<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1996
REGISTRATION NO. 333-00065
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
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:
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
B. NAME OF DEPOSITOR:
EVEREN UNIT INVESTMENT TRUSTS,
a service of EVEREN Securities, Inc.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
EVEREN UNIT INVESTMENT TRUSTS
77 West Wacker Drive, 29th Floor
Chicago, Illinois 60601
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE: Copy to:
ROBERT K. BURKE MARK J. KNEEDY
77 West Wacker Drive, 29th Floor c/o Chapman and Cutler
Chicago, Illinois 60601 111 West Monroe Street
Chicago, Illinois 60603
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE AND AMOUNT OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES BEING REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series An indefinite number of Indefinite $500 (previously paid)
41 Units of Beneficial Inter-
est pursuant to Rule 24f-2
under the Investment Com-
pany Act of 1940
</TABLE>
E. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
[X] Check box if it is proposed that this filing will become effective at
2:00 P.M. on January 10, 1996 pursuant to paragraph (b) of Rule 487.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a) may determine.
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
----------------
CROSS-REFERENCE SHEET
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTIONS AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
I. ORGANIZATION AND GENERAL INFORMATION
<C> <S> <C>
1. (a)Name of trust................... Prospectus front cover
(b)Title of securities issued...... Essential Information
2. Name and address of each depositor. General Information--Administration of
the Trusts
3. Name and address of trustee........
4. Name and address of principal The Tax-Exempt Portfolios--
underwriters...................... Underwriting
5. State of organization of trust..... The Trust Funds
6. Execution and termination of trust The Trust Funds; General Information--
agreement......................... Administration of the Trusts
7. Changes of name.................... The Trust Funds
8. Fiscal year........................ *
9. Litigation.........................
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. (a)Registered or bearer securities. General Information--Unitholders
(b)Cumulative or distributive
securities........................ The Trust Funds
(c)Redemption...................... General Information--Redemption
(d)Conversion, transfer, etc....... General Information--Unitholders;
General Information--Market for Units
(e)Periodic payment plan........... *
(f)Voting rights................... General Information--Unitholders
General Information--Investment
(g)Notice of certificateholders.... Supervision; General Information--
Administration of the Trusts; General
Information--Unitholders
(h)Consents required............... General Information--Unitholders;
General Information--Administration of
the Trusts
(i)Other provisions................ The Tax-Exempt Portfolios--Federal Tax
Status; The Tax-Exempt Portfolios--
Insurance on the Bonds
Type of securities comprising The Trust Funds; General Information--
11. units............................. Trust Information
12. Certain information regarding peri-
odic payment
certificates...................... *
Essential Information; Public Offering
of Units; General Information--
13. (a) Load, fees, expenses, etc...... Interest, Estimated Long-Term Return
and Estimated Current Return; General
Information--Expenses of the Trusts
</TABLE>
- --------
* Inapplicable, answer negative or not required.
i
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
----------- ---------------------
<C> <S> <C>
(b)Certain information regarding
periodic payment certifi-
cates....................... *
(c)Certain percentages........... Essential Information; Public Offering
of Units
(d)Certain other fees, etc. pay-
able by holders............. General Information--Unitholders
(e)Certain profits receivable by
depositor, principal under-
writers, trustee or affili- General Information--Expenses of the
ated persons................ Trusts; Public Offering of Units
(f)Ratio of annual charges to in-
come........................ *
The Trust Funds;
14. Issuance of trust's securities... General Information--Unitholders
15. Receipt and handling of payments
from purchasers................. *
16. Acquisition and disposition of The Trust Funds; General Information--
underlying securities........... Trust Information; General
Information--Investment Supervision
General Information--Market for Units;
General Information--Redemption;
17. Withdrawal or redemption......... Public Offering of Units
18. (a)Receipt, custody and disposi-
tion of income.............. General Information--Unitholders
(b)Reinvestment of distributions. General Information--Distribution
Reinvestment
(c)Reserves or special funds..... General Information--Expenses of the
Trusts
(d)Schedule of distributions..... *
General Information--Unitholders;
19. Records, accounts and reports.... General Information--Redemption;
General Information--Administration of
the Trusts
20. Certain miscellaneous provisions
of trust agreement
(a)Amendment..................... General Information--Administration of
the
(b)Termination................... Trusts
(c)and (d) Trustee, removal and General Information--Administration of
successor................... the Trusts
(e)and (f) Depositor, removal and General Information--Administration of
successor................... the Trusts
21. Loans to security holders........ *
22. Limitations on liability......... General Information--Administration of
the Trusts
23. Bonding arrangements............. *
24. Other material provisions of
trust agreement................. *
III. ORGANIZATION, PERSONNEL AND
AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor........ General Information--Administration of
the Trusts
26. Fees received by depositor....... See Items 13(a) and 13(e)
27. Business of depositor............ General Information--Administration of
the Trusts
28. Certain information as to offi-
cials and affiliated persons of General Information--Administration of
depositor....................... the Trusts
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
<C> <S> <C>
29. Voting securities of depos- General Information--Administration of the
itor...................... Trusts
30. Persons controlling deposi-
tor.......................
31. Payment by depositor for
certain services rendered
to trust..................
32. Payment by depositor for *
certain other services
rendered to trust.........
33. Remuneration of employees
of depositor for certain
services rendered to
trust.....................
34. Remuneration of other per-
sons for certain services
rendered to trust.........
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's se- Public Offering of Units
curities by states........
36. Suspension of sales of *
trust's securities........
37. Revocation of authority to
distribute................
38. (a)Method of distribution.. Public Offering of Units;
(b)Underwriting agreements. General Information--Market for Units;
(c)Selling agreements...... Public Offering of Units; The Tax-Exempt
Portfolios--Underwriting
39. (a)Organization of princi-
pal underwriters..........
(b)N.A.S.D. membership of General Information--Administration
principal underwriters.... of the Trusts
40. Certain fees received by See Items 13(a) and 13(e)
principal underwriters....
41. (a)Business of principal General Information--Administration
underwriters.............. of the Trusts
(b)Branch offices of prin-
cipal underwriters........
(c)Salesmen of principal *
underwriters..............
42. Ownership of trust's secu-
rities by certain persons.
43. Certain brokerage commis-
sions received by princi-
pal underwriters.......... Public Offering of Units
44. (a)Method of valuation..... Public Offering of Units
(b)Schedule as to offering *
price.....................
(c)Variation in offering Public Offering of Units
price to certain persons..
45. Suspension of redemption General Information--Redemption
rights....................
46. (a)Redemption valuation.... General Information--Redemption;
General Information--Market for Units;
Public Offering of Units
(b)Schedule as to redemp- *
tion price................
General Information--Market for Units;
47. Maintenance of position in Public Offering of Units;
underlying securities..... General Information--Redemption
V. INFORMATION CONCERNING THE TRUSTEE
OR CUSTODIAN
48. Organization and regulation General Information--Administration
of trustee................ of the Trusts
49. Fees and expenses of trust-
ee........................
50. Trustee's lien............. General Information--Expenses of the Trusts
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iii
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
----------- ---------------------
VI. INFORMATION CONCERNING INSURANCE OF
HOLDERS OF SECURITIES
<C> <S> <C>
51. Insurance of holders of trust's Cover Page; General Information--
securities.................. Expenses of the Trusts; The Tax-Exempt
Portfolios--Insurance on the Bonds
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement The Trust Funds; General Information--
with respect to selection or Trust Information; General
elimination of underlying se- Information--Investment Supervision
curities.....................
(b) Transactions involving elimi-
nation of underlying securi-
ties......................... *
(c) Policy regarding substitution
or elimination of underlying General Information--Investment
securities................... Supervision; General Information--
Trust Information
(d) Fundamental policy not other-
wise covered................. *
Essential Information; General
53. Tax status of Trust.............. Information--Trust Information; The
Tax-Exempt Portfolios--Federal Tax
Status
VIII. FINANCIAL AND STATISTICAL INFORMATION
Trust's securities during last
54. ten years........................
55.
56. Certain information regarding pe-
riodic payment certificates..... *
57.
58.
59. Financial statements (Instruction
1(c) to Form S-6)............... *
</TABLE>
- --------
* Inapplicable, answer negative or not required.
iv
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
Insured National Series 18 (the "Insured National Trust," a "Tax-Exempt
Portfolio" or an "Insured Trust") was formed for the purpose of gaining
interest income exempt from Federal income taxes while conserving capital and
diversifying risks by investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States or counties,
municipalities, authorities or political subdivisions thereof.
Insured California Series 22 and Insured Michigan Series 13 (each an "Insured
State Trust," a "Tax-Exempt Portfolio" or an "Insured Trust") were formed for
the purpose of gaining interest income free from Federal income taxes and
State and local income taxes and/or property taxes while conserving capital
and diversifying risks by investing in an insured, fixed portfolio consisting
of obligations issued by or on behalf of the State for which such Trust Fund
is named or counties, municipalities, authorities or political subdivisions
thereof.
Units of the Trusts are not deposits or obligations of, or guaranteed by, any
bank, and Units are not federally insured or otherwise protected by the
Federal Deposit Insurance Corporation and involve investment risk including
loss of principal. The use of the term "Insured" in the name of a Trust does
not mean that the Units of the Trust are insured by any governmental or
private organization. The Units are not insured.
Insurance guaranteeing the scheduled payment of principal and interest on all
of the Bonds in the portfolio of each Insured Trust (other than any U.S.
Treasury Obligations) has been obtained directly by the issuer or the Sponsor
from MBIA Insurance Corporation or other insurers. See "Insurance on the
Bonds" for each Insured Trust. Insurance obtained by a Bond issuer is
effective so long as such Bonds are outstanding. THE INSURANCE DOES NOT RELATE
TO THE UNITS OF THE INSURED TRUSTS OFFERED HEREBY OR TO THEIR MARKET VALUE. As
a result of such insurance, the Units of the Insured Trusts have received a
rating of "AAA" by Standard & Poor's, a division of The McGraw-Hill Companies,
("Standard & Poor's"). See "Insurance on the Bonds" for each Insured Trust. No
representation is made as to any insurer's ability to meet its commitments.
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.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS JANUARY 10, 1996.
<PAGE>
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust Fund
during the initial offering period is equal to a pro rata share of the
offering prices of the Securities in such Trust Fund plus or minus a pro rata
share of cash, if any, in the Principal Account held or owned by such Trust
Fund, plus accrued interest plus that sales charge indicated under "Essential
Information." The secondary market Public Offering Price per Unit will be
based upon a pro rata share of the bid prices of the Securities in each Trust
Fund plus or minus a pro rata share of cash, if any, in the Principal Account
held or owned by such Trust Fund, plus accrued interest plus the applicable
sales charge indicated under "Public Offering of Units--Public Offering
Price." The sales charge is reduced on a graduated scale for sales involving
at least $100,000 or 10,000 Units and will be applied on whichever basis is
more favorable to the investor. The minimum purchase for each Trust is $1,000.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Distributions of the estimated annual
interest income to be received by each Trust Fund, after deduction of
estimated expenses, will be made monthly. See "Essential Information."
Distributions of funds, if any, in the Principal Account will be made as
provided in "General Information--Unitholders--Distributions to Unitholders."
REINVESTMENT. Each Unitholder of a Trust Fund offered herein may elect to have
distributions of principal or interest or both automatically invested without
charge in shares of certain mutual funds sponsored by Kemper Financial
Services, Inc. See "General Information--Distribution Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Initial Date of Deposit, the Estimated Long-Term Return and
the Estimated Current Return, if applicable, for each Trust were as set forth
in "Essential Information." The Estimated Current Return is calculated by
dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee, the Sponsor and Evaluator
and with the principal prepayment, redemption, maturity and exchange or sale
of Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in the accrued
interest; therefore, there is no assurance that the present Estimated Current
Return will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and determines
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 or average lives of all of the Securities
in the applicable Trust and (2) takes into account the expenses and sales
charge associated with each Trust Unit. Since the market values and estimated
retirements or average lives of the Securities and the expenses of a Trust
will change, there is no assurance that the present Estimated Long-Term Return
will be realized in the future. Estimated Current Return and Estimated Long-
Term Return are expected to differ because the calculation of Estimated Long-
Term Return reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest income
and Public Offering Price.
MARKET FOR UNITS. After the initial offering period, while under no obligation
to do so, the Sponsor intends to, and certain Underwriters may, maintain a
market for the Units and to offer to repurchase such Units at prices subject
to change at any time which are based on the aggregate bid side evaluation of
the Securities in a Trust plus accrued interest.
RISK FACTORS. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the
inability of the issuer or an insurer to pay the principal of or interest on a
security when due, volatile interest rates, early call provisions, and changes
to the tax status of the Securities. See "The Tax-Exempt Portfolios--Municipal
Bond Risk Factors."
2
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: EVEREN UNIT INVESTMENT TRUSTS, A SERVICE OF
EVEREN SECURITIES, INC.
TRUSTEE:
THE BANK OF NEW YORK
The income, expense and distribution data set forth below has been calculated
for Unitholders purchasing less than 10,000 Units of a Trust. Unitholders
purchasing 10,000 Units or more of a Trust will receive a slightly higher
return because of the reduced sales charge for larger purchases.
<TABLE>
<CAPTION>
INSURED INSURED INSURED
NATIONAL CALIFORNIA MICHIGAN
SERIES 18 SERIES 22 SERIES 13
------------ ------------ ------------
<S> <C> <C> <C>
Public Offering Price per
Unit (1)(2)......................... $ 10.269 $ 10.237 $ 10.089
Principal Amount of Securities per
Unit................................ $ 10.000 $ 10.000 $ 10.000
Estimated Current Return based on
Public Offering Price (3)(4)(5)(6).. 5.00% 4.89% 4.88%
Estimated Long-Term
Return (3)(4)(5)(6)................. 5.02% 4.92% 4.92%
Estimated Normal Annual Distribution
per Unit (6)........................ $ 0.51368 $ 0.50066 $ 0.49260
Principal Amount of Securities....... $ 4,165,000 $ 2,500,000 $ 2,500,000
Number of Units...................... 416,500 250,000 250,000
Fractional Undivided Interest per
Unit................................ 1/416,500 1/250,000 1/250,000
Calculation of Public Offering Price:
Aggregate Offering Price of
Securities......................... $ 4,067,391 $ 2,433,733 $ 2,398,782
Aggregate Offering Price of
Securities per Unit................ 9.766 9.735 9.595
Plus Sales Charge per Unit (7)...... $ 0.503 $ 0.502 $ 0.494
Public Offering Price per
Unit (1)(2)........................ $ 10.269 $ 10.237 $ 10.089
Redemption Price per Unit............ $ 9.705 $ 9.685 $ 9.484
Sponsor's Initial Repurchase Price
per Unit............................ $ 9.766 $ 9.735 $ 9.595
Excess of Public Offering Price per
Unit over Redemption Price per Unit. $ 0.564 $ 0.552 $ 0.605
Excess of Public Offering Price per
Unit over Sponsor's Initial
Repurchase Price per Unit........... $ 0.503 $ 0.502 $ 0.494
Calculation of Estimated Net Annual
Interest Income per Unit (6):
Estimated Annual Interest Income.... $ 0.53472 $ 0.52416 $ 0.51550
Less: Estimated Annual Expense...... $ 0.02104 $ 0.02350 $ 0.02290
Estimated Net Annual Interest
Income............................. $ 0.51368 $ 0.50066 $ 0.49260
Estimated Daily Rate of Net Interest
Accrual per Unit.................... $0.001426890 $0.001390720 $0.001368330
Minimum Principal Value of the Trust
under which Trust Agreement may be
terminated (8)...................... $ 833,000 $ 500,000 $ 500,000
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made as
of the close of business of the Sponsor (currently 3:15 p.m. Central Time)
next following receipt of an order for a sale or purchase of Units or receipt
by the Trustee of Units tendered for redemption.
3
<PAGE>
ESSENTIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
INSURED INSURED INSURED
NATIONAL CALIFORNIA MICHIGAN
SERIES 18 SERIES 22 SERIES 13
--------- ---------- ---------
<S> <C> <C> <C>
Trustee's Annual Fee per $1,000 principal amount
of Securities (9).............................. $ 1.220 $ 1.350 $ 1.290
Reduction of Trustee's fee per Unit during the
first year (6)................................. $0.00145
Estimated annual interest income per Unit during
the first year (6)............................. $0.53327 $0.52416 $0.51550
Interest Payments (10):
First Payment per Unit, representing 15 days... $0.02140 $0.02086 $0.02052
Estimated Normal Monthly Distribution per Unit. $0.04281 $0.04172 $0.04105
Estimated Normal Annual Distribution per Unit.. $0.51368 $0.50066 $0.49260
Sales Charge (7):
As a percentage of Public Offering Price per
Unit.......................................... 4.900% 4.900% 4.900%
As a percentage of net amount invested......... 5.151% 5.157% 5.149%
As a percentage of net amount invested in
earning assets................................ 5.151% 5.157% 5.149%
</TABLE>
<TABLE>
<S> <C>
Date of Trust
Agreements............. January 10, 1996
First Settlement Date... January 16, 1996
Mandatory Termination
Date................... December 31, 2034
Evaluator's Annual
Evaluation Fee--Tax-
Exempt Portfolios...... Maximum of $0.30 per $1,000 Principal Amount of Securities
Sponsor's Annual
Surveillance Fee--Tax-
Exempt Portfolios...... Maximum of $0.002 per Unit
</TABLE>
- ---------------------
(1) Anyone ordering Units for settlement after the First Settlement Date will
pay accrued interest from such date to the date of settlement (normally
three business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. For purchases settling on
the First Settlement Date, no accrued interest will be added to the Public
Offering Price.
(2) Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities.
The Sponsor, on the other hand, in determining the number of Units for
each Trust has elected not to follow this format but rather to provide
that number of Units which will establish as close as possible as of the
Initial Date of Deposit a Principal Amount of Securities per Unit of $10.
(3) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge. See "Public Offering
of Units--Public Offering Price."
(4) The Estimated Current Returns are calculated by dividing the estimated net
annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee, the Sponsor 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 underlying Securities and with changes in the
accrued interest; therefore, there is no assurance that the present
Estimated Current Returns indicated above will be realized in the future.
The Estimated Long-Term Returns are calculated using a formula which (1)
takes into consideration, and determines 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
retirement dates of all of the Securities in the applicable Trust and (2)
takes into account the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirement dates of the
Securities and expenses of each Trust will change, there is no assurance
that the present Estimated Long-Term Returns as indicated above will be
realized in the future. The Estimated Current Returns and Estimated Long-
Term Returns are expected to differ because the calculation of the
Estimated Long-Term Returns 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.
(5) This figure is based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Securities. The estimated cash
flows to Unitholders for the Trusts are either set forth under "Estimated
Cash Flows to Unitholders" for each Trust or are available upon request at
no charge from the Sponsor.
4
<PAGE>
(6) During the first year, the Trustee has agreed to reduce its fee (and to
the extent necessary pay expenses of the Trust Funds) in the amounts
stated above. The Trustee has agreed to the foregoing to cover all or a
portion of the interest on any Securities accruing prior to their expected
dates of delivery, since interest will not accrue to the benefit of
Unitholders of a Trust Fund until such Securities are actually delivered
to the Trust Fund. The estimated net annual interest income per Unit will
remain as indicated. See "The Trust Funds" and "General Information--
Interest, Estimated Long-Term Return and Estimated Current Return."
(7) The sales charge as a percentage of the net amount invested in earning
assets will increase as accrued interest increases. Transactions subject
to quantity discounts (see "Public Offering of Units--Public Offering
Price") will have reduced sales charges, thereby reducing all percentages
in the table.
(8) The minimum principal value of each Trust (other than a Tax-Exempt
Portfolio) under which the Trust Agreement may be terminated is 40% of the
total aggregate principal amount of securities deposited in each such
Trust during the primary offering period. The minimum principal value of
each Tax-Exempt Portfolio under which the Trust Agreement may be
terminated is 20% of the initial aggregate principal amount of securities
deposited in such Trust.
(9) See "General Information--Expenses of the Trusts."
(10) Unitholders will receive interest distributions monthly. The Record Date
is the first day of the month, commencing February 1, 1996, and the
distribution date is the fifteenth day of the month, commencing February
15, 1996.
5
<PAGE>
THE TRUST FUNDS
EVEREN Unit Investment Trusts, Series 41 includes the following separate unit
investment trusts created by the Sponsor under the name EVEREN Unit Investment
Trusts: "Insured National Series 18," "Insured California Series 22" and
"Insured Michigan Series 13" (collectively, the "Trusts" or "Trust Funds").
Each of the Trust Funds is separate and is designated by a different series
number. Each of the Trust Funds was created under the laws of the State of New
York pursuant to a trust indenture dated the Initial Date of Deposit (the
"Trust Agreements") between EVEREN Unit Investment Trusts, a service of EVEREN
Securities, Inc. (the "Sponsor") and The Bank of New York (the "Trustee").*
The Insured National Trust was formed for the purpose of gaining interest
income exempt from Federal income taxes while conserving capital and
diversifying risks by investing in an insured, fixed portfolio consisting of
obligations issued by or on behalf of states of the United States or counties,
municipalities, authorities or political subdivisions thereof.
Each Insured State Trust was formed for the purpose of gaining interest income
free from Federal income taxes and State and local income and/or property
taxes while conserving capital and diversifying risks by investing in an
insured, fixed portfolio consisting of obligations issued by or on behalf of
the State for which such Trust Fund is named or counties, municipalities,
authorities or political subdivisions thereof.
There is, of course, no guarantee that the Trust Funds' objectives will be
achieved. Offerees in the states of Illinois, Indiana, Virginia and Washington
may purchase Units of the Insured National Trust only.
As used herein, the terms "Securities" and "Bonds" mean the obligations
initially deposited in the Trusts described under "Portfolio" for each Trust
(including all contracts to purchase such obligations accompanied by an
irrevocable letter of credit sufficient to perform such contracts initially
deposited in the Trusts) and any additional obligations deposited in the
Trusts following the Initial Date of Deposit. As used herein, the terms
"Municipal Bonds" and "Municipal Obligations" mean the obligations (and
contracts for the purchase thereof) included in the Tax-Exempt Portfolios.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase thereof
for deposit in the Trust Funds as set forth under "Essential Information." Of
such principal amount, the amount specified in "Essential Information" was
deposited in each Trust. In exchange for the Securities so deposited, the
Trustee delivered to the Sponsor documentation evidencing the ownership of
that number of Units for each Trust as indicated under "Essential
Information." Each Trust initially consists of delivery statements (i.e.,
contracts) to purchase obligations. The Sponsor has a limited right of
substitution for such Securities in the event of a failed contract. See
"General Information--Trust Information."
Additional Units of each Trust may be issued from time to time following the
Initial Date of Deposit by depositing in the Trust additional Securities or
contracts to purchase thereof together with irrevocable letters of credit or
cash. As additional Units are issued by a Trust as a result of the deposit of
additional Securities by the Sponsor, 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 Sponsor may continue to make
additional deposits of Securities into a Trust following the Initial Date of
Deposit, provided that such additional deposits will be in principal amounts
which will maintain the same original percentage relationship among the
principal amounts of the Securities in such Trust established by the
- ---------------------
* Reference is made to the Trust Agreements, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
6
<PAGE>
initial deposit of the Securities. Thus, although additional Units will be
issued, each Unit will continue to represent the same principal amount of each
Security, and the percentage relationship among the principal amount of each
Security in the related Trust will remain the same.
Each Unit initially offered represents that undivided interest in the
appropriate Trust indicated under "Essential Information." To the extent that
any Units are redeemed by the Trustee or additional Units are issued as a
result of additional Securities being deposited by the Sponsor, the fractional
undivided interest in a Trust represented by each unredeemed Unit will
increase or decrease accordingly, although the actual interest in such Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which
may include the Sponsor, or until the termination of the Trust Agreement.
An investment in Units of a Trust Fund should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of the Units will
decline with increases in interest rates. The value of the underlying
Securities will fluctuate inversely with changes in interest rates. The
uncertain economic conditions of recent years, together with the fiscal
measures adopted to attempt to deal with them, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally and long-term obligations in particular. The Sponsor
cannot predict the degree to which such fluctuations will continue in the
future.
7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
We have audited the accompanying statements of condition and the related
portfolios of EVEREN Unit Investment Trusts, Series 41 (Insured National
Series 18, Insured California Series 22 and Insured Michigan Series 13) as of
January 10, 1996. The statements of condition and portfolios are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of Securities owned at January 10, 1996 and a
letter of credit deposited to purchase Securities by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the overall
financial statement presentation. We believe our audit provides 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 EVEREN Unit Investment
Trusts, Series 41 (Insured National Series 18, Insured California Series 22
and Insured Michigan Series 13) as of January 10, 1996, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
January 10, 1996
8
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
STATEMENTS OF CONDITION AT THE OPENING OF BUSINESS ON JANUARY 10, 1996, THE
INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
INSURED INSURED INSURED
NATIONAL CALIFORNIA MICHIGAN
SERIES 18 SERIES 22 SERIES 13
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES
Securities deposited in the Trusts (1)(2)..... $ -- $ -- $ --
Contracts to purchase Securities (1)(2)....... 4,067,391 2,433,733 2,398,782
Accrued interest to First Settlement Date on
Securities (1)(3)............................ 41,208 33,948 16,691
---------- ---------- ----------
Total........................................ $4,108,599 $2,467,681 $2,415,473
========== ========== ==========
Number of Units............................... 416,500 250,000 250,000
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(3)... $ 41,208 $ 33,948 $ 16,691
Interest of Unitholders--
Cost to investors (4)........................ 4,277,039 2,559,250 2,522,250
Less: Gross underwriting commission (4)...... 209,648 125,517 123,468
---------- ---------- ----------
Net interest to Unitholders (1)(3)(4)........ 4,067,391 2,433,733 2,398,782
---------- ---------- ----------
Total...................................... $4,108,599 $2,467,681 $2,415,473
========== ========== ==========
</TABLE>
- --------
NOTES:
(1) The aggregate value of the Securities listed in each "Portfolio" and their
cost to the Trust are the same. The value of the Securities is determined
by Cantor Fitzgerald & Co. on the bases set forth under "Public Offering
of Units--Public Offering Price". The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $8,992,355 which has
been deposited with the Trustee. Of this amount, $8,899,906 relates to the
offering price of Securities to be purchased and $92,449 relates to
accrued interest on such Securities to the expected dates of delivery.
(2) Insurance coverage providing for the timely payment of principal and
interest on the Securities in an Insured Trust has been obtained directly
by the issuer of such Securities or by the Sponsor from MBIA Insurance
Corporation or other insurers.
(3) The Trustee will advance to each Trust the amount of net interest accrued
to the First Settlement Date for distribution to the Sponsor as the
Unitholder of Record.
(4) The aggregate public offering price includes a sales charge for the Trust
as set forth under "Essential Information", assuming all single
transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units the sales charge is reduced (see "Public
Offering of Units--Public Offering Price") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while
the Net interest to Unitholders remains unchanged.
9
<PAGE>
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of a Trust are offered at the Public Offering
Price thereof. During the initial offering period, the Public Offering Price
per Unit is equal to the aggregate of the offering side evaluations of the
Securities in such Trust (as determined, pursuant to the terms of a contract
with the Evaluator, by Cantor Fitzgerald & Co., a non-affiliated firm
regularly engaged in the business of evaluating, quoting or appraising
comparable securities), plus or minus a pro rata share of cash, if any, in the
Principal account held or owned by such Trust plus accrued interest plus the
applicable sales charge referred to in the tables below divided by the number
of outstanding Units of such Trust. The Public Offering Price for secondary
market transactions, on the other hand, is based on the aggregate bid side
evaluations of the Securities in a Trust (also, currently, as determined by
Cantor Fitzgerald & Co.), plus or minus cash, if any, in the Principal Account
held or owned by such Trust, plus accrued interest plus a sales charge based
upon the dollar weighted average maturity of such Trust. Investors who
purchase Units through brokers or dealers pursuant to a current management
agreement which by contract or operation of law does not allow such broker or
dealer to earn an additional commission (other than any fee or commission paid
for maintenance of such investor's account under the management agreement) on
such transactions may purchase such Units at the current Public Offering Price
net of the applicable broker or dealer concession. See "Public Offering of
Units--Public Distribution of Units" below.
For the Tax-Exempt Portfolios, the sales charge per Unit will be reduced
during the initial offering period pursuant to the following graduated scale:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YEARS TO MATURITY
---------------------------------------------------------------------------------------
0 TO 7.49 7.5 TO 9.99 10 TO 14.99 15 OR MORE
--------------------- --------------------- --------------------- ---------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
NUMBER OF UNITS PRICE INVESTED PRICE INVESTED PRICE INVESTED PRICE INVESTED
- --------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 9,999 Units........ 3.0% 3.093% 3.9% 4.058% 4.2% 4.384% 4.9% 5.152%
10,000 to 24,999 Units.. 2.8 2.881 3.7 3.842 4.0 4.167 4.5 4.712
25,000 to 49,999 Units.. 2.6 2.669 3.5 3.627 3.8 3.950 4.3 4.493
50,000 to 99,999 Units.. 2.5 2.564 3.3 3.413 3.5 3.627 3.5 3.627
100,000 or more Units... 2.0 2.041 2.7 2.775 2.8 2.881 3.0 3.093
</TABLE>
As indicated above, in connection with secondary market transactions the sales
charge is based upon the dollar weighted average maturity of a Trust and is
determined in accordance with the tables set forth below. For purposes of this
computation, Securities will be deemed to mature on their expressed maturity
dates unless: (a) the Securities have been called for redemption or funds or
securities have been placed in escrow to redeem them on an earlier call date,
in which case such call date will be deemed to be the date upon which they
mature; or (b) such Securities are subject to a "mandatory tender," in which
case such mandatory tender will be deemed to be the date upon which they
mature. The effect of this method of sales charge computation will be that
different sales charge rates will be applied to a Trust based upon the dollar
weighted average maturity of such Trust's portfolio, in accordance with the
following schedules.
10
<PAGE>
For the Tax-Exempt Portfolios, in connection with secondary market
transactions the sales charge per Unit will be reduced as set forth below:
<TABLE>
<CAPTION>
SECONDARY
---------------------------------------
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
--------- ------------------ ----------
SALES CHARGE (% OF PUBLIC OFFERING
AMOUNT OF INVESTMENT PRICE)
-------------------- ---------------------------------------
<S> <C> <C> <C>
$1,000 to $99,999................. 3.50% 4.50% 5.50%
$100,000 to $499,999.............. 3.25 4.25 5.00
$500,000 to $999,999.............. 3.00 4.00 4.50
$1,000,000 or more................ 2.75 3.75 4.00
</TABLE>
- ---------------------
* If the dollar weighted average maturity of the Trust Fund is from 1 to 3.99
years the sales charge is 2% and 1.5% of the Public Offering Price for
purchases of $1,000 to $249,999 and $250,000 or more, respectively.
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the same
purchaser from the same Underwriter or dealer and for this purpose purchases
of Units of a Trust Fund will be aggregated with concurrent purchases of Units
of any other unit investment trust that may be offered by the Sponsor.
Additionally, Units purchased in the name of a spouse or child (under 21) of
such purchaser will be deemed to be additional purchases by such purchaser.
The reduced sales charges will also be applicable to a trust or other
fiduciary purchasing for a single trust estate or single fiduciary account.
Unitholders of the various series of EVEREN Unit Investment Trusts, Insured
Corporate Series (or its predecessors) who meet the conditions in the next
succeeding sentence may, during the primary offering period of a Corporate
Income Series only, acquire Units of such Corporate Income Series at the
reduced sales charge equivalent to purchases during the initial offering
period of 100,000 or more Units. First, the special sales charge discount only
applies to purchases acquired with funds received from distributions of
unscheduled principal payments in connection with units issued in such series
and, second, the minimum purchase must be at least $1,000.
The Sponsor intends to permit officers, directors and employees of the Sponsor
and Evaluator and at the discretion of the Sponsor registered representatives
of selling firms to purchase Units of a Trust without a sales charge, although
a transaction processing fee may be imposed on such trades.
Had Units of a Trust been available for sale at the opening of business on the
Initial Date of Deposit, the Public Offering Price would have been as shown
under "Essential Information." The Public Offering Price per Unit of a Trust
on the date of this Prospectus or on any subsequent date will vary from the
amount stated under "Essential Information" in accordance with fluctuations in
the prices of the underlying Securities and the amount of accrued interest on
the Units. On the Initial Date of Deposit, pursuant to an exemptive order from
the Securities and Exchange Commission, the Public Offering Price at which
Units will be sold will not exceed the price determined as of the opening of
business on the Initial Date of Deposit as shown under "Essential
Information"; however, should the value of the underlying Securities decline,
purchasers will, of course, be given the benefit of such lower price. The
aggregate bid and offering side evaluations of the Securities shall be
determined (a) on the basis of current bid or offering prices of the
Securities, (b) if bid or offering prices are not available for any particular
Security, on the basis of current bid or offering prices for comparable bonds,
(c) by determining the value of Securities on the bid or offer side of the
market by appraisal, or (d) by any combination of the above.
11
<PAGE>
The foregoing evaluations and computations shall be made as of the evaluation
time stated under "Essential Information," on each business day commencing
with the Initial Date of Deposit of the Securities, effective for all sales
made during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related
estimated fees and expenses, is estimated to accrue in the annual amounts per
Unit set forth under "Essential Information." The amount of net interest
income which accrues per Unit may change as Securities mature or are redeemed,
exchanged or sold, or as the expenses of a Trust change or the number of
outstanding Units of a Trust changes.
Although payment is normally made three business days following the order for
purchase, payments may be made prior thereto. A person will become the owner
of Units on the date of settlement provided payment has been received. Cash,
if any, made available to the Sponsor prior to the date of settlement for the
purchase of Units may be used on the Sponsor's business and may be deemed to
be a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934. If a Unitholder desires to have certificates
representing Units purchased, such certificates will be delivered as soon as
possible following his written request therefor. For information with respect
to redemption of Units purchased, but as to which certificates requested have
not been received, see "General Information--Redemption" below.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest on a
security from the last day on which interest thereon was paid. Interest on
Securities generally is paid semi-annually (monthly in the case of Ginnie
Maes, if any) although a Trust accrues such interest daily. Because of this, a
Trust always has an amount of interest earned but not yet collected by the
Trustee. For this reason, with respect to sales settling subsequent to the
First Settlement Date, the Public Offering Price of Units will have added to
it the proportionate share of accrued interest to the date of settlement.
Unitholders will receive on the next distribution date of a Trust the amount,
if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of Units
to the public, the Trustee will advance the amount of accrued interest as of
the First Settlement Date and the same will be distributed to the Sponsor as
the Unitholder of record as of the First Settlement Date. Consequently, the
amount of accrued interest to be added to the Public Offering Price of Units
will include only accrued interest from the First Settlement Date to the date
of settlement, less any distributions from the Interest Account subsequent to
the First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore,
there will always remain an item of accrued interest that is added to the
value of the Units. If a Unitholder sells or redeems all or a portion of his
Units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his Units. Since the Trustee has the use of the
funds held in the Interest Account for distributions to Unitholders and since
such Account is non-interest-bearing to Unitholders, the Trustee benefits
thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the Initial
Public Offering Price of Units will be determined on the basis of the current
offering prices of the Securities in a Trust, the redemption price per Unit
(as well as the secondary market price per Unit) at which Units may be
redeemed (see "General Information--Redemption") will be determined on the
basis of the current bid
12
<PAGE>
prices of the Securities. As of the opening of business on the Initial Date of
Deposit, the Public Offering Price per Unit (based on the offering prices of
the Securities in a Trust and including the sales charge) exceeded the
redemption price at which Units could have been redeemed (based upon the
current bid prices of the Securities in a Trust) by the amount shown under
"Essential Information." Under current market conditions the bid prices for
U.S. Treasury Obligations are expected to be approximately 1/8 to 1/4 of 1%
lower than the offer price of such obligations. In the past, bid prices on
securities similar to those in the Trust Funds have been lower than the
offering prices thereof by as much as 5% or more of principal amount in the
case of inactively traded bonds or as little as 1/2 of 1% in the case of
actively traded bonds, but the difference between such offering and bid prices
may be expected to average 3% to 4% of principal amount. For this reason,
among others (including fluctuations in the market prices of the Securities
and the fact that the Public Offering Price includes a sales charge), the
amount realized by a Unitholder upon any redemption of Units may be less than
the price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units for
sale in a number of states (except for an Insured State Trust or uninsured
State Trust which will be qualified for sale only in the state for which such
Trust is named). Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers at prices which represent discounts from the
Public Offering Price as set forth below. Certain commercial banks are making
Units of the Trust Funds available to their customers on an agency basis. A
portion of the sales charge paid by their customers is retained by or remitted
to the banks in the amount shown in the tables below. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Fund Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law. The Sponsor reserves the right to change the discounts set forth
below from time to time. In addition to such discounts, the Sponsor may, from
time to time, pay or allow an additional discount, in the form of cash or
other compensation, to dealers employing registered representatives who sell,
during a specified time period, a minimum dollar amount of Units of a Trust
and other unit investment trusts created by the Sponsor. The difference
between the discount and the sales charge will be retained by the Sponsor. For
Tax-Exempt Portfolios only, any dealer who sells at least those amounts of
Units set forth under "The Tax-Exempt Portfolios--Underwriting" on the Initial
Date of Deposit will be entitled to a concession or agency commission equal to
the corresponding takedown set forth in that section for those Units sold on
the Initial Date of Deposit.
