Rule 497(b)
Registration No. 2-69621
NOTE: Part A of This Prospectus May Not Be
Distributed Unless Accompanied by Part B.
NEW YORK MUNICIPAL TRUST
SERIES 15
- ------------------------------------------------------------------------------
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 (including, where applicable, earned original issue
discount) 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. Capital gains are
subject to tax. (See "Tax Status" and "The Trust--Portfolio" in Part B of this
Prospectus.) The Sponsor is Bear, Stearns & Co. 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, 1994 (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.
Investors should retain both parts of this Prospectus for
future reference.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus Part A Dated April 28, 1995
112155.1
<PAGE>
THE TRUST. The Trust is a unit investment trust formed to preserve
capital and to provide interest income (including, where applicable, earned
original issue discount) 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 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. Although the Supreme
Court has determined that Congress has the authority to subject interest on
bonds such as the Bonds in the Trust to regular federal income taxation,
existing law excludes such interest from regular federal income tax. Such
interest income may, however, be subject to federal corporate alternative
minimum tax and to state and local taxes in other jurisdictions. (See "Tax
Status" in Part B of this Prospectus.) All of the Bonds in the Trust were
rated "A" or better by Standard & Poor's Corporation or Moody's Investors
Service, Inc. at the time 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. There can be no
assurance that the Trust's investment objectives will be achieved. 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. Each Unit in the Trust represents a 1/7658th 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 4.5% of the
Public Offering Price, or 4.712% 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 $249.79 plus accrued
interest of $15.36 under the monthly distribution plan, $16.46 under the
semi-annual distribution plan and $16.37 under the annual distribution plan
for a total of $265.15, $266.25 and $266.16, respectively. The Public Offering
Price per Unit can vary on a daily basis in accordance with fluctuations in
A-2
112155.1
<PAGE>
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 previously described under "Public Offering Price") 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".
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
A-3
112155.1
<PAGE>
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 4.5% (4.712% of the net amount invested),
plus net accrued interest. If a market is not maintained a Certificateholder
will be able to redeem his 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.)
TOTAL REINVESTMENT PLAN. Certificateholders under the semi-annual
and annual plans of distribution have the opportunity to have all their
regular interest distributions, and principal distributions, if any,
reinvested in available series of "New York Municipal Trust". (See "Total
Reinvestment Plan" in Part B of this Prospectus.) The Plan is not designed to
be a complete investment program.
A-4
112155.1
<PAGE>
NEW YORK MUNICIPAL TRUST
SERIES 15
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 31, 1994
Date of Deposit: January 19, 1981 Minimum Principal Distribution:
Principal Amount of Bonds ... $1,760,000 $1.00 per Unit.
Number of Units ............. 7,658 Weighted Average Life to Maturity:
Fractional Undivided Inter- 5.5 Years.
est in Trust per Unit ..... 1/7658 Minimum Value of Trust:
Principal Amount of Trust may be terminated if
Bonds per Unit ............ $229.83 value of Trust is less than
Secondary Market Public $3,600,000 in principal
Offering Price** amount of Bonds.
Aggregate Bid Price Mandatory Termination Date:
of Bonds in Trust ....... $1,826,784+++ The earlier of December 31,
Divided by 7,658 Units .... $238.55 2027 or the disposition of
Plus Sales Charge of 4.5% the last Bond in the Trust.
of Public Offering Price $11.24 Trustee***: The Bank of New York.
Public Offering Price Trustee's Annual Fee: Monthly
per Unit ................ $249.79+ plan $1.08 per $1,000; semi-
Redemption and Sponsor's annual plan $.60 per $1,000;
Repurchase Price and annual plan is $.40 per
per Unit .................. $238.55+ $1,000.
........... +++ Evaluator: Kenny S&P Evaluation
........... ++++ Services.
Excess of Secondary Market Evaluator's Fee for Each
Public Offering Price Evaluation: Minimum of $15
over Redemption and plus $.25 per each issue of
Sponsor's Repurchase Bonds in excess of 50 issues
Price per Unit ............ $11.24++++ (treating separate maturities
Difference between Public as separate issues).
Offering Price per Unit Sponsor: Bear, Stearns & Co. Inc.
and Principal Amount per
Unit Premium/(Discount) ... $19.96
Evaluation Time: 4:00 p.m.
New York Time.
PER UNIT INFORMATION BASED UPON INTEREST DISTRIBUTION PLAN ELECTED
Monthly Semi-Annual Annual
Option Option Option
Gross annual interest income# ......... $19.55 $19.55 $19.55
Less estimated annual fees and
expenses ............................ 1.19 .88 .81
Estimated net annual interest ______ ______ ______
income (cash)# ...................... $18.36 $18.67 $18.74
Estimated interest distribution# ...... 1.53 9.33 18.74
Estimated daily interest accrual# ..... .0510 .0518 .0520
Estimated current return#++ ........... 7.35% 7.47% 7.50%
Estimated long term return++ .......... 6.20% 6.32% 6.35%
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
A-5
112155.1
<PAGE>
* 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.
*** The Trustee maintains its corporate trust office at 101 Barclay Street,
New York, New York 10286 (tel. no.: 1-800-431-8002). 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 five
business days after purchase) of $15.36 monthly, $16.46 semi-annually
and $16.37 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.
A-6
112155.1
<PAGE>
INFORMATION REGARDING THE TRUST
AS OF DECEMBER 31, 1994
DESCRIPTION OF PORTFOLIO
Each Unit in the Trust consists of a 1/7658th fractional undivided
interest in the principal and net income of the Trust in the ratio of one Unit
for each $229.83 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 5 issues representing obligations of 4 issuers located in New York
State and 1 in Puerto Rico. One issue representing $130,000 of the principal
amount of the Bonds in the Trust is a "moral obligation" bond. 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). One issue
representing $970,000 of the principal amount of the Bonds is a general
obligation bond. All 4 of the remaining issues representing $790,000 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: Federally
Assisted Mortgage 1, Federally Subsidized Mortgage 1, Health Facilities 1, and
Hospital and Nursing Projects 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.
A-7
112155.1
<PAGE>
FINANCIAL AND STATISTICAL INFORMATION
Selected data for each Unit outstanding for the periods listed below:
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, 1992 8,250 $347.37 $28.13 $28.50 $28.59 $135.52
December 31, 1993 8,250 270.84 31.92 32.27 32.35 79.58
December 31, 1994 7,658 253.20 18.24 18.63 18.70 -0-
- --------
* 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-8
112155.1
<PAGE>
Independent Auditors' Report
The Sponsor, Trustee and Certificateholders
New York Municipal Trust, Series 15:
We have audited the accompanying statement of net assets, including the
portfolio, of New York Municipal Trust, Series 15 as of December 31, 1994, and
the related statements of operations, and changes in net assets for each of
the years in the three year period then ended. These financial statements are
the responsibility of the Trustee (see note 2). Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New York Municipal Trust,
Series 15 as of December 31, 1994, and the results of its operations and the
changes in its net assets for each of the years in the three year period then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
March 31, 1995
<PAGE>
NEW YORK MUNICIPAL TRUST, SERIES 15
Statement of Net Assets
December 31, 1994
Investments in marketable securities,
at market value (cost $1,427,762) $ 1,835,055
Accrued interest 58,987
Cash 45,341
------------
Other assets 104,328
------------
Accrued expenses 400
------------
Total liabilities 400
------------
Excess of other assets over total liabilities 103,928
------------
Net asset (7,658 units of fractional
undivided interest outstanding,
$253.20 per unit) $ 1,938,983
=============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
<CAPTION>
Years ended December 31,
------------ ---- ------------ ----- ------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Investment income - interest $ 157,998 268,557 256,403
------------ ------------ ------------
Expenses:
Trustee's fees 5,303 6,363 8,307
Evaluator's fees 3,308 3,298 3,307
------------ ------------ ------------
Total expenses 8,611 9,661 11,614
------------ ------------ ------------
Investment income, net 149,387 258,896 244,789
------------ ------------ ------------
Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on
bonds sold or called 26,203 (49,332) 68,488
Unrealized appreciation
(depreciation) for the year (169,964) 80,184 92,035
------------ ------------ ------------
Net (loss) gain
on investments (143,761) 30,852 160,523
------------ ------------ ------------
Net increase in net
assets resulting
from operations $ 5,626 289,748 405,312
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years ended December 31,
------------- -- ------------- -- ------------
1994 1993 1992
------------- ------------- ------------
<S> <C> <C> <C>
Operations:
Investment income, net $ 149,387 258,896 244,789
Net realized gain (loss) on
bonds sold or called 26,203 (49,332) 68,488
Unrealized appreciation
(depreciation) for the year (169,964) 80,184 92,035
------------- ------------- ------------
Net increase in net
assets resulting
from operations 5,626 289,748 405,312
------------- ------------- ------------
Distributions to Certificateholders:
Investment income 148,858 264,573 236,009
Principal - 656,535 1,121,884
Redemptions:
Interest 9,826 - 11,521
Principal 142,405 - 283,684
------------- ------------- ------------
Total distributions and
redemptions 301,089 921,108 1,653,098
------------- ------------- ------------
Total decrease (295,463) (631,360) (1,247,786)
Net assets at beginning of year 2,234,446 2,865,806 4,113,592
------------- ------------- ------------
Net assets at end of year (including
undistributed net investment
income of $111,638, $120,935 and
$126,612, respectively) $ 1,938,983 2,234,446 2,865,806
============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NEW YORK MUNICIPAL TRUST, SERIES 15
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) Organization
New York Municipal Trust, Series 15 (Trust) was organized on January
19, 1981 by Bear Stearns & Co. Inc. (Sponsor) 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.
(2) Summary of Significant Accounting Policies
The Bank of New York (Trustee) has custody of and responsibility for
the accounting records and financial statements of the Trust and is
responsible for establishing and maintaining a system of internal
control related thereto.
The Trustee is also responsible for all estimates of expenses and
accruals reflected in the Trust's financial statements. The
accompanying financial statements have been adjusted to record the
unrealized appreciation (depreciation) of investments and to record
interest income and expenses on the accrual basis.
Investments are carried at market value which is determined by Kenny
S&P Evaluation Services or Moody's Investors Service, Inc.
(Evaluator) as discussed in Footnotes to Portfolio. The market value
of the investments is based upon the bid prices for the bonds at the
end of the year, 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.
(3) Income Taxes
The Trust is not subject to Federal income taxes as provided for by
the Internal Revenue Code.
(4) Trust Administration
The fees and expenses of the Trust are incurred and paid on the basis
set forth under "Trust Expenses and Charges" in Part B of this
Prospectus.
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.
See "Financial and Statistical Information" in Part A of this
Prospectus for the amounts of per unit distributions during the years
ended December 31, 1994, 1993 and 1992.
The Trust Indenture and Agreement also requires the Trust to redeem
units tendered. 592 units were redeemed during the year ended
December 31, 1994. No units were redeemed during the year ended
December 31, 1993. 643 units were redeemed during the year ended
December 31, 1992.
