As filed with the Securities and Exchange Commission on January 28, 2000
Registration No. 33-64253*
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4**
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: EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 124, GUARANTEED SERIES 125,
GUARANTEED SERIES 126 AND GUARANTEED SERIES 133
B. Name of depositors: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
C. Complete address of depositors' principal executive offices:
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 East 43rd Street 120 Broadway
New York, NY 10017 New York, NY 10271
D. Name and complete address of agent for service:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL Copy of comments to:
Glickenhaus & Co. Lebenthal & Co., Inc. MICHAEL R. ROSELLA, ESQ.
6 East 43rd Street 120 Broadway Battle Fowler LLP
New York, NY 10017 New York, NY 10271 75 East 55th Street
New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/x/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on ( date ) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
================================================================================
* The Prospectus included in this Registration Statement constitutes a combined
Prospectus as permitted by the provisions of Rule 429 of the General Rules and
Regulations under the Securities Act of 1933 (the "Act"). Said Prospectus
covers units of undivided interest in Empire State Municipal Exempt Trust,
Guaranteed Series 124, Guaranteed Series 125, Guaranteed Series 126 and
Guaranteed Series 133 covered by prospectuses heretofore filed as part of
separate registration statements on Form S-6 (Registration Nos. 33-64253, 333-
00549, 333-00551 and 333-17301, respectively) under the Act.
**This Filing constitutes Post-Effective Amendment No. 4 for Guaranteed Series
124, Guaranteed Series 125, and Guaranteed Series 126, and Post-Effective
Amendment No. 3 for Guaranteed Series 133.
433537.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
Prospectus, Part I 9,005 Units Dated: January 28, 2000
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a
"Summary of Essential Financial Information" on the reverse hereof as of October
29, 1999 and a summary of additional specific information including "Special
Factors Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of September 30, 1999. The second part
of this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
The Trust is a unit investment trust formed for the purpose of
obtaining tax-exempt interest income through investment in a diversified,
insured portfolio of long-term bonds, issued by or on behalf of the State of New
York and counties, municipalities, authorities or political subdivisions thereof
or issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies ("Standard & Poor's").
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income on the Bonds that is
exempt from New York State and New York City income taxes will generally be
exempt from New York State and New York City personal income taxes in the hands
of the Unit holders. Capital gains, if any, are subject to tax. See Part II
under Tax Status."
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid
price of the Securities in the Trust divided by the number of Units outstanding,
plus a sales charge determined on the basis of the maturities of the Securities
in the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do
so, intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.
446883.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 124
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
<TABLE>
<S> <C>
Aggregate Principal Amount of Bonds in the Trust: $ 9,050,000
Number of Units: 9,005
Fractional Undivided Interest in the Trust Per Unit: 1/9,005
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $ 8,021,472.44
Sponsors' Repurchase Price Per Unit: $ 890.78
Plus Sales Charge(1): 55.99
Public Offering Price Per Unit(2): $ 946.77
Redemption Price Per Unit(3): $ 890.78
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 55.99
Weighted Average Maturity of Bonds in the Trust: 24.717 years
</TABLE>
Evaluation Time: 2:00 p.m., New York Time, on the next day
following receipt by a Sponsor of an order
for a Unit sale or purchase or by the
Trustee of a Unit tendered for redemption.
Annual Insurance Premium: $1,300
Evaluator's Fee: $.55 for each issue of Bonds in the Trust
for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds
in the Trust, $1.37 under the monthly and
$.97 under the semi-annual distribution
plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of
underlying Securities.
Date of Deposit: January 18, 1996
Date of Trust Agreement: January 18, 1996
Mandatory Termination Date: December 31, 2045
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust Agreement
may be Terminated: $2,000,000 or 20% of the value of the Trust
as of the date of deposit, whichever is
lower.
2
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 124
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
(Continued)
<TABLE>
<S> <C> <C
Monthly Semi-annual
P Estimated Annual Interest Income: $52.05 $52.05
Less Annual Premium on Portfolio Insurance .14 .14
E Less Estimated Annual Expenses 2.14 1.67
Less Organizational Costs .47 .47
R Estimated Net Annual Interest Income: $49.30 $49.77
U Estimated Interest Distribution: $ 4.11 $24.89
N Estimated Current Return Based on Public
Offering Price (4): 5.21% 5.26%
I
Estimated Long-Term Return Based
T on Public Offering Price (5): 5.41% 5.47%
Estimated Daily Rate of Net Interest
Accrual: $ .13694 $ .13825
Record Dates: 15th Day of 15th Day
Month of May and
November
Payment Dates: 1st Day of 1st Day
Month of June and
December
___________________
</TABLE>
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
2. Plus accrued interest to November 3, 1999, the expected date of
settlement, of $2.47 monthly and $23.29 semi-annually.
3. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net
annual interest income received in cash per Unit by the Public Offering
Price. Interest income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator, and with the redemption,
maturity, exchange or sale of Securities. This calculation, which
includes cash income accrual only, does not include discount accretion on
original issue discount bonds or on zero coupon bonds or premium
amortization on bonds purchased at a premium. See "Tax Status" and
"Estimated Current Return and Estimated Long-Term Return to Unit Holders"
in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes
into account the yields (including accretion of discounts and
amortization of premiums) of the individual Bonds in the Trust's
portfolio, weighted to reflect the market value and time to maturity (or,
in certain cases, to earlier call date) of such Bonds, adjusted to
reflect the Public Offering Price (including sales charge and expenses)
per Unit. See "Estimated Current Return and Estimated Long-Term Return to
Unit Holders" in Part II of this Prospectus.
3
<PAGE>
Portfolio Information
On September 30, 1999, the bid side valuation of 76.8% of the aggregate
principal amount of Bonds in the Portfolio for this Trust was at a discount from
par and 23.2% was at a premium over par. See Note (B) to "Tax-Exempt Bond
Portfolio" for information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
On September 30, 1999, the Portfolio consisted of six issues of Bonds
issued by entities located in New York or certain United States territories or
possessions. The following information is being supplied to inform Unit Holders
of circumstances affecting the Trust. 7.2% of the aggregate principal amount of
the Bonds in the Portfolio are general obligations of the governmental entities
issuing them and are backed by the taxing power thereof. 92.8% of the aggregate
principal amount of the Bonds in the Portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes.
Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and the purpose of issue are as follows: General Obligation, one (7.2%);
Revenue: Health Care, two (37.6%); Water and Sewer, one (15.4%); Transportation,
one (23.2%); and Higher Education, one (16.6%). The Trust is deemed to be
concentrated in the Health Care Bond category.1 All of the Bonds in the
Portfolio are original issue discount bonds of which one is a zero coupon bond.
Five issues (92.8%) were rated AAA, and one issue (7.2%) was rated A- by
Standard & Poor's.2 Subsequent to such date, such ratings may have changed. See
"Tax-Exempt Bond Portfolio." For a more detailed discussion, it is recommended
that Unit Holders consult the official statements for each Security in the
Portfolio of the Trust.
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
Tax Status
Interest on the Bonds in the Trust Portfolio is generally exempt from
federal income taxes. It is also generally exempt from New York State and local
personal income taxes. Bond counsel to the issuing governmental authorities
delivered their opinions confirming the tax-exempt status of the interest on the
dates of issuance of the Bonds. See "The Trust -- Portfolio" in Part II of this
Prospectus.
In the opinion of counsel to the sponsor, the Trust is not treated as a
separate taxable entity, and instead the Unit Holders will be treated as owning
the Trust's assets and as receiving the Trust's income.
Gain or loss realized on a sale, maturity or redemption of the Bonds by
the Trust or on a sale or redemption of a Unit by a Unit Holder must be taken
into account for federal, state and local income tax purposes. It will be
capital gain or loss if the Units are held as capital assets and will be
long-term if the Units (and the Bonds) have been held for more than one year.
The gain or loss on disposition does not include any amount received that is
attributable to accrued interest or earned original issue discount (which is
generally treated as tax-exempt interest) or any accrued market discount (which
is generally treated as ordinary income). Long-term capital gains realized by
noncorporate taxpayers are taxed at a maximum federal income tax rate of 20%
while ordinary income and short-term capital gains received by noncorporate
taxpayers will be taxed at regular federal income tax rates of up to 39.6%.
___________________
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part
II of this Prospectus.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 124:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 124, including the tax-exempt bond
portfolio, as of September 30, 1999, and the related statements of operations
and changes in net assets for the years ended September 30, 1999, 1998 and 1997.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1999, by correspondence
with the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 124 as of September 30, 1999, and the results of its
operations and changes in net assets for the years ended September 30, 1999,
1998 and 1997 in conformity with generally accepted accounting principles.
5
<PAGE>
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
October 29, 1999
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1999
===============================================================================
ASSETS:
<TABLE>
<S> <C>
INVESTMENTS IN SECURITIES,
at market value (cost $8,608,996) (Note 1) ..... $8 389 546
ACCRUED INTEREST RECEIVABLE........................... 96 578
ORGANIZATIONAL COSTS, net of accumulated
amortization of $15,477 (Note 1)................ 5 629
Total trust property............................ 8 491 753
LESS - ACCRUED EXPENSES AND OTHER LIABILITIES......... 47 444
NET ASSETS............................................ $8 444 309
</TABLE>
NET ASSETS REPRESENTED BY:
<TABLE>
<S> <C> <C> <C>
Monthly Semi-annual
distribution distribution
plan plan Total
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS...................... $6 001 456 $2 357 417 $8 358 873
UNDISTRIBUTED NET INVESTMENT
INCOME......................... 37 768 47 668 85 436
Total value.............. $6 039 224 $2 405 085 $8 444 309
UNITS OUTSTANDING.................. 6 479 2 545 9 024
VALUE PER UNIT..................... $ 932.12 $ 945.02
</TABLE>
See Notes to Financial Statements
6
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
STATEMENTS OF OPERATIONS
===============================================================================
<TABLE>
<S> <C> <C> <C>
Year ended September 30,
1999 1998 1997
INVESTMENT INCOME - INTEREST.............. $ 486 314 $516 235 $519 594
EXPENSES:
Trustee fees.......................... 13 460 14 026 13 983
Evaluation fees....................... 822 979 904
Insurance premiums.................... 1 300 1 300 1 300
Sponsors' advisory fees............... 2 769 2 208 2 495
Auditors' fees........................ 1 800 1 800 1 800
Amortization of organizational
costs (Note 1).................. 4 221 4 221 4 435
Total expenses........ 24 372 24 534 24 917
NET INVESTMENT INCOME..................... 461 942 491 701 494 677
REALIZED GAIN (LOSS) ON SECURITIES
SOLD OR REDEEMED (Notes 1 and 3)...... 15 415 6 476 (1 932)
NET CHANGE IN UNREALIZED MARKET
APPRECIATION (DEPRECIATION) (Note 1).. (762 218) 430 006 453 209
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS...... $(284 861) $928 183 $945 954
</TABLE>
See Notes to Financial Statements
7
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<S> <C> <C> <C>
Year ended September 30,
1999 1998 1997
OPERATIONS:
Net investment income........................... $ 461 942 $ 491 701 $ 494 677
Realized gain (loss) on securities sold or
redeemed (Notes 1 and 3)..................... 15 415 6 476 (1 932)
Net change in unrealized market appreciation
(depreciation) (Note 1)...................... (762 218) 430 006 453 209
Net increase (decrease) in net assets
resulting from operations............ (284 861) 928 183 945 954
DISTRIBUTIONS TO UNIT HOLDERS (Note 2):
Net investment income........................... (471 431) (492 792) (497 103)
CAPITAL SHARE TRANSACTIONS:
Redemption of 705, 172 and 99 units at
September 30, 1999, 1998 and 1997,
respectively................................... (704 107) (171 394) (93 748)
NET INCREASE (DECREASE) IN NET
ASSETS............................................. (1 460 399) 263 997 355 103
NET ASSETS:
Beginning of period............................. 9 904 708 9 640 711 9 285 608
End of period................................... $ 8 444 309 $9 904 708 $9 640 711
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan................................ $ 49.65 $ 49.55 $ 49.57
Semi-annual plan............................ $ 50.15 $ 50.06 $ 50.06
</TABLE>
See Notes to Financial Statements
8
<PAGE>
EPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
NOTES TO FINANCIAL STATEMENTS
===============================================================================
The Trust is a unit investment trust formed under the Investment Company Act of
1940 for the purpose of obtaining tax-exempt interest income through investment
in a fixed insured portfolio of long-term bonds, issued primarily by or on
behalf of the State of New York and counties, municipalities, authorities or
political subdivisions thereof.
The Bank of New York (the "Trustee") has custody of and responsibility for the
accounting records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on the
accrual basis.
NOTE 1 - ACCOUNTING POLICIES
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator. Securities transactions are recorded on the trade
date. The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
Termination of Trust
The mandatory termination date of the Trust is December 31, 2045. If the
value of the Trust falls below $2,000,000 or 20% of the value of the Trust as of
the date of deposit, whichever is lower, the Trust is subject to termination as
specified in the Trust Agreement.
Organizational costs
Organizational costs are being amortized over a period of five years
using the straight-line method.
Value per unit
Included in value per unit is undistributed net investment income per
unit. This represents income earned and accrued to each unit less amounts
distributed to the Unit Holder. The last income distribution dates were
September 1 and June 1, 1999 for Unit Holders electing monthly or semi-annual
distributions, respectively, resulting in a higher value per unit for those
electing semi-annual distributions than those electing monthly distributions.
9
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
NOTES TO FINANCIAL STATEMENTS
===============================================================================
(Continued)
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit Holders either
semi-annually on the first day of June and December or, if elected by the Unit
Holder, on the first day of each month after deducting applicable expenses.
NOTE 3 - BONDS SOLD OR REDEEMED
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Port-
folio Principal Date Net Realized
No. Description Amount Redeemed Proceeds Cost Gain (Loss)
Year ended September 30, 1999:
3 Dormitory Authority of the State $ 80 000 10/23/98 $ 81 800 79 080 $ 2 720
of New York University of 205 000 5/17/99 207 050 202 642 4 408
Rochester, Strong Memorial
Hospital Revenue Bonds
1994 (MBIA Insured)
1 Buffalo and Fort Erie Public 50 000 11/23/98 52 575 51 150 1 425
Bridge Authority Toll Bridge
System Revenue Bond Series
1995 (MBIA Insured)
2 New York State Medical Care 170 000 12/16/98 177 395 171 700 5 695
Facilities Finance Agency, FHA - 65 000 5/04/99 67 438 65 650 1 788
Insured Mortgage Revenue
Bonds, 1993 Series A, St. Luke's -
Roosevelt Hospital Center
(MBIA Insured)
4 New York City Municipal Water 90 000 6/10/99 89 280 89 901 (621)
Finance Authority Water &
Sewer System Revenue Bonds,
Fixed Rate Fiscal 1994 Series F
(MBIA Insured)
$660 000 $675 538 $660 123 $15 415
</TABLE>
10
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
NOTES TO FINANCIAL STATEMENTS
===============================================================================
(Concluded)
NOTE 4 - NET ASSETS
<TABLE>
<S> <C>
Cost of 10,000 units at Date of Deposit $ 10 018 503
Less gross underwriting commission 490 890
Net cost - initial offering price 9 527 613
Realized net gain on securities sold or redeemed 19 959
Redemption of 976 units (969 249)
Unrealized market depreciation of securities (219 450)
Undistributed net investment income 85 436
Net assets $ 8 444 309
</TABLE>
11
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 124
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
===============================================================================
Redemption Features
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 to Trust
1 AAA $2 110 000 Buffalo & Fort Erie 5.750% 01/01/25 1/01/16 @ 100 Ant. $2 158 530 $2 111 013 $121 325
Public Bridge Authority 01/01/05 @ 101 Opt.
Toll Bridge System
Revenue Bond Series
1995 (MBIA Insured)
2 AAA 1 765 000 New York State Medical 5.700 02/15/29 02/15/19 @ 100 Ant. 1 782 650 1 716 339 100 605
Care Facilities Finance 08/15/03 @ 102 Opt.
Agency, FHA-Insured
Mortgage Revenue
Bonds, 1993 Series A,
St. Luke's - Roosevelt
Hospital Center
(MBIA Insured)
3 AAA 1 505 000 Dormitory Authority of 5.500 07/01/21 07/01/18 @ 100 Ant. 1 487 693 1 447 659 82 775
the State of New York 07/01/04 @ 102 Opt.
University of Rochester,
Strong Memorial Hospi-
tal Revenue Bonds,
Series 1994 (MBIA
Insured)
4 AAA 1 400 000 New York City Muni- 5.500 06/15/23 06/15/21 @ 100 Ant. 1 398 460 1 353 128 77 000
cipal Water Finance 06/15/04 @ 101.5 Opt.
Authority Water &
Sewer System Revenue
Bonds, Fixed Rate
Fiscal 1994 Series F
(MBIA Insured)
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 to Trust
5 AAA $1 650 000 New York State 5.375% 02/15/25 02/15/15 @ 100 Ant. $1 598 850 $1 543 839 $ 88 688
Medical Care Facilities 02/15/04 @ 102 Opt.
Finance Agency Hospital
Insured Mortgage
Revenue Bonds, 1994
Series A Refunding
(MBIA Insured)
6 A- 650 000 The City of New York 0.000 08/01/18 No Sinking Fund 182 813 217 568 -
General Obligation No Optional Call
Bonds, Fiscal 1994
Series E
$9 080 000 $8 608 996 $8 389 546 $470 393
</TABLE>
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings are
by Standard & Poor's. Certain bond ratings have changed since the Date of
Deposit, at which time all such bonds were rated A or better by either
Standard & Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund (mandatory
partial redemption) (S.F.) or at the stated optional call (at the option
of the issuer) (Opt.) or by refunding. Certain bonds in the portfolio may
be redeemed earlier than dates shown in whole or in part under certain
unusual or extraordinary circumstances as specified in the terms and
provisions of such bonds.
13
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
Prospectus, Part I 8,573 Units Dated: January 28, 2000
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a
"Summary of Essential Financial Information" on the reverse hereof as of October
29, 1999 and a summary of additional specific information including "Special
Factors Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of September 30, 1999. The second part
of this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
The Trust is a unit investment trust formed for the purpose of
obtaining tax-exempt interest income through investment in a diversified,
insured portfolio of long-term bonds, issued by or on behalf of the State of New
York and counties, municipalities, authorities or political subdivisions thereof
or issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies ("Standard & Poor's").
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income on the Bonds that is
exempt from New York State and New York City income taxes will generally be
exempt from New York State and New York City personal income taxes in the hands
of the Unit holders. Capital gains, if any, are subject to tax. See Part II
under Tax Status."
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid
price of the Securities in the Trust divided by the number of Units outstanding,
plus a sales charge determined on the basis of the maturities of the Securities
in the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do
so, intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.
446884.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 125
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 8,645,000
Number of Units(1): 8,573
Fractional Undivided Interest in the Trust Per Unit: 1/8,573
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $7,755,421.35
Sponsors' Repurchase Price Per Unit: $ 904.66
Plus Sales Charge(2): 53.11
Public Offering Price Per Unit(3): $ 957.77
Redemption Price Per Unit(4): $ 904.66
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 53.11
Weighted Average Maturity of Bonds in the Trust: 19.744 years
Evaluation Time: 2:00 p.m., New York Time, on the next day
following receipt by a Sponsor of an order
for a Unit sale or purchase or by the Trustee
of a Unit tendered for redemption.
Annual Insurance Premium: $1,680
Evaluator's Fee: $.55 for each issue of Bonds in the Trust for
each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds in
the Trust, $1.35 under the monthly and $.95
under the semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of
underlying Securities.
Date of Deposit: February 9, 1996
Date of Trust Agreement: February 9, 1996
Mandatory Termination Date: December 31, 2045
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust Agreement
may be Terminated: $2,000,000 or 20% of the value of the Trust
as of the date of deposit, whichever is
lower.
2
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 125
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
(Continued)
Monthly Semi-annual
P Estimated Annual Interest Income: $51.86 $51.86
Less Annual Premium on Portfolio Insurance .20 .20
E Less Estimated Annual Expenses 2.54 1.96
Less Organizational Costs .40 .40
R Estimated Net Annual Interest Income: $48.72 $49.30
U Estimated Interest Distribution: $ 4.06 $24.65
N Estimated Current Return Based on Public
Offering Price (5): 5.09% 5.15%
I
Estimated Long-Term Return Based
T on Public Offering Price (6): 5.30% 5.36%
Estimated Daily Rate of Net Interest
Accrual: $.13533 $.13694
Record Dates: 15th Day of 15th Day of May
Month and November
Payment Dates: 1st Day of 1st Day of June
Month and December
___________________
1. The number of units is expressed in whole numbers with no adjustment for
fractional units.
2. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
3. Plus accrued interest to November 3, 1999, the expected date of
settlement, of $2.44 monthly and $23.00 semi-annually.
4. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
5. Estimated Current Return is calculated by dividing the estimated net
annual interest income received in cash per Unit by the Public Offering
Price. Interest income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator, and with the redemption,
maturity, exchange or sale of Securities. This calculation, which
includes cash income accrual only, does not include discount accretion on
original issue discount bonds or on zero coupon bonds or premium
amortization on bonds purchased at a premium. See "Tax Status" and
"Estimated Current Return and Estimated Long-Term Return to Unit Holders"
in Part II of this Prospectus.
6. Estimated Long-Term Return is calculated by using a formula that takes
into account the yields (including accretion of discounts and
amortization of premiums) of the individual Bonds in the Trust's
portfolio, weighted to reflect the market value and time to maturity (or,
in certain cases, to earlier call date) of such Bonds, adjusted to
reflect the Public Offering Price (including sales charge and expenses)
per Unit. See "Estimated Current Return and Estimated Long-Term Return to
Unit Holders" in Part II of this Prospectus.
3
<PAGE>
Portfolio Information
On September 30, 1999, the bid side valuation of 66.0% of the aggregate
principal amount of Bonds in the Portfolio for this Trust was at a discount from
par and 34.0% was at a premium over par. See Note (B) to "Tax-Exempt Bond
Portfolio" for information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
On September 30, 1999, the Portfolio consisted of six issues of Bonds
issued by entities located in New York or certain United States territories or
possessions. The following information is being supplied to inform Unit Holders
of circumstances affecting the Trust. 7.6% of the aggregate principal amount of
the Bonds in the Portfolio are general obligations of the governmental entities
issuing them and are backed by the taxing power thereof. 92.4% of the aggregate
principal amount of the Bonds in the Portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes.
Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and the purpose of issue are as follows: General Obligation, one (7.6%);
Revenue: Health Care, two (53.5%); Water and Sewer, one (25.3%); Transportation,
one (8.8%); and Utility, one (4.8%). The Trust is deemed to be concentrated in
the Health Care and Water and Sewer Bonds categories.1 All of the Bonds in the
Portfolio are original issue discount bonds of which one is a zero coupon bond.
Five issues (92.4%) were rated AAA, and one issue (7.6%) was rated A- by
Standard & Poor's.2 Subsequent to such date, such ratings may have changed. See
"Tax-Exempt Bond Portfolio." For a more detailed discussion, it is recommended
that Unit Holders consult the official statements for each Security in the
Portfolio of the Trust.
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
Tax Status
Interest on the Bonds in the Trust Portfolio is generally exempt from
federal income taxes. It is also generally exempt from New York State and local
personal income taxes. Bond counsel to the issuing governmental authorities
delivered their opinions confirming the tax-exempt status of the interest on the
dates of issuance of the Bonds. See "The Trust -- Portfolio" in Part II of this
Prospectus.
In the opinion of counsel to the sponsor, the Trust is not treated as a
separate taxable entity, and instead the Unit Holders will be treated as owning
the Trust's assets and as receiving the Trust's income.
Gain or loss realized on a sale, maturity or redemption of the Bonds by
the Trust or on a sale or redemption of a Unit by a Unit Holder must be taken
into account for federal, state and local income tax purposes. It will be
capital gain or loss if the Units are held as capital assets and will be
long-term if the Units (and the Bonds) have been held for more than one year.
The gain or loss on disposition does not include any amount received that is
attributable to accrued interest or earned original issue discount (which is
generally treated as tax exempt interest) or any accrued market discount (which
is generally treated as ordinary income). Long-term capital gains realized by
noncorporate taxpayers are taxed at a maximum federal income tax rate of 20%
while ordinary income and short-term capital gains received by noncorporate
taxpayers will be taxed at regular federal income tax rates of up to 39.6%.
___________________
1 A Trust is considered to be "concentrated" in a particular category
or issuer when the Bonds in that category or of that issuer constitute 25% or
more of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in
Part II of this Prospectus.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 125:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 125, including the tax-exempt bond
portfolio, as of September 30, 1999 and the related statements of operations and
changes in net assets for the years ended September 30, 1999, 1998 and 1997.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1999, by correspondence
with the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 125 as of September 30, 1999, and the results of its
operations and changes in net assets for the years ended September 30, 1999,
1998 and 1997 in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
October 29, 1999
5
<PAGE>
See Notes to Financial Statements
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1999
===============================================================================
ASSETS:
CASH............................................ $ 10 049
INVESTMENTS IN SECURITIES, at market value
(cost $8,219,600) (Note 1)................ 8 075 995
ACCRUED INTEREST RECEIVABLE..................... 84 818
ORGANIZATIONAL COSTS, net of accumulated
amortization of $12,420 (Note 1)............ 4 586
Total trust property...................... 8 175 448
LESS - ACCRUED EXPENSES AND OTHER LIABILITIES... 41 598
NET ASSETS...................................... $8 133 850
NET ASSETS REPRESENTED BY:
Monthly Semi-annual
distribution distribution
plan plan Total
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS................... $4 259 099 $3 779 529 $8 038 628
UNDISTRIBUTED NET INVESTMENT
INCOME...................... 20 515 74 707 95 222
Total value........... $4 279 614 $3 854 236 $8 133 850
UNITS OUTSTANDING............... 4 556 4 043 8 599
VALUE PER UNIT.................. $ 939.34 $ 953.31
See Notes to Financial Statements
6
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
STATEMENTS OF OPERATIONS
=============================================================================
Year ended September 30,
1999 1998 1997
INVESTMENT INCOME - INTEREST .............. $ 468 551 $514 256 $516 348
EXPENSES:
Trustee fees........................... 12 994 13 961 13 103
Evaluation fees........................ 822 979 958
Insurance premiums..................... 1 894 2 315 2 320
Sponsors' advisory fees................ 2 926 2 056 2 485
Auditors' fees......................... 1 800 1 800 1 800
Amortization of organizational
costs (Note 1).................. 3 401 3 401 3 885
Total expenses ........ 23 837 24 512 24 551
NET INVESTMENT INCOME...................... 444 714 489 744 491 797
REALIZED GAIN (LOSS) ON SECURITIES
SOLD OR REDEEMED (Notes 1 and 3)....... 42 408 10 595 (3 750)
NET CHANGE IN UNREALIZED MARKET
APPRECIATION (DEPRECIATION) (Note 1)... (694 701) 447 547 429 139
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS....... $(207 579) $947 886 $917 186
See Notes to Financial Statements
7
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<CAPTION>
Year ended September 30,
<S> <C> <C> <C>
1999 1998 1997
OPERATIONS:
Net investment income........................... $ 444 714 $ 489 744 $ 491 797
Realized gain (loss) on securities sold or
redeemed (Notes 1 and 3)....................... 42 408 10 595 (3 750)
Net change in unrealized market appreciation
(depreciation) (Note 1)........................ (694 701) 447 547 429 139
Net increase (decrease) in net assets
resulting from operations............. (207 579) 947 886 917 186
DISTRIBUTIONS TO UNIT HOLDERS
(Note 2):
Net investment income........................... (457 127) (503 465) (497 343)
CAPITAL SHARE TRANSACTIONS:
Redemption of 1,029, 296 and 74 units at
September 30, 1999, 1998 and 1997,
respectively................................... (1 026 856) (296 308) (70 696)
NET INCREASE (DECREASE) IN NET
ASSETS............................................ (1 691 562) 148 113 349 147
NET ASSETS:
Beginning of period............................. 9 825 412 9 677 299 9 328 152
End of period................................... $ 8 133 850 $ 9 825 412 $9 677 299
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan................................ $ 49.36 $ 49.34 $ 49.43
Semi-annual plan............................ $ 50.05 $ 49.82 $ 50.00
</TABLE>
8
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
NOTES TO FINANCIAL STATEMENTS
===============================================================================
12 The Trust is a unit investment trust formed under the Investment Company Act
of 1940 for the purpose of obtaining tax-exempt interest income through
investment in a fixed insured portfolio of long-term bonds, issued primarily by
or on behalf of the State of New York and counties, municipalities, authorities
or political subdivisions thereof.
The Bank of New York (the "Trustee") has custody of and responsibility for the
accounting records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on the
accrual basis.
NOTE 1 - ACCOUNTING POLICIES
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator. Securities transactions are recorded on the trade
date. The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
Termination of Trust
The mandatory termination date of the Trust is December 31, 2045. If the
value of the Trust falls below $2,000,000 or 20% of the value of the Trust as of
the date of deposit, whichever is lower, the Trust is subject to termination as
specified in the Trust Agreement.
Organizational costs
Organizational costs are being amortized over a period of five years
using the straight-line method.
Value per unit
Included in value per unit is undistributed net investment income per
unit. This represents income earned and accrued to each unit less amounts
distributed to the Unit Holder. The last income distribution dates were
September 1 and June 1, 1999 for Unit Holders electing monthly or semi-annual
distributions, respectively, resulting in a higher value per unit for those
electing semi-annual distributions than those electing monthly distributions.
9
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
NOTES TO FINANCIAL STATEMENTS
===============================================================================
(Concluded)
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit Holders either
semi-annually on the first day of June and December or, if elected by the Unit
Holder, on the first day of each month after deducting applicable expenses.
NOTE 3 - BONDS SOLD OR REDEEMED
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Port-
folio Principal Date Net Realized
No. Description Amount Redeemed Proceeds Cost Gain
Year ended September 30, 1999:
4 New York State Thruway $ 85 000 10/16/98 $ 88 698 $ 84 469 $ 4 229
Authority, General Revenue 95 000 10/23/98 98 942 94 406 4 536
Bonds, Series A 75 000 11/23/98 78 000 74 531 3 469
(FGIC Insured) 45 000 12/16/98 46 508 44 719 1 789
95 000 2/08/99 98 800 94 406 4 394
435 000 3/15/99 451 965 432 281 19 684
65 000 5/04/99 66 885 64 594 2 291
55 000 6/10/99 55 660 54 656 1 004
50 000 8/24/99 50 700 49 688 1 012
$1 000 000 $1 036 158 $993 750 $42 408
</TABLE>
NOTE 4 - NET ASSETS
<TABLE>
<S> <C> <C>
Cost of 10,000 units at Date of Deposit $ 10 019 175
Less gross underwriting commission 490 900
Net cost - initial offering price 9 528 275
Realized net gain on securities sold or redeemed 49 253
Redemption of 1,401 units (1 395 295)
Unrealized market depreciation of securities (143 605)
Undistributed net investment income 95 222
Net assets $ 8 133 850
</TABLE>
10
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features
Ant. - Anticipated Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 30, 1999 to Trust
1 AAA $2 350 000 New York State Medical 5.375% 02/15/25 02/15/12 @ 100 Ant. $2 297 125 $2 198 801 $126 313
Care Facilities Finance 02/15/04 @ 102 Opt.
Agency, Hospital
Insured Mortgage
Revenue Bonds, 1994
Series A Refunding
(MBIA Insured)
2 AAA 2 300 000 New York State Medical 5.625 08/15/18 02/15/11 @ 100 Ant. 2 311 500 2 265 408 129 375
Care Facilities Finance 08/15/03 @ 102 Opt.
Agency, St. Luke's -
Roosevelt Hospital
Center, FHA-Insured
Mortgage Revenue
Bonds, 1993 Series A,
(MBIA Insured)
3 AAA 2 195 000 New York City Muni- 5.750 06/15/20 No Sinking Fund 2 249 875 2 202 024 126 213
cipal Water Finance 06/15/04 @ 101.5 Opt.
Authority, Water &
Sewer System Revenue
Bonds, Fixed Rate
Fiscal 1994 Series F
(MBIA Insured)
4 AAA 760 000 New York State 5.500 01/01/23 01/01/20 @ 100 S.F. 755 250 781 174 41 800
Thruway Authority, 01/01/02 @ 100 Opt.
General Revenue Bonds,
Series A (FGIC Insured)
</TABLE>
11
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 125
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
(Concluded)
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features
Ant. - Anticipated Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September Income to
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 30, 1999 Trust
5 AAA $ 420 000 New York State Energy 5.500% 01/01/21 No Sinking Fund $ 421 050 $ 407 673 $ 23 100
Research and Develop- 01/01/06 @ 102 Opt.
ment Authority, Gas
Facilities Revenue
Bonds, 1996 Series
(The Brooklyn Union
Gas Company Project)
(MBIA Insured)
6 A- 660 000 The City of New York 0.000 08/01/18 No Sinking Fund 184 800 220 915 -
General Obligation No Optional Call
Bonds, Fiscal 1994
Series E
$8 685 000 $8 219 600 $8 075 995 $446 801
</TABLE>
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings are
by Standard & Poor's. Certain bond ratings have changed since the Date of
Deposit, at which time all such bonds were rated A or better by either
Standard & Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund (mandatory
partial redemption) (S.F.) or at the stated optional call (at the option
of the issuer) (Opt.) or by refunding. Certain bonds in the portfolio may
be redeemed earlier than dates shown in whole or in part under certain
unusual or extraordinary circumstances as specified in the terms and
provisions of such bonds.
12
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
Prospectus, Part I 8,030 Units Dated: January 28, 2000
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a
"Summary of Essential Financial Information" on the reverse hereof as of October
29, 1999 and a summary of additional specific information including "Special
Factors Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of September 30, 1999. The second part
of this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
The Trust is a unit investment trust formed for the purpose of
obtaining tax-exempt interest income through investment in a diversified,
insured portfolio of long-term bonds, issued by or on behalf of the State of New
York and counties, municipalities, authorities or political subdivisions thereof
or issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies ("Standard & Poor's").
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income on the Bonds that is
exempt from New York State and New York City income taxes will generally be
exempt from New York State and New York City personal income taxes in the hands
of the Unit holders. Capital gains, if any, are subject to tax. See Part II
under Tax Status."
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid
price of the Securities in the Trust divided by the number of Units outstanding,
plus a sales charge determined on the basis of the maturities of the Securities
in the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do
so, intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.
446886.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 126
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 8,080,000
Number of Units: 8,030
Fractional Undivided Interest in the Trust Per Unit: 1/8,030
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $7,486,792.74
Sponsors' Repurchase Price Per Unit: $ 932.35
Plus Sales Charge(1): 56.28
Public Offering Price Per Unit(2): $ 988.63
Redemption Price Per Unit(3): $ 932.35
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 56.28
Weighted Average Maturity of Bonds in the Trust: 23.283 years
Evaluation Time: 2:00 p.m., New York Time, on the next day
following receipt by a Sponsor of an order
for a Unit sale or purchase or by the
Trustee of a Unit tendered for redemption.
Annual Insurance Premium: $9,736
Evaluator's Fee: $.55 for each issue of Bonds in the Trust
for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds
in the Trust, $1.37 under the monthly and
$.97 under the semi-annual distribution
plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of
underlying Securities.
Date of Deposit: March 14, 1996
Date of Trust Agreement: March 14, 1996
Mandatory Termination Date: December 31, 2045
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust Agreement
may be Terminated: $2,000,000 or 20% of the value of the
Trust as of the date of deposit, whichever
is lower.
2
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 126
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
(Continued)
<TABLE>
<S> <C> <C>
Monthly Semi-annual
P Estimated Annual Interest Income: $55.60 $55.60
Less Annual Premium on Portfolio Insurance 1.21 1.21
E Less Estimated Annual Expenses 2.23 1.71
Less Organizational Costs .62 .62
R Estimated Net Annual Interest Income: $51.54 $52.06
U Estimated Interest Distribution: $ 4.30 $26.03
N Estimated Current Return Based on Public
Offering Price (4): 5.21% 5.27%
I
Estimated Long-Term Return Based
T on Public Offering Price (5): 5.30% 5.35%
Estimated Daily Rate of Net Interest
Accrual: $ .14317 $ .14461
Record Dates: 15th Day of 15th Day of May
Month and November
Payment Dates: 1st Day of 1st Day of June
Month and December
</TABLE>
___________________
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
2. Plus accrued interest to November 3, 1999, the expected date of
settlement, of $2.58 monthly and $24.26 semi-annually.
3. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net
annual interest income received in cash per Unit by the Public Offering
Price. Interest income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator, and with the redemption,
maturity, exchange or sale of Securities. This calculation, which
includes cash income accrual only, does not include discount accretion on
original issue discount bonds or on zero coupon bonds or premium
amortization on bonds purchased at a premium. See "Tax Status" and
"Estimated Current Return and Estimated Long-Term Return to Unit Holders"
in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes
into account the yields (including accretion of discounts and
amortization of premiums) of the individual Bonds in the Trust's
portfolio, weighted to reflect the market value and time to maturity (or,
in certain cases, to earlier call date) of such Bonds, adjusted to
reflect the Public Offering Price (including sales charge and expenses)
per Unit. See "Estimated Current Return and Estimated Long-Term Return to
Unit Holders" in Part II of this Prospectus.
3
<PAGE>
Portfolio Information
On September 30, 1999, the bid side valuation of 88.8% of the aggregate
principal amount of Bonds in the Portfolio for this Trust was at a discount from
par and 11.2% was at a premium over par. See Note (B) to "Tax-Exempt Bond
Portfolio" for information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
On September 30, 1999, the Portfolio consisted of six issues of Bonds
issued by entities located in New York or certain United States territories or
possessions. The following information is being supplied to inform Unit Holders
of circumstances affecting the Trust. 34.4% of the aggregate principal amount of
the Bonds in the Portfolio are payable from appropriations. 65.6% of the
aggregate principal amount of the Bonds in the Portfolio are payable from the
income of specific projects or authorities and are not supported by the issuers'
power to levy taxes.
Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and the purpose of issue are as follows: Appropriations, two (34.4%);
Revenue: Health Care, two (43.1%); Water and Sewer, one (18.5%); and
Transportation, one (4.0%). The Trust is deemed to be concentrated in the Health
Care and Appropriations Bonds categories.1 Three issues, constituting 47.1% of
the Bonds in the Portfolio, are original issue discount bonds. Three issues
(61.6%) were rated AAA, one issue (4.0%) was rated AA- and one issue (11.2%) was
rated BBB+ by Standard & Poor's; one issue (23.2%) was rated A3 by Moody's
Investors Service, Inc. ("Moody's").2 Subsequent to such date, such ratings may
have changed. See "Tax-Exempt Bond Portfolio." For a more detailed discussion,
it is recommended that Unit Holders consult the official statements for each
Security in the Portfolio of the Trust.
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
Tax Status
Interest on the Bonds in the Trust Portfolio is generally exempt from
federal income taxes. It is also generally exempt from New York State and local
personal income taxes. Bond counsel to the issuing governmental authorities
delivered their opinions confirming the tax-exempt status of the interest on the
dates of issuance of the Bonds. See "The Trust -- Portfolio" in Part II of this
Prospectus.
In the opinion of counsel to the sponsor, the Trust is not treated as a
separate taxable entity, and instead the Unit Holders will be treated as owning
the Trust's assets and as receiving the Trust's income.
Gain or loss realized on a sale, maturity or redemption of the Bonds by
the Trust or on a sale or redemption of a Unit by a Unit Holder must be taken
into account for federal, state and local income tax purposes. It will be
capital gain or loss if the Units are held as capital assets and will be
long-term if the Units (and the Bonds) have been held for more than one year.
The gain or loss on disposition does not include any amount received that is
attributable to accrued interest or earned original issue discount (which is
generally treated as tax-exempt interest) or any accrued market discount (which
is generally treated as ordinary income). Long-term capital gains realized by
noncorporate taxpayers are taxed at a maximum federal income tax rate of 20%
while ordinary income and short-term capital gains received by noncorporate
taxpayers will be taxed at regular federal income tax rates of up to 39.6%.
___________________
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part
II of this Prospectus.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 126:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 126, including the tax-exempt bond
portfolio, as of September 30, 1999, and the related statements of operations
and changes in net assets for the years ended September 30, 1999, 1998 and 1997.
These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1999, by correspondence
with the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 126 as of September 30, 1999, and the results of its
operations and changes in net assets for the years ended September 30, 1999,
1998 and 1997 in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
October 29, 1999
5
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1999
===============================================================================
ASSETS:
INVESTMENTS IN SECURITIES,
at market value (cost $7,646,258) (Note 1)...... $7 808 459
ACCRUED INTEREST RECEIVABLE........................... 95 292
ORGANIZATIONAL COSTS, net of
accumulated amortization of $17,791 (Note 1).... 7 041
Total trust property............................ 7 910 792
LESS - ACCRUED EXPENSES AND OTHER LIABILITIES......... 31 290
NET ASSETS............................................ $7 879 502
NET ASSETS REPRESENTED BY:
Monthly Semi-annual
distribution distribution
plan plan Total
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS.................... $4 782 058 $3 009 174 $7 791 232
UNDISTRIBUTED NET INVESTMENT
INCOME....................... 27 469 60 801 88 270
Total value............ $4 809 527 $3 069 975 $7 879 502
UNITS OUTSTANDING................ 4 955 3 118 8 073
VALUE PER UNIT................... $ 970.64 $ 984.60
See Notes to Financial Statements
6
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
STATEMENTS OF OPERATIONS
===============================================================================
Year ended September 30,
1999 1998 1997
INVESTMENT INCOME - INTEREST...............$ 471 440 $511 320 $540 254
EXPENSES:
Trustee fees........................... 12 309 13 342 13 488
Evaluation fees........................ 922 1 272 1 276
Insurance premiums..................... 11 003 11 859 13 320
Sponsors' advisory fees................ 3 011 1 793 2 363
Auditors' fees......................... 1 800 1 800 1 800
Amortization of organizational
costs (Note 1)....................... 4 966 4 966 5 409
Total expenses......... 34 011 35 032 37 656
NET INVESTMENT INCOME...................... 437 429 476 288 502 598
REALIZED GAIN ON SECURITIES SOLD OR
REDEEMED (Notes 1 and 3)............... 34 973 38 950 16 093
NET CHANGE IN UNREALIZED MARKET
APPRECIATION (DEPRECIATION) (Note 1)... (703 567) 369 470 469 319
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $(231 165) $884 708 $988 010
See Notes to Financial Statements
7
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<S> <C> <C> <C>
Year ended September 30,
1999 1998 1997
OPERATIONS:
Net investment income...................... $ 437 429 $ 476 288 $ 502 598
Realized gain on securities sold
or redeemed (Notes 1 and 3).............. 34 973 38 950 16 093
Net change in unrealized market
appreciation (depreciation) (Note 1)..... (703 567) 369 470 469 319
Net increase (decrease) in
net assets resulting from
operations...................... (231 165) 884 708 988 010
DISTRIBUTIONS TO UNIT HOLDERS
(Note 2):
Net investment income...................... (444 709) (485 566) (512 332)
CAPITAL SHARE TRANSACTIONS:
Redemption of 654, 662 and 611 units at
September 30, 1999, 1998 and 1997,
respectively.............................. (669 782) (677 759) (598 019)
NET DECREASE IN NET ASSETS..................... (1 345 656) (278 617) (122 341)
NET ASSETS:
Beginning of period........................ 9 225 158 9 503 775 9 626 116
End of period.............................. $7 879 502 $9 225 158 $9 503 775
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan........................... $ 51.78 $ 51.96 $ 51.94
Semi-annual plan....................... $ 52.37 $ 52.48 $ 52.42
</TABLE>
See Notes to Financial Statements
8
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
NOTES TO FINANCIAL STATEMENTS
================================================================================
The Trust is a unit investment trust formed under the Investment Company Act of
1940 for the purpose of obtaining tax-exempt interest income through investment
in a fixed insured portfolio of long-term bonds, issued primarily by or on
behalf of the State of New York and counties, municipalities, authorities or
political subdivisions thereof.
The Bank of New York (the "Trustee") has custody of and responsibility for the
accounting records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on the
accrual basis.
NOTE 1 - ACCOUNTING POLICIES
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator. Securities transactions are recorded on the trade
date. The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
Termination of Trust
The mandatory termination date of the Trust is December 31, 2045. If the
value of the Trust falls below $2,000,000 or 20% of the value of the Trust as of
the date of deposit, whichever is lower, the Trust is subject to termination as
specified in the Trust Agreement.
Organizational costs
Organizational costs are being amortized over a period of five years
using the straight-line method.
