Prospectus Part A Dated April 30, 1998
NEW YORK MUNICIPAL TRUST
SERIES 5
- ------------------------------------------------------------------------------
The Trust is a unit investment trust with an underlying
portfolio of long-term tax-exempt bonds and was formed to preserve capital and
to provide interest income which, in the opinions of bond counsel to the
respective issuers, is, with certain exceptions, currently exempt from regular
federal income tax and New York State and New York City income taxes under
existing law but may be subject to state and local taxes in other jurisdictions.
There can be no assurance that the Trust's investment objectives will be
achieved. Although the Supreme Court has determined that Congress has the
authority to subject interest on bonds such as the Bonds in the Trust to federal
income taxation, existing law excludes such interest from regular federal income
tax. Such interest income may, however, be subject to federal individual and
corporate alternative minimum tax and to state and local taxes in other
jurisdictions. (See "Description of Portfolio" in this Part A for a list of
those Bonds, if any, which pay interest income subject to the federal individual
alternative minimum tax.) (See "Tax Status" in Part B of this Prospectus.) In
addition, capital gains are subject to tax. (See "Tax Status" and "The
Trust--Portfolios" in Part B of this Prospectus.) The Sponsor is Reich & Tang
Distributors, Inc. The value of the Units of the Trust will fluctuate with the
value of the underlying bonds. Minimum purchase: 1 Unit.
This Prospectus consists of two parts. Part A contains the
Summary of Essential Information as of December 31, 1997 (the "Evaluation
Date"), a summary of certain specific information regarding the Trust and
audited financial statements of the Trust, including the related portfolio, as
of the Evaluation Date. Part B of this Prospectus contains a general summary of
the Trust. Part A of this Prospectus may not be distributed unless accompanied
by Part B. Investors should retain both parts of this Prospectus for future
reference. The Securities and Exchange Commission ("SEC") maintains a website
that contains reports, proxy and information statements and other information
regarding the Trust which is filed electronically with the SEC. The SEC's
Internet address is http:www.sec.gov. Offering materials for the sale of these
units available through the Internet are not being offered directly or
indirectly to residents of a particular state nor is an offer of these units
through the Internet specifically directed to any person in a state by, or on
behalf of, the issuer.
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.
- ------------------------------------------------------------------------------
THE TRUST. The Trust seeks to achieve its investment
objectives through investment in a fixed, diversified portfolio of long-term
bonds (the "Bonds") issued by or on behalf of the State of New York and its
political subdivisions, municipalities and public authorities and by the
Commonwealth of Puerto Rico and its public authorities. All of the Bonds in the
Trust were rated "A" or better by Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, or Moody's Investors Service, Inc. at the time
111215.1
<PAGE>
originally deposited in the Trust. For a discussion of the significance of such
ratings, see "Description of Bond Ratings" in Part B of this Prospectus. For a
list of ratings on the Evaluation Date, see "Portfolio".
Some of the Bonds in the Trust have been issued with optional
refunding or refinancing provisions ("Refunded Bonds") whereby the issuer of the
Bond has the right to call such Bond prior to its stated maturity date (and
other than pursuant to sinking fund provisions) and to issue new bonds
("Refunding Bonds") in order to finance the redemption. Issuers typically
utilize refunding calls in order to take advantage of lower interest rates in
the marketplace. Some of these Refunded Bonds may be called for redemption
pursuant to pre-refunding provisions ("Pre-Refunded Bonds") whereby the proceeds
from the issue of the Refunding Bonds are typically invested in government
securities in escrow for the benefit of the holders of the Pre- Refunded Bonds
until the refunding call date. Usually, Pre-Refunded Bonds will bear a triple-A
rating because of this escrow. The issuers of Pre- Refunded Bonds must call such
Bonds on their refunding call date. Therefore, as of such date, the Trust will
receive the call price for such bonds but will cease receiving interest income
with respect to them. For a list of those Bonds which are Pre-Refunded Bonds as
of the Evaluation Date, if any, see "Notes to Financial Statements" in this Part
A. Some of the Bonds in the portfolio may have been purchased at an aggregate
premium over par. The payment of interest and preservation of capital are, of
course, dependent upon the continuing ability of the issuers of the Bonds to
meet their obligations.
Investment in the Trust should be made with an understanding
of the risks which an investment in long-term fixed rate debt obligations may
entail, including the risk that the value of the underlying portfolio will
decline with increases in interest rates. A Trust designated as a long-term
trust must have a dollar-weighted average portfolio maturity of more than ten
years.
Each Unit in the Trust represents a 1/11477th undivided
interest in the principal and net income of the Trust. The principal amount of
Bonds deposited in the Trust per Unit is reflected in the Summary of Essential
Information. (See "The Trust--Organization" in Part B of this Prospectus.) The
Units being offered hereby are issued and outstanding Units which have been
purchased by the Sponsor in the secondary market.
PUBLIC OFFERING PRICE. The secondary market Public Offering
Price of each Unit is equal to the aggregate bid price of the Bonds in the Trust
divided by the number of Units outstanding, plus a sales charge of 4.35% of the
Public Offering Price, or 4.548% of the net amount invested in Bonds per Unit.
In addition, accrued interest to the expected date of settlement is added to the
Public Offering Price. If Units had been purchased on the Evaluation Date, the
Public Offering Price per Unit would have been $508.02 plus accrued interest of
$12.75 under the monthly distribution plan, $14.91 under the semi-annual
distribution plan and $14.84 under the annual distribution plan for a total of
$520.77, $522.93 and $522.86, respectively. The Public Offering Price per Unit
can vary on a daily basis in accordance with fluctuations in the aggregate bid
prices of the Bonds. (See "Public Offering--Offering Price" in Part B of this
Prospectus.)
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN. Units
of each Trust are offered to investors on a "dollar price" basis (using the
computation method described under "Public Offering -- Offering Price" in Part
B) as distinguished from a "yield price" basis often used in offerings of tax
exempt bonds (involving the lesser of the yield as computed to maturity of bonds
or to an earlier redemption date). Since they are offered on a dollar price
basis, the rate of return on an investment in Units of each Trust is measured in
terms of "Estimated Current Return" and "Estimated Long Term Return".
A-2
<PAGE>
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in the Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in the Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of the Trust); and (3) reducing the
average yield for the portfolio of the Trust in order to reflect estimated fees
and expenses of the Trust and the maximum sales charge paid by investors. The
resulting Estimated Long Term Return represents a measure of the return to
investors earned over the estimated life of the Trust. (For the Estimated Long
Term Return to Certificateholders under the monthly, semi-annual and annual
distribution plans, see "Summary of Essential Information".)
Estimated Current Return is a measure of the Trust's cash
flow. Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. 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 rating, the Estimated Current
Return per Unit may be affected adversely if such Bonds are redeemed prior to
their maturity.
The Estimated Net Annual Interest Income per Unit of the Trust
will vary with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the bid prices of the Bonds. Therefore, there is no assurance that
the present Estimated Current Return or Estimated Long Term Return will be
realized in the future. (For the Estimated Current Return to Certificateholders
under the monthly, semi-annual and annual distribution plans, see "Summary of
Essential Information". See "Estimated Long Term Return and Estimated Current
Return" in Part B of this Prospectus.)
A schedule of cash flow projections is available from the
Sponsors upon request.
DISTRIBUTIONS. Distributions of interest income, less
expenses, will be made by the Trust either monthly, semi-annually or annually
depending upon the plan of distribution applicable to the Unit purchased. A
purchaser of a Unit in the secondary market will initially receive distributions
in accordance with the plan selected by the prior owner of such Unit and may
thereafter change the plan as provided under "Interest and Principal
Distributions" in Part B of this Prospectus. Distributions of principal, if any,
will be made semi-annually on June 15 and December 15 of each year. For
estimated monthly, semi-annual and annual interest distributions, see "Summary
of Essential Information".
MARKET FOR UNITS. The Sponsor, although not obligated to do
so, presently maintains and intends to continue to maintain a secondary market
for the Units at prices based upon the aggregate bid price of the Bonds in the
Trust portfolio. The reoffer price will be based on the aggregate bid price of
the Bonds plus a sales charge of 4.35% (4.548% of the net amount invested), plus
net accrued interest. If a market is not maintained a Certificateholder will be
able to redeem his or her Units with the Trustee at a price also based upon the
aggregate bid price of the Bonds. (See "Sponsor Repurchase" and "Offering Price"
in Part B of this Prospectus.)
A-3
<PAGE>
NEW YORK MUNICIPAL TRUST
SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1997
--------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Date of Deposit*: June 22, 1979 Minimum Principal Distribution:
Principal Amount of Bonds.... $5,415,000 $1.00 per Unit.
Number of Units ............. 11,477 Weighted Average Life to
Fractional Undivided Inter- Maturity: 11.6 Years.
est in Trust per Unit .... 1/11477 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ........... $471.82 value of Trust is less than
Secondary Market Public $5,250,000 in principal amount
Offering Price** of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust........ $5,576,663+++ The earlier of December 31,
Divided by 11,477 Units.. $485.90 2028 or the disposition of the
Plus Sales Charge of 4.35% last Bond in the Trust.
of Public Offering Price $22.12 Trustee***: The Bank of New
Public Offering Price York.
per Unit ................ $508.02+ Trustee's Annual Fee: Monthly
Redemption and Sponsor's plan $1.08 per $1,000; semi-
Repurchase Price annual plan $.60 per $1,000;
per Unit ................ $485.90+ and annual plan is $.40 per
+++ $1,000.
++++ Evaluator: Kenny S&P Evaluation
Excess of Secondary Market Services.
Public Offering Price Evaluator's Fee for Each
over Redemption and Evaluation: Minimum of $35
Sponsor's Repurchase plus $.25 per each issue of
Price per Unit ........... $22.12++++ Bonds in excess of 50 issues
Difference between Public (treating separate maturities
Offering Price per Unit as separate issues).
and Principal Amount per Sponsor: Reich & Tang
Unit Premium/(Discount) .. $36.20 Distributors, Inc.
Evaluation Time: 4:00 p.m.
New York Time.
</TABLE>
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Monthly Semi-Annual Annual
Option Option Option
------ ------ ------
Gross annual interest income# ......... $33.03 $33.03 $33.03
Less estimated annual fees and
expenses ............................ 1.27 .86 .76
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $31.76 $32.17 $32.27
Estimated interest distribution# ...... 2.64 16.08 32.27
Estimated daily interest accrual# ..... .0882 .0893 .0896
Estimated current return#++ ........... 6.25% 6.33% 6.35%
Estimated long term return++ .......... 2.73% 2.81% 2.83%
Record dates .......................... 1st of Dec. 1 and Dec. 1
each month June 1
Interest distribution dates ........... 15th of Dec. 15 and Dec. 15
each month June 15
</TABLE>
A-4
<PAGE>
Footnotes to Summary of Essential Information
---------------------------------------------
* The Date of Deposit is the date on which the Trust Agreement was signed
and the deposit of the Bonds with the Trustee made.
** For information regarding offering price per unit and applicable sales
charge under the Total Reinvestment Plan, see Total Reinvestment Plan
in Part B of this Prospectus.
Certain amounts distributable as of December 31, 1997, may be reported
in the Summary of Essential Information as if they had been distributed
at year-end.
*** The Trustee maintains its corporate trust office at 101 Barclay Street,
New York, New York 10286 (tel. no.: 1-212-495-1784). For information
regarding redemption by the Trustee, see "Trustee Redemption" in Part B
of this Prospectus.
+ Plus accrued interest to expected date of settlement (approximately
three business days after purchase) of $12.75 monthly, $14.91
semi-annually and $14.84 annually.
++ The estimated current return and estimated long term returns are
increased for transactions entitled to a discount (see "Employee
Discounts" in Part B of this Prospectus), and are higher under the
semi-annual and annual options due to lower Trustee's fees and
expenses.
+++ Based solely upon the bid side evaluation of the underlying Bonds
(including, where applicable, undistributed cash in the principal
account). Upon tender for redemption, the price to be paid will be
calculated as described under "Trustee Redemption" in Part B of this
Prospectus.
++++ See "Comparison of Public Offering Price, Sponsor's Repurchase
Price and Redemption Price" in Part B of this Prospectus.
# Does not include accrual from original issue discount bonds, if any.
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Distribu-
tions of
Distributions of Interest Principal
During the Period (per Unit) During
Net Asset* Semi- the
Units Out- Value Monthly Annual Annual Period
Period Ended standing Per Unit Option Option Option (Per Unit)
- ------------ ---------- ---------- ------- ------ ------ ----------
December 31, 1995 11,842 $579.52 $37.80 $38.30 $38.43 $ 8.49
December 31, 1996 11,533 553.57 36.63 37.11 37.23 20.06
December 31, 1997 11,477 498.89 34.19 34.66 34.77 54.85
</TABLE>
- --------
* Net Asset Value per Unit is calculated by dividing net assets as
disclosed in the "Statement of Net Assets" by the number of Units
outstanding as of the date of the Statement of Net Assets. See Note 5
of Notes to Financial Statements for a description of the components of
Net Assets.
A-5
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1997
DESCRIPTION OF PORTFOLIO*
- -------------------------
Each Unit in the Trust consists of a 1/11477th fractional
undivided interest in the principal and net income of the Trust in the ratio of
one Unit for each $471.82 principal amount of the Bonds currently held in the
Trust. The Sponsor has not participated as a sole underwriter or manager,
co-manager or member of an underwriting syndicate from which any of the initial
aggregate principal amount of the Bonds were acquired. The portfolio of the
Trust consists of 20 issues representing obligations of 7 issuers located in New
York State and 2 in Puerto Rico. Eight issues representing $2,495,000 of the
principal amount of the Bonds in the Trust are "moral obligation" bonds. All of
the Bonds in the Trust are subject to redemption prior to their stated maturity
dates pursuant to sinking fund or optional call provisions. The Bonds may also
be subject to other calls, which may be permitted or required by events which
cannot be predicted (such as destruction, condemnation, termination of a
contract, or receipt of excess or unanticipated revenues). Seven issues
representing $670,000 of the principal amount of the Bonds are general
obligation bonds. All thirteen of the remaining issues representing $4,745,000
of the principal amount of the Bonds are payable from the income of a specific
project or authority and are not supported by the issuer's power to levy taxes.
