File No. 333-03455
CIK No. 927230
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: THE RANSON MUNICIPAL TRUST MULTI-STATE SERIES 7
B. Name of Depositor: RANSON & ASSOCIATES, INC.
C. Complete address of Depositor's principal executive offices:
120 South Market, Suite 450
Wichita, Kansas 67202
D. Name and complete address of agents for service:
RANSON & ASSOCIATES, INC. CHAPMAN AND CUTLER
Attention: John A. Ranson Attention: Mark J. Kneedy
120 South Market, Suite 450 111 West Monroe Street
Wichita, Kansas 67202 Chicago, Illinois 60603
E. Title and amount of securities being registered: 3,795* Units
F. Proposed maximum offering price to the public of the securities being
registered ($1,010 per Unit**): $3,832,950
G. Amount of filing fee, computed at one twenty-ninth of 1 percent of the
proposed maximum aggregate offering price to the public: $1,321.71
($348.28 previously paid)
H. Approximate date of proposed sale to the 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 on
May 15, 1996 at 11:00 A.M. pursuant to Rule 487
____________________________________________________________________________
* 2,530 Units registered for primary distribution.
1,265 Units registered for resale by Depositor of Units previously sold in
primary distribution.
** ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE
____________________________________________________________________________
THE RANSON MUNICIPAL TRUST
MULTI-STATE SERIES 7
CROSS REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust )
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Sponsor Information
3. Name and address of Trustee ) Trustee Information
4. Name and address of principal ) Sponsor Information
underwriter
5. Organization of trust ) Summary of the Trust
6. Execution and termination of ) Summary of the Trust
Trust Indenture and Agreement
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) Description of Trust Portfolio-
) General
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. General information regarding ) General Summary of Information
trust's securities and rights )
of security holders ) Redemption and Repurchase
) of Units
) Description of Trust Portfolio-
) General
) Other Rights of Certificate-
) holders
) Sponsor Information
) Trustee Information
) Tax Status (Federal, State,
) Capital Gains)
11. Type of securities comprising ) Prospectus Front Cover Page
units ) Summary of the Trust
12. Certain information regarding )*
periodic payment certificates )
13. (a) Loan, fees, charges and )
expenses ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Estimated Current Return
) Purchased and Accrued Interest
) Public Offering Information
) Expenses of the Trust
(b) Certain information regarding ) *
periodic payment plan certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Estimated Current Return
) Public Offering Information
) Purchased and Accrued Interest
) Sponsor Information
)
(d) Certain other fees, ) Other Rights of Certificate-
expenses or charges ) holders
payable by holders )
(e) Certain profits to be received )
by depositor, principal underwriter, ) Sponsor Information
trustee or any affiliated persons )
(f) Ratio of annual charges to income ) *
14. Issuance of trust's securities ) Summary of the Trust
) Public Offering Information
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) Summary of the Trust
underlying securities ) Description of Trust Portfolio
) Trustee Information
17. Withdrawal or redemption ) Redemption and Repurchase
) of Units
) Sponsor Information
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Purchased and Accrued Interest
) Distributions of Interest and
) Principal
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Expenses of the Trust
) Summary of the Trust
(d) Schedule of distributions ) *
19. records, accounts and reports ) Other Rights of Certificate-
) holders
20. Certain miscellaneous provisions ) Summary of the Trust
of Trust Agreement ) Sponsor Information
) Trustee Information
21. Loans to security holders ) *
22. Limitations on liability ) Summary of the Trust
23. Bonding arrangements ) *
24. Other material provisions of ) *
trust indenture or agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of Depositor ) Sponsor Information
26. Fees received by Depositor ) *
27. Business of Depositor ) Sponsor Information
28. Certain information as to )
officials and affiliated ) *
persons of Depositor )
29. Companies owning securities of ) *
Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of Depositor ) *
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35.Distribution of trust's securiies ) Prospectus Front Cover Page
by states ) Objectives of the Trust
36.Suspension of sales of trust's ) *
securities )
37.Revocation of authority to ) *
distribute securities )
38. (a) Method of distribution )
(b) Underwriting agreements ) Public Offering Information
(c) Selling agreement )
39. (a) Organization of principal )
underwriter ) Sponsor Information
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Sponsor Information
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of the trust ) *
43. Certain brokerage commissions ) *
received by principal underwriter )
44.(a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Public Offering Information
) Purchased and Accrued Interest
) Redemption and Repurchase
) of Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering ) Purchased and Accrued Interest
price to certain persons ) Public Offering Information
45. Suspension of redemption rights ) *
46. (a) Redemption valuation ) Estimated Current Return
) Purchased and Accrued Interest
) Public Offering Information
) Redemption and Repurchase
) of Units
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Sponsor Information
in underlying securities ) Redemption and Repurchase
) of Units
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Trustee Information
trustee )
49. Fees and expenses of trustee ) Summary of Essential Financial
) Information
) Expenses of the Trust
)
50. Trustee's lien ) Purchased and Accrued Interest
) Distribution of Interest and
) Principal
) Expenses of the Trust
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's )
securities ) *
52. (a) Provisions of trust agreement ) Trustee Information
with respect to replacement or ) Description of Trust Portfolio-
elimination of portfolio securities ) Replacement Bonds
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution ) Trustee Information
or elimination of underlying ) Description of Trust Portfolio-
securities ) Replacement Bonds
(d) Fundamental policy not ) *
otherwise covered )
53. Tax status of trust ) Tax Status (Federal, State,
) Capital Gains)
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during ) *
last ten years )
55. )
56. ) Certain information regarding
57. ) periodic payment certificates
58. )
59. Financial statements (Instructions ) Report of Allen, Gibbs & Houlik
1(c) to Form S-6) ) Independent Auditors
) Statement of Net Assets
THE RANSON MUNICIPAL TRUST, MULTI-STATE SERIES 7
THE NEBRASKA TAX-EXEMPT TRUST, SERIES 7
THE TRUST. The Ranson Municipal Trust, Multi-State Series 7 consists of the
one underlying unit investment trust set forth above. The Nebraska Tax-Exempt
Trust is referred to herein as the "Trust". The Trust initially consists of
bonds and delivery statements relating to contracts to purchase bonds and,
thereafter, will consist of a $2,450,000 aggregate principal amount portfolio
comprised of interest bearing obligations issued by or on behalf of
municipalities or other governmental authorities in the State of Nebraska (the
"Bonds" or "Securities"). In the opinion of counsel, interest income to the
Trust and to Certificateholders thereof, with certain exceptions, is exempt
under existing law from Federal and Nebraska state income taxes, but may be
subject to the Federal alternative minimum tax and other state and local
taxes. Capital gains, if any, are subject to tax. The Trust will hold no
more than 20% of its net assets in Securities which are subject to the Federal
alternative minimum tax. As of the Date of Deposit, approximately 16% of the
principal amount of the Bonds in the Trust, was subject to the Federal
alternative minimum tax. The objectives of the Trust include 1) interest
income which is exempt from Federal income taxes and Nebraska state income
taxes, 2) conservation of capital, and 3) liquidity of investment (see
"Objectives of the Trust"). The payment of interest and the preservation of
capital are dependent upon the continuing ability of the issuers and/or
obligors of the Bonds to meet their respective obligations. Certain of the
Bonds may be obligations which derive their payment from mortgage loans. A
substantial portion of such Bonds will probably be redeemed prior to their
scheduled maturities; any such early redemption would reduce the aggregate
principal amount of the Trust and could also affect the Estimated Long-Term
Return and the Estimated Current Return. Depending on which Bonds are
redeemed at any given time, the then Estimated Current Return may be higher,
lower or unchanged from the Estimated Current Return that existed immediately
prior to such redemption. The Sponsor has a limited right to substitute other
tax-exempt bonds in the Trust portfolio in the event of a failed contract.
There is no assurance that the Trust's objectives will be met. The Sponsor of
the Trust is Ranson & Associates, Inc., Suite 450, 120 South Market Street,
Wichita, Kansas 67202.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units during the
initial offering period is equal to the aggregate offering price of the Bonds
in the portfolio divided by the number of Units outstanding, plus a sales
charge equal to 4.90% of the Public Offering Price (5.152% of the aggregate
offering price of the Bonds). After the initial public offering period, the
secondary market public offering price will be equal to the aggregate bid
price of the Bonds in the portfolio of the Trust divided by the number of
Units outstanding, plus a sales charge of 5.50% of the Public Offering Price
(5.820% of the aggregate bid price of the Bonds). If the Bonds in the Trust
were available for direct purchase by investors, the purchase price of the
Bonds would not include the sales charge included in the Public Offering Price
of the Units. In addition, on transactions entered into on and after May 16,
1996, there will be added an amount equal to the accrued interest from May 20,
1996 to the date of settlement (three business days after order) less
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.
Please read this Prospectus and retain it for future reference.
The date of this Prospectus is May 15, 1996.
RANSON & ASSOCIATES, INC.
SPONSOR
distributions from the Interest Account subsequent to May 20, 1996 (the "First
Settlement Date"). If Units were available for purchase at the opening of
business on the Date of Deposit, the Public Offering Price per Unit would have
been $999.12. During the initial offering period, the sales charge is reduced
on a graduated scale for sales involving at least 150 Units. See "Public
Offering Information." The value of the Bonds will fluctuate with market and
credit conditions, including any changes in interest rate levels.
THE UNITS. Each Unit represents a fractional undivided interest in the
principal and net income of the Trust in the ratio of one Unit for each
$968.38 principal value of Bonds originally deposited in the Trust.
Initially, Units will be offered for sale in the minimum amount of five Units.
DISTRIBUTIONS. Distributions of interest received by the Trust will be made
on a monthly basis (pro-rated on an annual basis). The first distribution to
Certificateholders will be made on July 1, 1996 to holders of record on June
15, 1996, and thereafter distributions will be made monthly on the first day
of each month to record holders on the fifteenth day of the preceding month.
Distributions of funds in the Principal Account, if any, will also be made
monthly on the first day of each month to record holders on the fifteenth day
of the preceding month.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Returns and Estimated Long-Term Returns to Certificateholders as of
the business day prior to the Date of Deposit, were as set forth under
"Summary of Essential Financial Information." The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth in the
footnotes to "Summary of Essential Financial Information."
REDEMPTION AND MARKET FOR UNITS. A Certificateholder may redeem Units at the
office of the Trustee, Investors Fiduciary Trust Company ("IFTC"), at prices
based upon the bid prices of the Bonds. In addition, although not obligated
to do so, the Sponsor intends to maintain a secondary market for the Units at
prices based upon the aggregate bid price of the Bonds in the portfolio of the
Trust (see "Redemption and Repurchase of Units").
2
<TABLE>
<CAPTION>
THE RANSON MUNICIPAL TRUST, MULTI-STATE SERIES 7
THE NEBRASKA TAX-EXEMPT TRUST, SERIES 7
SERIES 79
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
As of MAY 14, 1996, the business day prior to the Date of Deposit
SPONSOR AND EVALUATOR: RANSON & ASSOCIATES, INC.
TRUSTEE: INVESTORS FIDUCIARY TRUST COMPANY
<S> <C>
Principal Amount of Bonds in Trust(1) $ 2,450,000
Number of Units 2,530
Fractional Undivided Interest in Trust per Unit 1/2,530
Principal Amount (Par Value) of Bonds per Unit(1) $ 968.38
Aggregate Offering Price of Bonds in the Trust $ 2,403,907
Aggregate Offering Price of Bonds per Unit $ 950.16
Plus Sales Charge 4.90% (5.152% of the Aggregate
Offering Price of the Bonds) $ 48.96
Public Offering Price per Unit(2) $ 999.12
Redemption Price per Unit(3) $ 940.45
Sponsor's Initial Repurchase Price per Unit(3)(4) $ 950.16
Excess of Public Offering Price per Unit Over
Redemption Price per Unit $ 58.67
Excess of Public Offering Price per Unit Over
Sponsor's Initial Repurchase Price per Unit $ 48.96
Estimated Annual Interest Income per Unit $ 56.50
Less: Estimated Annual Expense per Unit $ 2.71
Estimated Annual Net Interest Income per Unit $ 53.79
Estimated Daily Rate of Net Interest Income Accrual per Unit $ .1494
Estimated Current Return(5)(6)(7) 5.38%
Estimated Long-Term Return(5)(6)(7) 5.32%
Initial Distribution (July 1, 1996) $3.74 per Unit
Initial Date of Deposit May 15, 1996
First Settlement Date May 20, 1996
Minimum Principal Distribution $1.00 per Unit
Mandatory Termination Date June 1, 2028
Minimum Principal Amount of Bonds of Trust Under Which
Indenture May Be Terminated $490,000
Distribution Dates First day of every month commencing July 1, 1996
Trustee's Annual Fee $1.22 per $1,000 principal amount of Bonds,
exclusive of expenses of the Trust.
Evaluator's Annual Fee $.20 per $1,000 principal amount of Bonds
Annual Audit Fee $.40 per Unit
</TABLE>
[FN]
Evaluations for purpose of sale, purchase or redemption of Units are made as
of 3:00 P.M. Central time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or purchase of Units or receipt
by the Trustee of Units tendered for redemption.