For the Tax-Exempt Portfolios, the primary and secondary market concessions or
agency commissions are as follows:
<TABLE>
<CAPTION>
PRIMARY
--------------------------------------------
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 7.49 7.5 TO 9.99 10 TO 14.99 15 OR MORE
---------------------------------------
NUMBER OF UNITS DISCOUNT PER UNIT
- --------------- --------------------------------------------
<S> <C> <C> <C> <C>
1 to 9,999 Units................... $0.20 $0.27 $0.28 $0.32
10,000 to 24,999 Units............. $0.19 $0.25 $0.27 $0.32
25,000 to 49,999 Units............. $0.18 $0.23 $0.26 $0.32
50,000 to 99,999 Units............. $0.17 $0.22 $0.25 $0.25
100,000 or more Units.............. $0.11 $0.17 $0.18 $0.20
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SECONDARY MARKET
-------------------------------
DOLLAR WEIGHT AVERAGE
YEARS TO MATURITY*
4 TO 7.99 8 TO 14.99 15 OR MORE
------------------------------------
DISCOUNT PER UNIT
(PERCENT OF PUBLIC OFFERING
DOLLAR AMOUNT OF TRADE PRICE)
---------------------- -------------------------------
<S> <C> <C> <C>
$1,000 to $99,999......................... 2.00% 3.00% 4.00%
$100,000 to $499,999...................... 1.75 2.75 3.50
$500,000 to $999,999...................... 1.50 2.50 3.00
$1,000,000 or more........................ 1.25 2.25 2.50
</TABLE>
- ---------------------
* If the dollar weighted average maturity of a Trust Fund is from 1 to 3.99
years, the concession or agency commission is 1.00% of the Public Offering
Price.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units.
PROFITS OF SPONSOR AND UNDERWRITERS. In connection with Trusts other than a
Tax-Exempt Portfolio, the Sponsor will receive gross sales charges equal to
the percentage of the Offering Price of the Units of such Trusts stated under
"Public Offering Price" and will pay a fixed portion of such sales charges to
dealers and agents. As set forth under "The Tax-Exempt Portfolios--
Underwriting," the Underwriters of each Tax-Exempt Portfolio will receive
gross sales charges equal to the percentage of the Public Offering Price of
the Units of such Trust Fund stated under "Public Offering Price" and the
Sponsor will receive a fixed portion of such sales charges. In addition, the
Sponsor may realize a profit or a loss resulting from the difference between
the purchase prices of the Securities to the Sponsor and the cost of such
Securities to a Trust Fund, which is based on the offering side evaluation of
the Securities. See "Portfolio" for each Trust. The Sponsor or Underwriters
may also realize profits or losses with respect to Securities deposited in a
Trust which were acquired from underwriting syndicates of which the Sponsor or
any Underwriter was a member. An underwriter or underwriting syndicate
purchases securities from the issuer on a negotiated or competitive bid basis,
as principal, with the motive of marketing such securities to investors at a
profit. The Sponsor and the Underwriters may realize additional profits or
losses during the initial offering period on unsold Units as a result of
changes in the daily evaluation of the Securities in a Trust.
14
<PAGE>
T
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THE TAX-EXEMPT PORTFOLIOS
THE TRUST PORTFOLIO
The Tax-Exempt Portfolios may be appropriate investment vehicles for investors
who desire to participate in a portfolio of tax-exempt fixed income securities
with greater diversification than they might be able to acquire individually.
In addition, Municipal Bonds of the type deposited in the Tax-Exempt
Portfolios are often not available in small amounts.
The selection of Municipal Bonds for each Trust was based largely upon the
experience and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (a) Standard & Poor's or Moody's ratings of
the Municipal Bonds; (b) the price of the Municipal Bonds relative to other
issues of similar quality and maturity; (c) the diversification of the
Municipal Bonds as to purpose of issue; (d) the income to the Unitholders of
the Trust; (e) in the case of Insured Trust Funds whether such Bonds were
insured or the availability and cost of insurance for the scheduled payment of
principal and interest on the Municipal Bonds; and (f) the dates of maturity
of the Bonds.
All of the Municipal Bonds in each Trust Fund's portfolio are rated in the
category "BBB" or better (including provisional or conditional ratings) by
Standard & Poor's or "Baa" or better by Moody's. See "Portfolio" for each Tax-
Exempt Portfolio.
All Municipal Bonds deposited in the Trust Funds on the Initial Date of
Deposit were represented by purchase contracts assigned to the Trustee
together with cash, cash equivalents or irrevocable letters of credit issued
by a major commercial bank in the amounts necessary to complete the purchase
thereof. Each Trust consists of that number of Municipal Bonds divided by
purpose of issues (and percentage of principal amount of such Trust) as set
forth in the following table.
SERIES INFORMATION
<TABLE>
<CAPTION>
INSURED INSURED INSURED
NATIONAL CALIFORNIA MICHIGAN
SERIES 18 SERIES 22 SERIES 13
--------- ---------- ---------
<S> <C> <C> <C>
Number of Obligations........................... 10 8 7
Territorial Obligations (1)..................... 0 0 0
General Obligation Bonds (2)(3)................. 3(28%) 1(4%) 3(34%)
Revenue Bonds (4)(3)............................ 7(72%) 7(96%) 4(66%)
Revenue Bond Concentrations (3):
Correctional Facilities........................
Excise Tax Revenue.............................
Sales Tax Revenue..............................
Electric Systems............................... 3(30%) 1(20%)
Utilities......................................
Hospital....................................... 3(30%) 1(20%) 2(30%)
Pollution Control..............................
Lease Revenue..................................
Education...................................... 1(12%) 1(8%)
Wastewater.....................................
Water & Sewer.................................. 2(35%) 1(16%)
Tax Allocation................................. 2(13%)
Tollroad.......................................
Miscellaneous.................................. 1(20%)
Average life of the Municipal Bonds in the Trust
(5)............................................ 28 28 25
Percentage of "when, as and if issued" or "de-
layed delivery" Bonds purchased by the Trust... 32% NONE NONE
Syndication (6)................................. NONE NONE NONE
</TABLE>
TE-1
TAX-EXEMPT PORTFOLIOS
<PAGE>
- ---------------------
(1) Municipal Bonds issued by Territories of the United States (which term
includes the Commonwealth of Puerto Rico and the District of Columbia)
generally receive the same tax exempt treatment for both state and Federal
tax purposes as Municipal Bonds issued by political entities in the named
State Trust. See "State Risk Factors and State Tax Status" for each Trust.
(2) General obligation bonds are general obligations of governmental entities
and are backed by the taxing powers of such entities.
(3) The portfolio percentage in parenthesis represents the principal amount of
such Bonds to the total principal amount of Bonds in the Trust. For a
discussion of the risk associated with investments in the bonds of such
issuers, see "Municipal Bond Risk Factors" below.
(4) Revenue bonds are payable from the income of a specific project or
authority and are not supported by an issuer's power to levy taxes.
(5) The average life of the Bonds in a Trust is calculated based upon the
stated maturities of the Bonds in such Trust (or, with respect to Bonds
for which funds or securities have been placed in escrow to redeem such
Bonds on a stated call date, based upon such call date). The average life
of the Bonds in a Trust may increase or decrease from time to time as
Bonds mature or are called or sold.
(6) The Sponsor and/or affiliated Underwriters have participated as either the
sole underwriter or manager or a member of underwriting syndicates from
which approximately that percentage listed above of the aggregate
principal amount of the Bonds in such Trust were acquired.
TE-2
TAX-EXEMPT PORTFOLIOS
<PAGE>
TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN TABLES
As of the date of this Prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to tax-
exempt estimated current returns under combined Federal and State taxes (where
applicable) using the published Federal and State tax rates (where applicable)
scheduled to be in effect in 1996. They incorporate increased tax rates for
higher income taxpayers that were included in the Revenue Reconciliation Act
of 1993. These tables illustrate approximately what you would have to earn on
taxable investments to equal the tax-exempt estimated current return in your
income tax bracket. The table assumes that Federal taxable income is equal to
State income subject to tax, and for cases in which more than one State rate
falls within a Federal bracket the State rate corresponding to the highest
income within that Federal bracket is used. The combined State and Federal tax
rates shown reflect the fact that State tax payments are currently deductible
for Federal tax purposes, and have been rounded to the nearest 1/10 of 1%. The
table does not reflect any local taxes or any taxes other than personal income
taxes. The tables do not show the approximate taxable estimated current
returns for individuals that are subject to the alternative minimum tax. The
taxable equivalent estimated current returns may be somewhat higher than the
equivalent returns indicated in the following tables for those individuals who
have adjusted gross incomes in excess of $117,950. The tables do not reflect
the effect of Federal or State limitations (if any) on the amount of allowable
itemized deductions and the deduction for personal or dependent exemptions or
any other credits. These limitations were designed to phase out certain
benefits of these deductions for higher income taxpayers. These limitations,
in effect, raise the marginal Federal tax rate to approximately 44 percent for
taxpayers filing a joint return and entitled to four personal exemptions and
to approximately 41 percent for taxpayers filing a single return entitled to
only one personal exemption. These limitations are subject to certain
maximums, which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the limitation on
itemized deductions will not cause a taxpayer to lose more than 80% of his
allowable itemized deductions, with certain exceptions. See "Federal Tax
Status" for a more detailed discussion of recent Federal tax legislation,
including a discussion of provisions affecting corporations.
NATIONAL
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
- ---------------------------- -------------------------------------------
4 5% 5 6% 6 7% 7
1/2% 1/2% 1/2% 1/2%
SINGLE JOINT EQUIVALENT TAXABLE ESTIMATED
RETURN RETURN TAX BRACKET CURRENT RETURN
------ ------ ----------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
24.00 $ 0- 40.10 15.0% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
24.00-
58.15 40.10- 96.90 28.0 6.25 6.94 7.64 8.33 9.03 9.72 10.42
58.15-
121.30 96.90-147.70 31.0 6.52 7.25 7.97 8.70 9.42 10.14 10.87
121.30-
263.75 147.70-263.75 36.0 7.03 7.81 8.59 9.38 10.16 10.94 11.72
Over
263.75 Over 263.75 39.6 7.45 8.28 9.11 9.93 10.76 11.59 12.42
</TABLE>
TE-3
TAX-EXEMPT PORTFOLIOS
<PAGE>
CALIFORNIA
<TABLE>
<CAPTION>
TAXABLE INCOME ($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
- ---------------------------- --------------------------------------------
4% 4 5% 5 6% 6 7%
1/2% 1/2% 1/2%
SINGLE JOINT EQUIVALENT TAXABLE ESTIMATED
RETURN RETURN TAX BRACKET* CURRENT RETURN
------ ------ ------------ --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
24.00 $ 0- 40.10 20.1% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
24.00-
58.15 40.10- 96.90 34.7 6.13 6.89 7.66 8.42 9.19 9.95 10.72
96.90-147.70 37.4 6.39 7.19 7.99 8.79 9.58 10.38 11.18
58.15-
121.30 37.4 6.39 7.19 7.99 8.79 9.58 10.38 11.18
121.30-
219.87 147.70-263.75 42.0 6.90 7.76 8.62 9.48 10.34 11.21 12.07
219.87-
263.75 42.0 6.90 7.76 8.62 9.48 10.34 11.21 12.07
263.75-439.74 45.2 7.30 8.21 9.12 10.04 10.95 11.86 12.77
Over
263.75 Over 439.74 45.2 7.30 8.21 9.12 10.04 10.95 11.86 12.77
</TABLE>
- --------
*The State tax brackets are those for 1995. The 1996 brackets will be adjusted
to take into account changes in the California Consumer Price Index. These
adjustments have not yet been released. The table reflects a decrease in State
income tax rates for high income taxpayers which is, under current law,
scheduled to take place beginning in 1996.
MICHIGAN
<TABLE>
<CAPTION>
TAXABLE INCOME
($1,000'S) TAX-EXEMPT ESTIMATED CURRENT RETURN
- ------------------------ -------------------------------------------
4 5 6
4% 1/2% 5% 1/2% 6% 1/2% 7%
SINGLE JOINT EQUIVALENT TAXABLE ESTIMATED CURRENT
RETURN RETURN TAX BRACKET* RETURN
------ ------ ------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-
24.00 $ 0- 40.10 20.2% 5.01% 5.64% 6.27% 6.89% 7.52% 8.15% 8.77%
24.00-
58.15 40.10- 96.90 32.4 5.92 6.66 7.40 8.14 8.88 9.62 10.36
58.15-
121.30 96.90-147.70 35.2 6.17 6.94 7.72 8.49 9.26 10.03 10.80
121.30-
263.75 147.70-263.75 39.9 6.66 7.49 8.32 9.15 9.98 10.82 11.65
Over
263.75 Over 263.75 43.3 7.05 7.94 8.82 9.70 10.58 11.46 12.35
</TABLE>
- --------
*The combined State and Federal tax brackets reflect Federal and State income
and the State intangibles tax rate, because the intangibles tax is generally
based on income received from intangibles.
TE-4
TAX-EXEMPT PORTFOLIOS
<PAGE>
INSURED NATIONAL
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
SERIES 18
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: JANUARY 10, 1996
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE,
COUPON RATE AND MATURITY
DATE OF BOND
REPRESENTED BY SPONSOR'S
AGGREGATE CONTRACTS TO PURCHASE REDEMPTION COST OF BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 230,000 (S)City of Rochelle Ogle AAA 2006 @ 102 $ 223,100
County, Illinois Electric 2010 @ 100 S.F.
System Refunding Revenue
Bonds, Series of 1995
(AMBAC Insured), 5.2% Due
5/1/2016
85,000 (P)City of Bellevue King AAA 23,806
County, Washington
Limited Tax Levy General
Obligation Bonds, 1995
(AMBAC Insured), 0% Due
12/1/2018
600,000 (S)Western School AAA 2005 @ 101 599,760
District County of 2016 @ 100 S.F.
Jackson State of Michigan
1995 School Building and
Site and Refunding Bonds
(General Obligation--
Unlimited Tax) (MBIA
Insured), 5.5% Due
5/1/2020
500,000 New Prairie United School AAA 2005 @ 101 494,565
Building Corporation 2016 @ 100 S.F.
(LaPorte and St. Joseph
Counties, Indiana) First
Mortgage Refunding Bonds,
Series 1995 (Capital
Guaranty Insured), 5.5%
Due 7/5/2020
500,000 Industrial Development AAA 2004 @ 102 495,000
Authority of the City of
Alexandria, Virginia
5.375% Pollution Control
Revenue Refunding Bonds
(Potomac Electric
Project) 1994 Series
(MBIA Insured), 5.375%
Due 7/15/2024
250,000 Dormitory Authority of AAA 2005 @ 102 252,210
the State of New York 2013 @ 100 S.F.
Ellis Hospital FHA-
Insured Mortgage Hospital
Revenue Bonds, Series
1995 (MBIA Insured), 5.6%
Due 8/1/2025
500,000 (S)The School District of AAA 2005 @ 101 499,375
Philadelphia, 2019 @ 100 S.F.
Pennsylvania, General
Obligation Bonds, Series
B of 1995 (AMBAC
Insured), 5.5% Due
9/1/2025
500,000 Illinois Health AAA 2003 @ 102 485,825
Facilities Authority 2021 @ 100 S.F.
Revenue Bonds, Series
1993 (Rush-Presbyterian-
St. Luke's Medical Center
Obligated Group) (MBIA
Insured), 5.5% Due
11/15/2025
500,000 Allegheny County Hospital AAA 2005 @ 102 493,750
Development Authority 2018 @ 100 S.F.
(Pennsylvania) Health
Center Revenue Bonds,
Series of 1995
(University of Pittsburgh
Medical Center System)
(MBIA Insured), 5.375%
Due 12/1/2025
500,000 Municipal Electric AAA 2004 @ 100 500,000
Authority of Georgia,
Power Revenue Bonds,
Series EE (AMBAC
Insured), 5.5% Due
1/1/2026
---------- ----------
$4,165,000 $4,067,391
========== ==========
</TABLE>
- --------
See "Notes to Portfolios."
TE-5
TAX-EXEMPT PORTFOLIOS
<PAGE>
INSURED CALIFORNIA
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41
SERIES 22
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: JANUARY 10, 1996
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE,
COUPON RATE AND MATURITY
DATE OF BOND
REPRESENTED BY SPONSOR'S
AGGREGATE CONTRACTS TO PURCHASE REDEMPTION COST OF BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(3) TO TRUST(4)
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 500,000 Redding Joint Powers AAA 2003 @ 102 $ 476,005
Financing Authority, 2014 @ 100 S.F.
Water Revenue Bonds,
1993 Series A (AMBAC
Insured), 5% Due
6/15/2019
115,000 State of California AAA 2003 @ 102 111,701
Various Purpose General 2018 @ 100 S.F.
Obligation Refunding
Bonds (FGIC Insured),
5.15% Due 10/1/2019
190,000 Community Redevelopment AAA 2005 @ 102 186,390
Agency of the City of 2012 @ 100 S.F.
Healdsburg Sotoyome
Community Development
Project 1995 Tax
Allocation Bonds (MBIA
Insured), 5.25% Due
12/1/2019
130,000 Redevelopment Agency of AAA 2004 @ 102 123,889
the City of San Jose, 2017 @ 100 S.F.
Merged Area
Redevelopment Project
Tax Allocation Bonds,
Series 1993 (MBIA
Insured), 5% Due
8/1/2020
500,000 City of Loma Linda, AAA 2003 @ 102 493,815
California Hospital 2014 @ 100 S.F.
Revenue Refunding Bonds
(Loma Linda University
Medical Center Project)
Series 1993-C (MBIA
Insured), 5.375% Due
12/1/2022
365,000 Certificates of AAA 2004 @ 102 363,504
Participation (1994 2011 @ 100 S.F.
Water Facilities
Projects) Evidencing
Proportionate Interests
of the Owners Thereof in
Installment Payments to
be Made by Cucamonga
County Water District
(San Bernardino County,
California) (FGIC
Insured), 5.450% Due
9/1/2023
200,000 The Regents of the AAA 2003 @ 102 188,914
University of California 2020 @ 100 S.F.
Refunding Revenue Bonds
(1989 Multiple Purpose
Projects), Series C
(AMBAC Insured), 5% Due
9/1/2023
500,000 Department of Water and AAA 2004 @ 102 489,515
Power of The City of Los 2026 @ 100 S.F.
Angeles Electric Plant
Revenue Bonds, Issue
1994 (FGIC Insured),
5.375% Due 2/15/2034
---------- ----------
$2,500,000 $2,433,733
========== ==========
</TABLE>
- --------
See "Notes to Portfolios."
TE-6
TAX-EXEMPT PORTFOLIOS
<PAGE>
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41 INSURED MICHIGAN
SERIES 13
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: JANUARY 10, 1996
<TABLE>
<CAPTION>
NAME OF ISSUER, TITLE,
COUPON RATE AND MATURITY
DATE OF BOND
REPRESENTED BY SPONSOR'S
AGGREGATE CONTRACTS TO PURCHASE REDEMPTION COST OF BONDS
PRINCIPAL BONDS(1)(5) RATING(2) PROVISIONS(1) TO TRUST(4)
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 250,000 City of Kalamazoo AAA 2004 @ 102 $ 244,983
Hospital Finance 2015 @ 100 S.F.
Authority, Hospital
Revenue Refunding Bonds
(Borgess Medical Center),
Series 1994A (FGIC
Insured), 5.25% Due
06/01/2017
500,000 Michigan Municipal Bond AAA 2005 @ 102 496,780
Authority, Local 2012 @ 100 S.F.
Government Loan Program,
Revenue Bonds, Series
1995 B (AMBAC Insured),
5.375% Due 11/01/2017
100,000 (P)Romulus Community AAA 29,998
Schools, County of Wayne,
State of Michigan, 1993
Refunding Bonds (General
Obligation--Unlimited
Tax) (FGIC Insured),
0.00% Due 05/01/2018
500,000 Western School District, AAA 2005 @ 101 499,800
County of Jackson, State 2016 @ 100 S.F.
of Michigan, 1995 School
Building and Site and
Refunding Bonds (General
Obligation--Unlimited
Tax) (MBIA Insured),
5.50% Due 05/01/2020
250,000 Marquette Area Public AAA 2003 @ 102 244,770
Schools, County of 2015 @ 100 S.F.
Marquette, State of
Michigan, 1994 Refunding
Bonds (General
Obligation--Unlimited
Tax) (FGIC Insured),
5.25% Due 05/01/2021
500,000 County of Jackson AAA 2003 @ 102 481,495
Hospital Finance 2016 @ 100 S.F.
Authority, Hospital
Revenue Refunding Bonds
(W.A. Foote Memorial
Hospital, Jackson,
Michigan), Series 1993A
(FGIC Insured), 5.25% Due
06/01/2023
400,000 City of Detroit, AAA 2005 @ 101 400,956
Michigan, Water Supply 2016 @ 100 S.F.
System Revenue, Second
Lien Bonds, Series 1995-A
(MBIA Insured), 5.50% Due
07/01/2025
---------- ----------
$2,500,000 $2,398,782
========== ==========
</TABLE>
- --------
See "Notes to Portfolios."
TE-7
TAX-EXEMPT PORTFOLIOS
<PAGE>
NOTES TO PORTFOLIO:
All insured Bonds in the Trust Funds are insured only by the insurer indicated
in the description. The insurance was obtained directly by the issuer of the
Bonds or by the Sponsor.
(P) This Bond was issued at an original issue discount.The tax effect of Bonds
issued at an original issue discount is described in "Federal Tax Status."
(S) These Municipal Bonds are "when, as and if issued" or "delayed delivery"
and have expected settlement dates after the "First Settlement Date."
Interest on these Bonds begins accruing to the benefit of Unitholders on
the date of delivery.
(X) This Bond is of the same issue as another Bond in the Trust.
(D) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(1) Contracts to acquire Municipal Bonds were entered into by the Sponsor
between January 2, 1996 and January 9, 1996. All Bonds are represented by
regular way contracts, unless otherwise indicated, for the performance of
which an irrevocable letter of credit has been deposited with the Trustee.
(2) The ratings have been provided by Cantor Fitzgerald & Co. as reported to
Cantor Fitzgerald & Co. by the respective rating agencies. All ratings
represent Standard & Poor's ratings unless marked with the symbol "*" in
which case the rating represents a Moody's Investors Service, Inc. rating.
A brief description of the applicable Standard & Poor's and Moody's rating
symbols and their meanings is set forth under "Appendix: Description of
Ratings" or under "General Information--Rating of Units." A rating marked
by "[_]" is contingent upon Standard & Poor's receiving final
documentation from the insurer.
(3) There is shown under this heading the year in which each issue of
Municipal Bonds is initially redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the
terms and provisions of such Bonds. "S.F." indicates that a sinking fund
is established with respect to an issue of Municipal Bonds.
(4) During the initial offering period, evaluations of Municipal Bonds are
made on the basis of current offering side evaluations of the Municipal
Bonds. The aggregate offering price is greater than the aggregate bid
price of the Municipal Bonds, which is the basis on which Redemption
Prices will be determined for purposes of redemption of Units after the
initial offering period.
(5) Other information regarding the Municipal Bonds in the Trust Funds, at the
opening of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
INSURED INSURED INSURED
NATIONAL CALIFORNIA MICHIGAN
SERIES 18 SERIES 22 SERIES 13
---------- ---------- ----------
<S> <C> <C> <C>
Cost of Bonds to Sponsor.................. $4,067,241 $2,441,224 $2,396,637
Profit or (Loss) to Sponsor............... $ 149 $ (7,491) $ 2,145
Annual Interest Income to Trust........... $ 222,710 $ 131,040 $ 128,875
Bid Side Value of Bonds................... $4,041,932 $2,421,232 $2,370,886
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor reflects
underwriting profits or losses received or incurred by the Sponsor through
its participation in underwriting syndicates but such amounts reflect
portfolio hedging transaction costs, hedging gains or losses, certain other
carrying costs and the cost of insurance obtained by the Sponsor, if any,
prior to the Initial Date of Deposit for individual Bonds.
TE-8
TAX-EXEMPT PORTFOLIOS
<PAGE>
MUNICIPAL BOND RISK FACTORS
Certain of the Bonds in the Trust Funds may be general obligations of a
governmental entity that are backed by the taxing power of such entity. All
other Bonds in the Trusts are revenue bonds payable from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds, on the other hand, are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. There are, of
course, variations in the security of the different Bonds in the Trust Funds,
both within a particular classification and between classifications, depending
on numerous factors.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from services provided by hospitals and other health care
facilities, including nursing homes. Ratings of bonds issued for health care
facilities are often based on feasibility studies that contain projections of
occupancy levels, revenues and expenses. A facility's gross receipts and net
income available for debt service will be affected by future events and
conditions including, among other things, demand for services and the ability
of the facility to provide the services required, physicians' confidence in
the facility, management's capabilities, economic developments in the service
area, competition, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the
cost and possible unavailability of malpractice insurance, the funding of
Medicare, Medicaid and other similar third party payor programs, and
government regulation. Federal legislation has been enacted which implements a
system of prospective Medicare reimbursement which may restrict the flow of
revenues to hospitals and other facilities which are reimbursed for services
provided under the Medicare program. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse changes in these areas may affect the
ability of such issuers to make payments of principal and interest on
Municipal Bonds held in the portfolios of the Trust Funds. Such adverse
changes also may affect the ratings of the Municipal Bonds held in the
portfolios of the Trust Funds.
Certain of the Bonds in the Trust Funds may be single family mortgage revenue
bonds, which are issued for the purpose of acquiring from originating
financial institutions notes secured by mortgages on residences located within
the issuer's boundaries and owned by persons of low or moderate income.
Mortgage loans are generally partially or completely prepaid prior to their
final maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these Bonds are subject to
extraordinary mandatory redemption in whole or in part from such prepayments
of mortgage loans, a substantial portion of such Bonds will probably be
redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. The redemption price of such issues may be more or less than the
offering price of such Bonds. Extraordinary mandatory redemption without
premium could also result from the failure of the originating financial
institutions to make mortgage loans in sufficient amounts within a specified
time period or, in some cases, from the sale by the Bond issuer of the
mortgage loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates on mortgage
loans funded from other sources becoming competitive with the interest rates
on the mortgage loans funded with the proceeds of the single family mortgage
revenue bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of principal of
or interest on such mortgage revenue bonds. Single family mortgage revenue
bonds issued after December 31, 1980 were issued under Section 103A of the
Internal Revenue Code of 1954, which Section contains certain ongoing
requirements relating to the use
TE-9
TAX-EXEMPT PORTFOLIOS
<PAGE>
of the proceeds of such Bonds in order for the interest on such Bonds to
retain its tax-exempt status. In each case, the issuer of the Bonds has
covenanted to comply with applicable ongoing requirements and bond counsel to
such issuer has issued an opinion that the interest on the Bonds is exempt
from Federal income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to meet
these requirements could cause the interest on the Bonds to become taxable,
possibly retroactively from the date of issuance.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from mortgage loans to housing projects for low
to moderate income families. The ability of such issuers to make debt service
payments will be affected by events and conditions affecting financed
projects, including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in taxes,
employment and income conditions prevailing in local labor markets, utility
costs and other operating expenses, the managerial ability of project
managers, changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under Federal and
state programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or non-
origination of mortgage loans as well as upon the occurrence of other events.
Certain issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing Bonds held by
the Trust Funds, the Sponsor has not had any direct communications with any of
the issuers thereof, but at the Initial Date of Deposit it is not aware that
any of the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Bond in the Trusts will
not attempt to so redeem a Bond in the Trust Funds.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services. Water
and sewerage bonds are generally payable from user fees. Problems faced by
such issuers include the ability to obtain timely and adequate rate increases,
a decline in population resulting in decreased user fees, the difficulty of
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
increasing difficulty of obtaining or discovering new supplies of fresh water,
the effect of conservation programs and the impact of "no-growth" zoning
ordinances. Issuers may have experienced these problems in varying degrees.
Certain of the Bonds in the Trust Funds may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy or natural
gas. Utilities are generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which may be
charged and the appropriate rate of return on an approved asset base. The
problems faced by such issuers include the difficulty in obtaining approval
for timely and adequate rate increases from the governing public utility
commission, the difficulty in financing large construction programs, the
limitations on operations and increased costs and delays attributable to
environmental considerations, increased competition, recent reductions in
estimates of future demand for electricity in certain areas of the country,
the difficulty of the capital market in absorbing utility debt, the difficulty
in obtaining fuel at reasonable prices and the effect of energy conservation.
Issuers may have experienced these problems in varying degrees. In addition,
Federal, state and municipal governmental authorities may from time to time
review existing and impose additional regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of such Bonds to make payments of principal and/or
interest on such Bonds.
TE-10
TAX-EXEMPT PORTFOLIOS
<PAGE>
Certain of the Bonds in the Trust Funds may be industrial revenue bonds
("IRBs"), including pollution control revenue bonds, which are tax-exempt
securities issued by states, municipalities, public authorities or similar
entities to finance the cost of acquiring, constructing or improving various
industrial projects. These projects are usually operated by corporate
entities. Issuers are obligated only to pay amounts due on the IRBs to the
extent that funds are available from the unexpended proceeds of the IRBs or
receipts or revenues of the issuer under an arrangement between the issuer and
the corporate operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IRBs. Regardless of the
structure, payment of IRBs is solely dependent upon the creditworthiness of
the corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from leveraged buy-outs or takeovers. The IRBs in the
Trust Funds may be subject to special or extraordinary redemption provisions
which may provide for redemption at par or, with respect to original issue
discount bonds, at issue price plus the amount of original issue discount
accreted to the redemption date plus, if applicable, a premium. The Sponsor
cannot predict the causes or likelihood of the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or likelihood of
the redemption of IRBs or other Bonds in the Trust Funds prior to the stated
maturity of such Bonds.
Certain of the Bonds in the Trust Funds may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income
is generally derived from fees received from signatory airlines pursuant to
use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their obligations
under the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines are experiencing severe financial difficulties.
The Sponsor cannot predict what effect these industry conditions may have on
airport revenues which are dependent for payment on the financial condition of
the airlines and their usage of the particular airport facility. Similarly,
payment on Bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges and
rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of
transportation, scarcity of fuel and reduction or loss of rents.
Certain of the Bonds in the Trust Funds may be obligations of issuers which
are, or which govern the operation of, schools, colleges and universities and
whose revenues are derived mainly from ad valorem taxes, or for higher
eduction systems, from tuition, dormitory revenues, grants and endowments.
General problems relating to school bonds include litigation contesting the
state constitutionality of financing public eduction in part from ad valorem
taxes, thereby creating a disparity in educational funds available to schools
in wealthy areas and schools in poor areas. Litigation or legislation on this
issue may affect the sources of funds available for the payment of school
bonds in the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage of the
population consisting of "college" age individuals, possible inability to
raise tuition and fees sufficiently to cover increased operating costs, the
uncertainty of continued receipt of Federal grants and state
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funding and new government legislation or regulations which may adversely
affect the revenues or costs of such issuers. All of such issuers have been
experiencing certain of these problems in varying degrees.
Certain of the Bonds in the Trust Funds may be Urban Redevelopment Bonds
("URBs"). URBs have generally been issued under bond resolutions pursuant to
which the revenues and receipts payable under the arrangements with the
operator of a particular project have been assigned and pledged to purchasers.
In some cases, a mortgage on the underlying project may have been granted as
security for the URBs. Regardless of the structure, payment of the URBs is
solely dependent upon the creditworthiness of the operator of the project.
Certain of the Bonds in the Trust Funds may be lease revenue bonds whose
revenues are derived from lease payments made by a municipality or other
political subdivision which is leasing equipment or property for use in its
operation. The risks associated with owning Bonds of this nature include the
possibility that appropriation of funds for a particular project or equipment
may be discontinued. The Sponsor cannot predict the likelihood of
nonappropriation of funds for these types of lease revenue Bonds.
Certain of the Bonds in the Trust Funds may be sales and/or use tax revenue
bonds whose revenues are derived from the proceeds of a special sales or use
tax. Such taxes are generally subject to continuing Legislature approval.
Payments may be adversely affected by reduction of revenues due to decreased
use of a facility or decreased sales.
Investors should be aware that many of the Bonds in the Trust Funds are
subject to continuing requirements such as the actual use of Bond proceeds or
manner of operation of the project financed from Bond proceeds that may affect
the exemption of interest on such Bonds from Federal income taxation. Although
at the time of issuance of each of the Bonds in the Trusts an opinion of bond
counsel was rendered as to the exemption of interest on such obligations from
Federal income taxation, there can be no assurance that the respective issuers
or other obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the Bonds. A failure to comply with
such requirements may cause a determination that interest on such obligations
is subject to Federal income taxation, perhaps even retroactively from the
date of issuance of such Bonds, thereby reducing the value of the Bonds and
subjecting Unitholders to unanticipated tax liabilities.
Federal bankruptcy statutes relating to the adjustment of debts of political
subdivisions or authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of
creditors, which proceedings could result in material and adverse modification
or alteration of the rights of holders of obligations issued by such
subdivisions or authorities.
Certain of the Bonds in the Trust Funds may represent "moral obligations" of a
governmental entity other than the issuer. In the event that the issue of a
Municipal Bond defaults in the repayment thereof, the governmental entity
lawfully may, but is not obligated to, discharge the obligation of the issuer
to repay such Municipal Bond.
STATE RISK FACTORS AND STATE TAX STATUS
None of the special counsel to the various Trust Funds has expressed any
opinion regarding the completeness or materiality of any matters contained in
this Prospectus other than the tax opinions set forth under "Federal Tax
Status." For risks specific to the individual Trusts, see "Risk Factors" for
each Trust.
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INSURED CALIFORNIA SERIES 22
Risk Factors
As described above, the Trust will invest substantially all of its assets in
California Municipal Obligations. The Trust is therefore susceptible to
political, economic or regulatory factors affecting issuers of California
Municipal Obligations. These include the possible adverse effects of certain
California constitutional amendments, legislative measures, voter initiatives
and other matters that are described below. The following information provides
only a brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are generally
available to investors and are believed to be accurate. No independent
verification has been made of the accuracy or completeness of any of the
following information. It is based in part on information obtained from
various State and local agencies in California or contained in Official
Statements for various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of the Fund or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of almost 32 million represents 12.3% of
the total United States population and grew by 27% in the 1980s. While the
State's substantial population growth during the 1980s stimulated local
economic growth and diversification and sustained a real estate boom between
1984 and 1990, it has increased strains on the State's limited water resources
and its infrastructure. Resultant traffic congestion, school overcrowding and
high housing costs have increased demands for government services and may
impede future economic growth. Population growth has slowed between 1991 and
1993 even while substantial immigration has continued, due to a significant
increase in outmigration by California residents. Generally, the household
incomes of new residents have been substantially lower (and their education
and social service utilization higher) than those of departing households,
which may have a major long-term socioeconomic and fiscal impact. However,
with the California economy improving, the recent net outmigration within the
Continental U.S. is expected to decrease or be reversed.
From mid-1990 to late 1993, the State's economy suffered its worst recession
since the 1930s, with recovery starting later than for the nation as a whole.
The State has experienced the worst job losses of any post-war recession.
Prerecession job levels may not be realized until near the end of the decade.
The largest job losses have been in Southern California, led by declines in
the aerospace and construction industries. Weakness statewide occurred in
manufacturing, construction, services and trade. Additional military base
closures will have further adverse effects on the State's economy later in the
decade.
Since the start of 1994, the California economy has shown signs of steady
recovery and growth. The State Department of Finance reports net job growth,
particularly in construction and related manufacturing, wholesale and retail
trade, transportation, recreation and services. This growth has offset the
continuing but slowing job losses in the aerospace industry and restructuring
of the finance and utility sectors. Unemployment in the State was down
substantially in 1994 from its 10% peak in January, 1994, but still remains
higher than the national average rate. Retail sales were up strongly in 1994
from year-earlier figures. Delay or slowdown in recovery will adversely affect
State revenues.
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Constitutional Limitations on Taxes and Appropriations
Limitation on Taxes. Certain California municipal obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to the rate of inflation, not to exceed 2% per year,
or decline in value, or in the case of new construction or change of ownership
(subject to a number of exemptions). Taxing entities may, however, raise ad
valorem taxes above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13 and on June 18, 1992 the U.S. Supreme
Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the
voters of the State in 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval. Significant
elements of this initiative, "Proposition 62," have been overturned in recent
court cases. An initiative proposed to re-enact the provisions of Proposition
62 as a constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
Appropriations Limits. California and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations limit
imposed. "Appropriations subject to limitation" are authorizations to spend
"proceeds of taxes," which consists 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 cost of providing the product or
service, but "proceeds of taxes" excludes most State subventions to local
governments. No limit is imposed on appropriations of funds which are not
"proceeds of taxes," such as reasonable user charges or fees, and certain
other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January
1, 1979, or subsequently authorized by the voters, (2) appropriations arising
from certain emergencies declared by the Governor, (3) appropriations for
qualified capital outlay projects, (4) appropriations by the State of post-
1989 increases in gasoline taxes and vehicle weight fees, and (5)
appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in
California's economy.