(5) Net Assets
At December 31, 1994, the net assets of the Trust represented the
interest of Certificateholders as follows:
Original cost to Certificateholders $ 8,557,560
Less initial gross underwriting commission (385,110)
8,172,450
Cost of securities sold or called (6,744,688)
Net unrealized appreciation 407,293
Undistributed net investment income 111,638
Undistributed proceeds from bonds sold or called (7,710)
Total $1,938,983
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 9,000 units of fractional
undivided interest of the Trust as of the date of deposit.
<PAGE>
<TABLE>
NEW YORK MUNICIPAL TRUST, SERIES 15
Portfolio
December 31, 1994
<CAPTION>
Port- Aggregate Coupon Rate/ Redemption Feature
folio Principal Name of Issuer Ratings Date(s) of S.F.--Sinking Fund Market
No. Amount and Title of Bonds (1) Maturity(2) Ref.--Refunding (2)(7) Value(3)
- -- ----------- --------------------- ---- ----------- ---------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
(2)(7)
1 $ 500,000 New York State Housing AAA 7.600% 5/01/95 @ 100 S.F. $ 513,860
Finance Agency, Health 11/01/2004 None
Facilities, 1979
Series A
2 130,000 New York State Housing A* 5.875 No Sinking Fund 129,929
Finance Agency, 11/01/2007 5/01/95 @ 103 Ref.
Hospital and Nursing
Home Project Bonds,
1971 Series A
3 60,000 New York City Housing A * 8.250 Currently @ 100 61,440
Authority, Section 8 (cond.) 1/01/2011 S.F.
Federal Subsidy 2/01/95 @ 101
Mortgage Revenue Ref.
Bonds, 1978 Series A
4 100,000 Riverhead Housing NR 8.250 8/01/96 @ 100 S.F. 99,037
Development 8/01/2010 None
Corporation (New
York), Section 8
Assisted Mortgage
Revenue Bonds
(Riverhead Village
Apartments Project)
5 970,000 Commonwealth of Puerto AAA 9.375 7/01/00 @ 100 S.F. 1,030,789
----------- ---------
Rico, Public 7/01/2005 7/01/95 @ 104
Improvement Bonds of Ref.
1980 (General
Obligation Bonds) (5)
$ 1,760,000 $1,835,055
=========== ===========
See accompanying footnotes to portfolio and notes to financial statements.
</TABLE>
<PAGE>
NEW YORK MUNICIPAL TRUST, SERIES 15
Footnotes to Portfolio
December 31, 1994
(1) All ratings are by Kenny S&P Evaluation Services, except for those
identified by an asterisk (*) which are by Moody's Investors Service,
Inc. A brief description of the ratings symbols and their meanings
is set forth under "Description of Bond Ratings" in Part B of this
Prospectus.
(2) See "The Trust - Portfolio" in Part B of this Prospectus for an
explanation of redemption features. See "Tax Status" in Part B of
this 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, 1994, the net unrealized appreciation of all the bonds
was comprised of gross unrealized appreciation of $407,293.
(4) The annual interest income, based upon bonds held at December 31, 1994,
to the Trust is $149,774.
(5) The bonds have been prerefunded and will be redeemed at the next
refunding call date.
(6) Bonds sold or called after December 31, 1994 are noted in a footnote
"Changes in Trust Portfolio" under "Description of Portfolio" in Part
A of this Prospectus.
(7) 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).
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 28, 1995
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 Bear,
Stearns & Co. Inc., as Sponsor, The Bank of New York as Trustee, and Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., 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 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
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* 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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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 corporate 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 Bonds 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 Corporation or Moody's Investors Service, Inc. 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 Corporation or Moody's Investors Service, Inc., (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 Certificate-
holders 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
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
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occupancy levels, revenues and expenses. Actual experience may vary
considerably from such projections. A hospital's gross receipts and net
income will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to
provide them, physicians' confidence in hospital management capability,
economic developments in the service area, competition, actions by insurers
and governmental agencies and the increased cost and possible unavailability
of malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
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.
Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in
the areas noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse change in these areas may affect
the ability of such issuers to make payment of principal and interest on such
bonds. 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. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the
development and operation of nuclear generating facilities. The 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 1954, 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 1986, as amended (the "Code") (and
under similar provisions of the prior tax law) "mortgage revenue bonds" are
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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
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
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school bonds in the Trusts. See "Description of Portfolio" for the amount of
school bonds contained therein.
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.
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, the State may be called on to restore any deficits in capital reserve
funds of such agencies or authorities created with respect to the Bonds. Any
such restoration requires appropriation by the State Legislature for such
purpose, and accordingly the statutes do not constitute a legally enforceable
obligation or debt of the State. The agencies or authorities in question have
no taxing power. Neither the State nor any State agency having the benefit of
a "moral obligation" provision is in default in the payment of principal or
interest on any bond.
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
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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
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 portfolio may be
general obligations and/or revenue bonds of issuers located in Puerto Rico
which will be affected by general economic conditions in Puerto Rico. The
economy of Puerto Rico is closely integrated with that of the mainland United
States. During fiscal year 1993, approximately 86% of Puerto Rico's exports
were to the United States mainland, which was also the source of 69% of Puerto
Rico's imports. In fiscal 1993, Puerto Rico experienced a $2.5 billion
positive adjusted trade balance. The economy of Puerto Rico is dominated by
the manufacturing and service sectors. The manufacturing sector has
experienced a basic change over the years as a result of increased emphasis on
higher wage, high technology industries such as pharmaceuticals, electronics,
computers, microprocessors, professional and scientific instruments, and
certain high technology machinery and equipment. The service sector,
including finance, insurance and real estate, also plays a major role in the
economy. It ranks second only to manufacturing in contribution to the gross
domestic product and leads all sectors in providing employment. In recent
years, the service sector has experienced significant growth in response to
and paralleling the expansion of the manufacturing sector. Since fiscal 1987,
personal income has increased consistently in each fiscal year. In fiscal
1993, aggregate personal income was $24.1 billion ($20.6 billion in 1987
prices) and personal income per capita was $6,760 ($5,767 in 1987 prices).
Personal income includes transfer payments to individuals in Puerto Rico under
various social programs. Total federal payments to Puerto Rico, which include
many types in addition to federal transfer payments, are lower on a per capita
basis in Puerto Rico than in any state. Transfer payments to individuals in
fiscal 1993 were $5.3 billion, of which $3.6 billion, or 67.6%, represent
entitlement to individuals who had previously performed services or made
contributions under programs such as Social Security, Veterans Benefits and
Medicare. The number of persons employed in Puerto Rico during fiscal 1994
averaged 1,011,000. Unemployment, although at a low level compared to the
late 1970s, remains above the average for the United States. In fiscal 1994,
the unemployment rate in Puerto Rico was 15.9%. Puerto Rico's decade-long
economic expansion continued throughout the five-year period from fiscal 1989
through fiscal 1993. Almost every sector of its economy was affected and
record levels of employment were achieved. Factors behind this expansion
include Commonwealth sponsored economic development programs, the relatively
stable prices of oil imports, the continued growth of the United States
economy, periodic declines in exchange value of the United States dollar and
the relatively low cost borrowing during the period. Real gross product
(adjusted to reflect 1987 prices) amounted to approximately $20.07 billion in
fiscal 1993, or 3.1% above the fiscal 1992 level. The Puerto Rico Planning
Board's economic activity index, a composite index for thirteen economic
indicators, increased 1.6% in fiscal 1994 compared to fiscal 1993, which
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period showed an increase of 1.4% over fiscal 1992. Growth in the Puerto Rico
economy in fiscal 1995 depends on several factors, including the state of the
United States economy and the relative stability in the price of oil imports,
the exchange value of the U.S. dollar and the cost of borrowing.
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 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.
SPECIAL FACTORS AFFECTING NEW YORK
The information set forth below is derived from official
statements released by the City of New York and New York State in connection
with the issuance of New York State and New York City municipal bonds. The
Sponsor has not independently verified this information. The Sponsor has no
reason to believe it is not correct in all material respects.
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New York Risk Factors
This summary is included for the purpose of providing a general
description of New York State's (the "State") and New York City's (the "City")
credit and financial condition. 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 State and City municipal bonds.
The Fund has not independently verified this information.
State Economic Trends. Over the long term, the State and the City
face serious potential economic problems. The City accounts for approximately
41% of the State's population and personal income, and the City's financial
health affects the State in numerous ways. The State historically has been
one of the wealthiest states in the nation. For decades, however, the State
has grown more slowly than the nation as a whole, gradually eroding its
relative economic affluence. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the suburbs
and an influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the South
and the West have had in attracting people and business. The City has also
had to face greater competition as other major cities have developed financial
and business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City. In recent
years the State's economic position has improved in a manner consistent with
that for the Northeast as a whole. 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 publishing.
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. In order to achieve a balanced budget
as required by the laws of the State for the 1992 fiscal year, the City
increased taxes and reduced services during the 1991 fiscal year to close a
then projected gap of $3.3 billion in the 1992 fiscal year which resulted
from, among other things, lower than projected tax revenue of approximately
$1.4 billion, reduced State aid for the City and greater than projected
increases in legally mandated expenditures, including public assistance and
Medicaid expenditures. 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. The City's current four-year financial plan assumes that, after
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noticeable improvements in the City's economy during calendar year 1994,
economic growth will slow in calendar years 1995 and 1996 with local
employment increasing modestly. In December 1994, the City experienced
substantial shortfalls in payments of non-property tax revenues from those
forecasted. Through December 1994, collections of non-property taxes were
approximately $200 million lower than projected.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with generally accepted
accounting principles ("GAAP"), and the City's 1995 fiscal year results are
projected to be balanced in accordance with GAAP. The City was required to
close substantial budget gaps in recent years in order to maintain balanced
operating results. For fiscal year 1995, the City has adopted a budget which
has halted the trend in recent years of substantial increases in City spending
from one year to the next. 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 reductions in City services,
which could adversely affect the City's economic base.
Pursuant to the laws of the State, the City prepares an annual
four-year financial plan, which is reviewed and revised on a quarterly basis
and which includes the City's capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps.
The City is required to submit its financial plans to review bodies, including
the New York State Financial Control Board ("Control Board"). If the City
were to experience certain adverse financial circumstances, including the
occurrence or the substantial likelihood and imminence of the occurrence of an
annual operating deficit of more than $100 million or the loss of access to
the public credit markets to satisfy the City's capital and seasonal financing
requirements, the Control Board would be required by State law to exercise
powers, among others, of prior approval of City financial plans, proposed
borrowings and certain contracts.
The City depends on the State for 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.
The Mayor is responsible for preparing the City's four-year
financial plan, including the City's current financial plan for the 1995
through 1998 fiscal years (the "1995-1998 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 results of a pending actuarial audit of the City's pension system
which is expected to significantly increase the City's annual pension costs,
the ability to implement proposed reductions in City personnel and other cost
reduction initiatives, which may require in certain cases the cooperation of
the City's municipal unions, revenue generating transactions and provision of
State and Federal aid and mandate relief.
