As filed with the Securities and Exchange Commission on July 27, 1995
Registration No. 33-32434*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
To
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 55, GUARANTEED SERIES 56
AND GUARANTEED SERIES 57
B. Name of depositors: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
C. Complete address of depositors' principal executive offices:
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 East 43rd Street 120 Broadway
New York, NY 10017 New York, NY 10271
D. Name and complete address of agent for service:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL Copy of comments to:
Glickenhaus & Co. Lebenthal & Co., Inc. MICHAEL R. ROSELLA, ESQ.
6 East 43rd Street 120 Broadway Battle Fowler LLP
New York, NY 10017 New York, NY 10271 75 East 55th Street
New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on July 31, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
* The Prospectus included in this Registration Statement constitutes a
combined Prospectus as permitted by the provisions of Rule 429 of the
General Rules and Regulations under the Securities Act of 1933 (the "Act").
Said Prospectus covers units of undivided interest in Empire State
Municipal Exempt Trust, Guaranteed Series 55, Guaranteed Series 56 and
Guaranteed Series 57 covered by prospectuses heretofore filed as part of
separate registration statements on Form S-6 (Registration Nos. 33-32434,
33-33991 and 33-33992, respectively) under the Act.
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 55, GUARANTEED SERIES 56
AND GUARANTEED SERIES 57
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust...................Prospectus front cover
(b) Title of securities issued...... "
2. Name and address of each depositor..Sponsors
3. Name and address of trustee.........Trustee
4. Name and address of principal
underwriters......................Sponsors; Public Offering --
Distribution of Units; Back Cover
5. State of organization of trust......The Trust
6. Execution and termination of
trust agreement...................The Trust; Amendment and Termination of
the Trust Agreement
7. Changes of name.....................Not Applicable
8. Fiscal year......................... "
9. Litigation..........................None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities.....................Rights of Unit Holders
(b) Cumulative or distributive
securities..................... "
(c) Redemption..................... "
(d) Conversion, transfer, etc...... "
(e) Periodic payment plan..........Not Applicable
(f) Voting rights..................Amendment and Termination of the Trust
Agreement
(g) Notice to certificateholders...Rights of Unit Holders--Reports and
Records; Sponsors--Responsibility;
Trustee--Resignation; Amendment and
Termination of the Trust Agreement
(h) Consents required..............Sponsors--Responsibility; Amendment and
Termination of the Trust Agreement
(i) Other provisions...............The Trust--Tax Status
11. Type of securities
comprising units.................Prospectus front cover; The Trust--
Portfolio
12. Certain information regarding
periodic payment certificates....Not Applicable
13. (a) Load, fees, expenses, etc......Prospectus front cover; Summary of
Essential Financial Information;
Rights of Unit Holders--Expenses and
Charges; Public Offering--Offering
Price; Public Offering--Market for
Units
ii
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<PAGE>
(b) Certain information regarding
periodic payment certificates...Not Applicable
(c) Certain percentages.............Public Offering--Offering Price
(d) Certain other fees, etc. payable
by holders......................Rights of Unit Holders--Certificates
(e) Certain profits receivable by
depositors, principal
underwriters, trustee or
affiliated persons.............Public Offering--Offering Price; Rights
of Unit Holders--Redemption--Purchase by
the Sponsors of Units Tendered for
Redemption
(f) Ratio of annual charges
to income.......................Not Applicable
14. Issuance of trust's securities......The Trust; Rights of Unit Holders--
Certificates
15. Receipt and handling of payments
from purchasers...................Public Offering--Offering Price;
Amendment and Termination of the Trust
Agreement
16. Acquisition and disposition of
underlying securities.............The Trust--Portfolio; Sponsors--
Responsibility
17. Withdrawal or redemption............Public Offering--Market for Units;
Rights of Unit Holders--Redemption
18. (a) Receipt, custody and
disposition of income...........The Trust--Portfolio--General
Considerations; Insurance on the
Bonds; Public Offering--Offering
Price; Rights of Unit Holders--
Distribution of Interest and
Principal; Rights of Unit Holders--
Reports and Records; Amendment and
Termination of the Trust Agreement
(b) Reinvestment of distributions...Automatic Accumulation Account
(c) Reserves or special funds.......Rights of Unit Holders; Rights of Unit
Holders--Distribution of Interest and
Principal; Expenses and Charges--Other
Charges; Amendment and Termination of
the Trust Agreement
(d) Schedule of distributions.......Not Applicable
19. Records, accounts and reports.......Rights of Unit Holders--Reports and
Records; Rights of Unit Holders--
Distribution of Interest and
Principal; Amendment and Termination
of the Trust Agreement
20. Certain miscellaneous provisions
of trust agreement................Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations on
Liability; Amendment and Termination
of the Trust Agreement
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... "
(e) and (f) Depositor, removal
and successor................... "
21. Loans to security holders...........Not Applicable
iii
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<PAGE>
22. Limitations on liability............ The Trust--Portfolio; Sponsors--
Limitations on Liability; Trustee--
Limitations on Liability
23. Bonding arrangements................ Additional Information--Item A
24. Other material provisions
of trust agreement................ Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor.......... Sponsors
26. Fees received by depositors........ Not Applicable
27. Business of depositors............. Sponsors
28. Certain information as to
officials and affiliated
persons of depositor.............. Contents of Registration Statement
29. Voting securities of depositors..... Not Applicable
30. Persons controlling depositors...... "
31. Payments by depositors for certain
services rendered to trust........ "
32. Payment by depositors for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositors for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states.............Public Offering--Distribution of Units
36. Suspension of sales of trust's
securities.......................Not Applicable
37. Revocation of authority
to distribute.................... "
38. (a) Method of distribution.........Public Offering--Distribution of Units
(b) Underwriting agreements........ "
(c) Selling agreements............. "
39. (a) Organization of principal
underwriters...................Sponsors
(b) N.A.S.D. membership of
principal underwriters......... "
40. Certain fees received by
principal underwriters...........Not Applicable
41. (a) Business of principal
underwriters...................Sponsors
(b) Branch offices of principal
underwriters...................Not Applicable
(c) Salesmen of principal
underwriters................... "
42. Ownership of trust's
securities by certain persons.... "
43. Certain brokerage commissions
received by principal
underwriters..................... "
44. (a) Method of valuation............Prospectus front cover; Public
Offering--Offering Price;Public
Offering--Distribution of Units
(b) Schedule as to offering price..Not Applicable
iv
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<PAGE>
(c) Variation in offering price
to certain persons............Public Offering--Offering Price; Public
Offering--Distribution of Units
45. Suspension of redemption rights...Not Applicable
46. (a) Redemption valuation..........Rights of Unit Holders--Redemption--
Computation of Redemption Price per Unit
(b) Schedule as to redemption
price................ Not Applicable
47. Maintenance of position in
underlying securities...........Public Offering--Market for Units;
Rights of Unit Holders--Redemption--
Purchase by the Sponsors of Units
Tendered for Redemption; Rights of
Unit Holders--Redemption--Computation
of Redemption Price per Unit
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee.....................Trustee
49. Fees and expenses of trustee.....Rights of Unit Holders--Expenses and
Charges; Rights of Unit Holders--
Distribution of Interest and Principal
50. Trustee's lien...................Rights of Unit Holders--Expenses and
Charges--Other Charges; Rights of Unit
Holders--Distribution of Interest and
Principal
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities................ Insurance on the Bonds
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Prospectus front cover;
Sponsors--Responsibility
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Sponsors--Responsibility
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Prospectus front cover; Tax
Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years.................... Not Applicable
55. Certain information regarding
periodic payment certificates..... "
56. Certain information regarding
periodic payment certificates..... "
v
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<PAGE>
57. Certain information regarding
periodic payment certificates..... "
58. Certain information regarding
periodic payment certificates..... "
59. Financial Statements
(Instruction 1(c) to Form S-6).....Statement of Net Assets; Statements of
Operations; Statements of Changes in
Net Assets
vi
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
Prospectus, Part I
8,904 Units
Dated: July 31, 1995
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of April 28, 1995
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of March 31, 1995. The second part of
this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income to the Unit holders
is generally exempt from all New York State and New York City income taxes.
