will additionally keep on file for inspection by Unit
Holders a current list of the Securities held in a Trust. In connection
with the storage and handling of certain Securities deposited in the Trust,
the Trustee is authorized to use the services of Depository Trust Company.
These services would include safekeeping of the Securities, coupon-
clipping, computer book-entry transfer and institutional delivery services.
under the Banking Law of the State of New York, a member of the Federal
Reserve System and a clearing agency registered under the Securities
Exchange Act of 1934.
Distribution
The Trustee will collect the interest on the Securities (including
monies representing penalties for the failure to make timely payments on
the Securities, liquidated damages for default or breach of any condition
or term of the Securities, and monies paid (if any) pursuant to any
contract of insurance representing interest on the Securities) as it
becomes payable, and credit such interest to a separate Interest Account
created by the Indenture. All monies received by the Trustee from sources
other than interest will be credited to a separate Principal Account. All
funds collected or received will be held by the Trustee in trust without
interest to Unit Holders as part of each Trust or the Reserve Account (if
any) established pursuant to the Indenture, for taxes or charges referred
to herein until required to be disbursed in accordance with the provisions
of the Indenture.
Distribution of Interest and Principal
Interest and principal received by the Trust will be distributed on
each Distribution Date on a pro rata basis to Unit Holders of record as of
the preceding Record Date. All distributions will be net of applicable
expenses, funds required for the redemption of Units and, if applicable,
reimbursements to the Trustee for interest payments advanced to Unit
Holders on previous monthly Distribution Dates. (See Part A--"Summary of
Essential Information", "Expenses and Charges" and "Redemption".)
The pro rata share of the Interest Account and the pro rata share of
cash in the Principal Account represented by each Unit will be computed by
the Trustee each month as of the Record Date. (See Part A--"Summary of
Essential Information".) 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 and will not be
distributed until the following Distribution Date. The distribution to
Unit Holders as of each Record Date will be made on the following
Distribution Date or shortly thereafter and shall consist of an amount
substantially equal to one-twelfth of such Unit Holders' pro rata share of
the estimated annual income to be credited to the Interest Account after
deducting estimated expenses (the "Interest Distribution") plus such Unit
Holders' pro rata share of the cash balance in the Principal Account
computed as of the close of business on the preceding Record Date. Persons
who purchase Units between a Record Date and a Distribution Date will
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receive their first distribution on the second Distribution Date following
their purchase of Units. No distribution need be made from the Principal
Account if the balance therein is less than an amount sufficient to
distribute the Minimum Principal Distribution per Unit set forth in Part A
of the Prospectus. (See "Summary of Essential Information".) The Interest
Distribution per Unit initially will be in the amount shown under "Summary
of Essential Information" in Part A and will change as the income and
expenses of the Trust change and as Securities are exchanged, redeemed,
paid down or sold.
Because interest on the Securities is not received by a Trust at a
constant rate throughout the year, any semiannual Interest Distribution or
monthly Interest Distribution may be equal to, greater than or less than
the amount actually received by that Trust representing interest on the
Securities in its Portfolio as of a Distribution Date. In order to make
Interest Distributions at a constant amount, the Trustee is required under
the Indenture to advance such amounts as may be necessary to provide such
level Interest Distributions, thereby eliminating fluctuations which would
otherwise occur in such distributions as a result of the variances in
interest payments on Securities in the Trusts. The Trustee will be
reimbursed, without interest, for any such advances from interest received
on the Securities thereafter. If all or a portion of the Securities for
which advances have been made subsequently fail to pay interest when due,
the Trustee may recoup advances made by it in anticipation of receipt of
interest payments on such Securities by reducing the amount otherwise
distributable per Unit with respect to one or more monthly Interest
Distributions. If Units are redeemed subsequent to such advances by the
Trustee, but prior to receipt by the Trustee of actual notice of such
failure to pay interest, the amount of which was so advanced by the
Trustee, each remaining Unit Holder will be subject to a greater pro rata
reduction in its monthly Interest Distribution than would have occurred
absent such redemptions. Funds which are available for future
distributions, payments of expenses and redemptions are in accounts which
are non-interest bearing to Unit Holders and are available for use by the
Trustee, pursuant to normal banking procedures. In addition, because of
the varying interest payment dates of the Securities comprising the Trust's
Portfolio, accrued interest at any point in time will be greater than the
amount of interest actually received by the Trust and distributed to Unit
Holders. This excess accrued but undistributed interest amount (the
"accrued interest carryover"), will be added to the value of the Units on
any purchase after the date of the Prospectus.
The Trust has been structured so that a positive cash balance in the
Interest Account will be available to pay the current expenses and charges
of each Trust. Therefore, it is not anticipated that the Trustee will have
to sell Securities in each Trust to pay such expenses. The Trustee, when
making Interest Distributions, will have previously deducted from the
Interest Account the expenses and charges mentioned above, and thus will
distribute on each Distribution Date an amount which will be less than the
interest accrued to each Unit Holder on or immediately prior to such
Distribution Date by amounts equal to the current expenses and charges of
each Trust. The amount paid to a Unit Holder on a Distribution Date
typically includes interest which has recently been paid on the Securities
in the Trust. To the extent such recently received interest payments
exceed the amount of the next regularly scheduled Interest Distribution,
such interest will be held by the Trustee until the next following
Distribution Date as an asset of the Unit Holders and will be included as
part of the amount which will be received in subsequent Interest
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Distributions, upon the sale of Units or, in part, upon the sale,
redemption, or maturity of Securities in each Trust.