Implementation of the Financial Plan is also dependent upon the
City's ability to market its securities successfully in the public credit
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markets. The City's financing program for fiscal years 1995 through 1998
contemplates the issuance of $10.7 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. 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 will be subject to prevailing market conditions, and no assurance can be
given that such sales will be completed. If the City were unable to sell its
general obligation bonds and notes, it would be prevented from meeting its
planned capital and operating expenditures.
On October 25, 1994, the City published the Financial Plan for the
1995-1998 fiscal years, which is a proposed modification to a financial plan
submitted to the Control Board on July 8, 1994 (the "July Financial Plan") and
which relates to the City, the Board of Education ("BOE") and the City
University of New York.
The City's July Financial Plan set forth proposed actions for the
1995 fiscal year to close a previously projected gap of approximately $2.3
billion for the 1995 fiscal year, which included City actions aggregating $1.9
billion, a $288 million increase in State actions over the 1994 and 1995
fiscal years, and a $200 million increase in Federal assistance. The City
actions included proposed agency actions aggregating $1.1 billion, including
productivity savings; tax and fee enforcement initiatives; service reductions;
and savings for the restructuring of City services. City actions also
included savings of $45 million resulting from proposed tort reform, the
projected transfer to the 1995 fiscal year of $171 million of the projected
1994 fiscal year surplus, savings of $200 million for employee health care
costs, $51 million in reduced pension costs, savings of $225 million from
refinancing City bonds and $65 million from the proposed sale of certain City
assets.
The 1995-1998 Financial Plan published on October 25, 1994
reflects actual receipts and expenditures and changes in forecast revenues and
expenditures since the July Financial Plan and projects revenues and
expenditures for the 1995 fiscal year balanced in accordance with GAAP. For
the 1995 fiscal year, the Financial Plan includes actions to offset an
additional potential $1.1 billion budget gap, resulting principally from a
$104 million decrease in the $171 million projected surplus from the 1994
fiscal year to be transferred to the 1995 fiscal year, due primarily to lower
projected tax revenues for the 1994 fiscal year; reductions in projected tax
revenues for the 1995 fiscal year totaling $170 millon; $60 million of
increased City pension contributions resulting from lower than expected
earnings on pension fund assets for the 1994 fiscal year; a $166 million
shortfall in projected increased Federal assistance due primarily to the
failure to enact national health care reform; the failure of the State
Legislature to approve tort reform; the failure to achieve the projected
savings of $200 million for employee health care costs; a $165 million
increase in projected overtime expenditures; and additional agency spending
requirements, primarily for increased costs for foster care and homeless
services, and other decreased projected revenues.
The gap-closing measures for the 1995 fiscal year set forth in the
1995-1998 Financial Plan include additional proposed agency actions
aggregating $851 million, including $342 million of reduced personal services
costs resulting from a reduction in the number of city employees, additional
expenditure reductions and $42 million of greater than forecast miscellaneous
revenues. Additional proposed gap-closing actions include the availability of
$200 million, primarily from reserves held for unreported health insurance
claims. The $851 million of agency actions proposed in the Financial Plan for
the 1995 fiscal year, together with the $1.1 billion of agency actions
proposed in the July Financial Plan, are substantial and difficult to
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implement. Agency actions proposed in the Financial Plan for the 1995 fiscal
year include reduced expenditures for the Police Department totaling $67
million, a $107 million reduction in the City's subsidy to the New York City
Health and Hospital Corporation ("HHC"), reduced allocations to BOE totaling
$190 million, expenditure reductions totaling $102 million for the Human
Resources Administration, expenditure reduction totaling $32 million for the
Department of Corrections, a portion of which is subject to modification of a
court consent decree, and a $113 million reduction in the City's subsidy to
the Metropolitan Transportation Authority (the "MTA"). The Financial Plan is
subject to the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives.
Based on currently available results, the Mayor's Office of
Management and Budget ("OMB") believes that developments since the publication
of the Financial Plan on October 25, 1994 have caused an additional $650
million budget gap in the 1995 fiscal year due to (i) projected tax revenue
shortfalls of $400 million, (ii) failure to renegotiate the terms of certain
Port Authority leases to increase revenues by $75 million, (iii) miscellaneous
revenue shortfalls of $25 million, and (iv) increases in certain agency
expenditures of $150 million. The projected tax revenue shortfalls for the
1995 fiscal year result from lower capital gains, bonuses and business
profits, the timing of certain payments and discounting by retailers. OMB has
also identified gap-closing actions totaling $650 million in the 1995 fiscal
year. Certain of these gap-closing actions will be subject to the ability of
the City to implement expenditure reduction initiatives and, in the case of
the social security refund, final approval by the Internal Revenue Service.
In the event these gap-closing actions cannot be fully implemented, the City
will be required to adopt additional gap-closing measures for the remainder of
the 1995 fiscal year, and there is no assurance that such measures will enable
the City to achieve a balanced budget for the 1995 fiscal year. Current
forecasts of revenues and expenditures for the fiscal year 1995, including the
gap-closing actions, could require the City to take actions within the 1995
fiscal year to meet its cash flow requirements.
The Financial Plan also sets forth projections to the 1996 through
1998 fiscal years and outlines a proposed gap-closing program to close
projected gaps of $1.0 billion, $1.5 billion and $2.0 billion for the 1996
through 1998 fiscal years, respectively, after successful implementation of
the $1.1 billion gap-closing program to the 1995 fiscal year.
OMB believes that developments since the publication of the
Financial Plan have caused the $1.0 billion gap projected in the Financial
Plan for the 1996 fiscal year to increase to $2.7 billion. The $1.5 billion
increase in the forecast budget gap for fiscal year 1996 is due to (i) a
projected tax revenue shortfall of approximately $400 million, reflecting the
impact of the recent shortfall in collections of non-property taxes described
above, (ii) an $80 million shortfall in projected property tax receipts due to
a lower than forecast increase in the tentative assessment role published by
the New York City Department of Finance, (iii) a reduction of $390 million in
the forecast receipts of State and Federal aid, (iv) a reduction of $75
million in forecast receipts of lease payments for New York City airports,
(v) higher costs of $260 million for Medicaid and agency spending, (vi)
additional pension funding costs of $300 million resulting from an ongoing
actuarial audit of the City pension systems and (vii) $45 million in
additional costs for unachieved tort reform.
In February the Mayor published a modification (the "February
Modification") to the Financial Plan for the City's 1995 through 1998 fiscal
years and a preliminary budget for the City's 1996 fiscal year. The February
Modification reflected changes since the Financial Plan including measures to
be taken to assure balance in the 1995 fiscal year described above and the
City's program to address the currently forecast gap of approximately $2.7
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billion in fiscal year 1996 which gap is projected to increase to $3.2 billion
and $3.8 billion in 1997 and 1998, respectively. The gap-closing program is
subject to change. However, the major components of the gap-closing program
for fiscal year 1996 are (i) a reduction in spending for entitlements of
approximately $1.2 billion, primarily affecting public assistance and Medicaid
payments by the City, (ii) $600 million in savings from municipal unions and
(iii) $500 million from the Board of Education. In addition, the City will
continue to seek mandate relief such as tort reform and other changes in City
procedures and use of resources through privatization and efficient
utilization of the City's assets.
The proposals contained in the February Modification to close the
projected budget gaps for the 1995 and 1996 fiscal years engendered
substantial public debate, and that the public debate relating to the 1996
fiscal year budget will most likely continue through the time the budget is
scheduled to be adopted in June 1995. On January 17, 1995, Standard & Poor's
placed the City's general obligation bonds on CreditWatch with negative
implications, in light of the refunding of debt contemplated by this offering
to provide $120 million of the $650 million in gap-closing actions required
for the 1995 fiscal year. Standard & Poor's stated that it will review the
February Modification for evidence of continued progress toward long-term
structural balance, and eventual elimination of certain types of budget
devices, as well as the next State budget proposal, to determine the extent of
the City's relief from State mandates in education, social services, and
health care expenditures. Standard & Poor's stated that financial plans which
continue to incorporate budget devices, such as refunding, or fail to reflect
ongoing budget relief from the State, will result in a lowering of the rating
to the "BBB" category for New York City's general obligation bonds.
In January 1993, the City announced a settlement with a coalition
of municipal unions, including Local 237 of the International Brotherhood of
Teamsters, District Council 37 of the American Federation of State, County and
Municipal Employees and other unions covering approximately 44% of the City's
workforce. The settlement, which has been ratified by the unions, includes a
total net expenditure increase of 8.25% over a 39 month period, ending March
31, 1995 for most of these employees. The City is presently bargaining with
the Correction Officers' Benevolent Association and the Sanitation Officers'
Association. In addition, the Transit Police Benevolent Association's
delegate body rejected a tentative settlement with the City. The contract
dispute is currently being arbitrated before the State's Public Employment
Relations Board. Moreover, a contract dispute between the City and the
Licensed Practical Nurses is currently in arbitration before the City's Office
of Collective Bargaining.
The Financial Plan provides no additional wage increases for City
employees after their contracts expire in the 1995-1996 fiscal years. Each 1%
wage increase for all employees commencing in the 1995 and 1996 fiscal years
would cost the City an additional $28 million for the 1995 fiscal year, $140
million for the 1996 fiscal year and $150 million each year thereafter above
the amounts provided for in the Financial Plan.
Various actions proposed in the Financial Plan, including the
proposed increase in State aid, are subject to approval by the Governor and
the State Legislature, and the proposed increase in Federal aid is subject to
approval by Congress and the President. State and Federal actions are
uncertain and no assurance can be given that such actions will in fact be
taken or that the savings that the City projects will result from these
actions will be realized. The State Legislature failed to approve a
substantial portion of the proposed State assumption of Medicaid costs in the
last session. The Financial Plan assumes that these proposals will be
approved by the State Legislature during the 1995 fiscal year and that the
Federal government will increase its share of funding for the Medicaid
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program. If these measures cannot be implemented, the City will be required
to take other actions to decrease expenditures or increase revenues to
maintain a balanced financial plan.
Although the City has maintained balanced budgets in each of its
last thirteen fiscal years, and is projected to achieve balanced operating
results for the 1995 fiscal year, there can be no assurance that the gap-
closing actions proposed by the Financial Plan can be successfully implemented
or that the City will maintain a balanced budget in future years without
additional State aid, revenue increases or expenditure reductions. Additional
tax increases and reductions in essential City services could adversely affect
the City's economic base.
The 1995-1998 Financial Plan is based on numerous assumptions,
including the continuing improvement in the City's and the region's economy
and a modest employment recovery during calendar year 1994 and the concomitant
receipt of the economically sensitive tax revenues in the amounts projected.
