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Tobacco Bond Report

In 1998, 46 States settled a major case against the Tobacco industry. The agreement was for approximately $205 Billion for 25 years. It is referred to the Master Settlement Agreement (or MSA.) Tobacco companies are to pay States and so on shares of these monies based on proportions and percentages. Your brokers should have plenty of available research explaining this...if your brokers have no knowledge of or research on the Tobacco industry case and MSA then it is time find a new broker. This has been a big thing in Government, business and Wall St.

The reason the Securities industry has become so involved is that States, and various Counties in a few States, have opted to securitize their payments from the MSA. What this means is they have issued Municipal Bonds and taken an early lump sum payment instead of waiting for the Tobacco industry payments to come in over time.

For Municipal Bond investors, the underlying security for your Tobacco Bonds, therefore, are the payments made by Tobacco companies to States as called for and agreed to under the 1998 MSA. The risk for Municipal Bond investors is the strength of the Tobacco industry, cigarette sales and so on. Your interest payments and principal return are based on it.

"Light" Cigarettes, "Escrow Statutes"
In addition to asking your brokers for information about the 1998 MSA, ask your brokers for information about the 2003 Illinois court decision regarding "light" cigarettes as well as the pending New York State case regarding "escrow statutes."

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