Value per unit
Included in value per unit is undistributed net investment income per
unit. This represents income earned and accrued to each unit less amounts
distributed to the Unit Holder. The last income distribution dates were
September 1 and June 1, 1999 for Unit Holders electing monthly or semi-annual
distributions, respectively, resulting in a higher value per unit for those
electing semi-annual distributions than those electing monthly distributions.
9
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
NOTES TO FINANCIAL STATEMENTS
===============================================================================
(Concluded)
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit Holders either
semi-annually on the first day of June and December or, if elected by the Unit
Holder, on the first day of each month after deducting applicable expenses.
NOTE 3 - BONDS SOLD OR REDEEMED
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Port-
folio Principal Date Net Realized
No. Description Amount Redeemed Proceeds Cost Gain
Year ended September 30, 1999:
* New York State Thruway $110 000 11/23/98 $117 480 $109 725 $ 7 755
Authority, General Revenue 60 000 3/15/99 63 630 59 850 3 780
Bonds, Series A (MBIA Insured) 15 000 4/05/99 15 810 14 962 848
5 New York State Housing 55 000 4/05/99 57 365 53 487 3 878
Finance Agency, Service 50 000 5/17/99 51 600 48 625 2 975
Contract Obligation 75 000 6/01/99 77 325 72 938 4 387
Revenue Bonds, 1993, 65 000 6/18/99 66 073 63 213 2 860
Series C Refunding 60 000 7/26/99 61 230 58 350 2 880
110 000 8/24/99 111 760 106 975 4 785
30 000 9/09/99 30 000 29 175 825
$630 000 $652 273 $617 300 $34 973
</TABLE>
_____________________
* Portfolio redeemed in its entirety
NOTE 4 - NET ASSETS
<TABLE>
<S> <C>
Cost of 10,000 units at Date of Deposit $ 9 973 245
Less gross underwriting commission 488 670
Net cost - initial offering price 9 484 575
Realized net gain on securities sold or redeemed 90 016
Redemption of 1,927 units (1 945 560)
Unrealized market appreciation of securities 162 201
Undistributed net investment income 88 270
Net assets $ 7 879 502
</TABLE>
10
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features
Ant. - Anticipated Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income to
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 Trust
1 AAA $2 000 000 New York State Med- 5.400% 08/15/33 08/15/09 @ 100 Ant. $1 845 000 $1 842 520 $108 000
ical Care Facilities 08/15/03 @ 102 Opt.
Finance Agency,
Hospital and Nursing
Home Insured
Mortgage Revenue
Bonds, 1993 Series D
(MBIA Insured)
2 AAA 1 500 000 New York City Munic- 5.500 06/15/19 06/15/12 @ 100 S.F. 1 443 750 1 457 715 82 500
ipal Water Finance 06/15/04 @ 101 Opt.
Authority, Water &
Sewer System Reve-
nue Bonds, Fixed Rate
Fiscal 1994 Series B
(MBIA Insured)
3 AAA 1 500 000 New York State Med- 5.250 02/15/19 08/15/14 @ 100 S.F. 1 395 000 1 401 345 78 750
ical Care Facilities 12/15/04 @ 102 Opt.
Finance Agency,
Mental Health Ser-
vices Facilities Im-
provement Revenue
Bonds, 1993 Series F
Refunding (MBIA
Insured)
</TABLE>
11
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
(Continued)
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features
Ant. - Anticipated Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income to
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 Trust
4 AA- $ 320 000 The Port Authority of 5.750% 06/15/30 12/15/21 @ 100 S.F. $ 316 000 $ 319 510 $ 18 400
New York and New 06/15/05 @ 101 Opt.
Jersey Consolidated
Bonds, One Hundredth
Series
5 BBB+ 910 000 New York State Hous- 5.875 03/15/11 03/15/08 @ 100 S.F. 884 975 932 623 53 463
ing Finance Agency, 09/15/03 @ 102 Opt.
Service Contract
Obligation Revenue
Bonds, 1993, Series C
Refunding
6 A3* 1 885 000 Dormitory Authority 5.700 05/15/22 No Sinking Fund 1 761 533 1 854 746 107 445
of the State of New 05/15/03 @ 101.5 Opt.
York, Court Facilities,
Lease Revenue Bonds
(The City of New York
$8 115 000 $7 646 258 $7 808 459 $448 558
</TABLE>
12
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 126
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
(Concluded)
===============================================================================
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings are
by Standard & Poor's, except for those indicated by (*), which are by
Moody's. Certain bond ratings have changed since the Date of Deposit, at
which time all such bonds were rated A or better by either Standard &
Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund (mandatory
partial redemption) (S.F.) or at the stated optional call (at the option
of the issuer) (Opt.) or by refunding. Certain bonds in the portfolio may
be redeemed earlier than dates shown in whole or in part under certain
unusual or extraordinary circumstances as specified in the terms and
provisions of such bonds.
13
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
Prospectus, Part I 8,780 Units Dated: January 28, 2000
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of October 29, 1999
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of September 30, 1999. The second part
of this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies ("Standard & Poor's").
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income on the Bonds that is
exempt from New York State and New York City income taxes will generally be
exempt from New York State and New York City personal income taxes in the hands
of the Unit holders. Capital gains, if any, are subject to tax. See Part II
under Tax Status."
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.
332699.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 133
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 8,745,000
Number of Units (1): 8,780
Fractional Undivided Interest in the Trust Per Unit: 1/8,780
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $ 8,013,579.60
Sponsors' Repurchase Price Per Unit: $ 912.67
Plus Sales Charge(2): 57.25
Public Offering Price Per Unit(3): $ 969.92
Redemption Price Per Unit(4): $ 912.67
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 57.25
Weighted Average Maturity of Bonds in the Trust: 24.783 years
Evaluation Time: 2:00 p.m., New York Time, on the next day
following receipt by a Sponsor of an order
for a Unit sale or purchase or by the
Trustee of a Unit tendered for redemption.
Annual Insurance Premium: $5,005
Evaluator's Fee: $.55 for each issue of Bonds in the Trust
for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds
in the Trust, $1.39 under the monthly and
$.99 under the semi-annual distribution
plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of
underlying Securities.
Date of Deposit: January 30, 1997
Date of Trust Agreement: January 30, 1997
Mandatory Termination Date: December 31, 2046
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust Agreement
may be Terminated: $2,000,000 or 20% of the value of the Trust
as of the date of deposit, whichever is
lower.
2
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 133
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT OCTOBER 29, 1999
(Continued)
Monthly Semi-annual
P Estimated Annual Interest Income: $54.41 $54.41
Less Annual Premium on Portfolio Insurance .57 .57
E Less Estimated Annual Expenses 2.30 1.78
Less Organizational Costs .51 .51
R Estimated Net Annual Interest Income: $51.03 $51.55
U Estimated Interest Distribution: $ 4.25 $25.78
N Estimated Current Return Based on Public
Offering Price (5): 5.26% 5.31%
I
Estimated Long-Term Return Based
T on Public Offering Price (6): 5.36% 5.42%
Estimated Daily Rate of Net Interest
Accrual: $ .14175 $ .14319
Record Dates: 15th Day 15th Day
of Month of May and
November
Payment Dates: 1st Day 1st Day
of Month of June and
December
___________________
1. The number of units is expressed in whole numbers with no adjustment for
fractional units.
2. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
3. Plus accrued interest to November 3, 1999, the expected date of
settlement, of $2.56 monthly and $24.10 semi-annually.
4. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
5. Estimated Current Return is calculated by dividing the estimated net
annual interest income received in cash per Unit by the Public Offering
Price. Interest income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator, and with the redemption,
maturity, exchange or sale of Securities. This calculation, which
includes cash income accrual only, does not include discount accretion on
original issue discount bonds or on zero coupon bonds or premium
amortization on bonds purchased at a premium. See "Tax Status" and
"Estimated Current Return and Estimated Long-Term Return to Unit Holders"
in Part II of this Prospectus.
6. Estimated Long-Term Return is calculated by using a formula that takes
into account the yields (including accretion of discounts and
amortization of premiums) of the individual Bonds in the Trust's
portfolio, weighted to reflect the market value and time to maturity (or,
in certain cases, to earlier call date) of such Bonds, adjusted to
reflect the Public Offering Price (including sales charge and expenses)
per Unit. See "Estimated Current Return and Estimated Long-Term Return to
Unit Holders" in Part II of this Prospectus
3
<PAGE>
Portfolio Information
On September 30, 1999, the bid side valuation of 100.0% of the aggregate
principal amount of Bonds in the Portfolio for this Trust was at a discount from
par. See Note (B) to "Tax-Exempt Bond Portfolio" for information concerning call
and redemption features of the Bonds.
Special Factors Concerning the Portfolio
On September 30, 1999, the Portfolio consisted of seven issues of Bonds
issued by entities located in New York or certain United States territories or
possessions. The following information is being supplied to inform Unit Holders
of circumstances affecting the Trust. 9.4% of the aggregate principal amount of
the Bonds in the Portfolio are general obligations of the governmental entities
issuing them and are backed by the taxing power thereof. 90.6% of the aggregate
principal amount of the Bonds in the Portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes.
Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and the purpose of issue are as follows: General Obligation, one (9.4%);
Revenue: Health Care, one (22.6%); Higher Education, three (40.9%); Water and
Sewer, one (13.7%); and Electric Power-Investor Owned Utility, one (13.4%). The
Trust is deemed to be concentrated in the Higher Education Bond category.1 All
of the Bonds in the Portfolio are original issue discount bonds. Five issues
(88.4%) were rated AAA and two issues (11.6%) were rated A- by Standard &
Poor's.2 Subsequent to such date, such ratings may have changed. See "Tax-Exempt
Bond Portfolio." For a more detailed discussion, it is recommended that Unit
Holders consult the official statements for each Security in the Portfolio of
the Trust.
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
Tax Status
Interest on the Bonds in the Trust Portfolio is generally exempt from
federal income taxes. It is also generally exempt from New York State and local
personal income taxes. Bond counsel to the issuing governmental authorities
delivered their opinions confirming the tax-exempt status of the interest on the
dates of issuance of the Bonds. See "The Trust -- Portfolio" in Part II of this
Prospectus.
In the opinion of counsel to the sponsor, the Trust is not treated as a
separate taxable entity, and instead the Unit Holders will be treated as owning
the Trust's assets and as receiving the Trust's income.
Gain or loss realized on a sale, maturity or redemption of the Bonds by
the Trust or on a sale or redemption of a Unit by a Unit Holder must be taken
into account for federal, state and local income tax purposes. It will be
capital gain or loss if the Units are held as capital assets and will be
long-term if the Units (and the Bonds) have been held for more than one year.
The gain or loss on disposition does not include any amount received that is
attributable to accrued interest or earned original issue discount (which is
generally treated as tax-exempt interest) or any accrued market discount (which
is generally treated as ordinary income). Long-term capital gains realized by
noncorporate taxpayers are taxed at a maximum federal income tax rate of 20%
while ordinary income and short-term capital gains received by noncorporate
taxpayers will be taxed at regular federal income tax rates of up to 39.6%.
___________________
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part
II of this Prospectus.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 133:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 133, including the tax-exempt bond
portfolio, as of September 30, 1999, and the related statements of operations
and changes in net assets for the years ended September 30, 1999 and 1998 and
the period from January 30, 1997 (initial date of deposit) to September 30,
1997. These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1999, by correspondence
with the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 133 as of September 30, 1999, and the results of its
operations and changes in net assets for the years ended September 30, 1999 and
1998 and the period from January 30, 1997 (initial date of deposit) to September
30, 1997 in conformity with generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
October 29, 1999
5
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1999
===============================================================================
ASSETS:
INVESTMENTS IN SECURITIES, at market value
(cost $8,408,214) (Note 1)................. $8 434 194
ACCRUED INTEREST RECEIVABLE...................... 110 946
ORGANIZATIONAL COSTS, net of accumulated
amortization of $11,992 (Note 1)........... 10 495
Total trust property....................... 8 555 635
LESS - ACCRUED EXPENSES AND OTHER LIABILITIES.... 57 090
NET ASSETS....................................... $8 498 545
NET ASSETS REPRESENTED BY:
Monthly Semi-annual
distribution distribution
plan plan Total
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS................. $5 059 810 $3 337 443 $8 397 253
UNDISTRIBUTED NET INVESTMENT
INCOME.................... 33 101 68 191 101 292
Total value......... $5 092 911 $3 405 634 $8 498 545
UNITS OUTSTANDING............. 5 329 3 515 8 844
VALUE PER UNIT................ $ 955.70 $ 968.89
See Notes to Financial Statements
6
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
STATEMENTS OF OPERATIONS
===============================================================================
Period from
January 30, 1997
(initial date
Year ended September of deposit) to
30, 1999 30, 1998 September 30, 1997
INVESTMENT INCOME - INTEREST......... $ 499 809 $526 266 $356 845
EXPENSES:
Trustee fees..................... 13 118 13 959 9 540
Evaluation fees.................. 959 1 142 527
Insurance premiums............... 5 174 5 279 3 899
Sponsors' advisory fees.......... 2 457 2 342 1 668
Auditors' fees................... 1 800 1 800 1 800
Amortization of organizational
costs (Note 1)............. 4 497 4 497 2 998
Total expenses... 28 005 29 019 20 432
NET INVESTMENT INCOME................ 471 804 497 247 336 413
REALIZED GAIN ON SECURITIES SOLD
OR REDEEMED (Notes 1 and 3)......... 27 626 28 973 2 137
UNREALIZED MARKET APPRECIATION
(DEPRECIATION) (Note 1)............. (892 683) 440 139 478 524
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS.... $(393 253) $966 359 $817 074
See Notes to Financial Statements
7
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<S> <C> <C> <C>
Period from
January 30, 1997
(initial date
Year ended September 30, of deposit) to
1999 1998 September 30, 1997
OPERATIONS:
Net investment income...................... $ 471 804 $ 497 247 $ 336 413
Realized gain on securities sold or
redeemed (Notes 1 and 3).................. 27 626 28 973 2 137
Unrealized market appreciation
(depreciation) (Note 1)................... (892 683) 440 139 478 524
Net increase (decrease) in net assets
resulting from operations............... (393 253) 966 359 817 074
DISTRIBUTIONS TO UNIT HOLDERS
(Note 2):
Net investment income...................... (480 362) (502 522) (221 288)
CAPITAL SHARE TRANSACTIONS:
Redemption of 583, 442 and 131 units
at September 30, 1999, 1998 and 1997,
respectively.............................. (594 835) (451 884) (129 830)
NET INCREASE (DECREASE) IN NET
ASSETS........................................ (1 468 450) 11 953 465 956
NET ASSETS:
Beginning of period........................ 9 966 995 9 955 042 9 489 086
End of period.............................. $ 8 498 545 $9 966 995 $9 955 042
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan........................... $ 51.29 $ 51.45 $ 27.23
Semi-annual plan....................... $ 51.88 $ 51.94 $ 14.54
</TABLE>
See Notes to Financial Statements
8
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
NOTES TO FINANCIAL STATEMENTS
===============================================================================
The Trust is a unit investment trust formed under the Investment Company Act of
1940 for the purpose of obtaining tax-exempt interest income through investment
in a fixed insured portfolio of long-term bonds, issued primarily by or on
behalf of the State of New York and counties, municipalities, authorities or
political subdivisions thereof.
The Bank of New York (the "Trustee") has custody of and responsibility for the
accounting records and financial statements of the Trust and is responsible for
establishing and maintaining a system of internal control.
The Trustee is also responsible for all estimates of expenses and accruals
reflected in the Trust's financial statements. The accompanying financial
statements have been adjusted to record the unrealized appreciation
(depreciation) of investments and to record interest income and expenses on the
accrual basis.
NOTE 1 - ACCOUNTING POLICIES
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator. Securities transactions are recorded on the trade
date. The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Realized gains (losses) from
securities transactions are determined on the basis of average cost of the
securities sold or redeemed.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
Termination of Trust
The mandatory termination date of the Trust is December 31, 2046. If the
value of the Trust falls below $2,000,000 or 20% of the value of the Trust as of
the date of deposit, whichever is lower, the Trust is subject to termination as
specified in the Trust Agreement.
Organizational costs
Organizational costs are being amortized over a period of five years
using the straight-line method.
Value per unit
Included in value per unit is undistributed net investment income per
unit. This represents income earned and accrued to each unit less amounts
distributed to the Unit Holder. The last income distribution dates were
September 1 and June 1, 1999 for Unit Holders electing monthly or semi-annual
distributions, respectively, resulting in a higher value per unit for those
electing semi-annual distributions than those electing monthly distributions.
9
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
NOTES TO FINANCIAL STATEMENTS
===============================================================================
(Concluded)
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit Holders either
semi-annually on the first day of June and December or, if elected by the Unit
Holder, on the first day of each month after deducting applicable expenses.
NOTE 3 - BONDS SOLD OR REDEEMED
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Port- Realized
folio Principal Date Net Gain
No. Description Amount Redeemed Proceeds Cost (Loss)
Period ended September 30, 1999:
4 New York State Energy Research $ 75 000 10/23/98 $ 74 438 $ 69 921 $ 4 517
and Development Authority, 60 000 11/23/98 60 000 55 936 4 064
Facilities Refunding Revenue 55 000 3/15/99 54 945 51 275 3 670
Bonds, Series 1993B (Consolidated 85 000 5/17/99 83 385 79 243 4 142
Edison Company of New York, 130 000 6/10/99 126 100 121 195 4 905
Inc. Project) (Non-AMT) 35 000 8/25/99 32 112 32 629 (517)
(MBIA Insured) 35 000 9/09/99 32 270 32 629 (359)
5 Town of Clifton Park Water 45 000 5/04/99 43 200 40 044 3 156
Authority, (New York), Water
System Revenue Bonds, Series
1993 (FGIC Insured)
6 The City of New York 50 000 6/01/99 51 600 47 552 4,048
General Obligation Bonds,
Fiscal 1997 Series F
(MBIA Insured)
$570 000 $558 050 $530 424 $27 626
</TABLE>
NOTE 4 - NET ASSETS
<TABLE>
<S> <C>
Cost of 10,000 units at Date of Deposit $ 9 977 986
Less gross underwriting commission 488 900
Net cost - initial offering price 9 489 086
Realized net gain on securities sold or redeemed 58 736
Redemption of 1156 units (1 176 549)
Unrealized market appreciation of securities 25 980
Undistributed net investment income 101 292
Net assets $ 8 498 545
</TABLE>
10
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 to Trust
1 AAA $1 420 000 Dormitory Authority 5.700% 07/01/26 07/01/17 @ 100 S.F. $1 403 940 $1 401 057 $ 80 940
of the State of New 07/01/06 @ 102 Opt.
York, St. John's
University Insured
Revenue Bonds,
Series 1996
(MBIA Insured)
2 AAA 2 000 000 Dormitory Authority 5.500 07/01/24 07/01/20 @ 100 S.F. 1 928 640 1 929 120 110 000
of the State of 07/01/06 @ 102 Opt.
New York City
University System,
Consolidated Third
General Resolution
Revenue Bonds,
1996 Series 1
(MBIA Insured)
3 AAA 2 000 000 New York State
Medical Care 5.500 08/15/24 02/15/10 @ 100 S.F. 1 923 240 1 911 220 110 000
Facilities Finance 02/15/04 @ 102 Opt.
Agency Hospital,
Insured Mortgage
Revenue Bonds,
1994 Series A
Refunding (MBIA
Insured)
</TABLE>
11
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 to Trust
4 AAA $1 180 000 New York State 5.250% 08/15/20 No Sinking Fund $1 100 079 $1 104 669 $ 61 950
Energy Research 10/01/03 @ 102 Opt.
and Development
Authority, Facilities
Refunding Revenue
Bonds, Series 1993B
(Consolidated
Edison Company of
New York, Inc.
Project) (Non-AMT)
(MBIA Insured)
5 AAA 1 215 000 Town of Clifton Park 5.000 10/01/26 10/01/19 @ 100 S.F. 1 081 192 1 072 699 60 750
Water Authority, 10/01/03 @ 102 Opt.
(New York),
Water System
Revenue Bonds,
Series 1993
(FGIC Insured)
</TABLE>
12
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 133
TAX-EXEMPT BOND PORTFOLIO
SEPTEMBER 30, 1999
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemption Features Market Value Annual
Port- Aggregate Date of S.F. - Sinking Fund Cost of as of Interest
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call Bonds September 30, Income
No. (Note A) Amount Title of Bond Rate (Note B) (Note B) to Trust 1999 to Trust
6 A- $ 830 000 The City of New 5.875% 08/01/24 08/01/17 @ 100 S.F. $ 789 363 $ 826 689 $ 48 763
York General 08/01/06 @ 101.5 Opt.
Obligation Bonds,
Fiscal 1998 Series
F (MBIA Insured)
7 A- 200 000 Dormitory Authority 5.400 05/15/23 05/15/14 @ 100 S.F. 181 760 188 740 10 800
of the State of New 05/15/04 @ 102 Opt.
York, State University
Educational Facilities,
Revenue Bonds,
Series 1993 C (MBIA
Insured)
$8 845 000 $8 408 214 $8 434 194 $483 203
</TABLE>
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings are
by Standard & Poor's. Certain bond ratings have changed since the Date of
Deposit, at which time all such bonds were rated A or better by either
Standard & Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund (mandatory
partial redemption) (S.F.) or at the stated optional call (at the option
of the issuer) (Opt.) or by refunding. Certain bonds in the portfolio may
be redeemed earlier than dates shown in whole or in part under certain
unusual or extraordinary circumstances as specified in the terms and
provisions of such bonds.
13
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series
PROSPECTUS, Part II
Note: Part II of this Prospectus may not be
distributed unless accompanied by Part I.
THE TRUST
Organization
The Trust is one of a Series of similar but separate unit investment
trusts. Each Trust was created under the laws of the State of New York pursuant
to a Trust Indenture and Agreement (the "Trust Agreement"), dated the Date of
Deposit as set forth in "Summary of Essential Financial Information" in Part I
of this Prospectus, among the Sponsors, the Trustee and the Evaluator. The Bank
of New York acts as successor Trustee of Series 1 through 22 and as Trustee of
Series 23 and subsequent Series. Muller Data Corporation acts as successor
Evaluator for Series 1 through 90 and as Evaluator for Series 91 and subsequent
Series. Glickenhaus & Co. and Lebenthal & Co., Inc. act as co-Sponsors for all
Series (the "Sponsors").
On the date of this Prospectus, each Unit represented the fractional
undivided interest in the Trust set forth in Part I of this Prospectus under
"Summary of Essential Financial Information." Thereafter, if 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 each such Unit will remain essentially the same.