The 1995-1998 Financial Plan is subject to various other uncertainties and
contingencies relating to, among other factors, the extent, if any, to which
wage increases for City employees exceed the annual increases assumed for the
1995 through 1998 fiscal years; continuation of the 9% interest earnings
assumptions for pension fund assets and current assumptions with respect to
wages for City employees affecting the City's required pension fund
contributions; the willingness and ability of the State, in the context of the
State's current financial condition, to provide the aid contemplated by the
Financial Plan and to take various other actions to assist the City, including
the proposed State takeover of certain Medicaid costs and State mandate
relief; the ability of the Health and Hospitals Corporation ("HHC"), BOE and
other such agencies to maintain balanced budgets; the willingness of the
Federal government to provide Federal aid; approval of the proposed
continuation of the personal income tax surcharge; adoption of the City's
budgets by the City Council in substantially the forms submitted by the Mayor;
the ability of the City to implement proposed reductions in City personnel and
other cost reduction initiatives, which may require in certain cases the
cooperation of the City's municipal unions, and the success with which the
City controls expenditures; savings for health care costs for City employees
in the amounts projected in the Financial Plan; additional expenditures that
may be incurred due to the requirements of certain legislation requiring
minimum levels of funding for education; the impact on real estate tax
revenues of the current weakness in the real estate market; the City's ability
to market its securities successfully in the public credit markets; and
additional expenditures that may be incurred as a result of deterioration in
the condition of the City's infrastructure. Certain of these assumptions have
been questioned by the City Comptroller and other public officials.
The projections and assumptions contained in the 1995-1998
Financial Plan are subject to revision, which may involve substantial change,
and no assurance can be given that these estimates and projections, which
include actions which the City expects will be taken but which are not within
the City's control, will be realized.
From time to time, the Control Board staff, the City Comptroller
and others issue reports and make public statements regarding the City's
financial condition, commenting on, among other matters, the City's financial
plans, projected revenues and expenditures and actions by the City to
eliminate projected operating deficits. Some of these reports and statements
have warned that the City may have underestimated certain expenditures and
overestimated certain revenues and have suggested that the City may not have
adequately provided for future contingencies. Certain of these reports have
analyzed the City's future economic and social conditions and have questioned
whether the City has the capacity to generate sufficient revenues in the
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future to meet the costs of its expenditure increases and to provide necessary
services.
On January 17, 1995, the City Comptroller issued a report which
concluded that the risks for the 1995 fiscal year had increased from $453
million to $658 million, primarily as a result of the lower-than-projected tax
revenues totaling $400 million, partially offset by the anticipated receipt of
an additional $100 million of revenues from the refund by the Internal Revenue
Service of social security overpayments by the City in the 1995 fiscal year.
The report stated that the shortfall in tax revenue collections is explained
largely by weaknesses in the banking industry and securities sector, which
have been hurt by the tight monetary policies of the Federal Reserve Board
which have resulted in losses from bond trading operations, layoffs and lower
year-end bonuses. The report stated that this shortfall may increase if total
returns in the financial sector do not improve in the first half of the 1995
calendar year.
On December 27, 1994, the City Comptroller issued a report on the
City's economy which noted that the City's economic recovery had slowed in the
third quarter of the 1994 calendar year and concluded that the City's economy
is still very weak and the local recovery is fragile. The report noted that
the indications of weakness in the City's economy included slower growth in
payroll employment and retail sales in the third quarter, as well as softness
in the Manhattan commercial real estate market. The report also noted that
the tight monetary policies implemented by the Federal Reserve Bank since
February to curb inflationary pressures were particularly harmful to interest
rate sensitive and cyclical sectors, such as retailing, the securities
industry, banking and manufacturing and that the City's service driven economy
has not benefited from the national recovery, which was largely driven by
interest rate sensitive sectors of housing, capital goods and consumer durable
goods. The report noted that the slow-down in economic activity was expected
to continue in the fourth quarter of 1994, with more cutbacks in local
governments and additional layoffs in the financial sector, which will offset
new hiring in other areas and result in a slow growth in the 1995 calendar
year.
On November 30, 1994, OSDC issued a report reviewing the Financial
Plan. The report concluded that a projected budget gap of $252 million
existed for the 1995 fiscal year, due largely to higher social service costs
and uncertainties concerning the receipt of revenues from increased collection
efforts. The report identified additional substantial risks for the 1995
fiscal year totaling $351 million, including the proposed reduction in the
City subsidy to the Transit Authority, the receipt of revenues by the City as
a result of the refund of social security overpayments, the projected
subleasing of certain assets and possible additional expenditures for the BOE.
After taking into account possible reduced expenditures of $100 millon, OSDC
concluded that the City faces risks of approximately $500 million for the
remainder of the 1995 fiscal year.
With respect to the 1996 through 1998 fiscal years, the OSDC in
its March 21, 1995 report projects gaps of approximately $3 billion, $3.6
billion and $4.1 billion, respectively. According to the OSDC, the projected
gap could be greater than forecast by the City primarily because the City has
not yet secured $133 million in anticipated health insurance savings and
overtime costs from uniformed agencies are likely to be $80 million higher
than projected by the City. The report also identified a number of additional
risks which could raise the 1996 budget gap by another $400 millon (a net gap
of $232 million after accounting for possible savings from overestimating
prior year's expenses). These risks include (i) the expiration of the 14%
personal income tax surcharge which the Financial Plan assumes will be
extended by the State, (ii) unfunded liabilities at the Board of Education and
(iii) potentially higher pension costs. Additionally, the 1996 gap-closing
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program relies to a very large degree on cooperation from Federal and State
governments and municipal unions. In fact, the City has direct control of
less than $500 million of the total gap-closing measures. Therefore, no
assurance can be given that the 1996 measures will be successfully
implemented.
On December 8, 1994, the staff of the Control Board issued a
report on the Financial Plan. In its report the staff concluded that the City
faced risks of more than $513 million in the 1995 fiscal year. The staff
noted that tax receipts are stagnant, primarily because of a further
contraction in the property tax and sluggish growth in the non-property taxes,
related to erosion of profits in the securities industry, and that there are
substantial risks for the 1995 fiscal year with respect to possible increased
overtime and City Medicaid payments to HHC, shortfalls in parking fine
collections, the projected refund of social security payments, a proposed
asset sale, the renegotiation of certain Port Authority leases and possible
additional expenditures at BOE. In addition, the staff indicated that there
are risks of $2.0 billion, $2.6 billion and $3.1 billion for the 1996, 1997
and 1998 fiscal years, respectively. Risks for 1996 through 1998 fiscal years
include the potential for increased overtime and lower nonproperty tax
revenues, increased spending for City Medicaid payments to HHC, additional
expenditures at BOE, uncertainties concerning the proposed reduction in City
expenditures for health care costs, the anticipated revenues from
renegotiation of the terms of certain Port Authority leases, savings resulting
from the proposed tort reform to limit damage claims against the City, and
increased Federal aid for Medicaid. The report noted that the City faced
additional risks with respect to its assumptions regarding pension costs, a
reduced subsidy to the Transit Authority, social services savings and the cost
of wages. The staff noted that it is imperative that the City Council and the
Mayor work together to ensure that the actions taken for the 1995 fiscal year
are recurring and help reduce the over $2 billion gap for the 1996 fiscal year
and that a cooperative effort is necessary if the City is to solve its
structural budget problems and bring stability to the delivery of services to
its residents.
On March 17, 1995 the Control Board staff issued its report
commenting on the February Modification. The report notes that the February
Modification attempts to address the structural imbalances by dramatically
lowering expenditures in large budget areas while continuing the restructuring
of the City's finances. Their analysis does show a risk of at least $486
million in fiscal 1996, particularly because more than $2 billion in projected
budget relief is dependent upon the action of others. Both the Control Board
and the OSDC have noted that the City has not yet brought its long term
expenditures in line with recurring revenues; therefore, the City is likely to
face future budget gaps requiring it to reduce expenditures and/or increase
revenues.
A substantial portion of the capital improvements in the City are
financed by indebtedness issued by the Municipal Assistance Corporation for
the City of New York ("MAC"). MAC was organized in 1975 to provide financing
assistance for the City and also to exercise certain review functions with
respect to the City's finances. MAC bonds are payable out of certain State
sales and compensating use taxes imposed within the City, State stock transfer
taxes and per capita State aid to the City. Any balance from these sources
after meeting MAC debt service and reserve fund requirements and paying MAC's
operating expenses is remitted to the City or, in the case of the stock
transfer taxes, rebated to the taxpayers. The State is not, however,
obligated to continue the imposition of such taxes or to continue
appropriation of the revenues therefrom to MAC, nor is the State obligated to
continue to appropriate the State per capita aid to the City which would be
required to pay the debt service on certain MAC obligations. MAC has no
taxing power and MAC bonds do not create an enforceable obligation of either
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the State or the City. As of September 30, 1994, MAC had outstanding an
aggregate of approximately $4.885 billion of its bonds.
The City's general obligation bonds are rated Baa1 by Moody's.
Standard & Poor's has rated the City's general obligation bonds A-. Fitch
Investors Service, Inc. ("Fitch") has rated them A-. Such ratings reflect
only the view of Moody's, Standard & Poor's and Fitch, from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of
the City's general obligation bonds.
New York State and its Authorities. The State's current fiscal
year commenced on April 1, 1995, and ends on March 31, 1996, and is referred
to herein as the State's 1995-96 fiscal year. The prior fiscal year, which
ended on March 31, 1995, is referred to herein as the State's 1994-95 fiscal
year. The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for debt
service. The State Financial Plan for the 1994-95 fiscal year was formulated
on June 16, 1994 and is based on the State's budget as enacted by the
Legislature and signed into law by then Governor Cuomo. On February 1,
Governor Pataki presented his 1995-96 Executive Budget, containing his
recommendations for the upcoming fiscal year. The Governor's budget is
balanced on a cash basis in the General Fund (described below). However,
there can be no assurance that the Legislature will enact the proposed
Executive Budget into law, that the budget will be adopted in a more timely
manner than the prior year's budget, or that actual results will not differ
materially and adversely from the projections set forth below.
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.
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
economics. Many uncertainties exist in forecasts of both the national and
State economies, including consumer attitudes toward spending, Federal
financial and monetary policies, the availability of credit, and the condition
of the world economy, which could have an adverse effect on the State. There
can be no assurance that the State economy will not experience results in the
current fiscal year that are worse than predicted, with corresponding material
and adverse effects on the State's projections of receipts and disbursements.
The State Division of the Budget ("DOB") believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth below, and those projections may be changed materially
and adversely from time to time.
As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and regional economy
and actions of the Federal government, as well as State actions affecting the
level of receipts and disbursements. Owing to these and other factors, the
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State may, in future years, face substantial potential budget gaps resulting
from a significant disparity between tax revenues projected from a lower
recurring receipts base and the future costs of maintaining State programs at
current levels. Any such recurring imbalance would be exacerbated if the
State were to use a significant amount of nonrecurring resources to balance
the budget in a particular fiscal year. To address a potential imbalance for
a 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. To correct recurring budgetary imbalances, the
State would need to take significant actions to align recurring receipts and
disbursements in future fiscal years. There can be no assurance, however,
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.