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Obligations of the State of California. Under the California Constitution,
debt service on outstanding general obligation bonds is the second charge to
the General Fund after support of the public school system and public
institutions of higher education. Total outstanding general obligation bond
and lease purchase debt of the State increased from $9.4 billion at June 30,
1987 to $23.5 billion at June 30, 1994. In FY1993-94, debt service on general
obligation bonds and lease purchase debt was approximately 5.2% of General
Fund revenues.
Recent Financial Results. The principal sources of General Fund revenues in
1993-94 were the California personal income tax (44% of total revenues), the
sales tax (35%), bank and corporation taxes (12%), and the gross premium tax
on insurance (3%). California maintains a Special Fund for Economic
Uncertainties (the "Economic Uncertainties Fund"), derived from General Fund
revenues, as a reserve to meet cash needs of the General Fund.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to
local public school districts. In 1988, an initiative (Proposition 98) was
enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about
33%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse economic,
fiscal, and budget conditions. The economic recession seriously affected State
tax revenues. It also caused increased expenditures for health and welfare
programs. The State is also facing a structural imbalance in its budget with
the largest programs supported by the General Fund (education, health, welfare
and corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. These structural concerns will
be exacerbated in coming years by the expected need to substantially increase
capital and operating funds for corrections as a result of a "Three Strikes"
law enacted in 1994.
Recent Budgets. As a result a result of these factors, among others, from the
late 1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve,
the Special Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion
at its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
year thereafter, each budget required multibillion dollar actions to bring
projected revenues and expenditures into balance and to close large "budget
gaps" which were identified. The Legislature and Governor eventually agreed on
a number of different steps to produce Budget Acts in the years 1991-92 to
1994-95, including:
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and funding from the State to local
governments, coupled with some reduction in mandates on local government;
. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to
local school districts, thereby reducing State funding for schools;
. reduction in growth of support for higher education programs, coupled
with increases in student fees;
. revenue increases (particularly in the 1991-92 Fiscal Year budget), most
of which were for a short duration;
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. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less
federal aid than the State Administration has requested); and
. various one-time adjustments and accounting changes.
Despite these budget actions, the effects of the recession led to large,
unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of the 1993-94 Fiscal Year, the accumulated deficit was
so large (almost $2.8 billion) that it was impractical to budget to retire it
in one year, so a two-year program was implemented, using the issuance of
revenue anticipation warrants to carry a portion of the deficit over the end
of the fiscal year. When the economy failed to recover sufficiently in 1993-
94, a second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results. While General Fund revenues and expenditures were
essentially equal in FY 1992-93 (following two years of excess expenditures
over revenues), the General Fund had positive operating results in FY 1993-94
and 1994-95, which have reduced the accumulated budget deficit to around $600
million as of June 30, 1995.
A consequence of the accumulated budget deficits in the early 1990's, together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its
ongoing obligations. When the Legislature and the Governor failed to adopt a
budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish its
cash reserves, the State Controller was forced to issue registered warrants
("IOUs") to pay a variety of obligations representing prior years' or
continuing appropriations, and mandates from court orders. Available funds
were used to make constitutionally-mandated payments, such as debt service on
bonds and warrants. Between July 1 and September 4, 1992 the State Controller
issued a total of approximately $3.8 billion of registered warrants. After
that date, all remaining outstanding registered warrants (about $2.9 billion)
were called for redemption from proceeds of the issuance of 1992 Interim Notes
after the budget was adopted.
The State's cash condition became so serious in late spring of 1992 that the
State Controller was required to issue revenue anticipation warrants maturing
in the following fiscal year in order to pay the State's continuing
obligations. The State was forced to rely increasingly on external debt
markets to meet its cash needs, as a succession of notes and warrants (both
forms of short-term cash flow financing) were issued in the period from June
1992 to July 1994, often needed to pay previously-maturing notes or warrants.
These borrowings were used also in part to spread out the repayment of the
accumulated budget deficit over the end of a fiscal year.
The State issued $7.0 billion of short-term debt in July, 1994 to meet its
cash flow needs and to finance the deferral of part of the accumulated budget
deficit to the 1995-96 fiscal year. In order to assure repayment of the $4
billion, 22-month part of this borrowing, the State enacted legislation (the
"Trigger Law") which can lead to automatic, across-the-board cuts in General
Fund expenditures in either the 1994-95 or 1995-96 fiscal years if cash flow
projections made at certain times during those years show deterioration from
the projections made in July 1994 when the borrowings were made. On November
15, 1994, the State Controller as part of the Trigger Law reported that the
cash position of the General
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Fund on June 30, 1995 would be about $580 million better than earlier
projected, so no automatic budget adjustments were required in 1994-95. The
Controller's report showed that loss of federal funds was offset by higher
revenues, lower expenditures, and certain other increases in cash resources.
Current Budget. For the first time in four years, the State entered the 1995-
96 fiscal year with strengthening revenues based on an improving economy. The
major feature of the Governor's proposed Budget, a 15% phased tax cut, was
rejected by the Legislature.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34 days
after the start of the fiscal year. The Budget Act projects General Fund
revenues and transfers of $44.1 billion. Expenditures are budgeted at $43.4
billion. The Department of Finance projects that, after repaying the last of
the carryover budget deficit, there will be a positive balance of less than
$30 million in the budget reserve, the Special Fund for Economic
Uncertainties, at June 30, 1996, providing no margin for adverse results
during the year.
The Department of Finance projects cash flow borrowings in the 1995-96 Fiscal
Year will be the smallest in many years, comprising about $2 billion of notes
to be issued in April, 1996, and maturing by June 30, 1996. With full payment
of $4 billion of revenue anticipation warrants on April 25, 1996, the
Department sees no further need for borrowing over the end of the fiscal year.
The Department projects that available cash resources to pay State obligations
will be almost $2 billion at June 30, 1996. This "cushion" will be re-examined
by the State Controller on October 15, 1995, in the third step in the Budget
Adjustment Law process. If the Controller believes the available cash
resources on June 30, 1996 will, in fact, be zero or less, her report would
start a process which could lead to automatic budget cuts starting in
December, 1995.
The principal features of the 1995-96 Budget Act, in addition to those noted
above, are additional cuts in health and welfare expenditures (some of which
are subject to approvals or waivers by the federal government); assumed
further federal aid for illegal immigrant costs; and an increase in per-pupil
funding for public schools and community colleges, the first such significant
increase in four years.
The State's difficult financial condition for the current and upcoming budget
years will result in continued pressure upon almost all local governments,
particularly school districts and counties which depend on State aid. Despite
efforts in recent years to increase taxes and reduce governmental
expenditures, there can be no assurance that the State will not face budget
gaps in the future.
Bond Rating. State general obligation bonds ratings were reduced in July, 1994
to "A1" by Moody's and "A" by S&P. Both of these ratings were reduced from
"AAA" levels which the State held until late 1991. There can be no assurance
that such ratings will be maintained in the future. It should be noted that
the creditworthiness of obligations issued by local California issuers may be
unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
Legal Proceedings. The State is involved in certain legal proceedings
(described in the State's recent financial statements) that, if decided
against the State, may require the State to make significant future
expenditures or may substantially impair revenues. Trial courts have recently
entered tentative decisions or injunctions which would overturn several parts
of the state's recent budget compromises. The matters covered by these
lawsuits include a deferral of payments by the State to the Public Employees
Retirement System, reductions in welfare payments, and the use of certain
cigarette tax funds for health costs. All of these cases are subject to
further proceedings and appeals, and if the State eventually loses, the final
remedies may not have to be implemented in one year.
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Obligations of Other Issuers
Other Issuers of California Municipal Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the State that issue
Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of the
obligations backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments declined
more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
the State's General Fund surplus to local agencies, the reallocation of
certain State revenues to local agencies and the assumption of certain
governmental functions by the State to assist municipal issuers to raise
revenues. Through 1990-91, local assistance (including public schools)
accounted for approximately 75% of General Fund spending. To reduce State
General Fund support for school districts, the 1992-93 and 1993-94 Budget Acts
caused local governments to transfer $3.9 billion of property tax revenues to
school districts, representing loss of all of the post-Proposition 13
"bailout" aid. The largest share of these transfers came from counties, and
the balance from cities, special districts and redevelopment agencies. In
order to make up this shortfall, the Legislature proposed and voters approved
in 1993 dedicating 0.5% of the sales tax to counties and cities for public
safety purposes. In addition, the Legislature has changed laws to relieve
local governments of certain mandates, allowing them to reduce costs.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or other
fiscal considerations, the absolute level, or the rate of growth, of State
assistance to local governments may be further reduced. Any such reductions in
State aid could compound the serious fiscal constraints already experienced by
many local governments, particularly counties. At least one rural county
(Butte) publicly announced that it might enter bankruptcy proceedings in
August 1990, although such plans were put off after the Governor approved
legislation to provide additional funds for the county. Other counties have
also indicated that their budgetary condition is extremely grave. The Richmond
Unified School District (Contra Costa County) entered bankruptcy proceedings
in May 1991 but the proceedings have been dismissed. Los Angeles County, the
largest in the State, has reported severe fiscal problems, leading to a
nominal $1.2 billion deficit in its $11 billion budget for the 1995-96 Fiscal
Year. To balance the budget, the County has imposed severe cuts in services,
particularly for health care. The Legislature is considering actions to help
alleviate the County's fiscal problems, but none were completed before August
15, 1995. As a result of its bankruptcy proceedings (discussed further below),
Orange County also has implemented stringent cuts in services and has laid off
workers.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured
by land which is undeveloped at the time of issuance but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of a default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the only security for the
bonds. Moreover, in most cases the issuer of these bonds is not required to
make payments on the bonds in the event of delinquency in the payment of
assessments or taxes, except from amounts, if any, in a reserve fund
established for the bonds.
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California Long-Term Lease Obligations. Certain California long-term lease
obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be no
remedies available to the holders of the certificates evidencing the lease
obligation in the event abatement occurs. The most common cases of abatement
are failure to complete construction of the facility before the end of the
period during which lease payments have been capitalized and uninsured
casualty losses to the facility (e.g., due to earthquake). In the event
abatement occurs with respect to a lease obligation, lease payments may be
interrupted (if all available insurance proceeds and reserves are exhausted)
and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were
taken over by a State receiver (including a brief period under bankruptcy
court protection), the District failed to make rental payments on this lease,
resulting in a lawsuit by the Trustee for the Certificate of Participation
holders, in which the State was named defendant (on the grounds that it
controlled the District's finances). One of the defenses raised in answer to
this lawsuit was the invalidity of the District's lease. The trial court has
upheld the validity of the lease and the case has been settled. Any ultimate
judgment in any future case against the position asserted by the Trustee in
the Richmond case may have adverse implication for lease transactions of a
similar nature by other California entities.
Other Considerations. The repayment of industrial development securities
secured by real property may be affected by California laws limiting
foreclosure rights of creditors. Securities backed by health care and hospital
revenues may be affected by changes in State regulations governing cost
reimbursements to health care providers under Medi-Cal (the State's Medicaid
program), including risks related to the policy of awarding exclusive
contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g., because of a major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after the
enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which, typically, are the
issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue-raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local governments to impose new taxes or increase
existing taxes. It is not presently possible to predict the extent to which
any such legislation will be enacted. Nor is it presently possible to
determine the impact of any such legislation on California Municipal
Obligations in
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which the Fund may invest, future allocations of state revenues to local
governments or the abilities of state or local governments to pay the interest
on, or repay the principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $13 billion in aid for both earthquakes,
and neither event is expected to have any long-term negative economic impact.
Any California Municipal Obligation in the California Insured Trust could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the Federal or State
government to appropriate sufficient funds within their respective budget
limitations.
On January 17, 1994, a major earthquake with an estimated magnitude of 6.8 on
the Richter scale struck the Los Angeles area, causing significant property
damage to public and private facilities, presently estimated at $15-20
billion. While over $9.5 billion of federal aid, and a projected $1.9 billion
of State aid, plus insurance proceeds, will reimburse much of that loss, there
will be some ultimate loss of wealth and income in the region, in addition to
costs of the disruption caused by the event. Short-term economic projections
are generally neutral, as the infusion of aid will restore billions of dollars
to the local economy within a few months; already the local construction
industry has picked up. Although the earthquake will hinder recovery from the
recession in Southern California, already hard-hit, its long-term impact is
not expected to be material in the context of the overall wealth of the
region. Almost five years after the event, there are few remaining effects of
the 1989 Loma Prieta earthquake in northern California (which, however, caused
less severe damage than Northridge).
On December 7, 1994, Orange County, California (the "County"), together with
its pooled investment fund (the "Pools") filed for protection under Chapter 9
of the federal Bankruptcy Code, after reports that the Pools had suffered
significant market losses in its investments caused a liquidity crisis for the
Pools and the County. More than 180 other public entities, most but not all
located in the County, were also depositors in the Pooled Fund. The County
estimated the Pools' loss at about $1.64 billion, or 23% of its initial
deposits of around $7.5 billion. Many of the entities which kept moneys in the
Pools, including the County, faced cash flow difficulties because of the
bankruptcy filing and may be required to reduce programs or capital projects.
Moody's and Standard & Poor's have suspended, reduced to below investment
grade levels, or placed on "Credit Watch" various securities of the County and
the entities participating in the Pools.
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' investment; the balance is to be paid in the future. The County
succeeded in deferring, by consent, until June 30, 1996, the repayment of $800
million of short-term obligations due in July and August, 1995; these notes
are, however, considered to be in default by Moody's and S&P. On June 27,
1995, County voters turned down a proposal for a temporary 0.5% increase in
the local sales tax, making the County's fiscal recovery much harder.
The State of California has no obligation with respect to any obligations or
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate. All school districts were
able to meet their obligations in the 1994-95 Fiscal Year.
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California Tax Status
In the opinion of Orrick, Herrington & Sutcliffe, special California tax
counsel to Insured California Series 22 (the "Insured California Trust"),
under existing law:
The Insured California Trust is not an association taxable as a corporation
and the income of the Insured California Trust will be treated as the
income of the Unitholders under the income tax laws of California;
Amounts treated as interest on the underlying Bonds in the Insured
California Trust which are exempt from tax under California personal income
tax and property tax laws when received by the Insured California Trust
will, under such laws, retain their status as tax-exempt interest when
distributed to Unitholders. However, interest on the underlying Bonds
attributed to a Unitholder which is a corporation subject to the California
franchise tax laws may be includable in its gross income for purposes of
determining its California franchise tax. Further, certain interest which
is attributable to a Unitholder subject to the California personal income
tax and which is treated as an item of tax preference for purposes of the
federal alternative minimum tax pursuant to Section 57(a)(5) of the
Internal Revenue Code of 1986 may also be treated as an item of tax
preference that must be taken into account in computing such Unitholder's
alternative minimum taxable income for purposes of the California
alternative minimum tax enacted by 1987 California Statutes, chapter 1138.
However, because of the provisions of the California Constitution exempting
the interest on bonds issued by the State of California or by local
governments within the state, from taxes levied on income, the application
of the new California alternative minimum tax to interest otherwise exempt
from the California personal income tax in some cases may be unclear;
Under California income tax law, each Unitholder in the Insured California
Trust will have a taxable event when the Insured California Trust disposes
of a Bond (whether by sale, exchange, redemption, or payment at maturity)
or when the Unitholder redeems or sells units. Because of the requirement
that tax cost basis be reduced to reflect amortization of bond premium,
under some circumstances a Unitholder may realize taxable gains when Units
are sold or redeemed for an amount equal to, or less than, their original
cost. The total cost of each Unit in the Insured California Trust to a
Unitholder is allocated among each of the Bond issues held in the Insured
California Trust (in accordance with the proportion of the Insured
California Trust comprised by each Bond issue) in order to determine his
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 cost of each Bond issue. Unitholders' bases in their Units,
and the bases for their fractional interest in each Insured California
Trust asset, may have to be adjusted for their pro rata share of accrued
interest received, if any, on Bonds delivered after the Unitholders'
respective settlement dates;
Under the California personal property tax laws, bonds (including the Bonds
in the Insured California Trust) or any interest therein is exempt from
such tax;
Under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units
of the Insured California Trust is not deductible for the purposes of the
California personal income tax. While there presently is no California
authority interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining the
proper allocation and apportionment if interest costs for this purpose. The
Franchise Tax Board has not yet proposed or prescribed such regulations. In
interpreting the generally similar Federal provision, the Internal Revenue
Service has taken the position that such indebtedness need not be directly
traceable to the purchase or carrying of Units (although the Service has
not contended that a deduction for interest on indebtedness incurred to
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purchase or improve a personal residence or to purchase goods or services
for personal consumption will be disallowed). In the absence of conflicting
regulations or other California authority, the California Franchise Tax
Board generally has interpreted California statutory tax provisions in
accordance with Internal Revenue Service interpretations of similar Federal
provisions.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exemption of interest thereon from Federal
income tax and California personal income tax are rendered by bond counsel
to the respective issuing authorities and we have relied solely upon such
opinions, or, as to securities not yet delivered, forms of such opinions
contained in official statements relating to such securities. Except in
certain instances in which Orrick, Herrington & Sutcliffe acted as bond
counsel to issuers of Bonds in the Insured California Trust, and as such
made a review of proceedings relating to the issuance of certain Bonds at
the time of their issuance, Orrick, Herrington & Sutcliffe has not made any
review for the Trust of the proceedings relating to the issuance of the
Bonds in the Insured California Trust or of the basis for such opinions.
For a discussion of Federal tax matters relating to distributions from the
Trust Fund, see "Federal Tax Status."
INSURED MICHIGAN SERIES 13
Risk Factors
Investors should be aware that the economy of the State of Michigan has, in
the past, proven to be cyclical, due primarily to the fact that the leading
sector of the State's economy is the manufacturing of durable goods. While the
State's efforts to diversity its economy have proven successful, as reflected
by the fact that the share of employment in the State in the durable goods
sector has fallen from 33.1 percent in 1960 to 17.9 percent in 1990, durable
goods manufacturing still represents a sizable portion of the State's economy.
As a result, any substantial national economic downturn is likely to have an
adverse effect on the economy of the State and on the revenues of the State
and some of its local governmental units.
In July 1995, Moody's Investors Service Inc. raised the State's general
obligation bond rating to "Aa". In October 1989, Standard & Poor's Ratings
Group raised its rating on the State's general obligation bonds to "AA".
The State's economy could continue to be affected by changes in the auto
industry, notably consolidation and plant closings resulting from competitive
pressures and over-capacity. Such actions could adversely affect State
revenues and the financial impact on the local units of government in the
areas in which plants are closed could be more severe. In addition, the State
is a party to various legal proceedings, some of which could, if unfavorably
resolved from the point of view of the State, substantially affect State
programs or finances.
In recent years, the State has reported its financial results in accordance
with generally accepted accounting principles. For the fiscal years ended
September 30, 1990 and 1991, the State reported negative year-end balances in
the General Fund/School Aid Fund of $310.4 million and $169.4 million,
respectively. The State ended each of the 1992, 1993 and 1994 fiscal years
with its General Fund/School Aid Fund in balance, after having made
substantial transfers to the Budget Stabilization Fund in 1993 and 1994. A
positive cash balance in the combined General Fund/School Aid Fund was
recorded at September 30, 1990. In the 1991 through 1993 fiscal years, the
State experienced deteriorating cash
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balances which necessitated short-term borrowing and the deferral of certain
scheduled cash payments. The State did not borrow for cash flow purposes in
1994, but borrowed $500 million on March 9, 1995, which was repaid on
September 29, 1995. The State anticipates borrowing for cash flow purposes in
the current fiscal year. The State's Budget Stabilization fund received year-
end transfers from the General Fund of $283 million in 1993 and $464 million
in 1994, bringing the balance in the Budget Stabilization Fund to $779 million
at September 30, 1994.
The Michigan Constitution of 1963 limits the amount of total revenues of the
State raised from taxes and certain other sources to a level for each fiscal
year equal to a percentage of the State's personal income for the prior
calendar year. In the event that the State's total revenues exceed the limit
by 1 percent or more, the Michigan Constitution of 1963 requires that the
excess be refunded to taxpayers.
On March 15, 1994, Michigan voters approved a school finance reform amendment
to the State's Constitution which, among other things, increased the State
sales tax rate from 4% to 6% and placed a cap on property assessment increases
for all property taxes. Concurrent legislation cut the State's income tax rate
from 4.6% to 4.4%, reduced some property taxes and altered local school
funding sources to a combination of property taxes and state revenues, some of
which is provided from other new or increased State taxes. The legislation
also contained other provisions that alter (and in some cases, may reduce) the
revenues of local units of government, and tax increment bonds could be
particularly affected. While the ultimate impact of the constitutional
amendment and related legislation cannot yet be accurately predicted,
investors should be alert to the potential effect of such measures upon the
operations and revenues of Michigan local units of government.
In addition, the State Legislature recently adopted a package of state tax
cuts, including a phase out of the intangibles tax, an increase in exemption
amounts for personal income tax, and reductions in the single business tax.
Although all or most of the Bonds in the Trust are revenue obligations or
general obligations of local governments or authorities rather than general
obligations of the State of Michigan itself, there can be no assurance that
any financial difficulties the State may experience will not adversely affect
the market value or marketability of the Bonds or the ability of the
respective obligors to pay interest on or principal of the Bonds, particularly
in view of the dependency of local governments and other authorities upon
State aid and reimbursement programs and, in the case of bonds issued by the
State Building Authority, the dependency of the State Building Authority on
the receipt of rental payments from the State to meet debt service
requirements upon such bonds. In the 1991 fiscal year, the State deferred
certain scheduled cash payments to municipalities, school districts,
universities and community colleges. While such deferrals were made up at
specified later dates, similar future deferrals could have an adverse impact
on the cash position of some local governmental units. Additionally, the State
reduced revenue sharing payments to municipalities below that level provided
under formulas by $10.9 million in the 1991 fiscal year and $34.4 million in
the 1992 fiscal year, $45.5 million in the 1993 fiscal year and $64.6 million
(budgeted) in the 1994 fiscal year.
The Trust may contain general obligation bonds of local units of government
pledging the full faith and credit of the local unit which are payable from
the levy of ad valorem taxes on taxable property within the jurisdiction of
the local unit. Such bonds issued prior to December 22, 1978, or issued after
December 22, 1978 with the approval of the electors of the local unit, are
payable from property taxes levied without limitation as to rate or amount.
With respect to bonds issued after December 22, 1978, and which were not
approved by the electors of the local unit, the tax levy of the local unit for
debt service purposes is subject to constitutional, statutory and charter tax
rate limitations. In addition, several
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major industrial corporations have instituted challenges of their ad valorem
property tax assessments in a number of local municipal units in the State. If
successful, such challenges could have an adverse impact on the ad valorem tax
bases of such units which could adversely affect their ability to raise funds
for operation and debt service requirements.
Michigan Tax Status
In the opinion of Miller, Canfield, Paddock and Stone, P.L.C. special counsel
to the Insured Michigan Series 13 (the "Insured Michigan Trust") for Michigan
tax matters, under existing Michigan law:
The Insured Michigan Trust and the owners of Units will be treated for
purposes of the Michigan income tax laws and the Single Business Tax in
substantially the same manner as they are for purposes of the Federal
income tax laws, as currently enacted. Accordingly, we have relied upon the
opinion of Chapman and Cutler as to the applicability of Federal income tax
under the Internal Revenue Code of 1986 to the Insured Michigan Trust and
the Unitholders.
Under the income tax laws of the State of Michigan, the Insured Michigan
Trust is not an association taxable as a corporation; the income of the
Insured Michigan Trust will be treated as the income of the Unitholders and
be deemed to have been received by them when received by the Insured
Michigan Trust. Interest on the underlying Bonds which is exempt from tax
under these laws when received by the Insured Michigan Trust will retain
its status as tax exempt interest to the Unitholders.
For purposes of the foregoing Michigan tax laws, each Unitholder will be
considered to have received his pro rata share of Bond interest when it is
received by the Insured Michigan Trust, and each Unitholder will have a
taxable event when the Insured Michigan Trust disposes of a Bond (whether
by sale, exchange, redemption or payment at maturity) or when the
Unitholder redeems or sells his Unit to the extent the transaction
constitutes a taxable event for Federal income tax purposes. The tax cost
of each unit to a Unitholder will be established and allocated for purposes
of these Michigan tax laws in the same manner as such cost is established
and allocated for Federal income tax purposes.
Under the Michigan Intangibles Tax, the Insured Michigan Trust is not
taxable and the pro rata ownership of the underlying Bonds, as well as the
interest thereon, will be exempt to the Unitholders to the extent the
Insured Michigan Trust consists of obligations of the State of Michigan or
its political subdivisions or municipalities, or of obligations of the
Commonwealth of Puerto Rico, Guam or of the United States Virgin Islands.
The Intangibles Tax is being phased out, with reductions of twenty-five
percent (25%) in 1994 and 1995, fifty percent (50%) in 1996, and seventy-
five percent (75%) in 1997, with total repeal effective January 1, 1998.
The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the
Intangible Tax with respect to those intangibles of persons subject to the
Single Business Tax the income from which would be considered in computing
the Single Business Tax. Persons are subject to the Single Business Tax
only if they are engaged in "business activity", as defined in the Act.
Under the Single Business Tax, both interest received by the Insured
Michigan Trust on the underlying Bonds and any amount distributed from
Insured Michigan Trust to a Unitholder, if not included in determining
taxable income for Federal income tax purposes, is also not included in the
adjusted tax base upon which the Single Business Tax is computed, of either
the Insured Michigan Trust or the Unitholders. If the Insured Michigan
Trust or the Unitholders have a taxable event for Federal income tax
purposes when the Insured Michigan Trust disposes of a Bond (whether by
sale, exchange, redemption or payment at maturity) or the
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Unitholder redeems or sells his Unit, an amount equal to any gain realized
from such taxable event which was included in the computation of taxable
income for Federal income tax purposes (plus an amount equal to any capital
gain of an individual realized in connection with such event but excluded
in computing that individual's Federal taxable income) will be included in
the tax base against which, after allocation, apportionment and other
adjustments, the Single Business Tax is computed. The tax base will be
reduced by an amount equal to any capital loss realized from such
a taxable event, whether or not the capital loss was deducted in computing
Federal taxable income in the year the loss occurred. Unitholders should
consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of the
Trust, or paid under individual policies obtained by issuers of Bonds,
which, when received by the Unitholders, represent maturing interest on
defaulted obligations held by the Trustee, will be excludable from the
Michigan income tax laws and the Single Business Tax if, and to the same
extent as, such interest would have been so excludable if paid by the
issuer of the defaulted obligations. While treatment under the Michigan
Intangibles Tax is not premised upon the characterization of such proceeds
under the Internal Revenue Code, the Michigan Department of Treasury should
adopt the same approach as under the Michigan income tax laws and the
Single Business Tax.
As the Tax Reform Act of 1986 eliminates the capital gain deduction for tax
years beginning after December 31, 1986, the federal adjusted gross income,
the computation base for the Michigan Income Tax, of a Unitholder will be
increased accordingly to the extent such capital gains are realized when
the Insured Michigan Trust disposes of a Bond or when the Unitholder
redeems or sells a Unit, to the extent such transaction constitutes a
taxable event for Federal income tax purposes.
For a discussion of Federal tax matters relating to distributions from the
Trust Fund, see "Federal Tax Status."
INSURANCE ON THE BONDS
All Municipal Bonds in the portfolios of the Insured Trusts are insured as to
the scheduled payment of interest and principal by the issuer or the Sponsor
from MBIA Insurance Corporation ("MBIA Corporation") or other insurers. See
"Portfolios" and the Notes thereto. The premium for any insurance policy or
policies obtained by an issuer of Municipal Bonds or the Sponsor has been paid
in advance by such issuer or the Sponsor and any such policy or policies are
non-cancellable and will remain in force so long as the Municipal Bonds so
insured are outstanding and the insurer and/or insurers thereof remain in
business. Where Municipal Bond insurance is obtained by the issuer or the
Sponsor directly from MBIA Corporation or another insurer, no premiums for
insurance are paid by an Insured Trust Fund. If the provider of an original
issuance insurance policy is unable to meet its obligations under such policy
or if the rating assigned to the claims-paying ability of any such insurer
deteriorates, no other insurer has an obligation to insure any issue adversely
affected by either of the above described events.
The aforementioned insurance guarantees the scheduled payment of principal and
interest on all of the Municipal Bonds in an Insured Trust Fund. It does not
guarantee the market value of the Municipal Bonds or the value of the Units of
the Insured Trust Fund. Insurance obtained by the issuer of a Municipal Bond
or the Sponsor is effective so long as the Bond is outstanding, whether or not
held by an Insured Trust Fund. Therefore, any such insurance may be considered
to represent an element of market value in regard to the Bonds thus insured,
but the exact effect, if any, of this insurance on such market value cannot be
predicted.
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Financial Guaranty Insurance Company. Financial Guaranty is a wholly-owned
subsidiary of FGIC Corporation (the "Corporation"), a Delaware holding
company. The Corporation is a wholly-owned subsidiary of General Electric
Capital Corporation ("GECC"). Neither the Corporation nor GECC is obligated to
pay the debts or the claims against Financial Guaranty. Financial Guaranty is
domiciled in the State of New York and is subject to regulation by the State
of New York Insurance Department. As of September 30, 1995, the total capital
and surplus of Financial Guaranty was approximately $994,500,000. Copies of
Financial Guaranty's financial statements, prepared on the basis of statutory
accounting principles, and the Corporation's financial statements, prepared on
the basis of generally accepted accounting principles, may be obtained by
writing to Financial Guaranty at 115 Broadway, New York, New York 10006,
Attention: Communications Department (telephone number is (212) 312-3000) or
to the New York State Insurance Department at 160 West Broadway, 18th Floor,
New York, New York 10013, Attention: Property Companies Bureau (telephone
number (212) 621-0389).
In addition, Financial Guaranty Insurance Company is currently authorized to
write insurance in all 50 states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained herein with
respect to such corporation is unaudited but appears in reports or other
materials filed with state insurance regulatory authorities and is subject to
audit and review by such authorities. No representation is made herein as to
the accuracy or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof but the
Sponsor is not aware that the information herein is inaccurate or incomplete.
AMBAC Indemnity Corporation. AMBAC Indemnity Corporation ("AMBAC") is a
Wisconsin-domiciled stock insurance company, regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin, and licensed to do
business in 50 states, the District of Columbia and the Commonwealth of Puerto
Rico, with admitted assets (unaudited) of approximately $2,145,000,000 and
statutory capital (unaudited) of approximately $782,000,000 as of December 31,
1994. Statutory capital consists of AMBAC policyholders' surplus and statutory
contingency reserve. AMBAC is a wholly owned subsidiary of AMBAC Inc., a 100%
publicly-held company. Moody's Investors Service, Inc. and Standard & Poor's
have both assigned a AAA claims-paying ability rating to AMBAC. Copies of
AMBAC's financial statements prepared in accordance with statutory accounting
standards are available from AMBAC. The address of AMBAC's administrative
offices and its telephone number are One State Street Plaza, 17th Floor, New
York, New York 10004 and (212) 668-0340. AMBAC has entered into quota share
reinsurance agreements under which a percentage of the insurance underwritten
pursuant to certain municipal bond insurance programs of AMBAC has been and
will be assumed by a number of foreign and domestic unaffiliated reinsurers.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA Corporation") is
the principal operating subsidiary of MBIA, Inc., a New York Stock Exchange
listed company. MBIA, Inc. is not obligated to pay the debts of or claims
against MBIA Corporation. MBIA Corporation, which commenced municipal bond
insurance operations on January 5, 1987, is a limited liability corporation
rather than a several liability association. MBIA Corporation 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 the Northern Mariana Islands, the
Commonwealth of Puerto Rico, the Virgin Islands of the United States and the
Territory of Guam.
As of September 30, 1995 MBIA Corporation had admitted assets of $3.7 billion
(unaudited), total liabilities of $2.5 billion (unaudited), and total capital
and surplus of $1.2 billion (unaudited) determined
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in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of December 31, 1994, MBIA, Inc. had
admitted assets of $3.4 billion (audited), total liabilities of $2.3 billion
(audited), and total capital and surplus of $1.1 billion (audited) determined
in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. Standard & Poor's has rated the claims
paying ability of MBIA, Inc. "AAA". Copies of MBIA Corporation's financial
statements prepared in accordance with statutory accounting practices are
available from MBIA Corporation. The address of MBIA Corporation is 113 King
Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA, Inc. acquired Bond Investors Group, Inc. On
January 5, 1990, the Insurer acquired all of the outstanding stock of Bond
Investors Group, Inc., the parent of BIG, now known as MBIA Insurance Corp. of
Illinois. Through a reinsurance agreement, BIG has ceded all of its net
insured risks, as well as its unearned premium and contingency reserves, to
the Insurer and the Insurer has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA, Inc. "Aaa"
and short-term loans "MIG1," both designated to be of the highest quality.
Standard & Poor's rates all new issues insured by MBIA, Inc. "AAA."
Financial Security Assurance. Financial Security Assurance ("Financial
Security" or "FSA") is a monoline insurance company incorporated on March 16,
1984 under the laws of the State of New York. The operations of Financial
Security commenced on July 25, 1985, and Financial Security received its New
York State insurance license on September 23, 1985. Financial Security 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.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized securities offered in domestic and
foreign markets. Financial Security and its subsidiaries also write financial
guaranty insurance in respect of municipal and other obligations and reinsure
financial guaranty insurance policies written by other leading insurance
companies. In general, financial guaranty insurance consists of the issuance
of a guaranty of scheduled payments of an issuer's securities, thereby
enhancing the credit rating of these securities, in consideration for payment
of a premium to the insurer.
Financial Security is approximately 91.6% owned by U S West, Inc. and 8.4%
owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio Marine").
Neither U S West, Inc. nor Tokio Marine is obligated to pay the debts of or
the claims against Financial Security. Financial Security is domiciled in the
State of New York and is subject to regulation by the State of New York
Insurance Department.
As of March 31, 1993, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively, of Financial
Security and its consolidated subsidiaries were, in accordance with statutory
accounting principles, approximately $479,110,000 (unaudited) and $220,078,000
(unaudited), and the total shareholders' equity and the unearned premium
reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with generally accepted accounting principles,
approximately $628,119,000 (unaudited) and $202,493,000 (unaudited).
Copies of Financial Security's financial statements may be obtained by writing
to Financial Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's telephone number is (212) 826-
0100.
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Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies at an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security
reinsures a portion of its liabilities under certain of its financial guaranty
insurance policies with unaffiliated reinsurers under various quota share
treaties and on a transaction-by-transaction basis. Such reinsurance is
utilized by Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
Financial Security's obligations under any financial guaranty insurance
policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc., and "AAA" by Standard & Poor's, Nippon Investors Service Inc.,
Duff & Phelps Inc. and Australian Ratings Pty. Ltd. Such ratings reflect only
the views of the respective rating agencies, are not recommendations to buy,
sell or hold securities and are subject to revision or withdrawal at any time
by such rating agencies.
Capital Guaranty Insurance Company. Capital Guaranty Insurance Company
("Capital Guaranty" or "CGIC") is a "Aaa/AAA" rated 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. Capital Guaranty Corporation is a publicly owned company whose shares
are traded on the New York Stock Exchange.
Capital Guaranty Insurance Company is authorized to provide insurance in all
50 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam and
the U.S. Virgin Islands. Capital Guaranty focuses on insuring municipal
securities and provides policies which guaranty the timely payment of
principal and interest when due for payment on new issue and secondary market
issue municipal bond transactions. Capital Guaranty's claims-paying ability is
rated "Triple-A" by both Moody's and Standard & Poor's.
As of September 30, 1995, Capital Guaranty had more than $19.0 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$204,642,000 and the total admitted assets were $326,802,226 as reported to
the Insurance Department of the State of Maryland as of September 30, 1995.
Financial statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards, are
available upon request. The address of Capital Guaranty's headquarters is
Steuart Tower, 22nd Floor, One Market Plaza, San Francisco, CA 94105-1413 and
the telephone number is (415) 995-8000.
Chapman and Cutler, counsel for the Sponsor, has given an opinion to the
effect that the payment of insurance proceeds representing maturing interest
on defaulting municipal obligations paid by Financial Guaranty or another
insurer would be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid by the issuer
of the defaulted obligations. See "Federal Tax Status."
FEDERAL TAX STATUS
All Municipal Bonds deposited in the Trust Fund will be accompanied by copies
of opinions of bond counsel to the issuers thereof, given at the time of
original delivery of the Municipal Bonds, to the effect that the interest
thereon is excludable from gross income for Federal income tax purposes. In
connection
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with the offering of Units of the Trust Fund, neither the Sponsor, the
Trustee, the auditors nor their respective counsel have made any review of the
proceedings relating to the issuance of the Municipal Bonds or the basis for
such opinions. Gain realized on the sale or redemption of the Municipal Bonds
by the Trustee or of a Unit by a Unitholder is, however, includable in gross
income for Federal income tax purposes (subject to various non-recognition
provisions of the Internal Revenue Code of 1986, as amended (the "Code")).
Such gain does not include any amounts received in respect of accrued interest
or accrued original issue discount, if any. It should be noted that, as
further described below, accretion of market discount on tax-exempt bonds is
subject to taxation as ordinary income. Market discount can arise based on the
price a Trust Fund pays for Municipal Bonds or the price a Unitholder pays for
his or her Units. In addition, bond counsel to the issuing authorities
rendered opinions as to the exemption of interest on such Bonds, when held by
residents of the state in which the issuers of such bonds are located, from
state income taxes and, where applicable, local income taxes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under existing
law:
The Trust Fund is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Code will retain its
status when distributed to Unitholders; however, such interest may be taken
into account in computing the alternative minimum tax, an additional tax on
branches of foreign corporations and the environmental tax (the "Superfund
Tax"), as noted below.