Capital gains, if any, are subject to tax. See Part II under "Tax Status."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Corporation.
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders --Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
C/M: 10726.0053 287341.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 55
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 8,970,000
Number of Units: 8,904
Fractional Undivided Interest in the Trust Per Unit: 1/8,904
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $ 9,293,715.69
==================
Sponsors' Repurchase Price Per Unit: $ 1,043.77
Plus Sales Charge(1): 28.08
Public Offering Price Per Unit(2): $ 1,071.85
==================
Redemption Price Per Unit(3): $ 1,043.77
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 28.08
Weighted Average Maturity of Bonds in the Trust: 6.319 years
Evaluation Time: 2:00 p.m., New York Time, on the day
next following receipt by a Sponsor
of an order for a Unit sale or
purchase or by the Trustee of a Unit
tendered for redemption.
Annual Insurance Premium: $15,984
Evaluator's Fee: $.55 for each issue of Bonds in the
Trust for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of
Bonds in the Trust, $1.08 under the
monthly and $.60 under the
semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face
amount of underlying securities.
Date of Deposit: March 20, 1990
Date of Trust Agreement: March 20, 1990
Mandatory Termination Date: December 31, 2039
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust under which
Trust Agreement may be Terminated: $2,000,000
-2-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 55
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
(Continued)
<CAPTION>
Monthly Semi-annual
<S> <C> <C>
P Estimated Annual Interest Income: $75.11 $ 75.11
Less Annual Premium on Portfolio Insurance 1.80 1.80
E Less Estimated Annual Expenses 1.99 1.42
--------- ----------
R Estimated Net Annual Interest Income: $ 71.32 $ 71.89
========= ==========
U Estimated Interest Distribution: $ 5.93 $ 35.95
N Estimated Current Return Based on Public
Offering Price (4): 6.66% 6.71%
I
Estimated Long-Term Return Based
T on Public Offering Price (5): 4.51% 4.56%
Estimated Daily Rate of Net Interest
Accrual: $ .19811 $ .19969
Record Dates: 15th Day of 15th Day of May
Month and November
Payment Dates: 1st Day of 1st Day of June
Month and December
</TABLE>
- ---------------------------
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in Part
II of this Prospectus.
2. Plus accrued interest to May 5, 1995, the expected date of settlement, of
$14.43 monthly and $44.31 semi- annually.
3. Based solely upon the bid side evaluations of the portfolio securities. Upon
tender for redemption, the price to be paid will include accrued interest as
described in Part II under "Rights of Unit Holders -- Redemption --
Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net annual
interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator, and with the redemption, maturity, exchange or
sale of Securities. This calculation, which includes cash income accrual
only, does not include discount accretion on original issue discount bonds
or on zero coupon bonds or premium amortization on bonds purchased at a
premium. See "Tax Status" and "Estimated Current Return and Estimated
Long-Term Return to Unit Holders" in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes into
account the yields (including accretion of discounts and amortization of
premiums) of the individual Bonds in the Trust's portfolio, weighted to
reflect the market value and time to maturity (or, in certain cases, to
earlier call date) of such Bonds, adjusted to reflect the Public Offering
Price (including sales charge and expenses) per Unit. See "Estimated Current
Return and Estimated Long-Term Return to Unit Holders" in Part II of this
Prospectus.
-3-
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<PAGE>
Portfolio Information
On March 31, 1995, the bid side valuation of 5.6% of the aggregate principal
amount of Bonds in the Portfolio for this Trust was at a discount from par and
94.4% was at a premium over par. See Note (B) to "Tax-Exempt Bond Portfolio" for
information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
The Portfolio consists of 10 issues of Bonds issued by entities located in New
York or certain United States territories or possessions. The following
information is being supplied to inform Unit holders of circumstances affecting
the Trust. 5.2% of the aggregate principal amount of the Bonds in the Portfolio
are payable from appropriations. 94.8% of the aggregate principal amount of the
Bonds in the Portfolio are payable from the income of specific projects or
authorities and are not supported by the issuers' power to levy taxes.
Although income to pay such Bonds may be derived from more than one source, the
primary sources of such income, the number of issues (and the related dollar
weighted percentage of such issues) deriving income from such sources and the
purpose of issue are as follows: Appropriations, 2 (5.2%); Revenue: Higher
Education, 2 (32.5%); Health Care, 5 (41.7%); and Other, 1 (20.6%). The Trust is
deemed to be concentrated in the Higher Education and Health Care Bonds
categories.1 One issue, constituting 5.6% of the Bonds in the Portfolio is an
original issue discount bond and a zero coupon bond. On March 31, 1995, 6 issues
(54.8%) were rated AAA by Standard & Poor's Corporation; 2 issues (34.3%) were
rated Aaa by Moody's Investors Service, Inc.2 Two issues were partially
refunded. The partially refunded portion of one issue (4.3%) was rated AAA by
Standard & Poor's Corporation. The partially refunded portion of the other issue
(2.7%) was rated Aaa by Moody's Investors Corp. The remaining portion (3.9%) was
rated BBB+ by Standard & Poor's Corporation. Subsequent to such date, such
ratings may have changed. See "Tax-Exempt Bond Portfolio." For a more detailed
discussion, it is recommended that Unit holders consult the official statements
for each Security in the Portfolio of the Trust.