The portfolio is divided for purpose of issue as follows: Health Facilities 3,
Highway 1, Hospital and Nursing Projects 5, Housing 3 and Port Authority 1. For
an explanation of the significance of these factors see "The Trust--Portfolio"
and "Special Factors Concerning the Portfolio" in Part B of this Prospectus. See
"Tax Status" in Part B of this Prospectus.
None of the Bonds in the Trust are subject to the federal
individual alternative minimum tax under the Tax Reform Act of 1986. See "Tax
Status" in Part B of this Prospectus.
- --------
* Changes in the Trust Portfolio: From January 1, 1998 to March 20, 1998,
$55,000 of the principal amount of the Bond in portfolio no. 18 has
been called and is no longer contained in the Trust. 188 Units were
redeemed from the Trust.
A-6
<PAGE>
Report of Independent Accountants
To the Sponsor, Trustee and Certificateholders of
New York Municipal Trust, Series 5
In our opinion, the accompanying statement of net assets, including the
portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of New York Municipal Trust, Series 5
(the "Trust") at December 31, 1997, the results of its operations, the changes
in its net assets and the financial highlights for the two years then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the Trustee, provide a reasonable basis
for the opinion expressed above. The financial statements for the year ended
December 31, 1995 were audited by other independent accountants whose report
dated March 31, 1996 expressed an unqualified opinion on those financial
statements.
PRICE WATERHOUSE LLP
Boston, MA
March 18, 1998
<PAGE>
<TABLE>
New York Municipal Trust, Series 5
Portfolio
December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding
<S> <C> <C> <C> <C> <C>
1 $ 50,000 State of New York, General Obligation A* 3.300% No Sinking Fund
4/01/2001 4/01/00 @ 100 Ref.
2 150,000 State of New York, General Obligation A* 3.700 No Sinking Fund
12/01/2003 12/01/99 @ 100 Ref.
3 125,000 State of New York, General Obligation A* 3.700 No Sinking Fund
12/01/2004 12/01/99 @ 100 Ref.
4 50,000 State of New York, General Obligation A* 5.000 No Sinking Fund
12/15/2005 None
5 220,000 State of New York, General Obligation A* 3.400 No Sinking Fund
4/01/2006 4/01/00 @ 100 Ref.
6 25,000 State of New York, General Obligation A* 3.600 No Sinking Fund
2/01/2008 2/01/01 @ 100 Ref.
7 50,000 State of New York, General Obligation A* 5.200 No Sinking Fund
5/01/2008 5/01/98 @ 102 Ref.
8 100,000 New York State Housing Finance Agency, AAA 6.375 No Sinking Fund
Health Facilities Bonds, 1972 Series A 5/01/2003 None
8a 50,000 New York State Housing Finance Agency, AAA 6.375 No Sinking Fund
Health Facilities Bonds, 1972 Series A 5/01/2004 None
9 75,000 New York State Housing Finance Agency, AAA 5.600 No Sinking Fund
Health Facilities Bonds, 1973 Series A 5/01/2002 None
9a 30,000 New York State Housing Finance Agency, AAA 5.600 No Sinking Fund
Health Facilities Bonds, 1973 Series A 5/01/2003 None
9b 100,000 New York State Housing Finance Agency, AAA 5.600 No Sinking Fund
Health Facilities Bonds, 1973 Series A 11/01/2003 None
10 740,000 New York State Housing Finance Agency, AAA 7.600 Currently @ 100 S.F.
Health Facilities Bonds, 1979 Series A 11/01/2004 None
11 30,000 New York State Housing Finance Agency, A* 5.850 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2002 5/01/98 @ 102 Ref.
1971 Series A
11a 50,000 New York State Housing Finance Agency, A* 5.850 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2003 5/01/98 @ 102 Ref.
1971 Series A
11b 65,000 New York State Housing Finance Agency, A* 5.875 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2011 5/01/98 @ 102 Ref.
1971 Series A
12 30,000 New York State Housing Finance Agency, A* 5.500 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2006 1/31/98 @ 102 Ref.
1972 Series A
12a 40,000 New York State Housing Finance Agency, A* 5.500 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2011 1/31/98 @ 102 Ref.
1972 Series A
13 20,000 New York State Housing Finance Agency, A* 5.900 No Sinking Fund
Hospital and Nursing Home Project Bonds, 11/01/2006 1/31/98 @ 101 Ref.
1974 Series A
</TABLE>
Portfolio Market
No. Value (3)
1 $ 48,695
2 144,624
3 119,274
4 52,066
5 201,835
6 22,730
7 51,080
8 110,189
8a 55,804
9 79,326
9a 31,975
9b 107,128
10 820,431
11 30,782
11a 51,304
11b 66,489
12 30,625
12a 40,820
13 20,220
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
<TABLE>
New York Municipal Trust, Series 5
Portfolio
December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Redemption
Aggregate Coupon Rate/ Feature (2)(4)
Portfolio Principal Name of Issuer and Ratings Date(s) of S.F.-Sinking Fund
No. Amount Title of Bonds (1) Maturity (2) Ref.-Refunding
<S> <C> <C> <C> <C> <C>
14 $ 205,000 New York State Housing Finance Agency, A* 6.875% 11/01/98 @ 100 S.F.
Hospital and Nursing Home Project Bonds, 11/01/2007 1/31/98 @ 101 Ref.
1977 Series A
15 960,000 New York State Medical Care Facilities A* 7.400 11/01/04 @ 100 S.F.
Finance Agency, Hospital and Nuring 11/01/2016 1/31/98 @ 102 Ref.
Home Project Bonds, 1979 Series A
16 75,000 The Port Authority of New York and AA- 5.500 Currently @ 103 S.F.
New Jersey Consolidated Bonds, 10/01/2008 4/01/98@ 100 Ref.
Forty-First Series
17 100,000 Riverhead Housing Development NR 8.250 Currently @ 100 S.F.
Corporation (New York), Section 8 8/01/2010 1/31/98 @ 103.5 Ref.
Assisted Mortgage Revenue Bonds
(Riverhead Village Apartment Project)
18 1,240,000 Tonawanda Senior Citizen Housing NR 7.875 Currently @ 100 S.F.
Corporation, Section 8 Assisted 2/01/2011 2/01/98 @ 103.5 Ref.
Mortgage Rev. Bonds (Westchester Park
Apartment Project)
19 35,000 Puerto Rico Highway Authority, A 5.250 Currently @ 100 S.F.
Highway Revenue Bonds, Series A 7/01/98 1/31/98 @ 100 Ref.
20 800,000 Puerto Rico Housing Finance Corporation, A 8.250 Currently @ 100 S.F.
Multi-Fam. Mortgage Revenue Bonds, 6/01/2011 1/31/98 @ 100 Ref.
Series 1979A (Section 8 Assisted Albors
Housing Developments/National Housing
Partnership)
------------
$ 5,415,000 Total Investments (Cost $5,107,220)
============
</TABLE>
Portfolio Market
No. Value (3)
14 $ 207,476
15 981,570
16 76,537
17 103,663
18 1,283,969
19 35,041
20
802,976
----------------
$ 5,576,629
================
See accompanying footnotes to portfolio and notes to financial statements.
<PAGE>
New York Municipal Trust, Series 5
Footnotes to Portfolio
- -------------------------------------------------------------------------------
1. All ratings are by Kenny S&P Evaluation Services, a business unit of
J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill Companies,
Inc., except for those identified by an asterisk (*) which are by
Moody's Investors Service, Inc. A brief description of the ratings
symbols and their meaning is set forth under "Description of Bond
Ratings" in Part B of the Prospectus.
2. See "The Trust - Portfolio" in Part B of the Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of the
Prospectus for a statement of the Federal tax consequences to a
Certificateholder upon the sale, redemption or maturity of a bond.
3. At December 31, 1997, the net unrealized appreciation of all the bonds
was comprised of the following:
Gross unrealized appreciation $495,088
Gross unrealized depreciation (25,679)
--------
Net unrealized appreciation $469,409
========
4. The Bonds may also be subject to other calls, which may be permitted or
required by events which cannot be predicted (such as destruction,
condemnation, termination of a contract, or receipt of excess or
unanticipated revenues).
The accompanying notes form an integral part of the financial statements.
<PAGE>
New York Municipal Trust, Series 5
Statement of Net Assets
December 31, 1997
Investments in Securities,
at Market Value (Cost $5,107,220) $5,576,629
----------
Other Assets
Accrued Interest 84,952
Cash 64,184
----------
Total Other Assets 149,136
----------
Net Assets (11,477 Units of Fractional Undivided
Interest Outstanding, $498.89 per Unit) $5,725,765
==========
The accompanying notes form an integral part of the financial statements.
<PAGE>
New York Municipal Trust, Series 5
Statement of Operations
For the Years Ended December 31,
1997 1996 1995
Investment Income
Interest $405,120 $443,810 $467,724
-------- -------- --------
Expenses
Trustee's Fees 15,928 11,604 10,278
Evaluator's Fee 3,273 3,286 3,013
-------- -------- --------
Total Expenses 19,201 14,890 13,291
-------- -------- --------
Net Investment Income 385,919 428,920 454,433
-------- -------- --------
Realized and Unrealized Gain (Loss)
Realized Gain (Loss)
on Investments (4,458) 20,427 6,897
Change in Unrealized Appreciation
(Depreciation) on Investments 16,524 (87,680) 228,329
-------- -------- --------
Net Gain (Loss) on Investments 12,066 (67,253) 235,226
-------- -------- --------
Net Increase in Net Assets
Resulting From Operations $397,985 $361,667 $689,659
======== ======== ========
The accompanying notes form an integral part of the financial statements.
<PAGE>
New York Municipal Trust, Series 5
Statement of Changes in Net Assets
For the Years Ended December 31,
1997 1996 1995
Operations
Net Investment Income $385,919 $428,920 $454,433
Realized Gain (Loss)
on Investments (4,458) 20,427 6,897
Change in Unrealized Appreciation
(Depreciation) on Investments 16,524 (87,680) 228,329
---------- ---------- ----------
Net Increase in Net Assets
Resulting From Operations 397,985 361,667 689,659
---------- ---------- ----------
Distributions to Certificateholders
Investment Income 395,672 428,565 453,729
Principal 630,454 243,086 101,075
Redemptions
Interest 1,044 7,314 4,018
Principal 29,331 170,084 139,400
---------- ---------- ----------
Total Distributions
and Redemptions 1,056,501 849,049 698,222
---------- ---------- ----------
Total (Decrease) (658,516) (478,382) (8,563)
Net Assets
Beginning of Year 6,384,281 6,862,663 6,871,226
---------- ---------- ----------
End of Year (Including
Undistributed Net Investment
Income of $149,104, $159,901
and $166,860, Respectively) $5,725,765 $6,384,281 $6,862,663
========== ========== ==========
The accompanying notes form an integral part of the financial statements.
<PAGE>
New York Municipal Trust, Series 5
Notes to Financial Statements
1. Organization
New York Municipal Trust, Series 5 (the "Trust") was organized on June
22, 1979 by Bear, Stearns & Co. Inc. under the laws of the State of New
York by a Trust Indenture and Agreement, and is registered under the
Investment Company Act of 1940. The Trust was formed to preserve
capital and to provide interest income.
Effective September 28, 1995, Reich & Tang Distributors L.P. ("Reich &
Tang") has become the successor sponsor (the "Sponsor") to certain of
the unit investment trusts previously sponsored by Bear, Stearns & Co.
Inc. As successor Sponsor, Reich & Tang has assumed all of the
obligations and rights of Bear, Stearns & Co. Inc., the previous
sponsor.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Trust in preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements
in accordance with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual amounts could differ from those estimates.
Interest income is recorded on the accrual basis.
Security Valuation
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services, a business unit of J.J. Kenny Company, Inc., a
subsidiary of The McGraw-Hill Companies, Inc. The market value of the
portfolio is based upon the bid prices for the bonds at the end of the
year, which approximates the fair value of the security at that date,
except that the market value on the date of deposit represents the cost
to the Trust based on the offering prices for investments at that date.
The difference between cost and market value is reflected as unrealized
appreciation (depreciation) of investments. Securities transactions are
recorded on the trade date. Realized gains (losses) from securities
transactions are determined on the basis of average cost of the
securities sold or redeemed.
<PAGE>
New York Municipal Trust, Series 5
Notes to Financial Statements
3. Income Taxes
No provision for federal income taxes has been made in the accompanying
financial statements because the Trust intends to continue to qualify
for the tax treatment applicable to Grantor Trusts under the Internal
Revenue Code. Under existing law, if the Trust so qualifies, it will
not be subject to federal income tax on net income and capital gains
that are distributed to unitholders.
4. Trust Administration
The Bank of New York (the "Trustee") has custody of assets and
responsibility for the accounting records and financial statements of
the Trust and is responsible for establishing and maintaining a system
of internal control related thereto. The Trustee is also responsible
for all estimates of expenses and accruals reflected in the Trust's
financial statements.
The Trust Indenture and Agreement provides for interest distributions
as often as monthly (depending upon the distribution plan elected by
the Certificateholders).
The Trust Indenture and Agreement further requires that principal
received from the disposition of bonds, other than those bonds sold in
connection with the redemption of units, be distributed to
Certificateholders.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. For the years ended December 31, 1997, 1996 and 1995,
56, 309 and 247 units were redeemed, respectively.
The Trust pays an annual fee for trustee services rendered by the
Trustee that ranges from $.40 to $1.08 per $1,000 of outstanding
investment principal. In addition, a minimum fee of $35.00 is paid to a
service bureau for each portfolio valuation. For the year ended
December 31, 1997, the "Trustee's Fees" are comprised of Trustee fees
of $5,368 and other expenses of $10,560. For the year ended December
31, 1996, the "Trustee's Fees" are comprised of Trustee fees of $5,676
and other expenses of $5,928. The other expenses include professional,
printing and miscellaneous fees.