The General Fund is the general operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. In the State's 1994-95 fiscal year, the General Fund is expected to
account for approximately 52 percent of total governmental-fund receipts and
51 percent of total governmental-fund disbursements. General Fund moneys are
also transferred to other funds, primarily to support certain capital projects
and debt service payments in other fund types.
As a result of the national and regional economic recession, the
State's tax receipts for its 1991 and 1992 fiscal years were substantially
lower than projected, which resulted in reductions in State aid to localities
for the State's 1992 and 1993 fiscal years from amounts previously projected.
The State completed its 1993 fiscal year with a positive margin of $671
million in the General Fund, which was deposited into a tax refund reserve
account. The State's economy, as measured by employment, started to recover
near the start of the 1993 calendar year, continued into mid-1994 and then
virtually ceased and the State completed its 1994 fiscal year with a
cash-basis balanced budget in the State's General Fund (the major operating
fund of the State), after depositing $1.5 billion in various reserve funds.
The State's 1994-95 Financial Plan, which is based upon the
enacted State budget, projected a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions, which
include increased State education aid and State assumption of certain costs
previously paid by the City and restoration of certain prior year revenue
sharing reductions. However, the State Legislature failed to enact a
substantial portion of the proposed State assumption of local Medicaid costs,
other significant mandate relief items, and the proposed tort reform
legislation, which would have provided the City with additional savings. On
February 1, 1995, as part of his Executive Budget for the 1995-96 fiscal year,
the Governor submitted the third quarterly update to the State Financial Plan
for the 1994-95 fiscal year. This update reflects changes to receipts and
disbursements. The update revises the projected General Fund receipts and
disbursements contained in the 1994-95 State Financial Plan as revised by the
first and second quarterly updates issued on July 29, 1994 and October 28,
1994. The update reflected that estimates of General Fund receipts for the
1994-95 fiscal year have been reduced by $585 million, from the mid-year
update, and are down $1.058 billion from the budget enacted in June 1994 (of
which $227 million results from a post mid-year accounting restatement of the
State Financial Plan). Offsetting this projected loss in receipts, however,
are projected reductions of $312 million in disbursements from the mid-year
update, attributable to lower spending through the first nine months of the
fiscal year, and to the use of greater than anticipated receipts from the
State lottery. The net result of the projected reductions in receipts and
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disbursements is a negative margin of $273 million against the mid-year
update's projection of a $14 million surplus, producing a potential deficit of
$259 million for the 1994-95 fiscal year. The Governor has proposed to close
this deficit through a hiring freeze, a review of pending contracts, and
spending cuts in certain programs that were started or expanded in the 1994-95
budget. Governor Pataki submitted a proposed budget for the State's 1995-96
fiscal year on February 1, 1995. The Governor's budget for 1995-96 fiscal
year included significant savings from Medicaid cost containment measures and
welfare reform and substantial reductions in State aid to localities,
including the City.
The 1995-96 Executive Budget is the first to be submitted by the
Governor, who assumed office on January 1. It proposes actual reductions in
the year-over-year dollar levels of State spending from the General Fund for
the first time in over half a century with a proposed cut of 3.4 percent.
There are, however, risks and uncertainties concerning whether or not certain
tax and spending cuts proposed in the Executive Budget will be upheld in the
face of potential legal challenges. For example, there can be no assurance
that cuts in social-welfare entitlement programs will not be challenged in
court. Further, the Comptroller has indicated his intention to challenge in
Court the proposed use of certain pension reserves in the Executive Budget.
According to the Executive Budget, in the 1995-96 fiscal year, the
State Financial Plan would be out of balance by almost $4.7 billion, as a
result of three key factors: (1) the projected structural deficit resulting
from the ongoing disparity between sluggish growth in receipts, the effect of
prior-year tax changes, and the rapid acceleration of spending growth ($2.1
billion); (2) the impact of unfunded 1994-95 initiatives, including capital
projects such as sports and recreational facilities, an increase in revenue
sharing to local governments, further State takeover of local Medicaid costs,
more school aid, and increased tuition assistance ($1.1 billion); and (3) the
use of one-time solutions to fund recurring spending in the 1994-95 budget
($1.5 billion). Tax cuts proposed to spur economic growth and provide relief
for low and middle-income taxpayers add $240 million to the projected
imbalance or budget gap, bringing the total to approximately $5 billion.
The Executive Budget proposes to close the budget gap for the
1995-96 fiscal year through (1) $1.9 billion from cost containment savings in
social-welfare programs, particularly Medicaid cost-containment
recommendations ($1.277 billion), Income-Maintenance restructuring
recommendations ($340 million), and the consolidation of various child-care
programs into a Family Services Block Grant to counties and New York City; (2)
$2.5 billion in savings from State agency restructuring that is expected to
reduce spending on the State workforce, SUNY and CUNY, mental hygiene
programs, capital projects, the prison population, and public authorities; (3)
$350 million in savings from local assistance reforms, by freezing school aid,
revenue sharing and county costs of preschool special education at current
levels, while proposing program legislation to provide relief from certain
mandates that increase local spending; and (4) $200 million in new revenue
measures, primarily a new Quick Draw Lottery game and changes to tax-payment
schedules. The Executive Budget indicates that for years State revenues have
grown at a lower rate than State spending, producing an increasing structural
deficit, and that if the proposals in the Executive Budget are upheld
(particularly the spending cuts described above) the State will start to
eliminate the structural imbalance that has characterized the State's fiscal
record. There can, however, be no assurances that the tax and spending cuts
proposed in the Executive Budget will be upheld or enacted as proposed, or
that if enacted, will eliminate potential imbalances in future fiscal years.
As expected, the Governor's proposals will engender substantial
public debate which will continue until the enactment of the budget by the
State legislature, which as expected did not occur before April 1, 1995.
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However, no assurance can be given as to the amount of savings which the City
might realize from any such cost containment measures or welfare reform or the
size of any such reductions in State aid to the City. Depending upon the
amount of such savings or the size of any such reductions in State aid, the
City might be required to make substantial additional changes in the Financial
Plan.
In certain recent fiscal years, the State has failed to enact a
budget prior to the beginning of the State's fiscal year. The delay in the
adoption of the State's budget 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.
As a result of various uncertainties and other factors, including
consumer attitudes toward spending, Federal financial and monetary policies,
the availability of credit and the condition of the world economy, actual
results could differ materially and adversely from the State's current
projections and the State's projections could be materially and adversely
changed from time to time.
On January 13, 1992 Standard & Poor's Corporation ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from A to
A- and, in addition, reduced its ratings on the State's moral obligation,
lease purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's raised
its outlook to positive and, on December 12, 1994, confirmed its A- rating.
On January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced its
ratings on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On December 12, 1994, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.
The fiscal stability of the State is related to the fiscal
stability of its authorities, which generally have responsibility for
financing, constructing and operating revenue-producing public benefit
facilities. The authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. As of September 30, 1992, there were 18
authorities that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 18 authorities was $63.5
billion as of September 30, 1993. As of March 31, 1994, aggregate public
authority debt outstanding as State-supported debt was $21.1 billion and as
State-related debt was $29.4 billion.
The authorities are generally supported by revenues generated by
the projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent years,
however, the State has provided financial assistance through appropriations,
in some cases of a recurring nature, to certain of the 18 authorities for
operating and other expenses and, in fulfillment of its commitments on moral
obligation indebtedness or otherwise for debt service. This assistance is
expected to continue to be required in future years.
The MTA, a State agency, oversees the operation of the City's
subway and bus system (the "Transit Authority" or "TA") and commuter rail
lines serving the New York metropolitan area. Fare revenues from such
operations have been insufficient to meet expenditures, and the MTA depends
heavily upon a system of State, local, Triborough Bridge and Tunnel Authority
("TBTA") and, to the extent available, Federal support. Over the past several
years, the State has enacted several taxes, including a surcharge on the
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profits of banks, insurance corporations and general business corporations
doing business in the 12-county region served by the MTA and a special
one-quarter of 1% regional sales and use tax, that provide additional revenues
for mass transit purposes including assistance to the MTA. The surcharge,
which expires in November 1995, yielded $507 million in calendar year 1992, of
which the MTA was entitled to receive approximately 90% or approximately $456
million. For the 1994-95 State fiscal year, total State assistance to the MTA
is estimated at approximately $1.3 billion.
In 1993, State legislation authorized the funding of a five-year
$9.56 billion MTA capital plan for the five-year period, 1992 through 1996
(the "1992-1996 Capital Program"). The MTA has received approval of the
1992-96 Capital Program based on this legislation from the 1992-96 Capital
Program Review Board, as State law requires. This is the third five-year plan
since the Legislature authorized procedures for the adoption, approval and
amendment of a five-year plan in 1981 for a capital program designed to
upgrade the performance of the MTA's transportation systems and to supplement,
replace and rehabilitate facilities and equipment. The MTA, the TBTA and the
TA are collectively authorized to issue an aggregate of $3.1 billion of bonds
(net of certain statutory exclusions) to finance a portion of the 1992-96
Capital Program. The 1992-96 Capital Program is expected to be financed in
significant part through the dedication of State petroleum business taxes.
There can be no assurance that all the necessary governmental
actions for the Capital Program will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the 1992-96 Capital
Program, or parts thereof, will not be delayed or reduced. Furthermore, the
power of the MTA to issue certain bonds expected to be supported by the
appropriation of State petroleum business taxes is currently the subject of
court challenge. If the Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional State assistance.
The State's experience has been that if an Authority suffers
serious financial difficulties, both the ability of the State and the
Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes may be adversely affected.
The Housing Finance Agency ("HFA") and the Urban Development Corporation
("UDC") have in the past required substantial amounts of assistance from the
State to meet debt service costs or to pay operating expenses. Further
assistance, possibly in increasing amounts, may be required for these, or
other Authorities in the future. In addition, certain statutory arrangements
provide for State local assistance payments otherwise payable to localities to
be made under certain circumstances to certain Authorities. The State has no
obligation to provide additional assistance to localities whose local
assistance payments have been paid to Authorities under these arrangements.
However, in the event that such local assistance payments are so diverted, the
affected localities could seek additional State funds.
Litigation. A number of court actions have been brought involving
State finances. The court actions in which the State is a defendant generally
involve state programs and miscellaneous tort, real property, and contract
claims and the monetary damages sought are substantial. Adverse development
in these proceedings or the initiation of new proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the
current fiscal year or thereafter.
In addition to the proceedings noted below, the State is party to
other claims and litigation which its legal counsel has advised are not
probable of adverse court decisions. Although the amounts of potential
losses, if any, are not presently determinable, it is the State's opinion that
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its ultimate liability in these cases is not expected to have a material
adverse effect on the State's financial position in the current fiscal year or
thereafter.