The Trustee will distribute to Unit Holders an amount equal to such
Unit Holder's pro rata share of the cash balance in the Principal Account
resulting from the sale, redemption or maturity of Securities, less any
monies received as proceeds of Securities which were sold to redeem
tendered Units. In a short or short intermediate term trust, the pro rata
share of the cash balance in the Principal Account will be distributed
within one month of the date of such sale, redemption or maturity of
Securities (the "Principal Record Date") to all Unit Holders of record on
the Principal Record Date. In an intermediate, intermediate long or long
term trust, the pro rata share of the cash balance in the Principal Account
will be distributed on each Distribution Date, or shortly thereafter, to
Unit Holders of record on the preceding Record Date.
Any amounts to be paid on redemption of Units representing interest
shall be withdrawn from the Interest Account to the extent funds are
available. All other amounts paid on redemption shall be withdrawn from
the Principal Account.
The Trustee has agreed to advance to the Trust the amount of accrued
interest due on the Securities in the Portfolio from their respective issue
dates or previous interest payment dates through the first expected
settlement date. This accrued interest amount will be paid to the Sponsor
as the holder of record of all Units on such date. Consequently, when the
Sponsor sells Units of a Trust after the date of the Prospectus, 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 the first
expected settlement date to, but not including, the date of settlement of
the investor's purchase (normally five business days after purchase), less
any distributions from the Interest Account. Since a person who contracts
to purchase Units on the date of the Prospectus will settle such purchase
on the first expected settlement date of Units, no accrued interest will be
added to the Public Offering Price. The Trustee will recover its
advancements to the Trust (without interest or other cost to the Trust)
from interest received on the Securities deposited in the Trust.
Reports to Unit Holders
With each distribution, the Trustee will furnish to the Unit Holders,
a statement of the amount of interest and other receipts, if any,
distributed, expressed in each case as a dollar amount per Unit (or per
1,000 Units, in the case of a short or short intermediate term Trust) and a
change of address card. In the event that the Issuer of any of the
Securities fails to make payment when due of any interest or principal and
such failure results in a change in the amount which would otherwise be
distributed as a distribution, the Trustee will, with the first such
distribution following such failure, set forth in an accompanying
statement, the Issuer and the Securities, the amount of the reduction in
the distribution per Unit resulting from such failure, the percentage of
the aggregate face amount of Securities which such Security represents and,
to the extent then determined, information regarding any disposition or
legal action with respect to such Security. Within two months after the
end of each calendar year, the Trustee will furnish to each person who at
any time during such calendar year was a Unit Holder of record a statement
setting forth:
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As to the Interest Account: the amount of interest received on the
Securities and the percentage of such amount by states and territories in
which the Issuers of the Securities are located; the amount paid from the
Interest Account upon the redemption of Units; the deductions from the
Interest Account for applicable taxes or other governmental charges, if
any, and fees and expenses of the Sponsor (if any), the Trustee, the
Evaluator and counsel; the deductions from the Interest Account for payment
into the Reserve Account; and the net amount remaining after such payments
and deductions expressed both as a total dollar amount and as a dollar
amount per Unit (or per 1,000 Units) outstanding on the last business day
of such calendar year.
As to the Principal Account: the dates of the sale, maturity,
liquidation or redemption of any of the Securities and the net proceeds
received therefrom, excluding any portion credited to the Interest Account;
the amount paid from the Principal Account representing the Units which
were redeemed; if amounts in the Interest Account were insufficient, the
deductions from the Principal Account, if any, for payment of applicable
taxes or other governmental charges, fees and expenses of the Sponsor (if
any), the Trustee, the Evaluator and counsel; if amounts in the Interest
Account were insufficient, the deductions from the Principal Account for
payment into the Reserve Account; and the net amount remaining after such
payments and deductions expressed both as a total dollar amount and as a
dollar amount per Unit (or per 1,000 Units) outstanding on the last
business day of such calendar year.
The following information: a list of the Securities of the last
business day of such calendar year; the number of Units outstanding on the
last business day of such calendar year; the Redemption Price per Unit (or
per 1,000 Units) based on the last Trust evaluation made during such
calendar year; and the amounts actually distributed during such calendar
year from the Interest and Principal Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per Unit (or per 1,000
Units) outstanding on the Record Dates for such distributions.
In order to comply with state and local tax reporting requirements,
the Trustee will furnish to Unit Holders, upon request, evaluations of the
Securities as determined by the Evaluator. The accounts of the Trust shall
be audited not less frequently than annually by independent certified
public accountants designated by the Sponsor, and the report of such
accountants will be furnished by the Trustee to Unit Holders upon request.
SPONSOR
Dean Witter Reynolds Inc. ("Dean Witter") is a corporation organized
under the laws of the State of Delaware and is a principal operating
subsidiary of Dean Witter, Discover & Co., a publicly-traded corporation
("DWDC"). Dean Witter is a financial services company that provides to its
individual, corporate, and institutional clients services as a broker in
securities and commodities, a dealer in corporate, municipal, and
government securities, an investment banker, an investment adviser, and an
agent in the sale of life insurance and various other products and
services. Dean Witter is a member firm of the New York Stock Exchange, the
American Stock Exchange, the Chicago Board Options Exchange, other major
securities exchanges and the National Association of Securities Dealers,
and is a clearing member of the Chicago Board of Trade, the Chicago
Mercantile Exchange, the Commodity Exchange Inc., and other major commo-
dities exchanges. Dean Witter is currently servicing its clients through a
network of approximately 375 domestic and international offices with
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approximately 7,500 account executives servicing individual and
institutional client accounts.
Limitations on Liability
The Sponsor is liable for the performance of its obligations arising
from its responsibilities under the Indenture, but will be under no
liability to Unit Holders for taking any action or refraining from any
action in good faith or for errors in judgment or liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any
Securities, except in case of its own willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations and duties. (See
"Sponsor-Responsibility".)