Units will remain outstanding until redeemed upon tender to the Trustee by any
Unit holder, which may include the Sponsors, or until the termination of the
Trust Agreement for the related Trust. See "Rights of Unit Holders--Redemption."
On the Date of Deposit for each Trust, the Sponsors deposited with the
Trustee obligations or contracts for the purchase of such obligations (the
"Bonds" or "Securities"). Certain of the Bonds may have been purchased at prices
which resulted in original issue discount, market discount or the inclusion of
zero coupon bonds. Bonds selling at market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for gain. Any gain other than any earned original issue
discount or accrued interest will be taxable, but that income will not be
realized until maturity, redemption or sale of the underlying Bonds or Units.
Objectives
The objective of the Trust is to obtain tax-exempt interest income
through an investment in a fixed, insured portfolio consisting primarily of
various long-term municipal bonds. No assurance can be given that the Trust's
objectives will be achieved because these objectives are subject to the
continuing ability of the respective issuers of the bonds in the Portfolio to
meet their obligations and of the Insurer to meet its obligations under the
insurance. In addition, an investment in the Trust can be affected by interest
rate fluctuations.
279831.19
<PAGE>
Series 6 through 30 and Series 31 and subsequent Series have obtained
insurance guaranteeing the payment of principal and interest on the Bonds in
each respective Trust from MBIA Inc. and MBIA Insurance Corporation ("MBIA
Corp."), respectively (MBIA Inc. and MBIA Corp. are collectively referred to
herein as the "Insurer"). Insurance obtained by the Trust applies only while
Bonds are retained in the Trust. Pursuant to irrevocable commitments of MBIA
Inc. and MBIA Corp., however, in the event of a sale of a Bond from the Trust
the Trustee has the right to obtain permanent insurance for such Bond upon the
payment of a single predetermined insurance premium from the proceeds of the
sale of such Bond. It is expected that the Trustee will exercise the right to
obtain permanent insurance for a Bond in such Series upon instruction from the
Sponsors whenever the value of that Bond insured to its maturity less the
applicable permanent insurance premium and the related custodial fee exceeds the
value of the Bond without such insurance. Insurance relates only to the payment
of principal and interest on the Bonds in the Trust but neither covers the
nonpayment of any redemption premium on the Bonds nor guarantees the market
value of the Units. Certain Bonds in the Trust may also be insured under
insurance obtained by the issuers of such Bonds or third parties ("Pre-insured
Bonds"). As a result of the insurance, Moody's Investors Service, Inc.
("Moody's") has assigned a rating of "Aaa" to all of the Bonds in the Trust, as
insured, and Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), has assigned a rating of "AAA" to the
Bonds while in the Trust. No representation is made as to any insurer's ability
to meet its commitments. Insurance is not a substitute for the basic credit of
an issuer, but supplements the existing credit and provides additional security
therefor. A single or annual premium is paid by the issuer or any other party
for its insurance on Pre-insured Bonds, and a monthly premium is paid by the
Trust for the insurance it obtains from the Insurer on the Bonds in the Trust
that are not pre-insured by such Insurer. No premium will be paid by the Trust
on Bonds pre-insured by MBIA Inc. and MBIA Corp. See "Insurance on the Bonds."
Portfolio
In view of the Trust's objectives, the following factors, among others,
were considered in selecting the Bonds: (1) all the Bonds are obligations of the
State of New York and counties, municipalities, authorities or political
subdivisions thereof or issued by certain United States territories or
possessions, including Puerto Rico, and their public authorities so that the
interest on them will be exempt from Federal, New York State and New York City
income tax under existing law; (2) the Bonds are varied as to purpose of issue;
(3) in the opinion of the Sponsors, the Bonds are fairly valued relative to
other bonds of comparable quality and maturity; and (4) availability of
insurance for the payment of principal and interest on the Bonds. Subsequent to
the Date of Deposit, a Bond may cease to be rated or its rating may be reduced.
Neither event requires an elimination of such Bond from the portfolio, but such
an event may be considered in the Sponsors' determination to direct the Trustee
to dispose of the Bonds. See "Sponsors--Responsibility."
An investment in Units of the Trust should be made with an
understanding of the risks entailed in investments in fixed-rate bonds,
including the risk that the value of such bonds (and, therefore, of the Units)
will decline with increases in interest rates. Inflation and recession, as well
as measures implemented to address these and other economic problems, contribute
to fluctuations in interest rates and the value of fixed-rate bonds generally.
The Sponsors cannot predict future economic policies or their
279831.19
-2-
<PAGE>
consequences nor, therefore, can they predict the course or extent of such
fluctuations in the future.
Special Factors Affecting New York
The information set forth below is derived from the official statements
and/or preliminary drafts of official statements prepared in connection with the
issuance of New York State and New York City municipal bonds. The Sponsors have
not independently verified this information.
Economic Trends. Over the long term, the State of New York (the
"State") and the City of New York (the "City") face serious potential economic
problems. The City accounts for approximately 41% of the State's population and
personal income, and the City's financial health affects the State in numerous
ways. The State historically has been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation as
a whole, gradually eroding its relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration of the more
affluent to the suburbs and an influx of generally less affluent residents.
Regionally, the older Northeast cities have suffered because of the relative
success that the South and the West have had in attracting people and business.
The City has also had to face greater competition as other major cities have
developed financial and business capabilities which make them less dependent on
the specialized services traditionally available almost exclusively in the City.
The State has for many years had a very high State and local tax burden
relative to other states. The State and its localities have used these taxes to
develop and maintain their transportation networks, public schools and colleges,
public health systems, other social services and recreational facilities.
Despite these benefits, the burden of State and local taxation, in combination
with the many other causes of regional economic dislocation, has contributed to
the decisions of some businesses and individuals to relocate outside, or not
locate within, the State.
Notwithstanding the numerous initiatives that the State and its
localities may take to encourage economic growth and achieve balanced budgets,
reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State and its localities.
New York City. The City, with a population of approximately 7.4
million, is an international center of business and culture. Its non-
manufacturing economy is broadly based, with the banking and securities, life
insurance, communications, publishing, fashion design, retailing and
construction industries accounting for a significant portion of the City's total
employment earnings. Additionally, the City is the nation's leading tourist
destination. The City's manufacturing activity is conducted primarily in apparel
and printing.
For each of the 1981 through 1999 fiscal years, the City had an
operating surplus, before discretionary transfers, and achieved balanced
operating results as reported in accordance with then applicable generally
accepted accounting principles ("GAAP"), after discretionary transfers. The City
has been required to close substantial gaps between forecast revenues and
forecast expenditures in order to maintain balanced operating results. There can
be no assurance that the City will continue to maintain balanced operating
results as required by State law without tax or other revenue increases or
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reductions in City services or entitlement programs, which could adversely
affect the City's economic base.
As required by law, the City prepares a four-year annual financial
plan, which is reviewed and revised on a quarterly basis and which includes the
City's capital, revenue and expense projections and outlines proposed gap-
closing programs for years with projected budget gaps. The City's current
financial plan projects a surplus in the 2000 fiscal year, before discretionary
transfers, and budget gaps for each of the 2001, 2002 and 2003 fiscal years.
This pattern of current year surplus operating results and projected subsequent
year budget gaps has been consistent through the entire period since 1982,
during which the City has achieved surplus operating results, before
discretionary transfers, for each fiscal year.
The City depends on aid from the State of New York (the "State") both
to enable the City to balance its budget and to meet its cash requirements.
There can be no assurance that there will not be reductions in State aid to the
City from amounts currently projected; that, in future years, State budgets will
be adopted by the April 1 statutory deadline, or interim appropriations will be
enacted; or that any such reductions or delays will not have adverse effects on
the City's cash flow or expenditures. In addition, the Federal budget
negotiation process could result in a reduction in or a delay in the receipt of
Federal grants which could have additional adverse effects on the City's cash
flow or revenues.
The Mayor is responsible for preparing the City's financial plan,
including the City's current financial plan for the 2000 through 2003 fiscal
years (the "2000-2003 Financial Plan" or "Financial Plan"). The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Such
assumptions and contingencies include the condition of the regional and local
economies, the provision of State and Federal aid and the impact on City
revenues and expenditures of any future Federal or State policies affecting the
City.
Implementation of the Financial Plan is dependent upon the City's
ability to market its securities successfully. The City's program for financing
capital projects for fiscal years 2000 through 2003 contemplates the issuance of
$7.449 billion of general obligation bonds and $3.35 billion of bonds to be
issued by the New York City Transitional Finance Authority (the "Finance
Authority"). In addition, the Financial Plan anticipates access to approximately
$2.4 billion in financing capacity of Tobacco Settlement Asset Securitization
Corporation, Inc. ("TSASC"), which will issue debt secured by revenues derived
from the settlement of litigation with tobacco companies selling cigarettes in
the United States. The Finance Authority and TSASC were created to assist the
City in financing its capital program while keeping the City's indebtedness
within the forecast level of the constitutional restrictions on the amount of
debt the City is authorized to incur. In addition, the City issues revenue and
tax anticipation notes to finance its seasonal working capital requirements. The
success of projected public sales of City, New York City Municipal Water Finance
Authority ("Water Authority"), Finance Authority, TSASC and other bonds and
notes will be subject to prevailing market conditions. The City's planned
capital and operating expenditures are dependent upon the sale of its general
obligation bond debt, as well as debt of the Water Authority, Finance Authority
and TSASC bonds. Future developments concerning the City and public discussion
of such developments, as well as prevailing market conditions, may affect the
market for outstanding City general obligation bonds and notes.
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The City Comptroller and other agencies and public officials, from time
to time, issue reports and make public statements which, among other things,
state that projected revenues and expenditures may be different from those
forecast in the City's financial plans.
For the 1999 fiscal year, the City had an operating surplus, before
discretionary and other transfers, and achieved balanced operating results,
after discretionary and other transfers, in accordance with GAAP. The 1999
fiscal year is the nineteenth year that the City has achieved an operating
surplus, before discretionary and other transfers, and balanced operating
results, after discretionary and other transfers.
On June 14, 1999, the City released the Financial Plan for the 2000
through 2003 fiscal years, which relates to the City and certain entities which
receive funds from the City. The Financial Plan reflects changes as a result of
the City's expense and capital budgets for fiscal year 2000, which were adopted
on June 7, 1999. The Financial Plan projects revenues and expenditures for the
2000 fiscal year balanced in accordance with GAAP and projects gaps of $1.8
billion, $1.9 billion and $1.8 billion for fiscal years 2001 through 2003,
respectively.
Changes since adoption of the City's Expense Budget for the 1999 fiscal
year in June 1998, prior to the financial plan submitted to the Control Board on
June 26, 1998 include: (i) an increase in projected tax revenues of $762
million, $558 million, $417 million and $1.4 billion in fiscal years 2000
through 2003, respectively; (ii) $300 million, $250 million, $300 million and
$300 million of projected resources in fiscal years 2000 through 2003,
respectively, from the receipt by the City of funds from the settlement of
litigation with the leading cigarette companies; (iii) a reduction in the
assumed collection of $350 million of projected rent payments for the City's
airports to $210 million and a delay in the receipt of such payments from fiscal
year 2000 to fiscal year 2001; (iv) anticipated proceeds from the proposed sale
of the Coliseum in fiscal year 2001 totaling $345 million; and (v) net increases
in spending of $817 million, $739 million, $713 million and $1.05 billion in
fiscal years 2000 through 2003, including spending for Medicaid, education
initiatives, anti-smoking programs, employee fringe benefit costs, and other
agency programs. The Financial Plan includes a discretionary transfer in the
1999 fiscal year of $2.6 billion primarily to pay debt service due in fiscal
year 2000, for budget stabilization purposes, a discretionary transfer in fiscal
year 2000 to pay debt service due in fiscal year 2001 totaling $429 million, and
a proposed discretionary transfer in fiscal year 2001 to pay debt service due in
fiscal year 2002 totaling $345 million.
In addition, the Financial Plan sets forth gap-closing actions to
eliminate a previously projected gap for the 2000 fiscal year and to reduce
projected gaps for fiscal years 2001 through 2003. The gap-closing actions for
the 2000 through 2003 fiscal years include: (i) additional agency actions
totaling $502 million, $371 million, $293 million and $283 million for fiscal
years 2000 through 2003, respectively; (ii) additional Federal aid of $75
million in each of fiscal years 2000 through 2003, which include the proposed
restoration of $25 million of Federal revenue sharing and $50 million of
increased Federal Medicaid aid; and (iii) additional State actions totaling
approximately $125 million in each of fiscal years 2000 through 2003. The
Financial Plan also reflects a tax reduction program, which includes the
elimination of the City's non-residents earning tax, the proposed extension of
current tax reductions for owners of cooperative and condominium apartments and
a proposed income tax credit for low income wage earners.
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The 2000-2003 Financial Plan is based on numerous assumptions,
including the condition of the City's and the region's economies and modest
employment growth and the concomitant receipt of economically sensitive tax
revenues in the amounts projected. The 2000-2003 Financial Plan is subject to
various other uncertainties and contingencies relating to, among other factors,
the extent, if any, to which wage increases for City employees exceed the annual
wage costs assumed for the 2000 through 2003 fiscal years; continuation of
projected interest earnings assumptions for pension fund assets and current
assumptions with respect to wages for City employees affecting the City's
required pension fund contributions; the willingness and ability of the State to
provide the aid contemplated by the Financial Plan and to take various other
actions to assist the City; the ability of City agencies to maintain balanced
budgets; the willingness of the Federal government to provide the amount of
Federal aid contemplated in the Financial Plan; the impact on City revenues and
expenditures of Federal and State welfare reform and any future legislation
affecting Medicare or other entitlement programs; adoption of the City's budgets
by the City Council in substantially the forms submitted by the Mayor; the
ability of the City to implement cost reduction initiatives, and the success
with which the City controls expenditures; the impact of conditions in the real
estate market on real estate tax revenues; the City's ability to market its
securities successfully in the public credit markets; and unanticipated
expenditures that may be incurred as a result of the need to maintain the City's
infrastructure. The Financial Plan provides no additional wage increases for
City employees after their contracts expire in fiscal years 2000 and 2001. In
addition, the economic and financial condition of the City may be affected by
various financial, social, economic and political factors which could have a
material effect on the City.
On June 7, 1999, the City Council adopted a budget for fiscal year
2000. The adopted budget includes lower estimated debt service expenditures in
fiscal year 2000 resulting from a $456 million increase, from $2.1 billion to
$2.6 billion, in the proposed discretionary transfer in the 1999 fiscal year to
pay debt service due in fiscal year 2000. The $456 million increase in the
discretionary transfer reflects increased tax revenues and decreased
expenditures in the 1999 fiscal year. The adopted budget also includes $220
million of spending initiatives proposed by the City Council, other increased
spending and the net cost of revised tax reduction proposals, which reflect the
repeal of all of the City non-resident earnings tax and the elimination of
certain of the previously proposed tax reduction initiatives.
On July 16, 1998, Standard & Poor's revised its rating of City bonds
upward from BBB+ to A-. Moody's rating of City bonds was revised in February
1998 to A3 from Baa1. On March 8, 1999, Fitch revised its rating of City bonds
upward to A. Moody's, Standard & Poor's and Fitch currently rate the City's
outstanding general obligation bonds A3, A- and A, respectively.
New York State and its Authorities. The State ended the 1998-1999
fiscal year in balance on a cash basis for the 1998-1999 fiscal year, with a
reported closing balance in the General Fund of $892 million, after reserving a
projected $1.8 billion surplus for use in future years. The State ended the
1998-1999 fiscal year in balance on a cash basis, with a reported closing
balance in the General Fund of $892 million, after reserving a projected $1.8
billion surplus for use in future years. The State Financial Plan for the
1999-2000 fiscal year, which was released on August 20, 1999, projects balance
on a cash basis for the 1999-2000 fiscal year, with a closing balance in the
General Fund of $2.85 billion, including a projected tax reduction reserve of
$1.82 billion for use in future fiscal years. The State Division of the Budget
("DOB") has projected a potential imbalance in the 2000-2001 fiscal
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year of approximately $1.9 billion. DOB's estimate includes an assumption for
the projected costs of new collective bargaining agreements, $500 million in
assumed unspecified operating efficiencies and the planned application of
approximately $615 million of the $1.82 billion tax reduction reserve in fiscal
year 2000-2001. DOB has noted that, despite recent budgetary surpluses recorded
by the State, actions affecting the level of receipts and disbursements, the
relative strength of the State and regional economy and actions by the Federal
government could impact projected budget gaps of the State.
The State issued its second quarterly update to the State Financial
Plan for the 1999-2000 fiscal year on October 29, 1999, reflecting a net
increase of $15 million in tax revenues, a net decrease of $10 million in
disbursements and a $25 million increase in the State's litigation reserve fund
for the 1999-2000 fiscal year.
The State budget for the State's 1999-2000 fiscal year was not adopted
by the statutory deadline of April 1, 1999. However, legislation making interim
appropriations has been enacted. A prolonged delay in the adoption of the
State's budget beyond the statutory April 1 deadline without continuing interim
appropriations could delay the projected receipt by the City of State aid
payable after March 31, 2000.
Standard & Poor's rates the State's general obligation bonds A+, and
Moody's rates the State's general obligation bonds A2. On November 9, 1999,
Standard & Poor's revised its rating on the State's general obligation bonds
from A to A+.
Litigation. A number of court actions have been brought involving State
finances. The court actions in which the State is a defendant generally involve
State programs and miscellaneous tort, real property, and contract claims. While
the ultimate outcome and fiscal impact, if any, on the State of those
proceedings and claims are not currently predictable, adverse determinations in
certain of them might have a material adverse effect upon the State's ability to
carry out the 1999 Modification and 2000-2003 Financial Plan.
The City has estimated that its potential future liability on account
of outstanding claims against it as of June 30, 1999 amounted to approximately
$3.5 billion.
General Considerations
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with their terms
and the proceeds from such events will be distributed to Unit holders and will
not be reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. The inclusion of unrated Bonds
in certain Series of the Trust may result in less flexibility in their disposal
and a loss to the Trust upon their disposition. Except as described in footnotes
to "Summary of Essential Financial Information" in Part I of this Prospectus,
interest accrues to the benefit of Unit holders commencing with the expected
date of settlement for purchase of the Units. Neither the Sponsors nor the
Trustee shall be liable in any way for any default, failure or defect in any
Security.
The following paragraphs discuss the characteristics of the Bonds in
the Trust and of certain types of issuers of the Bonds in the Trust. See
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"Special Factors Concerning the Portfolio" in Part I of this Prospectus. These
paragraphs discuss, among other things, certain circumstances which may
adversely affect the ability of such issuers to make payments of principal of
and interest on Bonds held in the portfolio of the Trust or which may adversely
affect the ratings of such Bonds. Because of the insurance obtained by the
Sponsors or by the issuers, however, such changes should not adversely affect
the Trust's ultimate receipt of principal and interest or the Standard & Poor's
or Moody's ratings of the Bonds in the portfolio. An investment in Units of the
Trust should be made with an understanding of the risks that such an investment
may entail, certain of which are described below. Unit holders may obtain
additional information concerning a particular Bond by requesting an official
statement from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest. The
taxing power of any governmental entity may be limited, however, by provisions
of state constitutions or laws, and an entity's credit will depend on many
factors, including potential erosion of the tax base due to population declines,
natural disasters, declines in the state's industrial base or inability to
attract new industries; economic limits on the ability to tax without eroding
the tax base; state legislative proposals or voter initiatives to limit ad
valorem real property taxes; and the extent to which the entity relies on
Federal or state aid, access to capital markets or other factors beyond the
state or entity's control.
Appropriations Bonds
Many state or local governmental entities enter into lease purchase
obligations as a means for financing the acquisition of capital projects (e.g.,
buildings or equipment, among other things). Such obligations are often made
subject to annual appropriations. Certain Series of the Trust may contain Bonds
in the portfolio that are, in whole or in part, subject to and dependent upon
(1) the governmental entity making appropriations from time to time or (2) the
continued existence of special temporary taxes which require legislative action
for their reimposition. The availability of any appropriation is subject to the
willingness of the governmental entity to continue to make such special
appropriations or to reimpose such special taxes. The obligation to make lease
payments exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental entity beyond
the monies so appropriated. Subject to the foregoing, once an annual
appropriation is made, the governmental entity's obligation to make lease rental
payments is absolute and unconditional without setoff or counterclaim,
regardless of contingencies, whether or not a given project is completed or used
by the governmental entity and notwithstanding any circumstances or occurrences
which might arise. In the event of non-appropriation, certificate holders' or
bondowners' sole remedy (absent credit enhancement) generally is limited to
repossession of the collateral for resale or releasing, and the obligation of
the governmental lessee is not backed by a pledge of the general credit of the
governmental lessee. In the event of non-appropriation, the Sponsors may
instruct the Trustee to sell such Bonds.
Moral Obligation Bonds. Certain Series of the Trust may contain Bonds
in the portfolio that are secured by pledged revenues and additionally by the
so-called "moral obligation" of the State or a local governmental body. Should
the pledged revenues prove insufficient, the payment of such Bonds is
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not a legal obligation of the State or local government, and is subject to
its willingness to appropriate funds therefor.
Revenue Bonds
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue bonds".
Under the Internal Revenue Code of 1986, as amended (the "Code") (and under
similar provisions of the prior tax law), "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to residency,
ownership, purchase price and target area requirements, ceiling amounts for
state and local issuers, arbitrage restrictions, and certain information
reporting, certification, and public hearing requirements. There can be no
assurance that additional federal legislation will not be introduced or that
existing legislation will not be further amended, revised, or enacted after
delivery of these Bonds or that certain required future actions will be taken by
the issuing governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion of the
Bond proceeds is not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see "Original Issue Discount and Zero Coupon Bonds").
Housing Bonds. Some of the aggregate principal amount of Bonds may
consist of obligations of state and local housing authorities whose revenues are
primarily derived from mortgage loans to housing projects for low to moderate
income families. Since such obligations are not general obligations of a
particular state or municipality and are generally payable primarily or solely
from rents and other fees, adverse economic developments including failure or
inability to increase rentals, fluctuations of interest rates and increasing
construction and operating costs may reduce revenues available to pay existing
obligations.