Exemption of interest and accrued original issue discount on any Municipal
Bonds for Federal income tax purposes does not necessarily result in tax-
exemption under the laws of the several states as such laws vary with
respect to the taxation of such securities and in many states all or part
of such interest and accrued original issue discount may be subject to tax.
Each Unitholder is considered to be the owner of a pro rata portion of each
asset of the respective Trust Fund in the proportion that the number of
Units of such Trust Fund held by him bears to the total number of Units
outstanding of such Trust Fund under subpart E, subchapter J of chapter 1
of the Code and will have a taxable event when such Trust Fund disposes of
a Bond, or when the Unitholder redeems or sells his Units. Unitholders must
reduce the tax basis of their Units for their share of accrued interest
received by a Trust Fund, if any, on Bonds delivered after the date the
Unitholders pay for their Units to the extent that such interest accrued on
such Bonds during the period from the Unitholder's settlement date to the
date such Bonds are delivered to a Trust Fund and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Bonds (whether by sale, payment on maturity, redemption or otherwise), gain
or loss is recognized to the Unitholder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured by
comparing the Unitholder's pro rata share of the total proceeds from such
disposition with the Unitholder's basis for his or her fractional interest
in the asset disposed of. In the case of a Unitholder who purchases Units,
such basis (before adjustment for earned original issue discount and
amortized bond premium, if any) is determined by apportioning the cost of
the Units among each of the Trust Fund's assets ratably according to their
value as of the valuation date nearest the date of acquisition of the
Units. The basis of each Unit and of each Municipal Bond which was issued
with original issue discount must be increased by the amount of the accrued
original issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) and the basis of each Unit
and of the Unitholder's interest in each Municipal Bond which was acquired
by such Unitholder at a premium must be
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reduced by the annual amortization of Municipal Bond premium. The tax basis
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less
than his original cost.
Any insurance proceeds paid under individual policies obtained by issuers
of Bonds which represent maturing interest on defaulted obligations held by
the Trustee will be excludable from Federal gross income if, and to the
same extent as, such interest would have been so excludable if paid in the
normal course by the issuer of the defaulted obligations provided that, at
the time such policies are purchased, the amounts paid for such policies
are reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay debt
service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Municipal Bond, depending on the date the
Municipal Bond was issued. In addition, special rules apply if the purchase
price of a Municipal Bond exceeds the original issue price plus the amount of
original issue discount which would have previously accrued based upon its
issue price (its "adjusted issue price") to prior owners. The application of
these rules will also vary depending on the value of the Municipal Bond on the
date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units. Unitholders should consult with their tax advisers regarding these
rules and their application.
The Revenue Reconciliation Act of 1993 (the "Tax Act") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds purchased
after April 30, 1993. In general, market discount is the amount (if any) by
which the stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable to
original issue discount not yet accrued) subject to a statutory de minimis
rule. Market discount can arise based on the price a Trust Fund pays for
Municipal Bonds or the price a Unitholder pays for his or her Units. Under the
Tax Act, accretion of market discount is taxable as ordinary income; under
prior law the accretion had been treated as capital gain. Market discount that
accretes while a Trust Fund holds a Municipal Bond would be recognized as
ordinary income by the Unitholders when principal payments are received on the
Municipal Bond, upon sale or at redemption (including early redemption), or
upon the sale or redemption of his or her Units, unless a Unitholder elects to
include market discount in taxable income as it accrues. The market discount
rules are complex and Unitholders should consult their tax advisers regarding
these rules and their application.
In the case of certain corporations, the alternative minimum tax and the
Superfund Tax depend upon the corporation's alternative minimum taxable
income, which is the corporation's taxable income with certain adjustments.
One of the adjustment items used in computing the alternative minimum taxable
income and the Superfund Tax of a corporation (other than an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or REMIC) is an
amount equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its alternative minimum taxable income
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all of the Bonds in a Trust Fund and tax-exempt original
issue discount. Unitholders should consult their tax advisers with respect to
the particular tax consequences to them including the corporate alternative
minimum tax, the Superfund Tax and the branch profits tax imposed by Section
884 of the Code.
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<PAGE>
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Trust Fund is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence or to purchase goods or services for personal
consumption). Also, under Section 265 of the Code, certain financial
institutions that acquire Units would generally not be able to deduct any of
the interest expense attributable to ownership of such Units. On December 7,
1995 the U.S. Treasury Department released proposed legislation that, if
adopted, would generally extend the financial institution rules to all
corporations, effective for obligations acquired after the date of
announcement. Investors with questions regarding these issues should consult
with their tax advisers.
In the case of certain Municipal Bonds in a Trust Fund, the opinions of bond
counsel indicate that interest on such Municipal Bonds received by a
"substantial user" of the facilities being financed with the proceeds of these
Municipal Bonds or persons related thereto, for periods while such Municipal
Bonds are held by such a user or related person, will not be excludable from
Federal gross income, although interest on such Municipal Bonds received by
others would be excludable from Federal gross income. "Substantial user" and
"related person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes that he or she may be a "substantial user" or a "related
person" as so defined should contact his or her tax adviser.
In the case of corporations, the alternative tax rate applicable to long-term
capital gains is 35% effective for long-term capital gains realized in taxable
years beginning on or after January 1, 1993. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. Under the
Code, taxpayers must disclose to the Internal Revenue Service the amount of
tax-exempt interest earned during the year.
All statements of law in the Prospectus concerning exclusion from gross income
for Federal, state or other tax purposes are the opinions of counsel and are
to be so construed.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Trust Fund of the proceedings relating to the issuance of the Bonds or of the
basis for such opinions.
Section 86 of the Code, in general, provides that fifty percent of Social
Security benefits are includible in gross income to the extent that the sum of
"modified adjusted gross income" plus fifty percent of the Social Security
benefits received exceeds a "base amount". The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return and
zero for married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted gross income is
adjusted gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible in gross
income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after December 31,
1993, up to 85 percent of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus
fifty percent of Social Security benefits received exceeds an "adjusted base
amount."
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<PAGE>
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from the Trust Fund, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his or her Social Security
benefits in gross income whether or not he or she receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after inclusion of
tax-exempt interest) does not exceed the base amount need not include any
Social Security benefits in gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to either the environmental tax or the branch profits tax, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and taxpayers
who may be deemed to have incurred (or continued) indebtedness to purchase or
carry tax-exempt obligations. Prospective investors should consult their tax
advisors as to the applicability of any collateral consequences. On December
7, 1995, the U.S. Treasury Department released proposed legislation that, if
adopted, could affect the United States federal income taxation of non-United
States Unitholders and the portion of the Trusts' income allocable to non-
United States Unitholders.
For a discussion of the state tax status of income earned on Units of a state
trust, see the discussion of tax status for the applicable trust. Except as
noted therein, the exemption of interest on state and local obligations for
Federal income tax purposes discussed above does not necessarily result in
exemption 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.
TAX REPORTING AND REALLOCATION
Because the Trust receives interest and makes monthly distributions based upon
such Trust's expected total collections of interest and any anticipated
expenses, certain tax reporting consequences may arise. The Trust is required
to report Unitholder information to the Internal Revenue Service ("IRS"),
based upon the actual collection of interest by such Trust on the securities
in such Trust, without regard to such Trust's expenses or to such Trust's
payments to Unitholders during the year. If distributions to Unitholders
exceed interest collected, the difference will be reported as a return of
principal which will reduce a Unitholder's cost basis in its Units (and its
pro rata interest in the securities in the Trust). A Unitholder must include
in taxable income the amount of income reported by a Trust to the IRS
regardless of the amount distributed to such Unitholder. If a Unitholder's
share of taxable income exceeds income distributions made by a Trust to such
Unitholder, such excess is in all likelihood attributable to the payment of
miscellaneous expenses of such Trust which will not be deductible by an
individual Unitholder as an itemized deduction except to the extent that the
total amount of certain itemized deductions, such as investments expenses
(which would include the Unitholder's share of Trust expenses), tax return
preparation fees and employee business expenses, exceeds 2% of such
Unitholder's adjusted gross income. Alternatively, in certain cases, such
excess may represent an increase in the Unitholder's tax basis in the Units
owned. Investors with questions regarding these issues should consult with
their tax advisers.
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<PAGE>
UNDERWRITING
The Underwriters named below have severally purchased Units of the Trusts in
the following respective amounts:
<TABLE>
<CAPTION>
INSURED
INSURED INSURED MICHIGAN
NATIONAL CALIFORNIA SERIES
FIRM NAME SERIES 18 SERIES 22 13
--------- --------- ---------- --------
<S> <C> <C> <C>
*EVEREN Unit Investment Trusts.................... 306,500 200,000 175,000
*EVEREN Securities, Inc........................... 50,000 50,000 50,000
Roney & Company................................... 25,000
Stifel Nicolaus & Co., Inc........................ 10,000
Gruntal & Co., Inc................................ 10,000
Advest, Inc....................................... 10,000
City Securities Corp.............................. 10,000
Pershing.......................................... 10,000
INVEST Financial Corporation...................... 10,000
------- ------- -------
TOTAL UNITS:...................................... 416,500 250,000 250,000
======= ======= =======
</TABLE>
Underwriter Addresses:
*EVEREN Unit Investment Trusts, a service of EVEREN Securities, Inc., 77 West
Wacker Drive, 29th Floor, Chicago, IL 60601-1994
*EVEREN Securities, Inc., 77 West Wacker Drive, 28th Floor, Chicago, IL 60601-
1994
Roney & Company, One Griswold Street, 6th Floor, UITs, Detroit, MI 48226
Stifel Nicolaus & Co., Inc., 500 North Broadway, St. Louis, MO 63102
Gruntal & Co., Inc., 14 Wall Street, 14th Floor, New York, NY 10005
Advest, Inc., One Commercial Plaza, 280 Trumbull Street, Hartford, CT
City Securities Corp., 135 N. Pennsylvania, Suite #2200, Indianapolis, IN 46204
Pershing, One Pershing Plaza, 7th Floor, Jersey City, NJ 07399
INVEST Financial Corporation, 2701 North Rocky Point Drive, 7th Floor, Tampa,
FL 33607
- ------------------
*EVEREN Capital Corporation owns or has a controlling interest in EVEREN Unit
Investment Trusts (the Trusts' Sponsor and Evaluator) and EVEREN Securities,
Inc. EVEREN Unit Investment Trusts is a service of EVEREN Securities, Inc. For
additional information about the Underwriters, see "Underwriting."
The Underwriters acquired the Units of the Trust Funds at a price per Unit
equal to the Public Offering Prices set forth under "Essential Information"
less the Underwriters' takedown. The amount of the Underwriters' takedown for
Trusts with a weighted average maturity less than 7.5 years for each Unit is
$.22 for those firms committing for 10,000 to 24,999 Units, $.22 plus 50% of
any net portfolio profit for those firms committing for 25,000 to 99,999 Units
and $.23 plus 50% of any net portfolio profit for those firms committing for
100,000 or more Units. The amount of the Underwriters' takedown for Trusts with
a weighted average maturity between 7.5 and 9.99 years for each Unit is $.28
for those firms committing for 10,000 to 24,999 Units, $.28 plus 50% of any net
portfolio profits for those firms committing for 25,000 to 49,999 Units, $.29
plus 50% of any net portfolio profit for those firms committing for 50,000 to
99,999 Units and $.30 plus 50% of any net portfolio profit for those firms
committing for 100,000 or more Units. The amount of the Underwriters' takedown
for Trusts with a weighted average maturity 10 to 14.99 years for each Unit is
$.30 for those firms committing for 10,000 to 24,999 Units, $.30 plus 50% of
any net portfolio profits for those firms committing for 25,000 to 49,999
Units, $.31 plus 50% of any net portfolio profit for those firms committing for
50,000 to 99,999 Units and $.32 plus 50% of any net portfolio profit for those
firms committing for 100,000 or more Units. The amount of the Underwriters'
takedown for Trusts with a weighted average maturity greater than 14.99 years
for each Unit is $.36 for 10,000 to 24,999 Units, $.36 plus 50% of any net
portfolio profit for those firms committing for 25,000
TAX-EXEMPT PORTFOLIOS
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<PAGE>
to 49,999 Units, $.37 plus 50% of any net portfolio profit for those firms
committing for 50,000 to 99,999 Units and $.38 plus 50% of any net portfolio
profit for those firms committing for 100,000 or more Units. In connection
with any quantity discounts (see "Public Offering of Units--Public Offering
Price"), the Sponsor and the applicable Underwriter will each receive reduced
concessions as a result of the reduced sales charges to the investor. In
addition to such discounts, the Sponsor may, from time to time, pay or allow
an additional discount, in the form of cash or other compensation, to dealers
who underwrite additional Units of a Trust or who sell, during a specified
time period, a minimum dollar amount of Units of a Trust and other unit
investment trusts underwritten by the Sponsor. The Underwriting Agreement
provides that the Sponsor will select and purchase the Municipal Bonds for
deposit in the Trust Funds on its own behalf and on behalf of the other
Underwriters.
The Underwriting Agreement provides that a public offering of the Units of the
Trust Funds will be made by the Underwriters at the Public Offering Price
described in the Prospectus. Units may also be sold to or through dealers, who
are members of the National Association of Securities Dealers, Inc., and
others at prices representing discounts from the Public Offering Price.
However, resales of Units of the Trust Funds to the public will be made at the
Public Offering Price thereof.
Underwriters and broker-dealers of the Trusts, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their representatives who have sold a
minimum number of Units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of Underwriters,
brokers, dealers, banks and/or others may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will reallow to
any such Underwriters, brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by
the Sponsor, or participate in sales programs sponsored by the Sponsor, an
amount not exceeding the total applicable sales charges on the sales generated
by such persons at the public offering price during such programs. Also, the
Sponsor in its discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying underwriters, brokers,
dealers, banks or others for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trusts. These programs will not change the price Unitholders pay for their
Units or the amount that the Trusts will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to Underwriters that sell units of trusts it sponsors. The Sponsor
pays substantially all costs associated with the seminar, excluding
Underwriter travel costs. Each Underwriter is invited to send a certain number
of representatives based on the gross number of units such firm underwrites
during a designated time period.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the estimated monthly distributions of interest and
principal to Unitholders on a per Unit basis. The tables assume no changes in
expenses, no changes in the current interest rates, no exchanges, redemptions,
sales or prepayments of the underlying Securities prior to maturity or
expected retirement date and the receipt of principal upon maturity or
expected retirement date. To the extent the foregoing assumptions change
actual distributions will vary.
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<PAGE>
INSURED NATIONAL SERIES 18
Monthly
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Feb 15, 1996 $0.02140 $0.02140
Mar 15, 1996 to Jul 15, 2005 $0.04281 $0.04281
Aug 15, 2005 $0.04281 $0.61224 $0.65505
Sep 15, 2005 to Apr 15, 2016 $0.04011 $0.04011
May 15, 2016 $0.04011 $0.55222 $0.59233
Jun 15, 2016 to Nov 15, 2018 $0.03781 $0.03781
Dec 15, 2018 $0.03781 $0.20408 $0.24189
Jan 15, 2019 to Apr 15, 2020 $0.03781 $0.03781
May 15, 2020 $0.03781 $1.44058 $1.47839
Jun 15, 2020 to Jul 15, 2020 $0.03141 $0.03141
Aug 15, 2020 $0.02866 $1.20048 $1.22914
Sep 15, 2020 to Feb 15, 2024 $0.02601 $0.02601
Mar 15, 2024 $0.02332 $1.20048 $1.22380
Apr 15, 2024 to Aug 15, 2025 $0.02081 $0.02081
Sep 15, 2025 $0.02081 $1.20048 $1.22129
Oct 15, 2025 to Nov 15, 2025 $0.01541 $0.01541
Dec 15, 2025 $0.01266 $2.40096 $2.41362
Jan 15, 2026 $0.00481 $1.20048 $1.20529
</TABLE>
INSURED CALIFORNIA SERIES 22
Monthly
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Feb 15, 1996 $0.02086 $0.02086
Mar 15, 1996 to Jun 15, 2019 $0.04172 $0.04172
Jul 15, 2019 $0.03756 $2.00000 $2.03756
Aug 15, 2019 to Sep 15, 2019 $0.03362 $0.03362
Oct 15, 2019 $0.03362 $0.46000 $0.49362
Nov 15, 2019 $0.03172 $0.03172
Dec 15, 2019 $0.03172 $0.76000 $0.79172
Jan 15, 2020 to Jul 15, 2020 $0.02852 $0.02852
Aug 15, 2020 $0.02852 $0.52000 $0.54852
Sep 15, 2020 to Nov 15, 2022 $0.02642 $0.02642
Dec 15, 2022 $0.02642 $2.00000 $2.02642
Jan 15, 2023 to Aug 15, 2023 $0.01772 $0.01772
Sep 15, 2023 $0.01772 $2.26000 $2.27772
Oct 15, 2023 to Feb 15, 2034 $0.00812 $0.00812
Mar 15, 2034 $0.00364 $2.00000 $2.00364
</TABLE>
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<PAGE>
INSURED MICHIGAN SERIES 13
Monthly
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
---------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Feb 15, 1996 $0.02052 $0.02052
Mar 15, 1996 to Jun 15, 2006 $0.04105 $0.04105
Jul 15, 2006 $0.04105 $1.60000 $1.64105
Aug 15, 2006 to May 15, 2017 $0.03395 $0.03395
Jun 15, 2017 $0.03395 $1.00000 $1.03395
Jul 15, 2017 to Oct 15, 2017 $0.02975 $0.02975
Nov 15, 2017 $0.02975 $2.00000 $2.02975
Dec 15, 2017 to Apr 15, 2018 $0.02105 $0.02105
May 15, 2018 $0.02105 $0.40000 $0.42105
Jun 15, 2018 to Apr 15, 2020 $0.02115 $0.02115
May 15, 2020 $0.02115 $2.00000 $2.02115
Jun 15, 2020 to Apr 15, 2021 $0.01225 $0.01225
May 15, 2021 $0.01225 $1.00000 $1.01225
Jun 15, 2021 to May 15, 2023 $0.00805 $0.00805
Jun 15, 2023 $0.00805 $2.00000 $2.00805
</TABLE>
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GENERAL INFORMATION
RATING OF UNITS
Standard & Poor's has rated the Units of any U.S. Treasury Portfolio Series or
GNMA Portfolio Series "AAA." Because the Securities in an Insured Trust Fund
in a Tax-Exempt Portfolio Series or an Insured Corporate Series are insured as
to the scheduled payment of principal and interest and on the basis of the
financial condition and the method of operation of the insurance companies
referred to in "Insurance on the Bonds" for each such Trust, Standard & Poor's
has also rated the Units of any Insured Trust Fund "AAA." This is the highest
rating assigned by Standard & Poor's. Standard & Poor's has been compensated
by the Sponsor for its services in rating Units of the Trust Funds.
A Standard & Poor's rating (as described by Standard & Poor's) on the units of
an investment trust (hereinafter referred to collectively as "units" or
"trust") is a current assessment of creditworthiness with respect to the
investments held by such trust. 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 trust expenses or portfolio asset sales
for less than the trust's purchase price will reduce payment to the Unitholder
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.
Trusts rated "AAA" are composed exclusively of assets that are rated "AAA" by
Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for such assets as the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is very strong.
Securities in an Insured Trust Fund for which insurance has been obtained by
the Issuer or the Sponsor (all of which were rated "AAA" by Standard & Poor's
and/or "Aaa" by Moody's Investors Service, Inc.) may or may not have a higher
yield than uninsured Securities rated "AAA" by Standard & Poor's or "Aaa" by
Moody's Investors Service, Inc. In selecting Securities for the portfolios of
an Insured Trust Fund, the Sponsor has applied the criteria hereinbefore
described.
TRUST INFORMATION
Because certain of the Securities in certain of the Trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can be
given that a Trust will retain for any length of time its present size and
composition. Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any Security. In the event of a failure
to deliver any Security that has been purchased for a Trust under a contract,
including those securities purchased on a "when, as and if issued" basis
("Failed Securities"), the Sponsor is authorized under the Trust Agreement to
direct the Trustee to acquire other securities ("Replacement Securities") to
make up the original corpus of such Trust.
Securities in certain of the Trust Funds may have been purchased on a "when,
as and if issued" or delayed delivery basis with delivery expected to take
place after the First Settlement Date. See "Notes to Portfolios" for each
Trust. Accordingly, the delivery of such Securities may be delayed or may not
occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of
GI-1
GENERAL INFORMATION
<PAGE>
delivery. To the extent any Municipal Bonds in a Tax-Exempt Portfolio are
actually delivered to such Trust after their respective expected dates of
delivery, Unitholders who purchase Units in such Trust prior to the date such
"when, as and if issued" or "delayed delivery" Municipal Bonds are actually
delivered to the Trustee would, to the extent such income is not offset by a
reduction in the Trustee's fee (or, to the extent necessary, other expenses),
be required to reduce their tax basis in their Units of such Trust since the
interest accruing on such Municipal Bonds during the interval between their
purchase of Units and the actual delivery of such Municipal Bonds would, for
tax purposes, be considered a non-taxable return of principal rather than as
tax-exempt interest. The result of such adjustment, if necessary, would be,
during the first year only, that the Estimated Long-Term Returns may be, and
the Estimated Current Returns would be, slightly lower than those shown
herein, assuming such Trust portfolios and estimated annual expenses do not
vary. See footnote (4) to "Essential Information." Unitholders of all Trusts
will be "at risk" with respect to any "when, as and if issued" or "delayed
delivery" Securities included in their respective Trust (i.e., may derive
either gain or loss from fluctuations in the evaluation of such Securities)
from the date they commit for Units.
The Replacement Securities must be purchased within 20 days after delivery of
the notice that a contract to deliver a Security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities (i) must be payable in
United States currency, (ii) must be purchased at a price that results in a
yield to maturity and a current return at least equal to that of the Failed
Securities as of the Initial Date of Deposit, (iii) shall not be "when, as and
if issued" or restricted securities, (iv) must satisfy any rating criteria for
Securities originally included in such Trust, (v) not cause the Units of such
Trust to cease to be rated AAA by Standard & Poor's. if the Units were so
rated on the Initial Date of Deposit and (vi) in the case of Insured Trust
Funds must be insured prior to acquisition by a Trust. In connection with an
Insured Corporate Series only, Replacement Securities also must (i) be
intermediate or long-term, as applicable, corporate bonds, debentures, notes
or other straight debt obligations (whether secured or unsecured and whether
senior or subordinated) without equity or other conversion features, with
fixed maturity dates substantially the same as those of the Failed Securities
having no warrants or subscription privileges attached, (ii) be issued after
July 18, 1984 if interest thereon is United States source income and (iii)
have a fixed maturity of at least 10 years. In connection with a Corporate
Income Series only, Replacement Securities also must (i) be corporate bonds,
debentures, notes or other straight debt obligations (whether secured or
unsecured and whether senior or subordinated) without equity or other
conversion features, with fixed maturity dates substantially the same as those
of the Failed Securities having no warrants or subscription privileges
attached, (ii) be issued after July 18, 1984 and (iii) have a fixed maturity
of at least 6 years. In connection with a Tax-Exempt Portfolio only,
Replacement Securities must also (i) be tax-exempt bonds issued by the
appropriate state or counties, municipalities, authorities or political
subdivisions thereof and (ii) have a fixed maturity date of at least 3 years
if the bonds are to be deposited in a trust other than a long-term trust or at
least 10 years if the bonds are to be deposited in a long-term trust. Whenever
a Replacement Security is acquired for a Trust, the Trustee shall, within five
days thereafter, notify all Unitholders of the Trust of the acquisition of the
Replacement Security and shall, on the next monthly distribution date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the Trust of the Failed Security exceeded the cost
of the Replacement Security. Once all of the Securities in a Trust are
acquired, the Trustee will have no power to vary the investments of the Trust,
i.e., the Trustee will have no managerial power to take advantage of market
variations to improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs is
not utilized to acquire Replacement Securities in the event of a failed
contract, the Sponsor will refund the sales charge
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attributable to such Failed Securities to all Unitholders of the Trust Fund
and the Trustee will distribute the principal and accrued interest
attributable to such Failed Securities not more than 30 days after the date on
which the Trustee would have been required to purchase a Replacement Security.
In addition, Unitholders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other securities
at a yield equal to or in excess of the yield which such proceeds would have
earned for Unitholders of such Trust Fund.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
Unitholders of the Trust Fund to the date the Sponsor removes the Failed
Securities from the Trust Fund if the Sponsor determines not to purchase a
Replacement Security or to the date of substitution if a Replacement Security
is purchased. All such interest paid to Unitholders which accrued after the
date of settlement for a purchase of Units will be paid by the Sponsor. In the
event a Replacement Security could not be acquired by a Trust, the net annual
interest income per Unit for such Trust would be reduced and the Estimated
Current Return and Estimated Long-Term Return might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated or
its rating may be reduced below any minimum required as of the Initial Date of
Deposit. Neither event requires the elimination of such investment from a
Trust, but may be considered in the Sponsor's determination to direct the
Trustee to dispose of such investment. See "General Information--Investment
Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the happening
of certain extraordinary circumstances. See "General Information--Investment
Supervision." Certain of the Securities may be subject to optional call or
mandatory redemption pursuant to sinking fund provisions, in each case prior
to their stated maturity. A bond subject to optional call is one which is
subject to redemption or refunding prior to maturity at the option of the
issuer, often at a premium over par. A refunding is a method by which a bond
issue is redeemed, at or before maturity, by the proceeds of a new bond issue.
A bond subject to sinking fund redemption is one which is subject to partial
call from time to time at par with proceeds from a fund accumulated for the
scheduled retirement of a portion of an issue to maturity. Special or
extraordinary redemption provisions may provide for redemption at par of all
or a portion of an issue upon the occurrence of certain circumstances, which
may be prior to the optional call dates shown under "Portfolio" for each
Trust. Redemption pursuant to optional call provisions is more likely to
occur, and redemption pursuant to special or extraordinary redemption
provisions may occur, when the Securities have an offering side evaluation
which represents a premium over par, that is, when they are able to be
refinanced at a lower cost. The proceeds from any such call or redemption
pursuant to sinking fund provisions, as well as proceeds from the sale of
Securities and from Securities which mature in accordance with their terms
from a Trust, unless utilized to pay for Units tendered for redemption, will
be distributed to Unitholders of such Trust and will not be used to purchase
additional Securities for such Trust. Accordingly, any such call, redemption,
sale or maturity will reduce the size and diversity of a Trust and the net
annual interest income of such Trust and may reduce the Estimated Current
Return and the Estimated Long-Term Return. See "General Information--Interest,
Estimated Long-Term Return and Estimated Current Return." The call,
redemption, sale or maturity of Securities also may have tax consequences to a
Unitholder. See "Federal Tax Status" for each Trust. Information with respect
to the call provisions and maturity dates of the Securities is contained in
"Portfolio" for each Trust.
Each Unit of a Trust represents an undivided fractional interest in the
Securities deposited therein, in the ratio shown under "Essential
Information." Units may be purchased and certificates, if requested, will be
issued in denominations of one Unit or any multiple or fraction thereof,
subject to each Trust's minimum investment requirement of one Unit. Fractions
of Units will be computed to three decimal points. To the
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extent that Units of a Trust are redeemed, the principal amount of Securities
in such Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of such Trust will increase. See "General
Information--Redemption."
Certain of the Securities in certain of the Trusts may have been acquired at a
market discount from par value at maturity. The coupon interest rates on the
discount securities at the time they were purchased and deposited in the
Trusts were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors should also
note that the value of securities purchased at a market discount will increase
in value faster than securities purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of
securities purchased at a market discount will decrease faster than securities
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium securities and the prepayment
benefit for lower yielding, discount securities will be reduced. A discount
security held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and loss in the form of tax-exempt
interest income than a comparable security newly issued at current market
rates. See "Federal Tax Status." Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue. Neither
the Sponsor nor the Trustee shall be liable in any way for any default,
failure or defect in any of the Securities.
Certain of the Securities in certain of the Trust Funds may be "zero coupon"
bonds, i.e., an original issue discount bond that does not provide for the
payment of current interest. Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final payment
at the maturity of the bond and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not make current
interest payments (such as the zero coupon bonds) is that a fixed yield is
earned not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to reinvest
the income on such obligation at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are securities of comparable quality which pay
interest currently. For the Federal tax consequences of original issue
discount securities such as the zero coupon bonds, see "Federal Tax Status"
for each Trust.
To the best of the Sponsor's knowledge, there is no litigation pending as of
the Initial Date of Deposit in respect of any Security which might reasonably
be expected to have a material adverse effect on the Trust Funds. At any time
after the Initial Date of Deposit, litigation may be instituted on a variety
of grounds with respect to the Securities. The Sponsor is unable to predict
whether any such litigation may be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trust Funds. The
Sponsor and the Trustee shall not be liable in any way for any default,
failure or defect in any Security.
RETIREMENT PLANS
Units of the Trusts (other than a Tax-Exempt Portfolio) may be well suited for
purchase by Individual Retirement Accounts, Keogh Plans, pension funds and
other qualified retirement plans, certain of which are briefly described
below.
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Generally, capital gains and income received under each of the foregoing plans
are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan. Such plans are
offered by brokerage firms and other financial institutions. The Trusts will
waive the $1,000 minimum investment requirement for IRA accounts. The minimum
investment is $250 for tax-deferred plans such as IRA accounts. Fees and
charges with respect to such plans may vary.
Individual Retirement Account--IRA. Any individual under age 70 1/2 may
contribute the lesser of $2,000 or 100% of compensation to an IRA annually.
Such contributions are fully deductible if the individual (and spouse if
filing jointly) are not covered by a retirement plan at work. The deductible
amount an individual may contribute to an IRA will be reduced $10 for each $50
of adjusted gross income over $25,000 ($40,000 if married, filing jointly or
$0 if married, filing separately), if either an individual or their spouse (if
married, filing jointly) is an active participant in an employer maintained
retirement plan. Thus, if an individual has adjusted gross income over $35,000
($50,000 if married, filing jointly or $0 if married, filing separately) and
if an individual or their spouse is an active participant in an employer
maintained retirement plan, no IRA deduction is permitted. Under the Internal
Revenue Code of 1986, as amended (the "Code"), an individual may make
nondeductible contributions to the extent deductible contributions are not
allowed. All distributions from an IRA (other than the return of certain
excess contributions) are treated as ordinary income for federal income
taxation purposes provided that under the Code an individual need not pay tax
on the return of nondeductible contributions. The amount includable in income
for the taxable year is the portion of the amount withdrawn for the taxable
year as the individual's aggregate deductible IRA contributions bear to the
aggregate balance of all IRAs of the individual.
A participant's interest in an IRA must be, or commence to be, distributed to
the participant not later than April 1 of the calendar year following the year
during which the participant attains age 70 1/2. Distributions made before
attainment of age 59 1/2, except in the case of the participant's death or
disability, or where the amount distributed is to be rolled over to another
IRA, or where the distributions are taken as a series of substantially equal
periodic payments over the participant's life or life expectancy (or the joint
lives or life expectancies of the participant and the designated beneficiary)
are generally subject to a surtax in an amount equal to 10% of the
distribution. The amount of such periodic payments may not be modified before
the later of five years or attainment of age 59 1/2. Excess contributions are
subject to an annual 6% excise tax.
IRA applications, disclosure statements and trust agreements are available
from the Sponsor upon request.
Qualified Retirement Plans. Units of a Trust may be purchased by qualified
pension or profit sharing plans maintained by corporations, partnerships or
sole proprietors. The maximum annual contribution for a participant in a money
purchase pension plan or to paired profit sharing and pension plans is the
lesser of 25% of compensation or $30,000. Prototype plan documents for
establishing qualified retirement plans are available from the Sponsor upon
request.
Excess Distributions Tax. In addition to the other taxes due by reason of a
plan distribution, a tax of 15% may apply to certain aggregate distributions
from IRAs, Keogh plans, and corporate retirement plans to the extent such
aggregate taxable distributions exceed specified amounts (generally $150,000,
as adjusted) during a tax year. This 15% tax will not apply to distributions
on account of death, qualified
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domestic relations orders or amounts eligible for tax-deferred rollover
treatment. In general, for lump sum distributions the excess distributions
over $750,000 (as adjusted) will be subject to the 15% tax.
The Trustee has agreed to act as custodian for certain retirement plan
accounts. An annual fee of $12.00 per account, if not paid separately, will be
assessed by the Trustee and paid through the liquidation of shares of the
reinvestment account. An individual wishing the Trustee to act as custodian
must complete an EVEREN UIT/IRA application and forward it along with a check
made payable to The Bank of New York. Certificates for Individual Retirement
Accounts cannot be issued.
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically invested
without charge in shares of any mutual fund which is registered in such
Unitholder's state of residence and is underwritten or advised by Kemper
Financial Services, Inc. (the "Kemper Funds"), other than those Kemper Funds
sold with a contingent deferred sales charge.
If individuals indicate they wish to participate in the Reinvestment Program
but do not designate a reinvestment fund, the Program Agent referred to below
will contact such individuals to determine which reinvestment fund or funds
they wish to elect. Since the portfolio securities and investment objectives
of such Kemper Funds generally will differ significantly from that of the
Trusts, Unitholders should carefully consider the consequences before
selecting such Kemper Funds for reinvestment. Detailed information with
respect to the investment objectives and the management of the Funds is
contained in their respective prospectuses, which can be obtained from the
Sponsor upon request. An investor should read the prospectus of the
reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should file with the
Program Agent a written notice of election.
Unitholders who are receiving distributions in cash may elect to participate
in distribution reinvestment by filing with the Program Agent an election to
have such distributions reinvested without charge. Such election must be
received by the Program Agent at least ten days prior to the Record Date
applicable to any distribution in order to be in effect for such Record Date.
Any such election shall remain in effect until a subsequent notice is received
by the Program Agent. See "General Information--Unitholders--Distributions to
Unitholders."
The Program Agent is The Bank of New York. All inquiries concerning
participation in distribution reinvestment should be directed to the Program
Agent at its unit investment trust division office.
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each
Trust were as set forth in the "Essential Information" for each Trust.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and expenses of
the Trustee, the Sponsor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of the Securities while the Public
Offering Price will
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vary with changes in the offering price of the underlying Securities and
accrued interest; therefore, there is no assurance that the present Estimated
Current Return will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and determines
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 or average life of all of the Securities
in a Trust and (2) takes into account the expenses and sales charge associated
with each Trust Unit. Since the market values and estimated retirements of the
Securities and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future.
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of Estimated Long-Term Return reflects the estimated
date and amount of principal returned while Estimated Current Return
calculations include only net annual interest income and Public Offering
Price.
In order to acquire certain of the Securities contracted for by a Trust, it
may be necessary for the Sponsor or Trustee to pay on the dates for delivery
of such Securities amounts covering accrued interest on such Securities which
exceed the amount which will be made available in the letter of credit
furnished by the Sponsor on the Initial Date of Deposit. The Trustee has
agreed to pay any amounts necessary to cover any such excess and will be
reimbursed therefor, without interest, when funds become available from
interest payments on the Securities deposited in that Trust.
Payments received in respect of mortgages underlying Ginnie Maes in each
series of a GNMA Portfolio will consist of a portion representing interest and
a portion representing principal. Although the aggregate monthly payment made
by the obligor on each mortgage remains constant (aside from optional
prepayments of principal), in the early years most of each such payment will
represent interest, while in later years, the proportion representing interest
will decline and the proportion representing principal will increase. However,
by reason of optional prepayments, principal payments in the earlier years on
mortgages underlying Ginnie Maes may be substantially in excess of those
required by the amortization schedules of such mortgages. Therefore, principal
payments in later years may be substantially less since the aggregate unpaid
principal balances of such underlying mortgages may have been greatly reduced.
To the extent that the underlying mortgages bearing higher interest rates in a
GNMA Portfolio are prepaid faster than the other underlying mortgages, the net
annual interest rate per Unit and the Estimated Current Return on the Units of
a GNMA Portfolio can be expected to decline. Monthly payments to the
Unitholders of a GNMA Portfolio will reflect all of these factors.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the Sponsor
intends to, and certain of the Underwriters may, subject to change at any
time, maintain a market for Units of the Trust Funds offered hereby and to
continuously offer to purchase said Units at prices, determined by the
Evaluator, based on the aggregate bid prices of the underlying Securities in
such Trusts, together with accrued interest to the expected dates of
settlement. To the extent that a market is maintained during the initial
offering period, the prices at which Units will be repurchased will be based
upon the aggregate offering side evaluation of the Securities in the Trusts.
The aggregate bid prices of the underlying Securities in each Trust are
expected to be less than the related aggregate offering prices (which is the
evaluation method used during the initial public offering period).
Accordingly, Unitholders who wish to dispose of their Units should inquire of
their bank or broker as to current market prices in order to determine whether
there is in existence any price in excess of the Redemption Price and, if so,
the amount thereof.