On May 31, 1988, the United States Court took jurisdiction of a
claim of the State of Delaware that certain unclaimed dividends, interest and
other distributions made by issuers of securities and held by New York-based
brokers incorporated in Delaware for beneficial owners who cannot be
identified or located, had been, and were being, wrongfully taken by the State
of New York pursuant to New York's Abandoned Property Law (State of Delaware
v. State of New York, United States Supreme Court). All 50 states and the
District of Columbia moved to intervene, claiming a portion of such
distributions and similar property taken by the State of New York from New
York-based banks and depositories incorporated in Delaware. In a decision
dated March 30, 1993, the Court granted all pending motions of the states and
the District of Columbia to intervene and remanded the case to a Special
Master for further proceedings consistent with the Court's decision. The
Court determined that the abandoned property should be remitted first to the
state of the beneficial owner's last known address, if ascertainable and, if
not, then to the states of incorporation of the intermediary bank, broker or
depository. New York and Delaware have executed a settlement agreement which
provides for payment by New York to Delaware of $35 million in the State's
1993-94 fiscal year and five annual payments thereafter of $33 million. New
York and Massachusetts have executed a settlement agreement which provided for
aggregate payments by New York of $23 million, payable over consecutive years.
The claims of the other states and the District of Columbia remain.
Among the more significant of these claims still pending against
the State at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes transferred
title to the State of certain land in central New York; (2) certain aspects of
the State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; 3) contamination in the
Love Canal area of Niagara Falls; (4) an action against State and New York
City officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain
proper housing; (5) challenges to the practice of reimbursing certain Office
of Mental Health patient care expenses from the client's Social Security
benefits; (6) a challenge to the methods by which the state reimburses
localities for the administrative costs of food stamp programs; (7) alleged
responsibility of State officials to assist in remedying racial segregation in
the City of Yonkers; (8) an action in which the State is a third party
defendant, for injunctive or other appropriate relief, concerning liability
for the maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) an action challenging legislation enacted in 1990
which had the effect of deferring certain employer contributions to the State
Teachers' Retirement System and reducing State aid to school districts by a
like amount; (10) a challenge to the constitutionality of financing programs
of the Thruway Authority authorized by Chapters 166 and 410 of the Laws of
1991; (11) a challenge to the constitutionality of financing programs of the
MTA and the Thruway Authority authorized by Chapter 56 of the laws of 1993;
(12) challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on inpatient hospital bills paid by commercial insurers
and employee welfare benefit plans and portions of Chapter 55 of The Laws of
1992 which require hospitals to impose and remit to the State an 11% surcharge
on hospital bills paid by commercial insurers; (14) challenges to the
promulgation of the State's proposed procedure to determine the eligibility
for and nature of home care services for Medicaid recipients; (15) a challenge
to State implementation of a program which reduces Medicaid benefits to
certain home-relief recipients; (16) challenges to the rationality and
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retroactive application of State regulations recalibrating nursing home
Medicaid rates; and (17) challenge by AT&T to New York Tax Law Section
186-a (2-a) as violative of the Commerce Clause of the U.S. Constitution.
PUBLIC OFFERING
Offering Price
The secondary market Public Offering Price per Unit is computed by
adding to the aggregate bid price of the Bonds in the Trust divided by the
number of Units outstanding, an amount equal to 4.712% of such aggregate bid
prices of the Bonds. This amount is equal to a sales charge of 4-1/2% of the
secondary market Public Offering Price. 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 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 Certificateholder 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 Certificate-
holder 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 Bear, Stearns & Co.
Inc. 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.
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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 qualify 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 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 transaction.
(See "Offering Price.") In addition, in maintaining a market for the 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 5-1/2% sales charge for the New York Discount Trust or the 4-1/2%
sales charge for the New York Municipal Trust), the amount realized by a Cer-
tificateholder upon any redemption of Units may be less than the price paid
for such Units.
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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
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
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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,
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.
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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 shall 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 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.
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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
corporate 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.
The Revenue Reconciliation Act of 1993 ("P.L. 103-66") increases
maximum marginal income tax rates for individuals and corporations (generally
effective for taxable years beginning after December 31, 1992), extends the
authority to issue certain categories of tax-exempt bonds (qualified small
issue bonds and qualified mortgage bonds), limits the availability of capital
gain treatment for tax-exempt bonds purchased at a market discount, increases
the amount of Social Security benefits subject to tax (effective for taxable
years beginning after December 31, 1993) and makes a variety of other changes.
Prospective investors are urged to consult their own tax advisors as to the
effect of P.L. 103-66 on an investment in Units.
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
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
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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
acquired on or after January 1, 1988 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
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
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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). Further, interest on the
bonds is includable in a 0.12% additional corporate minimum tax imposed
by the Superfund Amendments and Reauthorization Act of 1986 for taxable
years beginning before January 1, 1996. 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
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
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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
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.
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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, Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167. 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
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 a 4-1/2% sales charge (4.712% of the net amount
invested) 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 salability 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
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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 seven calendar days following a tender for redemption, or,
if such seventh day is not a business day, on the first business day prior
thereto, 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
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 (v) the cash on hand in
such Trust or moneys in the process of being collected, (vi) the value of the
Bonds in such Trust based on the bid prices of such Bonds and (vii) 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
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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.
TOTAL REINVESTMENT PLAN
Under the Total Reinvestment Plan (the "Plan"), semi-annual and
annual Certificateholders may elect to have all regular interest and principal
distributions, if any, with respect to their Units reinvested either in units
of various series of "New York Municipal Trust"* which will have been created
shortly before each semi-annual or annual Payment Date (a "Primary Series")
or, if units of a Primary Series are not available, in units of a previously
formed series of a Trust which have been repurchased by the Sponsor in the
secondary market or which constitute a portion of the Units of a Trust not
sold by the Sponsor prior to such Payment Date (a "Secondary Series") (Primary
Series and Secondary Series are hereafter collectively referred to as
"Available Series"). June 15 and December 15 of each year, in the case of
semi-annual Certificateholders, and December 15 of each year, in the case of
annual Certificateholders, are the "Plan Reinvestment Dates."
Under the Plan (subject to compliance with applicable blue sky
laws), fractional units ("Plan Units") will be purchased from the Sponsor at a
price equal to the aggregate offering price per Unit of the bonds in the
Available Series portfolio during the initial offering of the Available Series
or at the aggregate bid price per Unit of the Available Series if its initial
offering has been completed, plus a sales charge equal to 3.627% of the net
amount invested in such bonds or 3-1/2% of the Reinvestment Price per Plan
Unit, plus accrued interest, divided by one hundred (the "Reinvestment Price
per Plan Unit"). All Plan Units will be sold at this reduced sales charge of
3-1/2% in comparison to the regular sales charge on primary and secondary
market sales of Units in any series of "New York Municipal Trust".
Participants in the Plan will have the opportunity to designate, in the
Authorization Form for the Plan, the name of a broker to whom the Sponsor will
allocate a sales commission of 1-1/2% per Plan Unit, payable out of the 3-1/2%
sales charge. If no such designation is made, the Sponsor will retain the
sales commission.
Under the Plan, the entire amount of a participant's income and
principal distributions will be reinvested. For example, a Certificateholder
who is entitled to receive $130.50 interest income from a Trust would acquire
13.05 Plan Units assuming that the Reinvestment Price per Plan Unit, plus
accrued interest, approximated $10 (Ten Dollars).
A semi-annual or annual Certificateholder may join the Plan at the
time he invests in Units of a Trust or any time thereafter by delivering to
the Trustee an Authorization Form which is available from brokers or the
Sponsor. In order that distributions may be reinvested on a particular Plan
- --------
* Certificateholders of either Trust who participate in the Plan will have
reinvestments made in Units from a similar Trust if such Units are
available. If no such Units are available for reinvestment,
distributions to Certificateholders will be reinvested in Units of
regular series of Municipal Securities Trusts, the income earned on
which may not be exempt from state and local income taxes.
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Reinvestment Date, the Authorization Form must be received by the Trustee not
later than the 15th day of the month preceding such Date. Authorization Forms
not received in time for a particular Plan Reinvestment Date will be valid
only for the second succeeding Plan Reinvestment Date. Similarly, a
participant may withdraw from the Plan at any time by notifying the Trustee
(see below). However, if written confirmation of withdrawal is not given to
the Trustee prior to a particular distribution, the participant will be deemed
to have elected to participate in the Plan with respect to that particular
distribution and his withdrawal would become effective for the next succeeding
distribution.
Once delivered to the Trustee, an Authorization Form will
constitute a valid election to participate in the Plan with respect to Units
purchased in a Trust (and with respect to Plan Units purchased with the
distributions from the Units purchased in a Trust) for each subsequent
distribution as long as the Certificateholder continues to participate in the
Plan. However, if an Available Series should materially differ from a Trust
in the opinion of the Sponsor, the authorization will be voided and
participants will be provided with both a notice of the material change and a
new Authorization Form which would have to be returned to the Trustee before
the Certificateholder would again be able to participate in the Plan. The
Sponsor anticipates that a material difference which would result in a voided
authorization would include such facts as the inclusion of bonds in the
Available Series portfolio the interest income on which was not exempt from
all federal, New York State and New York City income tax, or the inclusion of
bonds which were not rated "A" or better by either Standard & Poor's
Corporation or Moody's Investors Service, Inc. on the date such bonds were
initially deposited in the Available Series portfolio.
The Sponsor has the option at any time to use units of a Secondary
Series to fulfill the requirements of the Plan in the event units of a Primary
Series are not available either because a Primary Series is not then in
existence or because the registration statement relating thereto is not
declared effective in sufficient time to distribute final prospectuses to Plan
participants (see below). It should be noted that there is no assurance that
the quality and diversification of the Bonds in any Available Series or the
estimated current return thereon will be similar to that of these Trusts.
It is the Sponsor's intention that Plan Units will be offered on
or about each semi-annual and annual Record Date for determining who is
eligible to receive distributions on the related Payment Date. Such Record
Dates are June 1 and December 1 of each year for semi-annual Certificate-
holders, and December 1 of each year for annual Certificateholders. On each
Record Date, the Sponsor will send a current Prospectus relating to the
Available Series being offered for the next Plan Reinvestment Date along with
a letter which reminds each participant that Plan Units are being purchased
for him as part of the Plan unless he notifies the Trustee in writing by that
Plan Reinvestment Date that he no longer wishes to participate in the Plan.
In the event a Primary Series has not been declared effective in sufficient
time to distribute a final Prospectus relating thereto and there is no
Secondary Series as to which a registration statement is currently effective,
it is the Sponsor's intention to suspend the Plan and distribute to each
participant his regular semi-annual or annual distribution. If the Plan is so
suspended, it will resume in effect with the next Plan Reinvestment Date
assuming units of an Available Series are then being offered.