The housing bonds in the Trust, despite their optional redemption
provisions which generally do not take effect until ten years after the original
issuance dates of such Bonds (often referred to as "ten year call protection"),
do contain provisions which require the issuer to redeem such obligations at par
from unused proceeds of the issue within a stated period. In recent periods of
declining interest rates there have been increased redemptions of housing bonds
pursuant to such redemption provisions. In addition, the housing bonds in the
Trust are also subject to mandatory redemption in part at par at any time that
voluntary or involuntary prepayments of principal on the underlying mortgages
are made to the trustee for such Bonds or that the mortgages are sold by the
bond issuer. Prepayments of principal tend to be greater in periods of declining
interest rates; it is possible that such prepayments could be sufficient to
cause a housing bond to be redeemed substantially prior to its stated maturity
date, earliest call date or sinking fund redemption date.
Public Power Revenue Bonds. General problems of the electric utility
industry include difficulty in financing large construction programs during an
inflationary period; restrictions on operations and increased costs and delays
attributable to environmental considerations; the difficulty of the capital
markets in absorbing utility debt and equity securities; the availability of
fuel for electric generation at reasonable prices, including among other
considerations the potential rise in fuel costs and the costs associated with
conversion to alternate fuel sources such as coal; technical cost factors and
other problems associated with construction, licensing,
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regulation and operation of nuclear facilities for electric generation,
including among other considerations the problems associated with the use of
radioactive materials and the disposal of radioactive waste; and the effects of
energy conservation. Certain Bonds may have been issued in connection with the
financing of nuclear generating facilities. In view of recent developments in
connection with such facilities, legislative and administrative actions have
been taken and proposed relating to the development and operation of nuclear
generating facilities. The Sponsors are unable to predict whether any such
actions or whether any such proposals or litigation, if enacted or instituted,
will have an adverse impact on the revenues available to pay the debt service on
the Bonds in the portfolio issued to finance such nuclear projects.
Each of the problems referred to above could adversely affect the
ability of the issuers of public power revenue bonds to make payments of
principal of and/or interest on such bonds. Certain municipal utilities or
agencies may have entered into contractual arrangements with investor-owned
utilities and large industrial users and consequently may be dependent in
varying degrees on the performance of such contracts for payment of bond debt
service.
Health Care Revenue Bonds. Some of the aggregate principal amount of
Bonds may consist of hospital revenue bonds. Ratings of hospital bonds are often
initially based on feasibility studies which contain projections of occupancy
levels, revenues and expenses. Actual experience may vary considerably from such
projections. A hospital's gross receipts and net income will be affected by
future events and conditions including, among other things, demand for hospital
services and the ability of the hospital to provide them, physicians' confidence
in hospital management capability, economic developments in the service area,
competition, actions by insurers and governmental agencies and the increased
cost and possible unavailability of malpractice insurance. Additionally, a major
portion of hospital revenue typically is derived from federal or state programs
such as Medicare and Medicaid which have been revised substantially in recent
years and which are undergoing further review at the state and federal level.
Proposals for significant changes in the health care system and the
present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in the
areas noted above, among other things, would affect all hospitals to varying
degrees and, accordingly, any adverse change in these areas may affect the
ability of such issuers to make payment of principal and interest on such bonds.
Higher Education Revenue Bonds. Higher education revenue bonds include
debt of state and private colleges, universities and systems, and parental and
student loan obligations. The ability of universities and colleges to meet their
obligations is dependent upon various factors, including the revenues, costs and
enrollment levels of the institutions. In addition, their ability may be
affected by declines in Federal, state and alumni financial support,
fluctuations in interest rates and construction costs, increased maintenance and
energy costs, failure or inability to raise tuition or room charges and adverse
results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution
control facilities category include securities issued on behalf of a private
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corporation,* including utilities, to provide facilities for the treatment of
air, water and solid waste pollution. Repayment of these bonds is dependent upon
income from the specific pollution control facility and/or the financial
condition of the project corporation. See also "Private Activity Bonds."
Other Utility Revenue Bonds. Bonds in this category include securities
issued to finance natural gas supply, distribution and transmission facilities,
public water supply, treatment and distribution facilities, and sewage
collection, treatment and disposal facilities. Repayment of these bonds is
dependent primarily on revenues derived from the billing of residential,
commercial and industrial customers for utility services, as well as, in some
instances, connection fees and hook-up charges. Such utility revenue bonds may
be adversely affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this category
include securities issued to finance facilities for removal and disposal of
solid municipal waste. Repayment of these bonds is dependent on factors which
may include revenues from appropriations from a governmental entity, the
financial condition of the private project corporation and revenues derived from
the collection of charges for disposal of solid waste. Repayment of resource
recovery bonds may also be dependent to various degrees on revenues from the
sale of electric energy or steam. Bonds in this category may be subject to
mandatory redemption in the event of project non-completion, if the project is
rendered uneconomical or if it is considered an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds
issued for airport facilities, bridges, turnpikes, port authorities, railroad
systems or mass transit systems. Generally, airport facility revenue bonds are
payable from and secured by the revenues derived from the ownership and
operation of a particular airport. Payment on other transportation bonds is
often dependent primarily or solely on revenues from financed facilities,
including user fees, charges, tolls and rents. Such revenues may be adversely
affected by increased construction and maintenance costs or taxes, decreased
use, competition from alternative facilities, scarcity of fuel, reduction or
loss of rents or the impact of environmental considerations. Other
transportation bonds may be dependent primarily or solely on Federal, state or
local assistance including motor fuel and motor vehicle taxes, fees and licenses
and, therefore, may be subject to fluctuations in such assistance.
Special Tax Revenue Bonds. Bonds in this category are bonds secured
primarily or solely by receipt of certain state or local taxes, including sales
and use taxes or excise taxes. Consequently, such bonds may be subject to
fluctuations in the collection of such taxes. Such bonds do not include tax
increment bonds or special assessment bonds.
Other Revenue Bonds. Certain Series of the Trust may also contain
revenue bonds which are payable from and secured primarily or solely by revenues
from the ownership and operation of particular facilities, such as correctional
facilities, parking facilities, convention centers, arenas, museums and other
facilities owned or used by a charitable entity. Payment on bonds related to
such facilities is, therefore, primarily or solely dependent -------- * For the
purposes of the description of users of facilities, all references to
"corporations" shall be deemed to include any other nongovernmental person or
entity.
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on revenues from such projects, including user fees, charges and rents. Such
revenues may be affected adversely by increased construction and maintenance
costs or taxes, decreased use, competition from alternative facilities,
reduction or loss of rents or the impact of environmental considerations.
Certain Series of the Trust may also contain bonds that are secured by
direct obligations of the U.S. Government or, in some cases, obligations
guaranteed by the U.S. Government, placed in an escrow account maintained by an
independent trustee until maturity or a predetermined redemption date. In a few
isolated instances to date, bonds which were thought to be escrowed to maturity
have been called for redemption prior to maturity.
Puerto Rico Bonds
Certain of the Bonds in the Trust may be general obligations and/or
revenue bonds of issuers located in Puerto Rico which will be affected by
general economic conditions in Puerto Rico. The economy of Puerto Rico is fully
integrated with that of the mainland United States. During fiscal 1998,
approximately 90% of Puerto Rico's exports were to the United States mainland,
which was also the source of 61% of Puerto Rico's imports. In fiscal 1998,
Puerto Rico experienced a $8.5 billion positive adjusted merchandise trade
balance. The dominant sectors of the Puerto Rico economy are manufacturing and
services. Gross product in fiscal 1995 was $28.4 billion ($25.9 billion in 1992
prices) and gross product in fiscal 1999 was $38.1 billion ($29.7 billion in
1992 prices). This represents an increase in gross product of 34% from fiscal
1995 to 1999 (14.5% in 1992 prices). According to the Labor Department's
Household Employment Survey, average employment increased from 1,051,000 in
fiscal 1995, to 1,147,000 in fiscal 1999. Average unemployment decreased from
13.8% in fiscal 1995, to 12.5% in fiscal 1999. The Planning Board's gross
product forecast for fiscal 2000, made in October 1999, projected an increase of
2.7% over fiscal 1999.
Original Issue Discount Bonds and Zero Coupon Bonds
Certain Series of the Trust may contain original issue discount bonds
and/or zero coupon bonds. Original issue discount bonds are bonds that were
originally issued at less than the market interest rate. Zero coupon bonds are
original issue discount bonds that do not provide for the payment of any current
interest. For Federal income tax purposes, original issue discount on tax-exempt
bonds is treated as tax-exempt interest and must be accrued over the term of the
bonds.
Tax Status - Possible Changes in Law
It is possible that additional Federal legislation will be enacted or
that existing legislation will be amended hereafter with the effect that
interest on the bonds becomes subject to Federal income taxation. If the
interest on the Bonds should ultimately be deemed to be taxable, the Sponsors
may instruct the Trustee to sell them, and, since they would be sold as taxable
securities, it is expected that they would have to be sold at a substantial
discount from current market prices.
Bonds Subject to Sinking Fund Provisions
Most of the Bonds in the Trust are subject to redemption prior to their
stated maturity date pursuant to sinking fund or call provisions. A sinking fund
is a reserve fund accumulated over a period of time for
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retirement of debt. Sinking fund provisions are designed to redeem a significant
portion of an issue gradually over the life of the issue. Obligations to be
redeemed are generally chosen by lot. A callable debt obligation is one which is
subject to redemption prior to maturity at the option of the issuer. To the
extent that obligations in the Trust have a bid side valuation higher than their
par value, redemption of such obligations at par would result in a loss of
capital to a purchaser of Units at the public offering price. The estimated
current return of the Units might also be adversely affected if the return on
the retired Bonds is greater than the average return on the Bonds in the Trust.
In general, call provisions are more likely to be exercised when the offering
side valuation is at a premium over par than when it is at a discount from par.
See "Special Factors Concerning the Portfolio" in Part I of this Prospectus for
information for the number of bonds in the Portfolio that are original issue
discount and zero coupon bonds and "Portfolio Information" in Part I of this
Prospectus for a breakdown of the percentage of Bonds in the Trust with offering
side valuations at a premium, discount or at par. See also "Estimated Current
Return and Estimated Long Term Return". "The Portfolio" in Part I of this
Prospectus contains a listing of the sinking fund and call provisions, if any,
with respect to each of the Bonds therein.
Other Matters
An amendment to the Federal Bankruptcy Act relating to the adjustment
of indebtedness owed by any political subdivision or public agency or
instrumentality of any state, including municipalities, became effective in
1979. Among other things, this amendment facilitates the use of proceedings
under the Federal Bankruptcy Act by any such entity to restructure or otherwise
alter the terms of its obligations, including those of the type comprising the
Trust's portfolio. The Sponsors are unable to predict what effect, if any, this
legislation will have on the Trust.
To the best knowledge of the Sponsors, there is no litigation pending
as of the date hereof in respect of any Securities which might reasonably be
expected to have a material adverse effect on the Trust, unless otherwise stated
in Part I of this Prospectus. At any time, however, litigation may be initiated
on a variety of grounds with respect to Securities in the Trust. Such litigation
as, for example, suits challenging the issuance of pollution control revenue
bonds under recently enacted environmental protection statutes, may affect the
validity of such Securities or the tax-free nature of the interest thereon.
While the outcome of such litigation can never be entirely predicted with
certainty, bond counsel have given opinions to the issuing authorities of each
Bond on the date of issuance to the effect that such Securities have been
validly issued and that the interest thereon is exempt from regular Federal
income tax. In addition, other litigation or other factors may arise from time
to time which potentially may impair the ability of issuers to meet obligations
undertaken with respect to Securities.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units is based on the aggregate bid
price of the Bonds in the Trust (as determined by the Evaluator) plus a sales
charge determined in accordance with the schedule set forth below, which is
based upon the maturities of each Bond in the Trust. The Sponsors have
implemented this variable format as a more equitable method of assessing the
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sales charge for secondary market purchases. For the purpose of computing the
sales charge, Bonds are deemed to mature on their expressed maturity dates,
unless the Evaluator evaluates the price of the Bonds to a different date, such
as a call date or a mandatory tender date, in which case the maturity will be
deemed to be such other date. This method of computing the sales charge will
apply different sales charge rates to each Bond in the Trust depending on the
maturity of each Bond in accordance with the following schedule:
Secondary Market Period
Sales Charge
Percentage
Percentage of of Net
Years to Maturity Per Bond Public Offering Price Amount Invested
- -------------------------- --------------------- ---------------
0 Months to 2 Years 1.0% 1.010%
2 but less than 3 2.0% 2.091%
3 but less than 4 3.0% 3.093%
4 but less than 8 4.0% 4.167%
8 but less than 12 5.0% 5.363%
12 but less than 15 5.5% 5.820%
15 or more 5.9% 6.270%
A minimum sales charge of 1.0% of the Public Offering Price is applied
to all secondary market unit purchases. There is no reduction of the sales
charge for volume purchases in secondary market transactions.
A proportionate share of accrued and undistributed interest on the
Securities at the date of delivery of the Units to the purchaser is also added
to the Public Offering Price.
Unless Securities are in default in payment of principal or interest or
in significant risk of such default, the Evaluator will not attribute any value
to the Units due to the insurance obtained by the Trust. See also "Rights of
Unit Holders--Certificates" and "Rights of Unit Holders--Redemption" for
information relating to redemption of Units. The Evaluator will consider in its
evaluation of Defaulted Bonds which are covered by insurance obtained by the
Trust the value of the insurance guaranteeing interest and principal payments as
well as the market value of the Securities and the market value of similar
securities of issuers whose securities, if identifiable, carry identical
interest rates and maturities and are of creditworthiness comparable to the
issuer prior to the default or risk of default. If such other securities are not
identifiable, the Evaluator will compare prices of securities with substantially
identical interest rates and maturities and of a creditworthiness of minimum
investment grade. As to Series 18 and subsequent Series, the value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Bonds assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium attributable to the purchase of Permanent Insurance
and the related custodial fee) and (ii) the market value of such Defaulted Bonds
not covered by Permanent Insurance. In any case the Evaluator will consider the
ability of the Insurer to meet its commitments under the Trust's insurance
policy and, in the case of Series 18 and subsequent Series, MBIA Inc.'s or MBIA
Corp.'s commitment to issue Permanent Insurance. For a description of the
circumstances under which a full or partial suspension of the right of Unit
holders to redeem their Units may occur, see "Rights of Unit Holders--
Redemption."
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It is the present intention of the Trustee (and, in the case of Series
18 and subsequent Series, assuming the Trustee does not exercise the right to
obtain Permanent Insurance on any Defaulted Bonds), so long as the Trust
contains either some Bonds not in default or any Pre-insured Bonds, not to sell
Defaulted Bonds to effect redemptions or for any other reason but rather to
retain them in the portfolio BECAUSE VALUE ATTRIBUTABLE TO THE INSURANCE
OBTAINED BY THE TRUST CANNOT BE REALIZED UPON SALE. Insurance obtained by the
issuer of a Pre-insured Bond, or by some other party, is effective so long as
such Pre-insured Bond is outstanding and the insurer of such Bond continues to
fulfill its obligations. Therefore, any such insurance may be considered to
represent an element of market value in regard to the Pre-insured Bond, but the
exact effect, if any, of this insurance on such market value cannot be
predicted. Regardless of whether the insurer of a Pre-insured Bond continues to
fulfill its obligations, however, such Bond will in any case continue to be
insured under the policy obtained by the Trust from the Insurer as long as the
Bond is held in the Trust.
Certain commercial banks are making Units of the Trust available to
their customers on an agency basis. A portion of the sales charge discussed
above is retained by or remitted to the banks. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the Glass-Steagall
Act does permit certain agency transactions, and banking regulators have not
indicated that these particular agency transactions are not permitted under such
Act.
Market for Units
Although they are not obligated to do so, the Sponsors have maintained
and intend to continue to maintain a market for the Units and to continuously
offer to purchase Units at prices based on the aggregate bid price of the
Securities. The Sponsors' Repurchase Price shall be not less than the Redemption
Price plus accrued interest through the expected date of settlement. See "Rights
of Unit Holders--Redemption--Computation of Redemption Price per Unit." There is
no sales charge incurred when a Unit holder sells Units back to the Sponsors.
Any Units repurchased by the Sponsors may be reoffered to the public by the
Sponsors at the Public Offering Price at the time, plus accrued interest.
If the supply of Units of any Series exceeds demand, or for some other
business reason, the Sponsors may discontinue purchases of Units of such Series
at prices based on the aggregate bid price of the Securities. The Sponsors do
not in any way guarantee the enforceability, marketability or price of any
Security in the portfolio or of the Units of the Trust. In the event that a
market is not maintained for the Units, a Unit holder desiring to dispose of its
Units may be able to do so only by tendering such Units to the Trustee for
redemption at the Redemption Price, which is based upon the aggregate bid price
of the underlying Securities. The aggregate bid price of the Securities in the
Trust may be expected to be less than the aggregate offering price. If a Unit
holder wishes to dispose of its Units, he should inquire of the Sponsors as to
current market prices prior to making a tender for redemption to the Trustee.
See "Rights of Unit Holders--Redemption" and "Sponsors."
Employees (and their immediate families) of the Sponsors may, pursuant
to employee benefit arrangements, purchase Units of the Trust at a price equal
to the bid side evaluation of the underlying securities in the Trust, divided by
the number of Units outstanding. Such arrangements result in less selling effort
and selling expenses than sales to employee groups of
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other companies. Resales or transfers of Units purchased under the employee
benefit arrangements may only be made through the Sponsors' secondary market, so
long as it is being maintained.
Distribution of Units
The Sponsors are the sole underwriters of the Units. It is the
Sponsors' intention to effect a public distribution of the Units solely through
their own organizations. Units may, however, be sold to dealers who are members
of the National Association of Securities Dealers, Inc. at a discount. Such
discount is subject to change from time to time by the Agent for the Sponsors.
Sales will be made only with respect to whole Units, and the Sponsors reserve
the right to reject, in whole or in part, any order for the purchase of Units.
It is the Sponsors' intention to continue to qualify Units of the Trust for sale
where such qualification is necessary. In maintaining a market for the Units
(see "Public Offering--Market for Units"), the Sponsors will realize profits or
sustain losses in the amount of any difference between the price at which they
buy Units and the price at which they resell such Units (the Public Offering
Price described in the currently effective Prospectus which includes the sales
charge set forth in Part I of this Prospectus under "Summary of Essential
Financial Information") or the price at which they may redeem such Units (based
upon the aggregate bid side evaluation of the Securities), as the case may be,
and to the extent that they earn sales charges on resales.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO UNIT HOLDERS
Units of the Trust are offered on a "dollar price" basis. In contrast,
tax-exempt bonds customarily are offered on a "yield price" basis. Therefore,
the rate of return on each Unit is measured in terms of both Estimated Current
Return and Estimated Long-Term Return. Estimated Current Return based on the
Public Offering Price per Unit and Estimated Long-Term Return per Unit and
information regarding estimated monthly and semi-annual distributions of
interest to Unit holders are set forth under "Summary of Essential Financial
Information" in Part I of this Prospectus.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. Estimated Net
Interest Income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator and with principal prepayment, redemption, maturity,
exchange or sale of Bonds. The Public Offering Price per Unit will vary with
changes in the offering price of the Bonds. Estimated Current Return takes into
account only the interest payable on the Bonds and does not involve a
computation of yield to maturity or to an earlier redemption date nor does it
reflect any amortization of premium or discount from par value in the Bond's
purchase price. Moreover, because interest rates on bonds purchased at a premium
are generally higher than current interest rates on newly issued bonds of a
similar type with comparable ratings, the Estimated Current Return per Unit may
be affected adversely if such Bonds are redeemed prior to their maturity.
Therefore, there is no assurance that the Estimated Current Return as set forth
under "Summary of Essential Financial Information" in Part I of this Prospectus
will be realized in the future.
Estimated Long-Term Return is calculated using a formula that (i) takes
into consideration, and determines and factors in the relative weightings of,
the market values, yields (taking into account the amortization of premiums and
the accretion of discounts) and estimated retirements of all
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the Bonds in the portfolio and (ii) takes into account the expenses and sales
charge associated with each Unit of the Trust. The Estimated Long-Term Return
assumes that each Bond is retired on its pricing life date (i.e., that date
which produces the lowest dollar price when yield price calculations are done
for each optional call date and the maturity date of a callable security). If
the Bond is retired on any optional call or maturity date other than the pricing
life date, the yield to the holder of that Bond will be greater than the initial
quoted yield. Since the market values and estimated retirements of the Bonds,
the expenses of the Trust and the Net Annual Interest Income and Public Offering
Price per Unit may change, there is no assurance that the Estimated Long-Term
Return as set forth under "Summary of Essential Financial Information" in Part I
of this Prospectus will be realized in the future.
INSURANCE ON THE BONDS
Insurance guaranteeing the timely payment, when due, of all principal
and interest on the Bonds in the Trust has been obtained from the Insurer by the
Trust. The Insurer has issued a policy of insurance covering each of the Bonds
in the Trust, including Pre-insured Bonds. As to each Trust, the Insurer shall
not have any liability under the policy with respect to any Bonds which do not
constitute part of the Trust. In determining to insure the Bonds, the Insurer
has applied its own respective standards which generally correspond to the
standards it has established for determining the insurability of new issues of
municipal bonds.
By the terms of its policy, the Insurer unconditionally guarantees to
the Trust the payment, when due, required of the issuer of the Bonds of an
amount equal to the principal of (either at the stated maturity or by any
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on the Bonds as such payments shall become due but not paid. Except as
provided below with respect to small issue industrial development Bonds and
pollution control revenue Bonds, in the event of any acceleration of the due
date of principal by reason of mandatory or optional redemption (other than
mandatory sinking fund redemption), default or otherwise, the payments
guaranteed will be made in such amounts and at such times as would have been due
had there not been an acceleration. The Insurer will be responsible for such
payments less any amounts received by the Trust from any trustee for the Bond
issuers or from any other source. The policy issued by the Insurer does not
guarantee payment on an accelerated basis, the payment of any redemption premium
or the value of the Units. The MBIA Inc. and MBIA Corp. policies also do not
insure against nonpayment of principal of or interest on the Bonds resulting
from the insolvency, negligence or any other act or omission of the trustee or
other paying agent for the Bonds. With respect to small issue industrial
development Bonds and pollution control revenue Bonds, however, MBIA Inc. and
MBIA Corp., respectively, guarantee the full and complete payments required to
be made by or on behalf of an issuer of such Bonds if there occurs pursuant to
the terms of the Bonds an event which results in the loss of the tax-exempt
status of interest on such Bonds, including principal, interest or premium
payments payable thereon, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such Bonds. No assurance can be
given that the policy issued by the Insurer would insure the payment of
principal or interest on Bonds which is not required to be paid by the issuer
thereof because the Bonds were not validly issued. At the respective times of
issuance of the Bonds, opinions relating to the validity thereof were rendered
by bond counsel to the respective issuing authorities.