Tax Status (The tax opinion which is described herein was rendered on the Date
of Deposit. Consult your tax advisor to discuss any relevant changes in tax
laws since the Date of Deposit. See also "Tax Status" in Part II of this
Prospectus.)
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
------------------------------------
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part II
of this Prospectus.
-4-
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<PAGE>
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on a
sale or redemption of a Unit of the Trust is, however, includable in gross
income as capital gain (or loss) for federal, state and local income tax
purposes assuming that the Unit is held as a capital asset. Such gain (or loss)
does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term depending on the facts
and circumstances. Bonds selling at a market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for taxable gain (or reducing the potential for loss)
on their redemption, maturity or sale. In the case of Bonds acquired at a market
discount, gain will be treated as ordinary income to the extent of accrued
market discount. For tax years beginning after December 31, 1992, long-term
capital gains will be taxed at a maximum federal income tax rate of 28%, while
ordinary income will be taxed at a maximum federal income tax rate of 36% (plus
a 10% surtax applicable to certain high income taxpayers).
-5-
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<PAGE>
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
---------------------------------------------
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 55:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 55, including the bond portfolio, as
of March 31, 1995, and the related statements of operations and changes in net
assets for the years ended March 31, 1995 and 1994. These financial statements
are the responsibility of the Sponsors. 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 March 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsors, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 55 as of March 31, 1995, and the results of its
operations and changes in net assets for the years ended March 31, 1995 and
1994, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
April 28, 1995
-6-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
STATEMENT OF NET ASSETS
MARCH 31, 1995
---------------------------------------------------------
---------------------------------------------------------
<S> <C>
CASH ........................................................................................ $ 129 744
INVESTMENTS IN SECURITIES, at market value (cost $8,731,044).................................... 9 414 908
ACCRUED INTEREST RECEIVABLE..................................................................... 149 814
--------------
Total trust property.................................................................... 9 694 466
LESS - ACCRUED EXPENSES......................................................................... 1 049
--------------
NET ASSETS...................................................................................... $ 9 693 417
==============
NET ASSETS REPRESENTED BY:
</TABLE>
<TABLE>
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
<S> <C> <C> <C>
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS........................................ $ 4 660 682 $ 4 771 353 $ 9 432 035
UNDISTRIBUTED NET INVESTMENT
INCOME........................................... 88 357 173 025 261 382
------------ ------------- --------------
Total value.................................. $ 4 749 039 $ 4 944 378 $ 9 693 417
============ ============= ==============
UNITS OUTSTANDING.................................... 4 464 4 570 9 034
============ ============= ==============
VALUE PER UNIT....................................... $ 1 063.85 $ 1 081.92
============ =============
</TABLE>
- ----------
See accompanying notes to financial statements.
-7-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
STATEMENTS OF OPERATIONS
---------------------------------------------------------
---------------------------------------------------------
<CAPTION>
Year ended
March 31,
-------------------------------------
1995 1994
---------- -------
<S> <C> <C>
INVESTMENT INCOME - INTEREST........................................... $ 707 090 $ 724 880
------------- ------------
EXPENSES:
Trustee fees ........................................................ 9 311 9 639
Evaluation fees....................................................... 2 188 1 704
Insurance premiums.................................................... 16 069 16 383
Sponsors' advisory fees............................................... 2 360 2 387
Auditors' fees........................................................ 1 800 1 800
------------- ------------
Total expenses.................................................... 31 728 31 913
------------- ------------
NET INVESTMENT INCOME.................................................. 675 362 692 967
REALIZED GAIN ON SECURITIES SOLD OR
REDEEMED (Note 3)..................................................... 18 723 13 904
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION.......................................................... (268 163) (221 284)
-------------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................ $ 425 922 $ 485 587
============= ============
</TABLE>
- ----------
See accompanying notes to financial statements.
-8-
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<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------
----------------------------------------------------------
<CAPTION>
Year ended
March 31,
------------------------------------
1995 1994
---------- -------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 675 362 $ 692 967
Realized gain on securities sold or redeemed........................ 18 723 13 904
Net change in unrealized market
depreciation...................................................... (268 163) (221 284)
-------------- --------------
Net increase in net assets resulting
from operations............................................ 425 922 485 587
-------------- --------------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income............................................... (689 253) (698 902)
Principal........................................................... (16 826) -
--------------- --------------
Total distributions........................................ (706 079) (698 902)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Redemption of 192 and 151 units..................................... (582 333) (211 948)
-------------- --------------
NET DECREASE IN NET ASSETS............................................. (862 490) (425 263)
NET ASSETS:
Beginning of year................................................... 10 555 907 10 981 170
-------------- --------------
End of year......................................................... $ 9 693 417 $ 10 555 907
============== ==============
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan...................................................... $ 71.15 $ 71.19
Semi-annual plan.................................................. $ 71.70 $ 71.86
Principal:
Monthly plan...................................................... $ - $ -
Semi-annual plan.................................................. $ - $ -
</TABLE>
- ----------
See accompanying notes to financial statements.
-9-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------
---------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
General
The Trust is registered under the Investment Company Act of 1940.
Securities
Securities transactions are recorded on a trade date basis.
Securities are stated at bid side market value as determined by an
independent outside evaluator.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit holders either
semi-annually on the first day of June and December or, if elected by the Unit
holder, on the first day of each month, after deducting applicable expenses. No
principal distributions, resulting from the sale or redemption of securities,
were made for the year ended March 31, 1995.