The offering price of any Units resold by the Sponsor or Underwriters will be
in accord with that described in the currently effective Prospectus describing
such Units. Any profit or loss resulting from the
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resale of such Units will belong to the Sponsor and/or the Underwriters. The
Sponsor and/or the Underwriters may suspend or discontinue purchases of Units
of any Trust if the supply of Units exceeds demand, or for other business
reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written
request to the Trustee at its unit investment trust division office and, in
the case of Units evidenced by a certificate, by tendering such certificate to
the Trustee, properly endorsed or accompanied by a written instrument or
instruments of transfer in a form satisfactory to the Trustee. Unitholders
must sign the request, and such certificate or transfer instrument, exactly as
their names appear on the records of the Trustee and on any certificate
representing the Units to be redeemed. If the amount of the redemption is
$25,000 or less and the proceeds are payable to the Unitholder(s) of record at
the address of record, no signature guarantee is necessary for redemptions by
individual account owners (including joint owners). Additional documentation
may be requested, and a signature guarantee is always required, from
corporations, executors, administrators, trustees, guardians or associations.
The signatures must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program ("STAMP") or such other guarantee program in addition
to, or in substitution for, STAMP, as may be accepted by the Trustee. A
certificate should only be sent by registered or certified mail for the
protection of the Unitholder. Since tender of the certificate is required for
redemption when one has been issued, Units represented by a certificate cannot
be redeemed until the certificate representing such Units has been received by
the purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption Date")
by payment of cash equivalent to the Redemption Price for such Trust,
determined as set forth below under "Computation of Redemption Price," as of
the evaluation time stated under "Essential Information," next following such
tender, multiplied by the number of Units being redeemed. Any Units redeemed
shall be cancelled and any undivided fractional interest in the Trust
extinguished. The price received upon redemption might be more or less than
the amount paid by the Unitholder depending on the value of the Securities in
the Trust at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, any time a Unitholder elects to tender Units
for redemption, such Unitholder should make sure that the Trustee has been
provided a certified tax identification number in order to avoid this possible
"back-up withholding." In the event the Trustee has not been previously
provided such number, one must be provided at the time redemption is
requested.
Any amounts paid on redemption representing interest shall be withdrawn from
the Interest Account for such Trust to the extent that funds are available for
such purpose. All other amounts paid on redemption shall be withdrawn from the
Principal Account for such Trust. The Trustee is empowered to sell Securities
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for a Trust in order to make funds available for the redemption of Units of
such Trust. Such sale may be required when Securities would not otherwise be
sold and might result in lower prices than might otherwise be realized. To the
extent Securities are sold, the size and diversity of a Trust will be reduced.
In the case of a U.S. Treasury Portfolio or a GNMA Portfolio, Securities will
be sold by the Trustee so as to maintain, as closely as practicable, the
original percentage relationship between the principal amounts of the
Securities in such Trusts. The Securities to be sold for purposes of redeeming
Units will be selected from a list supplied by the Sponsor. The Securities
will be chosen for this list by the Sponsor on the basis of such market and
credit factors as it may determine are in the best interests of such Trusts.
Provision is made under the related Trust Agreements for the Sponsor to
specify minimum face amounts in which blocks of Securities are to be sold in
order to obtain the best price available. While such minimum amounts may vary
from time to time in accordance with market conditions, it is anticipated that
the minimum face amounts which would be specified would range from $25,000 to
$100,000. Sales may be required at a time when the 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 U.S. Treasury
Obligations and Ginnie Maes may be required to be sold, the proceeds of such
sales may exceed the amount necessary for payment of Units redeemed. To the
extent not used to meet other redemption requests in such Trusts, such excess
proceeds will be distributed pro rata to all remaining Unitholders of record
of such Trusts, unless reinvested in substitute Securities. See "General
Information--Investment Supervision."
The Trustee is irrevocably authorized in its discretion, if an Underwriter
does not elect to purchase any Unit tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-counter market for
the account of tendering Unitholders at prices which will return to the
Unitholders amounts in cash, net after brokerage commissions, transfer taxes
and other charges, equal to or in excess of the Redemption Price for such
Units. In the event of any such sale, the Trustee shall pay the net proceeds
thereof to the Unitholders on the day they would otherwise be entitled to
receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by the
Securities and Exchange Commission) trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by the Trustee of Securities is not reasonably practicable or
it is not reasonably practicable to fairly determine the value of the
underlying Securities in accordance with the Trust Agreements; or (3) for such
other period as the Securities and Exchange Commission may by order permit.
The Trustee is not liable to any person in any way for any loss or damage
which may result from any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units of each Trust
is computed by the Evaluator as of the evaluation time stated under "Essential
Information" next occurring after the tendering of a Unit for redemption and
on any other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in the
Trust to purchase Securities not applied to the purchase of such Securities;
(2) the aggregate value of each issue of the Securities (including "when
issued" contracts, if any) held in the Trust as determined by the Evaluator on
the basis of bid prices therefor; and (3) interest accrued and unpaid on the
Securities in the Trust as of the date of computation;
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B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions have
been previously made for the purpose of additions to the Reserve Account
described under "General Information--Expenses of the Trusts"; (2) an amount
representing estimated accrued expenses of the Trust, including but not
limited to fees and expenses of the Trustee (including legal and auditing fees
and any insurance costs), the Evaluator, the Sponsor and bond counsel, if any;
(3) cash held for distribution to Unitholders of record as of the business day
prior to the evaluation being made; and (4) other liabilities incurred by the
Trust; and
C. finally dividing the results of such computation by the number of Units of
the Trust outstanding as of the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of any Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation
statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise, a
2% surety bond fee will be required for replacement.
Units are transferable by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must sign
such written request, and such certificate or transfer instrument, exactly as
their names appear on the records of the Trustee and on any certificate
representing the Units to be transferred. Such signatures must be guaranteed
by a participant in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guarantee program in addition to, or in substitution
for, STAMP, as may be accepted by the Trustee.
Units may be purchased and certificates, if requested will be issued in
denominations of one Unit subject to each Trust's minimum investment
requirement of 100 Units or any whole Unit multiple thereof subject to any
minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in
fully registered form and will be transferable only on the books of the
Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to be
determined in the sole discretion of the Trustee, for each certificate re-
issued or transferred and to pay any governmental charge that may be imposed
in connection with each such transfer or interchange. The Trustee at the
present time does not intend to charge for the normal transfer or interchange
of certificates. Destroyed, stolen, mutilated or lost certificates will be
replaced upon delivery to the Trustee of satisfactory indemnity (generally
amounting to 3% of the market value of the Units), affidavit of loss, evidence
of ownership and payment of expenses incurred.
Distributions to Unitholders. Interest received by each Trust, including any
portion of the proceeds from a disposition of Securities which represents
accrued interest, is credited by the Trustee to the Interest Account for such
Trust. All other receipts are credited by the Trustee to a separate Principal
Account for the Trust. The Trustee normally has no cash for distribution to
Unitholders until it receives interest payments on the Securities in the
Trust. Since interest usually is paid semi-annually (monthly in the case of a
GNMA Portfolio), during the initial months of the Trusts, the Interest Account
of each Trust, consisting of accrued but uncollected interest and collected
interest (cash), will be predominantly the uncollected accrued interest that
is not available for distribution. On the dates set forth under "Essential
Information" for each Trust, the Trustee will commence distributions, in part
from funds advanced by the Trustee.
GI-10
GENERAL INFORMATION
<PAGE>
Thereafter, assuming the Trust retains its original size and composition,
after deduction of the fees and expenses of the Trustee, the Sponsor and
Evaluator and reimbursements (without interest) to the Trustee for any amounts
advanced to a Trust, the Trustee will normally distribute on each Interest
Distribution Date (the fifteenth of the month) or shortly thereafter to
Unitholders of record of such Trust on the preceding Record Date (which is the
first day of each month). Unitholders of the Trusts will receive an amount
substantially equal to one-twelfth of such holders' pro rata share of the
estimated net annual interest income to the Interest Account of such Trust.
However, interest earned at any point in time will be greater than the amount
actually received by the Trustee and distributed to the Unitholders.
Therefore, there will always remain an item of accrued interest that is added
to the daily value of the Units. If Unitholders of a Trust sell or redeem all
or a portion of their Units, they will be paid their proportionate share of
the accrued interest of such Trust to, but not including, the third business
day after the date of a sale or to the date of tender in the case of a
redemption.
In order to equalize distributions and keep the undistributed interest income
of the Trusts at a low level, all Unitholders of record in such Trust on the
first Record Date will receive an interest distribution on the first Interest
Distribution Date. Because the period of time between the first Interest
Distribution Date and the regular distribution dates may not be a full period,
the first regular distributions may be partial distributions.
Unitholders of a U.S. Treasury Portfolio which contains Stripped Treasury
Securities should note that Stripped Treasury Securities are sold at a deep
discount because the buyer of those securities obtains only the right to
receive a future fixed payment on the security and not any rights to periodic
interest payments thereon. Purchasers of these Securities acquire, in effect,
discount obligations that are economically identical to the "zero-coupon
bonds" that have been issued by corporations. Zero coupon bonds are debt
obligations which do not make any periodic payments of interest prior to
maturity and accordingly are issued at a deep discount. Under generally
accepted accounting principles, a holder of a security purchased at a discount
normally must report as an item of income for financial accounting purposes
the portion of the discount attributable to the applicable reporting period.
The calculation of this attributable income would be made on the "interest"
method which generally will result in a lesser amount of includible income in
earlier periods and a correspondingly larger amount in later periods. For
Federal income tax purposes, the inclusion will be on a basis that reflects
the effective compounding of accrued but unpaid interest effectively
represented by the discount. Although this treatment is similar to the
"interest" method described above, the "interest" method may differ to the
extent that generally accepted accounting principles permit or require the
inclusion of interest on the basis of a compounding period other than the
semi-annual period. See "Federal Tax Status" for the U.S. Treasury Portfolios,
if any.
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following
their purchase of Units. Since interest on Bonds in the Trusts is payable at
varying intervals, usually in semi-annual installments, and distributions of
income are made to Unitholders at different intervals from receipt of
interest, the interest accruing to a Trust may not be equal to the amount of
money received and available for distribution from the Interest Account.
Therefore, on each Distribution Date the amount of interest actually deposited
in the Interest Account of a Trust and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such
variances, the Trustee is authorized by the Trust Agreements to advance such
amounts as may be necessary to provide interest distributions of approximately
equal amounts. The Trustee will be reimbursed, without interest, for any such
advances from funds available in the Interest Account for such Trust.
GI-11
GENERAL INFORMATION
<PAGE>
The Trustee will distribute on each Distribution Date or shortly thereafter,
to each Unitholder of record of a Trust on the preceding Record Date, an
amount substantially equal to such holder's pro rata share of the cash
balance, if any, in the Principal Account of such Trust computed as of the
close of business on the preceding Record Date. However, no distribution will
be required if the balance in the Principal Account is less than $.01 per
Unit. Notwithstanding the foregoing, the Trustee will make a distribution to
Unitholders of all principal relating to maturing U.S. Treasury Obligations in
any U.S. Treasury Portfolio or GNMA Portfolio within twelve business days of
the date of such maturity.
In connection with GNMA Portfolios only, the terms of the Ginnie Maes provide
for payment to the holders thereof (including a GNMA Portfolio) on the
fifteenth day of each month of amounts collected by or due to the issuers
thereof with respect to the underlying mortgages during the preceding month.
The Trustee will collect the interest due a GNMA Portfolio on the Securities
therein as it becomes payable and credit such interest to a separate Interest
Account for such GNMA Portfolio created by the Indenture. Distributions will
be made to each Unitholder of record of a GNMA Portfolio on the appropriate
Distribution Date (see "Essential Information") and will consist of an amount
substantially equal to such Unitholder's pro rata share of the cash balances,
if any, in the Interest Account, the Principal Account and any Capital Gains
Account of such GNMA Portfolio, computed as of the close of business on the
preceding Record Date.
Statements to Unitholders. With each distribution, the Trustee will furnish or
cause to be furnished to each Unitholder a statement of the amount of interest
and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the Trust's
expense, by independent auditors designated by the Sponsor, unless the Sponsor
determines that such an audit would not be in the best interest of the
Unitholders of such Trust. The accountants' report will be furnished by the
Trustee to any Unitholder of such Trust upon written request. Within a
reasonable period of time after the end of each calendar year, the Trustee
shall furnish to each person who at any time during the calendar year was a
Unitholder of a Trust a statement, covering the calendar year, setting forth
for the applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities (and for Tax-Exempt
Portfolios, the percentage of such amount by states and territories in which
the issuers of such Securities are located);
2. The amount paid from the Interest Account representing accrued interest of
any Units redeemed;
3. The deductions from the Interest Account for applicable taxes, if any, fees
and expenses (including auditing fees) of the Trustee, the Sponsor, the
Evaluator, and, if any, of bond counsel;
4. Any amounts credited by the Trustee to the Reserve Account described under
"General Information--Expenses of the Trusts";
5. The net amount remaining after such payments and deductions, expressed both
as a total dollar amount and a dollar amount per Unit outstanding on the last
business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
GI-12
GENERAL INFORMATION
<PAGE>
2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The deductions from the Principal Account for payment of applicable taxes,
if any, fees and expenses (including auditing fees) of the Trustee, the
Sponsor, the Evaluator, and, if any, of bond counsel;
4. The amount of when-issued interest treated as a return of capital, if any;
5. Any amounts credited by the Trustee to the Reserve Account described under
"General Information--Expenses of the Trusts";
6. The net amount remaining after distributions of principal and deductions,
expressed both as a dollar amount and as a dollar amount per Unit outstanding
on the last business day of the calendar year; and
C. The following information:
1. A list of the Securities as of the last business day of such calendar year;
2. The number of Units outstanding on the last business day of such calendar
year;
3. The Redemption Price based on the last evaluation made during such calendar
year;
4. The amount actually distributed during such calendar year from the Interest
and Principal Accounts (and Capital Gains Account, if applicable) separately
stated, expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Dates for each such distribution.
Rights of Unitholders. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate a Trust nor entitle legal representatives or heirs to
claim an accounting or to bring any action or proceeding in any court for
partition or winding up of a Trust.
No Unitholder shall have the right to control the operation and management of
any Trust in any manner, except to vote with respect to the amendment of the
Trust Agreements or termination of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase, sale
or substitution of Securities, except in the special circumstances noted below
and as indicated earlier under "General Information--Trust Information"
regarding the substitution of Replacement Securities for any Failed
Securities. Thus, with the exception of the redemption or maturity of
Securities in accordance with their terms, the assets of the Trusts will
remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of which
has been affected by certain adverse events including institution of certain
legal proceedings or decline in price or the occurrence of other market
factors, including advance refunding, so that in the opinion of the Sponsor
the retention of such Securities in a Trust would be detrimental to the
interest of the Unitholders. The proceeds from any such sales, exclusive of
any portion which represents accrued interest, will be credited to the
Principal Account of such Trust for distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Securities to issue new obligations in exchange or substitution for
any of such Securities pursuant to a refunding financing plan, except that the
Sponsor may instruct the Trustee to accept or reject such an offer or to take
any other action with respect thereto as the Sponsor may deem proper if (1)
the issuer is in default with respect to such Securities or (2) in the written
opinion of the Sponsor the issuer will probably default with
GI-13
GENERAL INFORMATION
<PAGE>
respect to such Securities in the reasonably forseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after deposit of
obligations in exchange or substitution for underlying Securities, the Trustee
is required to give notice thereof to each Unitholder, identifying the
Securities eliminated and the Securities substituted therefor.
The Trustee may sell Securities, designated by the Sponsor, from a Trust for
the purpose of redeeming Units of such Trust tendered for redemption and the
payment of expenses.
ADMINISTRATION OF THE TRUSTS
The Trustee. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its offices at 101
Barclay Street, New York, New York 10286, telephone 1(800) 701-8178. The Bank
of New York is subject to supervision and examination by the Superintendent of
Banks of the State of New York and the Board of Governors of the Federal
Reserve System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not participated in
selecting the portfolio of any Trust. For information relating to the
responsibilities of the Trustee under the Trust Agreements, reference is made
to the material set forth under "General Information--Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep records of all
transactions at its office. Such records shall include the name and address
of, and the number of Units held by, every Unitholder of each Trust. Such
books and records shall be open to inspection by any Unitholder of such Trust
at all reasonable times during usual business hours. The Trustee shall make
such annual or other reports as may from time to time be required under any
applicable state or Federal statute, rule or regulation. The Trustee shall
keep a certified copy or duplicate original of the Trust Agreements on file in
its office available for inspection at all reasonable times during usual
business hours by any Unitholder, together with a current list of the
Securities held in each Trust. Pursuant to the Trust Agreements, the Trustee
may employ one or more agents for the purpose of custody and safeguarding of
Securities comprising the Trusts.
Under the Trust Agreements, the Trustee or any successor trustee may resign
and be discharged of its duties created by the Trust Agreements by executing
an instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of resignation
to all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may at any time remove the Trustee,
with or without cause, and appoint a successor trustee as provided in the
Trust Agreements. Notice of such removal and appointment shall be mailed to
each Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original Trustee shall vest in the successor. The Trustee
shall be a corporation organized under the laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers.
The Trustee shall have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
GI-14
GENERAL INFORMATION
<PAGE>
The Evaluator. EVEREN Unit Investment Trusts, a service of EVEREN Securities,
Inc., the Sponsor, also serves as Evaluator. The Evaluator may resign or be
removed by the Trustee in which event the Trustee is to use its best efforts
to appoint a satisfactory successor. Such resignation or removal shall become
effective upon acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within 30
days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to each
Unitholder. At the present time, pursuant to a contract with the Evaluator,
Cantor Fitzgerald & Co., a non-affiliated firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities, provides,
for both the initial offering period and secondary market transactions,
portfolio evaluations of the Securities in the Trusts which are then reviewed
by the Evaluator. In the event the Sponsor is unable to obtain current
evaluations from Cantor Fitzgerald & Co., it may make its own evaluations or
it may utilize the services of any other non-affiliated evaluator or
evaluators it deems appropriate.
Amendment and Termination. The Trust Agreements may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders: (1) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (2) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or
(3) to make such provisions as shall not adversely affect the interests of the
Unitholders. The Trust Agreements with respect to the Trusts may also be
amended in any respect by the Sponsor and the Trustee, or any of the
provisions thereof may be waived, with the consent of the holders of Units
representing 66 2/3% of the Units then outstanding of such Trust, provided
that no such amendment or waiver will reduce the interest of any Unitholder
thereof without the consent of such Unitholder or reduce the percentage of
Units required to consent to any such amendment or waiver without the consent
of all Unitholders of such Trust. In no event shall any Trust Agreement be
amended to increase the number of Units of a Trust issuable thereunder or to
permit, except in accordance with the provisions of such Trust Agreement, the
acquisition of any Securities in addition to or in substitution for those
initially deposited in a Trust. The Trustee shall promptly notify Unitholders
of the substance of any such amendment.
The Trust Agreements provide that the Trusts shall terminate upon the
maturity, redemption or other disposition of the last of the Securities held
in a Trust. If the value of a Trust shall be less than the applicable minimum
value stated under "Essential Information," the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the Trust. A
Trust may be terminated at any time by the holders of Units representing 66
2/3% of the Units thereof then outstanding. In the event of termination of a
Trust, written notice thereof will be sent by the Trustee to all Unitholders
of such Trust. Within a reasonable period after termination, the Trustee will
sell any Securities remaining in such Trust and, after paying all expenses and
charges incurred by the Trust, will distribute to Unitholders thereof (upon
surrender for cancellation of certificates for Units, if issued) their pro
rata share of the balances remaining in the Interest and Principal Accounts
(and Capital Gains Account, if applicable) of such Trust.
Limitations on Liability. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Trust Agreements, but will be under no liability to the Unitholders for taking
any action or refraining from any action in good faith pursuant to the Trust
Agreements or for errors in judgment, except in cases of its own gross
negligence, bad faith or willful misconduct. The Sponsor shall not be liable
or responsible in any way for depreciation or loss incurred by reason of the
sale of any Securities.
GI-15
GENERAL INFORMATION
<PAGE>
The Trustee: The Trust Agreements provide that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Securities or
certificates except by reason of its own gross negligence, bad faith or
willful misconduct, nor shall the Trustee be liable or responsible in any way
for depreciation or loss incurred by reason of the sale by the Trustee of any
Securities. In the event that the Sponsor shall fail to act, the Trustee may
act and shall not be liable for any such action taken by it in good faith. The
Trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon. In addition, the Trust Agreements contain other customary provisions
limiting the liability of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The Trust Agreements provide that the determinations made by the
Evaluator 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 or Unitholders for errors in judgment, but shall be
liable only for its gross negligence, lack of good faith or willful
misconduct.
EXPENSES OF THE TRUSTS
The Sponsor will charge the Trusts a surveillance fee for services performed
for the Trusts in an amount not to exceed that amount set forth in "Essential
Information" but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the Sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the Sponsor for providing such services. Such fee shall be based on
the total number of Units of the related Trust outstanding as of the January
Record Date for any annual period. The Sponsor will receive a portion of the
sales commissions paid in connection with the purchase of Units and will share
in profits, if any, related to the deposit of Securities in the Trusts. The
Sponsor and other Underwriters have borne all the expenses of creating and
establishing the Trusts including the cost of the initial preparation,
printing and execution of the Prospectus, Trust Agreements and certificates,
legal and accounting expenses, advertising and selling expenses, payment of
closing fees, the expenses of the Trustee, evaluation fees relating to the
deposit and other out-of-pocket expenses.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time during
the period. In no event shall the Trustee be paid less than $2,000 per Trust
in any one year. Funds that are available for future distributions,
redemptions and payment of expenses are held in accounts which are non-
interest bearing to Unitholders and are available for use by the Trustee
pursuant to normal trust procedures; however, the Trustee is also authorized
by the Trust Agreements to make from time to time certain non-interest bearing
advances to the Trusts. During the first year the Trustee has agreed to lower
its fees and absorb expenses by the amount set forth under "Essential
Information." The Trustee's fee will not be increased in future years in order
to make up this reduction in the Trustee's fee. The Trustee's fee is payable
on or before each Distribution Date.
For evaluation of Securities in each Trust, the Evaluator shall receive a fee,
payable monthly, calculated on the basis of that annual rate set forth under
"Essential Information," based upon the largest aggregate principal amount of
Securities in such Trust at any time during such monthly period.
GI-16
GENERAL INFORMATION
<PAGE>
The Trustee's and Evaluator's fees are deducted first from the Interest
Account of a Trust to the extent funds are available and then from the
Principal Account. Such fees may be increased without approval of Unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index
entitled "All Services Less Rent of Shelter," published by the United States
Department of Labor, or any equivalent index substituted therefor. In
addition, the Trustee's fee may be periodically adjusted in response to
fluctuations in short-term interest rates (reflecting the cost to the Trustee
of advancing funds to a Trust to meet scheduled distributions).
The following additional charges are or may be incurred by the Trusts: (a)
fees for the Trustee's extraordinary services; (b) expenses of the Trustee
(including legal and auditing expenses and insurance costs for Insured Trust
Funds, but not including any fees and expenses charged by any agent for
custody and safeguarding of Securities) and of bond counsel, if any; (c)
various governmental charges; (d) expenses and costs of any action taken by
the Trustee to protect a Trust or the rights and interests of the Unitholders;
(e) indemnification of the Trustee for any loss, liability or expense incurred
by it in the administration of a Trust not resulting from gross negligence,
bad faith or willful misconduct on its part; (f) indemnification of the
Sponsor for any loss, liability or expense incurred in acting in that capacity
without gross negligence, bad faith or willful misconduct; and (g)
expenditures incurred in contacting Unitholders upon termination of the
Trusts. The fees and expenses set forth herein are payable out of the
appropriate Trust and, when owing to the Trustee, are secured by a lien on
such Trust. Fees or charges relating to a Trust shall be allocated to each
Trust in the same ratio as the principal amount of such Trust bears to the
total principal amount of all Trusts. Fees or charges relating solely to a
particular Trust shall be charged only to such Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from the
Principal Accounts. The Trustee may withdraw from the Principal Account or the
interest Account of any Trust such amounts, if any, as it deems necessary to
establish a reserve for any taxes or other governmental charges or other
extraordinary expenses payable out of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for a Trust known as the Reserve
Account and shall not be considered a part of the Trust when determining the
value of the Units until such time as the Trustee shall return all or any part
of such amounts to the appropriate account.
THE SPONSOR
The Sponsor, EVEREN Unit Investment Trusts, with an office at 77 West Wacker
Drive, 29th Floor, Chicago, Illinois 60601, (800) 621-5024, is a service of
EVEREN Securities, Inc., which is a wholly-owned subsidiary of EVEREN Capital
Corporation. The Sponsor acts as underwriter of a number of other unit
investment trusts and will act as underwriter of any other unit investment
trust products developed by the Sponsor in the future. As of December 31,
1994, the total stockholder's equity of EVEREN Securities, Inc. was
$252,676,937.
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreements or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, or (b) terminate the Trust Agreements and liquidate the Trusts as
provided therein, or (c) continue to act as Trustee without terminating the
Trust Agreements.
GI-17
GENERAL INFORMATION
<PAGE>
The foregoing financial information with regard to the Sponsor relates to the
Sponsor only and not to these Trusts. Such information is included in this
Prospectus only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations with respect to the Trusts. More comprehensive financial
information can be obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, as counsel for the Sponsor. Emmet, Marvin &
Martin, 120 Broadway, New York, New York 10271 has acted as counsel for the
Trustee.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date of
Deposit included in this Prospectus have been audited by Grant Thornton LLP,
independent certified public accountants, as set forth in their report in the
Prospectus, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
GI-18
GENERAL INFORMATION
<PAGE>
<TABLE>
<CAPTION>
CONTENTS PAGE
-----
<S> <C>
SUMMARY.................................................................. 2
ESSENTIAL INFORMATION.................................................... 3
THE TRUST FUNDS.......................................................... 6
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS............................................................. 8
STATEMENTS OF CONDITION.................................................. 9
PUBLIC OFFERING OF UNITS................................................. 10
Public Offering Price................................................... 10
Accrued Interest........................................................ 12
Comparison of Public Offering Price and
Redemption Price....................................................... 12
Public Distribution of Units............................................ 13
Profits of Sponsor and Underwriters..................................... 14
THE TAX EXEMPT PORTFOLIOS................................................ TE-1
The Trust Portfolio..................................................... TE-1
Series Information...................................................... TE-1
Taxable Equivalent Estimated Current
Return Tables.......................................................... TE-3
Portfolio............................................................... TE-5
Notes to Portfolio...................................................... TE-8
Municipal Bond Risk Factors............................................. TE-9
State Risk Factors and State Tax Status................................. TE-12
Insurance on the Bonds.................................................. TE-25
Federal Tax Status...................................................... TE-28
Tax Reporting and Reallocation.......................................... TE-32
Underwriting............................................................ TE-33
Estimated Cash Flow to Unitholders...................................... TE-34
GENERAL INFORMATION...................................................... GI-1
Rating of Units......................................................... GI-1
Trust Information....................................................... GI-1
Retirement Plans........................................................ GI-4
Distribution Reinvestment............................................... GI-6
Interest, Estimated Long-Term Return and Estimated
Current Return......................................................... GI-6
Market for Units........................................................ GI-7
Redemption.............................................................. GI-8
Unitholders............................................................. GI-10
Investment Supervision.................................................. GI-13
Administration of the Trusts............................................ GI-14
Expenses of the Trusts.................................................. GI-16
The Sponsor............................................................. GI-17
Legal Opinions.......................................................... GI-18
Independent Certified Public Accountants................................ GI-18
</TABLE>
--------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS MADE.
--------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THE PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUSTS, THE TRUSTEE, OR THE SPONSOR. THE TRUSTS ARE REGISTERED AS UNIT
INVESTMENT TRUSTS UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION
DOES NOT IMPLY THAT THE TRUSTS OR THE UNITS HAVE BEEN GUARANTEED, SPONSORED,
RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE OR ANY AGENCY OR
OFFICER THEREOF.
--------------------
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.
<PAGE>
- --------------------
EVEREN
Unit
Investment
Trusts
- --------------------
---------------------
Prospectus
---------------------
Insured National Series 18
(Long-Term)
Insured California Series 22
(Long-Term)
Insured Michigan Series 13
(Long-Term)
January 10, 1996
EVEREN Unit Investment Trusts.
<PAGE>
This Registration Statement on Form S-6 comprises the following papers and
documents.
<TABLE>
<C> <S>
The facing sheet of Form S-6.
The cross-reference sheet.
The prospectus.
The signatures.
The following exhibits.
1.1. Form of Trust Indenture and Agreement for the Tax-Exempt Portfolios.
1.1.1. Standard Terms and Conditions of Trust for the Tax-Exempt Portfolios.
2.1. Form of Certificate of Ownership (pages two to four, inclusive, of the
Standard Terms and Conditions of Trust included as Exhibit 1.1.1).
3.1. Opinion of counsel to the Sponsor as to legality of the securities
being registered including a consent to the use of its name under the
headings "Federal Tax Status" for each Trust and "Legal Opinions" in
the Prospectus and opinion of counsel as to the Federal income tax
status of the securities being registered.
3.2. Opinion and consent of special counsel to Insured California Series 22
for California tax matters.
3.3. Opinion and consent of special counsel to Insured Michigan Series 13
for Michigan tax matters.
4.1. Consent of Standard & Poor's.
4.2. Consent of Cantor Fitzgerald & Co.
4.3. Consent of Grant Thornton LLP.
Ex-27. Financial Data Schedules.
</TABLE>
S-1
<PAGE>
SIGNATURES
THE REGISTRANT, EVEREN UNIT INVESTMENT TRUSTS, SERIES 41 HEREBY IDENTIFIES
MULTI-STATE SERIES 19 OF THE KEMPER TAX-EXEMPT INSURED INCOME TRUST AND KEMPER
DEFINED FUNDS INSURED NATIONAL SERIES 1 FOR PURPOSES OF THE REPRESENTATIONS
REQUIRED BY RULE 487 AND REPRESENTS THE FOLLOWING:
(1) THAT THE PORTFOLIO SECURITIES DEPOSITED IN THE SERIES AS TO THE
SECURITIES OF WHICH THIS REGISTRATION STATEMENT IS BEING FILED DO NOT
DIFFER MATERIALLY IN TYPE OR QUALITY FROM THOSE DEPOSITED IN SUCH PREVIOUS
SERIES;
(2) THAT, EXCEPT TO THE EXTENT NECESSARY TO IDENTIFY THE SPECIFIC
PORTFOLIO SECURITIES DEPOSITED IN, AND TO PROVIDE ESSENTIAL FINANCIAL
INFORMATION FOR, THE SERIES WITH RESPECT TO THE SECURITIES OF WHICH THIS
REGISTRATION STATEMENT IS BEING FILED, THIS REGISTRATION STATEMENT DOES NOT
CONTAIN DISCLOSURES THAT DIFFER IN ANY MATERIAL RESPECT FROM THOSE
CONTAINED IN THE REGISTRATION STATEMENTS FOR SUCH PREVIOUS SERIES AS TO
WHICH THE EFFECTIVE DATE WAS DETERMINED BY THE COMMISSION OR THE STAFF; AND
(3) THAT IT HAS COMPLIED WITH RULE 460 UNDER THE SECURITIES ACT OF 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EVEREN UNIT INVESTMENT TRUSTS, SERIES 41 HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON
THE 10TH DAY OF JANUARY, 1996.
EVEREN UNIT INVESTMENT TRUSTS,
SERIES 41
Registrant
By: EVEREN UNIT INVESTMENT TRUSTS,
a service of EVEREN Securities,
Inc.
Depositor
/s/ Michael J. Thoms
By: _________________________________
Michael J. Thoms
S-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON JANUARY 10, 1996 BY THE
FOLLOWING PERSONS, WHO CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF
EVEREN SECURITIES, INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James R. Boris
- -------------------------------------------
James R. Boris Chairman and Chief Executive Officer
/s/ Daniel D. Williams
- -------------------------------------------
Daniel D. Williams Senior Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Frank V. Geremia
- -------------------------------------------
Frank V. Geremia Senior Executive Vice President
/s/ Stephen G. McConahey
- -------------------------------------------
Stephen G. McConahey President and Chief Operating Officer
/s/ Stanley R. Fallis
- -------------------------------------------
Stanley R. Fallis Senior Executive Vice President and Chief
Administrative Officer
/s/ David M. Greene
- -------------------------------------------
David M. Greene Senior Executive Vice President and
Director of Client Services
/s/ Thomas R. Reedy
- -------------------------------------------
Thomas R. Reedy Senior Executive Vice President and
Director of Capital Markets
/s/ Janet L. Reali
- -------------------------------------------
Janet L. Reali Executive Vice President, Corporate Counsel
and Corporate Secretary
</TABLE>
/s/ Michael J. Thoms
_____________________________________
Michael J. Thoms
MICHAEL J. THOMS SIGNS THIS DOCUMENT PURSUANT TO A POWER OF ATTORNEY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WITH AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON FORM S-6 FOR EVEREN UNIT INVESTMENT TRUSTS, SERIES
39 (REGISTRATION NO. 33-63111).
S-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
Amendment Number 1 to Form S-6 and is qualified in its entirety by reference to
such Amendment Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> INSURED NATIONAL
<NUMBER> 18
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> JAN-10-1996
<PERIOD-END> JAN-10-1996
<INVESTMENTS-AT-COST> 4,067,391
<INVESTMENTS-AT-VALUE> 4,067,391
<RECEIVABLES> 41,208
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,108,599
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,208
<TOTAL-LIABILITIES> 41,208
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,067,391
<SHARES-COMMON-STOCK> 416,500
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,067,391
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<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>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
Amendment Number 1 to Form S-6 and is qualified in its entirety by reference to
such Amendment Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> INSURED CALIFORNIA
<NUMBER> 22
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> JAN-10-1996
<PERIOD-END> JAN-10-1996
<INVESTMENTS-AT-COST> 2,433,733
<INVESTMENTS-AT-VALUE> 2,433,733
<RECEIVABLES> 33,948
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,467,681
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33,948
<TOTAL-LIABILITIES> 33,948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,433,733
<SHARES-COMMON-STOCK> 250,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,433,733
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<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>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
Amendment Number 1 to Form S-6 and is qualified in its entirety by reference to
such Amendment Number 1 to Form S-6.
</LEGEND>
<SERIES>
<NAME> INSURED MICHIGAN
<NUMBER> 13
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> JAN-10-1996
<PERIOD-END> JAN-10-1996
<INVESTMENTS-AT-COST> 2,398,782
<INVESTMENTS-AT-VALUE> 2,398,782
<RECEIVABLES> 16,691
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,415,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,691
<TOTAL-LIABILITIES> 16,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,398,782
<SHARES-COMMON-STOCK> 250,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,398,782
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<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>
<PAGE>
Exhibit 1.1
EVEREN Unit Investment Trusts, Series 41
Trust Agreement
Dated: January 10, 1996
This Trust Agreement between EVEREN Securities, Inc., as Depositor and
Evaluator, and The Bank of New York, as Trustee, sets forth certain provisions
in full and incorporates other provisions by reference to the document entitled
"Standard Terms and Conditions of Trust for Tax-Exempt Portfolios Sponsored by
EVEREN Unit Investment Trusts, a service of EVEREN Securities, Inc., Effective:
January 10, 1996" (herein called the "Standard Terms and Conditions of Trust")
and such provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references herein
to Articles and Sections are to Articles and Sections of the Standard Terms and
Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor and the Trustee and the Evaluator agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the Provisions of Part ii hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(1), listed in Schedule A
hereto, have been deposited in trust under this Trust Agreement.
(b) The initial fractional undivided interest in and ownership of
each Trust represented by each Unit is the amount set forth under
"Essential Information--Fractional Undivided Interest per Unit" in the
Prospectus.
(c) The initial number of Units in each Trust is that amount set
forth under "Essential Information-Number of Units" in the Prospectus.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed.
EVEREN SECURITIES, INC.
through its EVEREN Unit Investment Trusts
service
Depositor
By Robert K. Burke
-------------------------------
Senior Vice President
THE BANK OF NEW YORK
By Ted Rudish
-------------------------------
Vice President
<PAGE>
-2-
SCHEDULE A
Bonds Initially Deposited
EVEREN Unit Investment Trusts Series 41
(Note: Incorporated herein and made a part hereof is the "Portfolios" as
set forth in the Prospectus for each Trust.)
<PAGE>
Exhibit 1.1.1
Standard Terms and Conditions of Trust
for
Tax-Exempt Portfolios
Sponsored by
EVEREN Unit Investment Trusts,
a service of EVEREN Securities, Inc.
Effective: January 10, 1996
among
EVEREN Securities, Inc.