(1) Many unit investment trusts comprised of municipal securities 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 Trust Units has elected not to follow this
format but rather to provide for that number of Units which will establish
3
as of the Date of Deposit a Public Offering Price per Unit of
approximately $1,000. Because certain of the Bonds may from time to time
under certain circumstances be sold or redeemed or will be called or
mature in accordance with their terms (including the call or sale of zero
coupon bonds at prices less than par value), there is no guarantee that
the value of a Unit at the Trust's termination will be equal to the
Principal Amount (Par Value) of Bonds per Unit stated above.
(2) No accrued interest will be added for any person contracting to purchase
Units on the Date of Deposit. Anyone ordering Units after such date will
pay accrued interest from the First Settlement Date to the date of
settlement (three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. A person will
become the owner of Units on the date of settlement provided payment has
been received.
(3) Plus accrued interest to the settlement date in the case of sale or to
the date of tender in the case of redemption.
(4) The Sponsor intends to maintain a secondary market for Units at prices
based on the aggregate bid price of the Bonds in the Trust; however,
during the initial offering period such prices will be based on the
aggregate offering price of the Bonds.
(5) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled to a reduced sales charge (see "Public Offering
Information").
(6) 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 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; therefore, there is no assurance that the present
Estimated Current Return indicated above will be realized in the future.
The 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 of all of the Bonds in the Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirements of the
Bonds and the expenses of the Trust will change, there is no assurance
that the present Estimated Long-Term Return as indicated above will be
realized in the future. The Estimated Current Return and Estimated Long-
Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price. Neither rate
reflects the true return to Certificateholders which is lower because
neither includes the effect of the delay in the first payment to
Certificateholders.
(7) These figures are 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 for this Trust are set forth under the section titled "Estimated
Cash Flows to Certificateholders."
4
SUMMARY OF THE TRUST
The Ranson Municipal Trust, Multi-State Series 7, which is comprised of
one unit investment trust, The Nebraska Tax-Exempt Trust, Series 7, was
created under the laws of the State of Missouri pursuant to a Trust Indenture
and Agreement, dated the Date of Deposit (the "Indenture"), between Ranson &
Associates, Inc., as Sponsor, and Investors Fiduciary Trust Company, as
Trustee.
The Trust consists of a portfolio of interest bearing obligations (or
delivery statements relating to contracts to purchase obligations) issued by
or on behalf of the State of Nebraska and political subdivisions,
municipalities and authorities thereof, the interest on which is excludable,
in the opinion of recognized bond counsel, from Federal gross income taxes,
and is exempt from Nebraska state income tax. However, in the case of
corporations, interest on all obligations held by the Trust may be subject to
the alternative minimum tax for Federal income tax purposes. Accordingly, the
Trust may be appropriate only for investors who are not subject to the
alternative minimum tax. See "Tax Status (Federal, State, Capital Gains)." An
investment in the Trust should be made with an understanding of the risks
associated with an investment in such obligations. Fluctuations in interest
rates may cause corresponding fluctuations in the value of the Bonds. The
Sponsor cannot predict whether the value of the Bonds in a portfolio will
increase or decrease.
On the Date of Deposit, the Sponsor deposited with the Trustee an
aggregate of $2,450,000 principal amount of interest-bearing obligations,
including delivery statements relating to contracts for the purchase of
certain such obligations. Upon deposit of such Bonds the Trustee delivered to
the Sponsor a certificate evidencing the ownership of 2,530 Units for the
Trust, which are offered for sale by this Prospectus. Each Unit initially
offered represents that undivided interest set forth under "Summary of
Essential Financial Information." To the extent that any Units are redeemed by
the Trustee, the fractional undivided interest in the Trust represented by
each unredeemed Unit will increase, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units in the Trust will
remain outstanding until redeemed upon tender to the Trustee by
Certificateholders, which may include the Sponsor, or until the termination of
the Indenture.
The Indenture may be amended at any time by consent of Certificateholders
representing at least 51% of the Units of the Trust then outstanding. The
Indenture may also be amended by the Trustee and the Sponsor without the
consent of any of the Certificateholders 1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, or 2) to make such other provisions as shall not adversely
affect the interest of the Certificateholders, provided, however, that the
Indenture may not be amended to increase the number of Units issuable
thereunder or to permit the deposit or acquisition of bonds either in addition
to, or in substitution for any of the Bonds initially deposited in the Trust
except in connection with the limited right of substitution of Replacement
Bonds for failed Bonds (see "Description of Trust Portfolio") and for the
substitution of refunding bonds under certain circumstances. The Trustee
shall advise the Certificateholders of any amendment promptly after the
execution thereof.
The Trust may be terminated at any time by consent of Certificateholders
representing at least 51% of the Units of the Trust then outstanding or by the
Trustee when the value of the Trust, as shown by any semi-annual evaluation,
is less than 20% of the original principal amount of the Trust and will be
liquidated by the Trustee in the event that a sufficient number of Units not
yet sold are tendered for redemption by the Sponsor and the Underwriters
thereby reducing the net worth of the Trust to less than 40% of the principal
amount of the Bonds originally deposited in the portfolio. The Indenture will
terminate upon the redemption, sale or other disposition of the last Bond held
5
in the Trust, but in no event shall it continue beyond the end of the calendar
year preceding the fiftieth anniversary of its execution.
Written notice of any termination specifying the time or times at which
Certificateholders may surrender their certificates for cancellation shall be
given by the Trustee to each Certificateholder at the address appearing on the
registration books of the Trust maintained by the Trustee. The Trustee will
begin to liquidate any Bonds held in the Trust within a reasonable period of
time from said notification and shall deduct from the proceeds any accrued
costs, expenses or indemnities provided by the Indenture, including any
compensation due the Trustee, any costs of liquidation and any amounts
required for payment of any applicable taxes, governmental charges or final
operating costs of the Trust.
The Trustee shall then distribute to Certificateholders their pro rata
shares of the remaining balances in the Principal and Interest Accounts of the
Trust together with a final distribution statement which will be in
substantially the same form as the annual distribution statement (see "Other
Rights of Certificateholders"). Any amount held by the Trustee in any reserve
account will be distributed when the Trustee determines the reserve is no
longer necessary in the same manner as the final distribution from the
Principal and Interest Accounts (see "Distribution of Interest and
Principal").
The Sponsor and the Trustee shall be under no liability to
Certificateholders for taking any action or for refraining from any action in
good faith pursuant to the indenture, or for errors in judgment, but shall be
liable only for their own negligence, lack of good faith, willful misconduct
or reckless disregard of their duties. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Bonds. In the event of the failure of the Sponsor to act under the
Indenture, the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not 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 under the Indenture or upon or in respect of the Trust
which the Trustee 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.
None of the aggregate principal amount of the Bonds in the Trust are "zero
coupon" bonds. 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.
6
DESCRIPTION OF TRUST PORTFOLIO
PORTFOLIO. The Trust consists of 7 obligations of issuers located in the
State of Nebraska. None of the issues in the Trust are general obligations of
the governmental entities issuing them or are backed by the taxing power
thereof. The remaining issues are payable directly or indirectly from the
income of a specific project or authority and are divided by source of revenue
(and percentage of principal amount to total Trust) as follows: Health Care, 2
(43.9%); Electric Utility, 2 (30.6%); Single-Family Housing, 1 (16.3%) and
Education, 2 (9.2%). The dollar weighted average maturity of the Bonds in the
Trust is 27.0 years. Approximately 16.3% of the aggregate principal amount of
the issues in the Trust are subject to the Federal alternative minimum tax.
Since the Trust will invest substantially all of its assets in Nebraska
municipal securities, the Trust is susceptible to political and economic
factors affecting the issuers of Nebraska municipal securities. The Nebraska
economy performed steadily during 1993 as the national economy slowly
expanded. The Nebraska economy generally avoided the national recession of
the early 1990s and continued to expand in 1993 with growth in the labor
force, job numbers, construction activity, business incorporations, retail
sales, tourism visits and expenditures and population. Overall, it is
anticipated that the state's economy will grow at a slightly slower rate
during the next two years, even if the national economy expands, as the
Nebraska economy tends to be less cyclical than the national economy. It
typically does not grow as fast as the national economy during expansions and
does not contract as much during recessions.
The number of Nebraska farms and ranches declined in 1993 to an estimated
55,000 from 56,000 in 1992. Since total land in farms and ranches remains
around 47 million acres, the size of the average farm and ranch increased 1.8
percent in 1993. Statewide, the average value of an acre of farmland
increased 9.0 percent by the end of 1993. The most recent Nebraska farm
income information reflects total cash receipts from farm marketings
decreased 2.9 percent in 1992 from the 1991 level. The leading non-farm job
sector in 1993 was the trade sector, comprising 25.2 percent of all non-farm
jobs. The number of trade sector jobs increased 1.4 percent from 1992 to
1993. The wholesale trade subsector accounted for 27.1 percent and the retail
subsector 72.9 percent of trade sector jobs. The services sector is the
second largest non-farm job sector accounting for 24.6 percent of total jobs.
The average monthly number of service sector jobs increased 1.2 percent in
1993 compared to 1992. The number of manufacturing jobs, which represents
13.5 percent of non-farm employment, increased 2.2 percent in 1993 compared to
1992. The finance, insurance, and real estate sector is an important job
category in Nebraska, especially in Omaha and Lincoln. In 1993, the number of
jobs in that sector averaged 50,274 per month, a 1.7 percent increase over
1992. Nationally, the number of finance, insurance, and real estate jobs
declined 1.3 percent. The travel and tourism industry is Nebraska's third
leading generator of out-of-state revenue, following agriculture and
manufacturing. The 1993 spring and summer floods in Nebraska threatened to
reduce tourism and tourism revenue in the state last year, however
expenditures in the State totaled over $1.9 billion in 1993, a 5.6 percent
increase over 1992. Travel industry employment totaled approximately 36,000
people within the State, who serviced the estimated 15.2 million visits to
Nebraska in 1993 by non-residents, a 3.4 percent increase over 1992.
The Legislature appropriated approximately $1.6 billion for State programs
from the State General Fund for fiscal year 1994, a reduction of $4.3 million
for the fiscal year 1993 budget, and recommended spending of approximately
$1.7 billion for fiscal year 1995. The major increases in the State budget
for the fiscal year 1993-95 biennium are the result of mandated programs and
entitlement programs and are concentrated primarily in the areas of medicaid,
State aid to schools, public assistance and special education. The budget
also allowed for a 3.0 percent budget reserve ($99.5 million) at the end of
the biennium.
7
The foregoing information constitutes only a brief summary of some of the
financial difficulties which may impact certain issuers of Bonds and does not
purport to be a complete or exhaustive description of all adverse conditions
to which the issuers in the Trust are subject. Additionally, many factors
including national economic, social and environmental policies and conditions,
which are not within the control of the issuers of Bonds, could affect or
could have an adverse impact on the financial condition of Nebraska and
various agencies and political subdivisions located in Nebraska. The Sponsor
is unable to predict whether or to what extent such factors or other factors
may affect the issuers of Bonds, the market value or marketability of the
Bonds or the ability of the respective issuers of the Bonds acquired by the
Trust to pay interest on or principal of the Bonds.
Approximately 44% of the aggregate principal amount of the Bonds in the
Trust are hospital revenue bonds. In view of this, an investment in the Trust
should be made with an understanding of the characteristics of such issuers
and the risks which such an investment may entail. 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
receipt 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 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 requires 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 adversely affect the
ability of such issuers to make payment of principal and interest on Bonds
held in the portfolio of the Trust. Such adverse changes also may adversely
affect the ratings of the Bonds held in the portfolio of the Trust.
Approximately 31% of the aggregate principal amount of the Bonds in the
Trust consists of obligations whose revenues are primarily derived from the
sale of electric energy. 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. All of such issuers have been experiencing
certain of 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.
Approximately 16% of the aggregate principal amount of the Bonds in the
Trust consists of obligations which derive their payment from mortgage loans.
No more than 25% of the Trust's total assets will be invested in mortgages
originated by the same financial institution. Certain of the Bonds in the
8
Trust may be single family mortgage revenue bonds 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. In view of this, an investment in the Trust should be
made with an understanding of the characteristics of such issuers and the
risks which such an investment may entail. 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 on 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.
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. 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. These bonds were issued under Section 103A of the Internal Revenue
Code, which Section contains certain requirements relating to the use 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 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. Certain of the Bonds in the Trust 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. Certain issuers of
housing bonds have considered various ways to redeem bonds they have issued
prior to the stated first redemption dates for such bonds. In one situation
an issuer, in reliance on its interpretation of certain language in the
indenture under which one of its bond issues was created, redeemed all of such
issue at par in spite of the fact that such indenture provided that the first
optional redemption was to include a premium over par and could not occur
prior to a later date. In connection with the housing bonds held by the
Trust, the Sponsor at the Date of Deposit 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. For a general
discussion of the effects of Bond prepayments and redemptions on
Certificateholders who acquired Units at a time when such Bonds were valued in
excess of the principal amount or redemption price of such Bonds, see
"General" below.
Approximately 9% of the aggregate principal amount of the Bonds in the
Trust consists of obligations of issuers which are, or which govern the
operation of colleges and universities and whose revenues are derived mainly
from tuition, dormitory revenues, grants and endowments. 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 tuitions and fees sufficiently to
cover increased operating costs, the uncertainty of continued receipt of
Federal grants and state 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.
