AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1998
REGISTRATION NO. 333-53963
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
Amendment No. 1
to
FORM S-6
For Registration Under the Securities Act
of 1933 of Securities of Unit Investment
Trusts Registered on Form N-8B-2
----------------------------
A. EXACT NAME OF TRUST:
Empire State Municipal Exempt Trust, Guaranteed Series 141
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, New York 10017 New York, New York 10281
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
<TABLE>
<S> <C> <C>
COPY OF COMMENTS TO:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL MICHAEL R. ROSELLA, Esq.
Glickenhaus & Co. Lebenthal & Co., Inc. Battle Fowler LLP
6 East 43rd Street 120 Broadway 75 East 55th Street
New York, New York 10017 New York, New York 10281 New York, New York 10022
(212) 856-6858
</TABLE>
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
An indefinite number of Units of Empire State Municipal Exempt Trust,
Guaranteed Series 141 is being registered under the Securities Act of
1933 pursuant to Section 24(f) of the Investment Company Act of 1940,
as amended and Rule 24f-2 thereunder.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
Indefinite
G. AMOUNT OF FILING FEE (computed at one-thirty-third of 1 percent of the
proposed maximum aggregate offering price to the public):
Not required
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement.
Check if it is proposed that this filing will become effective immediately
upon filing pursuant to Rule 487.
732925.1
<PAGE>
<TABLE>
<CAPTION>
8,000 UNITS
DATED: JULY 16, 1998
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 141
<S> <C>
No person is authorized to give any information or to Parts A, B and C of this Prospectus do not contain all of the
make any representations not contained in Parts A, B and information set forth in the registration statement and
C of this Prospectus; and any information not contained exhibits relating thereto, filed with the Securities and
herein must not be relied upon as having been authorized Exchange Commission, Washington, D.C. under the Securities Act
by the Trust, the Trustee, the Evaluator, or the of 1933, and the Investment Company Act of 1940, and to which
Sponsors. The Trust is registered as a unit investment reference is made.
trust under the Investment Company Act of 1940. Such
registration does not imply that the Trust or any of its This Prospectus does not constitute an offer to sell, or a
Units have been guaranteed, sponsored, recommended or solicitation of an offer to buy, securities in any state to
approved by the United States or any state or any agency any person to whom it is not lawful to make such an offer in
or officer thereof. such state.
Table of Contents PROSPECTUS PART A.
Part A This Prospectus consists of three parts. This Part A may not
Summary of Essential Information A-2 be distributed unless accompanied by Parts B and C. Please
Report of Independent Auditors A-7 read and retain each of the parts of this Prospectus for
Statement of Condition A-8 future reference.
Portfolio A-9
Underwriting Account A-11 The Empire State Municipal Exempt Trust, Guaranteed Series 141
Part B (the "Trust"), is one of a series of similar but separate unit
The Trust B-1 investment trusts formed for the purpose of obtaining
Public Offering B-7 tax-exempt interest income through an investment in a fixed
Estimated Current Return and insured portfolio consisting primarily of various long-term
Estimated Long-Term Return municipal bonds with average maturities of over 10 years. The
to Unit Holders B-11 Sponsors of the Trust are Glickenhaus & Co. and Lebenthal &
Insurance on Bonds B-11 Co., Inc. Units of the Trust will be offered to residents of
Tax Status B-14 New York, Connecticut, Pennsylvania and Florida. On the Date
Rights of Unit Holders B-18 of Deposit, all of the Units and the Bonds while in the Trust
Automatic Accumulation Account B-24 will be rated AAA by Standard & Poor's Ratings Services, A
Sponsors B-25 Division of The McGraw-Hill Companies ("Standard & Poor's")
Trustee B-27 and Moody's Investors Service, Inc. ("Moody's") will assign a
Evaluator B-27 rating of "Aaa" to all of the Bonds in the Trust, as insured.
Amendment and Termination of The value of the Units of the Trust will fluctuate with the
the Trust Agreement B-28 value of the underlying Bonds. Minimum purchase: 1 Unit.
Legal Opinions B-28
Auditors B-28
Description of Bond Ratings B-28
Part C
Special Factors Affecting New York C-1
Puerto Rico Bonds C-6
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
675530.2
<PAGE>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT JULY 15, 1998 (1):
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO. TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
DATE OF DEPOSIT: JULY 16, 1998
<TABLE>
<S> <C>
Aggregate Principal Amount of Bonds in Trust: $ 8,000,000.00(2)
Number of Units: 8,000
Fractional Undivided Interest in Trust Per Unit: 1/8,000
Total Value of Securities in Portfolio (Based on Offering Side Valuations of Securities): $ 7,724,822.50
===============
Sponsors' Initial Repurchase Price Per Unit (Total Value of Securities divided by 8,000 Units): $ 965.60(3)
Plus Sales Charge of 4.9% (on sales of fewer than 250 Units) (4): $ 49.76
Plus Organization Costs(5): $ 2.81
---------------
Public Offering Price Per Unit: $ 1,018.17(6)
===============
Redemption Price Per Unit: $ 958.96(7)
Excess of Public Offering Price Over Redemption Price Per Unit: $ 59.21
Excess of Public Offering Price Over Sponsors' Initial Repurchase Price Per Unit: $ 52.57
Weighted Average Maturity of Bonds in the Trust: 28.436 Years
Evaluation Time: 12:00 P.M. New York Time on the initial Date of Deposit and 2:00 P.M. New York Time
thereafter.
Annual Insurance Premium (8): $1,875.00
Evaluator's Fee: $.55 per Bond for each valuation.
Trustee's Annual Fee (13): For each $1,000 principal amount of Bonds in the Trust, $1.21 under the monthly and
$.81 under the semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $0.25 per $1,000 principal amount of underlying Securities. See "The
Trust--Expenses and Charges."
Sponsors' Profit (Loss) on Deposit: $49,072.50
Mandatory Termination Date: December 31, 2047
First Settlement Date: July 21, 1998
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust under which Trust
Agreement May be Terminated: $1,600,000 or 20% of the principal amount of the Bonds deposited
in Trust, whichever is lower.
</TABLE>
<TABLE>
<CAPTION>
Monthly Semi-Annual
<S> <C> <C>
Estimated Annual Interest Income (includes cash income accrued only): $49.29 $49.29
P Less Annual Premium on Portfolio Insurance: .23 .23
E Less Estimated Annual Expenses (9): 2.00 1.50
------ ------
R Estimated Net Annual Interest Income: $47.06 $47.56
====== ======
Estimated Interest Distribution (10): $ 3.92 $23.78
U Estimated Current Return Based on Public Offering Price (includes cash 4.62% 4.67%
N income accrual only) (11):
I Estimated Long-Term Return (12): 4.65% 4.70%
T Estimated Daily Rate of Net Interest Accrual: $ .130735 $.132124
Record Dates: 15th Day of Month 15th Day of
November and May
Payment Dates: 1st Day of Month 1st Day of
December and June
(continued on following page)
</TABLE>
A-2
675530.2
<PAGE>
Notes to Summary of Essential Information
(1) The business day prior to the date of this Prospectus. The date of this
Prospectus is the date on which the Trust Agreement was signed and the deposit
with the Trustee was made.
(2) If a Replacement Bond is not acquired when a contract for the purchase of
Bonds fails, the aggregate principal amount of the Bonds may be reduced. See
"The Trust--General Considerations" in Part B.
(3) Based, during the initial offering period, solely upon the offering prices
of the Securities and thereafter on the bid prices of such Securities. See "The
Trust--Market for Units" in this Part A.
(4) After the initial offering period, Units may be available for purchase from
the Sponsors at a price based upon 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 in "Public Offering--Offering Price" in
Part B of this Prospectus, which is based upon the maturities of each Bond in
the Trust. A pro rata portion of organization costs will not be added to the
Public Offering Price per Unit after the initial offering period.
(5) Investors will bear all or a portion of the costs incurred in organizing the
Trust (the "organization costs") -- including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the SEC and the states and the initial audit of the
Trust's portfolios.
(6) No accrued interest will be added to the Public Offering Price in connection
with purchases of Units contracted for on July 16, 1998. With respect to
purchases contracted for after such date, accrued interest from July 21, 1998
to, but not including, the date of settlement (normally three business days
after order) will be added to the Public Offering Price.
(7) Based solely upon the bid prices of the Securities. Upon tender for
redemption, the price to be paid will include accrued interest as described in
"Rights of Unit Holders--Redemption--Computation of Redemption Price per Unit"
in Part B.
(8) Based upon the aggregate principal amount of the Bonds in the Trust. If the
Trustee had exercised its right to obtain Permanent Insurance on all of the
Bonds in the Trust as of the Date of Deposit, the total cost of the Permanent
Insurance premiums for such insurance would have been $12,836.00.
(9) Excluding insurance costs.
(10) The first monthly interest distribution of $3.13 per Unit will be made on
September 1, 1998 (the "First Distribution Date") to all monthly
certificateholders of record August 15, 1998 (the "First Record Date"). The
regular monthly payment will be $3.92 on October 1, 1998 and thereafter. The
first semi-annual interest distribution of $15.06 per Unit will be made on
December 1, 1998 to all semi-annual certificateholders of record on November 15,
1998. The regular semi-annual payment will be $23.78 on June 1, 1999 and
thereafter. In order to reduce the amount of accrued interest investors have to
pay in addition to the Public Offering Price, the Trustee has agreed to advance
to the Trust the amount of accrued interest due on Securities through and
including July 21, 1998. This accrued interest will be paid to the Sponsors as
the holders of record of all Units on such date. Consequently, when the Sponsors
sell Units, the amount of accrued interest to be added to the Public Offering
Price of the Units purchased by an investor will include only accrued interest
from July 21, 1998 to but not including the date of settlement of the investor's
purchase (normally three business days after the purchase contract), less any
distributions from the Interest Account. Since a person who contracts to
purchase Units on July 16, 1998 will settle his purchase on July 21, 1998, no
accrued interest will be added to the Public Offering Price of Units settled on
that date. The Trustee will recover its advancements (without interest or other
cost to the Trust) from interest received on the Securities deposited in the
Trust. See "Rights of Unit Holders--Redemption--Computation at Redemption Price
per Unit" in Part B.
(11) Calculated after payment of insurance premiums payable by the Trust. The
Estimated Current Return on such date on an identical portfolio without such
insurance would have been 4.65% based on the monthly payment plan and 4.69%
based on the semi-annual payment plan. See "Tax Status" and "Estimated Current
Return and Estimated Long-Term Return to Unit Holders" in Part B.
(12) Calculated after payment of insurance premiums payable by the Trust. The
Estimated Long-Term Return on such date on an identical portfolio without such
insurance would have been 4.67% based on the monthly payment plan and 4.72%
based on the semi-annual payment plan. See "Estimated Current Return and
Estimated Long-Term Return to Unit Holders" in Part B.
(13) During the first year, the Trustee's fee will be adjusted downward by $.26
per Unit, interest income will be $49.03 per Unit; estimated expenses per Unit
exclusive of insurance costs under the monthly and semi-annual distribution
plans will be $1.74 and $1.24, respectively; and estimated net interest income
per Unit will remain the same as shown. The Trustee has agreed to the foregoing
to cover interest on any Bonds accruing prior to their expected dates of
delivery since interest will not accrue to the benefit of Unit holders until
such Bonds are actually delivered to the Trust. See "Distribution of Interest
and Principal."
A-3
675530.2
<PAGE>
The Trust. Certain of the Bonds in the Trust may be purchased at prices which
result in the portfolio as a whole being purchased at a discount due to 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 (all or a portion of which may be taxable as ordinary income). Any income
other than any earned original issue discount will be taxable and will not be
realized until maturity, redemption or sale of the underlying Bonds or Units of
the Trust. In the case of Bonds acquired at a market discount, gain will be
treated as ordinary income to the extent of accrued market discount. 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 interest thereon from Federal
income tax and New York State and City personal income tax were (or with respect
to "when-issued" Bonds will be) rendered by bond counsel to the issuing
governmental authority. The continued tax-exempt status will depend upon the
issuer's ability to comply with the provisions of the Internal Revenue Code of
1986, as amended. See "Tax Status" in Part B. On the Date of Deposit, the
Sponsors, acting for the Underwriting Account (see "Underwriting Account" in
this Part A), deposited with the Trustee delivery statements relating to
contracts for the purchase of $8,000,000 aggregate principal amount for the
interest-bearing obligations, including funds (represented by cash, cash
equivalents and/or an irrevocable letter of credit issued by a major financial
institution) for the purchase of certain such obligations (the "Bonds" or the
"Securities"). The Trustee thereafter delivered to the Sponsors a registered
certificate of 8,000 Units, representing the entire ownership of the Trust,
which Units are being offered hereby.
The Portfolio. The portfolio of the Trust contains contracts to purchase 6
issues of Bonds issued by entities located in New York or certain United States
territories or possessions, including Puerto Rico, and their public authorities.
See "Special Factors Affecting New York" and "Puerto Rico Bonds" in Part C for a
discussion of risk factors. Except as described below, all such contracts are
expected to be settled by July 21, 1998. The following information is being
supplied to inform Unit holders of circumstances affecting the Trust. None of
the aggregate principal amount of the Bonds in the portfolio are general
obligations of the governmental entity issuing them which are backed by the
taxing power thereof. 18.75% of the aggregate principal amount of the Bonds in
the portfolio are payable from appropriations. 81.25% 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 purpose of issue are as follows: Appropriation, 1 (18.75%); Health
Care, 2 (31.25%); Higher Education, 1 (18.75%); Special Tax, 1 (21.87%); and
Transportation, 1 (9.38%). The Trust is deemed to be concentrated in the Health
Care category.* Prior to their deposit in the Trust, all of the issues (100%)
were rated AAA by Standard and Poor's. See "Description of Bond Ratings" in Part
B. For a more detailed discussion, it is recommended that Unit holders consult
the official statements for each security in the portfolio of the Trust. None of
the Bonds initially deposited in the Trust have been purchased on a "when
issued" basis and two (31.25%) of the Bonds initially deposited in the Trust
have been purchased on a delayed settlement basis. Normally, delivery of "when
issued" Bonds and delayed settlement Bonds are expected to take place within 30
days after the First Settlement Date. Accordingly, delivery may be delayed or
may not occur. Interest on such Bonds begins accruing to the benefit of Unit
holders on the date of delivery. Holders of Units will be "at risk" with respect
to such Bonds (i.e., may derive either gain or loss from fluctuations in the
offering side valuation of such Bonds) from the date they commit for Units.
Moreover, the insurance on the Bonds in the portfolio obtained by the Trust does
not cover such Bonds until they are delivered to the Trust. See "The
Trust--General Considerations" in Part B. 100% of the aggregate principal amount
of the Bonds in the Trust are original issue discount bonds. Of these original
issue discount bonds, none have mandatory sinking fund installment provisions at
redemption prices equal to the compound accreted value on the date of
redemption. Of these original issue discount bonds, none are
- ----------
* 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 B of this Prospectus.
A-4
675530.2
<PAGE>
zero coupon bonds. (See "Original Issue Discount and Zero Coupon Bonds" in Part
B). On the Date of Deposit, based on the offering side valuation, none of the
aggregate principal amount of the Bonds were at par, 100% of the aggregate
principal amount of the Bonds were at a discount from par and none of the
aggregate principal amount of the Bonds were at a premium.
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 or a decrease in the federal or New York State income tax
rate. Inflation and recession, as well as measures implemented to address these
and other economic problems, contribute to fluctuations in interest rates and
the values of fixed-rate bonds generally. Additionally, changes in the tax
treatment of bonds may have an adverse impact on the value of the Units. The
Sponsors cannot predict future economic policies or their consequences, nor can
they predict the course or extent of such fluctuations in the future. Some of
the Bonds in the Trust may also have been previously insured by insurance
obtained by the issuers of such Bonds or by persons other than the Trust
("Pre-insured Bonds"). Three (3) of the issues (53.1%) initially deposited in
the Trust were Pre-insured Bonds. All of the Bonds in the Trust are covered by
policies of insurance obtained from the MBIA Insurance Corporation (the
"Insurer") guaranteeing payment of principal and interest when due. As a result
of such issuance, the Bonds in the Trust have received a rating of "Aaa" by
Moody's and both the Bonds in the Trust and the Units of the Trust have received
a rating of "AAA" by Standard & Poor's. For the meanings of these ratings see
"Description of Bond Ratings" in Part B.