Depositor and Evaluator
and
The Bank of New York
Trustee
___________________________________
Applicable to Tax-Exempt Portfolios included in
EVEREN Unit Investment Trusts, Series 41
and Subsequent Series
___________________________________
<PAGE>
STANDARD TERMS AND CONDITIONS OF TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
Preambles.................................................................. 1
Article I Definitions............................................... 1
Section 1.01. Definitions............................................ 1
Article II Deposit of Bonds; Acceptance of Trust; Separate
Trusts; Form and Issuance of Units;
Portfolio Insurance....................................... 6
Section 2.01. Deposit of Bonds....................................... 6
Section 2.02. Acceptance of Trust.................................... 6
Section 2.03. Issuance of Units...................................... 6
Section 2.04. Separate Trusts........................................ 7
Section 2.05. Form of Certificates................................... 7
Section 2.06. Portfolio Insurance for the Insured Trusts............. 7
Article III Administration of Fund.................................... 9
Section 3.01. Initial Costs.......................................... 9
Section 3.02. Interest Account....................................... 9
Section 3.03. Principal Account...................................... 9
Section 3.04. Reserve Account........................................ 10
Section 3.05. Deductions and Distributions........................... 10
Section 3.06. Distribution Statements................................ 13
Section 3.07. Extraordinary Sale of Bonds............................ 14
Section 3.08. Refunding Bonds........................................ 16
Section 3.09. Bond Counsel........................................... 16
Section 3.10. Notice and Sale by Trustee............................. 16
Section 3.11. Trustee Not Required to Amortize....................... 16
Section 3.12. Liability, Indemnification and Succession of Depositor. 17
Section 3.13. Notice to Depositor.................................... 17
Section 3.14. Limited Replacement of Special Bonds................... 18
Section 3.15. Compensation of Depositor for Supervisory Services..... 19
Section 3.16. Deferred Sales Charge.................................. 20
Article IV Evaluation of Bonds; Evaluator............................ 20
Section 4.01. Evaluation of Bonds.................................... 20
Section 4.02. Information for Unitholders............................ 21
Section 4.03. Compensation of Evaluator.............................. 21
Section 4.04. Liability of Evaluator................................. 22
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
Section 4.05. Resignation and Removal of Evaluator; Successor........ 22
Article V Evaluation, Redemption, Purchase, Transfer,
Interchange or Replacement of Units....................... 23
Section 5.01. Evaluation............................................. 23
Section 5.02. Redemptions by Trustee; Purchases by Depositor......... 24
Section 5.03. Transfer or Interchange of Units....................... 25
Section 5.04. Certificates Mutilated, Destroyed, Stolen or Lost...... 26
Article VI Trustee................................................... 27
Section 6.01. General Definition of Trustee's Liabilities, Rights and
Duties................................................. 27
Section 6.02. Books, Records and Reports............................. 29
Section 6.03. Indenture and List of Bonds on File.................... 30
Section 6.04. Compensation of Trustee................................ 30
Section 6.05. Removal and Resignation of Trustee; Successor.......... 31
Section 6.06. Qualifications of Trustee.............................. 32
Article VII Rights of Unitholders..................................... 32
Section 7.01. Beneficiaries of Trust................................. 32
Section 7.02. Rights, Terms and Conditions........................... 33
Article VIII Additional Covenants; Miscellaneous Provisions............ 33
Section 8.01. Amendments............................................. 33
Section 8.02. Termination............................................ 34
Section 8.03. Construction........................................... 36
Section 8.04. Registration of Units.................................. 36
Section 8.05. Written Notice......................................... 36
Section 8.06. Severability........................................... 36
Section 8.07. Dissolution of Depositor Not to Terminate.............. 36
</TABLE>
-ii-
<PAGE>
STANDARD TERMS AND CONDITIONS OF TRUST
EFFECTIVE: JANUARY 10, 1996
These Standard Terms and Conditions of Trust are executed by EVEREN
Securities, Inc., as Depositor and Evaluator and The Bank of New York, as
Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee and the Evaluator agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust shall be applicable to certain
EVEREN Unit Investment Trusts Series established on or after the date of
effectiveness hereof, as provided in this paragraph. For all Series established
on or after the date of effectiveness hereof to which these Standard Terms and
Conditions of Trust are to be applicable, the Depositor, the Trustee and the
Evaluator shall execute a Trust Agreement incorporating by reference these
Standard Terms and Conditions of Trust and designating any exclusion from or
exception to such incorporation by reference for the purposes of that Series or
variation of the terms hereof for the purposes of that Series and specifying for
that Series (if not otherwise specified in the Prospectus for such Series) (i)
the Bonds deposited in the various Trusts and the number of Units delivered by
the Trustee in exchange for the Bonds pursuant to Section 2.03, (ii) the
fractional undivided interest in the respective Trusts represented by each Unit,
(iii) the First Settlement Date, (iv) the Record and Distribution Dates and (v)
the amount of the Trustee advancement with respect to any "when-issued" Bonds
deposited in the related Trust.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Indenture the following
words and phrases, unless the context clearly indicates otherwise, shall have
the following meanings:
(1) "Bonds" shall mean such of the interest bearing tax-exempt
obligations, including delivery statements relating to "when-issued" and/or
"regular way" contracts, if any, for the purchase of certain bonds and
certified or bank check or checks or letter of credit or letters of credit
sufficient in amount or availability required for such purchase, deposited
in irrevocable trust and listed in all Schedules of the Trust Agreement,
and any obligations received in exchange, substitution or replacement for
such obligations pursuant to Sections 3.08 and 3.14 hereof, as may from
time to time continue to be held as a part of the Trusts.
<PAGE>
(2) "Business Day" shall mean any day other than a Sunday or, in the
City of New York, a legal holiday or a day on which banking institutions
are authorized by law to close.
(3) "Certificate" shall mean any one of the certificates executed by
the Trustee and the Depositor evidencing ownership of an undivided
fractional interest in a Trust in substantially the following form with the
blanks appropriately filled in:
Face of Certificate
Number EVEREN Unit Investment Trusts Series Units
Certificate of Beneficial Ownership
This Certifies That _____________________________ is the registered owner
of _______ Unit(s) of fractional undivided interest in EVEREN Unit Investment
Trusts of the above Series (herein referred to as the "Trust") created under the
laws of the State of New York pursuant to the Indenture and the related Trust
Agreement, a copy of which is available at the office of the Trustee. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the aforesaid Indenture and the related Trust Agreement to which
the holder of this Certificate by virtue of the acceptance hereof assents and is
bound. This Certificate is transferable and interchangeable by the registered
owner in person or by his duly authorized attorney at the office of the Trustee
upon surrender of this Certificate properly endorsed or accompanied by a written
instrument of transfer and any other documents that the Trustee may require for
transfer, in form satisfactory to the Trustee, and payment of the fees and
expenses provided in the Trust Agreement.
Witness the facsimile signature of the Depositor and the manual signature
of an authorized signatory of the Trustee.
Dated:
EVEREN Securities, Inc., The Bank of New York,
Depositor Trustee
By__________________________ By___________________________________
Authorized Signature Authorized Signature
-2-
<PAGE>
Reverse of Certificate
Form of Assignment
For Value Received _______________________________________ hereby sells,
assigns and transfers unto
____________________
____________________
Please Insert Social Security or Other
Identifying Number of Assignee
__________________________
__________________________
the within Certificate and does hereby irrevocably constitute and appoint
___________________________________________________, attorney, to transfer the
within Certificate on the books of the Trustee, with full power of substitution
in the premises.
Dated: __________________________
Notice: The signature to this assignment must correspond with the name
as written upon the face of the Certificate in every particular,
without alteration or enlargement or any change whatever, and must be
guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guarantee program
in addition to, or in substitution for, STAMP, as may be accepted by
the Trustee.
Signature Guaranteed
By____________________________________
-3-
<PAGE>
(4) "Contract Bonds" shall mean Bonds which are to be acquired by a
Trust pursuant to contracts, including (i) Bonds listed in Schedule A to
the Trust Agreement and (ii) Bonds which the Depositor has contracted to
purchase for such Trust pursuant to Section 3.14 hereof.
(5) "Depositor" shall mean EVEREN Securities, Inc., acting throught
its EVEREN Unit Investment Trusts service, and its successors in interest,
or any successor depositor appointed as hereinafter provided.
(6) "Evaluation Time" shall mean the close of business of the
Depositor, unless another meaning is assigned to it in the Prospectus.
(7) "Evaluator" shall mean EVEREN Securities, Inc., acting through
its EVEREN Unit Investment Trusts service, and its successors in interest,
or any successor evaluator appointed as hereinafter provided.
(8) "Fund" shall mean the collective Trusts created by the Trust
Agreement, which shall consist of the Bonds held pursuant and subject to
the Indenture together with all undistributed interest received or accrued
thereon, any undistributed cash realized from the sale, redemption,
liquidation, or maturity thereof or the proceeds of insurance received in
respect thereof. Such amounts as may be on deposit in any Reserve Account
hereinafter established shall be excluded from the Fund.
(9) "Indenture" shall mean these Standard Terms and Conditions of
Trust as originally executed or, if amended as hereinafter provided, as so
amended, together with the Trust Agreement creating a particular series of
the Fund.
(10) "Initial Date of Deposit" shall mean, with respect to any Trust,
the date of the Trust Agreement creating such Trust.
(11) "Insurance" shall mean one or more contracts or policies of
insurance obtained by certain Trusts of the Fund guaranteeing the payment
when due of the principal of and interest on the Bonds held pursuant and
subject to this Indenture, together with the proceeds thereof, if any,
payable to or received by the Trustee for the benefit of such Trusts and
the Unitholders thereof except that Insurance shall not include policies
relating to those Bonds held pursuant and subject to this Indenture which
are insured by individual policies of insurance issued by AMBAC Indemnity
Corporation, MBIA Insurance Corporation, Financial Guaranty Insurance
Company, Financial Security Assurance, Inc., Capital Guaranty Insurance
Company, Capital Markets Assurance Corporation and/or any other bond
insurance company (collectively, the "Pre-Insured Bond Insurers") which
have been obtained by the issuers of such Bonds or others (the "Pre-Insured
Bonds").
(12) "Insurer" shall mean any insurance company, its successors and
assigns, which has issued a contract or policy of insurance obtained by
certain Trusts
-4-
<PAGE>
protecting such Trusts and the Unitholders thereof against nonpayment when
due of the principal of and interest on any Bond (except for Pre-Insured
Bonds) held by the Trustee as part of such Trust.
(13) "Prospectus" shall mean (a) the prospectus relating to a Trust
filed with the Securities and Exchange Commission pursuant to Rule 497
under the Securities Act of 1933, as amended, and dated the date of the
Trust Agreement or (b) if any post-effective amendment to such prospectus
described in (a) shall have been subsequently made effective under the
Securities Act of 1933, as amended, such post-effective amendment thereto.
(14) "State Trust" shall mean a Trust which includes a portfolio
predominantly consisting of bonds issued by or on behalf of a state of the
United States or counties, municipalities, authorities or political
subdivisions thereof.
(15) "Supplemental Trust Agreement" shall mean an amendment or
supplement to the Trust Agreement executed pursuant to Section 2.01(b) for
the purpose of depositing additional Bonds in a Trust and issuing
additional Units.
(16) "Trust" or "Trusts" shall mean the separate trust or trusts,
created by this Indenture and a Trust Agreement, the Bonds constituting the
portfolios of which are listed in the various separate Schedules attached
to the related Trust Agreement. "Insured Trust" shall mean a Trust in the
Fund which is comprised exclusively of (a) Bonds insured by Insurance, as
such term is defined in Section 1.01(11) and/or (b) Pre-Insured Bonds, as
such term is defined in Section 1.01(11).
(17) "Trust Agreement" shall mean the Trust Agreement for the
particular series of the Fund into which these Standard Terms and
Conditions are incorporated.
(18) "Trustee" shall mean The Bank of New York, or any successor
trustee appointed as hereinafter provided or any entity which acquires all
or a substantial part of the unit investment trust division of The Bank of
New York.
(19) "Unitholder" shall mean the registered holder of any Unit,
whether or not in certificated form, as recorded on the books of the
Trustee, his legal representatives and heirs and the successors of any
corporation, partnership or other legal entity which is a registered holder
of any Unit and as such shall be deemed a beneficiary of the Trusts created
by this Indenture to the extent of his or her pro rata share thereof.
(20) "Units" in respect of any Trust shall mean the fractional
undivided interest in and ownership of the Trust equal initially to the
fraction of the respective Trust specified in the Prospectus, the
denominator of which shall be increased by the number of any additional
Units issued pursuant to Section 2.03 and decreased by the number of any
such Units redeemed as provided in Section 5.02.
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(21) Words importing singular number shall include the plural number
in each case and vice versa, and words importing persons shall include
corporations and associations, as well as natural persons.
(22) The words "herein," "hereby," "herewith," "hereof,"
"hereinafter," "hereunder," "hereinabove," "hereafter," "heretofore" and
similar words or phrases of reference and association shall refer to this
Indenture in its entirety.
ARTICLE II
DEPOSIT OF BONDS; ACCEPTANCE OF TRUST; SEPARATE TRUSTS;
FORM AND ISSUANCE OF UNITS; PORTFOLIO INSURANCE
Section 2.01. Deposit of Bonds. (a) The Depositor, on the Initial Date of
Deposit, has deposited with the Trustee in trust the Bonds listed in the
Schedules attached to the Trust Agreement in bearer form or duly endorsed in
blank or accompanied by all necessary instruments of assignment and transfer in
proper form to be held, managed and applied by the Trustee as herein provided.
The Depositor shall deliver the Bonds listed on said Schedules to the Trustee
which were not actually delivered concurrently with the execution and delivery
of the Trust Agreement within 90 days after said execution and delivery, or if
the contract to buy such Bond between the Depositor and seller is terminated by
the seller thereof for any reason beyond the control of the Depositor, the
Depositor shall forthwith take the remedial action specified in Section 3.14.
(b) From time to time following the Initial Date of Deposit for a Trust,
the Depositor is hereby authorized, in its discretion, to assign, convey to and
deposit with the Trustee additional Bonds for such Trust, duly endorsed in blank
or accompanied by all necessary instruments of assignment and transfer in proper
form, to be held, managed and applied by the Trustee as herein provided. Such
deposit of additional Bonds shall be made, in each case, pursuant to an executed
Supplemental Trust Agreement which shall be accompanied by a legal opinion
issued by legal counsel satisfactory to the Depositor. Any additional Bonds to
be deposited must (1) be issued by the same issuer; (2) have the same original
issue date; (3) have the same coupon or interest rate; (4) have the same
maturity date; (5) have the same redemption features; and (6) have other legal
characteristics as the Bonds originally deposited in the Trust on the Initial
Date of Deposit. The Depositor in each case shall ensure that each deposit of
additional Bonds pursuant to this Section shall have the same ratio of Bonds
(based on principal amount) as existed on the Initial Date of Deposit for each
Trust. Any brokerage fees related to the purchase of Bonds deposited in the
Trust after the Initial Date of Deposit shall be an expense of such Trust.
Section 2.02. Acceptance of Trust. The Trustee hereby accepts the trusts
herein created for the use and benefit of the Unitholders of the Trusts, subject
to the terms and conditions of this Indenture.
Section 2.03. Issuance of Units. (a) The Trustee hereby acknowledges
receipt of the deposit of the Securities listed in the Schedules to the Trust
Agreement and referred to in
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Section 2.01 hereof and, simultaneously with the receipt of said deposit, has
recorded on its books the ownership, by the Depositor or such other person or
persons as may be indicated by the Depositor, of the aggregate number of Units
specified in the Trust Agreement and has delivered, or on the order of the
Depositor will deliver, in exchange for such Securities, documentation
evidencing the ownership of the number of Units specified and, if such Units are
represented by a Certificate, such Certificate substantially in the form above
recited, representing the ownership of those Units. The Trustee hereby agrees
that on the date of any Supplemental Trust Agreement, it shall acknowledge that
the additional Bonds identified therein have been deposited with it by recording
on its books the ownership, by the Depositor or such other person or persons as
may be indicated by the Depositor, of the aggregate number of Units to be issued
in respect of such additional Bonds so deposited, and shall, if so requested,
execute documentation substantially in the form above recited representing the
ownership of an aggregate number of those Units.
(b) Under the terms and conditions of the Trust Agreement and this
Indenture and at such times as are permitted by the Trustee, Units may also be
held in certificated form. Unitholders may elect to have their Units held in
certificated form by making a written request to the Trustee requesting such
Certificates; provided, that the Trustee is entitled to specify the minimum
denomination of any Certificate issued. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make an appropriate notation in the
registration books of the Trustee. The rights set forth in this Indenture of any
holder of Units held in certificated form shall be the same as those of any
other Unitholder. Certificates may be transferred as provided herein.
Section 2.04. Separate Trusts. The Trusts created by this Indenture are
separate and distinct trusts for all purposes and the assets of one Trust may
not be commingled with the assets of any other nor shall the expenses of any
Trust be charged against the other. The Certificates representing the ownership
of an undivided fractional interest in one Trust shall not be exchangeable for
Certificates representing the ownership of an undivided fractional interest in
any other.
Section 2.05. Form of Certificates. Each Certificate referred to in
Section 2.03 is, and each Certificate hereafter issued shall be, in
substantially the form hereinabove recited, numbered serially for
identification, in fully registered form, transferable only on the books of the
Trustee as herein provided, executed manually by an authorized officer of the
Trustee and in facsimile by the Chairman, President or one of the Vice
Presidents of the Depositor and dated the date of execution and delivery by the
Trustee.
Section 2.06. Portfolio Insurance for the Insured Trusts. Concurrently
with the delivery to the Trustee of the Bonds listed in the Schedules attached
to the related Trust Agreement, the Insurer has delivered to and deposited with
the Trustee for each of the Insured Trusts of the Fund the Insurance to protect
such Trusts of the Fund and the Unitholders thereof against nonpayment of
principal and interest, when due, on any Bond or Bonds (except for Pre-Insured
Bonds) held by the Trustee in the portfolios of such Trusts of the Fund.; The
Trustee shall take all action deemed necessary or advisable in connection with
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the Insurance to continue the Insurance in full force and effect and shall pay
all premiums due thereon, including the initial premium, all in such manner as
in its sole discretion shall appear to result in the most protection and least
expense to the Insured Trusts of the Fund.
The Insurance may not be canceled by the Insurer. However, as of each
computation day the Trustee shall make the deduction and payment of premiums
prescribed in Section 3.05(c) of this Indenture in order to continue in force
the coverage thus provided. The Insurer's right to the payment of premiums from
funds held by the Trustee in accordance with the terms of the policy is absolute
(except when payment is withheld in good faith by the Trustee in the event of a
dispute over the amount thereof), but no failure on the part of the Trustee to
make such payment of premium or installment thereof to the Insurer shall result
in a cancellation of the Insurance or otherwise affect the right of any
Unitholder under the policy to have any amounts of principal and interest paid
by the Insurer to the Trustee to be held as part of the Insured Trusts of the
Fund when the same are not paid when due by the issuer of a Bond or Bonds held
by the Trustee as part of such Trusts of the Fund.
With each payment of premium or installment thereof, the Trustee shall
notify the Insurer of all Bonds (except Pre-Insured Bonds) which during the
expiring premium period were redeemed from or sold by the Insured Trusts of the
Fund.
At all times during the existence of the Insured Trusts of the Fund the
Insurance policy shall provide for payment by the Insurer to the Trustee of any
amounts of principal and interest due, but not paid, by the issuer of a Bond
insured by the Insurance. The Trustee shall promptly notify the Insurer of any
nonpayment or threatened nonpayment of principal or interest and the Insurer
shall within 30 days after receipt of such notice make payment to the Trustee of
all amounts of principal and interest at that time due, but not paid.
Payments of principal and interest assumed by the Insurer shall be made as
required by the related Bond or Bonds, except in the event of a sale of any such
Bond or Bonds by the Trustee under Section 3.07, 5.02 or 6.04, or a termination
of this Indenture and the Insured Trusts of the Fund created hereby under
Section 8.02, prior to the final maturity of such Bond or Bonds, in each of
which events, upon notice from the Trustee, the Insurer shall promptly make
payment of the accrued interest on such Bond or Bonds to the Trustee and shall
be relieved of further obligation to the Trustee thereon.
Upon the making of any payment referred to in the preceding paragraphs, the
Insurer shall succeed to the rights of the Trustee under the Bond or Bonds
involved to the extent of the payments made at that time, or any time subsequent
thereto, and shall continue to make all payments required by the terms of such
Bond or Bonds to the extent that funds are not provided therefor by the issuer
thereof. Upon the payment of any amounts by the Insurer, occasioned by the
nonpayment thereof by the issuer, the Trustee shall execute and deliver to the
Insurer any receipt, instrument or document required to evidence the right of
the Insurer in the Bond or Bonds involved to payment of principal and/or
interest thereon to the extent of the payments made by the Insurer to the
Trustee.
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With respect to Pre-Insured Bonds in the respective Trusts of the Fund, the
Trustee shall promptly notify the Pre-Insured Bond Insurer of any nonpayment of
principal or interest on such Pre-Insured Bonds and if the Pre-Insured Bond
Insurer should fail to make payment to the Trustee within 30 days after receipt
of such notice, the Trustee shall take all action against the Pre-Insured Bond
Insurer and/or the issuer deemed necessary to collect all amounts of principal
and interest at that time due, but not collected.
ARTICLE III
ADMINISTRATION OF FUND
Section 3.01. Initial Costs. To the extent not borne by the Depositor the
expenses incurred in establishing a Trust shall be borne by such Trust,
including the cost of the initial preparation and typesetting of the
registration statement, prospectuses (including preliminary prospectuses), the
Indenture, and other documents relating to a Trust, printing of Certificates,
Securities and Exchange Commission and state blue sky registration fees, the
costs of the initial valuation of the portfolio and audit of a Trust, the
initial fees and expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses incurred in the
printing of prospectuses (including preliminary prospectuses), expenses incurred
in the preparation and printing of brochures and other advertising materials and
any other selling expenses. To the extent the funds in the Interest and/or
Principal Accounts of the Trust shall be insufficient to pay the expenses borne
by the Trust specified in this Section 3.01, the Trustee shall advance out of
its own funds and cause to be deposited and credited to the Interest or
Principal Accounts such amount as may be required to permit payment of such
expenses. The Trustee shall be reimbursed for such advance in the manner
provided in the related Prospectus; provided, however, that nothing herein shall
be deemed to prevent, and the Trustee shall be entitled to, full reimbursement
for any advances made pursuant to this Section 3.01 no later than the
termination of the Trust.
Section 3.02. Interest Account. The Trustee shall collect the interest on
the Bonds in each Trust as such becomes payable (including all interest accrued
but unpaid prior to the date of deposit of the Bonds in trust and including that
part of the proceeds of the sale, liquidation, redemption or maturity of any
Bonds or insurance thereon which represents accrued interest thereon) and credit
such interest to a separate account for each Trust to be known as the "Interest
Account."
Section 3.03. Principal Account. (a) The Bonds in each Trust and all
moneys (except moneys held by the Trustee pursuant to subsection (b) hereof)
other than amounts credited to the Interest Account, received by the Trustee in
respect of the Bonds in each Trust, including insurance thereon, if any, shall
be credited to a separate account for each Trust to be known as the "Principal
Account."
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Bonds or deposited to secure such purchases are hereby declared to be
held specially by the Trustee for such purchases and shall not be deemed to be
part of the Principal Account of the applicable Trust until (i) the Depositor
fails to timely purchase a Contract Bond and has
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not given the Failed Contract Notice (as defined in Section 3.14) at which time
the moneys and/or letters of credit attributable to the Contract Bond not
purchased by the Depositor shall be credited to the Principal Account; or (ii)
the Depositor has given the Trustee the Failed Contract Notice at which time the
moneys and/or letters of credit attributable to failed contracts referred to in
such Notice shall be credited to the Principal Account; provided, however, that
if the Depositor also notifies the Trustee in the Failed Contract Notice that it
has purchased or entered into a contract to purchase a New Bond (as defined in
Section 3.14), the Trustee shall not credit such moneys and/or letters of credit
to the Principal Account unless the New Bond shall also have failed or is not
delivered by the Depositor within two business days after the settlement date of
such New Bond, in which event the Trustee shall forthwith credit such moneys
and/or letters of credit to the Principal Account. The Trustee shall in any case
forthwith credit to the Principal Account, and/or cause the Depositor to deposit
in the Principal Account, the difference, if any, between the purchase price of
the failed Contract Bond and the purchase price of the New Bond, together with
any sales charge and accrued interest applicable to such difference and
distribute such moneys to Unitholders pursuant to Section 3.05.
The Trustee shall give prompt written notice to the Depositor and the
Evaluator of all amounts credited to or withdrawn from a Principal Account and
the balance in such Account after giving effect to such credit or withdrawal.
Section 3.04. Reserve Account. From time to time the Trustee shall
withdraw from the cash on deposit in an Interest Account or Principal Account of
the appropriate Trust such amounts as it, in its sole discretion, shall deem
requisite to establish a reserve for any applicable taxes or other governmental
charges that may be payable out of such Trust. Such amounts so withdrawn shall
be credited to a separate account which shall be known as the "Reserve Account."
The Trustee shall not be required to distribute to the Unitholders any of the
amounts in the Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for payment of
any applicable taxes or other governmental charges, then it shall promptly
deposit such amounts in the account from which withdrawn or if such Trust shall
have terminated or shall be in the process of termination, the Trustee shall
distribute same in accordance with Section 8.02 (d) and (e) to each Unitholder
such holder's interest in the Reserve Account.
Section 3.05. Deductions and Distributions. The Trustee, as of the "First
Settlement Date" defined in the Prospectus, shall advance from its own funds and
shall pay to the Unitholders of the respective Trusts then of record the amount
of interest accrued on the Bonds deposited in such Trusts. The Trustee shall
also advance from its own funds and pay the appropriate persons the amount
specified in the Prospectus, which amount represents interest which accrues on
any "when issued" Bonds deposited in the respective Trusts from the date stated
in the preceding sentence to the respective dates of delivery to the respective
Trusts of any of such Bonds. The Trustee shall be entitled to reimbursement for
such advancement from interest received by the respective Trusts before any
further distributions shall be made from the Interest Account to Unitholders of
the respective Trusts. Subsequent distributions shall be made as hereinafter
provided.
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The second distribution of funds from the Interest Accounts of the
respective Trusts shall be made on the applicable "Record Dates" of each Trust
as defined in the Prospectus.
As of the first day of each month of each year commencing with the first
monthly Record Date, the Trustee shall, with respect to each Trust:
(a) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to itself
individually the amounts that it is at the time entitled to receive
pursuant to Section 6.04;
(b) deduct from the Interest Account, or, to the extent funds are not
available in such Account, from the Principal Account and pay to the
Evaluator the amount that it is at the time entitled to receive pursuant to
Section 4.03;
(c) with respect to the Insured Trusts, deduct from the Interest
Account, or, to the extent funds are not available in such Account, from
the Principal Account and pay to the Insurer the amount of any premium to
which it is at the time entitled to receive pursuant to Section 2.06.;
(d) deduct from the Interest Account, or to the extent funds are not
available in such Account, from the Principal Account and pay to the
Depositor the amount that it is entitled to receive pursuant to Section
3.15;
(e) deduct from the Interest Account, or to the extent funds are not
available in such Account, from the Principal Account (as provided in
Section 3.16) and pay to the Depositor that amount it is entitled to
receive pursuant to Section 3.16; and
(f) deduct from the Interest Account, or, to the extent funds are not
available in such Account, from the Principal Account and pay to bond
counsel, as hereinafter provided for, an amount equal to unpaid fees and
expenses, if any, of such bond counsel pursuant to Section 3.09 as
certified to by the Depositor.
On or shortly after the "Distribution Date" for each month as set forth in
the Prospectus the Trustee shall, with respect to each Trust, distribute by mail
to or upon the order of each Unitholder of record of such Trust as of the close
of business on the preceding Record Date at the post office address appearing on
the registration books of the Trustee such Unitholder's pro rate share of the
balance of the Interest Account calculated as of the Record Date for such
monthly payment. Such computation shall be made on the basis of one-twelfth of
the estimated annual interest income to the related Trust for the ensuing twelve
months, after deduction of the estimated costs and expenses to be incurred by
such Trust during the twelve month period for which such interest income has
been estimated.
In the event the amount on deposit in the Interest Account of a Trust is
not sufficient for the payment of the amount of interest to be distributed to
Unitholders on the bases of the aforesaid computations, the Trustee may advance
its own funds and cause to be deposited in and credited to such Interest Account
such amounts as may be required to permit payment of
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the interest distribution to be made as aforesaid and shall be entitled to be
reimbursed out of interest received by such Trust subsequent to the date of such
advance.
Distributions of amounts represented by the cash balance in the Principal
Account for each Trust shall be computed as of the monthly Record Date. On the
Distribution Date for each month of which such computation is made, or within a
reasonable period of time thereafter, the Trustee shall distribute by mail to
each Unitholder of record of such Trust at the close of business on the date of
computation (the Record Date) at his post office address such Unitholder's pro
rata share of the cash balance of the Principal Account as thus computed. The
Trustee shall not be required to make a distribution from the Principal Account
unless the cash balance on deposit therein available for distribution shall be
sufficient to distribute at least $0.01 per Unit.
If the Depositor (i) fails to replace any failed Special Bond (as defined
in Section 3.14) or (ii) is unable or fails to enter into any contract for the
purchase of any New Bond in accordance with Section 3.14, the Trustee shall
distribute to all Unitholders of the related Trust the principal, accrued
interest and sales charge attributable to such Special Bonds at the next monthly
Distribution Date which is more than thirty days after the expiration of the
Purchase Period (as defined in Section 3.14) or at such earlier time or in such
manner as the Trustee in its sole discretion deems to be in the best interest of
the Unitholders of the related Trust.
If any contract for a New Bond in replacement of a Special Bond shall fail,
the Trustee shall distribute the principal, accrued interest and sales charge
attributable to the Special Bond to the Unitholders of the related Trust at the
next monthly Distribution Date which is more than thirty days after the date on
which the contract in respect of such New Bond failed or at such earlier time or
in such earlier manner as the Trustee in its sole discretion determines to be in
the best interest of the Unitholders of the related Trust.
If, at the end of the Purchase Period, less than all moneys attributable to
a failed Special Bond have been applied or allocated by the Trustee pursuant to
a contract to purchase New Bonds, the Trustee shall distribute the remaining
moneys to Unitholders of the related Trust at the next monthly Distribution Date
which is more than thirty days after the end of the Purchase Period or at such
earlier time thereafter as the Trustee in its sole discretion deems to be in the
best interest of the Unitholders of the related Trust.
The amounts to be so distributed to each Unitholder of a Trust shall be
that pro rata share of the cash balance of the Interest and Principal Accounts
of such Trust, computed as set forth above, as shall be represented by the
Units, whether or not evidenced by a Certificate or Certificates, registered in
the name of such Unitholder.
In the computation of each such share, fractions of less than one cent
shall be omitted. After any such distribution provided for above, any cash
balance remaining in an Interest Account or Principal Account of a Trust shall
be held in the same manner as other amounts subsequently deposited in each of
such accounts, respectively.
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For the purpose of distributions as herein provided, the Unitholders of
record on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Unitholder of record. Nothing herein shall be construed to prevent
the payment of amounts from the Interest Account and the Principal Account of a
Trust to individual Unitholders by means of one check, draft or other proper
instrument, provided that the appropriate statement of such distribution shall
be furnished therewith as provided in Section 3.06 hereof.
Section 3.06. Distribution Statements. With each distribution from the
Interest or Principal Accounts of a Trust the Trustee shall set forth, either in
the instrument by means of which payment of such distribution is made or in an
accompanying statement, the amount being distributed from each such account and,
if from the Interest Account, the amount of accrued interest (uncollected and
not available for distribution) on the record date for such distribution, each
expressed as a dollar amount per Unit.
Within a reasonable period of time after the last business day of each
calendar year, the Trustee shall furnish to each person who at any time during
such calendar year was a Unitholder of a Trust a statement setting forth, with
respect to such calendar year:
(A) as to the Interest Account:
(1) the amount of interest received on the Bonds,
(2) the amounts paid for purchases of New Bonds pursuant to
Section 3.14 and for redemptions pursuant to Section 5.02,
(3) the deductions for applicable taxes and fees and expenses of
the Trustee and bond counsel, and
(4) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last business day of such calendar
year;
(B) as to the Principal Account:
(1) the dates of the sale, maturity, liquidation or redemption
of any of the Bonds and the net proceeds received therefrom, excluding
any portion thereof credited to the Interest Account,
(2) the amount paid for purchases of New Bonds pursuant to
Section 3.14 and for redemptions pursuant to Section 5.02,
(3) the deductions for payment of applicable taxes and fees and
expenses of the Trustee and bond counsel, and
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(4) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount per Unit outstanding on the last business day of such calendar
year;
(C) the following information:
(1) a list of the Bonds as of the last business day of such
calendar year,
(2) the number of Units outstanding on the last business day
of such calendar year,
(3) the Unit Value based on the last evaluation of such Trust
made during such calendar year, and
(4) 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
outstanding on the record dates for each plan of distribution.
Section 3.07. Extraordinary Sale of Bonds. If necessary, in order to
maintain the investment character of a Trust, the Depositor may direct the
Trustee to sell or liquidate Bonds at such price and time and in such manner as
shall be determined by the Depositor, provided that the Depositor has determined
that any one or more of the following conditions exist:
(a) that there has been a default on such Bonds in the payment of
principal or interest, or both, when due and payable;
(b) that any action or proceeding has been instituted in law or
equity seeking to restrain or enjoin the payment of principal or interest
on any such Bonds, attacking the constitutionality of any enabling
legislation or alleging and seeking to have judicially determined the
illegality of the issuing body or the constitution of its governing body or
officers, the illegality, irregularity or omission of any necessary acts or
proceedings preliminary to the issuance of such Bonds, or seeking to
restrain or enjoin the performance by the officers or employees of any such
issuing body of any improper or illegal act in connection with the
administration of funds necessary for debt service on such Bonds or
otherwise; or that there exists any other legal question or impediment
affecting such Bonds or the payment of debt service on the same;
(c) that there has occurred any breach of covenant or warranty in any
resolution, ordinance, trust indenture or other document, which would
adversely affect either immediately or contingently the payment of debt
service on such Bonds, or their general credit standing, or otherwise
impair the sound investment character of such Bonds;
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(d) that there has been a default in the payment of principal of or
interest on any other outstanding obligations of an issuer or guarantor of
such Bonds;
(e) that in the case of revenue Bonds, the revenues and income of the
facility or project or other special funds expressly charged and pledged
for debt service on any such Bonds shall fall substantially below the
estimated revenues or income calculated by the engineers or other proper
officials charged with the acquisition, construction or operation of such
facility or project, so that, in the opinion of the Depositor, the
retention of such Bonds would be detrimental to the sound investment
character of such Trust and to the interest of the Unitholders;
(f) that the price of any such Bonds had declined to such an extent,
or such other market or credit factor exists, so that in the opinion of the
Depositor the retention of such Bonds would be detrimental to such Trust
and to the interest of the Unitholders;
(g) that such Bonds are the subject of an advanced refunding. For
the purposes of this Section 3.07(g), "an advanced refunding" shall mean
when refunding bonds are issued and the proceeds thereof are deposited in
irrevocable trust to retire the Bonds on or before their redemption date;
or
(h) that as of any Record Date any of the Bonds are scheduled to be
redeemed and paid prior to the next succeeding monthly Distribution Date;
provided, however, that as the result of such redemption the Trustee will
receive funds in an amount sufficient to enable the Trustee to include in
the next distribution from the Principal Account at least $0.01 per Unit.
If the Trust is an Insured Trust, the Depositor shall also consider whether any
Insurance that may be applicable to the Bonds cannot be relied upon to provide
the principal and interest protections intended to be afforded by such
Insurance.
In the event the Depositor has directed the Trustee to sell a Bond from an
Insured Trust, the Trustee shall exercise its right to purchase a policy
providing for permanent insurance (a "Permanent Insurance Policy") if the
Depositor determines that such purchase and payment of the related premium will
result in a net realization for the Insured Trust greater than would the sale of
the Bond without the purchase of a Permanent Insurance Policy with respect to
such Bond and shall pay an amount equal to the premium payable for such
Permanent Insurance Policy to the Insurer at the time and in the manner required
by such Permanent Insurance Policy. Such premium shall be payable only from the
sale of such Bonds.
Upon receipt of such direction from the Depositor, upon which the Trustee
shall rely, the Trustee shall proceed to sell or liquidate the specified Bonds
in accordance with such direction; provided, however, that the Trustee shall not
sell or liquidate any Bonds upon receipt of a direction from the Depositor that
it has determined that the conditions in subdivision (h) above exist, unless the
Trustee shall receive on account of such sale or
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liquidation the full principal amount of such Bonds, plus the premium, if any,
and the interest accrued and to accrue thereon to the date of the redemption of
such Bonds.
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale made pursuant to any such direction or by
reason of the failure of the Depositor to give any such direction, and in the
absence of such direction the Trustee shall have no duty to sell or liquidate
any Bonds under this Section 3.07 except to the extent otherwise required by
Section 3.10 of this Indenture.
Section 3.08. Refunding Bonds. In the event that an offer shall be made
by an obligor of any of the Bonds in a Trust to issue new obligations in
exchange and substitution for any issue of Bonds pursuant to a plan for the
refunding or refinancing of such Bonds, the Depositor shall instruct the Trustee
in writing to reject such offer and either to hold or sell such Bonds, except
that if (1) the issuer is in default with respect to such Bonds or (2) in the
opinion of the Depositor, given in writing to the Trustee, the issuer will
probably default with respect to such Bonds in the reasonably foreseeable
future, the Depositor shall instruct the Trustee in writing to accept or reject
such offer or take any other action with respect thereto as the Depositor may
deem proper. Any obligation so received in exchange shall be deposited hereunder
and shall be subject to the terms and conditions of this Indenture to the same
extent as the Bonds originally deposited hereunder. Within five days after such
deposit, notice of such exchange and deposit shall be given by the Trustee to
each Unitholder of such Trust, including an identification of the Bonds
eliminated and the bonds substituted therefor.