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The insurance policy relating to the Trust is non-cancelable and will
continue in force so long as the Trust is in existence and the Securities
described in the policy continue to be held in and owned by the Trust. Failure
to pay premiums on the policy obtained by the Trust will not result in the
cancellation of insurance but will force the Insurer to take action against the
Trustee to recover premium payments due it. The Trustee in turn will be entitled
to recover such payments from the Trust.
The policy issued by the Insurer shall terminate as to any Bond which
has been redeemed from or sold by the Trustee on the date of such redemption or
on the settlement date of such sale, and the Insurer shall not have any
liability under the policy as to any such Bond thereafter. If the date of such
redemption or the settlement date of such sale occurs between a record date and
a date of payment of any such Bonds, any MBIA Inc. or MBIA Corp. policy will
terminate as to such Bond on the business day next succeeding such date of
payment. The termination of a MBIA Inc. or MBIA Corp. policy as to any Bond
shall not affect MBIA Inc.'s or MBIA Corp.'s obligations regarding any other
Bond in such Trust or any other Trust which has obtained a MBIA Inc. or MBIA
Corp. insurance policy. The policy issued by the Insurer will terminate as to
all Bonds on the date on which the last of the Bonds matures, is redeemed or is
sold by the Trust.
Pursuant to an irrevocable commitment of the Insurer, the Trustee upon
the sale of a Bond in the Trust has the right to obtain permanent insurance with
respect to such Bond (i.e., insurance to maturity of the Bonds) (the "Permanent
Insurance") upon the payment of a single predetermined insurance premium from
the proceeds of the sale of such Bond. Accordingly, any Bond in such Series of
the Trust is eligible to be sold on an insured basis. It is expected that the
Trustee will exercise the right to obtain Permanent Insurance for a Bond in the
Trust upon instruction from the Sponsors only if upon such exercise the Trust
would receive net proceeds (sale of Bond proceeds less the insurance premium
attributable to the Permanent Insurance and the related custodial fee) from such
sale in excess of the sale proceeds if such Bond was sold on an uninsured basis.
The Permanent Insurance premium with respect to each Bond is determined
based upon the insurability of each Bond as of the Date of Deposit and will not
be increased or decreased for any change in the creditworthiness of such Bond
unless such Bond is in default as to payment of principal and/or interest. In
such event, the Permanent Insurance premium shall be subject to an increase
predetermined at the Date of Deposit and payable from the proceeds of the sale
of such Bond.
Except as indicated below, insurance obtained by the Trust has no
effect on the price or redemption value of Units thereof. It is the present
intention of the Evaluator to attribute a value to the insurance obtained by the
Trust (including the right to obtain Permanent Insurance) for the purpose of
computing the price or redemption value of Units thereof only if the Bonds
covered by such insurance are in default in payment of principal or interest or,
in the Sponsors' opinion, in significant risk of such default ("Defaulted
Bonds"). The value of the insurance will be equal to the difference between (1)
the market value of a Bond which is in default in payment of principal or
interest or a significant risk of default assuming the exercise of the right to
obtain Permanent Insurance (less the insurance premium attributable to the
purchase of Permanent Insurance and the related custodial fee) and (2) the
market value of such Bonds not covered by Permanent Insurance. Insurance
obtained by the issuer of a Bond or by parties other than the Trust is
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effective so long as such Pre-insured Bond is outstanding and the insurer
of such Pre-insured Bond continues to fulfill its obligations.
Regardless of whether the insurer of a Pre-insured Bond continues to
fulfill its obligations, however, such Bond will continue to be insured under
the policy obtained by the Trust from MBIA Inc. or MBIA Corp. as long as the
Bond is held in the Trust. Insurance obtained by the issuer of a Bond or by
other parties may be considered to represent an element of market value in
regard to the Bonds thus insured, but the exact effect, if any, of this
insurance on such market value cannot be predicted.
In the event that interest on or principal of a Bond is due for payment
but is unpaid by reason of nonpayment by the issuer thereof, the Insurer will
make payments to its fiscal agent, as identified in the insurance policy (the
"Fiscal Agent"), equal to such unpaid amounts of principal and interest not
later than one business day after the Insurer has been notified by the Trustee
that such nonpayment has occurred (but not earlier than the date such payment is
due). The Fiscal Agent will disburse to the Trustee the amount of principal and
interest which is then due for payment but is unpaid upon receipt by the Fiscal
Agent of (1) evidence of the Trust's right to receive payment of such principal
and interest and (2) evidence, including any appropriate instruments of
assignment, that all of the rights to payment of such principal or interest then
due for payment shall thereupon vest in the Insurer. Upon payment by the Insurer
of any principal or interest payments with respect to any Bonds, the Insurer
shall succeed to the rights of the owner of such Bonds with respect to such
payment.
MBIA Corp. is the principal operating subsidiary of MBIA Inc., a New
York Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts
of or claims against MBIA Corp. MBIA Corp. is a limited liability corporation
rather than a several liability association. MBIA Corp. is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam.
As of December 31, 1998, MBIA Corp. had admitted assets of $6.5 billion
(audited), total liabilities of $4.2 billion (audited), and total capital and
surplus of $2.3 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of September 30, 1999, MBIA Corp. had admitted assets of $6.9
billion (unaudited), total liabilities of $4.5 billion (unaudited), and total
capital and surplus of $2.4 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. The address of MBIA Corp. is 113 King Street, Armonk, New York
10504.
As of the Evaluation Date, the claims-paying ability of MBIA Corp. has
been rated "AAA" by Standard & Poor's and "Aaa" by Moody's.
No representation is made herein as to the accuracy or adequacy of such
information or as to the absence of material adverse changes in such information
subsequent to the date thereof. The Sponsors are not aware that the information
herein is inaccurate or incomplete as of the date hereof.
The contract of insurance relating to the Trust and the negotiations in
respect thereof and certain agreements relating to Permanent Insurance represent
the only significant relationship between the Insurer and
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the Trust. Otherwise, neither the Insurer nor any associate thereof has any
material business relationship, direct or indirect, with the Trust or the
Sponsors, except that the Sponsors may from time to time in the normal course of
their business participate as underwriters or as managers or as members of
underwriting syndicates in the distribution of new issues of municipal bonds for
which a policy of insurance guaranteeing the payment of interest and principal
has been obtained from the Insurer, and except that James A. Lebenthal, Chairman
of the Board of Directors of Lebenthal & Co., Inc., is a director of MBIA Inc.
Although all issues contained in the portfolio of the Trust are individually
insured, neither the Trust, the Units nor the portfolio is insured directly or
indirectly by the Insurer.
A purpose of the insurance on the Bonds in the portfolio obtained by
the Trust is to obtain a higher yield on the Trust portfolio than would be
available if all the Securities in such portfolio had Standard & Poor's "AAA"
rating and/or Moody's "Aaa" rating but were uninsured and yet at the same time
to have the protection of insurance of payment of interest and principal on the
Securities. There is, of course, no certainty that this result will be achieved.
Any Pre-insured Bonds in the Trust (all of which are rated "AAA" by Standard &
Poor's and/or "Aaa" by Moody's, respectively) may or may not have a higher yield
than uninsured bonds rated "AAA" by Standard & Poor's and/or "Aaa" by Moody's,
respectively.
Because the Securities are insured by the Insurer as to the payment of
principal and interest, Moody's has assigned a rating of "Aaa" to all of the
Bonds in the Trust, as insured, and Standard & Poor's has assigned its "AAA"
investment rating to the Units and Bonds in the Trust. See "Tax Exempt Bond
Portfolio" in Part I of this Prospectus. These ratings apply to the Bonds only
while they are held in the Trust. The obtaining of these ratings by the Trust
should not be construed as an approval of the offering of the Units by Standard
& Poor's or Moody's or as a guarantee of the market value of the Trust or of the
Units. These ratings are not a recommendation to buy, hold or sell and do not
take into account the extent to which Trust expenses or portfolio asset sales
for less than the Trust's acquisition price will reduce payment to the Unit
holders of the interest or principal.
TAX STATUS (See also "Tax Status" in Part I of this Prospectus)
Interest income on the Bonds contained in the Trust portfolio is, in
the opinion of bond counsel to the issuing governmental authorities rendered at
the time of original issuance of the Bonds, excludable from gross income under
the Internal Revenue Code of 1954, as amended (the "1954 Code"), or the Internal
Revenue Code of 1986, as amended (the "Code"), depending upon the date of
issuance of the Bonds in any particular Series. See "The Trust--Portfolio."
Gain (or loss) realized on a sale, maturity or redemption of the Bonds
or on a sale or redemption of a Unit is, however, includable in gross income as
capital gain (or loss) for Federal, state and local income tax purposes,
assuming that the Unit is held as a capital asset. Such gain (or loss) does not
include any amount received in respect of accrued interest, accrued original
issue discount or accrued market discount. Gain on the disposition of a Bond
purchased at a market discount generally will be treated as ordinary income,
rather than capital gain, to the extent of accrued market discount. The
Administration's Fiscal Year 2000 Budget proposal would have required accrual
method taxpayers to accrue market discount on a current basis. Bonds selling at
a market discount tend to increase in market value as
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they approach maturity, when the principal amount is payable, thus increasing
the potential for taxable gain (or reducing the potential for loss) on their
redemption, maturity or sale. Capital gains realized by noncorporate Unit
holders on the disposition of Bonds or Units will be taxed at a maximum federal
income tax rate of 20% if the Unit and the Bonds have been held for more than
one year), whereas ordinary income received by noncorporate Unit holders will be
taxed at a maximum federal income tax rate of 39.6%. The deductibility of
capital losses is limited to the amount of capital gain; in addition, up to
$3,000 ($1,500 for married persons filing separately) of capital losses of
non-corporate Unit holders may be deducted against ordinary income. Since the
proceeds from sales of Bonds, under certain circumstances, may not be
distributed, a Unit holder's taxable income for any year may exceed the actual
cash distributions to the Unit holder in that year.
Among other things, the Code provides for the following: (1) interest
on certain private activity bonds issued after August 7, 1986 is an item of tax
preference included in the calculation of the individual's alternative minimum
tax currently taxed at a rate of up to 28% and the corporate alternative minimum
tax currently at a rate of 20%(however, none of the Bonds in the Trust is a
private activity bond, the interest on which is subject to this alternative
minimum tax); (2) 75% of the amount by which adjusted current earnings
(including interest on all tax-exempt bonds, such as the Bonds) exceed
alternative minimum taxable income, as modified for this calculation, will be
included in alternative minimum taxable income of corporations (the Code does
not otherwise require corporations, and does not require taxpayers other than
corporations, to treat interest on the Bonds as an item of tax preference in
computing alternative minimum tax); (3) subject to certain exceptions, no
financial institution is allowed a deduction for the portion of the
institution's interest expense that is allocable to tax-exempt interest on
tax-exempt bonds acquired after August 7, 1986; (4) the amount of the deduction
allowed to property and casualty insurance companies for underwriting loss is
decreased by an amount determined with regard to tax-exempt interest income and
the deductible portion of dividends received by such companies; (5) all
taxpayers are required to report for informational purposes on their Federal
income tax returns the amount of tax-exempt interest they receive; (6) an issuer
must meet certain requirements on a continuing basis in order for interest on a
tax-exempt bond to be tax-exempt, with failure to meet such requirements
resulting in the loss of tax exemption; and (7) a branch profits tax is imposed
on U.S. branches of foreign corporations which, because of the manner in which
the branch profits tax is calculated, may have the effect of subjecting the U.S.
branch of a foreign corporation to Federal income tax on the interest on bonds
otherwise exempt from such tax.
Section 86 of the Code provides that a portion of social security
benefits is includable in taxable income for taxpayers whose "modified adjusted
gross income," combined with a portion of their social security benefits,
exceeds a base amount. The base amount is $32,000 for a married couple filing a
joint return, zero for married persons filing separate returns that do not live
apart from their spouse at all times during the taxable year, and $25,000 for
all others. Interest on tax-exempt bonds is added to adjusted gross income for
purposes of determining whether an individual's income exceeds the base amount
described above.
In addition, certain "S corporations" may be subject to minimum tax on
certain passive income, including tax-exempt interest on the Bonds.
At the time of the original issuance of the Bonds held by the Trust,
opinions relating to the validity of the Bonds and the exemption of
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interest thereon from Federal income tax were or (with respect to "when, as and
if issued" Bonds) were to be rendered by bond counsel to the issuing
governmental authorities. Neither the Sponsors nor their special counsel have
made any review of proceedings relating to the issuance of such Bonds or the
basis for bond counsel's opinions.
In the case of certain Bonds which may be included in the Trust,
the opinions of bond counsel indicate that, although interest on such Bonds is
generally exempt from Federal income tax, such Bonds are "industrial development
bonds" under the 1954 Code or are "private activity bonds" as that term is
defined in the Code (the following discussion also applies to Bonds that are
"industrial development bonds" as they are defined in the 1954 Code in terms
similar to those under which private activity bonds are defined in the Code and
are generally subject to the same limitations). Interest on certain qualified
small issue private activity bonds is exempt from Federal income tax only so
long as the "principal user" of the bond-financed facility and any "related
person" remain within the capital expenditure limitations of the Code and only
so long as the aggregate private activity bond limits of the Code are met. In
addition, interest on private activity bonds will not be exempt from Federal
income tax for any period during which such bonds are held by a "substantial
user" of the facilities financed by the proceeds of such bonds (or a "related
person" to such a "substantial user"). Interest attributable to such Bonds, if
received by a Unit holder who is such a "substantial user" or "related person,"
will be taxable (i.e., not tax-exempt) to the same extent as if such Bonds were
held directly as owner.
In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events such as prohibited "arbitrage" activities by
the issuer of the Bond or the failure of the Bond to continue to satisfy the
conditions required for the exemption of interest thereon from regular federal
income tax. No investigation has been made as to the current or future owners or
users of the facilities financed by the bonds, the amount of such persons'
outstanding tax-exempt private activities bonds, or the facilities themselves,
and no assurance can be given that future events will not affect the tax-exempt
status of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
Under Section 265 of the Code, if borrowed funds are used by a Unit
holder to purchase or carry Units of the Trust, interest on such indebtedness
will not be deductible for Federal income tax purposes. Under rules used by the
Internal Revenue Service, the purchase of Units may be considered to have been
made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. Similar rules may be applicable for purposes
of state and local taxation. Investors with questions regarding this issue
should consult their tax advisors.
The Trust may contain Bonds issued with original issue discount. The
Code requires holders of tax-exempt obligations issued with original issue
discount, such as the Trust (and therefore the Unit holders), to accrue
tax-exempt original issue discount by using the constant interest method
provided for the holders of taxable obligations and to increase the basis of a
tax-exempt obligation by the amount of accrued tax-exempt original issue
discount. These provisions are applicable to obligations issued after September
3, 1982 and acquired after March 1, 1984. The Trust's tax basis in a Bond is
increased by any accrued original issue discount, as is a Unit holder's tax
basis in its Units.
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If a Unit holder's tax cost for its pro rata interest in a Bond exceeds
its pro rata interest in the Bond's face amount, the Unit holder will be
considered to have purchased its pro rata interest in the Bond at a "premium."
The Unit holder will be required to amortize any premium relating to its pro
rata interest in a Bond prior to the maturity of the Bond. Amortization of
premium on a Bond will reduce a Unit holder's tax basis for this pro rata
interest in the Bond, but will not result in any deduction from the Unit
holder's income. Thus, for example, a Unit holder who purchases a pro rata
interest in a Bond at a premium and resells it at the same price will recognize
taxable gain equal to the portion of the premium that was amortized during the
period the Unit holder is considered to have held such interest.
The exemption of interest on municipal obligations for Federal income
tax purposes does not necessarily result in exemption under the income tax laws
of any state or local government. Interest income derived from the Bonds is not
excluded from net income in determining New York State or New York City
franchise taxes on corporations or financial institutions. The laws of states
and local governments vary with respect to the taxation of such obligations.
From time to time proposals have been introduced before Congress, the
purpose of which is to restrict or eliminate the Federal income tax exemption
for interest on debt obligations similar to the Bonds in the Trust, and it can
be expected that similar proposals may be introduced in the future. The Sponsors
cannot predict whether additional legislation, if any, in respect of the Federal
income tax status of interest on debt obligations may be enacted and what the
effect of such legislation would be on Bonds in the Trust. In addition, the
enactment of a "flat tax" or other legislation that significantly alters the
federal income tax system may have a material adverse effect on the value of
Units. If the interest on any Bonds in the Trust should ultimately be deemed to
be taxable, the Sponsors may instruct the Trustee to sell such Bonds, and, since
they would be sold as taxable securities, it is expected that they would be sold
at a substantial discount from current market prices.
In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the federal government to
regulate and control bonds such as the Bonds in the Trust and to tax interest on
such bonds in the future. The decision does not, however, affect the current
exclusion from gross income of the interest earned on the Bonds in the Trust in
accordance with Section 103 of the Code.
The opinions of counsel to the issuing governmental authorities to the
effect that interest on the Bonds is exempt from regular federal income tax may
be limited to law existing at the time the Bonds were issued, and may not apply
to the extent that future changes in law, regulations or interpretations affect
such Bonds. Investors are advised to consult their own advisors for advice with
respect to the effect of any legislative changes.
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RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates executed by
the Trustee and the Sponsors. The Trustee is authorized to treat as the record
owner of Units that person who is registered as such owner on the books of the
Trustee. Certificates are transferable by presentation and surrender to the
Trustee properly endorsed and accompanied by a written instrument or instruments
of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit holder may be required to pay $2.00 per certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. For new certificates issued to replace
destroyed, stolen or lost certificates, the Unit holder must furnish indemnity
satisfactory to the Trustee and must pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for replacement.
Distribution of Interest and Principal
While interest will be distributed semi-annually or monthly, depending
on the method of distribution chosen, principal, including capital gains, will
be distributed only semi-annually; provided, however, that, other than for
purposes of redemption, no distribution need be made from the Principal Account
if the balance therein is less than $1.00 per Unit then outstanding, and that,
if at any time the pro rata share represented by the Units of cash in the
Principal Account exceeds $10.00 as of a Monthly Record Date, the Trustee shall,
on the next succeeding Monthly Distribution Date, distribute the Unit holder's
pro rata share of the balance of the Principal Account. Interest (semi-annually
or monthly) and principal, including capital gains, if any (semi-annually),
received by the Trust will be distributed on each Distribution Date to Unit
holders of record of the Trust as of the preceding Record Date who are entitled
to such distributions at that time under the plan of distribution chosen. All
distributions will be net of applicable expenses and funds required for the
redemption of Units. See "Summary of Essential Financial Information" in Part I
of this Prospectus, "The Trust--Expenses and Charges" and "Rights of Unit
Holders--Redemption" in Part II.
The Trustee will credit to the Interest Account for the Trust all
interest received by the Trust, including that part of the proceeds of any
disposition of Securities which represents accrued interest. Other receipts of
the Trust will be credited to the Principal Account for the Trust. The pro rata
share of the Interest Account of the Trust and the pro rata share of cash in the
Principal Account of the Trust represented by each Unit thereof will be computed
by the Trustee each month as of the Record Date. See "Summary of Essential
Financial Information" in Part I of this Prospectus. Proceeds received from the
disposition of any of the Securities subsequent to a Record Date and prior to
the next succeeding Distribution Date will be held in the Principal Account for
the Trust and will not be distributed until the second succeeding Distribution
Date. Because interest on the Securities is not received by the Trust at a
constant rate throughout the year, any particular interest distribution may be
more or less than the amount credited to the Interest Account of the Trust as of
the Record Date. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the second
Distribution Date following their purchase of Units
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under the applicable plan of distribution. No distribution need be made from the
Principal Account if the balance therein is less than an amount sufficient to
distribute $1.00 per Unit.
The difference between the estimated net interest accrued to the first
Record Date and to the related Distribution Date is an asset of the respective
Unit holder and will be realized in subsequent distributions or upon the earlier
of the sale of such Units or the maturity, redemption or sale of Securities in
the Trust.
The plan of distribution selected by a Unit holder will remain in
effect until changed. Unit holders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Each April, the Trustee will furnish each Unit holder a card to be
returned together with the Certificate by May 15 of such year if the Unit holder
desires to change its plan of distribution, and the change will become effective
on May 16 of such year for the ensuing twelve months. For a discussion of
redemption of Units, see "Rights of Unit Holders--Redemption--Tender of Units."
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 as of the
first day of such month. See "The Trust--Expenses and Charges." The Trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of the Trust's assets until
such time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the Interest
Account and the Principal Account such amounts as may be necessary to cover
redemption of Units by the Trustee. See "Rights of Unit Holders--Redemption."
Funds which are available for future distributions, payments of expenses and
redemptions are in accounts which are non-interest bearing to the Unit holders
and are available for use by the Trustee pursuant to normal banking procedures.
Because interest on Securities in the Trust is payable at varying
intervals, usually in semi-annual installments, the interest accruing to the
Trust will not be equal to the amount of money received and available monthly
for distribution from the Interest Account to Unit holders choosing the monthly
payment plan. Therefore, on each monthly Distribution Date, the amount of
interest actually deposited in the Interest Account and available for
distribution may be slightly more or less than the monthly interest distribution
made. In addition, because of the varying interest payment dates of the
Securities constituting the Trust portfolio, accrued interest at any point in
time will be greater than the amount of interest actually received by the Trust
and distributed to Unit holders. Therefore, there will usually remain an item of
accrued interest that is added to the value of the Units. If a Unit holder sells
all or a portion of its Units, he will be entitled to receive its proportionate
share of the accrued interest from the purchaser of its Units. Similarly, if a
Unit holder redeems all or a portion of its Units, the Redemption Price per Unit
which he is entitled to receive from the Trustee will also include accrued
interest on the Securities. Thus, the accrued interest attributable to a Unit
will not be entirely recovered until the Unit holder either redeems or sells
such Unit or until the Trust is terminated. See "Rights of Unit
Holders--Redemption--Computation of Redemption Price per Unit."
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Expenses and Charges
Initial Expenses
All the expenses of creating and establishing the Trust for Series 118
and prior Series have been borne by the Sponsors, including the cost of the
initial preparation, printing and execution of the Trust Agreement and the
certificates for Units, legal expenses, advertising and selling expenses,
expenses of the Trustee and other out-of-pocket expenses.