To aid a participant who might desire to withdraw either from the
Plan or from a particular distribution, the Trustee has established a toll
free number (see below) for participants to use for notification of
withdrawal, which must be confirmed in writing prior to the Plan Reinvestment
Date. Should the Trustee be so notified, it will make the appropriate cash
disbursement. Unless the withdrawing participant specifically indicates in
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his written confirmation that (a) he wishes to withdraw from the Plan for that
particular distribution only, or (b) he wishes to withdraw from the Plan for
less than all units of each series of "New York Municipal Trust" which he
might then own (and specifically identifies which series are to continue in
the Plan), he will be deemed to have withdrawn completely from the Plan in all
respects. Once a participant withdraws completely, he will only be allowed to
again participate in the Plan by submitting a new Authorization Form. A sale
or redemption of a portion of a participant's Plan Units will not constitute a
withdrawal from the Plan with respect to the remaining Plan Units owned by
such participant.
Unless a Certificateholder notifies the Trustee in writing to the
contrary, each semi-annual and annual Certificateholder who has acquired Plan
Units will be deemed to have elected the semi-annual and annual plan of
distribution, respectively, and to participate in the Plan with respect to
distributions made in connection with such Plan Units. (Should the Available
Series from which Plan Units are purchased for the account of an annual Cer-
tificateholder fail to have an annual distribution plan, such Certificate-
holder will be deemed to have elected the semi-annual plan of distribution,
and to participate in the Plan with respect to distributions made in
connection with such Plan Units.) A participant who subsequently desires to
have distributions made with respect to Plan Units delivered to him in cash
may withdraw from the Plan with respect to such Plan Units and remain in the
Plan with respect to units acquired other than through the Plan. Assuming a
participant has his distributions made with respect to Plan Units reinvested,
all such distributions will be accumulated with distributions generated from
the Units of a Trust used to purchase such additional Plan Units. However,
distributions related to units in other series of "New York Municipal Trust"
will not be accumulated with the foregoing distributions for Plan purchases.
Thus, if a person owns units in more than one series of "New York Municipal
Trust" (which are not the result of purchases under the Plan), distributions
with respect thereto will not be aggregated for purchases under the Plan.
Although not obligated to do so, the Sponsor has maintained and
intends to continue to maintain a market for the Plan Units and continuously
to offer to purchase Plan Units at prices based upon the aggregate offering
price of the bonds in the Available Series portfolio, during the initial
offering of the Available Series, or at the aggregate bid price of the Bonds
in the Available Series if its initial offering has been completed. The
Sponsor may discontinue such purchases at any time. The aggregate bid price
of the underlying bonds may be expected to be less than the aggregate offering
prices. In the event that a market is not maintained for Plan Units, a
participant desiring to dispose of his Plan Units may be able to do so only by
tendering such Plan Units to the Trustee for redemption at the Redemption
Price of full units in the Available Series corresponding to such Plan Units,
which is based upon the aggregate bid price of the underlying bonds as
described in the "New York Municipal Trust" Prospectus for the Available
Series in question. If a participant wishes to dispose of his Plan Units, he
should inquire of the Sponsor as to current market prices prior to making a
tender for redemption to the Trustee.
Any participant may tender his Plan Units for redemption to the
Available Series trustee. Participants may redeem Plan Units by making a
written request to the Trustee at the address set forth in Part A, on the
Redemption Form supplied by the Trustee. The redemption price per Plan Unit
will be determined as set forth in the "New York Municipal Trust" Prospectus
of the Available Series from which such Plan Unit was purchased following
receipt of the request and adjusted to reflect the fact that it relates to a
Plan Unit. There is no charge for the redemption of Plan Units.
The Trust Agreement requires that the Trustee notify the Sponsor
of any tender of Plan Units for redemption. So long as the Sponsor is
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maintaining a bid in the secondary market, the Sponsor will purchase any Plan
Units tendered to the Trustee for redemption by making payment therefor to the
Certificateholder in an amount not less than the redemption price for such
Plan Units on the date of tender not later than the day on which such Plan
Units would otherwise have been redeemed by the Trustee.
Participants in the Plan will not receive individual certificates
for their Plan Units unless the amount of Plan Units accumulated represents
$1,000 principal amount of bonds underlying such Units and, in such case, a
written request for certificates is made to the Trustee. All Plan Units will
be accounted for by the Trustee on a book entry system. Each time Plan Units
are purchased under the Plan, a participant will receive a confirmation
stating his cost, number of Units purchased and estimated current return.
Questions regarding a participant's statement should be directed to the
Trustee at the telephone number set forth in the "Summary of Essential
Information" in Part A.
All expenses relating to the operation of the Plan are borne by
the Sponsor. Both the Sponsor and the Trustee reserve the right to suspend,
modify or terminate the Plan at any time for any reason, including the right
to suspend the Plan if the Sponsor is unable or unwilling to establish a
Primary Series or is unable to provide Secondary Series units. All
participants will receive notice of any such suspension, modification or
termination.
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 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
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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 Certifi-
cateholders.
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
Certificate for Units his pro rata share of the Interest and Principal
Accounts of such Trust.
The Sponsor
The Sponsor, Bear, Stearns & Co. Inc., a Delaware corporation, is
engaged in the underwriting, investment banking and brokerage business and is
a member of the National Association of Securities Dealers, Inc. and all
principal securities and commodities exchanges, including the New York Stock
Exchange, the American Stock Exchange, the Midwest Stock Exchange and the
Pacific Stock Exchange. Bear Stearns maintains its principal business offices
at 245 Park Avenue, New York, New York 10167 and, since its reorganization
from a partnership to a corporation in October 1985, has been a wholly-owned
subsidiary of The Bear Stearns Companies Inc. Bear Stearns, through its
predecessor entities, has been engaged in the investment banking and brokerage
business since 1923. Bear Stearns is the sponsor for numerous series of unit
investment trusts, including: A Corporate Trust, Series 1 (and subsequent
series); 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), High Income
Trust, Series 1 (and Subsequent Series), Series 1-4 (Multiplier Portfolio);
Insured Municipal Securities Trust, Series 1; (and Subsequent Series); 5th
Discount Series (and Subsequent Series) and Navigator Series (and Subsequent
Series); Mortgage Securities Trust, CMO Series 1 (and Subsequent Series); and
Equity Securities Trust, Series 1, Signature Series, Gabelli Communications
Income Trust (and Subsequent Series). The information included herein is only
for the purpose of informing investors as to the financial responsibility of
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the Sponsor and its ability to carry out its contractual obligations. The
information contained in the Prospectus concerning governmental entities and
authorities, including the various issuers of the Bonds in the Trusts was
gathered from sources deemed to be reliable by the Sponsor. The Sponsor has
not independently verified the information contained in such sources.
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
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
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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
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 division of J.J.
Kenny Co., Inc., 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".)
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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
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.
EXCHANGE PRIVILEGE AND CONVERSION OFFER
Exchange Privilege
Certificateholders may elect to exchange any or all of their Units
of these Trusts for Units of one or more of any available series of Insured
Municipal Securities Trust, Municipal Securities Trust, New York Municipal
Trust, Mortgage Securities Trust, A Corporate Trust or Equity Securities Trust
(the "Exchange Trusts") at a reduced sales charge as set forth below. Under
the Exchange Privilege, the Sponsor's repurchase price is based on the
aggregate bid price of the Bonds in the particular Trust portfolio. Units in
an Exchange Trust then will be sold to the Certificateholder at a price based
on the aggregate offer price of the Bonds in the Exchange Trust portfolio (or
for Units of the Equity Securities Trust, based on the market value of the
underlying securities in the Equity Trust portfolio) during the initial public
offering period of the Exchange Trust; or, based on the aggregate bid price of
the Bonds in the Exchange Trust portfolio if its initial public offering has
been completed, plus accrued interest (or for Units of the Equity Securities
Trust, based on the market value of the underlying securities in the Equity
Trust portfolio) and a reduced sales charge as set forth below.
Except for Certificateholders who wish to exercise the Exchange
Privilege within the first five months of their purchase of Units of Trust,
the sales charge applicable to the purchase of units of an Exchange Trust
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shall be 1.5% per unit (or per 1,000 Units for the Mortgage Securities Trust
or per 100 Units for the Equity Securities Trust). For Certificateholders who
wish to exercise the Exchange Privilege within the first five months of their
purchase of Units of Trust, the sales charge applicable to the purchase of
units of an Exchange Trust shall be the greater of (i) 1.5% per unit (or per
1,000 Units for the Mortgage Securities Trust or per 100 Units for the Equity
Securities Trust), or (ii) an amount which when coupled with the sales charge
paid by the Certificateholder upon his original purchase of Units of the Trust
at least equals the sales charge applicable in the direct purchase of units of
an Exchange Trust. The Exchange Privilege is subject to the following
conditions:
(1) The Sponsor must be maintaining a secondary market in both
the Units of the Trust held by the Certificateholder and the Units of
the available Exchange Trust. While the Sponsor has indicated its
intention to maintain a market in the Units of all Trusts sponsored by
it, the Sponsor is under no obligation to continue to maintain a
secondary market and therefore there is no assurance that the Exchange
Privilege will be available to a Certificateholder at any specific time
in the future. At the time of the Certificateholder's election to
participate in the Exchange Privilege, there also must be Units of the
Exchange Trust available for sale, either under the initial primary
distribution or in the Sponsor's secondary market.
(2) Exchanges will be effected in whole units only. Any excess
proceeds from the Units surrendered for exchange will be remitted and
the selling Certificateholder will not be permitted to advance any new
funds in order to complete an exchange. Units of the Mortgage
Securities Trust may only be acquired in blocks of 1,000 Units. Units
of the Equity Securities Trust may only be acquired in blocks of 100
Units.
(3) The Sponsor reserves the right to suspend, modify or
terminate the Exchange Privilege. The Sponsor will provide
Certificateholders of the Trust with 60 days' prior written notice of
any termination or material amendment to the Exchange Privilege,
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 to delete a series which has been
terminated from eligibility for the Exchange Privilege, (ii) there is a
suspension of the redemption of units of an Exchange 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 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. In the event the
Exchange Privilege is not available to a Certificateholder at the time
he wishes to exercise it, the Certificateholder will immediately be
notified and no action will be taken with respect to his Units without
further instructions from the Certificateholder.
To exercise the Exchange Privilege, a Certificateholder should
notify the Sponsor of his desire to exercise his Exchange Privilege. If Units
of a designated, outstanding series of an Exchange 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
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with a current prospectus or prospectuses relating to each Exchange 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.
Example: Assume that after the initial public offering has been
completed, a Certificateholder has five units of a Trust with a current value
of $700 per unit which he has held for more than 5 months and the Certificate-
holder wishes to exchange the proceeds for units of a secondary market
Exchange Trust with a current price of $725 per unit. The proceeds from the
Certificateholder's original units will aggregate $3,500. Since only whole
units of an Exchange Trust may be purchased under the Exchange Privilege, the
Certificateholder would be able to acquire four units (or 4,000 Units of the
Mortgage Securities Trust or 400 Units of the Equity Securities Trust) for a
total cost of $2,943.50 ($2,900 for unit and $43.50 for the sales charge).