<TABLE>
NOTE 3 - BONDS SOLD OR REDEEMED
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ---- ------- ---------- ---------------------------------------- ------------ ------------ ---------
Year ended March 31, 1995:
<S> <C> <C> <C> <C> <C> <C>
12 $ 25 000 5/24/94 New York City Municipal $ 26 512 $ 22 859 $ 3 653
Water Finance Authority,
Water and Sewer System
Revenue Bonds, Fiscal
1989 Series A
7 5 000 6/16/94 New York State Medical Care 5 000 4 988 13
Facilities Finance Agency,
Mental Health Services
Facilities Improvement
Revenue Bonds, 1990
Series A
12 45 000 10/6/94 New York City Municipal 47 430 41 146 6 284
Water Finance Authority,
Water and Sewer System
Revenue Bonds, Fiscal
1989 Series A
2 50 000 11/15/94 New York Urban Development 51 750 51 309 441
Corporation, Correctional
Facilities Revenue Bonds,
1986 Refunding Services
(BIG Insured)
2 40 000 12/9/94 New York Urban Development 41 340 41 048 292
Corporation, Correctional
Facilities Revenue Bonds,
1986 Refunding Services
(BIG Insured)
</TABLE>
-10-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
NOTES TO FINANCIAL STATEMENTS
(Concluded)
---------------------------------------------------------
---------------------------------------------------------
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ---- --------- -------- ---------------------------------------- ------------ ------------ ---------
Year ended March 31, 1995 (continued):
<S> <C> <C> <C> <C> <C> <C>
2 $ 150 000 1/24/95 New York Urban Development $ 155 850 $ 153 928 $ 1 922
Corporation, Correctional
Facilities Revenue Bonds,
1986 Refunding Services
(BIG Insured)
2 125 000 2/28/95 New York Urban Development 130 125 128,274 1,851
Corporation, Correctional
Facilities Revenue Bonds,
1986 Refunding Services
(BIG Insured)
4 55 000 3/27/95 New York State Medical Care 57 475 59 492 (2 017)
Facilities Finance Agency,
Insured Hospital Mortgage
Revenue Bonds,
1985 Series C
12 45 000 3/27/95 New York City Municipal 47 250 41 146 6 104
Water Finance Authority,
Water and Sewer System
Revenue Bonds, Fiscal
1989 Series A
2 40 000 3/27/95 New York Urban Development 41 228 41 048 180
Corporation, Correctional
Facilities Revenue Bonds,
1986 Refunding Services
(BIG Insured)
$ 580 000 $ 603 961 $ 585 238 $18 723
========== ========= ========= =======
</TABLE>
NOTE 4 - NET ASSETS
Cost of 10,000 units at Date of Deposit $10 257 037
Less gross underwriting commission 502 500
--------
Net cost - initial offering price 9 754 537
Realized net gain on securities sold or redeemed 50 543
Principal distributions (35 048)
Redemption of 663 units (1 021 861)
Unrealized market appreciation of securities 683 864
Undistributed net investment income 261 382
--------
Net assets $ 9 693 417
===========
-11-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1 AAA $ 280 000 New York State 7.750% 01/01/13 01/01/10 @ 100 S.F.
Urban Develop- 01/01/98 @ 102 Opt.
ment Corporation,
Correctional
Facilities
Revenue Bonds,
Series C
(AMBAC Insured)
2 AAA 190 000 New York State 7.750 01/01/12 01/01/07 @ 100 S.F.
Urban Develop- 01/01/96 @ 102 Opt.
ment Corporation,
Correctional
Facilities
Revenue Bonds,
1986 Refunding
Series (BIG
Insured)
3 AAA 740 000 Dormitory Author- 7.350 08/01/29 02/01/05 @ 100 S.F.
ity of the 02/01/00 @ 102 Opt.
State of
New York,
United Health
Services, Inc.,
FHA-Insured
Mortgage
Revenue Bonds,
Series 1989
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- --------------- -------
1 $ 288 652 $ 306 113 $ 21 700
2 194 976 198 119 14 725
3 725 918 792 710 54 390
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C>
4 AAA $ 250 000 New York State 8.100% 02/15/22 No Sinking Fund
Medical Care 02/15/98 @ 102 Opt.
Facilities
Finance Agency,
Hospital and
Nursing Home
FHA-Insured
Mortgage
Revenue Bonds,
1988 Series B
5 Aaa* 1 785 000 New York State 8.000 02/15/25 No Sinking Fund
Medical Care 08/15/97 @ 102 Opt.
Facilities
Finance Agency,
Hospital Insured
Mortgage Revenue
Bonds, 1987
Series A
Refunding
6a Aaa* 245 000 New York State 7.750 02/15/20 02/15/11 @ 100 S.F.
Medical Care 02/15/00 @ 102 Opt.
Facilities
Finance Agency,
Mental Health
Services
Facilities
Improvement
Revenue Bonds,
1990 Series A
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- --------------- -------
4 $ 257 685 $ 276 332 $ 17 825
5 1 832 160 1 945 936 142 800
6a 244 388 276 992 18 987
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
6b BBB+ $ 230 000 New York State 7.750% 02/15/20 02/15/11 @ 100 S.F.
Medical Care 02/15/00 @ 102 Opt.
Facilities
Finance Agency,
Mental Health
Services
Facilities
Improvement
Revenue Bonds,
1990 Series A
7 Aaa* 1 305 000 Dormitory Author- 7.700 05/15/12 05/15/06 @ 100 S.F.
ity of the 05/15/00 @ 102 Opt.
State of New York,
State University
Educational
Facilities
Revenue Bonds,
Series 1990A
8a AAA 385 000 New York State 0.000 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care 08/15/98 @ 21.869 Opt.
Facilities
Finance Agency,
Mental Health
Services
Facilities
Improvement
Revenue Bonds,
1988 Series B
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- --------------- -------
6b $ 229 424 $ 246 942 $ 17 825
7 1 305 000 1 483 498 100 485
8a 45 622 71 409 -
-14-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
8b BBB+ $ 115 000 New York State 0.000% 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care 08/15/98 @ 21.869 Opt.
Facilities
Finance Agency,
Mental Health
Services
Facilities
Improvement
Revenue Bonds,
1988 Series B
9 AAA 1 625 000 Dormitory Author- 8.125 07/01/17 07/01/08 @ 100 S.F.
ity of the State 07/01/97 @ 102 Opt.
of New York,
City University
System Consoli-
dated Revenue
Bonds, Series
1987 A
10 AAA 1 850 000 Triborough Bridge 8.000 01/01/18 01/01/09 @ 100 S.F.
and Tunnel 01/01/98 @ 101.5 Opt.
Authority,
Mortgage
Recording Tax
Special Obli-
gation Bonds,
Series 1988A
$ 9 000 000
================
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- -------- -------
8b $ 13 628 $ 20 153 $ -
9 1 699 913 1 770 584 132 031
10 1 893 678 2 026 120 148 000
$ 8 731 044 $ 9 414 908 $ 671 194
================ ================ ============
-15-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 55
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings
are by Standard & Poor's Corporation, except for those indicated by
an asterisk (*), which are by Moody's Investors Service. Certain bond
ratings have changed since the Date of Deposit, at which time all
such bonds were rated A or better by either Standard & Poor's
Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking fund
(mandatory partial redemption) (S.F.) or at the stated optional call
(at the option of the issuer) (Opt.) or by refunding. Certain bonds
in the portfolio may be redeemed earlier than dates shown in whole or
in part under certain unusual or extraordinary circumstances as
specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely to
be called subject to such provisions, but other bonds may have
similar call features.
-16-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
Prospectus, Part I
10,366 Units
Dated: July 31, 1995
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of April 28, 1995
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of March 31, 1995. The second part of
this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income to the Unit holders
is generally exempt from all New York State and New York City income taxes.
Capital gains, if any, are subject to tax. See Part II under "Tax Status."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Corporation.