Responsibility
The Trust is a unit investment trust and is not actively managed. The
Indenture, however, permits the Sponsor to direct the Trustee to dispose of
any Security in the Trust upon the happening of certain events, including
without limitation, the following:
1. Default in the payment of principal or interest on any Security
when due and payable,
2. Institution of legal proceedings seeking to restrain or enjoin
the payment of any Security or attacking their validity,
3. A breach of covenant or warranty which could adversely affect
the payment of debt service on the Security,
4. Default in the payment of principal or interest on any other
outstanding obligations of the same Issuer of any Security,
5. In the case of a Security that is a revenue bond, a fall in
revenues, based upon official reports, substantially below the estimated
revenues calculated to be necessary to pay principal and interest,
6. A decline in market price to such an extent, or such other
market or credit factor, as in the opinion of the Sponsor would make
retention of a Security detrimental to the Trust and to the interests of
the Unit Holders,
7. Refunding or refinancing of the Security, as set forth in the
Indenture for the Trust, or
8. The loss of Federal income tax exemption with respect to
interest on the Security.
The Sponsor intends to monitor continuously developments affecting the
Securities in each Trust in order to determine whether the Trustee should
be directed to dispose of any such Securities.
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 Security 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
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respect to such Security or in the judgment of the Sponsor the Issuer will
probably default in respect to such Security 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 Indenture to the
same extent as Securities originally deposited thereunder. Within five
days after the deposit of obligations in exchange or substitution for any
of the underlying Securities, the Trustee is required to give notice
thereof to each Unit Holder, identifying the Securities eliminated and the
Securities substituted therefor. Except as stated in this and the
preceding paragraph, the acquisition by the Trust of any securities other
than the Securities initially deposited and any additional Securities
supplementally deposited in the Trust (see "Introduction" herein), and/or a
Replacement Security is prohibited.
Resignation
If at any time the Sponsor shall resign under the Indenture or shall
fail to perform or be incapable of performing its duties thereunder or
shall become bankrupt or if its affairs are taken over by public
authorities, the Indenture directs the Trustee to either (1) appoint a
successor Sponsor or Sponsors at rates of compensation deemed reasonable by
the Trustee not exceeding amounts prescribed by the Securities and Exchange
Commission, or (2) terminate the Trust. The Trustee will promptly notify
Unit Holders of any such action.
TRUSTEE
The Trustee for the Trust will be specified in Part A of this
prospectus and be either United States Trust Company of New York or The
Bank of New York. United States Trust Company of New York, with its
principal place of business at 114 West 47th Street, New York, New York
10036, and its unit investment trust office at 770 Broadway, New York, New
York 10003, has, since its establishment in 1853, engaged primarily in the
management of trust and agency accounts for individuals and corporations.
The Bank of New York has its principal place of business at 48 Wall Street,
New York, New York 10286, and its unit investment trust office at 101
Barclay Street, New York, New York 10286. Unit Holders should direct
inquiries regarding distributions, address changes and other matters
relating to the administration of a Trust for which The Bank of New York is
Trustee to Unit Investment Trust Division, P.O. Box 974, Wall Street
Station, New York, New York 10268-0974.
The Trustee is a member of the New York Clearing House Association and
is subject to supervision and examination by the Superintendent of Banks of
the State of New York, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System. In connection with the
storage and handling of certain Securities deposited in a Trust, the
Trustee may use the services of the Depository Trust Company. These
services may include safekeeping of the Securities and coupon-clipping,
computer book-entry transfer and institutional delivery services. The
Depository Trust Company is a limited purpose trust company organized under
the Banking Law of the State of New York, a member of the Federal Reserve
System and a clearing agency registered under the Securities Exchange Act
of 1934.
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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 moneys,
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 willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations and duties. In
addition, the Indenture provides that 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 to pay under current
or future laws of the United States or any other authority having
jurisdiction.
Responsibility
For information relating to the responsibilities of the Trustee under
the Indenture, reference is made to the material set forth under "Rights of
Unit Holders" and "Sponsor--Resignation".
Resignation and Removal
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, the Sponsor may remove the
Trustee and appoint a successor as provided in the Indenture. The Sponsor
may remove the Trustee in the event that the Sponsor determines that the
Trustee has materially failed to perform its duties under the Indenture and
the interest of Unit Holders has been substantially impaired as a result,
and such failure has continued for a period of sixty days following the
Trustee's receipt of notice of such determination by the Sponsor. The
Sponsor may also remove the Trustee in other instances as specified in the
Indenture. Such resignation or removal shall become effective upon the
acceptance of appointment by the successor trustee. If upon resignation of
a trustee no successor has been appointed or, if appointed, has not
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
The Evaluator is Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc., with main offices located at 65 Broadway, New
York, New York 10004.
Limitations on Liability
The Trustee, Sponsor and Unit Holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
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
judgment. But this provision shall not protect the Evaluator in cases of
48
<PAGE>
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties.
Responsibility
The Indenture requires the Evaluator to evaluate the Securities in a
Trust on the basis of their bid prices on the last business day of June and
December in each year, on the day on which 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 or bid prices as appropriate, see "Public Offering of
Units--Public Offering Price".