<PAGE>
New York Municipal Trust, Series 5
Notes to Financial Statements
5. Net Assets
At December 31, 1997, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $13,324,802
Less Initial Gross Underwriting Commission 599,560
----------
12,725,242
Accumulated Cost of Securities Sold,
Matured or Called (7,618,022)
Net Unrealized Appreciation 469,409
Undistributed Net Investment Income 149,104
Undistributed Proceeds From Investments 32
----------
Total $5,725,765
==========
The original cost to Certificateholders, less the initial gross
underwriting commission, represents the aggregate initial public
offering price net of the applicable sales charge on 13,000 units of
fractional undivided interest of the Trust as of the date of deposit.
6. Concentration of Credit Risk
Since the Trust invests a portion of its assets in municipal bonds, it
may be affected by economic and political developments in the
municipalities. Certain debt obligations held by the Trust may be
entitled to the benefit of insurance, standby letters of credit or
other guarantees of banks or other financial institutions.
<PAGE>
New York Municipal Trust, Series 5
Notes to Financial Statements
7. Financial Highlights (per unit)*
Selected data for a unit of the Trust outstanding:
For the years ended December 31,
1997 1996
Net Asset Value, Beginning of Year** $553.57 $579.52
------- -------
Interest Income 35.21 37.97
Expenses (1.67) (1.27)
------- -------
Net Investment Income 33.54 36.70
------- -------
Net Gain or Loss on Investments(1) 1.06 (4.55)
------- -------
Total from Investment Operations 34.60 32.15
------- -------
Less Distributions
to Certificateholders
Income 34.39 36.67
Principal 54.80 20.80
for Redemptions
Interest .09 .63
------- -------
Total Distributions 89.28 58.10
------- -------
Net Asset Value, End of Year** $498.89 $553.57
======= =======
(1) Net gain or loss on investments is a result of changes in outstanding
units since January 1, 1997 and 1996, respectively, and the dates of
net gain and loss on investments.
- --------
* Unless otherwise stated, based upon average units outstanding during
the year of 11,505 ([11,477 + 11,533]/2) for 1997 and of 11,688
([11,533 + 11,842]/2) for 1996.
** Based upon actual units outstanding
<PAGE>
replaces an earlier
one
Note: Part B of This Prospectus May Not be Distributed
Unless Accompanied by Part A.
Please Read And Retain Both Parts of This
Prospectus For Future Reference.
NEW YORK MUNICIPAL TRUST
Prospectus Part B
Dated: April 30, 1998
THE TRUST
ORGANIZATION. "New York Municipal Trust" is a unit investment
trust created under the laws of the State of New York pursuant to a Trust
Indenture and Agreement* (the "Trust Agreement"), dated the Date of Deposit,
among Reich & Tang Distributors, Inc. as Sponsor, The Bank of New York as
Trustee, and Kenny S&P Evaluation Services, a business unit of J.J. Kenny
Company, Inc., a subsidiary of The McGraw-Hill Companies, as Evaluator.
On the Date of Deposit the Sponsor deposited with the Trustee
long-term bonds, and/or delivery statements relating to contracts for the
purchase of certain such bonds (the "Bonds") and cash or an irrevocable letter
of credit issued by a major commercial bank in the amount required for such
purchases. Thereafter, the Trustee, in exchange for the Bonds so deposited,
delivered to the Sponsor the Certificates evidencing the ownership of all Units
of the Trusts.
The Trust consists of the interest-bearing bonds described
under "The Trust" in Part A of this Prospectus, the interest (including, where
applicable, earned original issue discount) on which is, in the opinions of bond
counsel to the respective issuers given at the time of original delivery of the
Bonds, exempt from regular federal income tax under existing law and from New
York State and New York City income taxes under existing law.
Each "Unit" outstanding on the Evaluation Date represented an
undivided interest or pro rata share in the principal and interest of the Trust
in the ratio of one Unit to the principal amount of Bonds initially deposited in
the Trust as set forth in Part A of this Prospectus. To the extent that any
Units are redeemed by the Trustee, the fractional undivided interest or pro rata
share in the Trusts represented by each unredeemed Unit will increase, although
the actual interest in the Trusts represented by such fraction will remain
unchanged. Units will remain outstanding until redeemed upon tender to the
Trustee by Certificateholders, which may include the Sponsor, or until the
termination of the Trust Agreements.
OBJECTIVES. The Trust offers investors the opportunity to
participate in a portfolio of long-term tax-exempt bonds with a greater
diversification than they might be able to acquire themselves. The objectives
- --------
* References in this Prospectus to the Trust Agreement are qualified in
their entirety by the Trust Indenture and Agreement which is
incorporated herein by reference.
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<PAGE>
of the Trust are to preserve capital and to provide interest income (including,
where applicable, earned original issue discount) which is, in the opinions of
bond counsel to the respective issuers given at the time of original delivery of
the Bonds, exempt from regular federal income tax and from New York State and
New York City income taxes under existing law. Such interest income may,
however, be subject to the federal alternative minimum tax and to state and
local taxes in other jurisdictions. Investors should be aware that there is no
assurance the Trusts' objectives will be achieved as these objectives are
dependent on the continuing ability of the issuers of the Bonds to meet their
interest and principal payment requirements, on the continuing satisfaction of
the conditions required for the exemption of interest thereon from regular
federal income tax and on the market value of the Bonds, which can be affected
by fluctuations in interest rates and other factors.
Since disposition of Units prior to final liquidation of the
Trust may result in an investor receiving less than the amount paid for such
Units (see "Comparison of Public Offering Price, Sponsor's Repurchase Price and
Redemption Price"), the purchase of a Unit should be looked upon as a long-term
investment. Neither the Trusts nor the Total Reinvestment Plan is designed to be
a complete investment program.
PORTFOLIOS
All of the Bonds in the Trust were rated "A" or better by
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies
("Standard & Poor's") or Moody's Investors Service, Inc. ("Moody's") at the time
originally deposited in the Trust. For a list of the ratings of each Bond on the
Evaluation Date, see "Portfolio" in Part A of this Prospectus.
For information regarding (i) the number of issues in the
Trust, (ii) the range of fixed maturities of the Bonds, (iii) the number of
issues payable from the income of a specific project or authority and (iv) the
number of issues constituting general obligations of a government entity, see
"Description of Portfolio" in Part A.
When selecting Bonds for the Trust, the following factors,
among others, were considered by the Sponsor on the Date of Deposit: (a) the
quality of the Bonds and whether such Bonds were rated "A" or better by either
Standard & Poor's or Moody's, (b) the yield and price of the Bonds relative to
other New York and Puerto Rico debt securities of comparable quality and
maturity, (c) income to the Certificateholders of the Trusts and (d) the
diversification of the Trust portfolio, as to purpose of issue and location of
issuer, taking into account the availability in the market of issues which meet
such Trust's quality, rating, yield and price criteria. Subsequent to the
Evaluation Date, a Bond may cease to be rated or its rating may be reduced below
that specified above. Neither event requires an elimination of such Bond from
the Trust but may be considered in the Sponsor's determination to direct the
Trustee to dispose of the Bond. See "Portfolio Supervision." For an
interpretation of the bond ratings see "Description of Bond Ratings."
Housing Bonds: Some of the aggregate principal amount of the
Bonds may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to rental housing projects
for low to moderate income families. Since such obligations are usually not
general obligations of a particular state or municipality and are generally
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<PAGE>
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. See "Description of Portfolio"
in Part A for the amount of rental housing bonds contained therein.
Hospital Revenue Bonds: Some of the aggregate principal amount
of the Bonds may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary considerably
from such projections. A hospital's gross receipts and net income will be
affected by future events and conditions including, among other things, demand
for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
third-party payors and government programs such as Medicare and Medicaid. Both
private third-party payors and government programs have undertaken cost
containment measures designed to limit payments. Furthermore, government
programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions, all of
which may materially decrease the rate of program payments for health care
facilities. There can be no assurance that payments under governmental programs
will remain at levels comparable to present levels or will, in the future, be
sufficient to cover the costs allocable to patients participating in such
programs. In addition, there can be no assurance that a particular hospital or
other health care facility will continue to meet the requirements for
participation in such programs.
The health care delivery system is undergoing considerable
alteration and consolidation. Consistent with that trend, the ownership or
management of a hospital or health care facility may change, which could result
in (i) an early redemption of bonds, (ii) alteration of the facilities financed
by the Bonds or which secure the Bonds, (iii) a change in the tax exempt status
of the Bonds or (iv) an inability to produce revenues sufficient to make timely
payment of debt service on the Bonds. 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. See
"Description of Portfolio" in Part A for the amount of hospital revenue bonds
contained therein.
Nuclear Power Facility Bonds: Certain Bonds may have been
issued in connection with the financing of nuclear generating facilities.
Electric utilities which own or operate nuclear power plants are exposed to
risks inherent in the nuclear industry. These risks include exposure to new
requirements resulting from extensive federal and state regulatory oversight,
public controversy, decommissioning costs, and spent fuel and radioactive waste
disposal issues. While nuclear power construction risks are no longer of
paramount concern, the emerging issue is radioactive waste disposal. In
addition, nuclear plants typically require substantial capital additions and
modifications throughout their operating lives to meet safety, environmental,
operational and regulatory requirements and to replace and upgrade various plant
systems. The high degree of regulatory monitoring and controls imposed on
nuclear plants could cause a plant to be out of service or on limited service
for long periods. When a nuclear facility owned by an investor-owned utility or
a state or local municipality is out of service or operating on a
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<PAGE>
limited service basis, the utility operator or its owners may be liable for the
recovery of replacement power costs. Risks of substantial liability also arise
from the operation of nuclear facilities and from the use, handling, and
possible radioactive emissions associated with nuclear fuel. Insurance may not
cover all types or amounts of loss which may be experienced in connection with
the ownership and operation of a nuclear plant and severe financial consequences
could result from a significant accident or occurrence. The Nuclear Regulatory
Commission has promulgated regulations mandating the establishment of funded
reserves to assure financial capability for the eventual decommissioning of
licensed nuclear facilities. These funds are to be accrued from revenues in
amounts currently estimated to be sufficient to pay for decommissioning costs.
The Sponsor is 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. See "Description of Portfolio" in Part
A for the amount of bonds issued to finance nuclear generating facilities
contained therein.
Mortgage Subsidy Bonds: Certain Bonds may be "mortgage subsidy
bonds" which are obligations of which all or a significant portion of the
proceeds are to be used directly or indirectly for mortgages on owner-occupied
residences. Section 103A of the Internal Revenue Code of 1986, as amended,
provided as a general rule that interest on "mortgage subsidy bonds" will not be
exempt from Federal income tax. An exception is provided for certain "qualified
mortgage bonds." Qualified mortgage bonds are bonds that are used to finance
owner-occupied residences and that meet numerous statutory requirements. These
requirements include certain residency, ownership, purchase price and target
area requirements, ceiling amounts for state and local issuers, arbitrage
restrictions and (for bonds issued after December 31, 1984) certain information
reporting, certification, public hearing and policy statement requirements. In
the opinions of bond counsel to the issuing governmental authorities, interest
on all the Bonds in a Trust that might be deemed "mortgage subsidy bonds" will
be exempt from Federal income tax when issued. See "Description of Portfolio" in
Part A for the amount of mortgage subsidy Bonds contained therein.
Mortgage Revenue Bonds: Certain Bonds may be "mortgage revenue
bonds." Under the Internal Revenue Code of 1954, 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 "Discount and Zero Coupon Bonds"). See "Description of
Portfolio" in Part A for the amount of mortgage revenue bonds contained therein.
Private Activity Bonds: The portfolio of the Trust may contain
other Bonds which are "private activity bonds" (often called Industrial Revenue
Bonds ("IRBs") if issued prior to 1987) which would be primarily of
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<PAGE>
two types: (1) Bonds for a publicly owned facility which 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) 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. See "Description of Portfolio" in Part A for the
amount of private activity bonds contained therein.
Litigation: Litigation challenging the validity under state
constitutions of present systems of financing public education has been
initiated in a number of states. Decisions in some states have been reached
holding such school financing in violation of state constitutions. In addition,
legislation to effect changes in public school financing has been introduced in
a number of states. The Sponsor is unable to predict the outcome of the pending
litigation and legislation in this area and what effect, if any, resulting
changes in the sources of funds, including proceeds from property taxes applied
to the support of public schools, may have on the school bonds in the Trusts.
See "Description of Portfolio" for the amount of school bonds contained therein.
Legal Proceedings Involving the Trust: As of the date of this
Prospectus, the Sponsor has not been notified or made aware of any litigation
pending with respect to any Bonds which might reasonably be expected to have a
material adverse effect on 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 Bonds
or the tax-free nature of the interest thereon. At any time after the date of
this Prospectus, litigation may be instituted on a variety of grounds with
respect to the Bonds in the Trust. The Sponsor is unable to predict whether any
such litigation may be instituted or, if instituted, whether it might have a
material adverse effect on the Trust.
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<PAGE>
Other Factors: The Bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until 10 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 bonds, particularly housing bonds, pursuant to such redemption provisions. In
addition, the Bonds in the Trusts are also subject to mandatory redemption in
whole or in part at par at any time that voluntary or involuntary prepayments of
principal on the underlying collateral are made to the trustee for such bonds or
that the collateral is 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 bond to be redeemed substantially
prior to its stated maturity date, earliest call date or sinking fund redemption
date.
The Bonds may also be subject to other calls, which may be
permitted or required by events which cannot be predicted (such as destruction,
condemnation, or termination of a contract).
In 1976 the federal bankruptcy laws were amended so that an
authorized municipal debtor could more easily seek federal court protection to
assist in reorganizing its debts so long as certain requirements were met.