Section 3.09. Bond Counsel. The Depositor may employ from time to time as
it may deem necessary a firm of municipal bond attorneys for any legal services
that may be required in connection with the disposition of underlying bonds
pursuant to Section 3.07 or the substitution of any securities for underlying
bonds as the result of any refunding permitted under Section 3.08. The fees and
expenses of such bond counsel shall be paid by the Trustee from the Interest and
Principal Accounts of the appropriate Trust as provided for in Section 3.05(e)
hereof.
Section 3.10. Notice and Sale by Trustee. If at any time the principal of
or interest on any of the Bonds shall be in default and not paid or provision
for payment thereof shall not have been duly made within thirty days, either
pursuant to any Insurance or otherwise, the Trustee shall notify the Depositor
thereof. If within thirty days after such notification the Depositor has not
given any instruction to sell or to hold or has not taken any other action in
connection with such Bonds, the Trustee may in its discretion sell such Bonds
forthwith, and the Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of such sale.
Section 3.11. Trustee Not Required to Amortize. Nothing in this
Indenture, or otherwise, shall be construed to require the Trustee to make any
adjustments between the Interest and Principal Accounts of any Trust by reason
of any premium or discount in respect of any of the Bonds.
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Section 3.12. Liability, Indemnification and Succession of Depositor. (a)
The Depositor shall be under no liability to the Unitholders for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Indenture or for errors in judgment, but shall be liable only for its own
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder. The Depositor may rely in good faith on any paper, order, notice,
list, affidavit, receipt, opinion, endorsement, assignment, draft or any other
document of any kind prima facie properly executed and submitted to it by the
Trustee, bond counsel or any other persons pursuant to this Indenture and in
furtherance of its duties.
(b) Each Trust shall pay and hold the Depositor harmless from and against
any loss, liability or expense incurred in acting as Depositor of such Trust
other than by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder. The Depositor shall not be under any
obligation to appear in, prosecute or defend any legal action which in its
opinion may involve it in any expense or liability; provided, however, that the
Depositor may in its discretion undertake any such action which it may deem
necessary or desirable in respect of this Indenture and the rights and duties of
the parties hereto and the interests of the Unitholders hereunder and, in such
event, the legal expenses and costs of any such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust
concerned and shall be paid directly by the Trustee out of the Interest and
Principal Accounts of such Trust.
(c) The covenants, provisions and agreements herein contained shall in
every case be binding upon any successor to the business of any Depositor. In
the event of an assignment by any Depositor to a successor corporation or
partnership as permitted by the next following sentence, such Depositor and, if
such Depositor is a partnership, its partners shall be relieved of all further
liability under this Indenture. Any Depositor may transfer all or substantially
all of its assets to a corporation or partnership which carries on the business
of such Depositor, if at the time of such transfer such successor duly assumes
all the obligations of such Depositor under this Indenture.
Section 3.13. Notice to Depositor. In the event that the Trustee shall
have been notified at any time of any action to be taken or proposed to be taken
by holders of the Bonds (including but not limited to the making of any demand,
direction, request, giving of any notice, consent or waiver or the voting with
respect to any amendment or supplement to any indenture, resolution, agreement
or other instrument under or pursuant to which the Bonds have been issued), the
Trustee shall promptly notify the Depositor and shall thereupon take such action
or refrain from taking any action as the Depositor shall in writing direct;
provided, however, that if the Depositor shall not within five business days of
the giving of such notice to the Depositor direct the Trustee to take or refrain
from taking any action, the Trustee shall take such action as it, in its sole
discretion, shall deem advisable. Neither the Depositor nor the Trustee shall be
liable to any person for any action or failure to take action with respect to
this Section 3.13.
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Section 3.14. Limited Replacement of Special Bonds. If any contract in
respect of Contract Bonds other than a contract to purchase a New Bond (as
defined below), including those purchased on a when, as and if issued basis,
shall have failed due to any occurrence, act or event beyond the control of the
Depositor or the Trustee (such failed Contract Bonds being herein called the
"Special Bonds"), the Depositor shall notify the Trustee (such notice being
herein called the "Failed Contract Notice") of its inability to deliver the
failed Special Bond to the Trustee after it is notified that the Special Bond
will not be delivered by the seller thereof to the Depositor. Prior to, or
simultaneously with, giving the Trustee the Failed Contract Notice, or within a
maximum of twenty days after giving such Failed Contract Notice (such twenty day
period being herein called the "Purchase Period"), the Depositor shall, if
possible, purchase or enter into a contract, if any, to purchase an obligation
to be held as a Bond hereunder (herein called the "New Bond") as part of the
appropriate Trust in replacement of the failed Special Bond, subject to the
satisfaction of all of the following conditions in the case of each purchase or
contract to purchase:
(a) The New Bonds (i) shall be tax exempt bonds issued by states or
territories of the United States or political subdivisions thereof and, in
the case of a State Trust, shall have the benefit of an exemption from
taxation of interest to an extent equal to or greater than that of the
Bonds they replace, (ii) shall have a fixed maturity date (whether or not
entitled to the benefits of any sinking, redemption, purchase or similar
fund) of at least three years if the related Trust is other than a long-
term Trust or at least ten years if the related Trust is a long-term Trust,
(iii) must be purchased at a price that results in a current return as of
the Initial Date of Deposit at least equal to that of the Special Bonds
they replace, (iv) must be purchased at a price that results in a yield to
maturity of the Initial Date of Deposit at least equal to that of the
Special Bonds they replace, (v) shall be payable as to principal and
interest in United States currency, (vi) shall not be "when, as and if
issued" or restricted securities and (vii) shall not cause Units of the
related Trust to cease to be rated "AAA" by Standard & Poor's or "Aaa" by
Moody's Investors Service, Inc. if such Units were so rated on the Initial
Date of Deposit.
(b) Each New Bond shall be rated at least "BBB-" or better by
Standard & Poor's or "Baa" or better by Moody's Investors Service, Inc. or
comparably rated by any other nationally recognized credit rating service
rating debt obligations which shall be designated by the Depositor and
shall be satisfactory to the Trustee.
(c) The purchase price of the New Bonds (exclusive of accrued
interest) shall not exceed the principal attributable to the Special Bonds.
(d) With respect to the Insured Trusts, each New Bond is either a
Pre-Insured Bond or is acceptable to the Insurer to be included under the
respective Insured Trust's Insurance and will be so included upon
acquisition by such Trust.
(e) The Depositor shall furnish a notice to the Trustee (which may be
part of the Failed Contract Notice) in respect of the New Bond purchased or
to be purchased that shall (i) identify the New Bonds, (ii) state that the
contract to purchase, if any,
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entered into by the Depositor is satisfactory in form and substance, and
(iii) state that the foregoing conditions of clauses (a) through (d) have
been satisfied with respect to the New Bonds.
Notwithstanding anything to the contrary in this Section 3.14, no
substitution of New Bonds will be made without an opinion of counsel that such
substitution will not adversely affect the federal income tax status of the
related Trust, if such New Bonds when added to all previously purchased New
Bonds in the related Trust exceed 15% of the principal amount of Bonds initially
deposited in the related Trust.
Upon satisfaction of the foregoing conditions with respect to any New Bond,
the Depositor shall pay the purchase price for the New Bond from its own
resources or, if the Trustee has credited any moneys and/or letters of credit
attributable to the failed Special Bond to the Principal Account of the related
Trust, the Trustee shall pay the purchase price of the New Bond upon directions
from the Depositor from the moneys and/or letters of credit so credited to such
Principal Account. If the Depositor has paid the purchase price, and, in
addition, the Trustee has credited moneys of the Depositor to the Principal
Account of the related Trust, the Trustee shall forthwith return to the
Depositor the portion of such moneys that is not properly distributable to
Unitholders of such Trust pursuant to Section 3.05.
Whenever a New Bond is acquired by the Depositor pursuant to the provisions
of this Section 3.14, the Trustee shall, within five days thereafter, mail to
all Unitholders of such Trust notices of such acquisition, including an
identification of the failed Special Bonds and the New Bonds acquired. The
purchase price of the New Bonds shall be paid out of the principal attributable
to the failed Special Bonds. The Trustee shall not be liable or responsible in
any way for depreciation or loss incurred by reason of any purchase made
pursuant to any such directions and in the absence of such directions the
Trustee shall have no duty to purchase any New Bonds under this Indenture. The
Depositor shall not be liable for any failure to instruct the Trustee to
purchase any New Bonds or for errors of judgment in respect of this Section
3.14; provided, however, that this provision shall not protect the Depositor
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 3.15. Compensation of Depositor for Supervisory Services. As
compensation for providing supervisory portfolio services under this Indenture,
the Depositor shall receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee as set forth in the
Prospectus. However, in no event shall such compensation when combined with all
compensation received from other unit investment trusts of which the Depositor
also acts as sponsor for providing such supervisory services in any calendar
year exceed the aggregate cost to the Depositor for providing such services.
Such compensation may, from time to time, be adjusted provided that the total
adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent
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of Shelter" or similar index, if such index should no longer be published. The
consent or concurrence of any Unitholder hereunder shall not be required for any
such adjustment or increase. Such compensation shall be charged by the Trustee,
upon receipt of invoice therefor from the Depositor, against the applicable
Interest and Principal Accounts on or before the Distribution Date on which such
period terminates. If the cash balance in the Interest and Principal Accounts
shall be insufficient to provide for amounts payable pursuant to this Section
3.15, the Trustee shall have the power to sell (i) Bonds from the current list
of Bonds designated to be sold pursuant to Section 5.02 hereof, or (ii) if no
such Bonds have been so designated, such Bonds as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section 3.15. Any moneys payable
to the Depositor pursuant to this Section 3.15 shall be secured by a prior lien
on the Fund except that no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 6.04.
Section 3.16. Deferred Sales Charge. If the Prospectus related to a Trust
specifies a deferred sales charge, the Trustee shall, on the dates specified and
as provided in such Prospectus, withdraw from the Interest Account or Principal
Account (as specified in the such Prospectus), an amount per Unit specified in
such Prospectus and credit such amount to a special non-Trust account designated
by the Depositor out of which the deferred sales charge will be distributed to
the Depositor (the "Deferred Sales Charge Account"). If the balance in the
applicable Account is insufficient to make such withdrawal, the Trustee shall,
as directed by the Depositor, advance funds in an amount required to fund the
proposed withdrawal and be entitled to reimbursement of such advance upon the
deposit of additional moneys in the applicable Account, and/or sell Securities
and credit the proceeds thereof to the Deferred Sales Charge Account. Such
direction shall, if the Trustee is directed to sell a Security, identify the
Security to be sold and include instructions as to the execution of such sale.
If a Unitholder redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related Prospectus, on the
Redemption Date, withhold from the Redemption Price payable to such Unitholder
an amount equal to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account. If pursuant to
Section 5.02 hereof, the Depositor shall purchase a Unit tendered for redemption
prior to the payment in full of the deferred sales charge due on the tendered
Unit, the Depositor shall pay to the Unitholder the amount specified under
Section 5.02 less the unpaid portion of the deferred sales charge. All advances
made by the Trustee pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unitholders.
ARTICLE IV
EVALUATION OF BONDS; EVALUATOR
Section 4.01. Evaluation of Bonds. The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor upon request
the value of each issue of Bonds in each Trust (treating separate maturities of
Bonds as separate issues) as of the
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Evaluation Time on days of trading on the New York Stock Exchange on the bid
side of the market on the days on which an evaluation of the Trust is required
by Section 5.01 and, in addition, as of the Evaluation Time on days of trading
on the New York Stock Exchange on the bid side of the market if a secondary
market for the Units is maintained, such additional evaluation being made on any
day desired by the Trustee or deemed necessary by the Depositor. Such
evaluations shall be made (i) on the basis of current bid prices for the Bonds,
(ii) if bids are not available for the Bonds, on the basis of current bid prices
for comparable bonds, (iii) by causing the value of the Bonds to be determined
by others engaged in the practice of evaluation, quoting or appraising
comparable bonds, or (iv) by any combination of the above. For each evaluation,
the Evaluator shall also determine and furnish to the Trustee and the Depositor
the aggregate of (a) the value of all Bonds in each Trust on the basis of such
evaluation and (b) on the basis of the information furnished to the Evaluator by
the Trustee pursuant to Section 3.03, the amount of cash then held in the
Principal Account relating to such Trust which was received by the Trustee after
the Record Date preceding such determination less any amounts held in the
Principal Account relating to such Trust for distribution to Unitholders on a
subsequent Distribution Date when a Record Date occurs four business days or
less after such determination. For the purposes of the foregoing, the Evaluator
may obtain current bid prices for the Bonds in each Trust from investment
dealers or brokers (including the Depositor) that customarily deal in municipal
bonds.
Section 4.02. Information for Unitholders. For the purpose of permitting
Unitholders to satisfy any reporting requirements of applicable Federal or State
tax law, the Evaluator shall make available to the Trustee and the Trustee shall
transmit to any Unitholder upon request any determinations made by it pursuant
to Section 4.01.
Section 4.03. Compensation of Evaluator. As compensation for its services
hereunder, the Evaluator shall receive against a statement therefor submitted to
the Trustee an annual fee, payable in monthly installments, as set forth in the
Prospectus computed on the basis set forth in the Prospectus. Such compensation
may, from time to time, be adjusted provided that the total adjustment upward
does not, at the time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for services as measured by
the United States Department of Labor Consumer Price Index entitled "All
Services Less Rent of Shelter" or similar index, if such index shall no longer
be published. The consent or concurrence of any Unitholder hereunder shall not
be required for any such adjustment or increase. Such compensation shall be
charged by the Trustee, upon receipt of invoice therefor from the Evaluator,
against the Interest and Principal Accounts of the respective Trusts on or
before the Distribution Date on which such period terminates. If the cash
balances in the Interest and Principal Accounts of any Trust shall be
insufficient to provide for amounts payable pursuant to this Section 4.03, the
Trustee shall have the power to sell (i) Bonds of such Trust from the Bonds
designated to be sold pursuant to Section 5.02 hereof, or (ii) if no such Bonds
have been so designated, such Bonds of such Trust as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section 4.03. Any moneys
payable to the Evaluator pursuant to this Section 4.03 shall be secured by a
prior lien on
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such Trust except that no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 6.04.
Section 4.04. Liability of Evaluator. The Trustee, the Depositor (if
other than the Evaluator) and the Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. The determinations made by the Evaluator hereunder shall be made in
good faith upon the basis of the best information available to it. The Evaluator
shall be under no liability to the Trustee, the Depositor (if other than the
Evaluator) or the Unitholders for errors in judgment provided, however, that
this provision shall not protect the Evaluator against any liability to which it
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
Section 4.05. Resignation and Removal of Evaluator; Successor. (a) The
Evaluator may resign and be discharged hereunder, by executing an instrument in
writing resigning as Evaluator and filing the same with the Depositor (if other
than the Evaluator) and the Trustee, not less than 60 days before the date
specified in such instrument when, subject to Section 4.05(e), such resignation
is to take effect. Upon receiving such notice of resignation, the Depositor and
the Trustee shall use their best efforts to appoint a successor evaluator having
qualifications and at a rate of compensation satisfactory to the Depositor (if
other than the Evaluator) and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor (if other than the Evaluator) and
Trustee, in duplicate, one copy of which shall be delivered to the resigning
Evaluator and one copy to the successor evaluator. The Depositor (if other than
the Evaluator) or the Trustee may remove the Evaluator at any time upon 30 days'
written notice and appoint a successor evaluator having qualifications and at a
rate of compensation satisfactory to the Depositor and the Trustee. Such
appointment shall be made by written instrument executed by the Depositor (if
other than the Evaluator) and the Trustee, in duplicate, one copy of which shall
be delivered to the Evaluator so removed and one copy to the successor
evaluator. Notice of such resignation or removal and appointment of a successor
evaluator shall be mailed by the Trustee to each Unitholder then of record.
(b) Any successor evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting such
appointment hereunder, and such successor evaluator without any further act,
deed or conveyance shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
Evaluator herein and shall be bound by all the terms and conditions of this
Indenture.
(c) In case at any time the Evaluator shall resign and no successor
evaluator shall have been appointed and have accepted appointment within 30 days
after notice of resignation has been received by the Depositor (if other than
the Evaluator) and the Trustee, the Evaluator may forthwith apply to a court of
competent jurisdiction for the appointment of a successor evaluator. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor evaluator.
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(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Evaluator hereunder shall be a party, shall be the
successor evaluator under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything herein, or in any agreement relating to such merger or consolidation,
by which the Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Evaluator and appointment of a
successor evaluator pursuant to this Section shall become effective upon
acceptance of appointment by the successor evaluator as provided in subsection
(b) hereof.
ARTICLE V
EVALUATION, REDEMPTION, PURCHASE, TRANSFER,
INTERCHANGE OR REPLACEMENT OF UNITS
Section 5.01. Evaluation. The Trustee shall make an evaluation of each
Trust as of the Evaluation Time on days of trading on the New York Stock
Exchange (i) on the day on which any Unit of such Trust is tendered for
redemption and (ii) on any other day desired by the Trustee or requested by the
Depositor. Such evaluations shall take into account and itemize separately for
each Trust of the Fund (1) the cash on hand in such Trust (other than cash
declared held in trust to cover contracts to purchase bonds) or moneys in the
process of being collected from matured interest coupons or bonds matured or
called for redemption prior to maturity, (2) the value of each issue of the
Bonds in such Trust as last determined by the Evaluator pursuant to Section
4.01, and (3) interest accrued thereon not subject to collection and
distribution. For each such evaluation there shall be deducted from the sum of
the above for each Trust of the Fund (i) amounts representing any applicable
taxes or governmental charges payable out of such Trust and for which no
deductions shall have previously been made for the purpose of addition to the
Reserve Account of such Trust, (ii) amounts representing accrued expenses of
such Trust including but not limited to unpaid fees and expenses of the Trustee,
the Evaluator, the Depositor and bond counsel, in each case as reported by the
Trustee to the Depositor on or prior to the date of evaluation, and (iii) cash
held for distribution to Unitholders of record of such Trust as of a date prior
to the evaluation then being made. The value of the pro rata share of each Unit
of such Trust determined on the basis of any such evaluation shall be referred
to herein as the "Unit Value."
The Trustee shall make an evaluation of the Bonds deposited in each Trust
as of the time said Bonds are deposited under this Indenture. Such evaluation
shall be made on the same basis as set forth in Section 4.01, except that it
shall be based upon the offering prices of the Bonds. The Trustee, in lieu of
making the evaluation required hereby, may use an evaluation prepared by the
Evaluator and/or by any other recognized evaluator including Cantor Fitzgerald &
Co. and in so doing shall not be liable or responsible, under any circumstances
whatsoever, for the accuracy or correctness thereof, or for any error or
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omission therein. The Trustee's determination of the offering price of the Bonds
on the date of deposit determined as herein provided shall be included in the
Schedules attached to the Trust Agreement.
Section 5.02. Redemptions by Trustee; Purchases by Depositor. Any Unit
tendered for redemption by a Unitholder or his duly authorized attorney to the
Trustee at its Unit Investment Trust Division office at 101 Barclay Street, New
York, New York 10286 whether in the form of a Certificate or in uncertificated
form tendered by means of an appropriate request for redemption in a form
approved by the Trustee shall be redeemed by the Trustee on the third Business
Day following the day on which tender for redemption is made (being herein
called the "Redemption Date"). Subject to payment by such Unitholder of any tax
or other governmental charges which may be imposed thereon, such redemption is
to be made by payment on the Redemption Date of cash equivalent to the Unit
Value, determined by the Trustee as of the close of trading on the New York
Stock Exchange, on the date of tender; provided that accrued interest is paid to
the Redemption Date, multiplied by the number of Units tendered (herein called
the "Redemption Price"). Units received for redemption by the Trustee on any day
after the Evaluation Time on days of trading on the New York Stock Exchange will
be held by the Trustee until the next day on which the New York Stock Exchange
is open for trading and will be deemed to have been tendered on such day for
redemption at the Redemption Price computed on that day. Units held in
certificated form will be deemed to be "tendered" to the Trustee when the
Trustee is in physical receipt of the Certificate or Certificates representing
such Units in the form and with such documentation as is required to accomplish
transfers of Units pursuant to Section 5.03 hereof.
The Trustee may in its discretion, and shall when so directed by the
Depositor, suspend the right of redemption for Units of a Trust or postpone the
date of payment of the Redemption Price therefor for more than three Business
Days following the day on which tender for redemption is made (1) for any period
during which the New York Stock Exchange is closed other than customary weekend
and holiday closings or during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by such Trust of the Bonds is not reasonably practicable or it is
not reasonably practicable fairly to determine in accordance herewith the value
of the Bonds; or (3) for such other period as the Securities and Exchange
Commission may by order permit, and shall not be liable to any person or in any
way for any loss or damage which may result from any such suspension or
postponement.
Not later than the close of business on the day of tender of a Unit or
Units for redemption by a Unitholder other than the Depositor, the Trustee shall
notify the Depositor of such tender. The Depositor shall have the right to
purchase such Unit or Units by notifying the Trustee of its election to make
such purchase as soon as practicable thereafter but in no event subsequent to
the close of business on the second business day after the day on which such
Unit or Units were tendered for redemption. Such purchase shall be made by
payment for such Unit or Units by the Depositor to the Unitholder not later than
the close of business on the Redemption Date of an amount not less than the
Redemption Price which would otherwise be payable by the Trustee to such
Unitholder.
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Any Unit or Units so purchased by the Depositor may at the option of the
Depositor be tendered to the Trustee for redemption at the Unit Investment Trust
Division office of the Trustee in the manner provided in the first paragraph of
this Section 5.02.
If the Depositor does not elect to purchase any Unit or Units of a Trust
tendered to the Trustee for redemption, or if a Unit or Units are being tendered
by the Depositor for redemption, that portion of the Redemption Price which
represents interest shall be withdrawn from the Interest Account of such Trust
to the extent available. The balance paid on any redemption, including accrued
interest, if any, shall be withdrawn from the Principal Account of such Trust to
the extent that funds are available for such purpose. If such available balance
shall be insufficient, the Trustee shall sell such of the Bonds held in such
Trust, currently designated for such purposes by the Evaluator, as the Trustee
in its sole discretion shall deem necessary. In the event that funds are
withdrawn from such Principal Account for payment of accrued interest, such
Principal Account shall be reimbursed for such funds so withdrawn when
sufficient funds are next available in such Interest Account.
The Evaluator shall designate the Bonds held in each Trust to be sold for
the purpose of redemption of Units of each Trust tendered for redemption and not
purchased by the Depositor, and for payment of expenses hereunder, provided that
if the Evaluator shall for any reason fail to designate a Bond or Bonds for such
purpose the Trustee, in its sole discretion, may designate Bonds for such
purposes. The net proceeds of any sales of Bonds representing principal shall
be credited to the Principal Account of such Trust and the proceeds of such
sales representing accrued interest shall be credited to the Interest Account of
such Trust. With respect to the Insured Trusts, the Evaluator shall also
designate on such list of Bonds designated to be sold, the Bonds upon the sale
of which the Trustee shall obtain permanent insurance (the "Permanent
Insurance") from an Insurer, provided that if the Evaluator shall for any reason
fail to make such designation, the Trustee in its sole discretion shall make
such designation if it deems such designation to be in the best interests of
Unitholders. The Trustee is hereby authorized to pay and shall pay out of the
proceeds of the sale of the Bonds which are covered by Permanent Insurance any
premium for such Permanent Insurance and the net proceeds after such deduction
shall be credited to the Principal and Interest Account as described above.
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale of Bonds made pursuant to this Section
5.02. Any Certificates evidencing Units redeemed pursuant to this Section 5.02
shall be canceled by the Trustee and the Unit or Units evidenced by such
Certificates shall be terminated by such redemptions. In the event that a
Certificate shall be tendered representing a number of Units greater than those
requested to be redeemed by the Unitholder, the Trustee shall issue to such
Unitholder, unless such Unitholder requests such Units be uncertificated, upon
payment of any tax or charges of the character referred to in the second
paragraph of Section 5.03, a new Certificate evidencing the Units representing
the balance of the Certificate so tendered and not redeemed.
Section 5.03. Transfer or Interchange ofUnits. (a) Certificates
representing Units held by a Unitholder will not be issued except upon written
request by a Unitholder, or his
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or her registered broker/dealer, to the Trustee at its Unit Investment Trust
Division office. Certificates that have been issued may be returned to the
Trustee at any time and canceled, without affecting the Unitholder's interest in
the Trust, when accompanied by proper written instructions from the Unitholder.
(b) A Unitholder may transfer any of his Units by making a written request
to the Trustee at its principal trust office and, in the case of Units evidenced
by a Certificate, by presenting and surrendering such Certificate at such office
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign such written
request, and such Certificate of transfer instrument, exactly as their name
appears on the records of the Trustee and on any Certificate representing the
Units to be transferred. Such signature must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for, STAMP, as
may be accepted by the Trustee. Such transfer shall thereupon be made on the
records of the Trustee and, if appropriate, a new registered Certificate or
Certificates for the same number of Units of the same Trust shall be issued in
exchange and substitution therefor. Certificates issued pursuant to this
Agreement are interchangeable for one or more other Certificates of the same
Trust in an equal aggregate number of Units and all Certificates issued shall be
issued in denominations of one Unit or any whole multiple thereof as may be
requested by the Unitholder. The Trustee may deem and treat the person in whose
name any Unit or Certificate shall be registered upon the books of the Trustee
as the owner of such Unit or Certificate for all purposes hereunder and the
Trustee shall not be affected by any notice to the contrary. The transfer books
maintained by the Trustee for each Trust for the purpose of this Section 5.03
shall be closed for an individual Trust as such Trust is terminated pursuant to
Article VIII hereof.
A sum sufficient to pay any tax or other charge that may be imposed in
connection with any such transfer or interchange shall be paid by the Unitholder
to the Trustee. The Trustee may require a Unitholder to pay a reasonable fee
which the Trustee in its sole discretion shall determine for each new
Certificate issued on any such transfer or interchange.
All Certificates canceled pursuant to this Indenture shall be disposed of
by the Trustee without liability on its part.
Section 5.04. Certificates Mutilated, Destroyed, Stolen or Lost. In case
any Certificate shall become mutilated or be destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and substitution
therefor upon the holder's furnishing the Trustee with proper identification and
satisfactory indemnity, complying with such other reasonable regulations and
conditions as the Trustee may prescribe and paying such expenses as the Trustee
may incur. Any mutilated Certificate shall be duly surrendered and canceled
before any new Certificate shall be issued in exchange and substitution
therefor. Upon the issuance of any new Certificate a sum sufficient to pay any
tax or other governmental charge and the fees and expenses of the Trustee may be
imposed. Any such new Certificate issued pursuant to this Section shall
constitute complete and indefeasible
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evidence of ownership in the respective Trust of the Fund, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
In the event the related Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in exchange
and substitution for any Certificate which shall have become mutilated or shall
have been destroyed, stolen or lost, make the distributions in respect of such
mutilated, destroyed, stolen or lost Certificate (without surrender thereof
except in the case of a mutilated Certificate) as provided in Section 8.02
hereof if the Trustee is furnished with such security or indemnity as it may
require to save it harmless, and in the case of destruction, loss or theft of a
Certificate, evidence to the satisfaction of the Trustee of the destruction,
loss or theft of such Certificate and of the ownership thereof.
ARTICLE VI
TRUSTEE
Section 6.01. General Definition of Trustees Liabilities, Rights and
Duties. The Trustee shall in its discretion undertake such action as it may
deem necessary at any and all times to protect each Trust and the rights and
interests of the Unitholders thereof pursuant to the terms of this Indenture,
provided, however, that the expenses and costs of such actions, undertakings or
proceedings shall be reimbursable to the Trustee from the Interest and Principal
Accounts of such Trust and the payment of such costs and expenses shall be
secured by a prior lien on such Trust.
In addition to and notwithstanding the other duties, rights, privileges and
liabilities of the Trustee as otherwise set forth, the liabilities of the
Trustee are further defined as follows:
(a) all moneys deposited with or received by the Trustee hereunder
related to a Trust shall be held by it without interest in trust as part of
such Trust or the Reserve Account of such Trust until required to be
disbursed in accordance with the provisions of this Indenture and such
moneys will be segregated by separate recordation on the trust ledger of
the Trustee so long as such practice preserves a valid preference under
applicable law, or if such preference is not so preserved, the Trustee
shall handle such moneys in such other manner as shall constitute the
segregation and holding thereof in trust within the meaning of the
Investment Company Act of 1940;
(b) the Trustee shall be under no liability for any action taken in
good faith on any appraisal, paper, order, list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement, assignment,
resolution, draft or other document whether or not of the same kind prima
facie properly executed, or for the disposition of moneys, Bonds or
certificates pursuant to this Indenture, or in respect of any evaluation
which it is required to make or is required or permitted to have made by
others under this Indenture or otherwise, except by reason of its own
negligence, lack of good faith or willful misconduct, provided that the
Trustee shall
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not in any event be liable or responsible for any evaluation made by the
Evaluator. The Trustee may construe any of the provisions of this
Indenture, insofar as the same may appear to be ambiguous or inconsistent
with any other provisions hereof, and any construction of any such
provisions hereof by the Trustee in good faith shall be binding upon the
parties hereto;
(c) the Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Indenture or for the
due execution hereof by the Depositor, or for the form, character,
genuineness, sufficiency, value or validity of any Bonds (except that the
Trustee shall be responsible for the exercise of due care in determining
the genuineness of Bonds delivered to it pursuant to contracts for the
purchase of such Bonds) or for or in respect of the validity or sufficiency
of the Certificates (except for the due execution thereof by the Trustee)
or of the due execution thereof by the Depositor, or for the payment by the
Insurer, if any, of amounts due under, or the performance by the Insurer of
its obligations in accordance with, the Insurance, and the Trustee shall in
no event assume or incur any liability, duty, or obligation to any
Unitholder or the Depositor other than as expressly provided for herein.
The Trustee shall not be responsible for or in respect of the validity of
any signature by or on behalf of the Depositor;
(d) the Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may involve it in
expense or liability, unless as often as required by the Trustee, it shall
be furnished with reasonable security and indemnity against such expense or
liability, and any pecuniary cost of the Trustee from such actions shall be
deductible from and a charge against the Interest and Principal Accounts of
the affected Trust or Trusts;
(e) the Trustee may employ agents, attorneys, accountants and
auditors and shall not be answerable for the default or misconduct of any
such agents, attorneys, accountants or auditors if such agents, attorneys,
accountants or auditors shall have been selected with reasonable care. The
Trustee shall be fully protected in respect of any action under this
Indenture taken, or suffered, in good faith by the Trustee, in accordance
with the opinion of its counsel. The fees and expenses charged by such
agents, attorneys, accountants or auditors shall constitute an expense of
the Trustee reimbursable from the Interest and Principal Accounts of the
affected Trust or Trusts as set forth in Section 6.04 hereof;
(f) if at any time the Depositor shall fail to undertake or perform
any of the duties which by the terms of this Indenture are required by it
to be undertaken or performed, or such Depositor shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of such
Depositor or of its property shall be appointed, or any public officer
shall take charge or control of such Depositor or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then in any such case, the Trustee may: (1) appoint a successor depositor
who shall act hereunder in all respects in place of such Depositor which
successor shall be satisfactory to the Trustee, and which may be
compensated at rates deemed by the
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Trustee to be reasonable under the circumstances, by deduction ratably from
the Interest Accounts of the affected Trusts or, to the extent funds are
not available in such Account, from the Principal Accounts of the affected
Trusts but no such deduction shall be made exceeding such reasonable amount
as the Securities and Exchange Commission may prescribe in accordance with
Section 26(a)(2)(C) of the Investment Company Act of 1940, or (2) terminate
and liquidate the affected Trust in the manner provided in Section 8.02;
(g) if (i) the value of any Trust as shown by any evaluation by the
Trustee pursuant to Section 5.01 hereof shall be less than 20% of the
aggregate principal amount of Bonds initially deposited in such Trust or
(ii) by reason of the aggregate redemption of Units of any Trust by the
Depositor and/or one or more underwriters not theretofore sold constituting
more than 60% of the number of Units of such Trust initially authorized and
the net worth of any Trust is reduced to less than 40% of the aggregate
principal amount of Bonds initially deposited in such Trust, the Trustee
may in its discretion, and shall when so directed by the Depositor,
terminate this Indenture and the trust created hereby insofar as they
relate to such Trust and liquidate such Trust, all in the manner provided
in Section 8.02;
(h) in no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Bonds or upon the
interest thereon or upon it as Trustee hereunder or upon or in respect of
any Trust which it may be required to pay under any present or future law
of the United States of America or of any other taxing authority having
jurisdiction in the premises. For all such taxes and charges and for any
expenses, including counsel fees, which the Trustee may sustain or incur
with respect to such taxes or charges, the Trustee shall be reimbursed and
indemnified out of the Interest and Principal Accounts of the affected
Trust, and the payment of such amounts so paid by the Trustee shall be
secured by a prior lien on such Trust;
(i) except as provided in Sections 3.01 and 3.05, no payment to a
Depositor or to any principal underwriter (as defined in the Investment
Company Act of 1940) for any Trust or to any affiliated person (as so
defined) or agent of a Depositor or such underwriter shall be allowed as an
expense except for payment of such reasonable amounts as the Securities and
Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services of a character normally
performed by the Trustee; and
(j) the Trustee except by reason of its own negligence or willful
misconduct shall not be liable for any action taken or suffered to be taken
by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
Section 6.02. Books, Records and Reports. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under this
Indenture at its corporate trust office including a record of the name and
address of, and the Certificates issued by
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each Trust and held by, every Unitholder, and such books and records of each
Trust shall be open to inspection by any Unitholder of such Trust at all
reasonable times during the usual business hours.
Unless the Depositor determines that such an audit is not required, the
account of each Trust shall be audited not less than annually by independent
public accountants designated from time to time by the Depositor and reports of
such accountants shall be furnished by the Trustee, upon request, to
Unitholders. The Trustee, however, in connection with any such audits shall not
be obligated to use Trust assets to pay for such audits in excess of the amounts
indicated in the Prospectus relating to such Trust.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of counsel to the Depositor, the Trustee shall pay, or
reimburse to the Depositor or others, the costs of the preparation of documents
and information with respect to a Trust required by law or regulation in
connection with the maintenance of a secondary market in units of such Trust.
Such costs may include but are not limited to accounting and legal fees, blue
sky registration and filing fees, printing expenses and other reasonable
expenses related to documents required under Federal and state securities laws.
Such costs shall be a Trust expense and the Trustee shall not be obligated to
advance any of its own funds to make such payments.
The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute or rule or
regulation thereunder.
Section 6.03. Indenture and List of Bonds on File. The Trustee shall keep
a certified copy or duplicate original of this Indenture on file at its
corporate trust office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Bonds in each Trust.
Section 6.04. Compensation of Trustee. For services performed under this
Indenture the Trustee shall be an amount per annum as set forth in the
Prospectus computed on the basis set forth in such Prospectus. The Trustee may
from time to time adjust its compensation provided that total adjustment upward
does not, at the time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for services as measured by
the United States Department of Labor Consumer Price Index entitled "All
Services Less Rent of Shelter" or similar index, if such index should no longer
be published. In addition, the Trustee's fee may be periodically adjusted in
response to fluctuations in short-term interest rates (reflecting the cost to
the Trustee of advancing funds to the Trust to meet scheduled distributions).
The consent or concurrence of any Unitholder hereunder shall not be required for
any such adjustment or increase. Such compensation shall be charged by the
Trustee against the Interest and Principal Accounts of each Trust on or before
the Distribution Date on which such period terminates; provided, however, that
such compensation shall be deemed to provide only for the usual, normal and
proper functions undertaken as Trustee pursuant to this Indenture. The Trustee
shall charge the Interest and Principal Accounts of each Trust for any and all
expenses and disbursements
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incurred hereunder, including legal and auditing expenses, and for any
extraordinary services performed by the Trustee hereunder relating to such
Trust.
The Trustee shall be indemnified ratably by the affected Trusts and held
harmless against any loss or liability accruing to it without gross negligence,
bad faith or willful misconduct on its part, arising out of or in connection
with the acceptance or administration of the trust, including the costs and
expenses (including counsel fees) of defending itself against any claim of
liability in the premises. If the cash balances in the Interest and Principal
Accounts of the affected Trust shall be insufficient to provide for amounts
payable pursuant to this Section 6.04, the Trustee shall have the power to sell
(i) Bonds of the affected Trust from the Bonds designated to be sold pursuant to
Section 5.02 hereof, or (ii) if no such Bonds have been so designated, such
Bonds of the affected Trust as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 6.04.
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale of Bonds made pursuant to this Section
6.04. Any moneys payable to the Trustee pursuant to this Section shall be
secured by a prior lien on the affected Trust.