REPLACEMENT BONDS. Because certain of the Bonds in the Trust 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
9
distributed to Certificateholders and will not be reinvested, no assurance can
be given that the Trust will retain for any length of time its present size
and composition. Neither the Sponsor nor the Trustee shall be liable in any
way for any default, failure or defect in any Bond. In the event of a failure
to deliver any Bond that has been purchased for the Trust under a contract,
including any Bonds purchased on a "delayed delivery" basis ("Failed Bonds"),
the Sponsor is authorized under the Indenture to direct the Trustee to acquire
other bonds ("Replacement Bonds") to make up the original corpus of the Trust.
The Replacement Bonds must be purchased within 20 days after delivery of
the notice of the failed contract and the purchase price (exclusive of accrued
interest) may not exceed the amount of funds reserved for the purchase of the
Failed Bonds. The Replacement Bonds (i) must be tax-exempt bonds issued by
the State of Nebraska or its political subdivisions, (ii) must have a fixed
maturity date of at least 10 years, (iii) must be purchased at a price that
results in a yield to maturity and in a current return, in each case as of the
Date of Deposit, at least equal to that of the Failed Bonds, (iv) shall not be
"when, as and if issued" bonds and (v) must be rated "BBB-" or better by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. ("Standard &
Poor's" or "S&P") or "Baa3" or better by Moody's Investors Service, Inc.
("Moody's"). Whenever a Replacement Bond has been acquired for the Trust, the
Trustee shall, within five days thereafter, notify all Certificateholders of
the Trust of the acquisition of the Replacement Bonds 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 Bond exceeded the cost of the Replacement Bond plus accrued interest.
Once the original corpus of the Trust is acquired, the Trustee will have no
power to vary the investment of the Trust, i.e., the Trust will have no
managerial power to take advantage of market variations to improve a
Certificateholder's investment.
If the right to limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such Failed
Bonds to all Certificateholders of the Trust and distribute the principal and
accrued interest (at the coupon rate of such Failed Bonds to the date the
Failed Bonds are removed from the Trust) attributable to such Failed Bonds not
more than 30 days after such removal or such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Certificateholders. In
the event a Replacement Bond should not be acquired by the Trust, the
estimated net annual interest income per Unit for the Trust would be reduced
and the Estimated Current Return and Estimated Long-Term Return thereon might
be lowered. In addition, Certificateholders should be aware that they may not
be able at the time of receipt of such principal to reinvest such proceeds in
other securities at a yield equal to or in excess of the yield which such
proceeds were earning to Certificateholders in the Trust.
GENERAL. Certain of the Bonds in the Trust are subject to redemption prior to
their stated maturity date pursuant to sinking fund provisions, call
provisions or extraordinary optional or mandatory redemption provisions. A
sinking fund is a reserve fund accumulated over a period of time for
retirement of debt. A callable debt obligation is one which is subject to
redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a debt obligation is redeemed, at or before
maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The portfolio
contains a listing of the sinking fund and call provisions, if any, with
respect to each of the debt obligations. Extraordinary optional redemptions
and mandatory redemptions result from the happening of certain events.
Generally, events that may permit the extraordinary optional redemption of
Bonds or may require the mandatory redemption of Bonds include, among others:
10
a final determination that the interest on the Bonds is taxable; the
substantial damage or destruction by fire or other casualty of the project for
which the proceeds of the Bonds were used; an exercise by a local, state or
Federal governmental unit of its power of eminent domain to take all or
substantially all of the project for which the proceeds of the Bonds were
used; changes in the economic availability of raw materials, operating
supplies or facilities or technological or other changes which render the
operation of the project for which the proceeds of the Bonds were used
uneconomic; changes in law or an administrative or judicial decree which
renders the performance of the agreement under which the proceeds of the Bonds
were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes,
not imposed on the date the Bonds are issued on the issuer of the Bonds or the
user of the proceeds of the Bonds; an administrative or judicial decree
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the Bonds; an overestimate of the costs of the
project to be financed with the proceeds of the Bonds resulting in excess
proceeds of the Bonds which may be applied to redeem Bonds; or an
underestimate of a source of funds securing the Bonds resulting in excess
funds which may be applied to redeem Bonds. See "Trust Portfolio" and
footnote (3) in "Notes to Trust Portfolio." See also "Portfolio" above for
possible redemptions prior to initial stated call dates. Certain of the Bonds
in the Trust may have been purchased by the Trust at premiums over the par
value (principal amount) of such Bonds (see "Trust Portfolio"). To the extent
Certificateholders acquire their Units at a time Bonds are valued at a premium
over such par value and such Bonds are subsequently redeemed or prepaid at par
or for less than such valuations, Certificateholders will likely sustain
losses in connection with such redemptions or prepayments. For the tax
effects of Bond redemptions generally, see "Tax Status (Federal, State,
Capital Gains)."
To the best knowledge of the Sponsor there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect upon the Trust. At any time after the Date
of Deposit, litigation may be initiated on a variety of grounds with respect
to Bonds in the Trust. Such litigation, as, for example, suits challenging
the issuance of pollution control revenue bonds under environmental protection
statutes, may affect the validity of such Bonds or the tax-free nature of the
interest thereon. While the outcome of litigation of such nature can never be
entirely predicted, the Trust has received opinions of bond counsel to the
issuing authorities of each Bond on the date of issuance to the effect that
such Bonds have been validly issued and that the interest thereon is exempt
from Federal income tax. In addition, other factors may arise from time to
time which potentially may impair the ability of issuers to meet obligations
undertaken with respect to the Bonds.
OBJECTIVES OF THE TRUST
The Trust has been formed to provide residents of the State of Nebraska
interest income which is exempt from Federal and Nebraska state income taxes.
In addition, the Trust also has objectives which include conservation of
capital and liquidity of investment. There is no assurance that the Trust's
objectives will be met.
In selecting Bonds for the Trust, the following facts, among others, were
considered by the Sponsor: (a) either the Standard & Poor's rating of the
Bonds was in no case less than "BBB-" or the Moody's Investors Service, Inc.
rating of the Bonds was in no case less than "Baa3" including provisional or
conditional ratings, respectively, or, if not rated, the Bonds had, in the
opinion of the Sponsor, credit characteristics sufficiently similar to the
credit characteristics of interest-bearing tax-exempt obligations that were so
rated as to be acceptable for acquisition by the Trust (see "Description of
Bond Ratings") and (b) the prices of the Bonds relative to other bonds of
11
comparable quality and maturity. Medium-quality Bonds (rated BBB or A by S&P
or Baa or A by Moody's) are obligations of issuers that are considered to
possess adequate, but not outstanding, capacities to service the obligations.
Investment in medium-quality debt securities involves greater investment risk,
including the possibility of issuer default or bankruptcy, than investment in
higher-quality debt securities. An economic downturn could severely disrupt
this market and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. During a period of
adverse economic changes, including a period of rising interest rates, issuers
of such bonds may experience difficulty in servicing their principal and
interest payment obligations. Medium quality debt securities tend to be less
marketable than higher-quality debt securities because the market for them is
less broad. During periods of thin trading in these markets, the spread
between bid and asked prices is likely to increase significantly, and the
Trust may have greater difficulty selling the medium-quality debt securities
in its portfolio. Subsequent to the Date of Deposit, a Bond may cease to be
rated or its rating may be reduced below the minimum required as of the Date
of Deposit. Neither event requires elimination of such Bond from a portfolio
but may be considered in the Sponsor's determination as to whether or not to
direct the Trustee to dispose of the Bond (see "Trustee Information").
The Trust consists of a portfolio of fixed rate, long-term debt
obligations. An investment in the Trust should be made with an understanding
of the risks associated with an investment in such obligations. Fluctuations
in interest rates may cause corresponding fluctuations in the value of the
Bonds in the portfolio. The Sponsor cannot predict whether the value of the
Bonds in the portfolio will increase or decrease.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the business day prior to the Date of Deposit, the Estimated Current
Return and the Estimated Long-Term Return were as set forth in "Summary of
Essential Financial Information." 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 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; 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 of all of the
Securities in the Trust and 2) takes into account a compounding factor and the
expenses and sales charge associated with each Trust Unit. Since the market
values and estimated retirements of the Securities and the expenses of the
Trust will change, there is no assurance that the present Estimated Long-Term
Return 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 the Estimated Current Return calculation includes only net annual
interest income and Public Offering Price. Neither rate reflects the true
return to Certificateholders which is lower because neither includes the
effect of the delay in the first payment to Certificateholders.
In order to acquire certain of the Bonds contracted for by the Sponsor for
deposit in the Trust, it may be necessary for the Sponsor or Trustee to pay on
the settlement dates for delivery of such Bonds amounts covering accrued
interest on such Bonds which exceed 1) the amounts paid by Certificateholders
and 2) the amounts which will be made available through cash furnished by the
Sponsor on the Date of Deposit, which amount of cash may exceed the interest
12
which would accrue to the First Settlement Date. 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 particular Bonds with respect to which such payments may have been
made.
PUBLIC OFFERING INFORMATION
Units in the Trust are offered at the Public Offering Price which during
the initial public offering period is based on the offering prices of the
Bonds in the Trust plus a sales charge of 4.90% of the Public Offering Price
(equivalent to 5.152% of the net amount invested) and which in the secondary
market is based on the bid prices of the Bonds in the portfolio and includes a
sales charge of 5.50% of the Public Offering Price (equivalent to 5.82% of the
net amount invested) plus accrued and undistributed interest to the settlement
date. The initial public offering period shall be the earlier of the sale to
the public of all the Units in the Trust or 30 days from the date of this
Prospectus; provided, however, the Sponsor reserves the right to extend this
period for three successive 30 day periods. Upon termination of the initial
offering period, any unsold Units and any Units repurchased in the secondary
market may be offered by this Prospectus at the secondary Public Offering
Price in the manner described herein. The sales charge applicable to quantity
purchases is reduced during the initial public offering period on a graduated
basis to any person acquiring at least 150 Units as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF
SALES CHARGE REDUCTION
NUMBER OF UNITS PURCHASED PER UNIT
<S> <C>
150-249 Units $ 2.50
250-499 Units 5.00
500-799 Units 7.75
800 or more Units 10.00
</TABLE>
Any reduced sales charge shall be the responsibility of the selling
dealer. The reduced sales charge will apply on all purchases of Units in the
Trust made by the same person on any one day from any one dealer. Units
purchased in the name of the spouse of a purchaser or in the name of a child
of any such purchaser under 21 years of age will be deemed for the purposes of
calculating the applicable sales charge to be a single
purchase by the purchaser. The reduced sales charges will also be applicable
to a trustee or other fiduciary purchasing Units for a single trust estate or
single fiduciary account.
Although payment is normally made three business days following the order
for purchase, payment 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 in 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.
During the initial offering period, Units will be distributed to the
public through the Underwriters and through certain dealers. Underwriters
will acquire Units from the Sponsor at the concessions set forth under
"Underwriting." Dealers will be allowed a concession during the initial
offering period equal to 3.25% of the Public Offering Price. In the secondary
market such concession will amount to 4.5% of the Public Offering Price.
13
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge paid by their
customers is retained by or remitted to the banks in an amount allowing a
concession equal to that shown above for dealers. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust 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.
To facilitate the handling of transactions during the initial public
offering period, sales of Units shall normally be limited to transactions
involving a minimum of five Units. Further purchases may be made in multiples
of one Unit. The minimum purchase in the secondary market will be one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units and to change the amount of the concession to
dealers, set forth below, from time to time.
ACCRUED INTEREST
Accrued interest is the accumulation of unpaid interest on a bond from the
last day on which interest thereon was paid. Interest on Bonds in the Trust
is paid to the Trustee either monthly or semi-annually. However, interest on
the Bonds in the Trust is accounted for daily on an accrual basis. Because of
this, the Trust always has an amount of interest earned but not yet collected
by the Trustee because of coupons that are not yet due. 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 and undistributed interest to the date of settlement.
Certificateholders will receive on the next distribution date of the 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 Certificateholder of record on such date. Consequently,
the amount of accrued interest to be added to the Public Offering Price of
Units will include only accrued interest arising after the First Settlement
Date of the Trust, less any distributions from the Interest Account subsequent
to this First Settlement Date. Since the First Settlement Date is the date of
settlement for anyone ordering Units on the Date of Deposit, no accrued
interest will be added to the Public Offering Price of Units ordered on the
Date of Deposit.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trust and distributed to Certificateholders.
Therefore, there will always remain an item of accrued interest that is added
to the value of the Units. If a Certificateholder 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 use of the funds held in the Interest Account for distributions to
Certificateholders and since such Account is non-interest-bearing to
Certificateholders, the Trustee benefits thereby.
14
REDEMPTION AND REPURCHASE OF UNITS
Certificateholders may redeem all or a portion of their Units by tender to
the Trustee, at its corporate office in Kansas City, Missouri, of the
certificates representing Units to be redeemed, duly endorsed or accompanied
by proper instruments of transfer with signature guaranteed. In order to
effect a redemption of Units, Certificateholders must tender their
certificates to the Trustee or provide satisfactory indemnity required in
connection with lost, stolen or destroyed certificates. No redemption fee
will be charged. On the third business day following such tender, the
Certificateholder will be entitled to receive in cash for each Unit tendered
an amount equal to the redemption price per Unit as next computed after
receipt by the Trustee of such tender of Units as determined by the bid price
of the Bonds in the Trust on the date of tender (the "Redemption Price") plus
accrued interest to, but not including, the date of redemption. The price
received upon redemption may be more or less than the amount paid by the
Certificateholder depending on the value of the Bonds on the date of tender.