Historically, very few financially troubled municipalities have sought court
assistance for reorganizing their debts; notwithstanding, the Sponsors are
unable to predict to what extent financially troubled municipalities may seek
court assistance in reorganizing their debts in the future and, therefore, what
effect, if any, the applicable federal bankruptcy law provisions will have on
the Trusts.
The Trust may also include "moral obligation" bonds issued by
agencies and authorities of New York State. Under statutes applicable to such
bonds, if an issuer is unable to meet its obligations, the repayment of such
bonds becomes a moral commitment but not a legal obligation of the state or
municipality in question. See "Portfolio" for each Trust in Part A of this
Prospectus for the amount of moral obligation bonds contained in each State
Trust's portfolio.
Certain of the Bonds in the Trust are subject to redemption
prior to their stated maturity dates pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund appropriated specifically toward
the retirement of a debt. 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 is redeemed at or before maturity from the proceeds of a
new issue of bonds. In general, call provisions are more likely to be exercised
when the offering side evaluation of a bond is at a premium over par than when
it is at a discount from par. A listing of the sinking fund and call provisions,
if any, with respect to each of the Bonds is contained under "Portfolio" in Part
A of this Prospectus. Certificateholders will realize a gain or loss on the
early redemption of such Bonds, depending upon whether the price of such Bonds
is at a discount from or at a premium over par at the time the
Certificateholders purchase their Units.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds. Because certain of the
Bonds from time to time may be redeemed or will mature in accordance with their
terms or may be sold under certain circumstances, no assurance can be given that
the Trust will retain its present size and composition for any
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<PAGE>
length of time. The proceeds from the sale of a Bond or the exercise of any
redemption or call provision will be distributed to Certificateholders on the
next distribution date except to the extent such proceeds are applied to meet
redemptions of Units. See "Trustee Redemption."
Puerto Rico Bonds: Certain of the Bonds in the Trust may be
general obligation 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 United States mainland. 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 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 Planning Board's gross product forecast for fiscal 1998
projected an increase of 3.0% over fiscal 1997.
Discount and Zero Coupon Bonds: Some of the Bonds in the Trust
may be original issue discount bonds. The original issue discount, which is the
difference between the initial purchase price of the Bonds and the face value,
is deemed to accrue on a daily basis and the accrued portion will be treated as
tax-exempt interest income for regular federal income tax purposes. Upon sale or
redemption, any gain realized that is in excess of the earned portion of
original issue discount will be taxable as capital gain. (See "Tax Status.") The
current value of an original issue discount bond reflects the present value of
its face amount at maturity. The market value tends to increase more slowly in
early years and in greater increments as the Bonds approach maturity. Of these
original issue discount bonds, a portion of the aggregate principal amount of
the Bonds in each Trust is Zero Coupon Bonds. See "Description of Portfolio" in
Part A. Zero Coupon Bonds do not provide for the payment of any current interest
and provide for payment at maturity at
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par value unless sooner sold or redeemed. The market value of Zero Coupon Bonds
is subject to greater fluctuation than coupon bonds in response to changes in
interest rates. Zero Coupon Bonds generally are subject to redemption at
compound accreted value based on par value at maturity. Because the issuer is
not obligated to make current interest payments, Zero Coupon Bonds may be less
likely to be redeemed than coupon bonds issued at a similar interest rate.
Some of the Bonds in the Trust may have been purchased at deep
"market" discount from par value at maturity. This is because the coupon
interest rates on the discount bonds at the time they were purchased and
deposited in the Trust were lower than the current market interest rates for
newly issued bonds of comparable rating and type. At the time of issuance the
discount Bonds were for the most part issued at then current coupon interest
rates. The current yields (coupon interest income as a percentage of market
price) of discount bonds will be lower than the current yields of comparably
rated bonds of similar type newly issued at current interest rates because
discount bonds tend to increase in market value as they approach maturity and
the full principal amount becomes payable. A discount bond held to maturity will
have a larger portion of its total return in the form of capital gain and less
in the form of tax-exempt interest income than a comparable bond newly issued at
current market rates. 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. Discount bonds with a longer term to
maturity tend to have a higher current yield and a lower current market value
than otherwise comparable bonds with a shorter term to maturity. If interest
rates rise, the value of discount bonds will decrease; and if interest rates
decline, the value of discount bonds will increase. The discount does not
necessarily indicate a lack of market confidence in the issuer.
Year 2000 Issue: The Trust, like other business entities,
could be adversely affected if the computer systems used by the Sponsor and
Trustee or other service providers to the Trust do not properly process and
calculate date-related information and data from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem." The Sponsor and Trustee are taking
steps that they believe are reasonably designed to address the Year 2000 Problem
with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by the Trusts' other service
providers. However, there can be no assurance that the Year 200 Problem will be
properly or timely resolved so to avoid any adverse impact to the Trust.
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
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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
7.3 million, is an international center of business and culture. Its non-
manufacturing economy is broadly based, with the banking and securities, life
insurance, communications, publishing, fashion design, retailing and
construction industries accounting for a significant portion of the City's total
employment earnings. Additionally, the City is the nation's leading tourist
destination. The City's manufacturing activity is conducted primarily in apparel
and printing.
The national economic downturn which began in July 1990
adversely affected the local economy, which had been declining since late 1989.
As a result, the City experienced job losses in 1990 and 1991 and real Gross
City Product ("GCP") fell in those two years. Beginning in calendar year 1992,
the improvement in the national economy helped stabilize conditions in the City.
Employment losses moderated toward year-end and real GCP increased, boosted by
strong wage gains. After noticeable improvements in the City's economy during
calendar year 1994, economic growth slowed in calendar year 1995, and thereafter
improved during calendar year 1996, reflecting improved securities industry
earnings and employment in other sectors. The City's current four-year financial
plan assumes that moderate economic growth will continue through calendar year
2001, with moderating job growth and wage increases.
For each of the 1981 through 1996 fiscal years, the City
achieved balanced operating results as reported in accordance with generally
accepted accounting principles ("GAAP"). The City has been required to close
substantial budget 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 a balanced budget as required by State law
without additional tax or other revenue increases or additional reductions in
City services or entitlement programs, which could adversely affect the City's
economic base.
Pursuant to the New York State Financial Emergency Act for the
City of New York, the City prepares an annual four-year financial plan, which
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is reviewed and revised on a quarterly basis and which includes the City's
capital, revenue and expense projections and outlines proposed gap-closing
programs for years with projected budget gaps. The City's current four-year
financial plan projects a surplus in the 1998 fiscal year (before discretionary
transfers) and substantial budget gaps for each of the 1999, 2000 and 2001
fiscal years. This pattern of current year surplus and projected subsequent year
budget gaps has been consistent through virtually the entire period since 1982,
during which the City has achieved balanced operating results for each fiscal
year. The City is required to submit its financial plans to review bodies,
including the New York State Financial Control Board ("Control Board").
The City depends on State aid 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 or that State budgets in future fiscal years will be adopted
by the April 1 statutory deadline and that 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 four-year
financial plan, including the City's current financial plan for the 1998 through
2001 fiscal years (the "1998-2001 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.
Changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include the condition
of the regional and local economies, the impact on real estate tax revenues of
the real estate market, wage increases for City employees consistent with those
assumed in the Financial Plan, employment growth, the ability to implement
proposed reductions in City personnel and other cost reduction initiatives, the
ability of the New York City Health and Hospitals Corporation ("HHC") and the
Board of Education ("BOE") to take actions to offset potential budget
shortfalls, the ability to complete revenue generating transactions, provision
of State and Federal aid and mandate relief and the impact on City revenues and
expenditures of Federal and State welfare reform and any future legislation
affecting Medicare or other entitlements.
Implementation of the Financial Plan is also dependent upon
the City's ability to market its securities successfully. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $4.9
billion of general obligation bonds and $7.1 billion of bonds to be issued by
the proposed New York City Infrastructure Finance Authority ("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 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
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discussion of such developments, as well as prevailing market conditions, may
affect the market for outstanding City general obligation bonds and notes.
The City's operating results for the 1996 fiscal year were
balanced in accordance with GAAP, after taking into account a discretionary
transfer of $224 million, the sixteenth consecutive year of GAAP balanced
results.
On June 10, 1997, the City submitted to the Control Board the
Financial Plan for the 1998 through 2001 fiscal years, which relates to the
City, BOE and the City University of New York ("CUNY") and reflects the City's
expense and capital budgets for the 1998 fiscal year, which were adopted on June
6, 1997. The Financial Plan projects revenues and expenditures for the 1998
fiscal year balanced in accordance with GAAP. The Financial Plan includes
increased tax revenue projections; reduced debt service costs; the assumed
restoration of Federal funding for programs assisting certain legal aliens;
additional expenditures for textbooks, computers, improved education programs
and welfare reform, law enforcement, immigrant naturalization, initiatives
proposed by the City Council and other initiatives; and a proposed discretionary
transfer to the 1998 fiscal year of $300 million of debt service due in the 1999
fiscal year for budget stabilization purposes. In addition, the Financial Plan
reflects the discretionary transfer to the 1997 fiscal year of $1.3 billion of
debt service due in the 1998 and 1999 fiscal years, and includes actions to
eliminate a previously projected budget gap for the 1998 fiscal year. These gap
closing actions include (i) additional agency actions totaling $621 million;
(ii) the proposed sale of various assets; (iii) additional State aid of $294
million, including a proposal that the State accelerate a $142 million revenue
sharing payment to the City from March 1999; and (iv) entitlement savings of
$128 million which would result from certain of the reductions in Medicaid
spending proposed in the Governor's 1997-1998 Executive Budget and the State
making available to the City $77 million of additional Federal block grant aid,
as proposed in the Governor's 1997-1998 Executive Budget. The Financial Plan
also sets forth projections for the 1999 through 2001 fiscal years and projects
gaps of $1.8 billion, $2.8 billion and $2.6 billion for the 1999 through 2001
fiscal years, respectively.
The Financial Plan assumes approval by the State Legislature
and the Governor of (i) a tax reduction program proposed by the City totaling
$272 million, $435 million, $465 million and $481 million in the 1998 through
2001 fiscal years, respectively, which includes a proposed elimination of the 4%
City sales tax on clothing items under $500 as of December 1, 1997, and (ii) a
proposed State tax relief program, which would reduce the City property tax and
personal income tax, and which the Financial Plan assumes will be offset by
proposed increased State aid totaling $47 million, $254 million, $472 million
and $722 million in the 1998 through 2001 fiscal years, respectively.
The Financial Plan also 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 $166 million and $494 million in the
2000 and 2001 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 $188 million, $527
million and $554 million in the 1999 through 2001 fiscal year, respectively;
(ii) collection of the projected rent payments for the City's airports, totaling
$385 million, $175 million, and $170 million in the 1999, 2000 and 2001 fiscal
years, respectively, which may depend on the successful completion of
negotiations with the Port Authority or the enforcement of the City's rights
under the existing leases through pending
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legal actions; and (iii) State approval of the cost containment initiatives and
State aid proposed by the City for the 1998 fiscal year, and $115 million in
State aid which is assumed in the Financial Plan but was not provided for in the
Governor's 1997-1998 Executive Budget. The Financial Plan reflects the increased
costs which the City is prepared to incur as a result of welfare legislation
recently enacted by Congress. 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.
The City annually prepares a modification to its financial
plan in October or November which amends the financial plan to accommodate any
revisions to forecast revenues and expenditures and to specify any additional
gap-closing initiatives to the extent required to offset decreases in projected
revenues or increases in projected expenditures. The Major is expected to
publish the first quarter modification (the "Modification") for the 1998 fiscal
year in November. Since the preparation of the Financial Plan, the State has
adopted its budget for the 1997-1998 fiscal year. The State budget enacted a
smaller sales tax reduction than the tax reduction program assumed by the City
in the Financial Plan, which will increase projected City sales tax revenues;
provided for State aid to the City which was less than assumed in the Financial
Plan; and enacted a State funded tax relief program which begins a year later
than reflected in the Financial Plan. In addition, the net effect of tax law
changes made in the Federal Balanced Budget Act of 1997 are expected to increase
tax revenues in the 1998 fiscal year. These changes will be reflected in the
Modification.
The projections for the 1998 through 2001 fiscal years reflect
the costs of the settlements with the United Federation of Teachers ("UFT") and
a coalition of unions headed by District Council 37 of the American Federation
of State, County and Municipal Employees ("District Council 37"), which together
represent approximately two-thirds of the City's workforce, and assume that the
City will reach agreement with its remaining municipal unions under terms which
are generally consistent with such settlements. The settlement provides for a
wage freeze in the first two years, followed by a cumulative effective wage
increase of 11% by the end of the five year period covered by the proposed
agreements, ending in fiscal years 2000 and 2001. Additional benefit increases
would raise the total cumulative effective increase to 13% above present costs.
Costs associated with similar settlements for all City-funded employees would
total $49 million, $459 million and $1.2 billion in the 1997, 1998 and 1999
fiscal years, respectively, and exceed $2 billion in each fiscal year after the
1999 fiscal year. Subsequently, the City reached settlements, through agreements
or statutory impasse procedures, with bargaining units which, together with the
UFT and District Council 37, represent approximately 86% of the City's
workforce.
In 1975, Standard & Poor's suspended its A rating of City
bonds. This suspension remained in effect until March 1981, at which time the
City received an investment grade rating of BBB from Standard & Poor's. On July
2, 1985, Standard & Poor's revised its rating of City bonds upward to BBB+ and
on November 19, 1987, to A-. On July 10, 1995, Standard & Poor's revised its
rating of City bonds downward to BBB+.
Moody's ratings of City bonds were revised in November 1981
from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985
to Baa1, in May 1988 to A and again in February 1991 to Baa1. On July 17, 1997,
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Moody's changed its outlook on City bonds to positive from stable. Since July
15, 1993, Fitch has rated City bonds A-. Since July 8, 1997, IBCA Limited has
rated City bonds A.