Resignation
The Evaluator may resign or may be removed by the Sponsor, and in such
event, the Sponsor is to use its best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective upon the
acceptance of appointment by a 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 INDENTURE
Amendment
The Sponsor and the Trustee have the power to amend the Indenture
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
Indenture 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 interests of the Unit Holders; provided that the
Indenture may also be amended by the Sponsor and the Trustee (or the
performance of any of the provisions of the Indenture may be waived) with
the consent of Unit Holders owning 51% of the Units of the Trust at the
time outstanding for the purposes of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of
modifying in any manner the rights of Unit Holders. In no event, however,
shall the Indenture be amended to increase the number of Units issuable
thereunder, to permit the deposit or acquisition of securities or other
property either in addition to or in substitution for any of the Securities
initially deposited in the Trust, except for the substitution of certain
refunding securities for such Securities as initially provided in the
Indenture or in connection with a supplemental deposit of Securities and
issuance of Additional Units, nor shall the Indenture be amended to provide
the Trustee with the power to engage in business or investment activities
not specifically authorized in the Indenture as originally adopted or so as
to affect adversely the characterization of the Trust as a grantor trust
for Federal income tax purposes. In the event of any amendment, the
Trustee is obligated to notify promptly all Unit Holders of the substance
of such amendment.
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<PAGE>
Termination
The Trust may be terminated at any time by the consent of the holders
of 51% of the Units or by the Trustee upon the direction of the Sponsor
when the value of the Trust as shown on the last business day of June or
December in any year is less than 40% of the value of the Securities
initially deposited therein supplemented by the deposit of additional
Securities, if any. However, in no event may the Trust continue beyond the
Mandatory Termination Date set forth under Part A--"Summary of Essential
Information." 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 Securities remaining in the
terminated Trust, 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. The sale of
Securities in a Trust upon termination may result in a lower amount than
might otherwise be realized if such sale were not required at such time.
For this reason, among others, the amount realized by a Unit Holder upon
termination may be less than the principal amount of Securities represented
by the Units held by such Unit Holder.
LEGAL OPINIONS
Certain legal matters in connection with the Units offered hereby have
been passed upon by Cahill Gordon & Reindel, a partnership including a
professional corporation, 80 Pine Street, New York, New York 10005, as
special counsel for the Sponsor.
AUDITORS
The financial statements of the Trust included in this Prospectus have
been audited by Deloitte & Touche, certified public accountants, as stated
in their report appearing herein, and are included in reliance upon such
report given upon the authority of that firm as experts in accounting and
auditing.
BOND RATINGS
Standard & Poor's Corporation
A Standard & Poor's Corporation corporate or municipal debt rating is
a current assessment of the creditworthiness of an obligor with respect to
a specific obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished to Standard &
Poor's Corporation by the issuer or obtained by Standard & Poor's
Corporation from other sources it considers reliable. Standard & Poor's
Corporation does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may
__________
2 As described by the rating agencies.
50
<PAGE>
be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations: (1) 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; (2) nature of and
provisions of the obligation; and (3) 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 -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's Corporation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and
repay principal, differs from the highest rated issues only in small
degree.
A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB -- Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits 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 debt in this category than in higher rated
categories.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion, makes no comment
on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise judgment with respect to such
likelihood and risk.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the
top four categories ("AAA," "AA," "A," "BBB," commonly known as "Investment
Grade" ratings) are generally regarded as eligible for bank investment. In
addition, the laws of various states governing legal investments impose
certain rating or other standards for obligations eligible for investment
by savings banks, trust companies, insurance companies and fiduciaries
generally.
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<PAGE>
Moody's Investors Service
A brief description of the applicable Moody's Investors Service's
rating symbols and their meanings is as 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. "Aa" bonds 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.
Rating symbols may include numerical modifiers "1," "2," or "3." The
numerical modifier "1" indicates that the security ranks at the high end,
"2" in the mid-range, and "3" nearer the low end of the generic category.
These modifiers of rating symbols "Aa," "A" and "Baa" are to give investors
a more precise indication of relative debt quality in each of the
historically defined categories.
Conditional ratings, indicated by "Con" are given to bonds for which
the security depends upon the completion of some act or the fulfillment of
some condition. 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. A parenthetical rating
denotes probable credit stature upon completion of construction or
elimination of basis of condition.
The following summarizes the applicable designations used by Moody's
for short-term notes and short-term loans:
MIG 1 -- Loans bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
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<PAGE>
MIG 2 -- Loans bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding
group.
Fitch Investors Service, Inc.
A brief description of the applicable Fitch Investors Services, Inc.
rating symbols and their meanings is as follows:
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A -- Bonds considered to be investment grade and of high credit
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 -- Bonds considered to be investment grade and of satisfactory
credit 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 have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
Plus (+) Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the "AAA"
category.
Conditional: A conditional rating is premised on the successful
completion of a project or the occurrence of a specific event.
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<PAGE>
FEDERAL TAX FREE VS. TAXABLE INCOME
This table shows the approximate yields which taxable securities must
earn in various income brackets to produce, after Federal income tax,
returns equivalent to 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 or her taxable income
resulting from a switch from taxable to tax-exempt securities or vice
versa. The table reflects the Federal income tax rates and tax brackets
for the 1994 taxable year under the Code as in effect on the date of this
Prospectus. 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>
1994 Tax Year
<CAPTION>
___________________________________________________________________________________
Taxable Income Bracket* Tax Exempt Yield
Joint Single Tax
Return Return Rate 4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable Equivalent Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $38,000 Up to $22,750 15.0% 4.705 5.294 5.882 6.470 7.059 7.647 8.235
$38,000-91,850 $22,750-55,100 28.0% 5.555 6.250 6.944 7.638 8.333 9.028 9.722
$91,850-140,000 $55,100-115,000 31.0% 5.797 6.521 7.246 7.971 8.696 9.420 10.145
$140,000-250,000 $115,000-250,000 36.0% 6.250 7.031 7.812 8.593 9.375 10.156 10.937
Over $250,000 Over $250,000 39.6% 6.622 7.450 8.278 9.105 9.933 10.761 11.589
</TABLE>
*The income amount shown is income subject to Federal income
tax reduced by adjustments to income, exemptions, and itemized
deductions or the standard deduction. It is assumed that the
investor is not subject to the alternative minimum tax. Where
applicable, investors should take into account the provisions of
the Code under which the benefit of certain itemized deductions
and the benefit of personal exemptions are limited in the case of
higher income individuals. Under the Code, an individual taxpayer
with adjusted gross income in excess of a $111,800 threshold
amount is subject to an overall limitation on certain itemized
deductions, requiring a reduction equal to the lesser of (i) 3% of
adjusted gross income in excess of the $111,800 threshold amount
or (ii) 80% of the amount of such itemized deductions otherwise
allowable. The benefit of each personal exemption is phased out
for married taxpayers filing a joint return with adjusted gross
income in excess of $167,700 and for single taxpayers with
adjusted gross income in excess of $111,800. Personal exemptions
are phased out at the rate of two percentage points for each
$2,450 (or fraction thereof) of adjusted gross income in excess of
the applicable threshold amount. The first three Federal tax
brackets, the threshold amounts at which itemized deductions are
subject to reduction, and the range over which personal exemptions
are phased out will be adjusted for inflation in each year after
1994. The 36% and the 39.6% Federal tax brackets will be adjusted
for inflation for each year after 1994, using 1993 as the base
year.