The value of the Bonds will fluctuate with market and credit conditions,
including any changes in interest rate levels.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. In addition, the Trustee is empowered, with certain
recommendations allowed by the Sponsor, to sell Bonds in the portfolio of the
Trust to make funds available for redemption. Units redeemed shall be
cancelled and not be available for reissuance.
The recognized date of tender is deemed to be the date on which Units are
received in proper form by the Trustee prior to 3:00 p.m. Central time. Units
received by the Trustee after 3:00 p.m. will be deemed to have their
recognized date of tender on the next business day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that date (see "Evaluation of the Trust").
To the extent that Bonds in the portfolio of the Trust are sold to meet
redemptions, the size and diversity of the Trust will be reduced. Such sales
may occur at a time when Bonds might not otherwise be sold which may result in
lower prices received on the Bonds than might be realized under normal trading
conditions.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming
Certificateholder'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 Certificateholder only when filing his or
her tax return. Under normal circumstances the Trustee obtains the
Certificateholder's tax identification number from the selling broker at the
time the certificate is issued, and this number is printed on the certificate
and on distribution statements. If a Certificateholder's tax identification
number does not appear on the certificate or statements, or if it is
incorrect, the Certificateholder should contact the Trustee before presenting
a certificate for redemption to determine what action, if any, is required to
avoid this back-up withholding.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
15
an emergency exists, as a result of which disposal or evaluation of the Bonds
is not reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit.
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's repurchase price in the secondary market at that
time equals or exceeds the redemption price, it may repurchase such Units by
notifying the Trustee before the close of business on the second succeeding
business day and by making payment therefor to the tendering Certificateholder
not later than the day on which payment would otherwise have been made by the
Trustee. The secondary market Public Offering Price of any Units thus
acquired by the Sponsor will be in accord with the procedure described in the
then currently effective prospectus relating to such Units. Units held by the
Sponsor may be tendered to the Trustee for redemption. Any profit or loss
resulting from the resale or redemption of such Units will belong to the
Sponsor.
Although not obligated to do so, the Sponsor intends to maintain a market
for the Units offered hereby and to offer continuously to purchase such Units
at prices, subject to change at any time, based upon the aggregate bid prices
of the Bonds in the portfolio plus interest accrued to the date of settlement
plus any principal cash on hand, less any amounts representing taxes or other
governmental charges payable out of the Trust and less any accrued Trust
expenses. If the supply of Units exceeds demand or if some other business
reason warrants it, the Sponsor may either discontinue all purchases of Units
or discontinue purchases of Units at such prices. In the event that a market
is not maintained for the Units and the Certificateholder cannot find another
purchaser, a Certificateholder desiring to dispose of his Units may be able to
dispose of such Units only by tendering them to the Trustee for redemption at
the redemption price, which is based upon the aggregate bid price of the Bonds
in the portfolio. The aggregate bid prices of the underlying Bonds in the
Trust are expected to be less than the related aggregate offering prices. A
Certificateholder who wishes to dispose of his Units should inquire of his
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.
DISTRIBUTION OF INTEREST AND PRINCIPAL
Interest received by the Trust, including that part of the proceeds from
the disposition of Bonds, if any, which represents accrued interest, is
credited by the Trustee to the Interest Account for the Trust. Any other
receipts are credited to the Principal Account for the Trust. Interest
received by the Trust will be distributed on or shortly after the first day of
each month on a pro rata basis to Certificateholders of record as of the
preceding record date (which is the fifteenth day of the month next preceding
the distribution). All distributions will be net of applicable expenses. The
pro rata share of cash in the Principal Account will be computed on the
fifteenth day of each month and will be distributed to the Certificateholders
as of the first day of the next succeeding month. Such principal distribution
may be combined with any interest distribution due to the Certificateholder at
that time. Proceeds received from the disposition of any of the Bonds in the
portfolio of the Trust after each record date and prior to the following
distribution date will be held in the Principal Account and not distributed
until the next distribution date. The Trustee is not required to pay interest
on funds held in the Principal or Interest Accounts (but may itself earn
interest thereon and therefore benefit from the use of such funds) nor to make
a distribution from the Principal Account unless the amount available for
distribution shall equal at least $1.00 per Unit.
The distribution to the Certificateholders as of each record date after
the First Settlement Date will be made on the following distribution date or
shortly thereafter and shall consist of an amount substantially equal to the
16
Certificateholder's pro rata share of the estimated annual income after
deducting estimated expenses. Because interest payments are not received by
the Trust at a constant rate throughout the year, such interest distribution
may be more or less than the amount credited to the Interest Account as of the
record date. For the purpose of minimizing fluctuations in the distributions
from the Interest Account, the Trustee is authorized to advance such amounts
as may be necessary to provide interest distributions of approximately equal
amounts. The Trustee shall be reimbursed, without interest, for any such
advances from funds in the Interest Account on the ensuing record date. A
person who purchases Units will commence receiving distributions only after
such person becomes a record owner. Notification to the Trustee of the
transfer of Units is the responsibility of the purchaser, but in the normal
course of business such notice is provided by the selling broker/dealer.
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust (see
"Expenses of the Trust"). The Trustee may also withdraw from said accounts an
amount, if deemed necessary, to fund a reserve for any governmental charges or
anticipated Trust expenses which may be payable out of the Trust. Amounts so
withdrawn will not be considered a part of the Trust's assets until such time
as the Trustee shall return all or part of the amount withdrawn to the
appropriate accounts. In addition, the Trustee may withdraw from the Interest
and Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Bonds and redemptions of Units by the Trustee (see "Description of
Trust Portfolio" and "Redemption and Repurchase of Units").
Funds which are available for future distributions, redemptions and
payment of expenses are held in accounts which are non-interest bearing to
Certificateholders and are available for use by the Trustee pursuant to normal
banking procedures.
DISTRIBUTION REINVESTMENT OPTION
The Sponsor has entered into an arrangement with Ranson Managed Portfolios
- - The Nebraska Municipal Fund (the "Nebraska Municipal Fund") which permits
any Certificateholder of The Nebraska Tax-Exempt Trust to elect to have each
distribution of interest income or principal, including capital gains, on his
Units automatically reinvested in shares of the Nebraska Municipal Fund. The
investment objective of the Nebraska Municipal Fund is to provide its
shareholders with a high level of current income exempt from both Federal
income tax and Nebraska state income tax as is consistent with preservation of
capital. The objectives and policies of the Nebraska Municipal Fund are
presented in more detail in the Nebraska Municipal Fund prospectus.
Certificateholders should contact the broker from whom they obtained this
Prospectus to obtain a current prospectus for the Nebraska Municipal Fund, or
they may obtain a current prospectus by contacting Ranson Capital Corporation
at (800) 601-5593.
Certificateholders will be able to reinvest their distributions of
interest income or principal in the Nebraska Municipal Fund with no sales
charge and no minimum investment.
A Certificateholder may at any time, by so notifying the Trustee in
writing, elect to terminate his participation in the Distribution Reinvestment
Option and receive future distributions on his Units in cash. There will be
no charge or other penalty for such termination. The Sponsor and the Nebraska
Municipal Fund each have the right to terminate the Distribution Reinvestment
Option, in whole or in part.
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TAX STATUS (FEDERAL, STATE, CAPITAL GAINS)
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof, to the exemption of interest thereon from Federal and
Nebraska income taxation were rendered by bond counsel to the respective
issuing authorities. If the interest on a Bond should be determined to be
taxable, the Bond would generally have to be sold at a substantial discount.
In addition, investors could be required to pay income tax on interest
received prior to the date of which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or of a
Unit by a Certificateholder is, however, includable in gross income for
Federal and Nebraska state income tax purposes. It should be noted in this
connection that such gain does not include any amounts received in respect of
accrued interest or earned original issue discount, if any. Neither the
Sponsor nor its counsel have made any special review for the Trust of the
proceedings relating to the issuance of the Bonds or of the bases for such
opinions.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
1) the Trust is not an association taxable as a corporation for Federal
income tax purposes and interest and accrued original issue discount on
the Bonds which is excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status when distributed to
Certificateholders. A Certificateholder's share of the interest on
certain Bonds in the Trust will be included as an item of tax preference
for both individuals and corporations subject to the alternative minimum
tax ("AMT Bonds"). In the case of certain corporations owning Units,
interest and accrued original issue discount with respect to Bonds other
than AMT Bonds held by the Trust may be subject to the alternative minimum
tax, an additional tax on branches of foreign corporations and the
environmental tax (the "Superfund Tax"); and
2) each Certificateholder is considered to be the owner of a pro rata
portion of the Trust under subpart E, subchapter J of Chapter 1 of the
Code and will have a taxable event when the Trust disposes of a Bond or
when the Certificateholder redeems or sells 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 Certificateholder. The
amount of any such gain or loss is measured by comparing the
Certificateholder's pro rata share of the total proceeds from such
disposition with the Certificateholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Certificateholder 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 assets ratably according to
value as of the date of acquisition of the Units. The tax basis reduction
requirements of said Code relating to amortization of bond premium may,
under some circumstances, result in the Certificateholder realizing a
taxable gain when his Units are sold or redeemed for an amount equal to
his original cost. A Certificateholder will realize a taxable gain when
his Units are sold or redeemed for an amount greater than his adjusted
basis in his Units at the time of such sale or redemption.
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 on its issue price (it's
"adjusted issue price"). The application of these rules will also vary
18
depending on the value of the Bond on the date a Certificateholder acquires
his Units and the price the Certificateholder pays for his Units. Investors
with questions regarding these Code sections should consult with their tax
advisers.
"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 pays for Bonds or the price a Certificateholder 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 the Trust holds a Bond would be recognized
as ordinary income by the Certificateholders when principal payments are
received on the Bond, upon sale or at redemption (including early redemption)
or upon the sale or redemption of the Units, unless a Certificateholder elects
to include market discount in taxable income as it accrues. The market
discount rules are complex and Certificateholders should consult their tax
advisers regarding these rules and their application.
Interest on certain "specified private activity bonds" held by the Trust
will be treated as an item of tax preference for purposes of computing the
alternative minimum tax of all Certificateholders of the Trust, including
individuals. As a result, such interest income may be subject to the
alternative minimum tax. The Trust will annually supply Certificateholders
with information regarding the amount of Trust income attributable to those
"specified private activity bonds" held by the Trust that give rise to a
specific item of tax preference. Certificateholders should consult their tax
adviser regarding the potential application of the alternative minimum tax and
the impact of a portion of the Trust's income being characterized as a tax
preference.
For purposes of computing the alternative minimum tax for individuals and
corporations and the Superfund Tax for corporations, interest on certain
private activity bonds (which includes most industrial and housing revenue
bonds) issued on or after August 8, 1986 such as the AMT Bonds, is included as
an item of tax preference.
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, 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 the Bonds in the
Trust. Corporate Certificateholders are urged to consult their tax advisers
with respect to the particular tax consequences to them, including the
corporate alternative minimum tax, Superfund Tax and the branch profits tax
imposed by Section 884 of the Code.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry obligations, the interest on which is wholly exempt from
Federal income taxes, is not deductible. Because each Certificateholder is
19
treated for Federal income tax purposes as the owner of a pro rata share of
the Bonds owned by the Trust, interest on borrowed funds used to purchase or
carry Units of the Trust will not be 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. Federally tax-exempt income, including income on Units of the
Trust, will be taken into consideration in computing the portion, if any, of
social security benefits received that will be included in a taxpayer's gross
income subject to Federal income tax. It should be noted that under the Tax
Act, the proportion of social security benefits subject to inclusion in
taxable income has been raised for taxable years starting in 1994. 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. Investors with questions regarding these issues
should consult with their tax advisers.
For taxpayers other than corporations, net capital gains are subject to a
maximum rate of 28 percent. However, it should be noted that legislative
proposals are made 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.
In the case of certain of the Bonds in the Trust, the opinions of bond
counsel indicate that interest on such securities received by a "substantial
user" of the facilities being financed with the proceeds of these securities,
or persons related thereto, for periods while such securities are held by such
a user or related person, will not be excludable from Federal gross income,
although interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person" are
defined under 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.
NEBRASKA TAXATION. With respect to certain Bonds in the Trust (the
"Nebraska Bonds") which may be held by the Trust, the opinions of bond counsel
to the issuing authorities for such Bonds have indicated that the interest on
such Bonds is included in computing the Nebraska Alternative Minimum Tax
imposed by Section 77-2715 (2) of the Revised Nebraska Statutes (the "Nebraska
Minimum Tax") (the "Nebraska AMT Bonds"). However, although no opinion is
expressed herein regarding such matters, it is assumed that: (i) the Bonds
were validly issued, (ii) the interest thereon is excludable from gross income
for Federal income tax purposes, (iii) none of the Bonds (other than the
Nebraska AMT Bonds, if any) are "specified private activity bonds" the
interest on which is included as an item of tax preference in the computation
of the Alternative Minimum Tax for federal income tax purposes, (iv) interest
on the Nebraska Bonds (other than the Nebraska AMT Bonds, if any), if received
directly by a Unitholder, would be exempt from both the Nebraska income tax,
imposed by Section 77-2714 et. seq. of the Revised Nebraska Statutes (other
than the Nebraska Minimum Tax) (the "Nebraska State Income Tax") and the
Nebraska Minimum Tax imposed by Section 77-2715 (2) of the Revised Nebraska
Statutes (the "Nebraska Minimum Tax") and (v) interest on the Nebraska AMT
Bonds, if any, if received directly by a Certificateholder, would be exempt
from the Nebraska State Income Tax. The opinion set forth below does not
address the taxation of persons other than full time residents of Nebraska.