Risk Factors. Insurance does not protect against the risk of market fluctuations
on the underlying bonds in the Trust's portfolio and of the units of the Trust.
No assurance can be given that the Trust's objectives will be achieved as these
objectives are subject to the continuing ability of the respective issuers of
the bonds to meet their obligations or of the insurer to meet its obligations
under the insurance. In addition, 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 or a decrease in the
federal or New York State income tax rate. Additionally, changes in the tax
treatment of bonds may have an adverse impact on the value of the Units.
There can be no assurance that the economic and political conditions on which
the ratings of the Bonds in any Trust are based will continue or that particular
Bond issues may not be adversely affected by changes in economic, political or
other conditions that do not affect the ratings by either Standard & Poor's or
Moody's. In the event a Bond's rating is downgraded to below investment grade
(i.e., "high yield" or "junk bond" status), such a Bond, as compared to an
investment grade bond, is subject to greater risk of downward price volatility
in periods of economic uncertainty. If a Bond in the Trust is downgraded to high
yield bond status, a decrease in the net asset value of the Trust may result. If
such a decrease in net asset value occurs and Units of the Trust are tendered
for redemption, the Trust may be forced to liquidate some of the Bonds at a
loss. If such redemptions are substantial enough, this could trigger a complete
and unexpected liquidation of the Trust before maturity, resulting in
unanticipated losses for investors. There is also risk involved with the
purchase of bonds on a "when issued" or delayed settlement basis. See "The
Trust--General Considerations" in Part B. The financial condition of the State
of New York is affected by various national, economic, social and environmental
policies and conditions which may affect the ability of the issuers of the Bonds
to satisfy their obligations. The economy of the State continues to be
influenced by the financial health of the City of New York, which faces greater
competition as other major cities develop financial and business capabilities.
For further information concerning New York risk factors see "Special Factors
Affecting New York" in Part C.
Distributions. Distributions of interest received by the Trust, pro rated on an
annual basis, will be made semi-annually unless the Unit holder elects to
receive them monthly. The first monthly distribution will be $3.13 Units of the
Trust and will be made on September 1, 1998, to monthly Unit holders of record
on August 15, 1998, and $3.92 thereafter. The first semi-annual distribution
will be $15.06 for Units of the Trust and will be made on December 1, 1998, to
semi-annual Unit
A-5
675530.2
<PAGE>
holders of record on November 15, 1998, and $23.78 thereafter. See "Rights of
Unit Holders--Distribution of Interest and Principal" in Part B of this
Prospectus.
Each Unit of the Trust at the Date of Deposit represents 1/8,000 fractional
undivided interest in the $8,000,000 face amount of underlying Bonds and net
income of the Trust in the ratio of 1 Unit for each $1,000 principal amount of
underlying Bonds (including contracts and funds for the purchase thereof) in the
Trust.
Public Offering Price. The Public Offering Price of the Units of the Trust
during the initial offering period is equal to the aggregate offering price of
the Securities in the respective Trust's portfolio divided by the number of
Units outstanding, plus a sales charge equal to 4.9% of such aggregate offering
price of Securities per Unit on sales of fewer than 250 Units and a pro rata
portion of estimated organization costs. In addition, for Units ordered after
the date hereof, accrued interest will be payable from the First Settlement Date
for Units of the Trust (three business days from the date hereof) to the
expected date of settlement (three business days after order). However, after
the initial offering period the Public Offering Price of the Units will not
include a pro rata portion of estimated organization costs. For additional
information regarding the Public Offering Price, the descriptions of interest
and principal distributions, repurchase and redemption of Units and other
essential information regarding the Trust, see the "Summary of Essential
Information" in this Part A. During the initial public offering period, sales of
at least 250 Units will be entitled to a volume discount from the Public
Offering Price. See "Public Offering--Offering Price" in Part B. If the Units of
the Trust had been available for sale on July 15, 1998, the Public Offering
Price per Unit would have been $1,018.17. During the initial public offering
period of the Trust, investors in any unit investment trust with a fixed income
portfolio (including, but not limited to, any Exchange Trusts, see "Exchange
Option" in Part B) can purchase Units of the Trust in an amount not greater than
the amount of said investment at a discount from the public offering price of
$10.00 per Unit.
Taxes. 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 (the "Code").
See "The Trust -- Tax Status" in Part B of this Prospectus. Investors should
consult their personal tax advisor to determine the federal, state and local
income tax consequences of purchasing, owning and selling Units.
The Insurer. The Insurer 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 the Insurer. The Insurer is a limited liability
corporation rather than a several liability association. The Insurer 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, 1997, the Insurer had admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1998, the Insurer had assets of $5.4 billion
(unaudited), total liabilities of $3.6 billion (unaudited) , and total capital
and surplus of $1.8 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of the Insurer's year end financial statements prepared in
accordance with statutory accounting practices are available from the Insurer.
The address of the Insurer is 113 King Street, Armonk, New York 10504.
No representation is made herein as to the accuracy 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.
Sponsors. The total partners' capital of Glickenhaus at September 30, 1997 was
$182,265,038 (audited); and the total stockholders' equity of Lebenthal at March
31, 1997 was $5,346,158 (audited).
A-6
675530.2
<PAGE>
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.
-----------
REPORT OF INDEPENDENT AUDITORS
The Sponsors, Trustee, and Unit Holders of Empire State Municipal Exempt Trust,
Guaranteed Series 141
We have audited the Statement of Condition of Empire State Municipal Exempt
Trust, Guaranteed Series 141, including the Portfolio as of July 16, 1998. This
financial statement is the responsibility of the Sponsors. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsors, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion. An
irrevocable letter of credit deposited on July 16, 1998 in the amount required
to purchase securities, as described in the Statement of Condition, was
confirmed to us by the Trustee.
In our opinion, the Statement of Condition referred to above presents fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 141 at July 16, 1998 in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
New York, New York
July 16, 1998
A-7
675530.2
<PAGE>
<TABLE>
<CAPTION>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series 141
STATEMENT OF CONDITION AS OF DATE OF DEPOSIT
JULY 16, 1998
TRUST PROPERTY
<S> <C>
Investment in Securities:
Contracts to purchase underlying Securities (1)(2)......................... $7,724,822.50
Accrued interest receivable (2)................................................. 55,720.50
-------------
Total............................................................... $7,780,543.00
=============
LIABILITIES AND INTEREST OF UNIT HOLDERS
Liabilities:
Accrued interest receivable (2)............................................ $ 55,720.50
-------------
$ 55,720.00
Interest of Unit holders:
Units of fractional undivided interest outstanding (8,000):
Cost to investors (3)...................................................... 8,145,322.50
Less-Organization Costs (4)................................................ 22,500.00
Less--gross underwriting commission (5).................................... 398,000.00
-------------
Net interest of Unit holders.................................................... 7,724,822.50
-------------
Total............................................................... $7,780,543.00
=============
</TABLE>
- ----------------------
(1) Aggregate cost to the Trust of the Securities listed under
"Portfolio" is based on offering side valuation determined by the Evaluator on
the basis set forth under "Public Offering--Offering Price" in Part B. The
aggregate bid side evaluation of the Securities in the portfolio, as determined
by the Evaluator, as of the Date of Deposit was $7,671,687.50. An irrevocable
letter of credit issued by Bankers Trust, in an aggregate amount equal to or in
excess of $7,784,919.74 has been deposited with the Trustee. The amount of such
letter of credit includes: $7,724,822.50, the amount required to purchase the
tax-exempt securities listed in the related portfolio, plus $60,097.24 covering
accrued interest through expected dates of delivery.
(2) On the basis set forth under "Rights of Unit Holders--Distribution
of Interest and Principal" in Part B the Trustee will advance an amount equal to
the accrued interest on the Securities as of July 21, 1998 (the "First
Settlement Date") plus any cash received by the Trustee with respect to interest
on the Securities prior to such date, and the same will be distributed to the
Sponsors on the First Settlement Date. Consequently, the amount of interest
accrued on a Unit to be added to the public offering price thereof will include
only such accrued interest from the First Settlement Date to the date of
settlement, less all withdrawals and deductions from the Interest Account
subsequent to the First Settlement Date made with respect to the Unit.
(3) Aggregate public offering price (exclusive of interest) is computed
on 8,000 Units on the basis set forth above under "Public Offering-- Offering
Price" in Part B.
(4) A portion of the Public Offering Price consists of an amount
sufficient to pay for all or a portion of the costs of establishing a Trust.
These costs have been estimated at $2.81 per Unit for the Trust.
(5) A sales charge of 4.9% computed on 8,000 Units. See "Public
Offering--Offering Price" in Part B for volume discounts on sales of 250 Units
or more.
A-8
675530.2
<PAGE>
<TABLE>
<CAPTION>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series 141
Portfolio as of Date of Deposit, July 16, 1998
Redemption Features Cost of
Port- Coupon Ant.--Anticipated Yield Securities
folio Rating Principal Represented by Contracts Rate and S.F.--Sinking Fund to to
No. (1)(2) Amount (3) to Purchase Securities (4) Maturity Opt.--Optional (5) Maturity Trust(6)(7)
----- ------ ----------- -------------------------- --------- ------------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 AAA/Aaa $1,750,000 Municipal Assistance 5.000% 01/15/17 @ 100 S.F. 5.166% $1,710,625.00
Corporation for the City 01/15/2022 01/15/07 @ 101.5 Opt.
of Troy General Resolution
Bonds Series 1996A (MBIA
Insured)
2 AAA/Aaa 1,500,000 Dormitory Authority of the 5.000 08/01/24 @ 100 S.F. 5.189 1,455,000.00
State of New York The New 08/01/2032 02/01/08 @ 101 Opt.
York and Presbyterian
Hospital FHA-Insured
Mortgage Hospital Revenue
Bonds, Series 1998 (AMBAC
Insured)
3 AAA/Aaa 1,500,000 New York State Urban 5.000 01/01/19 @ 100 S.F. 5.183 1,458,750.00
Development Corporation 01/01/2028 01/01/08 @ 102 Opt.
Correctional Facilities
Service Contract Revenue
Bonds, Series A (FSA
Insured)
4 AAA/Aaa 1,000,000 Dormitory Authority of the 5.000 11/01/18 @ 100 S.F. 5.170 976,080.00
State of New York (North 11/01/2023 11/01/08 @ 101 Opt.
Shore Health System
Obligated Group) North
Shore University Hospital
at Plainview Revenue Bonds
Series 1998 (MBIA Insured)
5 AAA/Aaa 1,500,000 Nassau County Industrial 4.750 07/01/24 @ 100 S.F. 5.120 1,415,400.00
Development Agency (State 07/01/2028 07/01/08 @ 102 Opt.
of New York) Civic
Facility Revenue and
Refunding Bonds (Hofstra
University Project-Series
1998), (MBIA Insured)
6 AAA/Aaa 750,000 Metropolitan 4.750 07/01/19 @ 100 S.F. 5.120 708,967.50
Transportation Authority 07/01/2026 07/01/08 @ 101 Opt.
Commuter Facilities
Revenue Bonds, Series 1998
B (FGIC Insured)
----------- -------------
$ 8,000,000 $7,724,822.50
=========== =============
</TABLE>
A-9
675530.2
<PAGE>
Notes to Portfolio
The symbol "NR" denotes a non-rated issue of Bonds.
(1) All ratings except those identified by an asterisk (*) are by
Standard & Poor's. 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. A
brief description of the rating symbols and their meanings is set forth under
"Description of Bond Ratings" in Part B.
(2) Ratings in the right hand column are after deposit of these issues
in the Trust and their insurance by MBIA. Moody's has assigned its "Aaa"
investment rating to all of the Bonds while in the Trust, as insured by MBIA
Insurance Corporation.
(3) All Bonds are represented by contracts to purchase.
(4) All contracts to purchase the Bonds were entered into from July 9,
1998 to July 14, 1998. All contracts are expected to be settled prior to or on
the First Settlement Date of the Trust which is expected to be July 21, 1998,
except for portfolio numbers 4 and 5 which will settle on August 5, 1998 and
July 22, 1998, respectively.
(5) Unless otherwise indicated, there is shown under this heading the
year in which each issue of bonds initially is redeemable and the redemption
price for that year. Each such issue continues to be redeemable at declining
prices thereafter, but not below par. "S.F." indicates a sinking fund has been
or will be established with respect to an issue of Bonds. In addition, certain
Bonds in the Trust may be redeemed in whole or in part other than by operation
of the stated optional call or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the terms
and provisions of such Bonds. A sinking fund is a reserve fund accumulated over
a period of time for retirement of debt. "Ant." indicates the existence of
anticipated redemptions at a price of 100%. Under certain circumstances, these
anticipated redemptions can be altered. A callable bond is one which is subject
to redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a bond issue is redeemed before maturity by the
proceeds of a new bond issue.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have an offering side valuation which represents a premium over par. To the
extent that the Bonds were deposited in the Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Monthly and semi-annual
distributions generally be reduced by the amount of the income which would
otherwise have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium received on
such redemption. The estimated current return in this event may be affected by
such redemptions. The Federal tax effect on Unit holders of such redemptions and
resultant distributions is described in the section entitled "Tax Status" in
Part B.
(6) See Note (1) to "Statement of Condition as of Date of Deposit"
regarding cost of Bonds. The offering prices are greater than the current bid
prices of the Bonds which is the basis on which Redemption Price per Unit is
determined for purposes of redemption of Units (see the first paragraphs under
"Public Offering--Offering Price" and "Rights of Unit
Holders--Redemption--Computation of Redemption Price Per Unit" in Part B). On
the business day prior to the Date of Deposit the aggregate bid side valuation
of the Securities in the Trust was lower than the aggregate offering side
valuation by .688%. Yield of Bonds was computed on the basis of offering prices
on the Date of Deposit.
Bonds identified as escrowed to maturity under "Portfolio" for the
Trust in this Part A are priced to the maturity date not the call date.
(7) Annual interest income to the Trust is $394,375.00.
(8) Yield calculated based on a call date prior to stated maturity.
A-10
675530.2
<PAGE>
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and the number of Units of
the Trust each has agreed to purchase from the Underwriting Account are:
<TABLE>
<CAPTION>
Units
Name Address Series 141
---- ------- ----------
<S> <C> <C>
Glickenhaus & Co. 6 East 43rd Street, New York, New York 10017 2,775
Lebenthal & Co., Inc. 120 Broadway, New York, New York 10271 2,775
Gruntal & Co. LLC 14 Wall Street, New York, New York 10005 1,200
Nathan & Lewis Securities, Inc. 1140 Avenue of the Americas, New York, New York 10036 250
Advest Incorporated 90 State House Square, Hartford, Connecticut 06103 100
CIBC Oppenheimer Corp. World Financial Center, New York, New York 10281 100
Cadaret, Grant & Co., Inc. . 108 W. Jefferson Street, Syracuse, New York 13203 100
David Lerner Associates, Inc. 477 Jericho Turnpike, Syosset, New York 11791 100
Everen Securities, Inc. 77 West Wacker Drive, Chicago, Illinois 60606 100
Josephthal & Company Inc. 6 East 43rd Street, New York, New York 10017 100
Kirlin Securities, Inc. 6901 Jericho Turnpike, Syosset, New York 11791 100
Samuel A. Ramirez & Co., Inc. 61 Broadway, New York, New York 10006 100
Salomon Smith Barney Inc. 388 Greenwich Street, New York, New York 10013 100
Stuart, Coleman & Co., Inc. 11 West 42nd Street, New York, New York 10036 100
-------
8,000
=======
</TABLE>
A-11
675530.2
<PAGE>
TAX EQUIVALENT YIELDS
The following tables indicate the approximate yield resident individuals in
various income brackets must earn on a security subject to Federal, New York
State and New York City income taxes to receive an after-tax yield equivalent to
that provided by a tax-exempt bond yielding from 4.0% to 8.0%, based on
anticipated 1998 Federal, New York State and New York City marginal tax rates.
New York City taxpayers should refer to Table I. New York State taxpayers
outside of New York City should refer to Table II.