New York State and its Authorities. The State's budget for the
State's 1997-1998 fiscal year, commencing on April 1, 1997, was adopted by the
Legislature on August 4, 1997. Prior to adoption of the budget, the Legislature
enacted appropriations for disbursements for its 1997-1998 fiscal year
considered to be necessary for State operations and other purposes. The State
Financial Plan for the 1997-1998 fiscal year was formulated on August 11, 1997
and is based on the State's budget as enacted by the Legislature, as well as
actual results for the first quarter of the current fiscal year. The 1997-1998
State Financial Plan is expected to be updated in October and January. The
1997-1998 State Financial Plan is projected to be balanced on a cash basis.
Total General Fund receipts and transfers from other funds are projected to be
$35.09 billion, while total General Fund disbursements and transfers to other
funds are projected to be $34.60 billion. The adopted 1997-1998 budget projects
a year-over-year increase in General Fund disbursements of 5.2 percent. As
compared to the Governor's proposed budget amended in February 1997, the State's
adopted budget for 1997-1998 increases General Fund spending by $1.7 billion,
primarily due to increases for local assistance ($1.3 billion). Resources used
to fund these additional expenditures include increased revenues projected for
the 1997-1998 fiscal year, increased resources produced in the 1996-1997 fiscal
year that will be utilized in 1997-1998, reestimates of social service, fringe
benefit and other spending, and certain non-recurring resources.
The 1997-1998 adopted budget includes 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 Financial Plan,
and do not begin to materially affect the out-year projections until the State's
1999-2000 fiscal year.
The economic and financial condition of the State may be
affected by various financial, social, economic and political factors. Those
factors can be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its agencies
and instrumentalities, but also by entities, such as the Federal government,
that are not under the control of the State. In addition, the State Financial
Plan is based upon forecasts of national and State economic activity. Economic
forecasts have frequently failed to predict accurately the timing and magnitude
of changes in the national and the State economies. Actual results could differ
materially and adversely from projections and those projections may be changed
materially and adversely from time to time.
The State closed projected budget gaps of $5.0 billion, $3.9
billion and $2.3 billion for its 1995-1996, 1996-1997 and 1997-1998 fiscal
years, respectively. The 1998-1999 budget gap was projected at $1.68 billion
(before the application of any assumed efficiencies) in the out-year projections
submitted to the Legislature in February 1997. As a result of changes made in
the adopted budget, the 1998-1999 gap is now expected by the State to be about
the same or smaller than the amount previously projected, after application of
the $530 million reserve for future needs. The Governor has indicated that he
will propose to close any potential imbalance primarily through General Fund
expenditure reductions and without increases in taxes or
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deferrals of scheduled tax reductions. The revised expectations for the 1998-
1999 fiscal year reflect the loss of $1.4 billion in surplus resources from
1996-1997 operations that are being utilized to finance current year spending,
an incremental effect of approximately $300 million in legislated State and
local tax reductions in the out-year and other factors.
In recent years, State actions affecting the level of receipts
and disbursements, the relative strength of the State and regional economy,
actions of the Federal government and other factors have created structural
budget gaps for the State. These gaps resulted from a significant disparity
between recurrent revenues and the costs of maintaining or increasing the level
of support for State programs. To address a potential imbalance in any given
fiscal year, the State would be required to take actions to increase receipts
and/or reduce disbursements as it enacts the budget for that year, and under the
State Constitution, the Governor is required to propose a balanced budget each
year. There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.
Other actions taken in the 1997-1998 adopted budget add
further pressure to future State budget balance. For example, the fiscal effects
of tax reductions adopted in the 1997-1998 budget are projected to grow more
substantially beyond the 1998-1999 fiscal year. The full annual cost of the
enacted tax reduction package is estimated by the State at approximately $4.8
billion when fully effective in State fiscal year 2001-2002. In addition, the
1997-1998 budget included multi-year commitments for school aid and pre-
kindergarten early learning programs which could add as much as $1.4 billion in
costs when fully annualized in fiscal year 2001-2002. These spending commitments
are subject to annual appropriation.
On September 11, 1997, the New York State Comptroller issued a
report which noted that the ability to deal with future budget gaps could become
a significant issue in the State's 2000-2001 fiscal year, when the cost of tax
cuts increases by $1.9 billion. The report contained projections that, based on
current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller
if recurring spending reductions produce savings in earlier years. The State
Comptroller has also stated that if Wall Street earnings moderate and the State
experiences a moderate recession, the gap for the 2001- 2002 State fiscal year
could grow to nearly $12 billion.
In recent years, the State has failed to adopt a budget prior
to the beginning of this fiscal year. A prolonged delay in the adoption of the
State's budget beyond the statutory April 1 deadline without interim
appropriations could delay the projected receipt by the City of State aid, and
there can be no assurance that State budgets in future fiscal years will be
adopted by the April 1 statutory deadline.
On August 28, 1997, Standard & Poor's revised its ratings on
the State's general obligation bonds from A- to A and, in addition, revised its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease purchase and contractual obligations
from A to Baa1. On February 10, 1997, Moody's confirmed its A2 rating on the
State's general obligation long-term indebtedness.
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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 maintain a balanced 1997-98 State Financial Plan.
The claims involving the City other than routine litigation
incidental to the performance of their governmental and other functions and
certain other litigation arise out of alleged constitutional violations, torts,
breaches of contract and other violations of law and condemnation proceedings.
While the ultimate outcome and fiscal impact, if any, on the City of those
proceedings and claims are not currently predictable, adverse determinations in
certain of them might have a material adverse effect upon the City's ability to
carry out the 1998-2001 Financial Plan. The City has estimated that its
potential future liability on account of outstanding claims against it as of
June 30, 1996 amounted to approximately $2.8 billion.
PUBLIC OFFERING
OFFERING PRICE. The secondary market Public Offering Price per
Unit is computed by adding a sales charge to the aggregate bid price of the
Bonds in the Trust divided by the number of Units outstanding. The method used
by the Evaluator for computing the sales charge for secondary market purchases
shall be based upon the number of years remaining to maturity of each Bond.
Bonds will be deemed to mature on their stated maturity dates unless bonds have
been called for redemption, funds have been placed in escrow to redeem them on
an earlier call date or are subject to a "mandatory put," in which case the
maturity will be deemed to be such other date.
The table below sets forth the various sales charges based on
the length of maturity of each Bond:
As Percent of Public
Time to Maturity Offering Price
less than 6 months 0%
6 mos. to 1 year 1%
over 1 yr. to 2 yrs. 1 1/2%
over 2 yrs. to 4 yrs. 2 1/2%
over 4 yrs. to 8 yrs. 3 1/2%
over 8 yrs. to 15 yrs. 4 1/2%
over 15 years 5 1/2%
A proportionate share of accrued interest on the Bonds to the
expected date of settlement for the Units is added to the Public Offering Price.
Accrued interest is the accumulated and unpaid interest on a Bond from the last
day on which interest was paid and is accounted for daily by a Trust at the
initial daily rate set forth under "Summary of Essential Information" in Part A.
This daily rate is net of estimated fees and expenses. The
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secondary market Public Offering Price can vary on a daily basis from the amount
stated on the cover of Part A of this Prospectus in accordance with fluctuations
in the prices of the Bonds. The price to be paid by each investor will be
computed on the basis of an evaluation made as of the date the Units are
purchased. The aggregate bid price evaluation of the Bonds is determined in the
manner set forth under "Trustee Redemption".
The Evaluator may obtain current prices for the Bonds from
investment dealers or brokers (including the Sponsor) that customarily deal in
tax-exempt obligations or from any other reporting service or source of
information which the Evaluator deems appropriate.
ACCRUED INTEREST. An amount of accrued interest which
represents accumulated unpaid or uncollected interest on a Bond from the last
day on which interest was paid thereon will be added to the Public Offering
Price. This daily rate is net of estimated fees and expenses. Since a Trust
normally receives the interest on Bonds twice a year and the interest on the
Bonds in such Trust is accrued on a daily basis, the Trusts will always have an
amount of interest earned but uncollected by, or unpaid to, the Trustee. A
Certifi cateholder will not recover his proportionate share of accrued interest
until the Units are sold or redeemed, or the Trusts are terminated. At that
time, the Certificateholder will receive his proportionate share of the accrued
interest computed to the settlement date in the case of sale or termination and
to the date of tender in the case of redemption.
EMPLOYEE DISCOUNTS. Employees (and their immediate families)
of Reich & Tang Distributors, Inc. (and its affiliates) and of any underwriter
of either Trust, pursuant to employee benefit arrangements, may purchase Units
of a Trust at a price equal to the bid side evaluation of the underlying
securities in such Trust divided by the number of Units outstanding plus a
reduced charge of $10.00 per Unit. 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 Sponsor's secondary market, so long as it is being
maintained.
DISTRIBUTION OF UNITS. Certain banks and thrifts will make
Units of the Trust available to their customers on an agency basis. A portion of
the sales charge paid by their customers is retained by or remitted to the
banks. Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have indicated that these particular agency
transactions are permitted under such Act. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law.
The Sponsor intends to register the Units for sale in New
York, New Jersey, Connecticut, Florida and New Hampshire through dealers who are
members of the National Association of Securities Dealers, Inc. Units may be
sold to dealers at prices which represent a concession of up to (a) 4% of the
Public Offering Price for the New York Municipal Trust Series or (b) $25.00 per
unit for the New York Municipal Trust, Discount and Zero Coupon Fund, subject to
the Sponsor's right to change the dealers' concession from time to time. In
addition, for transactions of 1,000,000 Units or more, the Sponsor intends to
negotiate the applicable sales charge and such charge will be disclosed to any
such purchaser. Such Units may then be distributed to the public by the dealers
at the Public Offering Price then in effect. The
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Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units. The Sponsor reserves the right to change the discount from
time to time.
SPONSOR'S PROFITS. The Sponsor will receive a gross commission
on all Units sold in the secondary market equal to the applicable sales charge
on each (see "Offering Price.") In addition, in maintaining a market for Units
(see "Sponsor Repurchase") the Sponsor will realize profits or sustain losses in
the amount of any difference between the price at which it buys Units and the
price at which it resells such Units.
Participants in the "Total Reinvestment Plan" can designate a
broker as the recipient of a dealer concession. See "Total Reinvestment Plan."
COMPARISON OF PUBLIC OFFERING PRICE, SPONSOR'S REPURCHASE
PRICE AND REDEMPTION PRICE. The secondary market Public Offering Price of Units
of the Trust will be determined on the basis of the current bid prices of the
Bonds in such Trust, plus the applicable sales charge. The value at which Units
may be resold in the secondary market or redeemed will be determined on the
basis of the current bid prices of such Bonds without any sales charge. On the
Evaluation Date, the Public Offering Price per Unit (based on the bid prices of
the Bonds in the Trust plus the sales charge) exceeded the Repurchase and
Redemption Price per Unit (based upon the bid prices of the Bonds in the Trust
without the sales charge) by the amount shown under "Summary of Essential
Information" in Part A. For this reason, among others (including fluctuations in
the market prices of Bonds and the fact that the Public Offering Price includes
the applicable sales charge), the amount realized by a Certificateholder upon
any redemption of Units may be less than the price paid for such Units.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The rate of return on an investment in Units of each Trust is
measured in terms of "Estimated Current Return" and "Estimated Long Term
Return".
Estimated Long Term Return is calculated by: (1) computing the
yield to maturity or to an earlier call date (whichever results in a lower
yield) for each Bond in a Trust's portfolio in accordance with accepted bond
practices, which practices take into account not only the interest payable on
the Bond but also the amortization of premiums or accretion of discounts, if
any; (2) calculating the average of the yields for the Bonds in each Trust's
portfolio by weighing each Bond's yield by the market value of the Bond and by
the amount of time remaining to the date to which the Bond is priced (thus
creating an average yield for the portfolio of each Trust); and (3) reducing the
average yield for the portfolio of each Trust in order to reflect estimated fees
and expenses of that Trust and the maximum sales charge paid by Unitholders. The
resulting Estimated Long Term Return represents a measure of the return to
Unitholders earned over the estimated life of each Trust. The Estimated Long
Term Return as of the day prior to the Evaluation Date is stated for each Trust
under "Summary of Essential Information" in Part A.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price per Unit. In
contrast to the Estimated Long Term Return, the Estimated Current Return does
not take into account the amortization of premium or accretion of discount, if
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any, on the Bonds in the portfolios of each Trust. 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 rating, the
Estimated Current Return per Unit may be affected adversely if such Bonds are
redeemed prior to their maturity. On the day prior to the Evaluation Date, the
Estimated Net Annual Interest Income per Unit divided by the Public Offering
Price resulted in the Estimated Current Return stated for each Trust under
"Summary of Essential Information" in Part A.
The Estimated Net Annual Interest Income per Unit of each
Trust will vary with changes in the fees and expenses of the Trustee and the
Evaluator applicable to each Trust and with the redemption, maturity, sale or
other disposition of the Bonds in each Trust. The Public Offering Price will
vary with changes in the bid prices of the Bonds. Therefore, there is no
assurance that the present Estimated Current Return or Estimated Long Term
Return will be realized in the future.
A schedule of cash flow projections is available from the
Sponsor upon request.
RIGHTS OF CERTIFICATEHOLDERS
CERTIFICATES. Ownership of Units of the Trust is evidenced by
registered Certificates executed by the Trustee and the Sponsor. Certificates
may be issued in denominations of one or more Units and will bear appropriate
notations on their faces indicating which plan of distribution has been selected
by the Certificateholder. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and/or accompanied by a written
instrument or instruments of transfer. Although no such charge is presently made
or contemplated, the Trustee may require a Certificateholder to pay $2.00 for
each Certificate reissued or transferred and any governmental charge that may be
imposed in connection with each such transfer or interchange. Mutilated,
destroyed, stolen or lost Certificates will be replaced upon delivery of
satisfactory indemnity and payment of expenses incurred.
INTEREST AND PRINCIPAL DISTRIBUTIONS. Interest received by the
Trust is credited by the Trustee to an Interest Account of such Trust and a
deduction is made to reimburse the Trustee without interest for any amounts
previously advanced. Proceeds representing principal received from the maturity,
redemption, sale or other disposition of the Bonds are credited to a Principal
Account of such Trust.