54
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following documents:
The facing sheet.
The Cross Reference Sheet.
The Prospectus.
The signatures.
Consents of the Evaluator, Independent Auditors, Standard &
Poor's Ratings Services and California counsel; all other
consents were previously filed.
The following exhibits:
8. 1. Opinion of Kopesky & Welke, LLP.
2. Opinion of Whiteford, Taylor & Preston
L.L.P.
23. 1a. Consents of Kenny S&P Evaluation Services,
a division of J.J. Kenny Co., Inc.
1b. Consent of Independent Auditors.
1d. Consent of Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
27. 1. Financial Data Schedule of
Dean Witter Select Municipal Trust,
Insured California Intermediate Term
Portfolio Series 11.
2. Financial Data Schedule of
Dean Witter Select Municipal Trust,
Delaware Portfolio Series 13.
3. Financial Data Schedule of
Dean Witter Select Municipal Trust, Maryland
Portfolio Series 15.
<PAGE>
CONSENT OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement are contained in their
opinions filed as Exhibits EX-5, EX-8, EX-8.1 and EX-8.2 to this
Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
each of the registrants, Dean Witter Select Municipal Trust, Insured
California Intermediate Term Portfolio Series 11, Delaware Portfolio Series
13 and Maryland Portfolio Series 15, certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 3 to the Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, all in The City
of New York and State of New York on the 14th day of November, 1996.
DEAN WITTER SELECT MUNICIPAL TRUST,
INSURED CALIFORNIA INTERMEDIATE TERM
PORTFOLIO SERIES 11
DELAWARE PORTFOLIO SERIES 13
MARYLAND PORTFOLIO SERIES 15
(Registrants)
By: DEAN WITTER REYNOLDS INC.
(Depositor)
Thomas Hines
Thomas Hines
Authorized Signatory
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 3 to the Registration Statement has been
signed on behalf of Dean Witter Reynolds Inc., the Depositor, by the
following person in the following capacities and by the following persons
who constitute a majority of the Depositor's Board of Directors in The City
of New York and State of New York on this 14th day of November, 1996.
DEAN WITTER REYNOLDS INC.
Name Office
Philip J. Purcell Chairman and Chief )
Executive Officer )
and Director<F33> )
By: Thomas Hines
Thomas Hines
Attorney-in-fact<F33>
_________________________
<F33> Executed copies of the Powers of Attorney have been filed with the
Securities and Exchange Commission in connection with Amendment No. 1
to the Registration Statement on Form S-6 for File No. 333-10499.
<PAGE>
Name Office
Richard M. DeMartini Director<F33>
Nancy S. Donovan Director<F33>
Robert J. Dwyer Director<F33>
Christine A. Edwards Director<F33>
Charles A. Fiumefreddo Director<F33>
James F. Higgins Director<F33>
Stephen R. Miller Director<F33>
Richard F. Powers Director<F33>
Philip J. Purcell Director<F33>
Thomas C. Schneider Director<F33>
William B. Smith Director<F33>
_________________________
<F33> Executed copies of the Powers of Attorney have been filed with the
Securities and Exchange Commission in connection with Amendment No. 1
to the Registration Statement on Form S-6 for File No. 333-10499.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TITLE OF DOCUMENT
8. 1. Opinion of Kopesky & Welke, LLP
2. Opinion of Whiteford, Taylor & Preston
L.L.P.
23. 1a. Consents of Kenny S&P Evaluation Services,
a division of J.J. Kenny Co., Inc.
1b. Consent of Deloitte & Touche LLP
1d. Consent of Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc.
27. 1. Financial Data Schedule of
Dean Witter Select Municipal Trust,
Insured California Intermediate Term Portfolio
Series 11
2. Financial Data Schedule of
Dean Witter Select Municipal Trust,
Delaware Portfolio Series 13
3. Financial Data Schedule of
Dean Witter Select Municipal Trust,
Maryland Portfolio Series 15
Exhibit 8.1
Letterhead of Kopesky & Welke, LLP
November 14, 1996
Dean Witter Reynolds Inc.
Two World Trade Center
New York, NY 10048
Re: Dean Witter Select Municipal Trust,
Insured California Intermediate Term
Portfolio Series 11
Gentlemen:
Pursuant to your request, we have reviewed the opinion included
in the Prospectus for the captioned Series expressed by prior California
counsel to the Sponsor regarding the California income and property tax
status of the above-captioned Series of the Dean Witter Select Municipal
Trust. We are of the opinion that such opinion, a copy of which is
included in the Prospectus for the above-captioned Series, remains valid
and that no change has occurred which would require a change to such
opinion and you may rely on it in connection with the filing of a Post
Effective Amendment to such Series.