<TABLE>
TABLE I. COMBINED EFFECT OF FEDERAL, NEW YORK STATE AND NEW YORK CITY INCOME TAXES
<CAPTION>
Approx.
1998 To equal a tax-exempt yield of:
----------------------------------------------------------------------
Federal,
NYS 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
----------------------------------------------------------------------
If your net taxable income1 & NYC
is approximately2 Marginal
Joint Return Single Return Tax Rates4 A taxable investment would have to pay you:3
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$21,601-$42,350 $12,001-$25,350 24.10% 5.3% 5.9% 6.6% 7.2% 7.9% 8.6% 9.2% 9.9% 10.5%
- ------------------------------------------------------------------------------------------------------------------------------------
$42,351-$102,300 $25,351-$61,400 35.75% 6.2% 7.0% 7.8% 8.6% 9.3% 10.1% 10.9% 11.7% 12.5%
- ------------------------------------------------------------------------------------------------------------------------------------
$102,301-$155,950 $61,401-$128,100 39.42% 6.6% 7.4% 8.3% 9.1% 9.9% 10.7% 11.6% 12.4% 13.2%
- ------------------------------------------------------------------------------------------------------------------------------------
$155,951-$278,450 $128,101-$278,450 43.89% 7.1% 8.0% 8.9% 9.8% 10.7% 11.6% 12.5% 13.4% 14.3%
- ------------------------------------------------------------------------------------------------------------------------------------
$278,451+ $278,451+ 47.30% 7.6% 8.5% 9.5% 10.4% 11.4% 12.3% 13.3% 14.2% 15.2%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
TABLE II. COMBINED EFFECT OF FEDERAL AND NEW YORK STATE INCOME TAXES
<CAPTION>
Approx.
1998 To equal a tax-exempt yield of:
-------------------------------------------------------------------------
If your net taxable Federal &
income1 is NYS 4.0% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
-------------------------------------------------------------------------
approximately2 Marginal
Joint Return Single Return Tax Rates5 A taxable investment would have to pay you:3
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$21,601-$42,350 $12,001-$25,350 20.82% 5.1% 5.7% 6.3% 7.0% 7.6% 8.2% 8.8% 9.5% 10.1%
- -----------------------------------------------------------------------------------------------------------------------------------
$42,351-$102,300 $25,351-$61,400 32.93% 6.0% 6.7% 7.5% 8.2% 9.0% 9.7% 10.4% 11.2% 11.9%
- ------------------------------------------------------------------------------------------------------------------------------------
$102,301-$155,950 $61,401-$128,100 36.59% 6.3% 7.1% 7.9% 8.7% 9.5% 10.3% 11.0% 11.8% 12.6%
- ------------------------------------------------------------------------------------------------------------------------------------
$155,951-$278,450 $128,101-$278,450 41.39% 6.8% 7.7% 8.5% 9.4% 10.2% 11.1% 11.9% 12.8% 13.7%
- ------------------------------------------------------------------------------------------------------------------------------------
$278,451+ $278,451+ 44.85% 7.3% 8.2% 9.1% 10.0% 10.9% 11.8% 12.7% 13.6% 14.5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 After exemptions and deductions other than state and local tax deductions.
2 The tables cover only a representative range of incomes, and income
brackets have been rounded off to facilitate illustration. Actual
Federal, New York State and New York City income brackets may differ
slightly from those in the table.
3 Yields on taxable investments have been rounded off to facilitate
illustration.
4 This rate is calculated by using the highest New York State and New
York City marginal tax rates that apply to the bracket.
5 This rate is calculated by using the highest New York State marginal
tax rate that applies to the bracket.
A-12
675530.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST Prospectus Part B
Part B of this Prospectus may not be Distributed Unless Accompanied by Part A
THE TRUST
Organization. The Empire State Municipal Exempt Trust, Guaranteed Series as
designated in Part A (the "Trust"), is one of a series of similar but separate
unit investment trusts created under the laws of the State of New York by a
Trust Indenture and Agreement* (the "Trust Agreement"), dated the Date of
Deposit, among Glickenhaus & Co. and Lebenthal & Co., Inc. as sponsors (the
"Sponsors"), The Bank of New York, as trustee (the "Trustee") and Muller Data
Corporation, as evaluator (the "Evaluator").
On the date of this Prospectus each Unit represented the fractional
undivided interest in the Trust set forth under "Summary of Essential Financial
Information" in Part A. Thereafter, if any Units of the Trust 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" in this Part B.
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 with average maturities of over 10 years. No
assurance can be given that the Trust's objectives will be achieved as these
objectives are subject to the continuing ability of the respective issuers of
the bonds to meet their obligations and, of the Insurer to meet its obligations
under the insurance. In addition, an investment in such portfolio can be
affected by fluctuations in interest rates.
Portfolio. The portfolio of the Trust consists of the Bonds described in "The
Portfolio" in Part A and are represented by the Sponsors' contracts to purchase,
which are expected to be settled by the date set forth in Part A. The Trust may
contain Bonds which have been purchased on a when, as, and if issued basis.
Accordingly, the delivery of such Bonds may be delayed or may not occur. (See
"The Portfolio" in Part A.) Interest on these Bonds begins accruing to the
benefit of Unit holders on their respective dates of delivery. Unit holders will
be "at risk" with respect to these Bonds (i.e., may derive either gain or loss
from fluctuations in the offering side evaluation of the Bonds) from the date
they commit for Units. (See "The Portfolio" in Part A.) For a discussion of the
Sponsors' obligations in the event of the failure of any contract for the
purchase of any of the Bonds and limited right to substitute other bonds to
replace any failed contract, see "The Trust--Substitution of Bonds" in this Part
B. As a result of the MBIA Insurance Corporation insurance, Moody's Investors
Service ("Moody's") has assigned a rating of "Aaa" to all of the Bonds in the
Trust, as insured and Standard & Poor's Corporation, a division of McGraw-Hill
("Standard & Poor's") has assigned a rating of "AAA" to the Units and Bonds
while in the Trust. (See "Insurance on the Bonds" in this Part B).
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) MBIA Insurance
Corporation insurance for the payment of principal and interest on the Bonds is
available. 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" in Part B. The insurance on the Bonds in the portfolio
obtained by the Trust does not cover such Bonds until they are delivered to the
Trust. See "The Trust--General Considerations" in this Part B.
- --------
* References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
B-1
369165.1
<PAGE>
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. Except as
described in footnotes to "Summary of Essential Financial Information" for the
Trust interest accrues to the benefit of Unit holders commencing with the
expected date of settlement for purchase of the Units. If a Replacement Bond is
not acquired, accrued interest (at the coupon rate of the Failed Bonds or earned
original issue discount in the case of original issue discount and zero coupon
Bonds) will be paid to Unit holders (from the Deposit Date to the date the
Trustee is notified of the failure of the Sponsors to purchase a Replacement
Bond). All such interest paid to Unit holders which accrued after the date of
settlement for a purchase of Units will be paid by the Sponsors and accordingly
will not be treated as tax-exempt income. In the event a Replacement Bond is not
acquired by the Trust, the net annual interest income per Unit for the Trust
would be reduced and the estimated current return might be lowered.
Neither the Sponsors nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event that any contract for
the purchase of Securities in the Trust fails and no Replacement Bond as
hereinafter defined is acquired, the Sponsors shall refund to all Unit holders
the sales charge attributable to such failed contract, and the principal and
accrued interest (at the coupon rate of the relevant Security or earned original
issue discount in the case of original issue discount and zero coupon Bonds to
the date the Sponsors are notified of the failure) which are attributable to
such failed contract, shall be distributed at the next Monthly Payment Date
which is more than 30 days after the failure to purchase Replacement Bonds. The
portion of such interest paid to a Unit holder which accrued after the expected
date of settlement for purchase of his Units will be paid by the Sponsors and
accordingly will not be treated as tax-exempt income.
The following paragraphs discuss the characteristics of the Bonds in the
Trust and of certain types of issuers of the Bonds in the Trust. These
paragraphs discuss, among other things, certain circumstances which may
adversely affect the ability of such issuers to make payment 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 for the Trust, however, such changes should not
adversely affect the Trust's ultimate receipt of principal and interest, the
Standard & Poor's or Moody's ratings of the Bonds in the portfolio, or the
Standard & Poor's rating of the Units of the Trust. 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 issuer's industrial or economic
base or inability to attract new industries; economic limits on the ability to
tax without eroding the tax base; 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
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 Bonds in the Trust may
be Bonds that are, in whole or in part, subject to and dependent upon (i) the
governmental entity making appropriations from time to time or (ii) the
continued existence of special temporary taxes which require legislative action
for their reimposition. The availability of any appropriation is subject to the
willingness or ability 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, certificateholders' 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.
B-2
369165.1
<PAGE>
Moral Obligation Bonds. Certain of the Bonds in the Trust may be secured by
pledged revenues and additionally by the so-called "moral obligations" of the
State or a local governmental body. Should the pledged revenues prove
insufficient, the payment of such Bonds is not a legal obligation of the State
or governmental entity, 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
Bonds proceeds are 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 "The Trust--Original Issue Discount and Zero Coupon
Bonds").
Housing Bonds. Some of the aggregate principal amount of Bonds of the Trust
may consist of obligations of state and local housing authorities whose revenues
are primarily derived from mortgage loans to owners of housing projects for low
to moderate income families. Since such obligations are not general obligations
of a particular state or municipality or other governmental authority 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. Certain Bonds may be bonds issued to finance
public power facilities. Certain risks associated with 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, 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 Bonds issued by public utilities. In addition, 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.
B-3
369165.1
<PAGE>
Health Care Revenue Bonds. Some of the aggregate principal amount of Bonds
of the Trust 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
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.
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
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* For 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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assistance including motor fuel and motor vehicle taxes, fees, and licenses and,
therefore, may be subject to fluctuations in such assistance.
Private Activity Bonds. The portfolio of the Trust may contain other Bonds
that are "private activity bonds," which would be primarily of two types: (1)
Bonds for a publicly owned facility that a private entity may have a right to
use or manage to some degree, such as an airport, seaport facility or water
system and (2) Bonds for facilities deemed owned or beneficially owned by a
private entity but which were financed with tax-exempt bonds of a public issuer,
such as a manufacturing facility or a pollution control facility. In the case of
the first type, bonds are generally payable from a designated source of revenues
derived from the facility and may further receive the benefit of the legal or
moral obligation of one or more political subdivisions or taxing jurisdictions.
In most cases of project financing of the first type, receipts or revenues of
the Issuer are derived from the project or the operator or from the unexpended
proceeds of the bonds. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which are owned by
or for the benefit of, and are operated by, corporate entities. Ordinarily, such
private activity bonds are not general obligations of governmental entities and
are not backed by the taxing power of such entities, and are solely dependent
upon the creditworthiness of the corporate user of the project or corporate
guarantor.
The private activity bonds in the Trust have generally been issued under
bond resolutions, agreements or trust indentures pursuant to which the revenues
and receipts payable under the issuer's arrangements with the users or the
corporate operator of a particular project have been assigned and pledged to the
holders of the private activity bonds. In certain cases a mortgage on the
underlying project has been assigned to the holders of the private activity
bonds or a trustee as additional security. In addition, private activity bonds
are frequently directly guaranteed by the corporate operator of the project or
by another affiliated company.
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 of the Bonds in the Trust may be 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 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 of the Bonds in the Trust 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.
Original Issue Discount Bonds and Zero Coupon Bonds. Certain of the Bonds in the
Trust may be 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 current interest. For Federal income tax
purposes, original issue discount on such bonds must be amortized over the term
of such bonds. On sale or redemption, the difference between the (i) the amount
realized (other than amounts treated as tax-exempt income as described below)
and (ii) the tax basis of such bonds (properly adjusted, in the circumstances
described below, for amortization of original issue discount) will be treated as
taxable income or loss. See "Tax Status" in this Part B. The Code requires
holders of tax-exempt obligations issued with original issue discount, such as
the Trust, to accrue tax-exempt original issue discount by using the constant
interest method provided for the holders of taxable obligations. In addition,
the Code provides that the basis of a tax-exempt obligation is increased 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. Each Trust's tax basis in a Bond is increased by any accrued
original issue discount as
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is a Unit holder's tax basis in his Units. For Bonds issued after June 9, 1980
that are redeemed prior to maturity, the difference between the Trust's basis,
as adjusted, and the amount received will be taxable gain or loss to the Unit
holders. All or a portion of any gain may be taxable as ordinary income.
There can be no assurance that additional Federal legislation will not be
enacted or that existing legislation will not be amended hereafter with the
effect that interest on bonds becomes subject to Federal income taxation. If the
interest on the Bonds in the Trust should ultimately be deemed to be taxable,
the Trustee may 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 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. On the Date of Deposit,
the offering valuations of some of the Bonds in the Trust may have been at a
premium and subject to retirement or refunding within ten years of the Date of
Deposit. 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 are
deposited in the Trust at a price higher than their par value, such redemption
at par would result in a loss of capital to a purchaser of Units at their
original 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 "The Portfolio" in Part A
for a list of original issue discount and/or zero coupon bonds and 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" in Part B. The portfolio contains a listing of the
sinking fund and call provisions, if any, with respect to each of the Bonds
therein.
Substitution of Bonds. In the event of a failure to deliver any Bond that has
been purchased for the Trust under a contract, including those Bonds purchased
on a "when, as and if issued" basis ("Failed Bonds"), the Sponsors are
authorized to purchase other bonds ("Replacement Bonds") which the Trustee shall
pay for out of funds held in connection with the Failed Bonds and to accept
delivery of the Replacement Bonds to make up the original corpus of the Trust.
The Replacement Bonds must be purchased within 20 days after delivery of the
notice of the failed contract, and the purchase price (exclusive of accrued
interest) may not exceed the principal attributable to the Failed Bonds. The
Replacement Bonds (i) must be tax-exempt bonds issued by the State of New York
or counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions or their public
authorities as described in the first paragraph under "Portfolio," (ii) must
have a fixed maturity date not exceeding the maturity date of the Failed Bonds
and not less than ten years after the date of purchase, (iii) shall be purchased
at a price that results in a yield to maturity and a current return, in each
case as of the Date of Deposit, at least equal to the yield to maturity and the
current return of the Failed Bonds, (iv) shall not be "when issued" bonds, (v)
must be rated at least equal to the Failed Bonds and (vi) must be eligible for
coverage under the MBIA Insurance Corporation insurance policy obtained by the
Trust. Whenever a Replacement Bond has been acquired for the Trust, the Trustee
shall, within five days thereafter, notify all Unit holders of the Trust of the
acquisition of the Replacement Bond and shall, on the next monthly Payment Date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the Trust of the Failed Bond exceeded the
cost of the Replacement Bond. Once the original corpus of the Trust is acquired,
the Trustee will have no power to vary the investment of the Trust, i.e., the
Trustee will have no managerial power to take advantage of market variations to
improve a Unit holder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsors will refund the sales charge attributable to such Failed
Bonds to all Unit holders of the Trust, and distribute the principal and accrued
interest (at the coupon rate of such Failed Bond, or earned original issue
discount in the case of zero coupon bonds, from the Deposit Date to the date the
Sponsors notify the Trustee that they will not purchase Replacement Bonds)
attributable to such Failed Bonds on the next monthly Payment Date which is more
than 30 days thereafter. In the event a Replacement Bond is not acquired by the
Trust, the Estimated Net Annual Interest Income per Unit for the Trust would be
reduced and the Estimated Current Return thereon might be lowered.
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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 at this time 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 of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon the Trust. At any time after the
Date of Deposit, 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 has
given or will give 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 price of the Units of the Trust as of the Date of Deposit
was determined by adding to the Evaluator's determination of the aggregate
offering price of the Securities per Unit a sales charge of 5.152% thereof equal
to 4.9% of the aggregate offering price of the Securities per Unit and a pro
rata portion of estimated organization costs. During the initial public offering
period, sales of at least 250 Units will be entitled to a volume discount from
the Public Offering Price as described below. For purchases settling after the
First Settlement Date, 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. However, after the initial offering
period the Public Offering Price of the Units will not include a pro rata
portion of estimated organizational expenses.