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders --Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
C/M: 10726.0053 287343.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 56
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 10,350,000
Number of Units: 10,366
Fractional Undivided Interest in the Trust Per Unit: 1/10,366
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $ 10,887,639.74
==================
Sponsors' Repurchase Price Per Unit: $ 1,050.32
Plus Sales Charge(1): 25.07
Public Offering Price Per Unit(2): $ 1,075.39
==================
Redemption Price Per Unit(3): $ 1,050.32
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 25.07
Weighted Average Maturity of Bonds in the Trust: 10.464 years
Evaluation Time: 2:00 p.m., New York Time, on the day
next following receipt by a Sponsor
of an order for a Unit sale or
purchase or by the Trustee of a Unit
tendered for redemption.
Annual Insurance Premium: $19,783
Evaluator's Fee: $.55 for each issue of Bonds in the
Trust for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of
Bonds in the Trust, $1.08 under the
monthly and $.60 under the
semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face
amount of underlying securities.
Date of Deposit: April 10, 1990
Date of Trust Agreement: April 10, 1990
Mandatory Termination Date: December 31, 2039
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust under which
Trust Agreement may be Terminated: $2,000,000
-2-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 56
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
(Continued)
<CAPTION>
Monthly Semi-annual
<S> <C> <C>
P Estimated Annual Interest Income: $ 74.88 $ 74.88
Less Annual Premium on Portfolio Insurance 1.91 1.91
E Less Estimated Annual Expenses 2.12 1.51
--------- ----------
R Estimated Net Annual Interest Income: $ 70.85 $ 71.46
========= ==========
U Estimated Interest Distribution: $ 5.90 $ 35.73
N Estimated Current Return Based on Public
Offering Price (4): 6.59% 6.65%
I
Estimated Long-Term Return Based
T on Public Offering Price (5): 4.81% 4.87%
Estimated Daily Rate of Net Interest
Accrual: $ .19680 $ .19850
Record Dates: 15th Day of 15th Day of May
Month and November
Payment Dates: 1st Day of 1st Day of June
Month and December
</TABLE>
- ---------------------------
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in Part
II of this Prospectus.
2. Plus accrued interest to May 5, 1995, the expected date of settlement, of
$14.70 monthly and $44.36 semi-annually.
3. Based solely upon the bid side evaluations of the portfolio securities. Upon
tender for redemption, the price to be paid will include accrued interest as
described in Part II under "Rights of Unit Holders -- Redemption --
Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net annual
interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator, and with the redemption, maturity, exchange or
sale of Securities. This calculation, which includes cash income accrual
only, does not include discount accretion on original issue discount bonds
or on zero coupon bonds or premium amortization on bonds purchased at a
premium. See "Tax Status" and "Estimated Current Return and Estimated
Long-Term Return to Unit Holders" in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes into
account the yields (including accretion of discounts and amortization of
premiums) of the individual Bonds in the Trust's portfolio, weighted to
reflect the market value and time to maturity (or, in certain cases, to
earlier call date) of such Bonds, adjusted to reflect the Public Offering
Price (including sales charge and expenses) per Unit. See "Estimated Current
Return and Estimated Long-Term Return to Unit Holders" in Part II of this
Prospectus.
-3-
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<PAGE>
Portfolio Information
On March 31, 1995, the bid side valuation of 2.7% of the aggregate principal
amount of Bonds in the Portfolio for this Trust was at a discount from par and
97.3% was at a premium over par. See Note (B) to "Tax-Exempt Bond Portfolio" for
information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
The Portfolio consists of 11 issues of Bonds issued by entities located in New
York or certain United States territories or possessions. The following
information is being supplied to inform Unit holders of circumstances affecting
the Trust. 8.6% of the aggregate principal amount of the Bonds in the Portfolio
are general obligations of the governmental entities issuing them and are backed
by the taxing power thereof. 9.6% of the aggregate principal amount of the Bonds
in the Portfolio are payable from appropriations. 81.8% of the aggregate
principal amount of the Bonds in the Portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes.
Although income to pay such Bonds may be derived from more than one source, the
primary sources of such income, the number of issues (and the related dollar
weighted percentage of such issues) deriving income from such sources and the
purpose of issue are as follows: General Obligation, 2 (8.6%); Appropriations, 1
(9.6%); Higher Education, 2 (7.3%); Health Care, 4 (43.9%); Water and Sewer, 1
(13.8%); and Other, 1 (16.8%). The Trust is deemed to be concentrated in the
Health Care Bonds category.1 One issue, constituting 2.7% of the Bonds in the
Portfolio, is an original issue discount bond and a zero coupon bond. On March
31, 1995, 5 issues (51.2%) were rated AAA and 2 issues (8.6%) were rated A- by
Standard & Poor's Corporation; 2 issues (23.5%) were rated Aaa by Moody's
Investors Service, Inc.2 Two issues were partially refunded. The partially
refunded portion of 1 issue (1.4%) was rated AAA by Standard & Poor's
Corporation. The partially refunded portion of the other issue (7.0%) was rated
Aaa by Moody's Investors Service, Inc. The remaining portions (8.3%) were rated
BBB+ by Standard & Poor's Corporation. Subsequent to such date, such ratings may
have changed. See "Tax-Exempt Bond Portfolio." For a more detailed discussion,
it is recommended that Unit holders consult the official statements for each
Security in the Portfolio of the Trust.
Tax Status (The tax opinion which is described herein was rendered on the Date
of Deposit. Consult your tax advisor to discuss any relevant changes in tax
laws since the Date of Deposit. See also "Tax Status" in Part II of this
Prospectus.)
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
------------------------------------
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part II
of this Prospectus.
-4-
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<PAGE>
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on a
sale or redemption of a Unit of the Trust is, however, includable in gross
income as capital gain (or loss) for federal, state and local income tax
purposes assuming that the Unit is held as a capital asset. Such gain (or loss)
does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term depending on the facts
and circumstances. Bonds selling at a market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for taxable gain (or reducing the potential for loss)
on their redemption, maturity or sale. In the case of Bonds acquired at a market
discount, gain will be treated as ordinary income to the extent of accrued
market discount. For tax years beginning after December 31, 1992, long-term
capital gains will be taxed at a maximum federal income tax rate of 28%, while
ordinary income will be taxed at a maximum federal income tax rate of 36% (plus
a 10% surtax applicable to certain high income taxpayers).