20
In the opinion of Chapman and Cutler under existing law as of the date of
this Prospectus and based upon the assumptions set forth above:
(1) The Trust is not an association taxable as a corporation, each
Certificateholder of the Trust will be treated as the owner of a pro rata
portion of the Trust, and the income of such portion of the Trust will
therefore be treated as the income of the Certificateholder for both Nebraska
State Income Tax and the Nebraska Minimum Tax purposes;
(2) Interest on the Bonds which is exempt from both the Nebraska State
Income Tax and the Nebraska Minimum Tax when received by the Trust, and which
would be exempt from both the Nebraska State Income Tax and the Nebraska
Minimum Tax if received directly by a Certificateholder, will retain its
status as exempt from such taxes when received by the Trust and distributed to
a Certificateholder;
(3) Interest on the Nebraska AMT Bonds, if any, which is exempt from the
Nebraska State Income Tax but is included in the computation of the Nebraska
Minimum Tax when received by the Trust, and which would be exempt from the
Nebraska State Income Tax but would be included in the computation of the
Nebraska Minimum Tax if received directly by a Certificateholder, will retain
its status as exempt from the Nebraska State Income Tax but included in the
computation of the Nebraska Minimum Tax when received by the Trust and
distributed to a Certificateholder;
(4) Each Certificateholder of the Trust will recognize gain or loss for
both Nebraska State Income Tax and Nebraska Minimum Tax purposes if the
Trustee disposes of a Bond (whether by redemption, sale or otherwise) or if
the Certificateholder redeems or sells Units of the Trust to the extent that
such a transaction results in a recognized gain or loss to such
Certificateholder for Federal income tax purposes;
(5) The Nebraska Sate Income Tax does not permit a deduction for interest
paid or incurred on indebtedness incurred or continued to purchase or carry
Units in the Trust, the interest on which is exempt from such Tax, and
(6) In the case of a Certificateholder subject to the Nebraska financial
institutions franchise tax, the income derived by such Certificateholder from
his pro rata portion of the Bonds held by the Trust may affect the
determination of such Certificateholder's maximum franchise tax.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Trust or the proceedings for the issuance thereof or the opinions
of bond counsel with respect thereto, and therefore express no opinion as to
the exemption from either the Nebraska State Income Tax or the Nebraska
Minimum Tax of interest on the Nebraska Bonds if received directly by a
Certificateholder.
MISSOURI TAXATION. In the opinion of Chapman and Cutler, under Missouri
law, as presently enacted and construed:
(i) The Trust is not an association taxable as a corporation for Missouri
income tax purposes.
(ii) The Certificateholders of the Trust will be treated as the owners of a
pro rata portion of the Trust and the income of the Trust will
therefore be treated as income of the Certificateholders under
Missouri law.
(iii) The Trust will not be subject to the Kansas City, Missouri Earnings and
Profits Tax and each Certificateholder's share of the Trust will not
generally be subject to the Kansas City, Missouri Earnings and Profits
21
Tax or the City of St. Louis Earnings Tax (except in the case of
certain Certificateholders, including corporations, otherwise subject
to the St. Louis City Earnings Tax).
All statements of law in the Prospectus concerning exemption from Federal,
state or other taxes are the opinion of counsel and are to be so construed.
EXPENSES OF THE TRUST
The Sponsor has borne the costs of establishing the Trust, including the
cost of initial preparation, printing and execution of the Indenture and the
certificates, legal and accounting expenses, advertising expenses, selling
expenses, expenses of the Trustee, initial fees for evaluations and other out-
of-pocket expenses, at no cost to the Trust. The Sponsor will not receive any
fees in connection with activities relating to the Trust. However, for
regularly evaluating the portfolio of the Trust, the Evaluator (which is the
Sponsor) will receive that minimum annual fee set forth under "Summary of
Essential Financial Information" which fee is based on the largest aggregate
amount of Bonds in the Trust at any time during such period. This fee may
exceed the actual costs of providing such evaluation services for this Trust,
but at no time will the total amount received for evaluation services rendered
to unit investment trust of which Ranson & Associates, Inc. is the Sponsor in
any calendar year exceed the aggregate cost to the Sponsor of supplying such
services in such year.
The Trustee will receive for ordinary services that annual fee set forth
under "Summary of Essential Financial Information", which fee is based on the
largest aggregate amount of Bonds in the Trust at any time during such period.
Both the Trustee's fee and the evaluation fee paid to the Sponsor may be
adjusted without prior approval from Certificateholders, provided that all
adjustments upward will not exceed the cumulative percentage increase of the
United States Department of Labor's Consumer Price Index or, if such index is
no longer published, in a comparable index. 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). Since the Trustee has the use of the
funds being held in the Principal and Interest Accounts for future
distributions, payment of expenses and redemptions and since such Accounts are
non-interest bearing to Certificateholders, the Trustee benefits thereby.
Part of the Trustee's compensation for its services to the Trust is expected
to result from the use of these funds. For a discussion of the services
rendered by the Trustee pursuant to its obligations under the Indenture, see
"Trustee Information" and "Other Rights of Certificateholders."
The following is a summary of expenses of the Trust which, when owed to
the Trustee, are secured by a lien on the assets of the Trust: 1) the expenses
and costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Certificateholders; 2) any taxes and other
governmental charges upon the Bonds or any part of the Trust (no such taxes or
charges are currently being levied, or, to the knowledge of the Sponsor,
contemplated); 3) amounts payable to the Trustee as fees for ordinary
recurring services and for extraordinary non-recurring services rendered
pursuant to the Indenture and all disbursements and expenses including counsel
fees (including fees of counsel which the Trustee may retain) and auditing
fees sustained or incurred by the Trustee in connection therewith; and 4) any
losses or liabilities accruing to the Trustee without negligence, bad faith or
willful misconduct on its part. The Trustee is empowered to sell Bonds from
the Trust in order to pay these amounts if funds are not available in the
Interest and Principal Accounts. Costs of disbursement (including postage,
checks and handling) of interest, principal and redemption distributions will
be paid by the Trustee and will not be charged to the Trust.
22
EVALUATION OF THE TRUST
As of the opening of business on the Date of Deposit, the price of the
Units was determined on the basis of an initial evaluation of the Bonds in the
Trust prepared by Stern Brothers & Co., a firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities. After
the opening of business on the Date of Deposit and during the period of
initial public offering, the Evaluator, Ranson & Associates, Inc., will
appraise or cause to be appraised daily the value of the underlying Bonds as
of 3:00 P.M. Central time on days the New York Stock Exchange is open and will
adjust the Public Offering Price of the Units commensurate with such
appraisal. Such Public Offering Price will be effective for all orders
received at or prior to 3:00 P.M. Central time on each such day. Orders
received by the Trustee or Sponsor for purchases, sales or redemptions after
that time, or on a day when the New York Stock Exchange is closed, will be
held until the next determination of price. While the Trustee has the power
to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which
determines the Redemption Price per Unit on a daily basis on days the New York
Stock Exchange is open (and on any other days on which Sponsor secondary
market transactions or redemptions occur). Each evaluation of the Trust has
been and will be determined on the basis of cash on hand in the Trust or money
in the process of being collected, the value of the Bonds in the portfolio of
the Trust based on the bid prices of the Bonds and interest accrued thereon
not subject to collection less any taxes or governmental charges payable, any
accrued expenses of the Trust and any cash held for distribution to
Certificateholders. The result of that computation is then divided by the
number of Units outstanding as of the date thereof to determine the per Unit
value of the Trust.
The Evaluator may determine the value of the Bonds in the portfolio of the
Trust 1) on the basis of current bid prices of the Bonds obtained from dealers
or brokers who customarily deal in bonds comparable to those held in the
Trust; 2) if bid prices are not available for any of the Bonds, on the basis
of bid prices for comparable bonds; 3) by causing the value of the Bonds to be
determined by others engaged in the practice of evaluating, quoting or
appraising comparable bonds; or 4) by any combination of the above. Although
the Unit value is based on the bid prices of the Bonds, the Units are sold
initially to the public at the Public Offering Price based on the offering
prices of the Bonds.
The initial or primary Public Offering Price of the Units and the
Sponsor's initial repurchase price per Unit are based on the offering price
per Unit of the underlying Bonds plus the applicable sales charge and any
interest accrued but undistributed. The secondary market Public Offering
Price and the Redemption Price per Unit are based on the bid price per Unit of
the Bonds in the portfolio of the Trust plus the applicable sales charge and
accrued interest. The offering price of Bonds in the portfolio of the Trust
may be expected to range from 1%-2% more than the bid price of such Bonds. On
the Date of Deposit, the offering side evaluation of the Bonds in the
portfolio of the Trust was higher than the bid side evaluation of such Bonds
by 1.0% of the aggregate principal amount of such Bonds.
OTHER RIGHTS OF CERTIFICATEHOLDERS
The Trustee shall furnish Certificateholders in connection with each
distribution a statement of the amount of interest and, if any, the amount of
other receipts (received since the preceding distribution) being distributed,
expressed in each case as a dollar amount representing the pro rata share of
each Unit outstanding. 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 registered Certificateholder of the Trust a
23
statement 1) as to the Interest Account for the Trust; interest received
(including amounts representing interest received upon any disposition of
Bonds), deductions for fees and expenses of the Trust, for purchases of
Replacement Bonds and for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
2) as to the Principal Account for the Trust: the dates of disposition of any
Bonds and the net proceeds received therefrom (excluding any portion
representing accrued interest), the amount paid for purchases of Replacement
Bonds and for redemptions of Units, if any, deductions for payment of
applicable taxes and fees and expenses of the Trustee, and the balance
remaining after such distributions and deductions expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each
Unit outstanding on the last business day of such calendar year; 3) a list of
the Bonds held and the number of Units outstanding on the last business day of
such calendar year; 4) the Redemption Price based upon the last computation
thereof made during such calendar year; and 5) amounts actually distributed
during such calendar year from the Interest Account and from the Principal
Account, separately stated, expressed both as total dollar amounts and as
dollar amounts representing the pro rata share of each Unit outstanding.
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. The
Trustee shall not be required, however, to cause such an audit to be performed
if its cost to the Trust shall exceed $.50 per Unit on an annual basis.
Certificateholders may obtain a copy of such audited financial statements upon
request.
In order to comply with Federal and state tax reporting requirements,
Certificateholders will be furnished, upon request to the Trustee, evaluations
of the Bonds in the Trust furnished to it by the Evaluator.
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee. Ownership
of Units of the Trust is evidenced by separate registered certificates
executed by the Trustee and the Sponsor. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or accompanied by
a written instrument or instruments of transfer. A Certificateholder must
sign exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program in
addition to, or in substitution for, STAMP, as may be accepted by the Trustee.
In certain instances the Trustee may require additional documents such as, but
not limited to, trust instruments, certificates of death, appointments as
executor or administrator or certificates of corporate authority.
Certificates will be issued in denominations of one Unit or any multiple
thereof. Destroyed, stolen, mutilated or lost certificates will be replaced
upon delivery to the Trustee of satisfactory indemnity, evidence of ownership
and payment of expenses incurred. Mutilated certificates must be surrendered
to the Trustee for replacement. Although no such charge is now made or
contemplated, the Trustee may require a Certificateholder to pay a reasonable
fee to be determined by the Trustee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange.
SPONSOR INFORMATION
Ranson & Associates, Inc., an investment banking firm created in 1995 by a
number of former owners and employees of Ranson Capital Corporation, is the
sponsor and successor sponsor of Series 1 - 80 of The Kansas Tax-Exempt Trust
and Multi-State Series 1 - 6 of The Ranson Municipal Trust and is the Sponsor
24
of the Trust. Ranson & Associates, Inc. is the successor to a series of
companies, the first of which was originally organized in Kansas in 1935.
During its history, Ranson & Associates, Inc. and its predecessors have been
active in public and corporate finance and has sold bonds and unit investment
trusts and maintained secondary market activities relating thereto. At
present, Ranson & Associates, Inc., which is a member of the National
Association of Securities Dealers, Inc., is the Sponsor to each of the above-
named unit investment trusts and serves as the financial advisor and as an
underwriter for issuers in the Midwest and Southwest, especially in Kansas,
Missouri and Texas.