During the initial offering period the aggregate offering price of the
Securities in the Trust is determined by the Evaluator (1) on the basis of
current offering prices for the Securities,* (2) if offering prices are not
available for any Securities, on the basis of current offering prices for
comparable securities, (3) by making an appraisal of the value of the Securities
on the basis of offering prices in the market, or (4) by any combination of the
above. Such determinations are made each business day during the initial public
offering period as of the Evaluation Time set forth in the "Summary of Essential
Financial Information" in Part A, effective for all sales made subsequent to the
last preceding determination. For information relating to the calculation of the
Redemption Price, which is based upon the aggregate bid price of the underlying
Securities and which may be expected to be less than the aggregate offering
price, see "Rights of Unit Holders--Redemption" in Part B. 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 MBIA
Insurance Corporation insurance obtained by the Trust. See also "Rights of Unit
Holders--Certificates" and "Rights of Unit Holders--Redemption" in Part B for
information relating to redemption of Units.
The Evaluator will consider in its evaluation of Securities which are in
default in payment of principal or interest or, in the Sponsors' opinion, in
significant risk of such default ("Defaulted Bonds") and which are covered by
insurance obtained by the Trust the value of the insurance guaranteeing interest
and principal payments. 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
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* With respect to the evaluation of Bonds during the initial syndicate
offering period for such Bonds, the "current offering price," as determined
by the Evaluator, will normally be equal to the syndicate offering price as
of the Evaluation Time, unless the Evaluator determines that a material
event has occurred which it believes may result in the syndicate offering
price not accurately reflecting the market value of such Bonds, in which
case the Evaluator, in making its determination with respect to such Bonds,
will consider not only the syndicate offering price but also the factors
described in (2) and (3) herein.
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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 MBIA Insurance Corporation to meet its commitments under the Trust's
insurance policy, including the commitment to issue Permanent Insurance. The
Evaluator intends to use a similar valuation method with respect to Securities
insured by the Trust if there is a significant risk of default and a resulting
decrease in the market value. 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" in Part B.
If the Trustee does not exercise the right to obtain Permanent Insurance as
to any Defaulted Bonds in the Trust, it is the present intention of the Trustee,
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 party
other than the Trust, 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 MBIA Insurance Corporation as long as the Bond is held in the
Trust.
No value has been ascribed to the MBIA Insurance Corporation insurance
obtained by the Trust as of the date of this Prospectus.
The secondary market Public Offering Price of the Units of the Trust 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 sales charge for secondary market purchases. For purposes of
computation, Bonds will be 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 sales charge computation will apply different sales charge
rates to each Bond in the Trust based upon the maturity of each such Bond in
accordance with the following schedule:
Secondary Market
Period Sales Change
------------------------------------
Percentage of Percentage of
Public Offering Net Amount
Per Bond Price Invested
---------------- ---------------
Years to Maturity Per Bond
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 will be
applied to all secondary market unit purchases.
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During the initial public offering period, purchasers of 250 Units or
more will be entitled to a volume discount from the Public Offering Price as set
forth in the table below:
Discount From
Public Offering
Number of Units Price Per Unit
--------------- ----------------
250-499..................................... $ 2.50
500-999..................................... 7.50
1,000-1,999................................. 15.00
2,000 or more............................... 20.00
Except as discussed under "Distribution of Units" below, the above volume
discount will be the responsibility of the Selling Underwriter or dealer and
will apply on all purchases at any one time by the same person of Units in the
Trust in the amounts stated. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed for the purposes hereof to be registered in the name of the purchaser.
The graduated sales charges are also applicable to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
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
intend to maintain a market for the Units of the Trust and continuously to offer
to purchase Units of the Trust during the initial offering period at prices
based upon the aggregate offering price of the Securities in the Trust; and
thereafter at prices based on the aggregate bid price of the related Securities.
After the initial offering period 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" in Part B). 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 such 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 of the Trust, a Unit holder desiring to
dispose of his 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 his 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" in Part B.
Employees (and their immediate families) of Glickenhaus & Co. and Lebenthal
& Co., Inc. may, pursuant to employee benefit arrangements, purchase Units of
the Trust at a price equal to the offering side evaluation of the underlying
Securities in the Trust during the initial offering period and at the bid side
thereafter, divided by the number of Units outstanding plus a reduced sales
charge of 1.5% of the Public Offering Price. Such arrangements result in less
selling effort and selling expenses than sales to employee groups of 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.
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Distribution of Units. The Underwriters of the Units of the Trust are listed in
the Underwriting Account (see "Underwriting Account" in Part A). It is the
Underwriters' intention to qualify Units of the Trust for sale in certain of the
states and to effect a public distribution of the Units solely through their own
organizations. However, Units may be sold to dealers who are members of the
National Association of Securities Dealers, Inc. at prices which represent a
concession equal to $32.00 per Unit from the related Public Offering Price
applicable to sales of fewer than 500 Units subject in each case to change from
time to time by the Agent for the Sponsors. Any volume discount (see "Offering
Price" in Part B) offered to investors will be borne by the selling Underwriter
or dealer except that, during the initial public offering period, the Sponsors
may pay the selling Underwriter or dealer $2.50 per Unit for individual sales of
more than 500 Units.
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.
Underwriters and broker-dealers of the Trust, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsors a nominal award for each of their registered representatives who have
sold a minimum number of units of unit investment trusts created by the Sponsors
during a specified time period. In addition, at various times the Sponsors may
implement other programs under which the sales forces of Underwriters, brokers,
dealers, banks and/or others may be eligible to win other nominal awards for
certain sales efforts, or under which the Sponsors will reallow to any such
Underwriters, brokers, dealers, banks and/or others that sponsor sales contests
or recognition programs conforming to criteria established by the Sponsors, or
participate in sales programs sponsored by the Sponsors, an amount not exceeding
the total applicable sales charges on the sales generated by such person at the
public offering price during such programs. Also, the Sponsors in their
discretion may from time to time, pursuant to objective criteria established by
the Sponsors, pay fees to qualifying Underwriters, brokers, dealers, banks
and/or others for certain services or activities which are primarily intended to
result in sales of Units of the Trust. Such payments are made by the Sponsors
out of their own assets and not out of the assets of the Trust. These programs
will not change the price Unit holders pay for their Units or the amount that
the Trust will receive from the Units sold.
Sponsors' and Underwriters' Profits. As set forth under "Public
Offering--Offering Price" in Part B, the Underwriters will receive gross
commissions equal to the specified percentages of the Public Offering Price of
the Units of the Trust. The Sponsors will receive from the Underwriters the
excess of such gross sales commission over $35 per Unit from Underwriters
underwriting 100 to 249 Units, will receive the excess over $36 per Unit from
Underwriters underwriting 250 to 499 Units, will receive the excess over $37 per
Unit from Underwriters underwriting 500 to 749 Units, will receive the excess
over $38 per Unit from Underwriters underwriting 750 to 999 Units, will receive
the excess over $39 per Unit from Underwriters underwriting 1,000 or more Units
and will receive the excess over $40 per Unit from Underwriters who underwrite
15% or more of the Units of the Trust. In addition, the Sponsors may, during the
initial public offering period, pay any Underwriter an additional $2.50 per Unit
for sales to individual purchasers of 500 or more Units. The Sponsors may also
from time to time pay, in addition to the amounts referenced above, an
additional concession, in the form of cash or other compensation, any
Underwriter who underwrites or sells, during a specific period, minimum dollar
amounts of the Units of the Trust. In no event will such additional concession
paid by the Sponsors to the Underwriter exceed the difference between the sales
charge and the Underwriter's allowance in respect of Units underwritten by the
Underwriter. Such Units then may be distributed to the public by the dealers at
the Public Offering Price then in effect.
In addition, the Sponsors realize a profit or sustain a loss, as the case
may be, in the amount of any difference between the cost of the Securities to
the Trust (which is based on the aggregate offering price of the Securities on
the Date of Deposit) and the purchase price of such Securities to the Sponsors
(which is the cost of such Securities at the time they were acquired for the
account of the Trust). The Underwriters share in the profits, if any, described
in the preceding sentence. See "Summary of Essential Financial Information" in
Part A. In addition, the Sponsors may realize profits or sustain losses with
respect to Bonds deposited in the Trust which were acquired from one or more of
the Sponsors or from underwriting syndicates of which they were members. During
the initial offering period, the Underwriters also may realize profits or
sustain losses as a result of fluctuations after the Date of Deposit in the
offering prices of the Securities and hence in the Public Offering Price
received by the Underwriters for Units. Cash, if any, made available to the
Sponsors prior to the settlement date for the purchase of Units of the Trust may
be used in the Sponsors' businesses, subject to the limitations of the
Securities Exchange Act of 1934 and may be of benefit to the Sponsors.
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The Sponsors may have participated as underwriters or as managers or
members of underwriting syndicates from which some of the aggregate principal
amount of the Bonds were acquired for the Trust in the amounts set forth in Part
A. The Sponsors have not purchased any of the Securities in the Trust from their
managed accounts.
In maintaining a market for the Units of the Trust (see "Market for Units")
the Sponsors and Underwriters will also 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 or redeem such Units and to the extent 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, each as
of the business day prior to the Date of Deposit, is set forth under "Summary of
Essential Financial Information " in Part A. Information regarding the estimated
monthly distributions of principal and interest to Unit holders of the Trust is
available from the Sponsors on request.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price. Estimated Net Annual
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 on 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 A 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 the Bonds in the
Trust 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 A 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. The insurance obtained by the Trust
from the MBIA Insurance Corporation is only effective as to Bonds owned by and
held in the Trust and, consequently, does not cover Bonds for which the contract
for purchase fails. A "when issued" Bond will be covered under the MBIA
Insurance Corporation policy upon the settlement date of the issue of such "when
issued" Bond. The MBIA Insurance Corporation policy shall continue in force only
with respect to Bonds held in and owned by the Trust, and 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 standards which generally correspond to the standards it has
established for determining the insurability of new issues of municipal bonds.
See "Notes to Portfolio" in Part A of this Prospectus.
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By the terms of its policy, the Insurer will unconditionally guarantee 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. No
representation is made as to the ability of the insurer to meet its commitments.
Except as provided below with respect to issues of 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. Except as provided below,
the MBIA Insurance Corporation policy does not guarantee payment on an
accelerated basis, the payment of any redemption premium or the value of the
Units of the Trust. The MBIA Insurance Corporation policy also does 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. However, with respect to small issue industrial
development Bonds and pollution control revenue Bonds covered by the policy, the
Insurer guarantees any accelerated 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 MBIA Insurance
Corporation policy 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.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. If an
issue is accepted for MBIA Insurance Corporation insurance, a non-cancelable
policy for the payment of interest on and principal of the bonds is issued by
the Insurer. 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 also MBIA Insurance Corporation Preinsured Bonds or Municipal Bond
Insurance Association Pre-insured Bonds. No premium will be paid by the Trust
for the insurance it obtains from the Insurer on Bonds that are also MBIA
Insurance Corporation Pre-insured Bonds or Municipal Bond Insurance Association
Pre-insured Bonds.
The MBIA Insurance Corporation insurance policy 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 MBIA Insurance Corporation 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 MBIA Insurance Corporation policy shall terminate as to any Bond which
has been redeemed from the Trust 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, the MBIA Insurance Corporation
policy will terminate as to such Bond on the business day next succeeding such
date of payment. The termination of the MBIA Insurance Corporation policy as to
any Bond shall not affect the Insurer's obligations regarding any other Bond in
the Trust or any other trust which has obtained a MBIA Insurance Corporation
insurance policy. The MBIA Insurance Corporation policy 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 Bond) (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 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 were sold on an uninsured basis.
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The Permanent Insurance premium with respect to each Bond in the Trust 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. See the footnotes to the "Summary of Essential Financial
Information" in Part A for the Trust for the cost of Permanent Insurance as of
the Date of Deposit.
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. The value of the
insurance will be equal to the difference between (i) the market value of a Bond
which is in default in payment of principal or interest or in significant risk
of such 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 (ii) the market value of such Bonds not
covered by Permanent Insurance. See "Public Offering--Offering Price" in this
Part B for a more complete description of the Evaluator's method of valuing
defaulted Bonds and Bonds which have a significant risk of default. Insurance
obtained by the issuer of a Bond or by parties other than the Trust is effective
so long as such Pre-insured Bond is outstanding and the insurer of such
Preinsured 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 the Insurer 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, State Street Bank and Trust Company, N.A., New
York, New York (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 (i) evidence of the Trust's right to receive
payment of such principal and interest and (ii) 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.
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.
Battle Fowler LLP, special counsel for the Sponsors, have rendered an
opinion to the effect that the payment of proceeds from the insurance will be
excludible from Federal gross income if, and to the same extent as, such
interest would have been so excludible if paid by the issuer of the defaulted
obligations. See "Tax Status" in this Part B.
The contract of insurance relating to the Trust, certain agreements
relating to the Permanent Insurance and the negotiations in respect thereof
represent the only significant relationship between the Insurer and 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 the
Insurer's parent company, MBIA Inc. Although all issues contained in the Trust
are individually insured, neither the Trust, the Units nor the portfolio is
insured directly or indirectly by the Insurer.
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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 Preinsured 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. In selecting Pre-insured Bonds for the portfolio of the Trust, the
Sponsors have applied the criteria hereinbefore described.
Because the Securities in the Trust are insured by MBIA Insurance
Corporation as to the payment of principal and interest, Standard & Poor's has
assigned its "AAA" investment rating to the Units and Bonds in the Trust and
Moody's has assigned a rating of "Aaa" to all of the Bonds in the Trust, as
insured. See "Notes to Portfolio" in Part A. These ratings apply to the Bonds
only while they are held in the Trust. Also, these ratings reflect Standard &
Poor's and Moody's current assessments of the creditworthiness of the Insurer
and their ability to pay claims on their policies of insurance. 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.
For additional information concerning the Insurer, see "The Insurer" in
Part A.
TAX STATUS
Interest income on the Bonds contained in the portfolio of the Trust is, in
the opinion of bond counsel to the issuing governmental authorities, which
opinion was rendered at the time of original issuance of the Bonds, excludible
from gross income under the Code. See "The Trust" in Part A.
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on
a sale or redemption of a Unit is, however, includible in gross income as
capital gain (or loss) for Federal, state and local income tax purposes,
assuming that the Units is held as a capital asset. Such gain (or loss), which
may be long-, mid- or short-term depending on the holding period of the Bonds,
does not include any amount received in respect of accrued interest or any
accrued original issue discount or accrued market discount. Bonds selling at a
market discount tend to increase in market value as they approach maturity, when
the principal amount is payable, thus increasing the potential for taxable gain
(or reducing the potential for loss) on their redemption, maturity or sale. 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. Long-term capital gains realized by non-corporate Units holders
will be taxed at a maximum federal income tax rate of 28% (or 20%, if the asset
has been held for more than 18 months), while ordinary income received by
non-corporate 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 of capital losses of non-corporate Unit holders
($1,500 in the case of married individuals filing separate returns) may be
deducted against ordinary income. Since the proceeds from sales of Bonds, under
certain circumstances, may not be distributed pro-rata, the Unit holder's
taxable income for any year may exceed their actual cash distributions in that
year. Pending legislation would generally elimiate the 18 month holding
requirement, and provide generally that long-term capital gains of non-corporate
taxpayers will be taxed at a maximum federal income tax rate of 20%.
In the opinion of Battle Fowler LLP, special counsel for the Sponsors,
under existing law:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and interest on the Bonds that is excludible from
Federal gross income under the Code when received by the Trust will be
excludible from the Federal gross income of the Unit holders of the Trust.
Any proceeds paid under the insurance policy described above issued to the
Trust with respect to the Bonds and any proceeds paid under individual
policies obtained by issuers of Bonds or other parties which represent
maturing interest on defaulted obligations held by the Trust will be
excludible from Federal gross income if, and to the same extent as, such
interest would have been so excludible if paid in the normal course by the
issuer of the defaulted obligations.