-5-
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<PAGE>
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
---------------------------------------------
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 56:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 56, including the bond portfolio, as
of March 31, 1995, and the related statements of operations and changes in net
assets for the years ended March 31, 1995 and 1994. These financial statements
are the responsibility of the Sponsors. 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 March 31, 1995 by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsors, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 56 as of March 31, 1995 and the results of its
operations and changes in net assets for the years ended March 31, 1995 and
1994, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
April 28, 1995
-6-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
STATEMENT OF NET ASSETS
MARCH 31, 1995
---------------------------------------------------------
---------------------------------------------------------
<S> <C> <C>
CASH........................................................................................ $ 131 896
INVESTMENTS IN SECURITIES, at market value (cost $10,048,277)............................... 10 915 515
ACCRUED INTEREST RECEIVABLE................................................................. 154 574
--------------
Total trust property.................................................................... 11 201 985
LESS - ACCRUED EXPENSES..................................................................... 1 141
--------------
NET ASSETS.................................................................................. $ 11 200 844
==============
</TABLE>
<TABLE>
NET ASSETS REPRESENTED BY:
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
<S> <C> <C> <C>
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS........................................ $ 6 562 835 $ 4 355 259 $ 10 918 094
UNDISTRIBUTED NET INVESTMENT
INCOME........................................... 125 277 157 473 282 750
------------ ------------- --------------
Total value.................................. $ 6 688 112 $ 4 512 732 $ 11 200 844
============ ============= ==============
UNITS OUTSTANDING.................................... 6 246 4 145 10 391
============ ============= ==============
VALUE PER UNIT....................................... $ 1 070.78 $ 1 088.72
============ =============
</TABLE>
- ----------
See accompanying notes to financial statements.
-7-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
STATEMENTS OF OPERATIONS
---------------------------------------------------------
---------------------------------------------------------
<CAPTION>
Year ended
March 31,
-------------------------------------
1995 1994
-------------- --------
<S> <C> <C>
INVESTMENT INCOME - INTEREST........................................... $ 787 395 $ 811 391
------------- ------------
EXPENSES:
Trustee fees ........................................................ 11 098 11 503
Evaluation fees....................................................... 2 131 1 713
Insurance premiums.................................................... 20 067 20 781
Sponsors' advisory fees............................................... 2 604 2 663
Auditors' fees........................................................ 1 800 1 800
------------- ------------
Total expenses.................................................... 37 700 38 460
------------- ------------
NET INVESTMENT INCOME.................................................. 749 695 772 931
REALIZED GAIN ON SECURITIES SOLD
OR REDEEMED (Note 3).................................................. 21 942 33 430
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION.......................................................... (283 447) (282 844)
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................ $ 488 190 $ 523 517
============= ============
</TABLE>
- ----------
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------
----------------------------------------------------------
<CAPTION>
Year ended
March 31,
------------------------------------
1995 1994
------------- ---------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 749 695 $ 772 931
Realized gain on securities
sold or redeemed.................................................. 21 942 33 430
Net change in unrealized market
depreciation...................................................... (283 447) (282 844)
-------------- --------------
Net increase in net assets resulting
from operations............................................ 488 190 523 517
-------------- --------------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income............................................... (755 091) (776 981)
Principal........................................................... (15 103) (12 050)
-------------- --------------
Total distributions........................................ (770 194) (789 031)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Redemption of 266 and 62 units...................................... (281 579) (311 321)
-------------- --------------
NET DECREASE IN NET ASSETS............................................. (563 583) (576 835)
NET ASSETS:
Beginning of year................................................... 11 764 427 12 341 262
-------------- --------------
End of year......................................................... $ 11 200 844 $ 11 764 427
============== ==============
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan................................. $ 71.01 $ 71.11
Semi-annual plan............................. $ 71.68 $ 71.82
Principal:
Monthly plan................................. $ 1.44 $ 1.12
Semi-annual plan............................. $ 1.44 $ 1.12
</TABLE>
- ----------
See accompanying notes to financial statements.
-9-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------
---------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
General
The Trust is registered under the Investment Company Act of 1940.
Securities
Securities transactions are recorded on a trade date basis.
Securities are stated at bid side market value as determined by an
independent outside evaluator.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit holders either
semi-annually on the first day of June and December or, if elected by the Unit
holder, on the first day of each month, after deducting applicable expenses.
Principal distributions, resulting from the sale or redemption of securities,
were made in December 1994.
<TABLE>
NOTE 3 - BONDS SOLD OR REDEEMED
<CAPTION>
Port-
folio Principal Date Realized
No. Amount Redeemed Description Net Proceeds Cost Gain
- ---- --------- -------- ---------------------------------------- ------------ ------------ -------
Year ended March 31, 1995:
<S> <C> <C> <C> <C> <C> <C>
7 $ 25 000 5/24/94 New York City Municipal Water $ 26 688 $ 25 000 $ 1 688
Finance Authority, Water and
Sewer System Revenue Bonds,
Fiscal 1986 Series B
10 20 000 6/16/94 New York State Medical Care 20 000 19 975 25
Facilities Finance Agency,
Mental Health Services
Facilities Improvements
Revenue Bonds, 1988 Series A
7 40 000 6/20/94 New York City Municipal Water 43 040 40 000 3 040
Finance Authority, Water and
Sewer System Revenue Bonds,
Fiscal 1986 Series B
7 100 000 7/25/94 New York City Municipal Water 108 000 100 000 8 000
Finance Authority, Water and
Sewer System Revenue Bonds,
Fiscal 1986 Series B
</TABLE>
-10-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
NOTES TO FINANCIAL STATEMENTS
(Concluded)
---------------------------------------------------------
---------------------------------------------------------
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
<CAPTION>
Port-
folio Principal Date Realized
No. Amount Redeemed Description Net Proceeds Cost Gain
- ---- --------- -------- ---------------------------------------- ------------ ------------ -------
Year ended March 31, 1995 (continued):
<S> <C> <C> <C> <C> <C> <C>
5 $ 15 000 8/29/94 Dormitory Authority of the State $ 16 350 $ 15 528 $ 822
of New York, City University
System Consolidated Revenue
Bonds, Series 1987A
3 70 000 1/24/95 New York State Medical Care 75 880 68 684 7 196
Facilities Finance Agency,
St. Lukes-Roosevelt
Hospital Center FHA-Insured
Mortgage Revenue Bonds,
1989 Series B
5 25 000 2/28/95 Dormitory Authority of the State 27 050 25 879 1 171
of New York, City University
System Consolidated Revenue
Bonds, Series 1987A
$ 295 000 $ 317 008 $ 295 066 $21 942
========== ========= ========= =======
</TABLE>
NOTE 4 - NET ASSETS
Cost of 11,000 units at Date of Deposit $11 240 803
Less gross underwriting commission 550 660
--------
Net cost - initial offering price 10 690 143
Realized net gain on securities sold or redeemed 62 471
Principal distributions (42 113)
Redemption of 609 units (659 645)
Unrealized market appreciation of securities 867 238
Undistributed net investment income 282 750
--------
Net assets $11 200 844
===========
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ---- -------- ---------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1 AAA $ 225 000 Dormitory Authority 7.125% 05/15/17 05/15/10 @ 100 S.F.
of the State of 05/15/99 @ 102 Opt.