The Sponsor's offices are located at 120 South Market, Suite 450, Wichita,
Kansas 67202. As of March 31, 1996, the net capital of Ranson & Associates,
Inc. was $335,765. (This paragraph relates only to the Sponsor and not to any
Series of The Ranson Municipal Trust or to any other dealer. The information
is included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
Dealers will purchase the Units from the Sponsor on the Date of Deposit at
a price equal to the Public Offering Price per Unit less that percentage
indicated under "Public Offering Information." Any reduced sales charge for
quantity purchases as described under "Public Offering Information" will be
the responsibility of the dealer. In addition to that portion of the sales
commission retained by the Sponsor, the Sponsor will realize a profit or
sustain a loss, as the case may be, as a result of the difference between the
price paid for the Bonds by the Sponsor and the cost of such Bonds to the
Trust (which is based on the aggregate offering price of the Bonds in the
portfolio of the Trust on the Date of Deposit as determined by Stern Brothers
& Co.). See "Trust Portfolio." The Sponsor may also realize profits or
sustain losses with respect to Bonds deposited in the Trust which were
acquired by the Sponsor from underwriting syndicates of which it was a member.
The Sponsor has participated as sole underwriter or as manager or as a member
of the underwriting syndicate from which none of the aggregate principal
amount of the Bonds in the portfolio of the Trust was acquired. The Sponsor
may realize additional profit or loss during the initial offering period as a
result of the possible fluctuations in the market value of the Bonds in the
Trust after the Date of Deposit.
As stated under "Redemption and Repurchase of Units," the Sponsor intends
to maintain a secondary market for the Units of the Trust. In so maintaining
a market, the Sponsor will also realize profits or sustain losses in the
amount of any difference between the price at which Units are purchased and
the price at which Units are resold (which price is based on the bid prices of
the Bonds in the Trust and includes a sales charge of 5.50%). In addition,
the Sponsor will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the purchase
price for such Units.
If the Sponsor shall fail to perform any of its duties under the Indenture
or become incapable of acting or become bankrupt or its affairs are taken over
by public authorities, then the Trustee may (i) appoint a successor Sponsor at
rates of compensation deemed by the Trustee to be reasonable and not exceeding
amounts prescribed by the Securities and Exchange Commission, (ii) terminate
the Indenture and liquidate the Trust as provided therein or (iii) continue to
act as Trustee without terminating the Indenture.
25
TRUSTEE INFORMATION
The Trustee, Investors Fiduciary Trust Company, is a trust company
specializing in investment related services, organized and existing under the
laws of Missouri, having its trust office at 127 West 10th Street, Kansas
City, Missouri 64105. The Trustee is subject to supervision and examination
by the Division of Finance of the State of Missouri and the Federal Deposit
Insurance Corporation. The Trustee is a wholly owned subsidiary of State
Street Boston Corporation.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Bonds for the Trust portfolio. The Trustee is
empowered to sell, for the purpose of redeeming Units tendered by any
Certificateholder and for the payment of expenses for which funds may not be
available, such of the Bonds as are designated by the Sponsor as the Trustee
in its sole discretion may deem necessary. The Sponsor is empowered, but not
obligated, to direct the Trustee to dispose of Bonds upon default in payment
of principal or interest, institution of certain legal proceedings, default
under other documents adversely affecting debt service, default in payment of
principal or interest on other obligations of the same issuer, decline in
projected income pledged for debt service on revenue bonds or decline in price
or the occurrence of other market or credit factors, including advance
refunding (i.e., the issuance of refunding securities and the deposit of the
proceeds thereof in trust or escrow to retire the refunded securities on their
respective redemption dates), so that in the opinion of the Sponsor the
retention of such Bonds would be detrimental to the interest of the
Certificateholders. The Sponsor is required to instruct the Trustee to reject
any offer made by an issuer of any of the Bonds to issue new obligations in
exchange or substitution for any Bond pursuant to a refunding or refinancing
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 Bond or
(2) in the written opinion of the Sponsor the issuer will probably default
with respect to such Bond in the reasonably foreseeable future. Any
obligation so received in exchange or substitution will be held by the Trustee
subject to the terms and conditions of the Indenture to the same extent as
Bonds originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the Trustee is
required to give notice thereof to each Certificateholder, identifying the
Bonds eliminated and the Bonds substituted therefor. Except as stated herein
and under "Description of Trust Portfolio" regarding the substitution of
Replacement Bonds for Failed Bonds, the acquisition by the Trust of any
securities other than the Bonds initially deposited is not permitted.
If any default in the payment of principal or interest on any Bond occurs
and no provision for payment is made therefor within 30 days, the Trustee is
required to notify the Sponsor thereof. If the Sponsor fails to instruct the
Trustee to sell or to hold such Bond within 30 days after notification by the
Trustee to the Sponsor of such default, the Trustee may in its discretion sell
the defaulted Bond and not be liable for any depreciation or loss thereby
incurred.
In accordance with the Indenture, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the certificates issued by
the Trust to, every Certificateholder of the Trust. Such books and records
shall be open to inspection by any Certificateholder at all reasonable times
during the 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
26
Federal statute, rule or regulation. The Trustee is required to keep a
certified copy or duplicate original of the Indenture on file in its office
available for inspection at all reasonable times during the usual business
hours by any Certificateholder, together with a current list of the Bonds held
in the Trust.
Under the Indenture, the Trustee or any successor trustee may resign and
be discharged of the trust created by the Indenture 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
Certificateholders 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 remove the Trustee and appoint a
successor trustee as provided in the Indenture at any time or without cause.
Notice of such removal and appointment shall be mailed to each
Certificateholder 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
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a corporation organized under the laws of the United States, or any
state thereof, be authorized under such laws to exercise trust powers and have
at all times an aggregate capital, surplus and undivided profits of not less
than $5,000,000.
UNDERWRITING
<TABLE>
The Underwriters named below have severally purchased Units in the
following respective amounts from the Sponsor.
<CAPTION>
NAME ADDRESS UNITS
- ------------------------------------ ---------------------------------- ------
<S> <C> <C>
Ranson & Associates, Inc. 120 S. Market, Suite 450 1,780
Wichita, Kansas 67202
Edward D. Jones & Co. 201 Progress Parkway 500
Maryland Heights, Missouri 63043
Principal Financial Securities, Inc. The Fountain Place, 1445 Ross Ave. 250
Dallas, TX 75202
</TABLE>
Underwriters and broker-dealers of the Trust are eligible to participate
in a program in which such firms receive from the Sponsor a nominal award for
each of their registered representatives who have sold a minimum number of
units of unit investment trust created by the Sponsor during a specified time
period. In addition, at various times the Sponsor may implement other
programs under which the sales force of an Underwriter, broker or dealer may
be eligible to win other nominal awards for certain sales efforts, or under
which the Sponsor will reallow to any such Underwriter, broker or dealer that
27
sponsors sales contests or recognition programs conforming to criteria
established by the Sponsor, or participates in sales programs sponsored by the
Sponsor, an amount not exceeding the total applicable sales charges on the
sales generated by such person 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 or dealers for certain services or activities which are
primarily intended to result in sales of Units of the Trust. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trust. These programs will not change the price Certificateholders pay
for their Units or the amount that the Trust will receive from the Units sold.
Units may also be sold to dealers at prices representing the per Unit
concession stated under "Public Offering Information." However, resales of
Units by such dealers to the public will be made at the Public Offering Price
described in the Prospectus. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units and the right to change
the amount of the concession from time to
time. Underwriters will acquire Units from the Sponsor based on the amount of
Units underwritten. The concessions from the Public Offering Price will be as
set forth in the following table:
<TABLE>
<CAPTION>
100-249 250-499 Units 500-999 Units 1,000 or More Units
Underwritten Underwritten Underwritten Underwritten
<C> <C> <C> <C>
3.50% 3.60% 3.80% 4.00%
</TABLE>
In addition, the Sponsor has agreed to provide Underwriters with an
additional concession of $2.50 per Unit for committing to underwrite a total
of 1,500 or more Units.
LEGAL AND AUDITING MATTERS
The legality of the Units offered hereby and certain matters relating to
Federal and Nebraska tax law have been passed upon by Chapman and Cutler,
Chicago, Illinois as special counsel for the Sponsor.
The statements of net assets, including the Trust portfolio, of the Trust
at the opening of business on May 15, 1996, the Date of Deposit, appearing in
this Prospectus and Registration Statement have been audited by Allen, Gibbs &
Houlik, L.C., independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL, INC. A
description of the applicable Standard & Poor's rating symbols and their
meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
debt obligation. This assessment may take into consideration obligators such
as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
28
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1) Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
2) Nature of and provisions of the obligation;
3) Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should exercise his
own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal
amount of those bonds where the underlying deposit collateral is fully insured
by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance
Corp.
29
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Their safety is so absolute that, with the occasional exception of oversupply
in a few specific instances, characteristically, their market value is
affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. Their market value is virtually immune to all but money market
influences, with the occasional exception of oversupply in few specific
instances.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree by
economic performance during a sustained period of depressed business
conditions, but, during periods of normalcy, A-rated bonds frequently move in
parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
Baa-Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected or poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. The market value of Baa-rated
bonds is more sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations move in parallel with Aaa, Aa and A obligations during
periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Con. (---)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by a) earnings of projects under construction, b) earnings
of projects unseasoned in operation experience, c) rentals which begin when
facilities are completed, or d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
TAX-EXEMPT/TAXABLE ESTIMATED CURRENT RETURN EQUIVALENTS
As of the date of this Prospectus, the following table shows the
approximate taxable estimated current returns for individuals that are
equivalent to tax-exempt estimated current returns under combined Federal and
30
state taxes, using the published 1996 Federal and Nebraska tax rates scheduled
to be in effect*. The table incorporates increased tax rates for higher-
income taxpayers that were included in the Revenue Reconciliation Act of 1993.
The combined Federal and state tax brackets shown reflect the fact that state
tax payments are deductible for Federal tax purposes and that no deduction of
the Federal tax is claimed for state purposes. The table illustrates
approximately what you would have to earn on taxable investments to equal tax-
exempt estimated current returns in your income tax bracket under present tax
law. Locate your income (after deductions and exemptions), then locate your
tax bracket based on joint or single tax filing. Read across to the
equivalent taxable estimated current return you would need to match tax-free
income. The taxable equivalent estimated current returns may be somewhat
higher than the equivalent returns indicated in the table below for those
individuals who have Adjusted Gross Income in excess of $117,950.
<TABLE>
<CAPTION>
Taxable Income Tax-Exempt Estimated Current Return
- ---------------------------------- ------------------------------------------------------------
Single Joint
Return Return Tax 41/2% 5% 51/2% 6% 61/2% 7% 71/2%
In thousands Bracket Equivalent Taxable Estimated Current Returns
- ---------------------------------- ------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 - 24.00 $ 0 - 40.10 19.50 5.59 6.21 6.83 7.45 8.07 8.70 9.32
24.00 - 58.15 40.10 - 96.90 33.00 6.72 7.46 8.21 8.96 9.70 10.45 11.19
58.15 - 121.30 96.90 - 147.70 35.80 7.01 7.79 8.57 9.35 10.12 10.90 11.68
121.30 - 263.75 147.70 - 263.75 40.50 7.56 8.40 9.24 10.08 10.92 11.76 12.61
Over 263.75 Over 263.75 43.80 8.01 8.90 9.79 10.68 11.57 12.46 13.35
</TABLE>
[FN]
* The table does not reflect the effect of two adjustments designed to phase-
out the advantage of itemized deductions and personal exemptions for higher
income taxpayers. These adjustments, in effect, increase the marginal
Federal tax rate above the stated marginal tax rate by eliminating a
portion of claimed itemized deductions and potentially eliminating entirely
the effect of personal exemptions in determining Taxable Income. The total
impact of the adjustments, which will vary from taxpayer to taxpayer, is
dependent upon the itemized deductions and personal exemptions claimed.
A comparison of tax-free and equivalent taxable estimated current returns with
the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales material compare the then current estimated returns on
the Trust and return over specified periods on other similar Ranson &
Associates, Inc. sponsored unit investment trusts with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs and money
market accounts or money market funds, each of which has investment
characteristics that may differ from those of the Trust. U.S. Government
bonds, for example, are backed by the full faith and credit of the U.S.
Government and bank CDs and money market accounts are insured by an agency of
the federal government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics of the Trust
are described more fully elsewhere in this Prospectus.
31
REPORT OF ALLEN, GIBBS & HOULIK, L.C.
INDEPENDENT AUDITORS
CERTIFICATEHOLDERS
THE RANSON MUNICIPAL TRUST
MULTI-STATE SERIES 7 (THE NEBRASKA TAX-EXEMPT TRUST, SERIES 7):
We have audited the accompanying statement of net assets, including the
Trust portfolio, of The Ranson Municipal Trust, Multi-State Series 7 (The
Nebraska Tax-Exempt Trust, Series 7), as of the opening of business on May
15, 1996, the Date of Deposit. This statement of net assets is the
responsibility of the Trust's Sponsor. Our responsibility is to express an
opinion on this statement of net assets 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 statement of net assets is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of net
assets. Our procedures included confirmation of the Bonds held by the
Trustee at the opening of business on May 15, 1996. An audit also includes
assessing the accounting principles used and significant estimates made by
the Trust's Sponsor, as well as evaluating the overall statement of net
assets presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of The Ranson
Municipal Trust, Multi-State Series 7 (The Nebraska Tax-Exempt Trust, Series
7) at the opening of business on May 15, 1996, in conformity with generally
accepted accounting principles.
ALLEN, GIBBS & HOULIK, L.C.