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Each Unit holder will be considered the owner of a pro rata portion of
the Bonds and any other assets held in the Trust under the grantor trust
rules of Code Sections 671-679. Each Unit holder will be considered to have
received its pro rata share of income from Bonds held by the Trust on
receipt (or earlier accrual, depending on the Unit holder's method of
accounting and depending on the existence of any original issue discount)
by the Trust, and each Unit holder will have a taxable event when an
underlying Bond is disposed of (whether by sale, redemption, or payment at
maturity) or when the Unit holder redeems or sells its Units. Gain from a
sale will be treated as short term or long term capital gain, depending on
the Unit holder's holding period for its Units and the Trust's holding
period for the Bonds, assuming that the Unit holder holds the Unit as a
capital asset. The total tax basis (i.e., cost) of each Unit to a Unit
holder is allocated among each of the Bonds held in the Trust (in
accordance with the proportion of the Trust comprised by each such Bond) in
order to determine its per Unit tax basis for each Bond, and the tax basis
reduction requirements of the Code relating to amortization of bond premium
will apply separately to the per Unit cost of each such Bond. Therefore,
under some circumstances, a Unit holder may realize taxable gain when its
Units are sold or redeemed for an amount equal to its original cost. No
deduction is allowed for the amortization of bond premium on tax-exempt
bonds such as the Bonds. None of the interest received from the portfolio
is subject to the alternative minimum tax for individuals; however, some or
all of the interest received from the portfolio may be includible in the
calculation of a corporation's alternative minimum tax.
For Federal income tax purposes, when a Bond is sold, a Unit holder
may exclude from its share of the amount received any amount that
represents accrued interest or accrued original issue discount but may not
exclude amounts attributable to market discount. Thus, when a Bond is sold
by the Trust, taxable gain or loss will equal the difference between (i)
the amount received (excluding the portion representing accrued interest)
and accrued original issue discount and (ii) the adjusted basis (including
any accrued original issue discount, limited in the case of Bonds issued
after June 8, 1980 to the portion earned from the date of acquisition, as
discussed below). In the case of Bonds acquired at a market discount, gain
will be treated as ordinary income to the extent of accrued market
discount.
A Unit holder may also realize taxable gain or loss when a Unit is
sold or redeemed. Taxable gain will result if a Unit is sold or redeemed
for an amount greater than its adjusted basis to the Unit holder. The
amount received when a Unit is sold or redeemed is allocated among all the
Bonds in the Trust in the same manner as when the Trust disposes of Bonds,
and the Unit holder may exclude accrued interest, including the earned
portion of any original issue discount, but not amounts attributable to
market discount. In the case of Bonds acquired at a market discount, gain
will be treated as ordinary income to the extent of accrued market
discount. The return of a Unit holder's tax basis is otherwise a tax-free
return of capital.
If the Trust purchases any units of a previously issued series then,
based on the opinion of counsel with respect to such series, the Trust's
pro rata ownership interest in the bonds of such series (or any previously
issued series) will be treated as though it were owned directly by the
Trust.
Under the income tax laws of the State and City of New York, the Trust
is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unit holders.
A Unit holder who is a non-resident of New York will not be subject to
New York State or City income tax on any interest or gain derived from its
interest in the Trust's assets or upon any gain from the sale of its Units
except to the extent that such interest or gain is from property employed
in a business, trade, profession or occupation carried on in the State of
New York. An individual Unit holder who resides in New York State or City
will not be subject to State or City tax on interest income derived from
the Bonds held in the Trust (except in certain limited circumstances),
although it will be subject to New York State and, depending upon its place
of residence, City tax with respect to any gains realized when Bonds are
sold, redeemed or paid at maturity or when any such Units are sold or
redeemed. In addition, an individual Unit holder residing in New York State
or City will not be subject to State or City income tax on any proceeds
paid under the insurance policy or policies described above with respect to
the Trust which represent maturing interest on defaulted obligations held
by the Trustee if, and to the same extent as, such interest would have been
so excludible if paid by the issuer of the defaulted obligations. A New
York State or City resident should determine its basis and holding period
for his Units for New York State and City tax purposes in the same manner
as for Federal tax purposes.
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The above opinion of Battle Fowler LLP as to the tax status of the Trust is
not affected by the provision of the Trust Agreement that authorizes the
acquisition of Replacement Bonds or by the implementation of the option
automatically to reinvest principal and interest distributions from the Trust
pursuant to the Automatic Accumulation Plan, described under "Automatic
Accumulation Account" in this Part B.
Among other things, the Code provides for the following: (1) interest on
certain private activity bonds issued after August 7, 1986 is included in the
calculation of the individual's alternative minimum tax (currently taxed at a
rate of up to 28%); none of the Bonds in the Trust is a Private Activity Bond
the interest on which is subject to the alternative minimum tax; (2) interest on
certain Private Activity Bonds issued after August 7, 1986 is included in the
calculation of the corporate alternative minimum tax and 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.
Interest on the Bonds is includible in the adjusted current earnings of a
corporation for purposes of such alternative minimum tax. The Code does not
otherwise require corporations, and does not require taxpayers other than
corporations, including individuals, to treat interest on the Bonds as an item
of tax preference in computing an alternative minimum tax; (3) subject to
certain exceptions, no financial institution is allowed a deduction for that
portion of the institution's interest expense 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 on U.S.
branches of foreign corporations is implemented 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 includible 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 $25,000 for an individual, $32,000 for a married
couple filing a joint return and zero for married persons filing separate
returns. Under Section 86 of the Code, interest on tax-exempt bonds is to be
added to adjusted gross income for purposes of determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax.
In addition, certain "S Corporations", with accumulated earnings and
profits from Subchapter C years, may be subject to minimum tax on excess passive
income, including tax-exempt interest, such as 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 interest
thereon from regular Federal income tax were or (with respect to "when 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.
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 are applicable for purposes of state and local
taxation.
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, 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 his Units. For Bonds issued after June 9,
1980 that are redeemed prior to maturity, the difference between the Trust's
basis, as adjusted, and the amount received will be taxable gain or loss to the
Unit holders.
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Unit holders should consult their own tax advisors with respect to the
state and local tax consequences of owning original issue discount bonds. It is
possible that under applicable provisions governing determination of such state
and local taxes, interest on tax-exempt bonds such as any Bonds issued with
original issue discount may be deemed to be received in the year of accrual even
though there is no corresponding cash payment.
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 its 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.
Bond premium must be amortized under the method the Unit holder regularly
employs for amortizing bond premium (assuming such method is reasonable). With
respect to a callable bond, the premium must be computed with respect to the
call price and be amortized to the first call date (and successively to later
call dates based on the call prices for those dates).
In the case of Bonds that are private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on such
Bonds is exempt from regular federal income tax. However, interest on such Bonds
will not be exempt from regular 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 by a "related person" thereof within the meaning of
the Code. Therefore, interest on any such Bonds allocable to a Unit holder who
is such a "substantial user" or "related person" thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the "small issue" exemption,
the "small issue" exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding
tax-exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities was determined to
have exceeded $40,000,000 on the date of issue. In the case of Bonds issued
under the $10,000,000 "small issue" exemption, interest on such Bonds will
become taxable if the face amount of the Bonds plus certain capital expenditures
exceeds $10,000,000 within 3 years of the date of issue of such Bonds.
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 activity 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.
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 SUCH
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, including proposals for a "flat tax" or
"consumption tax", 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.
The Revenue Reconciliation Act of 1993 increases maximum marginal tax rates
for individuals and corporations, extends the authority to issue certain
categories of tax-exempt bonds (qualified small issue bonds and qualified
mortgage bonds), expands a category of qualified tax-exempt bonds (bonds for
high-speed intercity rail facilities), limits the
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availability of capital gain treatment for tax-exempt bonds purchased at a
market discount, and makes a variety of other changes. Prospective investors are
urged to consult their own tax advisors as to the effect of this Act on a
possible investment in the Trust.
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 exemption from
taxation 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.
RIGHTS OF UNIT HOLDERS
Certificates. Ownership of Units of the Trust 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 A, "Rights of Unit Holders--Expenses
and Charges" and "Rights of Unit Holders--Redemption" in Part B.
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 (other than amounts representing failed contracts as previously
discussed) 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 A. 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. See
"Summary of Essential Financial Information" in Part A. Persons who purchase
Units between a Record Date and a Distribution Date will receive their
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first distribution on the second Distribution Date following their purchase of
Units under the applicable plan of distribution.
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.
Purchasers of Units who desire to receive distributions on a monthly basis
may elect to do so at the time of purchase during the initial public offering
period. Those indicating no choice will be deemed to have chosen the semi-annual
distribution plan. Record dates for monthly distributions will be the fifteenth
day of the preceding month and record dates for semi-annual distributions will
be the fifteenth day of May and November.
Details of estimated interest distributions under the payment plans, on a
per Unit basis, appear in the footnotes to the "Summary of Essential Financial
Information" in Part A.
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 his 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" in
Part B.
The Trustee will, as of the fifteenth day of each month, 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 "Rights of Unit Holders--Expenses and Charges" in
Part B. 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" in Part B. 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 order to eliminate fluctuations in monthly interest distributions
resulting from such variances during the first year of the Trust, the Trustee is
required by the Trust Agreement to advance such amounts as may be necessary to
provide monthly interest distributions of approximately equal amounts. In
addition, the Trustee has agreed to advance sufficient funds to the Trust in
order to reduce the amount of time before monthly distributions of interest to
Unit holders commence. The Trustee will be reimbursed, without interest, for any
such advances from funds available from the Interest Account of the Trust. The
Trustee's fee takes into account the costs attributable to the outlay of capital
needed to make such advances.
In order to acquire certain of the Securities subject to contract, it may
be necessary to pay on the settlement dates for delivery of such Securities
amounts covering accrued interest on such Securities which exceed the amounts
paid by Unit holders (which excess will be made available under a letter of
credit furnished by the Sponsors on the Date of Deposit). The Trustee has agreed
to pay for any amounts necessary to cover any such excess and will be reimbursed
therefor (without interest) when funds become available from interest payments
on the particular Securities with respect to which such payments may have been
made. Also, since interest on such Securities in the portfolio of the Trust (see
"The Portfolio" in Part A) does not begin accruing as tax-exempt interest income
to the benefit of Unit holders until such Bonds' respective dates of delivery
(accrued interest prior to delivery being treated under the Code as a return of
principal), the Trustee will, in order to cover interest treated as a return of
principal, adjust its fee downward in an
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amount equal to the amount of interest that would have so accrued as tax-exempt
interest (if not treated as a return of principal) on such Securities between
the date of settlement for the Units and such dates of delivery.
In addition, because of the varying interest payment dates of the
Securities comprising the Trust portfolio, accrued interest at any point in
time, subsequent to the recovery of any advancements of interest made by the
Trustee, 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 his Units he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his Units.
Similarly, if a Unit holder redeems all or a portion of his 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.
Expenses and Charges. Initial Expenses. Investors will bear all or a portion of
the incurred in organizing the Trust -- including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the SEC and the states and the initial audit of the
Trust's portfolios costs. During the initial public offering period only, a pro
rata portion of such organization will be charged upon the investor's purchase
of Units.
Fees. The Trustee's, Sponsors' and Evaluator's fees are set forth under the
"Summary of Essential Financial Information" in Part A. The Sponsors' fee, 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 under the "Summary of Essential
Financial Information" for the Trust, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount the Sponsors receive 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" for the Trust; provided, however, that such fees may be adjusted as
set forth under the "Summary of Essential Financial Information". 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" in Part B.
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" in Part B.
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"; except no such increase in the
Trustee's fee will be so made for the sole purpose of making up any downward
adjustment therein as described in "Summary of Essential Financial Information".
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.
Insurance Premiums. The cost of the MBIA Insurance Corporation insurance
obtained by the Trust, based on the aggregate amount of Bonds in the Trust as of
the Date of Deposit, is set forth in the "Summary of Essential Financial
Information". Premiums, which are obligations of the Trust, are payable monthly
by the Trustee on behalf of the Trust. As Securities in the portfolio 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 Insurance
Corporation Pre-insured Bonds or Municipal Bond Insurance Association
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 the Trustee exercises the right to obtain Permanent
Insurance on such Bond.
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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 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, purchase of Replacement Bonds, 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 of the Trust, certificates issued or held, a current list of Securities
in 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 cancelled.
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" in Part B). 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.
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Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto, the
Unit holder will be entitled to receive in cash an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the "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 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 "Rights of Unit Holders--Redemption--Purchase by the
Sponsors of Units Tendered for Redemption" in Part B.
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
in the Trust, 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 MBIA Insurance Corporation 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 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" in Part B 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, 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 Trust 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.
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, while the Public Offering Price of Units during the initial offering
period is determined on the basis of the offering prices of the Securities, both
as of the Evaluation Time on the day any such determination is made. The bid
prices of the Securities may be expected to be less than the offering prices.
This 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 (other than cash
covering contracts to purchase Securities), 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 (1) on the basis of current bid prices for the
Securities, (2) if bid prices are not available for any Securities,
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on the basis of current bid prices for comparable bonds, (3) by appraisal, or
(4) 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--Offering Price" in this
Part B.
The difference between the bid and offering prices of the Securities may be
expected to average 1 1/2% of face amount. In the case of actively traded bonds,
the difference may be as little as 1/2 of 1%, and in the case of inactively
traded bonds such difference usually will not exceed 3%. On the business day
prior to the date of this Prospectus, the aggregate bid side evaluation was
lower than the aggregate offering side evaluation by the amount set forth in the
footnotes to the "Portfolio". For this reason, among others, the price at which
Units may be redeemed could be less than the price paid by the Unit holder. On
the Date of Deposit the aggregate current offering price of such Securities per
Unit exceeded the bid price of such Securities per Unit by the amount set forth
under "Summary of Essential Financial Information".
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--Offering Price--Market for Units" in this Part B). 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" in Part B). 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 (see "Public Offering--Sponsors' and Underwriters'
Profits" in this Part B).
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 "Exchange Trusts") are offering Unit
holders of the Exchange Trusts for which the Sponsors are maintaining a
secondary market an option to exchange a Unit of any series of the Exchange
Trusts for a Unit of a different series of the Exchange Trusts 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--Offering Price--Markets
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 his 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 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
his Units without further instructions from the Unit holder.
Unit holders are urged to consult their own 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 Federal income tax, New York State and New
York City 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 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 and/or New York City income taxes, 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 adviser 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 Participant by the Plan Agent
indicating distributions and shares (or fractions thereof) of the Empire Builder
purchased on his 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 his participation in the Plan and receive future
distributions on his 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, return the enclosed
card for a copy of the Empire Builder Prospectus. 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 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, AA, 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 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 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 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 his 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
his participation in the Plan and receive future distributions on his 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 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, return the enclosed card for a copy of the Bond Fund Prospectus.
Read it carefully before you decide to participate.
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SPONSORS
Glickenhaus and Lebenthal are the Sponsors of Empire State Municipal Exempt
Trust, Series 10 and all subsequent 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.
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 67 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 of 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.
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, gross negligence or reckless disregard for their
obligations and duties. See "The Trust--Portfolio" and "Sponsors-Responsibility"
in Part B.
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 are
not 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 the Trustee does
not exercise the right to obtain Permanent Insurance on a Defaulted Bond or
Bonds in the Trust, 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 Trust 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. In the event the
Trustee does not exercise the right 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" in Part B. The Sponsors are empowered, but not obligated,
to direct the Trustee to dispose of Bonds in the event of advanced 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 in 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 and in the discussion under "The
Trust--General Considerations" in Part B regarding the
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substitution of Replacement Bonds for Failed Bonds, 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 "Insurance on the Bonds" in Part B.
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
the Trust would be detrimental to the interest of the Unit holders. The proceeds
from any such sales will be credited to the Principal Account 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 prior to December 31, 2045, with respect to the Trust, it 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 in the Trust 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 in the Trust 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").
Agent for Sponsors. The Sponsor named as Agent for Sponsors under "Summary of
Essential Financial Information" has been appointed by the other Sponsors as
agent for purposes of taking action under the Trust Agreement. 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 Sponsors act 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 each 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.
For financial information regarding the Sponsors see "Sponsors" in Part A.
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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. 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
banking corporation organized under the laws of the United States or any state
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. The duties of the Trustee are primarily ministerial in
nature. The Trustee did not participate in the selection of Securities for 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
monies, 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 "Portfolio" in Part A.
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"
in this Part B.
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 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.
EVALUATOR
Both during and after the initial offering period, the Evaluator shall be
Muller Data Corporation ("Muller Data"), a New York corporation with main
offices located at 395 Hudson Street, New York, New York 10014. Muller Data 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 Unit holders for errors in judgement. But 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" in Part B.