All or a portion of the expenses incurred in creating and establishing
the Trust for Series 119 and subsequent Series, including the cost of the
initial preparation and execution of the Trust Agreement, the initial fees and
expenses of the Trustee, legal expenses and other actual out-of-pocket expenses,
have been paid by the Trust. For Series 119 through 140 such expenses will be
amortized over a five year period. Organizational expenses for Series 141 and
subsequent Series will be charged upon the investor's purchase of Units during
the initial offering period and will be paid at the close of the initial
offering period by the Trust. All advertising and selling expenses, as well as
any organizational expenses not paid by the Trust, will be borne by the Sponsors
at no cost to the Trust.
Fees
The Trustee's, Sponsor's and Evaluator's fees are set forth under
"Summary of Essential Financial Information" in Part I of this Prospectus. The
Sponsors' fee, if any, which is earned for portfolio supervisory services, is
based on the face amount of Securities in the Trust at December 1 of each year.
The Sponsors' fee, which is not to exceed the maximum amount set forth in the
"Summary of Essential Financial Information" in Part I of this Prospectus, may
exceed the actual costs of providing portfolio supervisory services for a
particular Series, but at no time will the total amount received by the Sponsors
for portfolio supervisory services rendered to all Series of Empire State
Municipal Exempt Trust in any calendar year exceed the aggregate cost to them of
supplying such services in such year.
The Trustee will receive for its ordinary recurring services to the
Trust an annual fee in the amount set forth in the "Summary of Essential
Financial Information" in Part I of this Prospectus. There is no minimum fee
and, except as hereinafter set forth, no maximum fee. For a discussion of
certain benefits derived by the Trustee from the Trust's funds, see "Rights of
Unit Holders--Distribution of Interest and Principal." For a discussion of the
services performed by the Trustee pursuant to its obligations under the Trust
Agreement, reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee's and Evaluator's fees are payable monthly on or before
each Distribution Date and the Sponsors' annual fee is payable annually on
December 1, each from the Interest Account to the extent funds are available and
then from the Principal Account. These fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases in consumer
prices for services as measured by the United States Department of Labor's
Consumer Price Index entitled "All Services Less Rent." If the balances in the
Principal and Interest Accounts are insufficient to provide for amounts payable
by the Trust, or amounts payable to the Trustee which are secured by its prior
lien on the Trust, the Trustee is permitted to sell Bonds to pay such amounts.
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Insurance Premiums
The cost of the insurance obtained by the Trust as set forth under
"Summary of Essential Financial Information" in Part I of this Prospectus is
based on the aggregate amount of Bonds in the Trust as of the date of such
information. The premium, which is an obligation of each respective Trust, is
payable monthly by the Trustee on behalf of the Trust. As Securities in the
portfolio of the Trust mature, are redeemed by their respective issuers or are
sold by the Trustee, the amount of the premium will be reduced in respect of
those Securities no longer owned by and held in the Trust. The Trust does not
incur any premium expense for any insurance which has been obtained by an issuer
of a Pre-insured Bond, since the premium or premiums for such insurance have
been paid by such issuer or other party; Pre-insured Bonds, however, are
additionally insured by the Trust. No premium will be paid by the Trust on Bonds
which are also MBIA Corp Pre-insured Bonds or MBIA Pre-insured Bonds. The
premium payable for Permanent Insurance and the related custodial fee will be
paid solely from the proceeds of the sale of a Bond from the Trust in the event
that the Trustee exercises the right to obtain Permanent Insurance on such Bond.
Other Charges
The following additional charges are or may be incurred by the Trust:
all expenses (including audit and counsel fees) of the Trustee incurred in
connection with its activities under the Trust Agreement, including annual audit
expenses by independent public accountants selected by the Sponsors (so long as
the Sponsors maintain a secondary market, the Sponsors will bear any audit
expense which exceeds 50 cents per Unit), the expenses and costs of any action
undertaken by the Trustee to protect the Trust and the rights and interests of
the Unit holders; fees of the Trustee for any extraordinary services performed
under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without willful misconduct, bad faith or gross
negligence on its part, arising out of or in connection with its acceptance or
administration of the Trust; and all taxes and other governmental charges
imposed upon the Securities or any part of the Trust (no such taxes or charges
are being levied or made or, to the knowledge of the Sponsors, contemplated).
The above expenses, including the Trustee's fee, when paid by or owing to the
Trustee, are secured by a lien on the Trust. In addition, the Trustee is
empowered to sell Securities in order to make funds available to pay all
expenses.
Reports and Records
The Trustee shall furnish Unit holders of the Trust in connection with
each distribution a statement of the amount of interest, if any, and the amount
of other receipts, if any, which are being distributed, expressed in each case
as a dollar amount per Unit. Within a reasonable time after the end of each
calendar year, the Trustee will furnish to each person who at any time during
the calendar year was a Unit holder of record a statement providing the
following information: (1) as to the Interest Account: interest received
(including amounts representing interest received upon any disposition of
Securities and any earned original issue discount), and, if the issuers of the
Securities are located in different states or territories, the percentage of
such interest by such states or territories, deductions for payment of
applicable taxes and for fees and expenses of the Trust (including insurance
costs), redemptions of Units and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the
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last business day of such calendar year; (2) as to the Principal Account: the
dates of disposition of any Securities and the net proceeds received therefrom
(including any unearned original issue discount but excluding any portion
representing interest, with respect to the Trust the premium attributable to the
Trustee's exercise of the right to obtain Permanent Insurance and any related
custodial fee), deductions for payments of applicable taxes and for fees and
expenses of the Trust, redemptions of Units, the amount of any "when issued"
interest treated as a return of capital and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) a list of the Securities held and
the number of Units outstanding on the last business day of such calendar year;
(4) the Redemption price per Unit based upon the last computation thereof made
during such calendar year; and (5) amounts actually distributed during such
calendar year from the Interest Account and from the Principal Account,
separately stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
The Trustee shall keep available for inspection by Unit holders, at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee including records of the names and addresses of Unit
holders, certificates issued or held, a current list of Securities in the
portfolio of the Trust and a copy of the Trust Agreement.
Redemption
Tender of Units
While it is anticipated that Units can be sold in the secondary market,
Units may also be tendered to the Trustee for redemption at its corporate trust
office at 101 Barclay Street, New York, New York 10286, upon payment of any
applicable tax. At the present time there are no specific taxes related to the
redemption of the Units. No redemption fee will be charged by the Sponsors or
the Trustee. Units redeemed by the Trustee will be canceled.
Certificates for Units to be redeemed must be delivered to the Trustee
and must be properly endorsed and accompanied by a written instrument of
transfer. Thus, redemption of Units cannot be effected until certificates
representing such Units have been delivered to the person seeking redemption.
See "Rights of Unit Holders--Certificates." Unit holders must sign exactly as
their names appear on the face of the certificate with signature(s) guaranteed
by an officer of a national bank or trust company, a member firm of either the
New York, Midwest or Pacific Stock Exchange, or in such other manner as may be
acceptable to the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
By the third business day following such tender, the Unit holder will
be entitled to receive in cash an amount for each Unit tendered equal to the
Redemption Price per Unit computed as of the Evaluation Time set forth in Part I
of this Prospectus under "Summary of Essential Financial Information" as of the
next subsequent Evaluation Time. See "Redemption--Computation of Redemption
Price per Unit." The "date of tender" is deemed to be the date on which Units
are received by the Trustee, except that as regards Units received after the
Evaluation Time on the New York Stock Exchange, the date of tender
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is the next day on which such Exchange is open for trading or the next day on
which there is a sufficient degree of trading in Units of the Trust, and such
Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day. For information
relating to the purchase by the Sponsors of Units tendered to the Trustee for
redemption at prices in excess of the Redemption Price, see
"Redemption--Purchase by the Sponsors of Units Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn from the
Interest Account or, if the balance therein is insufficient, from the Principal
Account. All other amounts paid on redemption shall be withdrawn from the
Principal Account. The Trustee is empowered to sell Securities in order to make
funds available for redemption. Such sales, if required, could result in a sale
of Securities by the Trustee at a loss. To the extent Securities are sold, the
size and diversity of the Trust will be reduced.
If the Trustee exercises the right to obtain Permanent Insurance on a
Bond, such Bond will be sold from the Trust on an insured basis. In the event
that the Trustee does not exercise the right to obtain Permanent Insurance on a
Bond, such Bond will be sold from the Trust on an uninsured basis since the
insurance obtained by the Trust covers the timely payment of principal and
interest when due on the Bonds only while the Bonds are held in and owned by the
Trust. If the Trustee does not exercise the right to obtain Permanent Insurance
on a Defaulted Bond, to the extent that Bonds which are current in payment of
interest are sold from the Trust portfolio in order to meet redemption requests
and Defaulted Bonds are retained in the portfolio in order to preserve the
related insurance protection applicable to said Bonds, the overall value of the
Bonds remaining in the Trust will tend to diminish. See
"Sponsors--Responsibility" for the effect of selling Defaulted Bonds to meet
redemption requests.
The Trustee reserves the right to suspend the right of redemption and
to postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or during which trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission by rule or
regulation) an emergency exists as a result of which disposal or evaluation of
the underlying Bonds is not reasonably practicable, or for such other periods as
the Securities and Exchange Commission has by order permitted.
Because insurance obtained by the Trust terminates as to Bonds which
are sold by the Trustee, and because the insurance obtained by the Trust does
not have a realizable cash value which can be used by the Trustee to meet
redemptions of Units (assuming, in the case of Series 18 and subsequent Series,
that the Trustee does not exercise the right to obtain Permanent Insurance on
Defaulted Bonds), under certain circumstances the Sponsors may apply to the
Securities and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units if a significant
portion of the Bonds in the portfolio is in default in payment of principal or
interest or in significant risk of such default. No assurances can be given that
the Securities and Exchange Commission will permit the Sponsors to suspend the
rights of Unit holders to redeem their Units, and, without the suspension of
such redemption rights when faced with excessive redemptions, the Sponsors may
not be able to preserve the benefits of the Trust's insurance on Defaulted
Bonds.
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Computation of Redemption Price Per Unit
The Redemption Price per Unit is determined by the Trustee on the basis
of the bid prices of the Securities in the Trust, as of the Evaluation Time
stated under "Summary of Essential Financial Information" in Part I of this
Prospectus on the day any such determination is made. The Redemption Price per
Unit is each Unit's pro rata share, determined by the Trustee, of (1) the
aggregate value of the Securities in the Trust (determined by the Evaluator as
set forth below), except for those cases in which the value of insurance has
been included, (2) cash on hand in the Trust, and (3) accrued and unpaid
interest on the Securities as of the date of computation, less (a) amounts
representing taxes or governmental charges payable out of the Trust, (b) the
accrued expenses of the Trust, and (c) cash held for distribution to Unit
holders of record as of a date prior to the evaluation. The Evaluator may
determine the value of the Securities in the Trust (i) on the basis of current
bid prices for the Securities, (ii) if bid prices are not available for any
Securities, on the basis of current bid prices for comparable bonds, (iii) by
appraisal, or (iv) by any combination of the above. In determining the
Redemption Price per Unit, no value will be assigned to the portfolio insurance
obtained by the Trust on the Bonds in the Trust unless such Bonds are in default
in payment of principal or interest or in significant risk of such default. On
the other hand, Pre-insured Bonds in the Trust are entitled at all times to the
benefits of insurance obtained by their respective issuers so long as the
Pre-insured Bonds are outstanding and the insurer continues to fulfill its
obligations, and such benefits are reflected and included in the market value of
Pre-insured Bonds. For a description of the situations in which the Evaluator
may value the insurance obtained by the Trust, see "Public Offering--Market for
Units."
Purchase by the Sponsors of Units Tendered for Redemption
The Trust Agreement requires that the Trustee notify the Sponsors of
any tender of Units for redemption. So long as the Sponsors are maintaining a
bid in the secondary market, the Sponsors, prior to the close of business on the
second succeeding business day, will purchase any Units tendered to the Trustee
for redemption at the price so bid by making payment therefor to the Unit holder
in an amount not less than the Redemption Price on the date of tender not later
than the day on which the Units would otherwise have been redeemed by the
Trustee. See "Public Offering--Market for Units." Units held by the Sponsors may
be tendered to the Trustee for redemption as any other Units, provided that the
Sponsors shall not receive for Units purchased as set forth above a higher price
than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors will be the
Public Offering Price determined in the manner provided in this Prospectus. See
"Public Offering--Offering Price." Any profit resulting from the resale of such
Units will belong to the Sponsors which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to their acquisition of
such Units.
Exchange Option
The Sponsors of the Series of Empire State Municipal Exempt Trust
(including the Series of Municipal Exempt Trust, the predecessor trust to Empire
State Municipal Exempt Trust) (the "Trust") are offering Unit holders of those
Series of the Trust for which the Sponsors are maintaining a secondary market an
option to exchange a Unit of any Series of the Trust for a
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Unit of a different Series of the Trust being offered by the Sponsors (other
than in the initial offering period) at a Public Offering Price generally based
on the bid prices of the underlying Securities divided by the number of Units
outstanding (see "Public Offering--Market for Units") plus a fixed sales charge
of $15 per Unit (in lieu of the normal sales charge). However, a Unit holder
must have held its Unit for a period of at least six months in order to exercise
the exchange option or agree to pay a sales charge based on the greater of $15
per Unit or an amount which together with the initial sales charge paid in
connection with the acquisition of Units being exchanged equals the normal sales
charge of the Series into which the investment is being converted, determined as
of the date of the exchange. Such exchanges will be effected in whole Units
only. Any excess proceeds from the Units being surrendered will be returned, and
the Unit holder will not be permitted to advance any new money in order to
complete an exchange. The Sponsors reserve the right to modify, suspend or
terminate this plan at any time without further notice to the Unit holders. In
the event that the exchange option is not available to a Unit holder at the time
he wishes to exercise it, the Unit holder will be immediately notified and no
action will be taken with respect to its Units without further instructions from
the Unit holder.
Unit holders are urged to consult their tax advisors as to the tax
consequences of exchanging Units.
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AUTOMATIC ACCUMULATION ACCOUNT
The Sponsors have entered into an arrangement (the "Plan") with Empire
Builder Tax Free Bond Fund (the "Empire Builder") which permits Unit holders of
the Trust to elect to have distributions from Units in the Trust automatically
reinvested in shares of the Empire Builder. The Empire Builder is an open-end,
non-diversified investment company whose investment objective is to seek as high
a level of current income exempt from regular Federal income tax, New York State
and New York City personal income taxes as is believed to be consistent with
preservation of capital. It is the policy of the Empire Builder to invest
primarily in debt securities the interest income from which is exempt from such
taxes.
The Empire Builder has an investment objective which differs in certain
respects from that of the Trust. The bonds purchased by the Empire Builder will
be of "investment grade" quality - that is, at the time of purchase by the
Empire Builder, such bonds either will be rated not lower than the four highest
ratings of either Moody's (Aaa, Aa, A or Baa) or Standard & Poor's (AAA, AA, A,
or BBB) or will be unrated bonds which at the time of purchase are judged by the
Empire Builder's investment advisor to be of comparable quality to bonds rated
within such four highest grades. It is a fundamental policy of the Empire
Builder that under normal market conditions at least 90% of the income
distributed to its shareholders will be exempt from regular Federal income tax,
New York State and New York City personal income taxes. However, during times of
adverse market conditions when the Empire Builder is investing for temporary
defensive purposes in obligations other than New York tax-exempt bonds, more
than 10% of the Empire Builder's income distributions could be subject to
Federal income tax, New York State income tax and/or New York City income tax,
as described in the current prospectus relating to the Empire Builder (the
"Empire Builder Prospectus"). Glickenhaus & Co. ("Glickenhaus"), a sponsor of
the Trust, acts as the investment advisor and distributor for the Empire
Builder.
Each Unit holder may request from The Bank of New York (the "Plan
Agent") a copy of the Empire Builder Prospectus describing the Empire Builder
and a form by which such Unit holder may elect to become a participant
("Participant") in the Plan. Thereafter, as directed by such person,
distributions on the Participant's Units will, on the applicable Distribution
Date, automatically be applied as of that date by the Trustee to purchase shares
(or fractions thereof) of the Empire Builder at a net asset value as computed as
of the close of trading on the New York Stock Exchange on such date, as
described in the Empire Builder Prospectus. Unless otherwise indicated, new
Participants in the Empire Builder Plan will be deemed to have elected the
monthly distribution plan with respect to their Units. Confirmations of all
transactions undertaken for each Participant in the Plan will be mailed to each
such Participant by the Plan Agent indicating distributions and shares (or
fractions thereof) of the Empire Builder purchased on its behalf. A Participant
may at any time prior to ten days preceding the next succeeding distribution
date, by so notifying the Plan Agent in writing, elect to terminate its
participation in the Plan and receive future distributions on its Units in cash.
There will be no charge or other penalty for such termination. The Sponsors, the
Trustee, the Empire Builder and Glickenhaus, as investment advisor for Empire
Builder each will have the right to terminate this Plan at any time for any
reason. The reinvestment of distributions from the Trust through the Plan will
not affect the income tax status of such distributions. For more complete
information about investing in the Empire Builder through the Plan, including
charges and expenses, request a copy of the Empire Builder Prospectus from The
Bank of New York, Unit Investment Trust, P.O. Box 972, New York, New York
10269-0067. Read it carefully before you decide to participate.
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[ALTERNATE PAGE]
AUTOMATIC ACCUMULATION ACCOUNT
For Unit holders of the Trust who are clients of Lebenthal & Co., Inc.,
the Sponsors have entered into an arrangement (the "Plan") with Lebenthal New
York Municipal Bond Fund (the "Bond Fund") which permits Unit holders of the
Trust who receive distributions from the Trust on a semi-annual basis to elect
to have distributions from Units in the Trust automatically reinvested in shares
of the Bond Fund. The Bond Fund is an open-end, non-diversified investment
company whose investment objective is to maximize current income exempt from
regular Federal income tax, and from New York State and New York City income
taxes, consistent with preservation of capital and with consideration given to
opportunities for capital gain. It is the policy of the Bond Fund to invest
primarily in long term investment grade tax-exempt securities the interest
income from which is exempt from such taxes.
The Bond Fund has an investment objective which differs in certain
respects from that of the Trust. The bonds purchased by the Bond Fund will be of
"investment grade" quality -- that is, at the time of purchase by the Bond Fund,
such bonds either will be rated not lower than the four highest ratings of
either Moody's (Aaa, Aa, A or Baa) or Standard & Poor's (AAA, A, A or BBB) or
will be unrated bonds which at the time of purchase are judged by the Bond
Fund's investment advisor to be of comparable quality to bonds rated within such
four highest grades. It is a fundamental policy of the Bond Fund that under
normal market conditions at least 80% of the income distributed to its
shareholders will be exempt from regular Federal income tax, and from New York
State and New York City personal income taxes. However, during times of adverse
market conditions, more than 20% of the Bond Fund's income distributions could
be subject to Federal income tax, New York State and/or New York City income
taxes, as described in the current prospectus relating to the Bond Fund (the
"Bond Fund Prospectus"). Lebenthal & Co., Inc., a sponsor of the Trust, acts as
the manager and distributor for the Bond Fund.
Each Unit holder who receives distributions from the Trust on a
semi-annual basis may request from The Bank of New York (the "Plan Agent") a
copy of the Bond Fund Prospectus describing the Bond Fund and a form by which
such Unit holder may elect to become a participant ("Participant") in the Plan.
Thereafter, as directed by such person, distributions on the Participant's Unit
will, on the applicable Distribution Date, automatically be applied as of that
date by the Trustee to purchase shares (or fractions thereof) of the Bond Fund
at a net asset value as computed as of the close of trading on the New York
Stock Exchange on such date, as described in the Bond Fund Prospectus. Unless
otherwise indicated, new Participants in the Bond Fund Plan will be deemed to
have elected the monthly distribution plan with respect to their Units.
Confirmations of all transactions undertaken for each Participant in the Plan
will be mailed to each Participant by the Plan Agent indicating distributions
and shares (or fractions thereof) of the Bond Fund purchased on its behalf. A
Participant may at any time prior to ten days preceding the next succeeding
distribution date, by so notifying the Plan Agent in writing, elect to terminate
its participation in the Plan and receive future distributions on its Units in
cash. There will be no charge or other penalty for such termination. The
Sponsors, the Trustee, the Bond Fund and Lebenthal & Co. Inc., as manager for
the Bond Fund, each will have the right to terminate or modify this Plan at any
time for any reason. The reinvestment of distributions from the Trust through
the Plan will not affect the income tax status of such distributions. For more
complete information about investing in the Bond Fund through the Plan,
including charges and expenses, request a copy of the Bond Fund Prospectus from
The Bank of New York, Unit Investment Trust, P.O. Box 972, New York, New York
10269- 0067. Read it carefully before you decide to participate.
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<PAGE>
SPONSORS
Glickenhaus and Lebenthal are the Sponsors for Empire State Municipal
Exempt Trust, Series 10 and all subsequent Series, including all Guaranteed
Series.
Glickenhaus, a New York limited partnership, is engaged in the
underwriting and securities brokerage business and in the investment advisory
business. It is a member of the New York Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. and is an associate member of the
American Stock Exchange. Glickenhaus acts as a sponsor for successive Series of
The Glickenhaus Value Portfolios and The Municipal Insured National Trusts, and
for the prior series of Empire State Municipal Exempt Trust, including those
sold under the name of Municipal Exempt Trust, New York Exempt Series 1, New
York Series 2 and New York Series 3. Glickenhaus, in addition to participating
as a member of various selling groups of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of securities
of such companies and sells securities to such companies in its capacity as a
broker or dealer in securities. The principal offices of Glickenhaus are located
at 6 East 43rd Street, New York, New York 10017.
Lebenthal, a New York corporation originally organized as a New York
partnership in 1925, has been buying and selling municipal bonds for its own
account as a dealer for over 74 years; Lebenthal also buys and sells securities
as an agent and participates as an underwriter in public offerings of municipal
bonds. It acted as a sponsor for Empire State Tax Exempt Bond Trust, Series 8
and successive Series of The Municipal Insured National Trust through Series 28.
Lebenthal is registered as a broker/dealer with the Securities and Exchange
Commission and various state securities regulatory agencies and is a member of
the National Association of Securities Dealers, Inc. and Securities Investors
Protection Corp. The principal offices of Lebenthal are located at 120 Broadway,
New York, New York 10271.