Distributions to each Certificateholder from the Interest
Account are computed as of the close of business of each Record Date for the
following Payment Date and consist of an amount substantially equal to
one-twelfth, one-half or all of each Certificateholder's pro rata share of the
Estimated Net Annual Interest Income in the Interest Account, depending upon the
applicable plan of distribution. Distributions from the Principal Account will
be computed as of each semi-annual Record Date, and will be made to the Certifi
cateholders on or shortly after the next semi-annual Payment Date. Proceeds
representing principal received from the disposition of any of the Bonds between
a Record Date and a Payment Date which are not used for redemptions of Units
will be held in the Principal Account and not distributed until the second
succeeding semi-annual Payment Date. No distributions will be made to
Certificateholders electing to participate in the Total Reinvestment Plan,
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except as provided thereunder. Persons who purchase Units between a Record Date
and a Payment Date will receive their first distribution on the second Payment
Date after such purchase.
Because interest payments are not received by the Trust at a
constant rate throughout the year, interest distributions may be more or less
than the amount credited to the Interest Account as of a given Record Date. For
the purpose of minimizing fluctuations in the distributions from the Interest
Account, the Trustee will advance sufficient funds as may be necessary to
provide interest distributions of approximately equal amounts. The Trustee shall
be reimbursed, without interest, for these advances to the Interest Account.
Funds which are available for future distributions, investment in the Total
Reinvestment Plan, payments of expenses and redemptions are in accounts which
are non-interest bearing to Certificate holders and are available for use by the
Trustee pursuant to normal banking procedures.
As of the first day of each month, the Trustee will deduct
from the Interest Account of the Trust and, to the extent funds are not
sufficient therein, from the Principal Account of such Trust, amounts necessary
to pay the expenses of such Trust (as determined on the basis set forth under
"Trust Expenses and Charges"). The Trustee also may withdraw from said accounts
such amounts, if any, as it deems necessary to establish a reserve for any
applicable taxes or other governmental charges that may be payable out of such
Trust. Amounts so withdrawn shall not be considered a part of such Trust's
assets until such time as the Trustee shall return all or any part of such
amounts to the appropriate accounts. In addition, the Trustee may withdraw from
the Interest and Principal Accounts such amounts as may be necessary to cover
redemptions of Units of such Trust by the Trustee.
The estimated monthly, semi-annual or annual interest
distribution per Unit will be in the amount shown under "Summary of Essential
Information" in Part A and will change and may be reduced as Bonds mature or are
redeemed, exchanged or sold, or as expenses of the Trust fluctuate. No
distribution need be made from the Principal Account until the balance therein
is an amount sufficient to distribute at least $1.00 per Unit.
DISTRIBUTION ELECTIONS. Interest is distributed monthly,
semi-annually or annually, depending upon the distribution plan applicable to
the Unit purchased. Record Dates are the first day of each month for monthly
distributions, the first day of each June and December for semi-annual
distributions and the first day of each December for annual distributions.
Payment Dates will be the fifteenth day of each month following the respective
Record Dates. Certificateholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Every October each Certificateholder may change his distribution election
by notifying the Trustee in writing of such change between October 1 and
November 1 of each year. (Certificateholders deciding to change their election
should contact the Trustee by calling the number listed on the back cover hereof
for information regarding the procedures that must be followed in connection
with this written notification of the change of election.) Failure to notify the
Trustee on or before November 1 of each year will result in a continuation of
the plan for the following 12 months.
RECORDS. The Trustee will furnish Certificateholders 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
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after the end of each calendar year (normally prior to January 31 of the
succeeding year), the Trustee will furnish to each person who at any time during
the calendar year was a Certificateholder of record of a Trust, a statement
showing (a) as to the Interest Account of such Trust: interest received
(including amounts representing interest received upon any disposition of Bonds
and earned original issue discount, if any), amounts paid for redemptions of
Units, if any, deductions for applicable taxes and fees and expenses of such
Trust, 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; (b) as to the Principal Account of such Trust: the dates of
disposition of any Bonds and the net proceeds received therefrom (including any
unearned original issue discount but excluding any portion representing accrued
interest), deductions for payments of applicable taxes and fees and expenses of
such Trust, amounts paid for redemptions of Units, if any, 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; (c) a list of
the Bonds held in such Trust and the number of Units outstanding on the last
business day of such calendar year; (d) the Redemption Price per Unit of such
Trust based upon the last computation thereof made during such calendar year;
and (e) amounts actually distributed to Certificateholders during such calendar
year from the Interest and Principal Accounts, separately stated, expressed both
as total dollar amounts and as dollar amounts representing the pro rata share of
each Unit outstanding on the last business day of such calendar year.
The Trustee shall keep available for inspection by Certificate
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 Certificateholders, Certificates issued or held, a current list of
Bonds in the portfolio and a copy of the Trust Agreement.
TAX STATUS
All Bonds acquired by the Trust were accompanied by copies of
opinions of bond counsel to the issuing governmental authorities given at the
time of original delivery of the Bonds to the effect that the interest thereon
is exempt from regular federal income tax and from New York State and New York
City income taxes. Such interest may, however, be subject to federal alternative
minimum tax and to state or local taxes in other jurisdictions. None of the
Bonds in the Trust is subject to the federal individual alternative minimum tax
under the Tax Reform Act of 1986 (the "Act"). All Bonds were issued by or on
behalf of the State of New York, its political subdivisions or its public
authorities or by the Commonwealth of Puerto Rico or its public authorities.
Neither the Sponsor nor the Trustee nor their respective counsel have made any
review of the proceedings relating to the issuance of the Bonds or the bases for
such opinions and express no opinion as to these matters, and neither the
Trustee nor the Sponsor nor their respective counsel have made an independent
examination or verification that the federal income tax status of the Bonds has
not been altered since the time of the original delivery of those opinions.
In rendering the opinion set forth below, counsel has examined
the Agreement, the final form of Prospectus dated the date hereof (the
"Prospectus") and the documents referred to therein, among others, and has
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relied on the validity of said documents and the accuracy and completeness of
the facts set forth therein.
In the opinion of Battle Fowler LLP, counsel for the Sponsor,
under existing law:
The Trust is not an association taxable as a corporation for federal
income tax purposes under the Internal Revenue Code of 1986 (the "Code"), and
income received by the Trust that consists of interest excludable from federal
gross income under the Code will be excludable from the federal gross income of
the Certificateholders of the Trust.
Each Certificateholder will be considered the owner of a pro rata
portion of the Trust under Section 676(a) of the Code. Thus, each Cer
tificateholder will be considered to have received his pro rata share of bond
interest when it is received by the Trust, and the net income distributable to
Certificateholders that is exempt from federal income tax when received by the
Trust will constitute tax-exempt income when received by the Certificateholders.
Gain (other than any earned original issue discount) realized on a sale
or redemption of the Bonds or on sale of a Unit is, however, includable in gross
income for federal income tax purposes, generally as capital gain, although gain
on the disposition of a Bond or a Unit purchased at a market discount generally
will be treated as ordinary income, rather than capital gain, to the extent of
accrued market discount. (It should be noted in this connection that such gain
does not include any amounts received in respect of accrued interest.) Such gain
may be long- or short-term gain depending on the facts and circumstances.
Capital losses are deductible to the extent of capital gains; in addition, up to
$3,000 of capital losses of non-corporate Cer tificateholders may be deducted
against ordinary income. Capital assets must be held for more than one year to
qualify for long-term capital gain treatment. Individuals who realize long-term
capital gains will be subject to a maximum tax rate of 28% on such gain.
Each Certificateholder will realize taxable gain or loss when the Trust
disposes of a Bond (whether by sale, exchange, redemption or payment at
maturity), as if the Certificateholder had directly disposed of his pro rata
share of such Bond. The gain or loss is measured by the difference between (i)
the tax cost of such pro rata share and (ii) the amount received therefor. For
this purpose, a Certificateholder's tax cost for each Bond is determined by
allocating the total tax cost of each Unit among all of the Bonds held in the
Trust (in accordance with the portion of such Trust comprised by each Bond). In
order to determine the amount of taxable gain or loss, the Certificateholder's
amount received is similarly allocated at that time. The Certificate holder may
exclude from the amount received any amounts that represent accrued interest or
the earned portion of any original issue discount but may not exclude amounts
attributable to market discount. Thus, when a Bond is disposed of by the Trust
at a gain, taxable gain will equal the difference between (i) the amount
received and (ii) the amount paid plus any original issue discount (limited, in
the case of Bonds issued after June 8, 1980, to the portion earned from the date
of acquisition to the date of disposition). 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. No deduction
is allowed for the amortization of bond premium
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on tax-exempt bonds such as the Bonds in computing regular federal
income tax.
Discount generally accrues based on the principle of compounding of
accrued interest, not on a straight-line or ratable method, with the result that
the amount of earned original issue discount is less in the earlier years and
more in the later years of a bond term. The tax basis of a discount bond is
increased by the amount of accrued, tax-exempt original issue discount thus
determined. This method of calculation will produce higher capital gains (or
lower losses) to a Certificate holder, as compared to the results produced by
the straight-line method of accounting for original issue discount, upon an
early disposition of a Bond by the Trust or of a Unit by a Certificateholder.
A Certificateholder may also realize taxable income or loss when a Unit
of the Trust is sold or redeemed. The amount received is allocated among all the
Bonds in such Trust in the same manner as when the Trust disposes of Bonds and
the Certificateholder may exclude accrued interest and the earned portion of any
original issue discount (but not amounts attributable to market discount). The
return of a Certificateholder's tax cost is otherwise a tax-free return of
capital.
A portion of social security benefits is includable in gross income for
taxpayers whose "modified adjusted gross income" combined with a portion of
their 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. Interest on tax-exempt bonds is to be
added to adjusted gross income for purposes of computing the amount of Social
Security benefits that are includable in gross income and determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax. For taxable years beginning after December 31,
1993, the amount of Social Security benefits subject to tax have been increased.
Corporate Certificateholders are required to include in federal
corporate alternative minimum taxable income 75 percent of the amount by which
the adjusted current earnings (which will include tax-exempt interest) of the
corporation exceeds alternative minimum taxable income (determined without
regard to this item). In addition, in certain cases, Subchapter S corporations
with accumulated earnings and profits from Subchapter C years will be subject to
a minimum tax on excess "passive investment income" which includes tax-exempt
interest.
Under federal law, interest on Trust-held Bonds issued by authority of
the Government of Puerto Rico is exempt from regular federal income tax, and
state and local income tax in the United States and Puerto Rico.
The Trust is not subject to the New York State Franchise Tax on
Business Corporations or the New York City General Corporation Tax. Under the
personal income tax laws of the State and City of New York, the income of the
Trust will be treated as the income of the Certifi cateholders. Interest on the
Bonds that is exempt from tax under the laws of the State and City of New York
when received by the Trust will retain its status as tax-exempt interest to its
Certificateholders. In addition, non-residents of New York City will not be
subject to the New York City personal income tax on gains derived with respect
to their
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Units. Non-residents of New York State will not be subject to New York State
personal income tax on such gains unless the Units are employed in a business,
trade or occupation carried on in New York State. A New York State or New York
City resident should determine his basis and holding period for his Units in the
same manner for New York State and New York City tax purposes as for federal tax
purposes. For corporations doing business in New York State and New York City,
interest earned on state and municipal obligations that are exempt from federal
income tax, including obligations of New York State and New York City, its
political subdivisions and instrumentalities, must be included in calculating
New York State and New York City entire net income for purposes of calculating
New York State and New York City franchise (income) tax. The laws of the several
states and local taxing authorities vary with respect to the taxation of such
obligations and each Certificateholder is advised to consult his own tax advisor
as to the tax consequences of his Certificates under state and local tax laws.
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. The laws of such states and local
governments vary with respect to the taxation of such obligations.
In the case of Bonds that are industrial revenue bonds
("IRBs") or certain types of 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 Certificateholder
who is such a "substantial user" or "related person" thereof will not be
tax-exempt. Furthermore, in the case of IRBs 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 exceeds
$40,000,000. In the case of IRBs issued under the $10,000,000 "small issue"
exemption, interest on such IRBs will become taxable if the face amount of such
IRBs plus certain capital expenditures exceeds $10,000,000.
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 IRBs, 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.
Interest on indebtedness incurred or continued to purchase or
carry the Units is not deductible for regular federal income tax or New York
State or New York City income tax purposes. However, such interest is deductible
for New York State and New York City income tax purposes by corporations that
are required to include interest on the Bonds in New York
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State and New York City entire net income for purposes of calculating New York
State and New York City franchise (income) taxes. In addition, under rules used
by the Internal Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying particular assets, the
purchase of Units may be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the purchase of the
Units. Similar rules are applicable for New York State and New York City tax
purposes. Also, in the case of certain financial institutions that acquire
Units, in general no deduction is allowed for interest expense allocable to the
Units.
From time to time proposals have been introduced before
Congress to restrict or eliminate the federal income tax exemption for interest
on debt obligations similar to the Bonds in the Trust, and it can be expected
that similar proposals may be introduced in the future.
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 bond counsel or special tax 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 tax advisors for advice with respect to the effect of any
legislative changes.
LIQUIDITY
SPONSOR REPURCHASE. The Sponsor, although not obligated to do
so, intends to maintain a secondary market for the Units. The Sponsor's
secondary market repurchase price will be based on the aggregate bid price of
the Bonds in the Trust portfolio and will be the same as the redemption price.
The aggregate bid price will be determined by the Evaluator on a daily basis set
forth under "Trustee Redemption." Certificateholders who wish to dispose of
their Units should inquire of the Sponsor prior to making a tender for
redemption. The Sponsor may discontinue repurchases of Units of the Trust if the
supply of Units exceeds demand, or for other business reasons. The date of
repurchase is deemed to be the date on which Certificates representing Units are
physically received in proper form by the Sponsor, Reich & Tang Distributors,
Inc., 600 Fifth Avenue, New York, New York 10020. Units received after 4 P.M.,
New York time, will be deemed to have been repurchased on the next business day.