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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 the 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 each Trust Agreement. In
the event of any amendment, the Trustee is obligated to notify promptly all Unit
holders of the substance of such amendment.
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 hereof, whichever is lower, at which time the Trust may be
terminated (i) by the consent of 66 2/3% of the Units or (ii) by the Trustee;
provided, however, that upon affirmative written notice to the Sponsors and the
holders at least 33 1/3% of the Units may 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 A; provided, however, that prior to such
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. 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 his certificate for Units, his pro rata share of the balances
remaining in the Interest and Principal Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters will be passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsors, and
Winston & Strawn,100 Park Avenue, New York, New York 10166, acting as counsel
for the Trustee.
AUDITORS
The statement of condition of the Trust included in this Prospectus has
been audited by BDO Seidman, LLP, independent certified public accountants, as
stated in their report appearing herein, and has been so included in reliance
upon such report given upon the authority of that firm as experts in accounting
and auditing.
DESCRIPTION OF BOND RATINGS
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. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information or for other circumstances.
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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 upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to such
likelihood and risk.
NR--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 Investors Service 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 of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
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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.
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 are
bonds secured by: (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. 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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PROSPECTUS--Part C:
Note: Part C of this Prospectus may not be distributed unless accompanied by
Parts A and B.
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. Manufacturing activity in the City is conducted primarily in
apparel and printing.
For each of the 1981 through 1997 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
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-
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closing programs for years with projected budget gaps. The City's current
financial plan projects a surplus in each of the 1998 and 1999 fiscal years,
before discretionary transfers, and budget gaps for each of the 2000, 2001 and
2002 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 State budgets will
be adopted by the April 1 statutory deadline, or interim appropriations 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 1999 through 2002
fiscal years (the "1999-2002 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 financing
program for fiscal years 1999 through 2002 contemplates the issuance of $5.2
billion of general obligation bonds and $5.4 billion of bonds to be issued by
the New York City Transitional Finance Authority (the "Finance Authority") to
finance City capital projects. The Finance Authority was created as part of the
City's effort to assist in 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 bonds and notes, New York City Municipal Water
Finance Authority ("Water Authority") bonds and Finance Authority bonds will be
subject to prevailing market conditions. The City's planned capital and
operating expenditures are dependent upon the sale of its general obligation
bonds and notes, and the Water Authority and Finance Authority 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.
For the 1997 fiscal year, the City had an operating surplus,
before discretionary transfers, and achieved balanced operating results, after
discretionary transfers, in accordance with GAAP. The 1997 fiscal year is the
seventeenth year that the City has achieved an operating surplus, before
discretionary transfers, and balanced operating results, after discretionary
transfers. The most recent quarterly modification to the City's financial plan
for the 1998 fiscal year, submitted to the Control Board on April 30, 1998 (the
"1998 Modification"), projects a balanced budget in accordance with GAAP for the
1998 fiscal year.
On April 24, 1998, the City released the Financial Plan for
the 1999 through 2002 fiscal years, which relates to the City and certain
entities which receive funds from the City, and which is based on the Executive
Budget and Budget Message for the City's 1999 fiscal year (the "Executive
Budget"). The Financial Plan is consistent with the Executive Budget and has not
been revised to reflect changes subsequent to the date of the Financial Plan.
The Executive Budget and Financial Plan project revenues and expenditures for
the 1999 fiscal year balanced in accordance
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<PAGE>
with GAAP, and project gaps of $1.5 billion, $2.1 billion and $1.6 billion for
the 2000, 2001 and 2002 fiscal years, respectively.
Changes since the June Financial Plan include: (i) an increase
in projected tax revenues of $1.3 billion, $1.1 billion, $955 million, $897
million and $1.7 billion in the 1998 through 2002 fiscal years, respectively;
(ii) a reduction in assumed State aid of $283 million in the 1998 fiscal year
and of between $134 million and $142 million in each of the 1999 through 2002
fiscal years, reflecting the adopted budget for the State's 1998 fiscal year;
(iii) a delay in the assumed collection of $350 million of projected rent
payments for the City's airports in the 1999 fiscal year to fiscal years 2000
through 2002; (iv) a reduction in projected debt service expenditures totaling
$197 million, $361 million, $204 million and $226 million in the 1998 through
2001 fiscal years, respectively; (v) an increase in the Board of Education (the
"BOE") spending of $266 million, $26 million, $58 million and $193 million in
the 1999 through 2002 fiscal years, respectively; (vi) an increase in
expenditures for the City's proposed drug initiatives totaling $68 million in
the 1998 fiscal year and of between $167 million and $193 million in each of the
1999 through 2002 fiscal years; (vii) other agency net spending initiatives
totaling $112 million, $443 million, $281 million, $273 million and $677 million
in fiscal years 1998 through 2002, respectively; and (viii) reduced pension
costs of $116 million, $168 million and $404 million in fiscal years 2000
through 2002, respectively. The Financial Plan also sets forth gap-closing
actions for the 1998 through 2002 fiscal years, which include: (i) additional
agency actions totaling $176 million, $595 million, $516 million, $494 million
and $552 million in fiscal years 1998 through 2002, respectively, and (ii)
assumed additional Federal and State aid of $100 million in each of fiscal years
1999 through 2002.
The 1998 Modification and the 1999-2002 Financial Plan include
a proposed discretionary transfer in the 1998 fiscal year of approximately $2.0
billion to pay debt service due in the 1999 fiscal year, and a proposed
discretionary transfer in the 1999 fiscal year of $416 million to pay debt
service due in fiscal year 2000, included in the Budget Stabilization Accounts
for the 1998 and 1999 fiscal years, respectively. In addition, the Financial
Plan reflects proposed tax reduction programs totaling $237 million, $537
million, $657 million and $666 million in fiscal years 1999 through 2002,
respectively, including the elimination of the City sales tax on all clothing as
of December 1, 1999, a City-funded acceleration of the State funded personal
income tax reduction for the 1999 through 2001 fiscal years, the extension of
current tax reductions for owners of cooperative and condominium apartments
starting in fiscal year 2000 and a personal income tax credit for child care and
for resident holders of Subchapter S corporations, which are subject to State
legislative approval, and reduction of the commercial rent tax commencing in
fiscal year 2000.
The Financial Plan assumes (i) approval by the Governor and
the State Legislature of the extension of the 14% personal income tax surcharge,
which is scheduled to expire on December 31, 1999, and the extension of which is
projected to provide revenue of $172 million, $500 million and $514 million in
the 2000, 2001 and 2002 fiscal years, respectively, and of the extension of the
12.5% personal income tax surcharge, which is scheduled to expire on December
31, 1998, and the extension of which is projected to provide revenue of $201
million, $546 million, $568 million and $593 million in the 1999 through 2002
fiscal years, respectively; (ii) collection of the projected rent payments for
the City's airports, totaling $15 million, $365 million, $155 million and $185
million in the 1999 through 2002 fiscal years, respectively, which may depend on
the successful completion of negotiations with The Port Authority of New York
and New Jersey (the "Port Authority") or the enforcement of the City's rights
under the existing leases through pending legal actions; and (iii) State
approval of the repeal of the Wicks Law relating to contracting requirements for
City construction projects and the additional State funding assumed in the
Financial Plan and State and Federal approval of the State and Federal
gap-Closing actions assumed in the Financial Plan. 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.
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<PAGE>
On June 5, 1998, the City Council adopted a budget which
re-allocated expenditures from those provided in the Executive Budget in the
amount of $409 million. The re-allocated expenditures, which include $116
million from the Budget Stabilization Account, $82 million from debt service,
$45 million from pension contributions, $54 million from social services
spending and $112 million from other spending, were re-allocated to uses set
forth in the City Council's adopted budget. Such uses include a revised tax
reduction program at a revenue cost in the 1999 fiscal year of $45 million,
additional expenditures for various programs of $199 million and provision of
$165 million to retire high interest debt. The revised tax reduction program in
the City Council's adopted budget assumes the expiration of the 12.5% personal
income tax surcharge, rather than the implementation of the personal income tax
reduction program proposed in the Executive Budget. The changes reflected in the
City Council's adopted budget would increase the gaps forecast between revenues
and expenditures in the future years of the Financial Plan.
On June 5, 1998, in accordance with the City Charter, the
Mayor certified to the City Council revised estimates of the City's revenues
(other than property tax) for fiscal year 1999. Consistent with this
certification, the property tax levy was estimated by the Mayor to require an
increase to realize sufficient revenue from this source to produce a balanced
budget within generally accepted accounting principles. On June 8, 1998, the
City Council adopted a property tax levy that was $237.7 million lower than the
levy estimated to be required by the Mayor. The City Council, however,
maintained that the revenue to be derived from the levy it adopted would be
sufficient to achieve a balanced budget because the property tax reserve for
uncollectibles could be reduced. Property tax bills for fiscal year 1999 are
expected to be mailed in the near future by the City's Department of Finance at
the rates adopted by the City Council for fiscal year 1998, subject to later
adjustment.
On July 10, 1995, Standard & Poor's revised its rating of City
bonds downward to BBB+. On February 3, 1998, Standard & Poor's placed its BBB+
rating of City bonds on CreditWatch with positive implications. Moody's rating
of City bonds was revised in February 1998 to A3 from Baa1. Moody's, Standard &
Poor's and Fitch currently rate the City's outstanding general obligation bonds
A3, BBB+ and A-, respectively.
New York State and its Authorities. The State currently
projects that it will end its 1997-1998 fiscal year balanced on a cash basis,
with a reported surplus of $2.04 billion resulting from revenue growth and lower
than expected entitlement spending. The Governor presented his 1998-1999
Executive Budget to the Legislature on January 20, 1998. The Governor's
Executive Budget, as amended on February 13, 1998, projected balance on a cash
basis in the General Fund. The Legislature passed a State budget for the
1998-1999 fiscal year on April 14, 1998, and on April 26, 1998 the Governor
vetoed certain of the increased spending in the State budget passed by the
Legislature.
The Executive Budget, as amended, contains projections of a
potential imbalance in the 1999-2000 fiscal year of $1.66 billion and in the
2000-2001 fiscal year of $3.72 billion, assuming implementation of the 1998-1999
Executive Budget recommendations and implementation of $600 million and $800
million of unspecified efficiency initiatives and other actions in the 1999-2000
and 2000-2001 fiscal years, respectively. The Executive Budget stated that the
assumed unspecified efficiency initiatives and other actions for such fiscal
years are comparable with reductions over the past several years, and that the
Governor plans to make additional proposals to limit State spending and to take
such other actions as are necessary in order to address any potential remaining
gap. As a result of the budget passed by the State Legislature and the
subsequent vetoes by the Governor, the potential imbalance in the 1999-2000
fiscal year is expected to be somewhat less than projected in the Executive
Budget. The projections in the Executive Budget reflect constant law income tax
liability growth of approximately 5.3% and sales tax growth averaging slightly
less than 5%, while business tax receipts are projected to rise slowly over the
two years. The Executive Budget identifies various risks, including either a
financial market or broader economic correction during the period, which risks
are heightened by the relatively lengthy expansion currently underway, and the
financial turmoil in Asia. In addition, the Executive
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<PAGE>
Budget notes that a normal forecast error of one percentage point in the
expected growth rate could raise or lower receipts by over $1 billion by the
last year of the projection period, and that funding is not included for any
costs associated with new collective bargaining agreements after the expiration
of the current contracts at the end of the 1998- 1999 fiscal year.
The 1997-1998 adopted State budget and the 1998-1999 Executive
Budget include multi-year tax reductions, including a State funded property and
local income tax reduction program, estate tax relief, utility gross receipts
tax reductions, permanent reductions in the State sales tax on clothing, and
elimination of assessments on medical providers. The various elements of the
State and local tax and assessment reductions have little or no impact on the
1997-1998 State Financial Plan, but reduce projected revenues by greater than
$3.0 billion in the 2000-2001 fiscal year.
On February 3,1998, the New York State Comptroller issued a
report which noted that a significant cause for concern is the budget gaps in
the 1999-2000 and 2000-2001 fiscal years, which the State Comptroller projected
at $2.6 billion and $4.8 billion, respectively, reflecting uncertainty
concerning the receipt by the State of $250 million of funds from the tobacco
settlement assumed for each of such fiscal years, as well as the unspecified
actions assumed in the State's projections. The State Comptroller also stated
that if the economy slows, the size of the gaps would increase.
Standard & Poor's rates the State's general obligation bonds
A, and Moody's rates the State's general obligation bonds A2. On August 28,
1997, Standard & Poor's revised its rating on the State's general obligation
bonds from A- to A.
Litigation. 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 1999-2002 Financial Plan. The City has
estimated that its potential future liability on account of outstanding claims
against it as of June 30, 1997 amounted to approximately $3.5 billion.
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 1997,
approximately 88% of Puerto Rico's exports went to the United States mainland,
which was also the source of approximately 62% of Puerto Rico's imports. In
fiscal 1997, Puerto Rico experienced a $2.7 billion positive adjusted
merchandise trade balance. The dominant sectors of the Puerto Rico economy are
manufacturing and services. Puerto Rico's more than decade-long economic
expansion continued throughout the five-year period from fiscal 1993 through
fiscal 1997. Factors behind this expansion included government-sponsored
economic development programs, periodic declines in the exchange value of the
United States dollar, increases in the level of federal transfers, and the
relatively low cost of borrowing. Gross product in fiscal 1993 was $25.1 billion
($24.5 billion in 1992 prices) and gross product in fiscal 1997 was $32.1
billion ($27.7 billion in 1992 prices). This represents an increase in gross
product of 27.7% from fiscal 1993 to 1997 (13.0% in 1992 prices). Since fiscal
1985, personal income, both aggregate and per capita, has increased consistently
each fiscal year. In fiscal 1997, aggregate personal income was $32.1 billion
($30.0 billion in 1992 prices) and personal income per capita was $8,509 ($7,957
in 1992 prices). Personal income includes transfer payments to individuals in
Puerto Rico under various social
C-5
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<PAGE>
programs. Total federal payments to Puerto Rico, which include transfers to
local government entities and expenditures of federal agencies in Puerto Rico,
in addition to federal transfer payments to individuals, are lower on a per
capita basis in Puerto Rico than in any state. Transfer payments to individuals
in fiscal 1997 were $7.3 billion, of which $5.2 billion, or 71.6%, represented
entitlements to individuals who had previously performed services or made
contributions under programs such as Social Security, Veterans' Benefits,
Medicare and U.S. Civil Service retirement pensions. Average employment
increased from 999,000 in fiscal 1993, to 1,128,300 in fiscal 1997. Average
unemployment decreased from 16.8% in fiscal 1993, to 13.1% in fiscal 1997.
According to the Labor Department's Household Employment Survey, during the
first eight months of fiscal 1998, total employment increased 0.4% over the same
period in fiscal 1997. Total monthly employment averaged 1,129,000 during the
first eight months of fiscal 1998, compared to 1,124,500 in the same period of
fiscal 1997. The Puerto Rico Planning Board's gross product forecast for fiscal
1998 projected an increase of 3.0% over fiscal 1997.
C-6
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<PAGE>
PART II--ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A--BONDING ARRANGEMENTS
The employees of Glickenhaus & Co. and Lebenthal & Co., Inc. are covered
under Brokers' Blanket Policy, Standard Form 14, in the respective amounts of
$5,000,000 and $10,000,000.
ITEM B--CONTENTS OF REGISTRATION STATEMENT
This Registration Statement 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 Registration Statement of Empire
State Municipal Exempt Trust, Guaranteed Series 133).
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included in Exhibit 99.3.1)
BDO Seidman, LLP
Muller Data Corporation (included in Exhibit 99.5.1)
The following exhibits:
*99.1.1 -- Reference Trust Agreement including certain
Amendments to the Trust Indenture and Agreement
referred to under Exhibit 99.1.1 below.
+99.1.1.1 -- Trust Indenture and Agreement dated December 18,
1990.
99.1.3 -- Form of Agreement Among Underwriters and Selected
Dealers Agreement (filed as Exhibit 1.8 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-28268
of Empire State Municipal Exempt Trust, Guaranteed
Series 49 on July 18, 1989, and incorporated herein
by reference).