Section 6.05. Removal and Resignation of Trustee; Successor. The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor trustee:
(a) the Trustee or any trustee or trustees hereafter appointed may
resign and be discharged of the Trusts created by this Indenture, by
executing an instrument in writing resigning as Trustee of such Trusts and
filing same with the Depositor and mailing a copy of a notice of
resignation to all Unitholders then of record, not less than sixty days
before the date specified in such instrument when, subject to Section
6.05(e), such resignation is to take effect. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor trustee as
hereinafter provided, by written instrument, in duplicate, one copy of
which shall be delivered to the resigning Trustee and one copy to the
successor trustee. The Depositor may at any time remove the Trustee, with
or without cause, and appoint a successor trustee by written instrument, in
duplicate, one copy of which shall be delivered to the Trustee so removed
and one copy to the successor trustee. Notice of such resignation or
removal of a trustee and appointment of a successor trustee shall be mailed
by the successor trustee, promptly after its acceptance of such
appointment, to each Unitholder then of record;
(b) any successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositor and to the retiring Trustee an
instrument accepting such appointment hereunder, and such successor trustee
without any further act, deed or conveyance shall become vested with all
the rights, powers, duties and obligations of its predecessor hereunder
with like effect as if originally named Trustee herein and shall be bound
by all the terms and conditions of this Indenture. Upon the request of
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such successor trustee, the Depositor and the retiring Trustee shall, upon
payment of any amounts due the retiring Trustee, or provision therefor to
the satisfaction of such retiring Trustee, execute and deliver an
instrument acknowledged by it transferring to such successor trustee all
the rights and powers of the retiring Trustee; and the retiring Trustee
shall transfer, deliver and pay over to the successor trustee all Bonds and
moneys at the time held by it hereunder, together with all necessary
instruments of transfer and assignment or other documents properly executed
necessary to effect such transfer and such of the records or copies thereof
maintained by the retiring Trustee in the administration hereof as may be
requested by the successor trustee, and shall thereupon be discharged from
all duties and responsibilities under this Indenture;
(c) in case at any time the Trustee shall resign and no successor
trustee shall have been appointed and have accepted appointment within
thirty days after notice of resignation has been received by the Depositor,
the retiring Trustee may forthwith apply to a court of competent
jurisdiction for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee;
(d) any entity into which any trustee hereunder may be merged or with
which it may be consolidated, or any entity resulting from any merger or
consolidation to which any trustee hereunder shall be a party, shall be the
successor trustee under this Indenture without the execution or filing of
any paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which any such trustee may seek to retain certain powers,
rights and privileges theretofore obtaining for any period of time
following such merger or consolidation to the contrary notwithstanding; and
(e) any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in
subsection (b) hereof.
Section 6.06. Qualifications of Trustee. The Trustee shall be a
corporation organized and doing business under the laws of the United States or
any state thereof, which is authorized under such laws to exercise corporate
trust powers and having at all times an aggregate capital, surplus, and
undivided profits of not less than $5,000,000.
ARTICLE VII
RIGHTS OF UNITHOLDERS
Section 7.01. Beneficiaries of Trust. By the purchase and acceptance or
other lawful delivery and acceptance of any Unit of a Trust, whether
certificated or not, the Unitholder shall be deemed to be a beneficiary of such
Trust created by this Indenture and vested with all right, title and interest in
such Trust to the extent of the Unit or Units set forth and
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evidenced by such Certificate or held in uncertificated form, subject to the
terms and conditions of this Indenture and of any such Certificate.
Section 7.02. Rights, Terms and Conditions. In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture the Unitholders shall have the following rights and powers and shall
be subject to the following terms and conditions:
(a) a Unitholder may at any time prior to the Trustee's close of
business as of the date on which the Trust is terminated tender his Units
or his Certificate(s) if held in certificated form (including any temporary
Certificate or other evidence of ownership of Units of such Trust, issued
by the Trustee or the Depositor) to the Trustee for redemption in
accordance with Section 5.02;
(b) the death or incapacity of any Unitholder shall not operate to
terminate this Indenture or any Trust nor entitle his legal representatives
or heirs to claim an accounting or to take any action or proceeding in any
court of competent jurisdiction for a partition or winding up of the Fund
or the related Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them. Each Unitholder expressly
waives any right he may have under any rule of law, or the provisions of
any statute, or otherwise, to require the Trustee at any time to account,
in any manner other than as expressly provided in this Indenture, in
respect of the Bonds or moneys from time to time received, held and applied
by the Trustee hereunder; and
(c) no Unitholder shall have any right to vote or in any manner
otherwise control the operation and management of the Fund, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates which may have been issued, be
construed so as to constitute the Unitholders from time to time as partners
or members of an association; nor shall any Unitholder ever be under any
liability to any third persons by reason of any action taken by the parties
to this Indenture, or any other cause whatsoever.
ARTICLE VIII
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
Section 8.01. Amendments. (a) This Indenture may be amended from time to
time by the parties hereto or their respective successors, without the consent
of any of the Unitholders, (i) to cure any ambiguity or to correct or supplement
any provision contained hereon which may be defective or inconsistent with any
other provision contained herein; or (ii) to make such other provision in regard
to matters or questions arising hereunder as shall not adversely affect the
interests of the Unitholders; provided, however, that the parties hereto may not
amend this Indenture so as to (1) increase the number of Units issuable
hereunder above the maximum number set forth in Section 2.03 of this Indenture
except as provided in Section 5.04 hereof or such lesser amount as may be
outstanding at any time
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during the term of this Indenture or (2) permit the deposit or acquisition
hereunder of interest-bearing obligations or other securities either in addition
to or in substitution for any of the Bonds.
(b) Except for the amendments, changes or modifications as provided in
Section 8.01(a) hereof, neither the parties hereto nor their respective
successors shall consent to any other amendment, change or modification of this
Indenture without the giving of notice and the obtaining of the approval or
consent of Unitholders representing at least 66-2/3% of the Units then
outstanding of the affected Trust. Nothing contained in this Section 8.01(b)
shall permit, or be construed as permitting, a reduction of the aggregate
percentage of Units the holders of which are required to consent to any
amendment, change or modification of this Indenture without the consent of the
Unitholders of all of the Units then outstanding of the affected Trust and in no
event may any amendment be made which would (1) alter the rights to the
Unitholders as against each other, (2) provide the Trustee with the power to
engage in business or investment activities other than as specifically provided
in this Indenture or (3) adversely affect the characterization of the Trust as a
grantor trust for federal income tax purposes.
(c) Promptly after the execution of any such amendment the Trustee shall
furnish written notification to all then outstanding Unitholders of the
substance of such amendment.
Section 8.02. Termination. The Trust Agreement and each Trust created
thereby shall terminate upon the maturity, redemption, sale or other disposition
as the case may be of the last Bond held in such Trust unless sooner terminated
as hereinbefore specified and may be terminated at any time by the written
consent of Unitholders representing 66-2/3% of the then outstanding Units of
such Trust; provided, that in no event shall any Trust continue beyond the end
of the calendar year preceding the fiftieth anniversary of the execution of this
Indenture (the "Mandatory Termination Date"); and provided further that in
connection with any such liquidation it shall not be necessary for the Trustee
to dispose of any Bond or Bonds of such Trusts if retention of such Bond or
Bonds, until due, shall be deemed to be in the best interests of Unitholders,
including, but not limited to, situations in which a Bond or Bonds insured by
the Insurance, if any, are in default, situations in which a Bond or Bonds
insured by the Insurance reflect a deteriorated market price resulting from a
fear of default and situations in which a Bond or Bonds mature after the
Mandatory Termination Date. The Depositor and Trustee will observe the
procedures described in Section 5.02 with respect to the purchase of Permanent
Insurance in connection with the liquidation of Bonds of an Insured Trust.
Written notice of any termination, specifying the time or times at which
any Unitholders holding Certificates may surrender their Certificates for
cancellation shall be given by the Trustee to each such Unitholder at his
address appearing on the registration books of the Trustee. Within a reasonable
period of time after such termination of a Trust the Trustee shall fully
liquidate the Bonds of such Trust then held, if any, and shall:
(a) deduct from the Interest Account of such Trust or, to the extent
that funds are not available in such Account, from the Principal Account of
such Trust and
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pay to itself individually an amount equal to the sum of (1) its accrued
compensation for its ordinary recurring services in connection with such
Trust, (2) any compensation due it for its extraordinary services in
connection with such Trust and (3) any costs, expenses or indemnities in
connection with such Trust as provided herein;
(b) deduct from the Interest Account of such Trust or, to the extent
that funds are not available in such Account, from the Principal Account of
such Trust and pay accrued and unpaid fees of the Evaluator, Depositor and
bond counsel in connection with such Trust, if any;
(c) deduct from the Interest Account of such Trust or the Principal
Account of such Trust any amounts which may be required to be deposited in
the Reserve Account of such Trust to provide for payment of any applicable
taxes or other governmental charges and any other amounts which may be
required to meet expenses incurred under this Indenture in connection with
such Trust;
(d) distribute to each Unitholder of such Trust such Unitholder's
pro rata share of the balance of the Interest Account of such Trust;
(e) distribute to each Unitholder of such Trust such Unitholder's
pro rata share of the balance of the Principal Account of such Trust; and
(f) together with such distribution to each Unitholder as provided
for in (d) and (e), furnish to each such Unitholder a final distribution
statement as of the date of the computation of the amount distributable to
Unitholders, setting forth the data and information in substantially the
form and manner provided for in Section 3.06 hereof.
The amounts to be so distributed to each Unitholder shall be that pro rata
share of the balance of the total Interest and Principal Accounts of such Trust
as shall be represented by the Units therein held of record by such Unitholder.
The Trustee shall be under no liability with respect to moneys held by it
in the Interest, Reserve and Principal Accounts of a Trust upon termination
except to hold the same in trust without interest until disposed of in
accordance with the terms of this Indenture.
In the event that all of the Unitholders holding Certificates of a Trust
shall not surrender their Certificates for cancellation within six months after
the time specified in the above-mentioned written notice, the Trustee shall give
a second written notice to the remaining Unitholders to surrender their
Certificates for cancellation and receive the liquidation distribution with
respect thereto. If within one year after the second notice all the Certificates
shall not have been surrendered for cancellation, the Trustee may take steps, or
may appoint an agent to take appropriate steps, to contact the remaining
Unitholders
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concerning surrender of their Certificates and the cost thereof shall be paid
out of the moneys and other assets which remain in the related Trust.
Section 8.03. Construction. This Indenture is executed and delivered in
the State of New York, and all laws or rules of construction of such State shall
govern the rights of the parties hereto and the Unitholders and the
interpretation of the provisions hereof.
Section 8.04. Registration of Units. The Depositor agrees and undertakes
on its own part to register the Units with the Securities and Exchange
Commission or other applicable governmental agency, federal or state, pursuant
to applicable federal or state statutes, if such registration shall be required,
and to do all things that may be necessary or required to comply with this
provision during the term of the Fund created hereunder, and the Trustee shall
incur no liability or be under any obligation for expenses in connection
therewith, except as provided in Sections 3.01 and 3.05.
Section 8.05. Written Notice. Any notice, demand, direction or
instruction to be given to the Depositor or the Evaluator hereunder shall be in
writing and shall be duly given if mailed or delivered to the Depositor at 77
West Wacker Drive, Chicago, Illinois 60601-1994, or at such other address as
shall be specified by the Depositor or the Evaluator to the other parties hereto
in writing.
Any notice, demand, direction or instruction to be given to the Trustee
hereunder shall be in writing and shall be duly given if mailed or delivered to
the corporate trust office of the Trustee at 101 Barclay Street, New York, New
York 10286, Attention: Unit Investment Trust Division, or at such other address
as shall be specified by the Trustee to the other parties hereto in writing.
Any notice to be given to the Unitholders shall be duly given if mailed or
delivered to each Unitholder at the address of such holder appearing on the
registration books of the Trustee.
Section 8.06. Severability. If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to any
express provision of law or contrary to policy of express law, though not
expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Indenture and shall in no way affect the validity or
enforceability of the other provisions of this Indenture or of any Certificates
or the rights of the Unitholders.
Section 8.07. Dissolution of Depositor Not to Terminate. The dissolution
of the Depositor from or for any cause whatsoever shall not operate to terminate
this Indenture or the Fund insofar as the duties and obligations of the Trustee
are concerned.
-36-
<PAGE>
In Witness Whereof, EVEREN Securities, Inc. and The Bank of New York have
caused this Indenture to be executed by one of their Presidents or Vice
Presidents; all as of the day, month and year first above written.
EVEREN Securities, Inc., Depositor and
Evaluator
By_____________________________________
President
The Bank of New York, Trustee
By_____________________________________
Vice President
-37-
<PAGE>
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
January 10, 1996
EVEREN Unit Investment Trusts
77 West Wacker Drive
Chicago, Illinois 60601
Re: EVEREN Unit Investment Trusts Series 41
---------------------------------------
Gentlemen:
We have served as counsel for EVEREN Unit Investment Trusts, as Sponsor and
Depositor of EVEREN Unit Investment Trusts Series 41 (the "Fund"), in connection
with the preparation, execution and delivery of Trust Agreements dated the date
of this opinion between EVEREN Unit Investment Trusts, as Depositor, and The
Bank of New York, as Trustee, pursuant to which the Depositor has delivered to
and deposited the Bonds listed in the Schedules to each Trust Agreement with the
Trustee and pursuant to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing all the Units of fractional
undivided interest in, and ownership of, the Fund, created under said Trust
Agreements.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreements and the
execution and issuance of certificates evidencing the Units of the Fund
have been duly authorized; and
2. The certificates evidencing the Units of the Fund, when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Trust Agreements, will constitute valid and binding
obligations of the Fund and the Depositor in accordance with the terms
thereof.
<PAGE>
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-00065) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE>
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
January 10, 1996
EVEREN Unit Investment Trusts,
a service of EVEREN Securities, Inc.
77 West Wacker Drive, 29th Floor
Chicago, Illinois 60601
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Everen Unit Investment Trusts Series 41
(Insured National Series 18, Insured California Series 22
and Insured Michigan Series 13)
Gentlemen:
We have acted as counsel for Everen Unit Investment Trusts, Depositor of
Everen Unit Investment Trusts Series 41 (Insured National Series 18, Insured
California Series 22 and Insured Michigan Series 13) (collectively, the "Fund"
and each a "Trust Fund"), in connection with the issuance of Units of fractional
undivided interest in the Trust Fund of said Fund under the Trust Agreement
dated January 10, 1996 (the "Indenture") between EVEREN Unit Investment Trusts,
as Depositor and Evaluator and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust Fund is not an association taxable as a corporation
but will be governed by the provisions of subchapter J (relating to trusts)
of chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered as owning a pro rata share of
each asset of the respective Trust Fund in the proportion that the number
of Units of such Trust Fund held by him bears to the total number of Units
outstanding of
<PAGE>
-2-
such Trust Fund. Under subpart E, subchapter J of chapter 1 of the Code,
income of each Trust Fund will be treated as income of each Unitholder of
the respective Trust Fund in the proportion described, and an item of Trust
Fund income will have the same character in the hands of a Unitholder as it
would have in the hands of the Trustee. Accordingly, to the extent that the
income of a Trust Fund consists of interest and original issue discount
excludable from gross income under Section 103 of the Code, such income
will be excludable from Federal gross income of the Unitholders, except in
the case of a Unitholder who is a substantial user (or a person related to
such user) of a facility financed through issuance of any industrial
development bonds or certain private activity bonds held by the respective
Trust Fund. In the case of such Unitholder (and no other) interest received
with respect to his Units attributable to such industrial development bonds
or such private activity bonds is includable in his gross income. In the
case of certain corporations, interest on the Bonds is included in
computing the alternative minimum tax pursuant to Section 56(c) of the
Code, the environmental tax (the "Superfund Tax") imposed by Section 59A of
the Code, and the branch profits tax imposed by Section 884 of the Code
with respect to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units. Such gain or loss is measured by comparing
the proceeds of such redemption or sale with the adjusted basis of the
Units represented by his Unit. Before adjustment, such basis would normally
be cost if the Unitholder had acquired his Units by purchase, plus his
aliquot share of advances by the Trustee to a Trust Fund to pay interest on
Bonds delivered after the Unitholder's settlement date to the extent that
such interest accrued on the Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the respective
Trust Fund, but only to the extent that such advances are to be repaid to
the Trustee out of interest received by such Trust Fund with respect to
such Bonds. In addition, such basis will be increased by the Unitholder's
aliquot share of the accrued original issue discount (and market discount,
if the Unitholder elects to include market discount in income as it
accrues) with respect to each Bond held by a Trust Fund with respect to
which there was an original issue discount at the time the Bond was issued
(or which was purchased with market discount) and reduced by the annual
amortization of bond premium, if any, on Bonds held by the Trust Fund.
(iv) If the Trustee disposes of a Trust Fund asset (whether by sale,
payment on maturity, redemption or otherwise) gain or loss is recognized to
the Unitholder and the amount thereof is measured by comparing the
Unitholder's aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of. Such basis
is ascertained by apportioning the tax basis for his Units among each of
the Trust Fund assets (as of the date on which his Units were acquired)
ratably according to their values
<PAGE>
-3-
as of the valuation date nearest the date on which he purchased such Units.
A Unitholder's basis in his Units and of his fractional interest in each
Trust Fund asset must be reduced by the amount of his aliquot share of
interest received by the Trust Fund, if any, on bonds delivered after the
Unitholder's settlement date to the extent that such interest accrued on
the Bonds during the period from the Unitholder's settlement date to the
date such Bonds are delivered to the Trust Fund, must be reduced by the
annual amortization of bond premium, if any, on Bonds held by the Trust
Fund and must be increased by the Unitholder's share of the accrued
original issue discount (and market discount if the Unitholder elects to
include market discount in income as it accures) with respect to each Bond
which, at the time the Bond was issued, had original issue discount (or
which was purchased with market discount).
(v) In the case of any Bond held by the Trust Fund where the "stated
redemption price at maturity" exceeds the "issue price", such excess shall
be original issue discount. With respect to each Unitholder, upon the
purchase of his Units subsequent to the original issuance of Bonds held by
the Trust Fund, Section 1272(a)(7) of the Code provides for a reduction in
the accrued "daily portion" of such original issue discount upon the
purchase of a Bond subsequent to the Bond's original issue, under certain
circumstances. In the case of any Bond held by the Trust Fund the interest
on which is excludable from gross income under Section 103 of the Code, any
original issue discount which accrues with respect thereto will be treated
as interest which is excludable from gross income under Section 103 of the
Code.
(vi) Certain bonds in the portfolios of certain of the Trust Fund
have been insured by the issuers thereof against default in the prompt
payment of principal and interest. Insurance has been obtained for such
bonds, or, in the case of a commitment, the bonds will be ultimately
insured under the terms of such an insurance policy, which are designated
as issuer insured bonds on the portfolio pages of the respective Trust Fund
in the prospectus for a Trust Fund, by the issuer of such bonds. Insurance
obtained by the issuer is effective so long as such bonds remain
outstanding. For each of these bonds, we have been advised that the
aggregate principal amount of such bonds listed on the portfolio page for
the respective Trust Fund was acquired by the applicable Trust Fund and are
part of the series of such bonds listed on the portfolio page for the
respective Trust Fund in the aggregate principal amount listed on the
portfolio page for the respective Trust Fund. Based upon the assumption
that the bonds acquired by the applicable Trust Fund are part of the series
covered by an insurance policy or, in the case of a commitment, will be
ultimately insured under the terms of such an insurance policy, it is our
opinion that any amounts received by the applicable Trust Fund representing
maturing interest on such bonds will be excludable from federal gross
income if, and to the same extent as, such interest would have been so
excludable if paid in normal course by the
<PAGE>
-4-
Issuer provided that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the Issuer of the bonds, rather than the
insurer, will pay debt service on the bonds. Paragraph (ii) of this opinion
is accordingly applicable to such payment.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the bond on
the date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units.
Because the Trust Funds do not include any "private activity" bonds within
the meaning of Section 57 (a)(5) of the Code issued on or after August 8, 1986,
none of the Trust Funds' interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alternative minimum tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income ("AMTI") which is the corporation's taxable
income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used in
computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for taxable years beginning after 1989, is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in a Trust Fund, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers are
required to disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year of
100 percent of the otherwise deductible interest on indebtedness incurred or
continued by financial institutions, to which either Section 585 or Section 593
of the Code applies, to purchase or carry obligations acquired after August 7,
1986, (with certain exceptions) the interest on which is exempt from Federal
income taxes for such taxable year. Under rules prescribed by Section 265, the
amount of interest otherwise deductible by such financial institutions in any
taxable year which is deemed to be attributable to tax-exempt obligations
acquired after
<PAGE>
-5-
August 7, 1986, will be the amount that bears the same ratio to the interest
deduction otherwise allowable (determined without regard to Section 265) to the
taxpayer for the taxable year as the taxpayer's average adjusted basis (within
the meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer,
unless such financial institution can otherwise establish, under regulations, to
be prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations. On
December 7, 1995 the U.S. Treasury Department released proposed legislation
that, if adopted, would generally extend the financial institution rules to all
corporations, effective for obligations acquired after the date of announcement.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence."
The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds purchased
after April 30, 1993. In general, market discount is the amount (if any) by
which the stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable to
original issue discount not yet accrued) subject to a statutory de minimis
rule. Market discount can arise based on the price a Trust Fund pays for Bonds
or the price a Unitholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under prior law, the
accretion had been treated as capital gain. Market discount that accretes while
a Trust Fund holds a Bond would be recognized as ordinary income by the
Unitholders when principal payments are received on the Bonds, upon sale or at
redemption (including early redemption), or upon the sale or redemption of his
or her Units, unless a Unitholder elects to include market discount in taxable
income as it accrues.
<PAGE>
-6-
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including state or local taxes or collateral tax
consequences with respect to the purchase, ownership and disposition of Units.
Very truly yours
CHAPMAN AND CUTLER
MJK/cjw
<PAGE>
Exhibit 3.2
ORRICK, HERRINGTON & SUTCLIFFE
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
January 10, 1996
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: EVEREN Unit Investment Trusts Series 41
Insured California Series 22
Dear Sirs:
We have acted as special California counsel for EVEREN Unit Investment
Trusts, a Service of EVEREN Securities, Inc., as Depositor of EVEREN Unit
Investment Trusts Series 41--Insured California Series 22 (the "Fund"), in
connection with the issuance under the Trust Indenture and Agreement dated
January 10, 1996, between EVEREN Unit Investment Trust, a Service of EVEREN
Securities, Inc., as Depositor, and The Bank of New York, as Trustee, of 250,000
Units of fractional undivided interest in the Fund (the "Units") in exchange for
certain bonds, as well as "regular-way" and "when-issued" contracts for the
purchase of bonds (such bonds and contracts are hereinafter referred to
collectively as the "Securities").
In connection therewith, we have examined such corporate records,
certificates and other documents and such questions of law as we have deemed
necessary or appropriate for the purpose of this opinion, and, on the basis of
such examination, and upon existing provisions of the Revenue and Taxation Code
of the State of California, we are of the opinion that:
1. The Fund is not an association taxable as a corporation and the
income of the Fund will be treated as the income of the certificateholders
under the income tax laws of California.
2. Amounts treated as interest on the underlying securities which
are exempt from tax under California personal income tax and property tax
laws when received by the Fund will, under such laws, retain their status
as tax-exempt interest when distributed to certificateholders. However,
interest on the underlying securities attributed to a certificateholder
which is a corporation subject to the California franchise tax laws may be
includable in its gross income for purposes of determining its California
franchise tax.
<PAGE>
The Bank of New York
January 10, 1996
Page 2
3. Under California income tax law, each certificateholder in the
Fund will have a taxable event when the Fund disposes of a security
(whether by sale, exchange, redemption, or payment at maturity) or when the
certificateholder redeems or sells Units. Because of the requirement that
tax cost basis be reduced to reflect amortization of bond premium, under
some circumstances a certificateholder may realize taxable gain when Units
are sold or redeemed for an amount equal to, or less than, their original
cost. The total tax cost of each Unit to a certificateholder is allocated
among each of the bond issues held in the Fund (in accordance with the
proportion of the Fund comprised by each bond issue) in order to determine
his 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 cost of each bond issue. Certificateholders' bases in
their Units, and the bases for their fractional interest in each Fund
asset, may have to be adjusted for their pro rata share of accrued interest
received, if any, on securities delivered after the certificateholders'
respective settlement dates.
4. Under the California personal property tax laws, bonds
(including the Securities) or any interest therein is exempt from such tax.
5. Any proceeds paid under the insurance policy, if any, issued to
the Trustee of the Fund with respect to the Securities which represent
maturing interest on defaulted obligations held by the Trustee will be
exempt from California personal income tax if, and to the same extent as,
such interest would have been so exempt if paid by the issuer of the
defaulted obligations.
6. Under Section 17280(b)(2) of the California Revenue and Taxation
Code, interest on indebtedness incurred or continued to purchase or carry
Units of the Fund is not deductible for the purposes of the California
personal income tax. While there presently is no California authority
interpreting this provision, Section 17280(b)(2) directs the California
Franchise Tax Board to prescribe regulations determining the proper
allocation and apportionment of interest costs for this purpose. The
Franchise Tax Board has not yet proposed or prescribed such regulations.
In interpreting the generally similar Federal provision, the Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (although the
Service has not contended that a deduction for interest on indebtedness
incurred to purchase or improve a personal residence or to purchase goods
or services for personal consumption will be disallowed). In the absence
of conflicting regulations or other California authority, the California
Franchise Tax Board generally has interpreted California statutory tax
provisions in accord with Internal Revenue Service interpretations of
similar Federal provisions.
Opinions relating to the validity of securities and the exemption of
interest thereon from State of California income tax are rendered by bond
counsel to the issuing authority at the time securities are issued and we have
relied solely upon such opinions, or as to
<PAGE>
The Bank of New York
January 10, 1996
Page 3
securities not yet delivered, forms of such opinions contained in official
statements relating to such securities. Except in certain instances in which we
acted as bond counsel to issuers of securities, and as such made a review of
proceedings relating to the issuance of certain securities at the time of their
issuance, we have not made any review of proceedings relating to the issuance of
securities or the bases of bond counsels' opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (SEC No. 333-00065) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
Orrick, Herrington & Sutcliffe
<PAGE>
Exhibt 3.3
Miller, Canfield, Paddock and Stone, P.L.C.
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48303-2014
January 10, 1996
EVEREN Unit Investment Trusts, a division
of EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
The Bank of New York through its
Wall Street Trust division as
Trustee of the EVEREN Unit Investment
Trusts, Series 41
101 Barclay Street
New York, New York 10286
Re: EVEREN Unit Investment Trusts, Series 41
Insured Michigan Series 13
Gentlemen:
We have acted as special Michigan counsel to you as Depositor and Trustee
of EVEREN Unit Investment Trusts, Series 41 -- Insured Michigan Series 13 (the
"Insured Michigan Trust") referred to above (the "Fund") . You have asked that
we, acting in such capacity, render an opinion to you with respect to certain
matters relating to the issuance of the units of fractional undivided interest
in the Fund (the "Units") pursuant to a Registration Statement on Form S-6 filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Registration Statement").
You have requested our opinion as to the applicability to the Insured
Michigan Trust (the "Michigan Trust") and the holders of Units (the
"Unitholders") , each of which Units represents the ownership of a specified
fractional undivided interest in the assets of the Michigan Trust, of the
Michigan Income Tax Act (M.C.L.A. (S)(S)206.1 et seq.; M.S.A. (S)(S)7.557(101)
et seq.) (the "Michigan Income Tax"), the City Income Tax Act (M.C.L.A.
(S)(S)141.501 et seq.; M.S.A. (S)(S)5.3194(1) et seq.) , which incorporates the
"Uniform City Income Tax ordinance," the First Class School District excise tax
upon income (M.C.L.A. (S)380.451; M.S.A. (S)(S)15.4451) (collectively, the
"income tax laws"), the Michigan Single Business Tax Act (M.C.L.A. (S)(S)208.1
et seq.; M.S.A. (S)(S)7.558(1) et seq.) (the "Single Business Tax") and the
Michigan Tax on ownership of Intangible Personal Property (M.C.L.A.
(S)(S)205.131 et seq.; M.S.A. (S)(S)7.556(1) et seq.) (the "Intangibles Tax").
The Intangibles Tax is being phased out, with reductions of twenty-five percent
(25%) in 1994 and 1995, fifty percent (50%) in 1996, and seventy-five percent
(75%) in 1997, with total repeal effective January 1, 1998 PA 4 and 5). You
have also requested our opinion
<PAGE>
Miller, Canfield, Paddock and Stone
January 10, 1996
Page 2
regarding the tax status of proceeds payable from an insurance policy to be
obtained by either the Fund or by the issuer of the Bonds involved, guaranteeing
prompt payment of principal and interest on all Bonds in the portfolio of the
Fund.
The Michigan Trust, its formation, its proposed method of operation, the
rights of owners of Certificates representing Units, the nature of such
ownership and the portfolio of investments of the Michigan Trust are described
and set forth in the Prospectus dated January 10, 1996, filed with the
Securities and Exchange Commission in Registration No. 333-00065. In giving our
opinion set forth hereunder, we have relied upon the facts contained in such
Registration Statement, including the fact that, at the respective dates of
issuance of the underlying Debt Obligations, opinions of bond counsel to the
respective Michigan authorities issuing such Debt Obligations were given with
respect to the validity of the Debt obligations and the exemption of the same,
and of the interest thereon, from Michigan taxation.
Based on the above, it is our opinion that:
The Michigan Trust and the owners of Units will, in our opinion, be treated
for purposes of the Michigan income tax laws and the Single Business Tax in
substantially the same manner as they are for purposes of the Federal income tax
laws, as currently enacted. Accordingly, we have relied upon the opinion of
Messrs. Chapman and Cutler as to the applicability of Federal income tax under
the Internal Revenue Code of 1986, as currently amended, to the Michigan Trust
and the Unitholders.
Under the income tax laws of the State of Michigan, the Michigan Trust is
not an association taxable as a corporation; the income of the Michigan Trust
will be treated as the income of the Unitholders of the Michigan Trust and be
deemed to have been received by them when received by the Michigan Trust.
Interest on the Debt Obligations in the Michigan Trust which is exempt from tax
under the Michigan income tax laws when received by the Michigan Trust will
retain its status as tax exempt interest to the Unitholders of the Michigan
Trust.
For purposes of the Michigan income tax laws, each Unitholder of the
Michigan Trust will be considered to have received his pro rata share of
interest on each Debt Obligation in the Michigan Trust when it is received by
the Michigan Trust, and each Unitholder will have a taxable event when the
Michigan Trust disposes of a Debt Obligation (whether by sale, exchange,
redemption or payment at maturity) or when the Unitholder redeems or sells his
Unit, to the extent the transaction constitutes a taxable event for Federal
income tax purposes. The tax cost of each Unit to a Unitholder will be
established and allocated for purposes of the Michigan income tax laws in the
same manner as such cost is established and allocated for Federal income tax
purposes.
Under the Michigan Intangibles Tax, the Michigan Trust is not taxable and
the pro rata ownership of the underlying Debt Obligations, as well as the
interest thereon, will be exempt to the Unitholders to the extent the Michigan
Trust consists of obligations of the
<PAGE>
Miller, Canfield, Paddock and Stone
January 10, 1996
Page 3
State of Michigan or its political subdivisions or municipalities, or of
obligations of the Commonwealth of Puerto Rico, Guam or of the United States
Virgin Islands.
The Michigan Single Business Tax replaced the tax on corporate and
financial institution income under the Michigan Income Tax, and the intangible
tax with respect to those intangibles of persons subject to the Single Business
Tax the income from which would be considered in computing the Single Business
Tax. Persons are subject to the Single Business Tax only if they are engaged in
"business activity," as defined in the Act. Under the Single Business Tax,
both interest received by the Michigan Trust on the underlying Debt Obligations
and any amount distributed from the Michigan Trust to a Unitholder, if not
included in determining taxable income for Federal income tax purposes, is also
not included in the adjusted tax base upon which the Single Business Tax is
computed, of either the Michigan Trust or the Unitholders. If the Michigan
Trust or the Unitholders have a taxable event for Federal income tax purposes
when the Michigan Trust disposes of a Debt Obligation (whether by sale,
exchange, redemption or payment at maturity) or the Unitholder redeems or sells
his Unit, an amount equal to any gain realized from such taxable event which was
included in the computation of taxable income for Federal income tax purposes
(plus an amount equal to any capital gain of an individual realized in
connection with such event but excluded in computing that individual's Federal
taxable income) will be included in the tax base against which, after
allocation, apportionment and other adjustments, the Single Business Tax is
computed. The tax base will be reduced by an amount equal to any capital loss
realized from such a taxable event, whether or not the capital loss was deducted
in computing Federal taxable income in the year the loss occurred. Unitholders
should consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee of the
Fund, or paid under individual policies obtained by issuers of Bonds, which,
when received by the Unitholders, represent maturing interest on defaulted
obligations held by the Trustee, will be excludable from the Michigan income tax
laws and the Single Business Tax if, and to the same extent as, such interest
would have been so excludable if paid by the issuer of the defaulted
obligations. While treatment under the Michigan Intangibles Tax is not premised
upon the characterization of such proceeds under the Internal Revenue Code, the
Michigan Department of Treasury should adopt the same approach as under the
Michigan income tax laws and the Single Business tax.
Chapman and Cutler of 111 West Monroe Street, Chicago, Illinois 60603, are
entitled to rely on this opinion as though it were addressed to them.
We also advise you that, as the Tax Reform Act of 1986 eliminates the
capital gain deduction for tax years beginning after December 31, 1986, the
federal adjusted gross income, the computation base for the Michigan Income Tax,
of a Unitholder will be increased accordingly to the extent such capital gains
are realized when the Michigan Trust disposes of a Debt obligation or when the
Unitholder redeems or sells a Unit, to the extent such transaction constitutes a
taxable event for Federal income tax purposes.
<PAGE>
Miller, Canfield, Paddock and Stone
January 10, 1996
Page 4
We hereby consent to the reference to Miller, Canfield, Paddock and Stone
under the heading "Michigan Tax Status" in the Prospectus relating to the
Michigan Trust which is part of the Registration Statement in Registration No.
333-00065 filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and to the filing of this opinion as an exhibit to said
registration statement.
Yours very truly,
Miller, Canfield, Paddock and Stone, P.L.C.
<PAGE>
EXHIBIT 4.1
STANDARD & POOR'S,
A DIVISION OF McGRAW-HILL, INC.
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1740
FAX 212/208-8262
Sanford B. Bragg
Managing Director
Managed Funds Ratings Services
Everen Unit Investment Trusts
77 West Wacker Drive - 29th Floor
Chicago, IL 60601
Re: Everen Unit Investment Trusts Series 41, containing: Insured National
Series 18, Insured California Series 22 and Insured Michigan Series 13
Pursuant to your request for a Standard & Poor's rating on the
units of the above-captioned Trust, SEC #333-00065, we have reviewed the
information presented to us and have assigned a 'AAA' rating to the units of the
Trust and a 'AAA' rating to the securities contained in the Trust. The ratings
are direct reflections of the portfolios of the Trust, which will be composed
solely of securities covered by bond insurance policies that insure against
default in the payment of principal and interest on the securities so long as
they remain outstanding. Since the policies on the insured securities have been
issued by one or more insurance companies which have been assigned 'AAA' claims
paying ability ratings by Standard & Poor's, Standard & Poor's has assigned a
'AAA' rating to the units of the Trust and to the securities contained in the
Trust.
You have permission to use the name of Standard & Poor's 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
trusts or the securities contained in the trusts. Further, it should be
understood the rating on the units does not take into account the extent to
which trust expenses or portfolio asset sales for less than the trust's purchase
price will reduce payment to the unit holders of the interest and principal
required to be paid on the portfolio assets. S&P reserves the right to advise
its own clients, subscribers, and the public of the ratings. S&P 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. S&P
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 in connection with the rating assigned to the units in the registration
statement or prospectus relating to the units or the trusts. 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 Group in connection with the ratings assigned to the securities
contained in the trusts. You are hereby authorized to file a copy of this letter
with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a reasonable
time after the closing or should they not conform to the representations made to
us, we reserve the right to withdraw the rating.
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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,
/s/ Sanford Bragg/WD
<PAGE>
EXHIBIT 4.2
[CANTOR FITZGERALD LOGO AND LETTERHEAD]
EVEREN Securities, Inc.
Unit Trust Department 29th Floor
77 West Wacker Drive
Chicago, Illinois 60601
Re: EVEREN Unit Investment Trusts, Series 41
Gentlemen:
You have provided to us and we have examined Registration Statement File No.
333-00065 for the above captioned trust. We hereby acknowledge that Cantor
Fitzgerald & Co. ("Cantor") will act as the evaluator for the trust pursuant to
the terms and conditions of the Information Evaluation Service Agreement between
Cantor and EVEREN Securities, Inc. ("EVEREN") dated as of January 10, 1996 (the
"IES Agreement"). We hereby consent to the use in the Registration Statement of
the reference to Cantor Fitzgerald & Co. as evaluator.
You acknowledge that this letter shall not confer upon you any rights or impose
on Cantor any obligations, other than those expressly set forth in the IES
Agreement.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Very truly yours,
CANTOR FITZGERALD & CO.,
By: /s/ Debra Walton
Debra Walton
Managing Director
Acknowledged and Agreed:
EVEREN SECURITIES, INC.
By:
[CANTOR FITZGERALD LETTERHEAD]
<PAGE>
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
-------------------------------------------------
We have issued our report dated January 10, 1996 on the statements of
condition and related bond portfolios of EVEREN Unit Investment Trusts Series 41
as of January 10, 1996 contained in the Registration Statement on Form S-6 and
in the Prospectus. We consent to the use of our report in the Registration
Statement and in the Prospectus and to the use of our name as it appears under
the caption "Other Matters-Independent Certified Public Accountants".
GRANT THORNTON LLP
Chicago, Illinois
January 10, 1996