In the event a market is not maintained for the Units, a Certificateholder may
be able to dispose of Units only by tendering them to the Trustee for
redemption.
Prospectuses relating to certain other bond trusts indicate an
intention by the respective Sponsors, subject to change, to repurchase units
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on the basis of a price higher than the bid prices of the Bonds in the Trusts.
Consequently, depending on the prices actually paid, the secondary market
repurchase price of other trusts may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for units of these
Trusts, although in all bond trusts, the purchase price of a unit depends
primarily on the value of the bonds in the trust portfolio.
Units purchased by the Sponsor in the secondary market may be
reoffered for sale by the Sponsor at a price based on the aggregate bid price of
the Bonds in a Trust plus the applicable sales charge plus net accrued interest.
Any Units that are purchased by the Sponsor in the secondary market also may be
redeemed by the Sponsor if it determines such redemption to be in its best
interest.
The Sponsor may, under certain circumstances, as a service to
Cer tificateholders, elect to purchase any Units tendered to the Trustee for
redemption (see "Trustee Redemption"). Factors which the Sponsor will consider
in making a determination will include the number of Units of all Trusts which
it has in inventory, its estimate of the sale ability and the time required to
sell such Units and general market conditions. For example, if in order to meet
redemptions of Units the Trustee must dispose of Bonds, and if such disposition
cannot be made by the redemption date (seven calendar days after tender), the
Sponsor may elect to purchase such Units. Such purchase shall be made by payment
to the Certificateholder not later than the close of business on the redemption
date of an amount equal to the Redemption Price on the date of tender.
TRUSTEE REDEMPTION. Units also may be tendered to the Trustee
for redemption at its corporate trust office as set forth in Part A of this
Prospectus, upon proper delivery of Certificates representing such Units and
payment of any relevant tax. At the present time there are no specific taxes
related to the redemption of Units. No redemption fee will be charged by the
Sponsor or the Trustee. Units redeemed by the Trustee will be canceled.
Certificates representing Units to be redeemed must be
delivered to the Trustee and must be properly endorsed or accompanied by proper
instruments of transfer with signature guaranteed (or by providing satisfactory
indemnity, as in the case of lost, stolen or mutilated Certificates). Thus,
redemptions of Units cannot be effected until Certificates representing such
Units have been delivered by the person seeking redemption. (See
"Certificates".) Certificateholders must sign exactly as their names appear on
the faces of their Certificates. 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.
Within three business days following a tender for redemption,
the Certificateholder 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 on the date of tender. The "date of tender" is deemed to be the
date on which Units are received by the Trustee, except that with respect to
Units received after the close of trading on the New York Stock Exchange, the
date of tender is the next day on which such Exchange is open for trading, and
such Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from
the Interest Account, or, if the balance therein is insufficient, from the
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Principal Account. All other amounts paid on redemption shall be withdrawn from
the Principal Account. The Trustee is empowered to sell bonds in order to make
funds available for redemptions. Such sales, if required, could result in a sale
of Bonds by the Trustee at a loss. To the extent Bonds in a Trust are sold, the
size and diversity of such Trust will be reduced.
The Redemption Price per Unit is the pro rata share of each
Unit in a Trust determined by the Trustee on the basis of (i) the cash on hand
in such Trust or moneys in the process of being collected, (ii) the value of the
Bonds in such Trust based on the bid prices of such Bonds and (iii) interest
accrued thereon, less (a) amounts representing taxes or other governmental
charges payable out of such Trust, (b) the accrued expenses of such Trust and
(c) cash allocated for distribution to Certificateholders of record of such
Trust as of the business day prior to the evaluation being made. The Evaluator
may determine the value of the Bonds in such Trust for purposes of redemption
(1) on the basis of current bid prices of the bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held by such Trust,
(2) on the basis of bid prices for bonds comparable to any Bonds for which bid
prices are not available, (3) by determining the value of the Bonds by
appraisal, or (4) by any combination of the above.
The Trustee is irrevocably authorized in its discretion, if
the Sponsor does not elect to purchase a Unit tendered for redemption or if the
Sponsor tenders a Unit for redemption, in lieu of redeeming such Unit, to sell
such Unit in the over-the-counter market for the account of the tendering Cer
tificateholder at prices which will return to the Certificateholder an amount in
cash, net after deducting brokerage commissions, transfer taxes and other
charges, equal to or in excess of the Redemption Price for such Unit. The
Trustee will pay the net proceeds of any such sale to the Certificateholder on
the day he would otherwise be entitled to receive payment of the Redemption
Price.
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
customary weekend and holiday closings, or trading on that Exchange is
restricted or during which (as determined by the Securities and Exchange
Commission) an emergency exists as a result of which disposal or evaluation of
the Bonds is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. The Trustee and the
Sponsor are not liable to any person or in any way for any loss or damage which
may result from any such suspension or postponement.
A Certificateholder who wishes to dispose of his Units should
inquire of his bank or broker in order to determine if there is a current
secondary market price in excess of the Redemption Price.
TRUST ADMINISTRATION
PORTFOLIO SUPERVISION. The Sponsor may direct the Trustee to
dispose of Bonds upon (i) default in payment of principal or interest on such
Bonds, (ii) institution of certain legal proceedings with respect to the issuers
of such Bonds, (iii) default under other documents adversely affecting debt
service on such Bonds, (iv) default in payment of principal or interest on other
obligations of the same issuer or guarantor, (v) with respect to revenue Bonds,
decline in revenues and income of any facility or project below
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the estimated levels calculated by proper officials charged with the
construction or operation of such facility or project, or (vi) decline in price
or the occurrence of other market or credit factors which in the opinion of the
Sponsor would make the retention of such Bonds in a Trust detrimental to the
interests of the Certificateholders. If a default in the payment of principal or
interest on any of the Bonds occurs and if the Sponsor fails to instruct the
Trustee to sell or hold such Bonds, the Trust Agreement provides that the
Trustee may sell such Bonds.
The Sponsor is authorized by the Trust Agreement to direct the
Trustee to accept or reject certain plans for the refunding or refinancing of
any of the Bonds. Any bonds received in exchange or substitution will be held by
the Trustee subject to the terms and conditions of the Agreement to the same
extent as the Bonds originally deposited. Within five days after such deposit,
notice of such exchange and deposit shall be given by the Trustee to each
Certificateholder registered on the books of the Trustee, including an
identification of the Bonds eliminated and the Bonds substituted therefor.
Except as stated, the acquisition by the Trusts of any securities other than the
bonds initially deposited is prohibited.
TRUST AGREEMENT, AMENDMENT AND TERMINATION. The Trust
Agreement may be amended by the Trustee, the Sponsor and the Evaluator without
the consent of any of the Certificateholders: (1) to cure any ambiguity or to
correct or supplement any provision which may be defective or inconsistent; (2)
to change any provision thereof as may be required by the Securities and
Exchange Commission or any successor governmental agency; or (3) to make such
other provisions in regard to matters arising thereunder as shall not adversely
affect the interests of the Certificateholders.
The Trust Agreement may also be amended in any respect, or
performance of any of the provisions thereof may be waived, with the consent of
the holders of Certificates evidencing 66-2/3% of the Units then outstanding for
the purpose of modifying the rights of Certificateholders; provided that no such
amendment or waiver shall reduce any Certificateholder's interest in a Trust
without his consent or reduce the percentage of Units required to consent to any
such amendment or waiver without the consent of the holders of all Certificates.
The Trust Agreement may not be amended, without the consent of the holders of
all Certificates in a Trust then outstanding, to increase the number of Units
issuable by such Trust or to permit the acquisition of any bonds in addition to
or in substitution for those initially deposited in such Trust, except in
accordance with the provisions of the Trust Agreement. The Trustee shall
promptly notify Certificateholders, in writing, of the substance of any such
amendment.
The Trust Agreement provides that the Trust shall terminate
upon the maturity, redemption or other disposition, as the case may be, of the
last of the Bonds held in such Trust but in no event is it to continue beyond
the end of the calendar year preceding the fiftieth anniversary of the execution
of the Trust Agreement. If the value of a Trust shall be less than the minimum
amount set forth under "Summary of Essential Information", the Trustee may, in
its discretion, and shall, when so directed by the Sponsor, terminate such
Trust. The Trust may also be terminated at any time with the consent of the
holders of Certificates representing 100% of the Units of such Trust then
outstanding. In the event of termination, written notice thereof will be sent by
the Trustee to all Certificateholders. Within a reasonable period after
termination, the Trustee must sell any Bonds remaining in the terminated Trust,
and, after paying all expenses and charges incurred by such Trust, distribute to
each Certificateholder, upon surrender for cancellation of his
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<PAGE>
Certificate for Units his pro rata share of the Interest and Principal Accounts
of such Trust.
THE SPONSOR. The Sponsor, Reich & Tang Distributors, Inc.
("Reich & Tang"), a Delaware corporation, is engaged in the brokerage business
and is a member of the National Association of Securities Dealers, Inc. Reich &
Tang is also a registered investment adviser. Reich & Tang maintains its
principal business offices at 600 Fifth Avenue, New York, New York 10020. The
sole shareholder of the Sponsor, Reich & Tang Asset Management, Inc. ("RTAM
Inc.") is wholly owned by NEIC Holdings, Inc. which, effective December 29,
1997, was wholly owned by NEIC Operating Partnership, L.P. ("NEICOP").
Subsequently, on March 31, 1998, NEICOP changed its name to Nvest Companies,
L.P. ("Nvest"). The general partners of Nvest are Nvest Corporation and Nvest,
L.P. Nvest, L.P. is owned approximately 99% by public unitholders and its
general partner is Nvest Corporation. Nvest, with a principal place of business
at 399 Boyston Street, Boston, MA 02116, is a holding company of firms engaged
in the securities and investment advisory business. These affiliates in the
aggregate are investment advisors or managers to over 80 registered investment
companies. Reich & Tang is Sponsor (and Co-Sponsor, as the case may be) for
numerous series of unit investment trusts, including New York Municipal Trust,
Series 1 (and Subsequent Series), Municipal Securities Trust, Series 1 (and
Subsequent Series), 1st Discount Series (and Subsequent Series), Multi-State
Series 1 (and Subsequent Series), Mortgage Securities Trust, Series 1 (and
Subsequent Series), Insured Municipal Securities Trust, Series 1 (and Subsequent
Series) and 5th Discount Series (and Subsequent Series), Equity Securities
Trust, Series 1, Signature Series, Gabelli Communications Income Trust (and
Subsequent Series) and Schwab Trusts.
Nvest Corporation is wholly owned by MetLife New England
Holdings, Inc., a wholly-owned subsidiary of Metropolitan Life Insurance Company
("MetLife"). Effective December 30, 1997, MetLife owns approximately 47% of the
limited partnership interests of Nvest.
MetLife is a mutual life insurance company with assets of
$297.6 billion at December 31, 1996. It is the second largest life insurance
company in the United States in terms of total assets. MetLife provides a wide
range of insurance and investment products and services to individuals and
groups and is the leader among United States life insurance companies in terms
of total life insurance in force, which exceeded $1.6 trillion at December 31,
1996 for MetLife and its insurance affiliates. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreement, but will be under
no liability to Certificateholders for taking any action, or refraining from
taking any action, in good faith pursuant to the Trust Agreement, or for errors
in judgment except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Sponsor may resign at any time by delivering to the
Trustee an instrument of resignation executed by the Sponsor.
If at any time the Sponsor shall resign or fail to perform any
of its duties under the Trust Agreement or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, then the
Trustee may either (a) appoint a successor Sponsor, (b) terminate the Trust
Agreement and liquidate the Trusts, or (c) continue to act as Trustee without
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<PAGE>
terminating the Trust Agreement. Any successor Sponsor appointed by the Trustee
shall be satisfactory to the Trustee and, at the time of appointment, shall have
a net worth of at least $1,000,000.
THE 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 (1-800-431-8002). 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 portfolio of the Trust.
The Trustee shall not be liable or responsible in any way for
taking any action or for refraining from taking any action, in good faith
pursuant to the Trust Agreement, or for errors in judgment; or for any
disposition of any moneys, Bonds or Certificates in accordance with the Trust
Agreement, except in cases of its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties; provided,
however, that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect of
the Bonds or the Trusts which it may be required to pay under current or future
law of the United States or any other taxing authority having jurisdiction. The
Trustee shall not be liable for depreciation or loss incurred by reason of the
sale by the Trustee of any of the Bonds pursuant to the Trust Agreement.
For further information relating to the responsibilities of
the
Trustee under the Trust Agreement, see "Rights of
Certificateholders."
The Trustee may resign by executing an instrument in writing
and filing the same with the Sponsor, and mailing a copy of a notice of
resignation to all Certificateholders. In such an event, the Sponsor is
obligated to appoint a successor Trustee as soon as possible. In addition, if
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Trust Agreement. Notice of such removal and
appointment shall be mailed to each Certificateholder by the Sponsor. If upon
resignation of the 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 the Trustee becomes effective only when the
successor Trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor Trustee. Upon execution of a written
acceptance of such appointment by such successor Trustee, all the rights,
powers, duties and obligations of the original Trustee shall vest in the
successor.
Any corporation into which the Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the successor
Trustee. The Trustee must always be a banking corporation organized under the
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<PAGE>
laws of the United States or any State and have at all times an aggregate
capital, surplus and undivided profits of not less than $2,500,000.
THE EVALUATOR. The Evaluator is Kenny S&P Evaluation Services,
a business unit of J.J. Kenny Company, Inc., a subsidiary of The McGraw-Hill
Companies, with main offices located at 65 Broadway, New York, New York 10006.
The Evaluator is a wholly-owned subsidiary of McGraw-Hill, Inc. The Evaluator is
a registered investment advisor and also provides financial information
services.
The Trustee, the Sponsor and Certificateholders 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 Sponsor, or Certificateholders for errors in judgment, except in
cases of its own willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Evaluator may resign or may be removed by the Sponsor and
the Trustee, and the Sponsor 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.