99.1.6(a) -- Eighth Agreement of Amendment to Fourth Amended and
Restated Agreement of Limited Partnership of
Glickenhaus & Co. (filed as exhibit 1.6(a) to
Amendment No. 1 to Form S-6 Registration Statement
No. 333-30481 of Empire State Municipal Exempt Trust,
Guaranteed Series 138 on November 25, 1997).
+99.1.6.1 -- Certificate of Incorporation of Lebenthal & Co., Inc.
as amended on October 23, 1981.
+99.1.6.2 -- By-Laws of Lebenthal & Co., Inc.
*99.1.7 -- Form of Insurance Policy obtained by the Trust.
- --------
* Filed herewith.
+ Filed with Amendment No. 1 to Form S-6 Registration Statement No.
333-17307 of Empire State Municipal Exempt Trust, Guaranteed Series 134 on
April 2, 1997 and incorporated herein by reference.
II-i
732925.1
<PAGE>
99.1.7(a) -- Master Letter Agreement of Municipal Bond Investors
Assurance Corporation (filed as Exhibit 1.7(a) to
Amendment No. 1 to Form S-6 Registration Statement
No. 33-35124 of Empire State Municipal Exempt Trust,
Guaranteed Series 59 on July 1, 1990, and
incorporated herein by reference).
99.1.7(b) -- Form of Permanent Insurance Policy of Municipal Bond
Investors Assurance Corporation (filed as Exhibit
1.7.1 to Amendment No. 1 to Form S-6 Registration
Statement No. 33- 10860 of Empire State Municipal
Exempt Trust, Guaranteed Series 31 on June 10, 1987,
and incorporated herein by reference).
+99.2.1 -- Form of Certificate.
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of
the securities being registered.
99.4.1 -- Information as to Partners of Glickenhaus & Co.
(filed as Exhibit 4.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-26577 of Empire State
Municipal Exempt Trust, Guaranteed Series 46 on April
19, 1989, and incorporated herein by reference).
99.4.2 -- Information as to Officers and Directors of Lebenthal
& Co., Inc. (filed as Exhibit 4.2 to Amendment No. 1
to Form S-6 Registration Statement No. 33-22568 of
Empire State Municipal Exempt Trust, Guaranteed
Series 39 on August 9, 1988, and incorporated herein
by reference).
99.4.3 -- Affiliations of Sponsors with other investment
companies (filed as Exhibit 4.6 to Amendment No. 1 to
Form S-6 Registration Statement No. 2-95041 of
Municipal Insured National Trust Series 1 on March
21, 1985, and incorporated herein by reference).
99.4.4 -- Stockbrokers' Bond and Policy, Form B for Glickenhaus
& Co. (filed as Exhibit 4.7 to Form S-6 Registration
Statement No. 2-95041 of Municipal Insured National
Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
+99.4.5 -- Stockbrokers' Blanket Bond Policy, Standard Form No.
14 for Lebenthal & Co., Inc. dated April 5, 1983.
*99.5.1 -- Consent To Be Evaluator of Muller Data Corporation
and Affirmation Letter of Standard & Poor's
Corporation.
*99.5.2 -- Affirmation Letter of Moody's Investors Service.
99.6.1 -- Copies of Powers of Attorney of General Partners of
Glickenhaus & Co. (filed with Amendment No. 1 to Form
S-6 Registration Statement No. 333-17307 of Empire
State Municipal Exempt Trust, Guaranteed Series 134
on April 2, 1997 and Post-Effective Amendment No. 7
to Form S-6 Registration Statement No. 33-40723 on
November 25, 1997 and incorporated herein by
reference).
- -------------------
+ Filed with Amendment No. 1 to Form S-6 Registration Statement No. 333-17307
of Empire State Municipal Exempt Trust, Guaranteed Series 134 on April 2,
1997 and incorporated herein by reference.
* Filed herewith.
II-ii
732925.1
<PAGE>
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. 42453 of Empire State Municipal Exempt
Trust, Guaranteed Series 140 on May 18, 1998; and 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).
*27 -- Financial Data Schedule.
- --------
* Filed herewith for EDGAR purposes only.
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732925.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Empire State Municipal Exempt Trust, Guaranteed Series 141 has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, hereunto duly authorized, in the City of New York and State
of New York on the 16th day of July 1998.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 141
By: GLICKENHAUS & CO.
------------------------------------
(Sponsor)
/s/ MICHAEL J. LYNCH
By:-------------------------------------
(Michael J. Lynch, Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
NAME TITLE DATE
- ---- ----- ----
ALFRED FEINMAN* General Partner
- ----------------------------
(Alfred Feinman)
JAMES M. GLICKENHAUS* General Partner
- ----------------------------
(James M. Glickenhaus)
SETH M. GLICKENHAUS* General Partner,
- ---------------------------- Chief Investment Officer
(Seth M. Glickenhaus)
*By: /S/ MICHAEL J. LYNCH July 16, 1998
-------------------------------------
(Michael J. Lynch, Attorney-in-Fact)
</TABLE>
- ---------------------
* Executed copy of powers of attorney was filed as Exhibit 6.1 to
Registration Statement No. 333-17307 on April 2, 1997 and
Post-Effective Amendment No. 7 to Registration Statement No. 33-40723
on November 25, 1997.
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732925.1
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Empire State Municipal Exempt Trust, Guaranteed Series 141 has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the City of New York and State
of New York on the 16th day of July 1998.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 141
By: LEBENTHAL & CO., INC.
-------------------------------------
(Sponsor)
By: /s/ D. WARREN KAUFMAN
-------------------------------------
(D. Warren Kaufman, Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
NAME TITLE DATE
- ---- ----- ----
H. GERARD BISSINGER, II* Director
- ------------------------------------
(H. Gerard Bissinger, II)
JEFFREY M. JAMES* Director
- ------------------------------------
(Jeffrey M. James)
/s/ D. WARREN KAUFMAN* Director July 16, 1998
- ------------------------------------
(D. Warren Kaufman)
ALEXANDRA LEBENTHAL* Director, President
- ------------------------------------
(Alexandra Lebenthal)
JAMES A. LEBENTHAL* Director, Chief Executive Officer
- ------------------------------------
(James A. Lebenthal)
JAMES E. McGRATH** Director
- ------------------------------------
(James E. McGRATH)
DUNCAN K. SMITH* Director
- ------------------------------------
(Duncan K. Smith)
*By: /s/ D. WARREN KAUFMAN July 16, 1998
- ------------------------------------
(D. Warren Kaufman, Attorney-In-Fact)
</TABLE>
- --------
* An executed copy of the power of attorney was 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. 42453 on May 18, 1998.
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<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of their name in the Prospectus included
in this Registration Statement is contained in their opinion filed as Exhibit
99.3.1 to this Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of Empire State Municipal Exempt Trust, Guaranteed
Series 141
We hereby consent to the use in this Amendment No. 1 to the Registration
Statement No. 333-53963 of our report dated July 16, 1998, relating to the
Statement of Condition of Empire State Municipal Exempt Trust, Guaranteed Series
141 and to the reference to our firm under the heading "Auditors" in the
Prospectus which is a part of such Registration Statement.
BDO SEIDMAN, LLP
New York, New York
July 16, 1998
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732925.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 141
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated July 16, 1998 among
Glickenhaus & Co. and Lebenthal & Co., Inc., as Depositors, The Bank of New
York, as Trustee and Muller Data Corporation, as Evaluator, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Empire State Municipal Exempt Trust, Guaranteed Series 66,
Trust Indenture and Agreement" dated December 18, 1990 as amended in part by
this Reference Trust Agreement (herein as amended or supplemented called the
"Indenture"). This Reference Trust Agreement and the Indenture, as incorporated
by reference herein, will constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements
herein contained, the Depositors, the Trustee, and the Evaluator agree as
follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the
provisions contained in the Indenture are herein incorporated by reference in
their entirety and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth in full in this
instrument except that for all purposes of this Empire State Municipal Exempt
Trust, Guaranteed Series 141, and all subsequent Series, the following sections
of the Indenture are amended as follows:
(a) Section 1.1(8) is hereby amended in its entirety to read
as follows:
"(8) "Evaluation Time" shall mean 12:00 p.m. New York Time
on the Business Day prior to the Date of Deposit and 2:00
p.m. New York Time thereafter."
(b) Section 1.1(9) is hereby amended by deleting the words
"Standard and Poor's Corporation" therein and substituting the words "Muller
Data Corporation" in place thereof.
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295222.1
<PAGE>
(c) Section 3.1 is hereby amended by revising it in its
entirety to read as follows:
"Section 3.1. Initial Cost. Subject to reimbursement by
Unitholders to the Depositors of the estimated per-Unit amount
set forth in the Prospectus, the cost of organizing the Trust
and sale of the Trust Units shall be borne by the Depositors,
provided, however, that the liability on the part of the
Depositors under this section shall not include any fees or
other expenses incurred in connection with the administration
of the Trust subsequent to the deposit referred to in Section
2.1. As used herein, the Depositors' reimbursable expenses of
organizing the Trust and sale of the Trust Units shall include
the cost of the initial preparation and typesetting of the
registration statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating to
the Trust, SEC and state blue sky registration fees, the cost
of the initial valuation of the portfolio and audit of the
Trust, the initial fees and expenses of the Trustee, and legal
and other out-of-pocket expenses related thereto but not
including the expenses incurred in the printing of preliminary
prospectuses and prospectuses, expenses incurred in the
preparation and printing of brochures and other advertising
materials and any other selling expenses."
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295222.1
<PAGE>
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The interest-bearing obligations listed in the Prospectus
related to Empire State Municipal Exempt Trust, Guaranteed Series 141 have been
deposited in trust under this Indenture (See "Portfolio" in Part A of the
Prospectus which for purposes of this Indenture is the Schedule of Securities or
Schedule A).
(b) For the purposes of the definition of the Unit in item
(28) of Section 1.1, the fractional undivided interest in and ownership of the
Trust is 8,000.
(c) The fiscal year for the Trust shall end on May 31 of each
year.
(d) All Certificateholders of record on August 15, 1998 (the
"First Monthly Record Date") who have selected the monthly distribution plan,
will receive a distribution to be made on or shortly after September 1, 1998
(the "First Distribution Date"), and thereafter distributions will be made
monthly. The first semi-annual distribution will be made on or shortly after
December 1, 1998 to all Certificateholders of record on November 15, 1998 who
have selected the semi-annual distribution plan, and thereafter distributions
will be made semi-annually.
(e) The First Settlement Date shall mean July 21, 1998.
(f) The number of Units referred to in Section 2.3 is 8,000.
(g) For the purposes of Section 4.3, the Evaluator shall
receive for each evaluation of the Bonds in the Trust $.55 per Bond for each
valuation.
(h) For purposes of Section 6.4, the Trustee shall be paid per
annum 1.21 per $1,000 principal amount of Bonds for that portion of the Trust
under the monthly distribution plan and $.81 per $1,000 principal amount of
Bonds for that portion of the Trust under the semi-annual distribution plan.
(i) For purposes of Section 8.6, the Depositors' maximum
annual fee is hereby specified to be $.25 per $1,000 principal amount of Bonds
in the Trust.
-3-
295222.1
<PAGE>
(j) For purposes of Section 9.2, the Mandatory Termination
Date for the Trust is December 31, 2047.
(k) For purposes of this Series of Empire State Municipal
Exempt Trust, the form of Certificate set forth in this Indenture shall be
appropriately modified to reflect the title of this Series as set forth above.
(l) For purposes of this Series of Empire State Municipal
Exempt Trust, the execution date of this Indenture shall be the date first
written above.
IN WITNESS WHEREOF, the parties hereto have caused this
Reference Trust Agreement to be duly executed on the date first above written.
[Signatures on separate pages]
-4-
295222.1
<PAGE>
GLICKENHAUS & CO.
By /s/ Michael Lynch
----------------------------
Attorney-in-Fact
for each of the
General Partners
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Carla Vogel, a Notary Public in and for the said County in the State
aforesaid, do hereby certify that Anne Thorsen, personally known to me to be the
same whose name is subscribed to the foregoing instrument, appeared before me
this day in person, and acknowledged that he signed and delivered the said
instrument as his free and voluntary act as Attorney-in-Fact for each of the
General Partners, and as the free and voluntary act of said GLICKENHAUS & CO.,
for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 16th day of July, 1998.
/s/ Carla Vogel
---------------------------
Notary Public
CARLA VOGEL
Notary Public, State of New York
No. 02V05019906
Qualified in Bronx County
Commission Expires November 1, 1999
[SEAL]
313665.1
<PAGE>
Lebenthal & Co., Inc.
By: /s/James McGrath
---------------------------
Authorized Officer
ATTEST:
By: /s/D. Warren Kaufman
----------------------------
Secretary
[CORPORATE SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Carla Vogel, a Notary Public in and for the said County in the State
aforesaid, do hereby certify that James McGrath and D. Warren Kaufman personally
known to me to be the same persons whose names are subscribed to the foregoing
instrument and personally known to me to be the Authorized Officer and
Secretary, respectively, of LEBENTHAL & CO., INC., appeared before me this day
in person, and acknowledged that they signed, sealed with the corporate seal of
LEBENTHAL & CO., INC., and delivered the said instrument as their free and
voluntary act as such Authorized Officer and Secretary, respectively, and as the
free and voluntary act of said LEBENTHAL & CO., INC., for the uses and purposes
therein set forth.
GIVEN, under my hand and notarial seal this 16th day of July, 1998.
/s/ Carla Vogel
--------------------------
Notary Public
CARLA VOGEL
Notary Public, State of New York
No. 02V05019906
Qualified in Bronx County
Commission Expires November 1, 1999
[SEAL]
313665.1
<PAGE>
THE BANK OF NEW YORK, Trustee
By: /s/ Thomas Centrone
--------------------------
Vice President
ATTEST:
By: /s/ Jeffrey Cohen
(CORPORATE SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Emmanual T. Lytle, Jr., a Notary Public in and for the said County in
the State aforesaid, do hereby certify that Jeffrey Cohen and Thomas Centrone,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President and
Assistant Vice President, respectively, of The Bank of New York, appeared before
me this day in person, and acknowledge that they signed, sealed with the
corporate seal of The Bank of New York and delivered the said instrument as
their free and voluntary act as such Vice President and Assistant Vice
President, respectively, and as the free and voluntary act of said The Bank of
New York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 1st day of July, 1998.
/s/ Emmanual T. Lytle, Jr.
--------------------------
Notary Public
[SEAL]
My commission expires: April 30, 1999
313665.1
<PAGE>
MULLER DATA CORPORATION, Evaluator
By: /s/Ron Valinoti
-----------------------------
Ron Valinoti
Chief Operating Officer
[Seal]
ATTEST:
By: /s/ Richard Birnbaum
----------------------------
Vice President
313665.1
EXHIBIT 99.1.7
MBIA
FINANCIAL GUARANTY MASTER
WHILE IN TRUST WITH A PERMANENT OPTION
UNIT INVESTMENT TRUST INSURANCE POLICY
MBIA Insurance Corporation
Armonk, New York 10504
Policy No. ESGT-141-1010
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of
the premium and subject to the terms of this policy, hereby unconditionally and
irrevocably guarantees to the Trust, as hereinafter defined, the full and
complete payment required to be made by or on behalf of the issuer(s) to the
applicable Paying Agent(s) or its/their successor(s) (the "Paying Agent") of an
amount equal to (i) 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 obligations described in Exhibit A attached hereto (referred to
herein as the "Obligations"), as such payments shall become due but shall not be
so paid (except that in the event of any acceleration of the due date of such
principal by reason of mandatory or optional redemption or acceleration
resulting from default or otherwise, other than any advancement of maturity
pursuant to a mandatory sinking fund payment, the payments guaranteed hereby
shall be made in such amounts and at such times as such payments of principal
would have been due had there not been any such acceleration); and (ii) the
reimbursement of any such payment which is subsequently recovered from the Trust
pursuant to a final judgment by a court of competent jurisdiction that such
payment constitutes an avoidable preference to the Trust within the meaning of
any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii)
of the preceding sentence shall be referred to herein collectively as the
"Insured Amounts."