New York, State
University Educa-
tional Facilities
Revenue Bonds,
Series A
(MBIA Insured)
2 AAA 1 750 000 New York State 7.100 02/15/27 08/15/02 @ 100 S.F.
Medical Care 02/15/97 @ 102 Opt.
Facilities Finance
Agency, Secured
Hospital Revenue
Bonds, 1987
Series A
(BIG Insured)
3 AAA 1 065 000 New York State 7.450 02/15/29 08/15/95 @ 100 S.F.
Medical Care 02/15/00 @ 102 Opt.
Facilities Finance
Agency St. Luke's-
Roosevelt Hospital
Center FHA-Insured
Mortgage Revenue
Bonds, 1989
Series B
4 AAA 1 740 000 Triborough Bridge 8.000 01/01/18 01/01/09 @ 100 S.F.
and Tunnel 01/01/98 @ 101.5 Opt.
Authority, Mort-
gage Recording Tax
Special Obligation
Bonds, Series 1988A
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ---- ------------ ------------- -------
1 $ 217 782 $ 244 412 $ 16 031
2 1 683 693 1 827 385 124 250
3 1 044 978 1 193 897 79 343
4 1 751 310 1 905 648 139 200
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ---- -------- ---------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
5 AAA $ 525 000 Dormitory Authority 8.125% 07/01/17 07/01/08 @ 100 S.F.
of the State of 07/01/97 @ 102 Opt.
New York, City
University System
Consolidated Reve-
nue Bonds, Series
1987A
6 Aaa* 1 000 000 New York State 8.000 01/01/06 01/01/02 @ 100 S.F.
Urban Development 01/01/96 @ 102 Opt.
Corporation, Cor-
rectional Facili-
ties Revenue Bonds,
Series B
7 Aaa* 1 425 000 New York City 7.875 06/15/16 06/15/07 @ 100 S.F.
Municipal Water 06/15/96 @ 102 Opt.
Finance Authority
Water and Sewer
System Revenue
Bonds Fiscal
1986 Series B
8 A- 545 000 The City of 7.875 08/01/09 No Sinking Fund
New York General 08/01/00 @ 101.5 Opt.
Obligation Bonds
Fiscal 1990
Series G
9 A- 350 000 The City of 7.875 08/01/08 No Sinking Fund
New York General 08/01/00 @ 101.5 Opt.
Obligation Bonds
Fiscal 1990
Series G
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ---- ------------ ------------- -------
5 $ 543 464 $ 572 034 $ 42 656
6 1 011 250 1 044 510 80 000
7 1 425 000 1 506 937 112 219
8 538 253 587 744 42 919
9 345 765 378 616 27 563
-13-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ---- -------- ---------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
10a Aaa* $ 730 000 New York State 7.750% 02/15/20 02/15/11 @ 100 S.F.
Medical Care 02/15/00 @ 102 Opt.
Facilities Finance
Agency, Mental
Health Services
Facilities Improve-
ment Revenue Bonds,
1988 Series A
10b BBB+ 725 000 New York State 7.750 02/15/20 02/15/11 @ 100 S.F.
Medical Care 02/15/00 @ 102 Opt.
Facilities Finance
Agency, Mental
Health Services
Facilities Improve-
ment Revenue Bonds,
1988 Series A
11a AAA 150 000 New York State 0.000 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care 08/15/98 @ 21.869 Opt.
Facilities Finance
Agency, Mental
Health Services
Facilities Improve-
ment Revenue Bonds,
1988 Series B
11b BBB+ 130 000 New York State 0.000 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care 08/15/98 @ 21.869 Opt.
Facilities Finance
Agency, Mental
Health Services
Facilities Improve-
ment Revenue Bonds,
1988 Series B
$ 10 360 000
================
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ---- ------------ ------------- -------
10a $ 729 087 $ 825 323 $ 56 575
10b 724 095 778 404 56 188
11a 18 000 27 822 -
11b 15 600 22 783 -
$ 10 048 277 $ 10 915 515 $ 776,944
================ ================ ============
-14-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 56
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings
are by Standard & Poor's Corporation, except for those indicated by
an asterisk (*), which are by Moody's Investors Service. Certain bond
ratings have changed since the Date of Deposit, at which time all
such bonds were rated A or better by either Standard & Poor's
Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking fund
(mandatory partial redemption) (S.F.) or at the stated optional call
(at the option of the issuer) (Opt.) or by refunding. Certain bonds
in the portfolio may be redeemed earlier than dates shown in whole or
in part under certain unusual or extraordinary circumstances as
specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely to
be called subject to such provisions, but other bonds may have
similar call features.
-15-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
Prospectus, Part I
9,160 Units
Dated: July 31, 1995
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of April 28, 1995
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of March 31, 1995. The second part of
this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income to the Unit holders
is generally exempt from all New York State and New York City income taxes.
Capital gains, if any, are subject to tax. See Part II under "Tax Status."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited in
the portfolio of the Trust are sometimes referred to herein as the "Securities."
Insurance guaranteeing the payment of principal and interest on the Securities
while in the Trust has been obtained by the Trust from the Insurer as set forth
in Part II under "Insurance on the Bonds." Such insurance does not guarantee the
market value of the Securities or the Units offered hereby. The payment of
interest and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers of the Bonds and any other insurer to meet
their obligations. As a result of the insurance on the Bonds, the Units are
rated "AAA" by Standard & Poor's Corporation.
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights of
Unit Holders --Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering --
Market for Units." If such a market is not maintained, a Unit holder may be able
to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
C/M: 10726.0053 287345.1
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 57
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
Aggregate Principal Amount of Bonds in the Trust: $ 9,210,000
Number of Units: 9,160
Fractional Undivided Interest in the Trust Per Unit: 1/9,160
Total Value of Securities in the Portfolio
(Based on Bid Side Evaluations of Securities): $ 9,660,627.01
==================
Sponsors' Repurchase Price Per Unit: $ 1,054.65
Plus Sales Charge(1): 30.10
Public Offering Price Per Unit(2): $ 1,084.75
==================
Redemption Price Per Unit(3): $ 1,084.75
Excess of Public Offering Price Over Redemption
Price Per Unit: $ 30.10
Weighted Average Maturity of Bonds in the Trust: 4.800 years
Evaluation Time: 2:00 p.m., New York Time, on the day
next following receipt by a Sponsor
of an order for a Unit sale or
purchase or by the Trustee of a Unit
tendered for redemption.