We consent to the use of our name under the caption "California
Tax Status" in the Prospectus comprising a part of the above-captioned Post
Effective Amendment and we consent to the filing of this opinion as an
exhibit to said Post Effective Amendment.
Very truly yours,
Kopesky & Welke, LLP
Kopesky & Welke, LLP
<PAGE>
Exhibit 8.2
Letterhead of WHITEFORD, TAYLOR & PRESTON L.L.P.
November 14, 1996
Dean Witter Reynolds, Inc.
Two World Trade Center
New York, New York 10048
The Bank of New York
101 Barclay Street
New York, New York 10286
Ladies and Gentlemen:
You have asked for our opinion with respect to certain Maryland
income tax consequences of the Dean Witter Select Municipal Trust (the
"Investment Trust").
The Investment Trust was created under the terms of an
agreement (the "Indenture") among Dean Witter Reynolds, Inc. (the
"Sponsor"), The Bank of New York as Trustee (the "Trustee") and Kenny S&P
Evaluation Services as the evaluator (the "Evaluator").
The Investment Trust consists of separate unit investment
trusts (the "Unit Investment Trusts") combined under the Indenture. One
such Unit Investment Trust, designated the Maryland Portfolio - Series 15
(hereinafter, the "Maryland Trust"), holds a fixed portfolio consisting
exclusively of interest bearing obligations issued (i) by or on behalf of
the State of Maryland, its agencies, authorities or political subdivisions,
and (ii) by the Government of Puerto Rico or by its authority (hereinafter
the "Bonds"). Upon deposit of the Bonds, the Trustee issued Certificates
of ownership representing fractional individual interests ("Units") in the
Maryland Trust. Certificates representing the Units in the Maryland Trust
were offered and sold by the Sponsor to holders (the "Unit Holders").
In the opinion of Cahill Gordon & Reindel, counsel to the
Sponsor, set forth in Part B of the prospectus, inter alia, the Maryland
Trust is not an association taxable as a corporation for Federal income tax
purposes, and interest on an underlying security which is exempt from
Federal income tax
<PAGE>
under the Internal Revenue Code of 1986, as amended (the "1986 Code"), or
the Internal Revenue Code of 1954, as amended, when received by the Trust
will retain its status as tax-exempt interest for Federal income tax
purposes to the Unit Holders. Each Unit Holder will be considered the
owner of a pro rata portion of the Trust's assets under Sections 671-678 of
the 1986 Code. Each Unit Holder will be considered to have received his
pro rata share of interest derived from the Trust's assets when it is
received by the Trust and each Unit Holder will have a taxable event when
an underlying security is disposed of (whether by sale, exchange,
redemption, or payment at maturity) or when the Unit Holder redeems or
sells his Units.
In the opinion of Whiteford, Taylor & Preston L.L.P., special
Maryland Counsel on Maryland income tax matters, which relies on the
opinion of Cahill Gordon & Reindel regarding federal income tax matters
relating to the Maryland Trust, under existing Maryland income tax law
applicable to individuals who are Maryland residents and to subchapter C
corporations subject to the Maryland corporate income tax:
The Maryland Trust will be treated as a trust for Maryland
income tax purposes and not as an association taxable as a corporation.
Each transaction of the Maryland Trust will be treated for such purposes as
a transaction of the several Unit Holders and not as a transaction of the
Maryland Trust that could give rise to Maryland taxable income to the
Maryland Trust.
The Maryland corporate income tax is imposed at the rate of 7%
of the corporation's Maryland taxable income. The Maryland income tax is
imposed upon the taxable income of resident individuals. The counties and
City of Baltimore are required by State law to levy local income taxes that
"piggyback" the State income tax; i.e., these taxes are determined as a
percentage ranging from 20% to 60% of the liability of the resident for the
state income tax. The local income tax applies to individuals who are
residents of the local jurisdiction.
The State imposes a maximum 5% tax rate for taxable income of
individuals in excess of $3,000. The State permits local jurisdictions to
impose a "piggyback" tax rate on individuals of up to a maximum of 60% of
the State rate. For 1996 all counties and the City of Baltimore will
impose "piggyback" income taxes at a 50% rate except as follows: Worcester
County, 30%; Baltimore, Queen Anne's, and Talbot Counties, 55%; Carroll
County, 58%; Allegany, Caroline, Montgomery, Prince George's, St. Mary's,
Somerset, and Wicomico
<PAGE>
Counties, 60%. The counties and the City of Baltimore may increase or
decrease these rates in increments of 5% (or, at the option of the county,
by multiples of 2% where the county rate is in excess of 50% of the State
rate) effective on January 1 of the year that the county or City designates
by giving notice to the State Comptroller of the rate change and its
effective date on or before July 1 prior to its effective date. Effective
January 1, 1997, the piggyback tax rate in Talbot County will be 40%.
Otherwise, the local rates set forth above will remain in effect during
1997.
Individual Unit Holders who are residents of Maryland and Unit
Holders which are subchapter C corporations subject to the Maryland
corporate income tax are not required to include in their regular Maryland
taxable income their respective shares of interest earnings on obligations
of the State of Maryland, its agencies, authorities or political
subdivisions derived through the Maryland Trust to the extent that such
interest is excludable from gross income for federal income tax purposes.