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer or its designee from the
Paying Agent or the Trust, that required payment of any Insured Amount has not
been made, the Insurer on the due date of such payment or within one business
day after receipt of notice of such nonpayment, whichever is later, will make a
deposit of funds, in an account with State Street Bank and Trust Company, N.A.,
in New York, New York, or its successor, sufficient for the payment of any such
Insured Amounts which are then due. Upon presentment and surrender of such
Obligations or coupons or presentment of such other proof of ownership of the
Obligations registered as to principal or as to principal and interest, together
with evidence satisfactory to State Street Bank and Trust Company, N.A. that (i)
in the case of Pre-Insured Obligations, as hereinafter defined, that demand for
payment has been made from the other insurer, and (ii) in all cases, that such
Obligations or coupons are the Obligations or coupons described in this policy
or replacements or successors thereto, and any appropriate instruments of
assignment to evidence the assignment of the Insured Amounts due on the
Obligations as are paid by the Insurer, and appropriate instruments to effect
the appointment of the Insurer as agent for the Trust in any legal proceeding
related to payment of Insured Amounts on the Obligations or coupons, such
instruments being in a form satisfactory to State Street Bank and Trust Company,
N.A., State Street Bank and Trust Company, N.A. shall disburse to the Trust or
the Paying Agent making such presentment and/or surrender payment of the Insured
Amounts due on such Obligations and coupons, less any amount held by the Paying
Agent for the payment of such Insured Amounts and legally available therefor.
This policy does not insure against loss of any prepayment premium which may at
any time be payable with respect to any Obligation or coupon.
The term "Depositor" shall mean Glickenhaus & Co. and Lebenthal & Co., Inc. and
its successors or any successor Depositor.
The term "Pre-Insured Obligations" shall mean obligations, if any, on which the
payment of principal of and/or interest on shall have been insured prior to the
issuance of this policy by the Insurer.
The term "Trust" shall mean the Empire State Municipal Exempt Trust, Guaranteed
Series 141, created pursuant to the Trust Indenture and Agreement dated December
18, 1990, among the Depositor, the Trustee and Standard & Poor's Corporation, as
supplemented and amended as of July 16, 1998 by the Reference Trust Agreement
dated as of July 16, 1998, among the Depositor, the Trustee and Muller Data
Corporation.
The term "Trustee" shall mean Bank of New York, or any successor trustee or
co-trustee.
Any service of process on the Insurer may be made to the Insurer at its offices
located at 113 King Street, Armonk, New York 10504, and such service of process
shall be valid and binding.
<PAGE>
MBIA
This policy shall only apply to Obligations held in and owned by the Trust and
shall not apply to any Obligations not deposited therein by the Depositor. This
policy shall continue in force only with respect to Obligations held in and
owned by the Trust, and, subject to the provisions of this paragraph, the
Insurer shall not have any liability under this policy with respect to any
Obligations which do not constitute part of the Trust. This policy is
non-cancellable during the term hereof for any reason, but shall terminate as to
any Obligation which has been redeemed from or sold by the Trustee or the Trust
on the date of such redemption or on the settlement date of such sale, and the
Insurer shall not have any liability under this policy as to any such Obligation
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 Obligation, this
policy shall terminate as to such Obligation on the business day next succeeding
such date of payment. Notwithstanding the foregoing provisions of this
paragraph, the termination of this policy as to any Obligation shall not affect
the obligations of the Insurer regarding any other Obligation in the Trust. This
policy shall terminate as to all Obligations on the date on which the last of
the Obligations mature, are redeemed or are sold by the Trust.
The premium on this policy is not refundable for any reason, including the
payment prior to maturity of the Obligations.
This policy is issued only to the Trust and is nontransferable.
This policy shall be governed by and construed under the laws of the State of
New York.
This policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in
facsimile on its behalf by its President and its Secretary, this 16th day of
July, 1998.
MBIA INSURANCE CORPORATION
/s/ Richard Weill
- ----------------------------
President
Attest: /s/ Anne McKenna
--------------------
Assistant Secretary
<PAGE>
MBIA
E N D O R S E M E N T
Attached to Policy No. ESGT-141-1010
issued by MBIA Insurance Corporation (the "Insurer"), to the Trust, as defined
in the policy issued with respect to the small issue industrial development
bonds and pollution control revenue bonds listed in Exhibit A (the "Bonds").
It is further understood that this policy shall guarantee to the Trust, as
defined in the policy, the full and complete payments required to be made by or
on behalf of the Issuer if there occurs pursuant to the terms of the Bonds an
event which results in the loss of the tax exempt status of the interest on the
Bonds, including any principal, interest or premium payments payable thereon, if
any, as and when thereby required.
This endorsement forms a part of the policy to which it is attached, effective
on the inception date of the policy.
IN WITNESS WHEREOF, the Insurer has caused this endorsement to be executed in
facsimile on its behalf by its President and its Assistant Secretary this 16th
day of July, 1998.
MBIA INSURANCE CORPORATION
/s/ Richard Weill
- ----------------------------
President
Attest: /s/ Anne McKenna
-----------------------
Assistant Secretary
<PAGE>
MBIA
CERTIFICATE OF MBIA INSURANCE CORPORATION
(EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 141)
This Certificate is being delivered in connection with the issuance by MBIA
Insurance Corporation (the "Corporation") of a Municipal Bond Guaranty Insurance
Policy relating to EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 141
(the "Policy"). The undersigned, hereby certifies that she is qualified and
acting as Assistant Secretary of the Corporation.
The undersigned hereby certifies that:
(a) The Policy has been duly executed, is a valid and binding obligation of the
Corporation enforceable in accordance with its terms except that the enforcement
of the Policy may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity;
(b) The information concerning the Corporation and its policy or policies as set
forth in the prospectus of the Trust filed as part of a Registration Statement
dated July 16, 1998, under the caption entitled "Insurance on the Bonds,"
regarding Empire State Municipal Exempt Trust, Guaranteed Series 141, is
accurate; and
(c) The financial information as of December 31, 1997 for the Corporation
supplied to the Sponsors is true and correct financial information provided to
the New York Insurance Department in connection with the licensing of the
Corporation, and such financial information is the most recent financial
information available.
IN WITNESS WHEREOF, the undersigned has herewith set her hand and caused her
signature to be affixed hereto on this 16th day of July, 1998.
By /s/Anna McKenna
--------------------------
Assistant Secretary
July 16, 1998
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
120 Broadway
New York, New York 10271-0005
Re: Empire State Municipal Exempt Trust,
Guaranteed Series 141
Dear Sirs:
We have acted as special counsel for Glickenhaus & Co. and Lebenthal
& Co., Inc., as Depositors, Sponsors and Principal Underwriters (collectively,
the "Depositors") of Empire State Municipal Exempt Trust, Guaranteed Series 141
(the "Trust") in connection with the issuance by the Trust of 8,000 units of
fractional undivided interest (collectively, the "Units") in the Trust. Pursuant
to the Trust Agreement referred to below, the Depositors have transferred to the
Trust certain long-term bonds and contracts to purchase certain long-term bonds
together with an irrevocable letter of credit to be held by the Trustee upon the
terms and conditions set forth in the Trust Agreement. (All bonds to be acquired
by the Trust are collectively referred to as the "Bonds").
In connection with our representation, we have examined copies of
the following documents relating to the creation of the Trust and the issuance
and sale of the Units: (a) the Trust Indenture and Agreement and related
Reference Trust Agreement, each of even date herewith, relating to the Trust
(the "Trust Agreements") among the Depositors, the Bank of New York, as Trustee,
and Muller Data Corporation, as Evaluator; (b) the notification of registration
on Form N-8A and the Registration Statement on
207440.1
<PAGE>
Glickenhaus & Co.
July 16, 1998
Form N-8B-2, as amended, relating to the Trust, as filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Investment Company Act of
1940 (the "1940 Act"); (c) the Registration Statement on Form S-6 (Registration
No. 333-53963) filed with the Commission pursuant to the Securities Act of 1933
(the "1933 Act"), and Amendment No. 1 thereto (said Registration Statement, as
amended by said Amendment No. 1, being herein called the "Registration
Statement"); (d) the proposed form of final Prospectus (the "Prospectus")
relating to the Units, which is expected to be filed with the Commission this
day; (e) certified resolutions of Lebenthal & Co. Inc., authorizing the
execution and delivery by it of the Trust Agreements and the consummation of the
transactions contemplated thereby; (f) the Certificate of Incorporation and
By-Laws of Lebenthal & Co., Inc. and the Restated Agreement of Limited
Partnership of Glickenhaus & Co.; and (g) a certificate of an authorized officer
or partner of each of the Depositors with respect to certain factual matters
contained therein.
We have also examined the applications for orders of exemption from
certain provisions of the 1940 Act, and the amendments thereto, filed with the
Commission on May 23, 1978 (file no. 812-4315), on November 7, 1978 (file no.
812-4389), on September 10, 1980 (file no. 812-4334) and on November 9, 1984
(file no. 812-5980) and the related orders issued by the Commission with respect
thereto on June 20, 1978, January 10, 1979, December 31, 1980 and February 22,
1985, respectively.
We have not reviewed the financial statements, compilation of the
Bonds held by the Trust, or other financial or statistical data contained in the
Registration Statement and the Prospectus, as to which you have been furnished
with the reports of the accountants appearing in the Registration Statement and
the Prospectus.
In addition, we have assumed the genuineness of all agreements,
instruments and documents submitted to us as originals and the conformity to
originals of all copies thereof submitted to us. We have also assumed the
genuineness of all signatures and the legal capacity of all persons executing
agreements, instruments and documents examined or relied upon by us.
In addition, with respect to the opinion set forth in paragraph (1)
below, and insofar as that opinion relates to Glickenhaus & Co., we have relied,
with their approval, on the opinion of Newman Tannenbaum Helpern Syracuse &
Hirsctritt dated of even date herewith.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by
207440.1
<PAGE>
Glickenhaus & Co.
July 16, 1998
bankruptcy, reorganization, moratorium, insolvency and other laws of general
application relating to or affecting the enforceability of creditors' rights,
and (ii) to limitations under equitable principles governing the availability of
equitable remedies.
We are not admitted to the practice of law in any jurisdiction but
the State of New York and we do not hold ourselves out as experts in or express
any opinion as to the laws of other states or jurisdictions except as to matters
of Federal and Delaware corporate law.
Based exclusively on the foregoing, we are of the opinion that under
existing law:
(1) The Trust Agreements have been duly authorized and entered into
by an authorized officer or General Partner of each of the Depositors and are
valid and binding obligations of the Depositors in accordance with their terms.
(2) The execution and delivery of the Certificates evidencing the
Units has been duly authorized by the Depositors and such Certificates, when
executed by the Depositors and the Trustee in accordance with the provisions of
the Certificates and the Trust Agreements and issued for the consideration
contemplated therein, will constitute fractional undivided interests in the
Trust, will be entitled to the benefits of the Trust Agreements, will conform in
all material respects to the description thereof for the Units as provided in
the Trust Agreements and the Registration Statement, and the Units will be fully
paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus under the headings "Tax Status" and "Legal Opinions". We
authorize you to deliver copies of this opinion to the Trustee and the
Underwriters named in Schedule A to the Master Agreement Among Underwriters
relating to the Trust and the Trustee may rely on this opinion as fully and to
the same extent as if it had been addressed to it.
This opinion is intended solely for the benefit of the addressees
and the Trustee in connection with the issuance of the Units of the Trust and
may not be relied upon in any other manner or by any other person without our
express written consent.
Very truly yours,
Battle Fowler LLP
207440.1
MULLER DATA CORPORATION
A Thomson Financial Services Company
July 16, 1998
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
120 Broadway
New York, New York 10271
RE: Empire State Municipal Exempt Trust,
Guaranteed Series 141
Gentlemen:
We have examined Registration Statement File No.333-53963 for the
above-captioned trust. We hereby acknowledge that Muller Data Corporation is
currently acting as the evaluator for Empire State Municipal Exempt Trust
Guaranteed Series 141. Subsequently, we hereby consent to the use in the
Registration Statement of the reference to Muller Data Corporation as evaluator.
In addition, we hereby confirm that the ratings of the bonds comprising the
Portfolio of the Trust, as indicated the Registration Statement, are the ratings
currently indicated in our Muniview database as of the date of the evaluation
report.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely,
/s/ Ron Valinoti
Ron Valinoti
Chief Operating Officer
395 Hudson Street, New York,
New York 10014-3622 -- (212) 807-3800
<PAGE>
Standard & Poor's
A Division of The McGraw-Hill Companies, Inc.
Managed Fund Ratings
25 Broadway
New York, New York 10004-1064
Telephone 212/208-8000
FAX 212/208-8034
Managed Funds Ratings
July 16, 1998
Glickenhaus & Company
6 East 43rd Street
New York, New York 10017
Re: Empire State Municipal Exempt Trust, Guaranteed Series 141
Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned trust, SEC #333-53963, we have reviewed the information
presented to us and have assigned a 'AAA' rating to the units of the trust and a
'AAA' rating to the securities contained in the trust. The ratings are direct
reflections, of the portfolios of the trust, which will be composed solely of
securities covered by bond insurance policies that insure against default in the
payment of principal and interest on the securities. Since such policies have
been issued by MBIA, which has been assigned 'AAA' claims paying ability ratings
by Standard & Poor's, Standard & Poor's has assigned a 'AAA' rating to the units
of the trust and to the securities contained in the trust. Please note that
securities covered by bond insurance policies that insure such securities only
as long as they remain in the trust are rated 'AAA' only as long as they remain
in the trust.
Standard & Poor's will maintain serveillance on the 'AAA' rating until August
15, 1999. On this date, the rating will be automatically withdrawn by Standard &
Poor's unless a post effective letter is requested by the Trust.
You have permission to use the name of Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. and the above-assigned ratings in
connection with your dissemination of information relating to these units,
provided that it is understood that the ratings are not "market" ratings nor
recommendations to buy, hold, or sell the units of the trust or the securities
contained in the trust. Further, it should be understood the rating on the units
does not take into account the extent to which fund expenses or portfolio asset
sales for less than the fund's purchase price will reduce payment to the unit
holders of the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on the
sponsor and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the ratings.
Standard & Poor's does not independently verify the truth or accuracy of any
such information.
This letter evidences our consent to the use of the name of Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. in connection
with the rating assigned to the units in the registration statement or
prospectus relating to the units or the trust. However, this letter should not
be construed as a consent by us, within the meaning of Section 7 of the
Securities Act of 1933, to the use of the name of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. in connection with the
ratings assigned to the securities contained in the trust. You are hereby
authorized to file a copy of this letter with the Securities and Exchange
Commission.
Please be certain to send us a copy of your final prospectus as soon as it
becomes available. Should we not receive them within a reasonable time after the
closing or should they not conform to the representations made to us, we reserve
the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we can be
of further help, please do not hesitate to call upon us.
Sincerely,
/s/ Sanford B. Bragg
Sanford B. Bragg
Managing Director
EXHIBIT 99.5.2
Moody's Investors Service
99 Church Street
New York, NY 10007
July 16, 1998
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
RE: Empire State Municipal Exempt
Trust, Guaranteed Series 141
Gentlemen:
Moody's Investors Service has assigned the rating of Aaa (MBIA Insurance Corp.)
to each of the bonds insured by MBIA Insurance Corporation, comprising Empire
State Municipal Exempt Trust, Guaranteed Series 141. The rating is based upon an
insurance policy provided by MBIA Insurance Corporation. The rating applies to
each bond only while it is held in such trust.
Please send us a final Prospectus when available. Should you have any questions
regarding the above, please do not hesitate to contact the assigned analyst,
Margaret Kessler, at (212) 553-7884.
Sincerely yours,
Laura Levenstein
Vice President and Managing
Director
DNH:vlw
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the statement
of condition as of date of deposit and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<CURRENCY> US DOLLARS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUL-16-1998
<PERIOD-END> JUL-16-1998
<PERIOD-TYPE> OTHER
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 7,724,823
<RECEIVABLES> 55,720
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,780,543
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,720
<TOTAL-LIABILITIES> 55,720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,724,823
<SHARES-COMMON-STOCK> 8,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 7,724,823
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
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<EXPENSES-NET> 0
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<REALIZED-GAINS-CURRENT> 0
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<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 7,724,823
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 966
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