Limitations on Liability
The Sponsors are jointly and severally liable for the performance of
their obligations arising from their responsibilities under the Trust Agreement,
but will be under no liability to the Unit holders for taking any action or
refraining from any action in good faith or for errors in judgment; nor will
they be responsible in any way for depreciation or loss incurred by reason of
the sale of any Bonds, except in cases of their willful misconduct, bad faith or
gross negligence. See "The Trust--Portfolio" and "Sponsors--Responsibility."
Responsibility
The Trustee shall sell, for the purpose of redeeming Units tendered by
any Unit holder, and for the payment of expenses for which funds may not be
available, such of the Bonds in a list furnished by the Sponsors as the Trustee
in its sole discretion may deem necessary. In the event that the Trustee does
not exercise the right to obtain Permanent Insurance on a Defaulted Bond or
Bonds, to the extent that Bonds are sold which are current in payment of
principal and interest in order to meet redemption requests and Defaulted Bonds
are retained in the portfolio in order to preserve the related insurance
protection applicable to said Bonds, the overall value of the Bonds remaining in
the Trust's portfolio will tend to diminish. As to Series 18 and subsequent
Series, in the event that the Trustee does not exercise the right
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to obtain Permanent Insurance on a Defaulted Bond or Bonds, except as described
below and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unit holders or if there is no
alternative, the Trustee is not empowered to sell Defaulted Bonds for which
value has been attributed for the insurance obtained by the Trust. Because of
such restrictions on the Trustee, under certain circumstances the Sponsors may
seek a full or partial suspension of the right of Unit holders to redeem their
Units. See "Rights of Unit Holders--Redemption." The Sponsors are empowered, but
not obligated, to direct the Trustee to dispose of Bonds in the event of advance
refunding. It is the responsibility of the Sponsors to instruct the Trustee to
reject any offer made by an issuer of any of the Securities to issue new
obligations in exchange and substitution for any Securities pursuant to a
refunding or refinancing plan, except that the Sponsors may instruct the Trustee
to accept such an offer or to take any other action with respect thereto as the
Sponsors may deem proper if the issuer is in default with respect to such
Securities or in the judgment of the Sponsors the issuer will probably default
with respect to such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Trust Agreement to the
same extent as Securities originally deposited thereunder. Within five days
after the deposit of obligations in exchange or substitution for underlying
Securities, the Trustee is required to give notice thereof to each Unit holder,
identifying the obligations eliminated and the Securities substituted therefor.
Except as stated in this and the preceding paragraph, the acquisition by the
Trust of any securities other than the Securities initially deposited is
prohibited.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor either pursuant to the
portfolio insurance with respect to the Trust or otherwise within 30 days, the
Trustee is required to notify the Sponsors thereof. If the Sponsors fail to
instruct the Trustee to sell or to hold such Bond within 30 days after
notification by the Trustee to the Sponsors of such default, the Trustee may in
its discretion sell the Defaulted Bond and not be liable for any depreciation or
loss thereby incurred. See "The Trust--Insurance on the Bonds."
The Sponsors may direct the Trustee to dispose of Bonds upon default in
the payment of principal or interest, institution of certain legal proceedings
or the existence of certain other impediments to the payment of Bonds, default
under other documents which may adversely affect debt service, default in the
payment of principal or interest on other obligations of the same issuer,
decline in projected income pledged for debt service on revenue Bonds, or
decline in price or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsors the retention of such Bonds in
a Trust would be detrimental to the interest of the Unit holders. The proceeds
from any such sales will be credited to the Principal Account of the affected
Trust for distribution to the Unit holders.
Notwithstanding the foregoing, in connection with final distributions
to Unit holders, if the Trustee does not exercise the right to obtain Permanent
Insurance on any Defaulted Bond, because the portfolio insurance obtained by the
Trust is applicable only while Bonds so insured are held by the Trust, the price
to be received by the Trust upon the disposition of any such Defaulted Bond will
not reflect any value based on such insurance. Therefore, in connection with any
liquidation with respect to a Trust, it
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<PAGE>
shall not be necessary for the Trustee to, and the Trustee does not currently
intend to, dispose of any Bonds if retention of such Bonds, until due, shall be
deemed to be in the best interest of Unit holders, including, but not limited
to, situations in which Bonds so insured are in default and situations in which
Bonds so insured have a deteriorated market price resulting from a significant
risk of default. Since the Pre-insured Bonds will reflect the value of the
insurance obtained by the Bond issuer, it is the present intention of the
Sponsors not to direct the Trustee to hold any Pre-insured Bonds after the date
of termination. All proceeds received, less applicable expenses, from insurance
on Defaulted Bonds not disposed of at the date of termination will ultimately be
distributed to Unit holders of record as of such date of termination as soon as
practicable after the date such Defaulted Bonds become due and applicable
insurance proceeds have been received by the Trustee. See "Summary of Essential
Financial Information" in Part I of this Prospectus.
Agent for Sponsors
The Sponsor named as Agent for Sponsors under "Summary of Essential
Information" in Part I of this Prospectus has been appointed by the other
Sponsor as agent for purposes of taking action under the Trust Agreement. In
those Trusts for which there is a sole Sponsor, references herein to the Agent
for Sponsors shall be deemed to refer to such sole Sponsor. If the Sponsors are
unable to agree with respect to action to be taken jointly by them under the
Trust Agreement and they cannot agree as to which Sponsor shall act as sole
Sponsor, then the Agent for Sponsors shall act as sole Sponsor. If one of the
Sponsors fails to perform its duties under the Trust Agreement or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, that Sponsor is automatically discharged under the Trust Agreement
and the other Sponsor acts as the Sponsors.
Resignation
Any Sponsor may resign at any time provided that at the time of such
resignation one remaining Sponsor maintains a net worth of $1,000,000 and all
the remaining Sponsors are agreeable to such resignation. Concurrent with or
subsequent to such resignation, a new Sponsor may be appointed by the remaining
Sponsors and the Trustee to assume the duties of the resigning Sponsor. If, at
any time, only one Sponsor is acting under the Trust Agreement and that Sponsor
shall resign or fail to perform any of its duties thereunder or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, then the Trustee may appoint a successor sponsor or terminate the
Trust Agreement and liquidate the Trust.
Financial Information
At September 30, 1999, the total partners' capital of Glickenhaus was
$205,505,380 (audited); and at March 31, 1999, the total stockholders' equity of
Lebenthal was $6,269,873 (audited).
The foregoing information with regard to the Sponsors relates to the
Sponsors only, and not to any series of Empire State Municipal Exempt Trust.
Such information is included in this Prospectus only for the purpose of
informing investors as to the financial responsibility of the Sponsors and their
ability to carry out their contractual obligations shown herein. More
comprehensive financial information can be obtained upon request from any
Sponsor.
279831.19
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<PAGE>
TRUSTEE
The Trustee is The Bank of New York, a trust company organized under
the laws of New York, having its offices at 101 Barclay Street, New York, New
York 10286, (800) 221-7771. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law. The
Trustee must be a corporation organized under the laws of the United States or
the State of New York, which is authorized under such laws to exercise corporate
trust powers, and must have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000 and its principal office and place
of business in the Borough of Manhattan, New York City. The duties of the
Trustee are primarily ministerial in nature. The Trustee did not participate in
the selection of Securities for the portfolio of any Series of the Trust.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the disposition of any moneys,
Securities or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents except
in cases of its willful misconduct, bad faith, gross negligence or reckless
disregard for its obligations and duties. In addition, the Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Trust which the Trustee may be required to pay under current or
future law of the United States or any other taxing authority having
jurisdiction. See "The Trust--Portfolio."
Responsibility
For information relating to the responsibilities of the Trustee under
the Trust Agreement, reference is made to the material set forth under "Rights
of Unit Holders," "Sponsors--Responsibility" and "Sponsors--Resignation."
Resignation
By executing an instrument in writing and filing the same with the
Sponsors, the Trustee and any successor may resign. In such an event the
Sponsors are obligated to appoint a successor trustee as soon as possible. If
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, or, in the case of Series 11 and subsequent
Series, if the Sponsors deem it to be in the best interest of the Unit holders,
the Sponsors may remove the Trustee and appoint a successor as provided in the
Trust Agreement. Such resignation or removal shall become effective upon the
acceptance of appointment by the successor trustee. If, upon resignation or
removal of a trustee, no successor has been appointed and has accepted the
appointment within thirty days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only when the
successor trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
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<PAGE>
EVALUATOR
The Evaluator is Muller Data Corporation, a New York corporation, with
main offices at 395 Hudson Street, New York, New York 10014. Muller Data
Corporation is a wholly owned subsidiary of Thomson Publishing Corporation, a
Delaware corporation.
Limitations on Liability
The Trustee and the Sponsors may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in good
faith upon the basis of the best information available to it; provided, however,
that the Evaluator shall be under no liability to the Trustee, the Sponsors or
the Unit holders for errors in judgement. This provision shall not protect the
Evaluator in cases of its willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Responsibility
The Trust Agreement requires the Evaluator to evaluate the Securities
on the basis of their bid prices on each business day after the initial offering
period, when any Unit is tendered for redemption and on any other day such
evaluation is desired by the Trustee or is requested by the Sponsors. For
information relating to the responsibility of the Evaluator to evaluate the
Securities on the basis of their offering prices, see "Public Offering--Offering
Price."
Resignation
The Evaluator may resign or may be removed by the Sponsors and the
Trustee, and the Sponsors and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within thirty
days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
The Sponsors and the Trustee have the power to amend the Trust
Agreement without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision of the
Trust Agreement which may be defective or inconsistent with any other provision
contained therein, or (2) to make such other provisions as shall not adversely
affect the interest of the Unit holders; and the Sponsors and the Trustee may
amend the Trust Agreement with the consent of the holders of certificates
evidencing 66-2/3% of the Units then outstanding, provided that no such
amendment will reduce the interest in a Trust of any Unit holder without the
consent of such Unit holder or reduce the percentage of Units required to
consent to any such amendment without the consent of all the Unit holders. In no
event shall the Trust Agreement be amended to increase the number of Units
issuable thereunder or to permit the deposit or acquisition of securities either
in addition to or in substitution for any of the Bonds initially deposited in
the Trust, except in accordance with the provisions of the Trust Agreement. In
the event of any amendment, the Trustee is obligated to notify promptly all Unit
holders of the substance of such amendment.
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The Trust shall terminate upon the maturity, redemption, sale or other
disposition, as the case may be, of the last of the Securities. The Trustee
shall notify all Unit holders when the value of the Trust as shown by any
evaluation is less than $2,000,000 or less than 20% of the value of the Trust as
of the Date of Deposit, whichever is lower, at which time the Trust may be
terminated (i) by the consent of the holders of 66-2/3% of the Units or (ii) by
the Trustee; provided, however, that upon affirmative written notice of their
opportunity to object to such termination and to the Sponsors and the holders of
at least 33-1/3% of the Units do not instruct the Trustee not to terminate the
Trust. In no event, however, may the Trust continue beyond the Mandatory
Termination Date set forth in Part I of this Prospectus under "Summary of
Essential Financial Information"; provided, however, that prior to the Mandatory
Termination Date the Trustee shall not dispose of any Bonds if the retention of
such Bonds, until due, shall be deemed to be in the best interest of the Unit
holders of the affected Trust. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders. Within a reasonable
period after termination, the Trustee will sell any remaining Securities and,
after paying all expenses and charges incurred by the Trust, will distribute to
each Unit holder, upon surrender for cancellation of its certificate for Units,
its pro rata share of the balances remaining in the Interest and Principal
Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters have been passed upon by Brown & Wood, One World
Trade Center, New York, New York 10048, as special counsel for the Sponsors as
to Series 9 through 64 and by Battle Fowler LLP, 75 East 55th Street, New York,
New York 10022 as special counsel for the Sponsors as to Series 65 and
subsequent Series of Empire State Municipal Exempt Trust, Guaranteed Series.
Winston & Strawn, 200 Park Avenue, New York, New York 10016, acts as counsel for
the Trustee.
AUDITORS
The financial statements of the Trust included in Part I of this
Prospectus have been audited by Goldstein Golub Kessler LLP, independent
certified public accountants, as stated in their report with respect thereto,
and are included therein in reliance upon such report given upon their authority
as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment of creditworthiness may take into consideration
obligors such as guarantors, insurers or lessees. The bond rating is not a
recommendation to purchase, sell or hold a security, inasmuch as it does not
comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in connection
with any rating and may, on occasion, rely on unaudited financial information.
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The ratings may be changed, suspended or withdrawn as a result of changes in,
or unavailability of, such information or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA: Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA: Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A: Bonds rated "A" have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC" the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, the ratings from "AA" to "B" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or the risk of default
279831.19
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upon failure of, such completion. Accordingly, the investor should exercise
its own judgment with respect to such likelihood and risk.
NO: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of policy.
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
*Moody's rating. A summary of the meaning of the applicable rating symbols
as published by Moody's follows:
Aaa: Bonds which are rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered as medium grade
obligations; i.e, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
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B: Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of time may
be small.
Con.(...): Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These bonds are secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operating experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of
condition.
Moody's applies numerical modifiers "1," "2" and "3" in each rating
classification from "Aa" through "B" in its corporate rating system. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the security ranks in the lower end of its generic
rating category.
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<TABLE>
<S> <C>
This Prospectus contains information concerning the
Trust and the Sponsors, but does not contain all the
information set forth in the registration statements EMPIRE STATE
and exhibits relating thereto, which the Trust has MUNICIPAL EXEMPT TRUST
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. GUARANTEED SERIES
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INDEX PROSPECTUS, PART II
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Page
Sponsors:
THE TRUST.........................................................1
PUBLIC OFFERING..................................................13 GLICKENHAUS & CO.
6 East 43rd Street
ESTIMATED CURRENT RETURN AND New York, New York 10017
ESTIMATED LONG-TERM RETURN TO (212) 953-7532
UNIT HOLDERS..........................................16
INSURANCE ON THE BONDS...........................................17 LEBENTHAL & CO., INC.
120 Broadway
TAX STATUS ......................................................20 New York, New York 10271
(212)425-6116
RIGHTS OF UNIT HOLDERS...........................................24
AUTOMATIC ACCUMULATION ACCOUNT...................................32
SPONSORS.........................................................33
TRUSTEE..........................................................36
EVALUATOR........................................................37
AMENDMENT AND TERMINATION OF THE
TRUST AGREEMENT.......................................37
LEGAL OPINIONS...................................................38
AUDITORS.........................................................38
DESCRIPTION OF BOND RATINGS......................................38
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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 or the Sponsors.
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.
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279831.19
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PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-Reference
Sheet to the Form S-6 Registration Statement of Empire State Municipal Exempt
Trust, Guaranteed Series 133).
The Prospectus.
Signatures.
Written Consent of the following persons:
Consent of Independent Auditors.
Consent of Counsel (previously filed)
Consent of the Evaluator including Confirmation of Ratings (included
in Exhibit 99.5.1).
The following exhibits:
*99.5.1 -- Consent of the Evaluator including Confirmation of Ratings
99.6.1 -- Copies of Powers of Attorney of General Partners of Glickenhaus &
Co. (filed as Exhibit 6.1 to Form S-6 Registration Statement No.
333-89553 of Empire State Municipal Exempt Trust, Guaranteed Series
149 on December 9, 1999 and incorporated herein by reference).
99.6.2 -- Copies of Powers of Attorney of Directors and certain officers of
Lebenthal & Co., Inc. (filed as Exhibit 6.2 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-55385 of Empire State
Municipal Exempt Trust, Guaranteed Series 109 on November 2, 1994,
and incorporated herein by reference).
- --------
* Being filed by this Amendment.
433537.1
II-1
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Empire State Municipal Exempt Trust, Guaranteed Series 124,
Guaranteed Series 125, Guaranteed Series 126 and Guaranteed Series 133 certify
that they have met all of the requirements for effectiveness of this Post-
Effective Amendment to the Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933. The registrants have duly caused this Post-
Effective Amendment to the Registration Statement to be signed on their behalf
by the undersigned, thereunto duly authorized, in the City of New York and State
of New York on the 28th day of January, 2000.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 124, GUARANTEED SERIES 125,
GUARANTEED SERIES 126 AND GUARANTEED SERIES 133
(Registrants)
GLICKENHAUS & CO.
(Depositor)
By: /s/ Michael J. Lynch
-------------------------------
Michael J. Lynch
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this
Post- Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Name Title Date
ALFRED FEINMAN* General Partner ) January 28, 2000
)
)
JAMES M. GLICKENHAUS* General Partner )
)
SETH M. GLICKENHAUS* General Partner, )
Chief Investment Officer ) By:/s/ Michael J. Lynch
--------------------
) Michael J. Lynch
) Attorney-in-Fact*
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Registration Statement No. 333-89553 on December 9, 1999.
433537.1
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrants, Empire State Municipal Exempt Trust, Guaranteed Series 124,
Guaranteed Series 125, Guaranteed Series 126 and Guaranteed Series 133 certify
that they have met all of the requirements for effectiveness of this Post-
Effective Amendment to the Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933. The registrants have duly caused this Post-
Effective Amendment to the Registration Statement to be signed on their behalf
by the undersigned, thereunto duly authorized, in the City of New York and State
of New York on the 28th day of January, 2000.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 124, GUARANTEED SERIES 125,
GUARANTEED SERIES 126 AND GUARANTEED SERIES 133
(Registrants)
LEBENTHAL & CO., INC.
(Depositor)
By: /s/ D. Warren Kaufman
-----------------------------------
D. Warren Kaufman
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933,
this Post- Effective Amendment to the Registration Statement has been signed
below by the following persons, in the capacities and on the dates indicated.
Name Title Date
H. GERARD BISSINGER, II* Director )
) January 28, 2000
JEFFREY M. JAMES* Director )
)
/s/ D. Warren Kaufman Director )
- -----------------------
D. WARREN KAUFMAN ) By:/s/ D. Warren Kaufman
------------------------
) D. Warren Kaufman
ALEXANDRA LEBENTHAL* Director, President ) Attorney-in-Fact*
)
JAMES A. LEBENTHAL* Director, Chief )
Executive Officer )
)
JAMES E. MCGRATH** Director )
)
DUNCAN K. SMITH* Director )
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.2 to
Amendment No. 1 to Registration Statement No. 33-55385 on November
2, 1994.
** An executed copy of the Power of Attorney was filed as Exhibit 6.2 to
Amendment No. 1 to Registration Statement No. 333-42453 on May 18, 1998.
433537.1
II-3
<PAGE>
CONSENT OF COUNSEL
The consent of Battle Fowler LLP to the use of their name in the
Prospectus included in the Registration Statement is contained in their opinion
filed previously.
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 124,
GUARANTEED SERIES 125, GUARANTEED SERIES 126 AND GUARANTEED SERIES 133
We hereby consent to the use in this Post-Effective Amendment to
Registration Statement No. 33-64253 of our opinions dated October 29, 1999
relating to the financial statements of Empire State Municipal Exempt Trust,
Guaranteed Series 124, Guaranteed Series 125, Guaranteed Series 126 and
Guaranteed Series 133 and to the reference to our firm under the heading
"Auditors" in the Prospectus which is a part of such Registration Statement.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 28, 2000
433537.1
MULLER DATA CORPORATION
-----------------------
Thomson Financial Services
January 20, 2000
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co.
120 Broadway
New York, New York 10271
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Series 124: Post - Effective Amendment No. 4
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement,
File No. 33-64253, for the referenced Trusts and acknowledge that Muller Data
Corporation is currently acting as the evaluator for the Empire State Municipal
Exempt Trust Series 124. Subsequently, we hereby consent to the
reference of Muller Data Corporation as Trust evaluator in the post-effective
Amendment.
In addition, we confirm that the ratings of the bonds comprising the portfolios
of the Trusts, as indicated in the Amendment to the Registration Statement, are
the ratings currently indicated in our Muniview data base.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/ Art Brasch
- ---------------
Art Brasch
Vice President
395 Hudson Street - New York, NY 10014
Ph. 212 807-3240
Fx. 212 989-1938
www.muller.com
<PAGE>
MULLER DATA CORPORATION
-----------------------
Thomson Financial Services
January 20, 2000
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co.
120 Broadway
New York, New York 10271
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Series 125: Post - Effective Amendment No. 4
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement,
File No. 333-00549, for the referenced Trusts and acknowledge that Muller Data
Corporation is currently acting as the evaluator for the Empire State Municipal
Exempt Trust Series 125. Subsequently, we hereby consent to the
reference of Muller Data Corporation as Trust evaluator in the post-effective
Amendment.
In addition, we confirm that the ratings of the bonds comprising the portfolios
of the Trusts, as indicated in the Amendment to the Registration Statement, are
the ratings currently indicated in our Muniview data base.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/ Art Brasch
- ---------------
Art Brasch
Vice President
395 Hudson Street - New York, NY 10014
Ph. 212 807-3240
Fx. 212 989-1938
www.muller.com
<PAGE>
MULLER DATA CORPORATION
-----------------------
Thomson Financial Services
January 20,2000
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co.
120 Broadway
New York, New York 10271
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Series 126: Post - Effective Amendment No. 4
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement,
File No. 333-00551, for the referenced Trusts and acknowledge that Muller Data
Corporation is currently acting as the evaluator for the Empire State Municipal
Exempt Trust Series 126. Subsequently, we hereby consent to the
reference of Muller Data Corporation as Trust evaluator in the post-effective
Amendment.
In addition, we confirm that the ratings of the bonds comprising the portfolios
of the Trusts, as indicated in the Amendment to the Registration Statement, are
the ratings currently indicated in our Muniview data base.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
/s/ Art Brasch
- ---------------
Art Brasch
Vice President
395 Hudson Street - New York, NY 10014
Ph. 212 807-3240
Fx. 212 989-1938
www.muller.com
<PAGE>
MULLER DATA CORPORATION
-----------------------
Thomson Financial Services
January 20, 2000
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co.
120 Broadway
New York, New York 10271
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Series 133: Post - Effective Amendment No. 3
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement,
File No. 333-17301, for the referenced Trust and acknowledge that Muller Data
Corporation is currently acting as the evaluator for the Empire State Municipal
Exempt Trust Series 133. Subsequently, we hereby consent to the reference of
Muller Data Corporation as Trust evaluator in the post-effective Amendment.
In addition, we confirm that the ratings of the bonds comprising the portfolio
of the Trust, as indicated in the Amendment to the Registration Statement, are
the ratings currently indicated in our Muniview data base.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
- ---------------
Art Brasch
Vice President
395 Hudson Street - New York, NY 10014
Ph. 212 807-3840
Fx. 212 989-1938
www.muller.com