Wichita, Kansas
May 15, 1996
<TABLE>
THE RANSON MUNICIPAL TRUST
MULTI-STATE SERIES 7 (THE NEBRASKA TAX-EXEMPT TRUST, SERIES 7)
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON MAY 15, 1996, THE DATE OF DEPOSIT
<CAPTION>
TRUST PROPERTY
Investment in securities--
<S> <C>
Bonds deposited in Trust (1) $ 2,403,907
Accrued interest to Date of Deposit on Bonds (2) 28,738
------------
2,432,645
Less distributions payable (2) 28,738
------------
Net assets, applicable to 2,530 outstanding Units of
fractional undivided interest $ 2,403,907
============
<CAPTION>
INTEREST OF CERTIFICATEHOLDERS
<S> <C>
Cost to investors (3) $ 2,527,767
Less sales charge (3) 123,860
------------
Net proceeds to the Trust, equal to net assets $ 2,403,907
============
</TABLE>
[FN]
NOTES:
(1) Aggregate cost to the Trust of the Bonds listed in the Trust Portfolio is
based on offering side evaluations determined by Stern Brothers & Co.
(2) Pursuant to the Indenture, the Trustee will advance funds in the amount of
$30,724 representing the accrued interest to May 20, 1996 (the "First
Settlement Date") and such advance will be distributed to the Sponsor.
(3) The aggregate cost to investors (exclusive of interest) includes a sales
charge computed at the rate of 4.90% of the Public Offering Price
(equivalent to 5.152% of the net amount invested) assuming no reduction of
sales charge for quantity purchases.
32
<TABLE>
THE NEBRASKA TAX-EXEMPT TRUST, SERIES 7
TRUST PORTFOLIO AT THE OPENING OF BUSINESS ON MAY 15, 1996, THE DATE OF DEPOSIT
<CAPTION>
NAME OF ISSUER, TITLE, COUPON RATE
AND MATURITY DATE OF BONDS DEPOSITED
AGGREGATE IN TRUST OR REPRESENTED BY SPONSOR'S REDEMPTION COST OF BONDS
PRINCIPAL(6) CONTRACTS TO PURCHASE BONDS(1)(5) RATINGS(2) PROVISION(3) TO TRUST(4)
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
$@@%% 100,000 The Board of Regents of the University of Nebraska A+ 2001 @ 101.5 $ 98,418
University of Nebraska-Lincoln Student Fees and 2004 @ 100
Facilities Revenue Bonds, Series 1996, 5.50%,
Due 7/1/2012
@@%% 125,000 The Board of Regents of the University of Nebraska A+ 2001 @ 101.5 122,780
University of Nebraska-Lincoln Student Fees and 2004 @ 100
Facilities Revenue Bonds, Series 1996, 5.65%, Due
7/1/2016
* 150,000 City of Kearney, Nebraska Combined Utilities A1# 2001 @ 100 150,000
Revenue Bonds, Series 1996, 5.90% Due 5/15/2016
@@ 600,000 Hospital Authority No. 2 of Douglas County, AAA 2005 @ 102 580,056
Nebraska Health Facilities Revenue Bonds (Catholic 2007 @ 100
Health Corporation) Series 1995C (MBIA Insured)
5.50% Due 11/15/2021
475,000 Hospital Authority No. 1 of Lancaster County, AAA 2002 @ 102 505,291
Nebraska Hospital Revenue Bonds (Bryan Memorial 2004 @ 100
Project) Series 1992 (MBIA Insured) 6.70%
Due 6/1/2022
## 400,000 Nebraska Investment Finance Authority Single Family AAA 2006 @ 101.5 403,000
Housing Revenue Bonds 1996 Series B, 6.30% Due 2008 @ 100
9/1/2027
@@ 600,000 Nebraska Public Power District Power Supply AAA 2005 @ 101 544,362
System Revenue Bonds, 1995 Series A (MBIA 2006 @ 100
Insured) 5.25%, Due 1/1/2028
___________ ___________
$2,450,000 $2,403,907
</TABLE>
[FN]
See "Notes to Trust Portfolio.
33
NOTES TO TRUST PORTFOLIO:
(1) Contracts to acquire Bonds were entered into by the Sponsor during the
period May 1, 1996 through May 10, 1996. All Bonds are represented by
regular way contracts, unless otherwise indicated, for the performance of
which cash or an irrevocable letter of credit has been deposited with the
Trustee.
(2) Securities ratings represent the latest published ratings by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. unless marked with a
"#" in which case the rating is by Moody's Investors Service, Inc. or
unless marked with a "&&" in which case the Sponsor expects Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc. or Moody's Investors
Service, Inc., upon the receipt of an insurance policy obtained by the
issuer, to issue a AAA rating. A brief description of the applicable
Standard & Poor's or Moody's rating symbols and their meanings is set
forth under "Description of Bond Ratings." "N/R" indicates that no rating
has been provided for such Bonds; in the opinion of the Sponsor, these
Bonds have credit characteristics sufficiently similar to the credit
characteristics of interest-bearing tax-exempt obligations that were so
rated as to be acceptable for acquisition by the Trust. "**" indicates
rating is contingent upon receipt by Standard & Poor's of final
documentation.
(3) There is shown under this heading the year in which each issue of Bonds
is initially redeemable and the redemption price for that year or, if
currently redeemable, the redemption price in 1996; 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 Trust 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 a sinking fund is established with respect to an issue of
Bonds.
(4) During the initial offering period, evaluations of the Bonds are made on
the basis of current offering side evaluations of the Bonds. The
aggregate offering price is greater than the aggregate bid price of the
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 Bonds in the Trust, at the opening of
business on the Date of Deposit, is as follows:
<TABLE>
<CAPTION>
COST OF BONDS PROFIT TO ANNUAL INTEREST BID SIDE VALUE
TO SPONSOR SPONSOR INCOME TO TRUST OF BONDS
_____________ ________ ______________ _____________
<C> <C> <C> <C>
$2,380,334 $23,573 $142,938 $2,379,350
</TABLE>
34
(6) Approximately 16% of the aggregate principal amount of the Bonds in the
Trust are subject to the alternative minimum tax. The interest income
from each such Bond will be treated as an item of tax preference for
purposes of computing the alternative minimum tax of all
Certificateholders of the Trust. Each such Bond is identified in the
portfolio with a "##."
%% This Bond is the same issue as another Bond in the portfolio.
@@ This Bond was issued at an original issue discount.
* This Bond is represented by a "when, as and if issued" or "delayed
delivery" contract and has an expected settlement date after the "First
Settlement Date" of the Trust. Interest on this Bond begins accruing to
the benefit of Certificateholders on the date of delivery.
35
ESTIMATED CASH FLOWS TO CERTIFICATEHOLDERS
The table below sets forth the per Unit estimated monthly distribution of
interest and principal to Certificateholders. The table assumes no changes in
expenses, no changes in the current interest rates, no exchanges, redemptions,
sales or prepayments of the underlying Bonds 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.
<TABLE>
SERIES 7
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
- -------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
July 1996 $3.74 $ 0.00 $ 3.74
August 1996 - May 2004 4.48 0.00 4.48
June 2004 4.48 187.75 192.23
July 2004 - February 2008 3.47 0.00 3.47
March 2008 3.47 158.10 161.57
April 2008 - June 2012 2.67 0.00 2.67
July 2012 2.67 39.53 42.20
August 2012 - April 2016 2.49 0.00 2.49
May 2016 2.49 59.29 61.78
June 2016 2.21 0.00 2.21
July 2016 2.21 49.41 51.62
August 2016 - October 2021 1.99 0.00 1.99
November 2021 1.99 237.15 239.14
December 2021 - December 2027 0.95 0.00 0.95
January 2029 0.95 237.15 238.10
</TABLE>
36
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or any dealer. 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.
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
TITLE PAGE
- ----- -----
<S> <C>
General Summary of Information 1
Summary of Essential Financial Information 3
Summary of the Trust 5
Description of Trust Portfolio 7
Objectives of the Trust 11
Estimated Current Return and Estimated Long-Term Return 12
Public Offering Information 13
Accrued Interest 14
Redemption and Repurchase of Units 15
Distribution of Interest and Principal 16
Distribution Reinvestment Option 17
Tax Status (Federal, State, Capital Gains) 18
Expenses of the Trust 22
Evaluation of the Trust 23
Other Rights of Certificateholders 23
Sponsor Information 24
Trustee Information 26
Underwriting 27
Legal and Auditing Matters 28
Description of Bond Ratings 28
Tax-Exempt/Taxable Estimated Current Return Equivalents 30
Report of Allen, Gibbs & Houlik, L.C. Independent Auditors 32
Statement of Net Assets 32
Trust Portfolio 33
Notes to Trust Portfolio 34
Estimated Cash Flows to Unitholders 36
</TABLE>
37
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, evaluator,
rating services and legal counsel
The following exhibits:
1.1 Trust Agreement between Ranson & Associates, Inc., as Depositor, and
Investors Fiduciary Trust Company, as Trustee
3.1 Opinion and consent of Chapman and Cutler, special counsel to the
Depositor, as to legality of securities being registered.
3.2 Opinion of Chapman and Cutler, special counsel to the Depositor, as to
Federal and Nebraska income tax status of securities being registered.
4.1 Consent of Stern Brothers & Co.
4.2 Consent of Allen, Gibbs & Houlik, L.C.
EX-27 Financial Data Schedule.
S-1
SIGNATURES
The Registrant, The Ranson Municipal Trust Multi-State Series 7 hereby
identifies The Ranson Municipal Trust Multi-State 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, The Ranson Municipal Trust Multi-State Series 7, 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 Wichita and State of
Kansas on the 14th day of May, 1996.
THE RANSON MUNICIPAL TRUST MULTI-STATE SERIES 7
(REGISTRANT)
BY RANSON & ASSOCIATES, INC., (DEPOSITOR)
(SEAL)
By John A. Ranson
__________________________________________
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on May 14, 1996.
Signature Title
_________ _____
John A. Ranson President and Director )
__________________
John A. Ranson )
Alex R. Meitzner Chief Executive Officer )
__________________
Alex R. Meitzner and Director )
Robin K. Pinkerton Secretary, Treasurer and ) John A. Ranson
___________________ ____________________
Robin K. Pinkerton and Director ) (Attorney-in-fact)
S-2
EXHIBIT 1.1
THE RANSON MUNICIPAL TRUST MULTI-STATE SERIES 7
TRUST AGREEMENT
Dated: May 15, 1996
This Trust Agreement between Ranson & Associates, Inc., as Depositor,
and Investors Fiduciary Trust Company, 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 The Kansas Tax-
Exempt Trust, Series 67 and Subsequent Series, effective February 15, 1994"
(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 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 Article 1 listed in Schedule A
hereto have been deposited in trust under this Trust Agreement.
(b) The "Initial Date of Deposit" is that date set forth in "Summary
of Essential Financial Information" in the Prospectus.
(c) The "Interest Distribution Date" is that date set forth in
"Summary of Essential Financial Information" and "Distribution of
Interest and Principal" in the Prospectus.
(d) The "Principal Distribution Date" is that date set forth in
"Distribution of Interest and Principal" in the Prospectus.
(e) The "Record Date" is that date set forth in "Distriubtion of
Interest and Principal" in the Prospectus.
(f) The fractional undivided interest in and ownership of the
Trust represented by each unit is the amount set forth under "Summary of
Essential Financial Information - Fractional Undivided Interest in the
Trust per Unit" in the Prospectus.
(g) As provided in Section 4.03 of the Standard Terms and Conditions of
Trust, the Evaluator shall receive compensation in that amount set forth
in the Prospectus under the caption "Summary of Essential Financial
Information - Evaluator's Annual Fee."
(h) As described in Section 8.01(g) of the Standard Terms and Conditions
of Trust, the Trust may be terminated if the value as shown by any Trust
Fund Evaluation shall be less than the liquidation amount specified in
"Summary of Essential Financial Information - Minimum Principal Amount
of Bonds of Trust Under Which Indenture May Be Terminated" in the Prospectus.
(i) As provided in Section 8.05 of the Standard Terms and Conditions of
Trust, the Trustee shall receive compensation in that amount set forth in the
Prospectus under the caption "Summary of Essential Financial Information -
Trustee's Annual Fee," which amount may be periodically adjusted in reponse
to fluctuations in short-term interest rates (reflecting the cost to the
Trustee of advancing funds to the Trusts to meet scheduled distributions).
(j) Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, the term "Ranson Capital Corporation" included therein
shall be deleted and replaced with "Ranson & Associates, Inc."
(k) Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, the Standard Terms and Conditions of Trust shall be
applicable to Ranson Municipal Trust, Multi-State Series 1 and all
subsequent Series.
(l) The First Settlement Date shall be the date set forth under "Summary of
Essential Financial Information - First Settlement Date" in the Prospectus.
- -2-
IN WITNESS WHEREOF, Ranson & Associates, Inc. has caused this Trust
Agreement to be executed by its Chairman or President or one of its Vice
Presidents and Investors Fiduciary Trust Company, has caused this Trust
Agreement to be executed by one of its Officers all as of the day, month and
year first above written.
Ranson & Associates, Inc., Depositor
By JOHN A. RANSON
___________________________
President and Director
Investors Fiduciary Trust Company, Trustee
By Ron Puett
___________________________
Operations Officer
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
THE RANSON MUNICIPAL TRUST MULTI-STATE SERIES 7
(Note: Incorporated herein and made a part hereof is each "Portfolio"
as set forth in the Prospectus.)