The remaining $556.50 would be remitted to the Certificateholder in cash. If
the Certificateholder acquired the same number of units at the same time in a
regular secondary market transaction, the price would have been $3,059.50
($2,900 for units and $159.50 for the sales charge, assuming a 5 1/2% sales
charge times the public offering price).
The Conversion Offer
Certificateholders of any registered unit investment trust for
which there is no active secondary market in the units of such trust (a
"Redemption Trust") may elect to redeem such units and apply the proceeds of
the redemption to the purchase of available Units of one or more series of A
Corporate Trust, Municipal Securities Trust, Insured Municipal Securities
Trust, Mortgage Securities Trust, New York Municipal Trust or Equity
Securities Trust sponsored by Bear, Stearns & Co. Inc. or the Sponsor (the
"Conversion Trusts") at the Public Offering Price for units of the Conversion
Trust based on a reduced sales charge as set forth below. Under the
Conversion Offer, units of the Redemption Trust must be tendered to the
trustee of such trust for redemption at the redemption price, which is based
upon the aggregate bid side evaluation of the underlying bonds in such trust
and is generally about 1 1.2% to 2% lower than the offering price for such
bonds (or for Units of Equity Securities Trust, based on the market value of
the underlying securities in the Equity Trust portfolio). The purchase price
of the units of the Conversion Trusts will be based on the aggregate offer
price of the underlying bonds in the Conversion Trust portfolio (or for Units
of the Equity Securities Trust, based on the market value of the underlying
securities in the Equity Trust portfolio) during its initial offering period;
or, at a price based on the aggregate bid price of the underlying bonds if the
initial public offering of the Conversion Trust has been completed, plus
accrued interest (or for Units of the Equity Securities Trust, based on the
market value of the underlying securities in the Equity Trust portfolio) and a
sales charge as set forth below.
Except for Certificateholders who wish to exercise the Conversion
Offer within the first five months of their purchase of units of a Redemption
Trust, the sales charge applicable to the purchase of Units of the Conversion
Trust shall be 1.5% per Unit (or per 1,000 Units for the Mortgage Securities
Trust or per 100 Units for the Equity Securities Trust). For
Certificateholders who wish to exercise the Conversion Offer within the first
five months of their purchase of units of a Redemption Trust, the sales charge
applicable to the purchase of Units of a Conversion Trust shall be the greater
of (i) 1.5% per Unit (or per 1,000 Units for the Mortgage Securities Trust or
per 100 Units for the Equity Securities Trust) or (ii) an amount which when
coupled with the sales charge paid by the Certificateholder upon his original
purchase of units of the Redemption Trust at least equals the sales charge
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applicable in the direct purchase of Units of a Conversion Trust. The
Conversion Offer is subject to the following limitations:
(1) The Conversion Offer is limited only to Certificateholders of
any Redemption Trust, defined as a unit investment trust for which there
is no active secondary market at the time the Certificateholder elects
to participate in the Conversion Offer. At the time of the
Certificateholder's election to participate in the Conversion Offer,
there also must be available units of a Conversion Trust, either under a
primary distribution or in the Sponsor's secondary market.
(2) Exchanges under the Conversion Offer will be effected in
whole units only. Certificateholders will not be permitted to advance
any new funds in order to complete an exchange under the Conversion
Offer. Any excess proceeds from units being redeemed will be returned
to the Certificateholder. Units of the Mortgage Securities Trust may
only be acquired in blocks of 1,000 units. Units of the Equity
Securities Trust may only be acquired in blocks of 100 units.
(3) The Sponsor reserves the right to modify, suspend or
terminate the Conversion Offer at any time without notice to
Certificateholders of Redemption Trusts. In the event the Conversion
Offer is not available to a Certificateholder at the time he wishes to
exercise it, the Certificateholder will be notified immediately and no
action will be taken with respect to his units without further
instruction from the Certificateholder. The Sponsor also reserves the
right to raise the sales charge based on actual increases in the
Sponsor's costs and expenses in connection with administering the
program, up to a maximum sales charge of $20 per unit (or per 1,000
units for the Mortgage Securities Trust or 100 Units for the Equity
Securities Trust).
To exercise the Conversion Offer, a Certificateholder 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 a Conversion Trust are at that time available for sale
and if 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 Conversion Trust in which
he indicates an interest. He then may select the Trust or Trusts into which
he decides to invest the proceeds from the sale of his Units. The transaction
will be handled entirely through the Certificateholder'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
Certificateholder's broker will be entitled to retain $5 of the applicable
sales charge.
Example: Assume a Certificateholder has five units of a
Redemption Trust which has held for more than 5 months with a current
redemption price of $675 per unit based on the aggregate bid price of the
underlying bonds and the Certificateholder wishes to participate in the
Conversion Offer and exchange the proceeds for units of a secondary market
Conversion Trust with a current price of $750 per Unit. The proceeds from the
Certificateholder's redemption of units will aggregate $3,375. Since only
whole units of a Redemption Trust may be purchased under the Conversion Offer,
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the Certificateholder will be able to acquire four units of the Conversion
Trust (or 4,000 units of the Mortgage Securities Trust or 400 Units of the
Equity Securities Trust) for a total cost of $3,045 ($3,000 for units and $45
for the sales charge). The remaining $330 would be remitted to the
Certificateholder in cash. If the Certificateholder acquired the same number
of Conversion Trust units at the same time in a regular secondary market
transaction, the price would have been $3,165 ($3,000 for units and $165 sales
charge, assuming a 5 1/2% sales charge times the public offering price).
Description Of The Exchange
Trusts And The Conversion Trusts
A Corporate Trust may be an appropriate investment vehicle for an
investor who is more interested in a higher current return on his investment
(although taxable) than a tax-exempt return (resulting from the fact that the
current return from taxable fixed income securities is normally higher than
that available from tax-exempt fixed income securities). Municipal Securities
Trust and New York Municipal Trust may be appropriate investment vehicles for
an investor who is more interested in tax-exempt income. The interest income
from New York Municipal Trust is, in general, also exempt from New York State
and local New York income taxes, while the interest income from Municipal
Securities Trust is subject to applicable New York State and local New York
income taxes, except for that portion of the income which is attributable to
New York obligations in the Trust portfolio, if any. The interest income from
each State Trust of the Multi-State Series is, in general, exempt from state
and local taxes when held by residents of the state where issuers of bonds in
such State Trusts are located. The Insured Municipal Securities Trust
combines the advantages of income free from regular federal income tax with
the added safety of irrevocable insurance on the underlying obligations.
Insured Navigator Series further combines the advantages of providing interest
income free from regular federal income tax and sate and local taxes when held
by residents of the state where issuers of bonds in such state trusts are
located with the added safety of irrevocable insurance on the underlying
obligations. Mortgage Securities Trust offers an investment vehicle for
investors who are interested in obtaining safety of capital and a high level
of current distribution of interest income through investment in a fixed
portfolio of collaterized mortgage obligations. Equity Securities Trust
offers investors an opportunity to achieve capital appreciation together with
a high level of current income.
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- 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 Messrs. Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022 or Berger Steingut Tarnoff
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& Stern, 600 Madison Avenue, New York, New York 10022, as counsel for the
Sponsor. Messrs. Booth & Baron, 122 East 42nd Street, New York, New York
10168 have acted as counsel to the Trustee.
Independent Auditors
The financial statements of the Trusts included in Part A of this
Prospectus as of the dates set forth in Part A have been examined by KPMG Peat
Marwick LLP, independent certified public accountants, for the periods
indicated in its reports appearing herein. The financial statements examined
by KPMG Peat Marwick have been included in reliance upon its reports given on
the authority of said firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's Corporation
A brief description of the applicable Standard & Poor's
Corporation 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 Investors Service, Inc.
A brief description of the applicable Moody's Investors Service,
Inc.'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.
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
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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.
-47-
1653.1
<PAGE>
==============================================================================
AUTHORIZATION FOR INVESTMENT IN NEW YORK MUNICIPAL TRUST
TRP PLAN - TOTAL REINVESTMENT PLAN
I hereby elect to participate in the TRP Plan and am the owner of ____ units
of Series ____.
I hereby authorize The Bank of New York, Trustee, to pay all semi-annual or
annual distributions of interest and principal (if any) with respect to such
units to The Bank of New York, as TRP Plan Agent, who shall immediately invest
the distributions in units of the available series of New York Municipal Trust
or, if unavailable, of other available series of regular Municipal Securities
Trust.
The foregoing authorization is subject Date ______________, 19__
in all respects to the terms and
conditions of participation set forth
in the prospectus relating to such
available series.
- -------------------------------------- ------------------------------------
Registered Holder (print) Registered Holder (print)
- -------------------------------------- ------------------------------------
Registered Holder Signature Registered Holder Signature
(Two signatures if joint tenancy)
My Brokerage Firm's Name ____________________________________________________
Street Address ______________________________________________________________
City, State & Zip Code ______________________________________________________
Salesman's Name ______________________ Salesman's No. _____________________
UNIT HOLDERS NEED ONLY DATE AND SIGN THIS FORM AND MAIL THIS CARD.
==============================================================================
Mail to your Broker
or
The Bank of New York
101 Barclay Street
New York, New York 10286
1653.1
<PAGE>
INDEX
Title Page NEW YORK MUNICIPAL TRUST
Summary of Essential Information........... A-5
Information Regarding the Trust............ A-7
Financial and Statistical Information...... A-8 (A Unit Investment Trust)
Audit and Financial Information
Report of Independent Auditors........... F-1 Prospectus
Statement of Net Assets.................. F-2
Statement of Operations.................. F-3 Dated: April 28, 1995
Statement of Changes in Net Assets....... F-4
Notes to Financial Statements............ F-5 Sponsor:
Portfolio................................ F-6
The Trust.................................. 1 Bear, Stearns & Co. Inc.
Portfolios................................. 2 245 Park Avenue
Special Factors Affecting New York......... 8 New York, NY 10167
Public Offering............................ 19 212-272-2500
Estimated Long Term Return and Estimated
Current Return........................... 21
Rights of Certificateholders............... 22 Trustee:
Tax Status................................. 24
Liquidity.................................. 28 The Bank of New York
Total Reinvestment Plan.................... 30 101 Barclay Street
Trust Administration....................... 33 New York, NY 10286
Trust Expenses and Charges................. 37 1-800-431-8002
Exchange Privilege and Conversion Offer.... 38
Other Matters.............................. 42
Description of Bond Ratings................ 42 Evaluator:
Kenny S&P Evaluation Services,
Parts A and B of this Prospectus do not a division of
contain all of the information set forth in J.J. Kenny Co., Inc.
the registration statement and exhibits 65 Broadway
relating thereto, filed with the Securities New York, NY 10006
and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, and to which
reference is made.
* * *
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.
1653.1