In certain cases an exemption for interest on Maryland State, county and
municipal obligations, and obligations of certain agencies thereof, is
provided from Maryland income tax, whether or not the interest income is
exempt from federal income tax. Furthermore, Unit Holders are not required
to include in their regular Maryland taxable income their respective shares
of interest earnings on bonds issued by the government of Puerto Rico or by
its authority, which are derived through the Maryland Trust to the extent
that such interest is excludable from gross income for federal income tax
purposes and is also excludable from any state income taxation under
federal law. Individual Unit Holders, however, may be subject to the
Maryland income tax on tax preferences with respect to 50% of any interest
derived through the Maryland Trust from non-Maryland obligations in excess
of a threshold amount and constituting a tax preference for federal income
tax purposes.
As a general rule, to the extent that gain from the sale,
exchange or other disposition of obligations held by the Maryland Trust
(whether as a result of a sale or exchange of such obligations by the
Maryland Trust or as a result of a sale or exchange of a Unit by a Unit
Holder) is includable in the federal adjusted gross income of a resident
individual, or taxable income of a corporation, such gain will be included
in the calculation of the Unit Holder's Maryland taxable income. Maryland
law does not generally exclude capital gains from income tax. However,
under Maryland law, any profit realized upon the sale or exchange of bonds
issued by the State of Maryland, its political subdivisions and certain
specified other Maryland issuers, is specifically excluded from the
<PAGE>
computation of the Maryland taxable income of individuals and corporations.
Although there are no Maryland authorities on point, it is possible that
the taxing authorities in Maryland could take the position that the
statutory exclusion or exemption of profit on these obligations requires a
disallowance in the calculation of Maryland income tax of any loss that may
be realized on such obligations.
With respect to the amount of Social Security benefits required
to be included in the calculation of federal adjusted gross income, a
subtraction modification is provided for under the Maryland income tax law
so that such amount is eliminated in determining Maryland taxable income.
Tax counsel should be consulted as to other Maryland tax
consequences not specifically considered herein, and as to the Maryland tax
status of Unit Holders in the Maryland Trust which are neither individuals
resident in Maryland nor subchapter C corporations. By way of example, no
opinion is expressed as to the tax consequences under the Maryland
franchise tax applicable to a financial institution which is a Unit Holder
in the Maryland Trust. However, it should be noted that, pursuant to
legislation passed in 1995, interest received by certain financial
institutions on certain government obligations will be subject to partial
exclusion from tax commencing in 1996. Beginning in 1998, certain
financial institutions will be subject to the Maryland corporate income tax
rather than the franchise tax. Further, no opinion is being rendered as to
the Maryland tax consequences resulting from any proposed or future tax
legislation.
We have not examined any of the obligations deposited in the
Maryland Trust, and express no opinion as to whether the interest on any
such obligations is, in fact, tax exempt upon receipt by the Maryland
Trust, or would be tax exempt if directly received by a Unit Holder; nor
have we made any review of the proceedings relating to the issuance of
bonds, or the basis for bond counsel opinions.
We hereby consent to the filing of this opinion as an exhibit
to the Post Effective Amendment relating to the Units referred to above,
and the use of our name, to the reference of our firm, and the inclusion of
this opinion in said Post Effective Amendment and in the related
Prospectus.
Very truly yours,
WHITEFORD, TAYLOR & PRESTON
L.L.P.
<PAGE>
Exhibit 23.1a.
Letterhead of KENNY S&P EVALUATION SERVICES,
A Division of J.J. KENNY CO., INC.
November 14, 1996
Dean Witter Reynolds Inc.
Two World Trade Center
New York, NY 10048
Re: Dean Witter Select Municipal Trust,
Insured California Intermediate Term
Portfolio Series 11
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-49703 for the above-captioned trust. We
hereby acknowledge that Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. is currently acting as the evaluator for the trust. We
hereby consent to the use in the Amendment of the reference to Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in
the above-referenced Amendment to the Registration Statement for the
respective bonds comprising the trust portfolio are the ratings currently
indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Frank A. Cicotto
Frank A. Cicotto
Vice President
<PAGE>
Letterhead of KENNY S&P EVALUATION SERVICES,
A Division of J.J. KENNY CO., INC.
November 14, 1996
Dean Witter Reynolds Inc.
Two World Trade Center
New York, NY 10048
Re: Dean Witter Select Municipal Trust,
Delaware Portfolio Series 13
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-49595 for the above-captioned trust. We
hereby acknowledge that Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. is currently acting as the evaluator for the trust. We
hereby consent to the use in the Amendment of the reference to Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in
the above-referenced Amendment to the Registration Statement for the
respective bonds comprising the trust portfolio are the ratings currently
indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Frank A. Cicotto
Frank A. Cicotto
Vice President
<PAGE>
Letterhead of KENNY S&P EVALUATION SERVICES,
A Division of J.J. KENNY CO., INC.
November 14, 1996
Dean Witter Reynolds Inc.
Two World Trade Center
New York, NY 10048
Re: Dean Witter Select Municipal Trust,
Maryland Portfolio Series 15
Gentlemen:
We have examined the post-effective Amendment to the
Registration Statement File No. 33-40710 for the above-captioned trust. We
hereby acknowledge that Kenny S&P Evaluation Services, a division of J.J.
Kenny Co., Inc. is currently acting as the evaluator for the trust. We
hereby consent to the use in the Amendment of the reference to Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc. as evaluator.
In addition, we hereby confirm that the ratings indicated in
the above-referenced Amendment to the Registration Statement for the
respective bonds comprising the trust portfolio are the ratings currently
indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Frank A. Cicotto
Frank A. Cicotto
Vice President
<PAGE>
Exhibit 23.1b.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated November 5, 1996, accompanying the
financial statements of the Dean Witter Select Municipal Trust Insured
California Intermediate Term Portfolio Series 11, Delaware Portfolio
Series 13 and Maryland Portfolio Series 15 included herein and to the
reference to our Firm as experts under the heading "Auditors" in the
prospectus which is a part of this registration statement.