May 15, 1996
Ranson & Associates, Inc.
Suite 450
120 South Market Street
Wichita, Kansas 67202
Re: The Ranson Municipal Trust Multi-State Series 7
Ladies/Gentlemen:
We have served as special counsel for Ranson & Associates, Inc., as
Sponsor and Depositor (the "Depositor") of The Ranson Municipal Trust Multi-
State Series 7 (the "Trust"), in connection with the preparation, execution
and delivery of a Trust Agreement dated May 15, 1996, between Ranson &
Associates, Inc., as Depositor, and Investors Fiduciary Trust Company, as
Trustee, pursuant to which the Depositor has delivered to and deposited the
bonds listed in Schedule A to the 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 units of fractional undivided
interest in and ownership of the Trust created under said Trust Agreement.
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 Agreement and the
execution and issuance of certificates evidencing the units of the Trust
have been duly authorized; and
2. The certificates evidencing the units of the Trust when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will constitute
valid and binding obligations of the Trust and the Depositor in
accordance with the terms thereof.
- -2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-03455) 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
May 15, 1996
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Ranson & Associates, Inc.
Suite 450
120 South Market Street
Wichita, Kansas 67202
Re: The Ranson Municipal Trust Multi-State Series 7
Ladies/Gentlemen:
We have acted as special counsel for Ranson & Associates, Inc.,
Depositor of The Ranson Municipal Trust Multi-State Series 7 (the "Fund"), in
connection with the issuance of units of fractional undivided interest in the
Trust, under a Trust Agreement dated May 15, 1996 (the "Indenture")
between Ranson & Associates, Inc., as Depositor, and Investors Fiduciary
Trust Company, 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) The Trust 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 Certificateholder will be considered as owning a pro
rata share of each asset of the Trust in the proportion that the number of
units held by him bears to the total number of units outstanding. Under
subpart E, subchapter J of chapter 1 of the Code, income of the Trust will
be treated as income of each Certificateholder in the proportion
described, and an item of Trust income will have the same character in
the hands of a Certificateholder as it would have in the hands of the
Trustee. Accordingly, to the extent that the income of the Trust consists
of interest excludable from gross income under Section 103 of the Code,
such income will be excludable from Federal gross income of the
- -2-
Certificateholders, except in the case of a Certificateholder who is
a substantial user (or a person related to such user) of a facility
financed through issuance of any industrial development bond or
certain private activity bond held by the Trust. In the case of such
Certificateholder (and no other) interest received with respect to his
units attributable to such industrial development bonds or such private
activity bonds is includible in his gross income. However, the interest
on certain Bonds held by the Trust ("specified private activity bonds,"
within the meaning of Section 57(a)(5) of the Code) shall constitute a
specific item of tax preference for purposes of the alternative minimum
tax applicable to all Certificateholders, including individuals. As a
result, such interest income may be subject to the alternative minimum
tax. Moreover, in the case of certain corporations, interest on all of
the Bonds other than any "specified private activity bonds" (which is
included in computing the alternative minimum tax as described above)
held by the Trust is included in computing the alternative minimum tax
pursuant to Section 56(c) of the Code, and the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code. Interest on all of
the Bonds is included in the computation of 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 Certificateholder
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 Certificate. Before adjustment,
such basis would normally be cost if the Certificateholder had acquired
his units by purchase, plus his aliquot share of advances by the Trustee
to the Trust to pay interest on bonds delivered after the
Certificateholder's settlement date to the extent that such interest
accrued on the bonds during the period from the Certificateholder's
settlement date to the date such bonds are delivered to the Trust, but
only to the extent that such advances are to be repaid to the
Trustee out of interest received by the Trust with respect to such
bonds. In addition, such basis will be increased by the
Certificateholder's aliquot share of the accrued original issue discount
(and market discount if the Certificateholder elects to include market
discount in income as it accrues) with respect to each bond held by
the Trust 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.
(iv) If the Trustee disposes of a Trust asset (whether by
sale, payment on maturity, redemption or otherwise) gain or loss is
recognized to the Certificateholder and the amount thereof is measured
by comparing the Certificateholder'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 assets (as of the date on
which his units were acquired) ratably according to their values as of
the valuation date nearest the date on which he purchased such units. A
Certificateholder's basis in his units and of his fractional interest in
- -3-
each Trust asset must be reduced by the amount of his aliquot share of
interest received by the Trust, if any, on bonds delivered after the
Certificateholder's settlement date to the extent that such interest
accrued on the bonds during the period from the Certificateholder's
settlement date to the date such bonds are delivered to the Trust, must
be reduced by the annual amortization of bond premium, if any, on bonds
held by such Trust and must be increased by the Certificateholder's
share of the accrued original issue discount (and market discount, if
the Certificateholder elects to include market discount in income as
it accrues) 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 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, 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 the
interest on which is excludable from gross income under Section 103 of
the Code, any original issue discount which accrues with respect to the
bonds will be treated as interest which is excludable from gross income
under Section 103 of the Code.
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 Bonds, 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 Certificateholder acquires
his units, and the price the Certificateholder pays for his units.
Because the Trust includes some "specified private activity bonds"
within the meaning of Section 57(a)(5) of the Code issued on or after
August 8, 1986, that portion of the Trust Fund's interest income attributable
to such Bonds shall be treated as a specific item of tax preference when
computing the alternative minimum tax for all taxpayers, including
individuals. 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
- -4-
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 the Trust, 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, 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 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 roles 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 by
taxpayers other than certain financial institutions, as referred to above, 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 deminimus
rule. Market discount can arise based on the price the Trust pays for Bonds or
the price a Certificateholder pays for his or her units. Under the Tax Act,
- -5-
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 the Trust holds a Bond would be recognized as ordinary income by the
Certificateholders when principal payments are received on the Bond, upon sale
or at redemption (including early redemption), or upon the sale or redemption
of his or her units, unless a Certificateholder elects to include market
discount in taxable income as it accrues.
The assets of the Nebraska Tax-Exempt Trust (the "Nebraska Trust") will
consist of interest-bearing obligations issued by or on behalf of the State of
Nebraska (the "State") or counties, municipalities, authorities or political
subdivisions thereof (the "Nebraska Bonds") or by the Commonwealth of Puerto
Rico, Guam and the United States Virgin Islands (the "Possession Bonds")
(collectively, the "Bonds"). With respect to certain Nebraska Bonds which may
be held by the Nebraska Trust, the opinions of bond counsel to the issuing
authorities for such bonds have indicated that the interest on such bonds is
included in computing the Nebraska alternative minimum tax imposed by Section
77-2715(2) of the Revised Nebraska Statutes (the "Nebraska Minimum Tax") (the
"Nebraska AMT Bonds").
Although we express no opinion with respect to the issuance of the
Bonds, in rendering our opinion expressed herein, we have assumed that: (i)
the Bonds were validly issued, (ii) the interest thereon is excludable from
gross income for federal income tax purposes, (iii) none of the Bonds (other
than the Nebraska AMT Bonds, if any) are "specified private activity bonds"
the interest on which is included as an item of tax preference in the
computation of the alternative minimum tax for federal income tax purposes,
(iv) interest on the Nebraska Bonds (other than the Nebraska AMT Bonds, if
any), if received directly by a Certificateholder, would be exempt from both
the Nebraska income tax, imposed by Section 77-2714 et. seq. of the Revised
Nebraska Statutes (other than the Nebraska Minimum Tax) (the "Nebraska State
Income Tax") and the Nebraska Minimum Tax, if any, and (v) interest on the
Nebraska AMT Bonds, if received directly by a Certificateholder, would be
exempt from the Nebraska State Income Tax. This opinion does not address
the taxation of persons other than full time residents of Nebraska.
Based on the foregoing, and based on review and consideration of
existing laws of the State as of this date, it is our opinion, and we
herewith advise you, as follows:
(1) the Nebraska Trust is not an association taxable as a
corporation, each Certificateholder of the Nebraska Trust will be
treated as the owner of a pro rata portion of the Trust, and the income
of such portion of the Nebraska Trust will therefore be treated as the
income of the Certificateholder for both Nebraska State Income Tax and
Nebraska Minimum Tax purposes;
(2) interest on the Bonds which is exempt from both the
Nebraska State Income Tax and the Nebraska Minimum Tax when received by
the Nebraska Trust, and which would be exempt from both the Nebraska
State Income Tax and the Nebraska Minimum Tax if received directly by a
- -6-
Certificateholder, will retain its status as exempt from such taxes when
received by the Nebraska Trust and distributed to a Certificateholder;
(3) interest on the Nebraska AMT Bonds, if any, which is exempt from
the Nebraska State Income Tax but is included in the computation of the
Nebraska Minimum Tax when received by the Nebraska Trust, and which
would be exempt from the Nebraska State Income Tax but would be included
in the computation of the Nebraska Minimum Tax if received directly by a
Certificateholder, will retain its status as exempt from the Nebraska
State Income Tax but included in the computation of the Nebraska Minimum
Tax when received by the Nebraska Trust and distributed to a
Certificateholder;
(4) to the extent that interest derived from the Nebraska
Trust by a Certificateholder with respect to any Possession Bonds is
excludable from gross income for Federal income tax purposes pursuant to
48 U.S.C. Section 745, 48 U.S.C. Section 1423 and 48 U.S.C. Section 1403,
such interest will not be subject to either the Nebraska State Income Tax
or the Nebraska Minimum Tax;
(5) each Certificateholder of the Nebraska Trust will
recognize gain or loss for both Nebraska State Income Tax and Nebraska
Minimum Tax purposes if the Trustee disposes of a bond (whether by
redemption, sale or otherwise) or if the Certificateholder redeems or
sells Units of the Nebraska Trust to the extent that such a transaction
results in a recognized gain or loss to such Certificateholder for
Federal income tax purposes;
(6) the Nebraska State Income Tax does not permit a deduction
for interest paid or incurred on indebtedness incurred or continued to
purchase or carry Units in the Nebraska Trust, the interest on which is
exempt from such Tax; and
(7) in the case of a Certificateholder subject to the State
financial institutions franchise tax, the income derived by such
Certificateholder from his pro rata portion of the Bonds held by the
Nebraska Trust may affect the determination of such Certificateholder's
maximum franchise tax.
We have not examined any of the Bonds to be deposited and held in the
Nebraska Trust or the proceedings for the issuance thereof or the opinions
of bond counsel with respect thereto, and therefore express no opinion as
to the exemption from either the Nebraska State Income Tax or the Nebraska
Minimum Tax of interest on the Nebraska Bonds if received directly by a
Certificateholder.
We have also examined the laws of the State of Missouri to determine
their applicability to the Trust. It is our opinion that under Missouri law,
as presently enacted and construed:
- -7-
(i) The Trust is not an association taxable as a corporation
for Missouri income tax purposes.
(ii) The Certificateholders of the Trust will be treated as
the owners of a pro rata portion of such Trust and the income of the
Trust will therefore be treated as income of the Certificateholders
under Missouri law.
(iii) The Trust will not be subject to the Kansas City,
Missouri Earnings and Profits Tax and each Certificateholder's share of
income of the Trust will not generally be subject to the Kansas City,
Missouri Earnings and Profits Tax or the City of St. Louis Earnings Tax
(except in the case of certain Certificateholders, including
corporations, otherwise subject to the St. Louis City Earnings Tax).
Very truly yours,
CHAPMAN AND CUTLER
MJK/mat
EXHIBIT 4.1
May 14, 1996
Mr. Brian Free
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
Re: The Ranson Municipal Trust Multi-State Series 7
(The Nebraska Tax-Exempt Trust, Series 7)
CUSIP #639701168
(File No. 333-03455)
Dear Brian:
It is our understanding that a Registration Statement has been filed with the
Securities and Exchange Commission relating to units of the subject fund.
Attached you will find our initial evaluation. Pursuant to said
evaluation, the total bid side value of the Bonds in The Nebraska Tax-Exempt
Trust, Series 7 is $2,379,350, the ask side value is $2,403,907.
This letter will evidence our consent to the use of our name on the subject
registration statement as the initial evaluator of the securities in the
portfolio of the subject trust.
Sincerely,
STERN BROTHERS & CO.
/s/ James Howk
--------------------
K. James Howk
Managing Director
JH:asm
EXHIBIT 4.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm as experts under the
caption "Legal and Auditing Matters" and to the use of our report
dated May 15, 1996 in Amendment No. 1 to the Registration
Statement (Form S-6 File No. 333-03455) and related Prospectus of
The Ranson Municipal Trust Multi-State Series 7.
ALLEN, GIBBS & HOULIK
Wichita, Kansas
May 15, 1996
<TABLE> <S> <C>
<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>
<NUMBER> 07
<NAME> THE RANSON MUNICIPAL TRUST MULTI-STATE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-15-1996
<PERIOD-START> MAY-15-1996
<PERIOD-END> MAY-15-1996
<INVESTMENTS-AT-COST> 2,403,907
<INVESTMENTS-AT-VALUE> 2,403,907
<RECEIVABLES> 28,738
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,432,645
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (28,738)
<TOTAL-LIABILITIES> (28,738)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,403,907
<SHARES-COMMON-STOCK> 2,530
<SHARES-COMMON-PRIOR> 2,530
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,403,907
<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>