TRUST EXPENSES AND CHARGES
At no cost to the Trust, the Sponsor has borne the expenses of
creating and establishing the Trust, including the cost of initial preparation
and execution of the Trust Agreement, registration of the Trust and the Units
under the Investment Company Act of 1940 and the Securities Act of 1933,
preparation and printing of the Certificates, legal and auditing expenses,
advertising and selling expenses, initial fees and expenses of the Trustee and
other out-of-pocket expenses. The fees of the Evaluator, however, incurred
during the initial public offering period are paid directly by the Trust.
The Sponsor will not charge the Trust a fee for its services
as
such. (See "Sponsor's Profits".)
The Trustee will receive for its ordinary recurring services
to each Trust an annual fee in the amount set forth under "Summary of Essential
Information" in Part A. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Trust Agreement, see "Trust
Administration" and "Rights of Certificateholders".
The Evaluator will receive, for each daily evaluation of the
Bonds in the Trusts, a fee in the amount set forth under "Summary of Essential
Information" in Part A.
The Trustee's and Evaluator's fees are payable monthly as of
the Record Date from the Interest Account to the extent funds are available and
then from the Principal Account. Both fees may be increased without approval of
the Certificateholders by amounts not exceeding proportionate increases in
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<PAGE>
consumer prices for services as measured by the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent."
The following additional charges are or may be incurred by the
Trust: all expenses (including counsel and auditing fees) of the Trustee
incurred and advances made in connection with its activities under the Trust
Agreement, including the expenses and costs of any action undertaken by the
Trustee to protect a Trust and the rights and interests of the Certificate
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 gross negligence, bad faith or willful misconduct on its
part, arising out of or in connection with its acceptance or administration of a
Trust; indemnification of the Sponsor for any loss, liabilities and expenses
incurred in acting as Sponsor of a Trust without gross negligence, bad faith or
willful misconduct on its part; and all taxes and other governmental charges
imposed upon the Bonds or any part of a Trust (no such taxes or charges are
being levied, made or, to the knowledge of the Sponsor, contemplated). The above
expenses, including the Trustee's fees, when paid by or owing to the Trustee are
secured by a first lien on the Trust to which such expenses are allowable. In
addition, the Trustee is empowered to sell Bonds of a Trust in order to make
funds available to pay all expenses of such Trust.
Unless the Sponsor otherwise directs, the accounts of the
Trust shall be audited not less than annually by independent public accountants
selected by the Sponsor. The expenses of the audit shall be an expense of the
Trust. So long as the Sponsor maintains a secondary market, the Sponsor will
bear any audit expense which exceeds $.50 per 1,000 Units. Certificateholders
covered by the audit during the year may receive a copy of the audited financial
statements upon request.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Certificateholders will be able to elect to exchange any or
all of their Units of this Trust for Units of one or more of any available
series of Equity Securities Trust, Insured Municipal Securities Trust, Municipal
Securities Trust, New York Municipal Trust or Mortgage Securities Trust (the
"Exchange Trusts") subject to a reduced sales charge as set forth in the
prospectus of the Exchange Trust (the "Exchange Privilege"). Unit owners of any
registered unit investment trust for which there is no active secondary market
in the units of such trust (a "Redemption Trust") will be able to elect to
redeem such units and apply the proceeds of the redemption to the purchase of
available Units of one or more series of an Exchange Trust (the "Conversion
Trusts") at the Public Offering Price for units of the Conversion Trust subject
to a reduced sales charge as set forth in the prospectus of the Conversion Trust
(the "Conversion Offer"). Under the Exchange Privilege, the Sponsor's repurchase
price during the initial offering period of the Units being surrendered will be
based on the market value of the Securities in the Trust portfolio or on the
aggregate offer price of the Bonds in the other Trust Portfolios; and, after the
initial offering period has been completed, will be based on the aggregate bid
price of the securities in the particular Trust portfolio. Under the Conversion
Offer, units of the Redemption Trust must be tendered to the trustee of such
trust for redemption at the redemption price determined as set forth in the
relevant Redemption Trust's prospectus. Units in an Exchange or Conversion Trust
will be sold to the Certificateholder at a price based on the aggregate offer
price of the securities in the
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<PAGE>
Exchange or Conversion trust portfolio (or for units of Equity Securities Trust,
based on the market value of the underlying securities in the trust portfolio)
during the initial public offering period of the Exchange or Conversion Trust;
and after the initial public offering period has been completed, based on the
aggregate bid price of the securities in the Exchange or Conversion Trust
Portfolio if its initial offering has been completed plus accrued interest (or
for units of Equity Securities Trust, based on the market value of the
underlying securities in the trust portfolio) and a reduced sales charge.
Except for Certificateholders who wish to exercise the
Exchange Privilege or Conversion Offer within the first five months of their
purchase of Units of the Exchange or Redemption Trust, any purchaser who
purchases Units under the Exchange Privilege or Conversion Offer will pay a
lower sales charge than that which would be paid for the Units by a new
investor. For Certificateholders who wish to exercise the Exchange Privilege or
Conversion Offer within the first five months of their purchase of Units of the
Exchange or Redemption Trust, the sales charge applicable to the purchase of
units of an Exchange or Conversion Trust shall be the greater of (i) the reduced
sales charge or (ii) an amount which when coupled with the sales charge paid by
the Certificateholder upon his original purchase of Units of the Exchange or
Redemption Trust would equal the sales charge applicable in the direct purchase
of units of an Exchange Trust.
In order to exercise the Exchange Privilege the Sponsor must
be maintaining a secondary market in the units of the available Exchange Trust.
The Conversion Offer is limited only to unit owners of any Redemption Trust.
Exercise of the Exchange Privilege and the Conversion Offer by
Certificateholders is subject to the following additional conditions: (i) at the
time of the Certificateholder's election to participate in the Exchange
Privilege or Conversion Offer, there must be units of the Exchange or Conversion
Trust available for sale, either under the initial primary distribution or in
the Sponsor's secondary market, (ii) exchanges will be effected in whole units
only, (iii) Units of the Mortgage Securities Trust may only be acquired in
blocks of 1,000 Units and (iv) Units of the Equity Securities Trust may only be
acquired in blocks of 100 Units. Certificate holders will not be permitted to
advance any funds in excess of their redemption in order to complete the
exchange. Any excess proceeds received from a Certificateholder for exchange or
from units being redeemed per conversion will be remitted to such
Certificateholder.
The Sponsor reserves the right to suspend, modify or terminate
the Exchange Privilege and/or the Conversion Offer. The Sponsor will provide
Certificateholders of the Trust with 60 days' prior written notice of any
termination or material amendment to the Exchange Privilege and/or the
Conversion Offer, provided that no notice need be given if (i) the only material
effect of an amendment is to reduce or eliminate the sales charge payable at the
time of the exchange, to add one or more series of the Trust eligible for the
Exchange Privilege or the Conversion Offer, to add any new unit investment trust
sponsored by Reich & Tang or a sponsor controlled by or under common control
with Reich & Tang, or to delete a series which has been terminated from
eligibility for the Exchange Privilege and/or the Conversion Offer, (ii) there
is a suspension of the redemption of units of an Exchange or Conversion Trust
under Section 22(e) of the Investment Company Act of 1940, or (iii) an Exchange
Trust temporarily delays or ceases the sale of its units because it is unable to
invest amounts effectively in accordance with its investment objectives,
policies and restrictions. During the 60-day notice period prior to the
termination or material amendment of the Exchange
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<PAGE>
Privilege described above, the Sponsor will continue to maintain a secondary
market in the units of all Exchange Trusts that could be acquired by the
affected Certificateholders. Certificateholders may, during this 60-day period,
exercise the Exchange Privilege in accordance with its terms then in effect.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. To exercise
the Conversion Offer, a unit owner of a Redemption Trust should notify his
retail broker of his desire to redeem his Redemption Trust Units and use the
proceeds from the redemption to purchase Units of one or more of the Conversion
Trusts. If Units of a designated, outstanding series of an Exchange or
Conversion Trust are at the time available for sale and such Units may lawfully
be sold in the state in which the Certificateholder is a resident, the
Certificateholder will be provided with a current prospectus or prospectuses
relating to each Exchange or Conversion Trust in which he indicates an interest.
He may then select the Trust or Trusts into which he desires to invest the
proceeds from his sale of Units. The exchange transaction will operate in a
manner essentially identical to a secondary market transaction except that units
may be purchased at a reduced sales charge. The conversion transaction will be
handled entirely through the unit owner's retail broker. The retail broker must
tender the units to the trustee of the Redemption Trust for redemption and then
apply the proceeds to the redemption toward the purchase of units of a
Conversion Trust at a price based on the aggregate offer or bid side evaluation
per Unit of the Conversion Trust, depending on which price is applicable, plus
accrued interest and the applicable sales charge. The certificates must be
surrendered to the broker at the time the redemption order is placed and the
broker must specify to the Sponsor that the purchase of Conversion Trust Units
is being made pursuant to the Conversion Offer. The unit owner's broker will be
entitled to retain a portion of the sales charge.
TAX CONSEQUENCES OF THE EXCHANGE PRIVILEGE AND THE CONVERSION
OFFER. A surrender of units pursuant to the Exchange Privilege or the Conversion
Offer normally will constitute a "taxable event" to the Certifi cateholder under
the Code. The Certificateholder will recognize a tax gain or loss that will be
of a long-, mid- or short-term capital or ordinary income nature depending on
the length of time the units have been held and other factors. A
Certificateholder's tax basis in the Units acquired pursuant to the Exchange
Privilege or Conversion Offer will be equal to the purchase price of such Units.
Investors should consult their own tax advisors as to the tax consequences to
them of exchanging or redeeming units and participating in the Exchange
Privilege or Conversion Offer.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units originally offered
and certain matters relating to federal tax law have been passed upon by Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022, or Berger Steingut
Tarnoff & Stern, 600 Madison Avenue, New York, New York 10022, as counsel for
the Sponsor. Carter, Ledyard & Milburn, Two Wall Street, New York, New York
10005 have acted as counsel for The Chase Manhattan Bank. On the initial date of
deposit, Booth & Baron acted as counsel for The Bank of New York.
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<PAGE>
INDEPENDENT ACCOUNTANTS. The financial statements of the
Trusts for the years ended December 31, 1997 and 1996 included in Part A of this
Prospectus have been examined by Price Waterhouse LLP, independent accountants.
The financial statements have been so included in reliance on their report given
upon the authority of said firm as experts in accounting and auditing. KPMG Peat
Marwick LLP has consented to the incorporation by reference of their report on
the statements of operations and changes in net assets for the Trusts included
in Part A of this Prospectus for the year ended December 31, 1995.
DESCRIPTION OF BOND RATINGS*
STANDARD & POOR'S. A brief description of the applicable
Standard & Poor's rating symbols and their meanings is as follows:
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase or sell a
security, inasmuch as it does not comment as to market price.
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. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information.
The ratings are based, in varying degrees, on the following
considerations:
(a) 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.
(b) Nature of and provisions of the obligation.
(c) 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 -- This is the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and they
differ from AAA issues only in small degrees.
- --------
* As described by the rating agencies.
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A -- Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "BB" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
Provisional Ratings -- (Prov.) following a rating indicates
the rating is provisional, which assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion, 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.
MOODY'S. A brief description of the applicable Moody's rating
symbols and their meanings is as 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.
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.
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Those bonds in the A and Baa group which Moody's believes
possess the strongest investment attributes are designated by the symbol A 1 and
Baa 1. Other A bonds comprise the balance of the group. These rankings (1)
designate the bonds which offer the maximum in security within their quality
group, (2) designate bonds which can be bought for possible upgrading in quality
and (3) additionally afford the investor an opportunity to gauge more precisely
the relative attractiveness of offerings in the market place.
Moody's applies numerical modifiers, 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond 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 issue ranks in the lower end of its generic
rating category.
Con-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are debt obligations 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. Rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
1653.4
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<PAGE>
<TABLE>
<CAPTION>
INDEX
Title Page NEW YORK MUNICIPAL TRUST
<S> <C> <C>
Summary of Essential Information............................... A-4
Financial and Statistical Information.......................... A-5
Information Regarding the Trust................................ A-6 (A Unit Investment Trust)
Audit and Financial Information.....................................F-1
The Trust...................................................... 1 Prospectus
----------
Portfolios..................................................... 2
Special Factors Affecting New York............................. 8 Dated: April 30, 1998
Public Offering................................................ 15
Estimated Long Term Return and Estimated Sponsor:
Current Return............................................... 17
Rights of Certificateholders................................... 18 Reich & Tang Distributors, Inc.
Tax Status..................................................... 20 600 Fifth Avenue
Liquidity...................................................... 24 New York, NY 10020
Trust Administration........................................... 26 212-830-5200
Trust Expenses and Charges..................................... 30
Exchange Privilege and Conversion Offer........................ 31
Other Matters.................................................. 33 Trustee:
Description of Bond Ratings.................................... 34
The Bank of New York
101 Barclay Street
Parts A and B of this Prospectus do not New York, NY 10286 contain all of the
information set forth in 1-800-431-8002 the registration statement and exhibits
relating thereto, filed with the Securities and Exchange Commission, Washington,
D.C., Evaluator:
under the Securities Act of 1933, and to which
reference is made. Kenny S&P Evaluation Services
65 Broadway
New York, NY 10006
</TABLE>
* * *
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, securities in any state to any person to whom
it is not lawful to make such offer in such state.
No person is authorized to give any information or to make any
representations not contained in Parts A and B in this Prospectus; and any
information or representation not contained herein must not be relied upon as
having been authorized by the Trust, the Trustee, the Evaluator, or the Sponsor.
The Trust is registered as a unit investment trust under the Investment Company
Act of 1940. Such registration does not imply that the Trust or any of its Units
have been guaranteed, sponsored, recommended or approved by the United States or
any state or any agency or officer thereof.
1653.4
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<PAGE>