DELOITTE & TOUCHE LLP
November 14, 1996
New York, New York
<PAGE>
Exhibit 23.1d.
Letterhead of Standard & Poor's Rating Services,
A Division of The McGraw-Hill Companies, Inc.
November 14, 1996
Dean Witter Reynolds Inc.
Two World Trade Center
New York, New York 10048
Re: Dean Witter Select Municipal Trust,
Insured California Intermediate Term
Portfolio Series 11
We have received the post-effective amendment to the
registration statement SEC file number 33-49703 for the above-captioned
trust.
Since the portfolio is composed solely of securities covered by
bond insurance policies that insure against default in the payment of
principal and interest on the securities for so long as they remain
outstanding and such policies have been issued by one or more insurance
companies which have been assigned "AAA" claims paying ability ratings by
Standard & Poor's, we reaffirm the assignment of a "AAA" rating to the
units of the trust and a "AAA" rating to the securities contained in the
trust.
You have permission to use the name of Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings
are not "market" ratings nor recommendations to buy, hold, or sell the
units of the trust or the securities in the trust. Further, it should be
understood that the rating on the units does not take into account the
extent to which fund expenses or portfolio asset sales for less than the
fund's purchase price will reduce payment to the unit holders of the
interest and principal required to be paid on the portfolio assets.
Standard & Poor's reserves the right to advise its own clients,
subscribers, and
<PAGE>
-2-
the public of the ratings. Standard & Poor's relies on the sponsor and its
counsel, accountants, and other experts for the accuracy and completeness
of the information submitted in connection with the ratings. Standard &
Poor's does not independently verify the truth or accuracy of any such
information.
This letter evidences our consent to the use of the name of
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. in connection with the rating assigned to the units in the
amendment referred to above. However, this letter should not be construed
as a consent by us, within the meaning of Section 7 of the Securities Act
of 1933, to the use of the name of Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. in connection with the ratings
assigned to the securities contained in the trust. You are hereby
authorized to file a copy of this letter with the Securities and Exchange
Commission.
We are pleased to have had the opportunity to be of service to
you. If we can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Sanford B. Bragg
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR DEAN WITTER SELECT
MUNICIPAL TRUST INSURED CALIFORNIA
INTERMEDIATE TERM PORTFOLIO SERIES 11 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
<RESTATED>
<CIK> 0000906452
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM
PORTFOLIO SERIES 11
<SERIES>
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
INSURED CALIFORNIA INTERMEDIATE TERM
PORTFOLIO SERIES
<NUMBER> 11
<MULTIPLIER> 1
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-1-1995
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 3,465,052
<INVESTMENTS-AT-VALUE> 3,385,712
<RECEIVABLES> 31,549
<ASSETS-OTHER> 16,787
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,434,048
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,563
<TOTAL-LIABILITIES> 4,563
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,464,959
<SHARES-COMMON-STOCK> 3,496,000
<SHARES-COMMON-PRIOR> 3,750,000
<ACCUMULATED-NII-CURRENT> 43,866
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (79,340)
<NET-ASSETS> 3,429,485
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 161,235
<OTHER-INCOME> 3,784
<EXPENSES-NET> 7,390
<NET-INVESTMENT-INCOME> 157,629
<REALIZED-GAINS-CURRENT> (11,031)
<APPREC-INCREASE-CURRENT> 47,008
<NET-CHANGE-FROM-OPS> 193,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 154,286
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 254,000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (203,367)
<ACCUMULATED-NII-PRIOR> 47,053
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR DEAN WITTER SELECT
MUNICIPAL TRUST DELAWARE PORTFOLIO
SERIES 13 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<RESTATED>
<CIK> 0000902048
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES 13
<SERIES>
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
DELAWARE PORTFOLIO SERIES
<NUMBER> 13
<MULTIPLIER> 1
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-1-1995
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 2,070,321
<INVESTMENTS-AT-VALUE> 1,984,177
<RECEIVABLES> 26,802
<ASSETS-OTHER> 5,489
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,016,468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,141
<TOTAL-LIABILITIES> 2,141
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,070,321
<SHARES-COMMON-STOCK> 2,085
<SHARES-COMMON-PRIOR> 2,085
<ACCUMULATED-NII-CURRENT> 30,150
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (86,144)
<NET-ASSETS> 2,014,327
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 97,381
<OTHER-INCOME> 3,048
<EXPENSES-NET> 5,691
<NET-INVESTMENT-INCOME> 94,738
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 14,054
<NET-CHANGE-FROM-OPS> 108,792
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 92,511
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,281
<ACCUMULATED-NII-PRIOR> 30,972
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR DEAN WITTER SELECT
MUNICIPAL TRUST MARYLAND PORTFOLIO
SERIES 15 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<RESTATED>
<CIK> 0000874631
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES 15
<SERIES>
<NAME> DEAN WITTER SELECT MUNICIPAL TRUST
MARYLAND PORTFOLIO SERIES
<NUMBER> 15
<MULTIPLIER> 1
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-1-1995
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 2,965,246
<INVESTMENTS-AT-VALUE> 2,858,786
<RECEIVABLES> 32,202
<ASSETS-OTHER> 18,541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,909,529
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,188
<TOTAL-LIABILITIES> 3,188
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,965,246
<SHARES-COMMON-STOCK> 3,015
<SHARES-COMMON-PRIOR> 3,015
<ACCUMULATED-NII-CURRENT> 47,555
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (106,460)
<NET-ASSETS> 2,906,341
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 134,670
<OTHER-INCOME> 3,206
<EXPENSES-NET> 6,151
<NET-INVESTMENT-INCOME> 131,725
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 23,334
<NET-CHANGE-FROM-OPS> 155,059
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 128,439
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,620
<ACCUMULATED-NII-PRIOR> 47,474
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