Annual Insurance Premium: $20,013
Evaluator's Fee: $.55 for each issue of Bonds in the
Trust for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of
Bonds in the Trust, $1.08 under the
monthly and $.60 under the
semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per 1,000 face
amount of underlying securities.
Date of Deposit: May 9, 1990
Date of Trust Agreement: May 9, 1990
Mandatory Termination Date: December 31, 2039
Minimum Principal Distribution: $1.00 per Unit
Minimum Value of the Trust under which
Trust Agreement may be Terminated: $2,000,000
-2-
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 57
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT APRIL 28, 1995
(Continued)
<CAPTION>
Monthly Semi-annual
<S> <C> <C>
P Estimated Annual Interest Income: $ 75.87 $ 75.87
Less Annual Premium on Portfolio Insurance 2.18 2.18
E Less Estimated Annual Expenses 2.01 1.40
--------- ----------
R Estimated Net Annual Interest Income: $ 71.68 $ 72.29
========= ==========
U Estimated Interest Distribution: $ 5.97 $ 36.14
N Estimated Current Return Based on Public
Offering Price (4): 6.61% 6.66%
I
Estimated Long-Term Return Based
T on Public Offering Price (5): 4.95% 5.01%
Estimated Daily Rate of Net Interest
Accrual: $ .19911 $ .20080
Record Dates: 15th Day of 15th Day of May
Month and November
Payment Dates: 1st Day of 1st Day of June
Month and December
</TABLE>
- ---------------------------
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in Part
II of this Prospectus.
2. Plus accrued interest to May 5, 1995, the expected date of settlement, of
$14.82 monthly and $44.84 semi- annually.
3. Based solely upon the bid side evaluations of the portfolio securities. Upon
tender for redemption, the price to be paid will include accrued interest as
described in Part II under "Rights of Unit Holders -- Redemption --
Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net annual
interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator, and with the redemption, maturity, exchange or
sale of Securities. This calculation, which includes cash income accrual
only, does not include discount accretion on original issue discount bonds
or on zero coupon bonds or premium amortization on bonds purchased at a
premium. See "Tax Status" and "Estimated Current Return and Estimated
Long-Term Return to Unit Holders" in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes into
account the yields (including accretion of discounts and amortization of
premiums) of the individual Bonds in the Trust's portfolio, weighted to
reflect the market value and time to maturity (or, in certain cases, to
earlier call date) of such Bonds, adjusted to reflect the Public Offering
Price (including sales charge and expenses) per Unit. See "Estimated Current
Return and Estimated Long-Term Return to Unit Holders" in Part II of this
Prospectus.
-3-
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<PAGE>
Portfolio Information
On March 31, 1995, the bid side valuation of 14.2% of the aggregate principal
amount of Bonds in the Portfolio for this Trust was at a discount from par and
85.8% was at a premium over par. See Note (B) to "Tax Exempt Bond Portfolio" for
information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
The Portfolio consists of 12 issues of Bonds issued by entities located in New
York or certain United States territories or possessions. The following
information is being supplied to inform Unit holders of circumstances affecting
the Trust. 10.8% of the aggregate principal amount of the Bonds in the Portfolio
are general obligations of the governmental entities issuing them and are backed
by the taxing power thereof. 19.1% of the aggregate principal amount of the
Bonds in the Portfolio are payable from appropriations. 70.1% of the aggregate
principal amount of the Bonds in the Portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes.
Although income to pay such Bonds may be derived from more than one source, the
primary sources of such income, the number of issues (and the related dollar
weighted percentage of such issues) deriving income from such sources and the
purpose of issue are as follows: General Obligation, 1 (10.8%); Appropriations,
3 (19.1%); Health Care, 6 (47.0%); Water and Sewer, 1 (9.5%); and Other, 1
(13.6%). The Trust is deemed to be concentrated in the Health Care Bonds
category.1 One issue, constituting 3.4% of the Bonds in the Portfolio, is an
original issue discount bond and a zero coupon bond. On March 31, 1995, 5 issues
(62.5%) were rated AAA and 1 issue (10.8%) was rated A- by Standard & Poor's
Corporation; 3 issues (18.5%) were rated Aaa by Moody's Investors Service, Inc.
Three issues were partially refunded. The partially refunded portion of two
issues (3.9%) was rated AAA by Standard & Poor's Corporation. The partially
refunded portion of the other issue (.8%) was rated Aaa by Moody's Investors
Service, Inc. The remaining portions of all three partially refunded bonds
(3.5%) were rated BBB+ by Standard & Poor's Corporation.2 Subsequent to such
date, such ratings may have changed. See "Tax-Exempt Bond Portfolio." For a more
detailed discussion, it is recommended that Unit holders consult the official
statements for each Security in the Portfolio of the Trust.
Tax Status (The tax opinion which is described herein was rendered on the Date
of Deposit. Consult your tax advisor to discuss any relevant changes in tax
laws since the Date of Deposit. See also "Tax Status" in Part II of this
Prospectus.)
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable from
gross income under the Internal Revenue Code of 1986, as amended. See "The Trust
- -- Portfolio" in Part II of this Prospectus.
------------------------------------
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust -- General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part II
of this Prospectus.
-4-
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<PAGE>
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on a
sale or redemption of a Unit of the Trust is, however, includable in gross
income as capital gain (or loss) for federal, state and local income tax
purposes assuming that the Unit is held as a capital asset. Such gain (or loss)
does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term depending on the facts
and circumstances. Bonds selling at a market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for taxable gain (or reducing the potential for loss)
on their redemption, maturity or sale. In the case of Bonds acquired at a market
discount, gain will be treated as ordinary income to the extent of accrued
market discount. For tax years beginning after December 31, 1992, long-term
capital gains will be taxed at a maximum federal income tax rate of 28%, while
ordinary income will be taxed at a maximum federal income tax rate of 36% (plus
a 10% surtax applicable to certain high income taxpayers).
-5-
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<PAGE>
INDEPENDENT AUDITORS' REPORT
---------------------------------------------------
---------------------------------------------------
The Sponsors, Trustee and Unit Holders of Empire State Municipal
Exempt Trust, Guaranteed Series 57:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 57, including the bond portfolio, as
of March 31, 1995, and the related statements of operations and changes in net
assets for the years ended March 31, 1995 and 1994. These financial statements
are the responsibility of the Sponsors. 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 March 31, 1995, by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsors, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 57 as of March 31, 1995, and the results of its
operations and changes in net assets for the years ended March 31, 1995 and
1994, in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
New York, New York
April 28, 1995
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
STATEMENT OF NET ASSETS
MARCH 31, 1995
--------------------------------------------------------------
--------------------------------------------------------------
<S> <C>
CASH ....................................................................................... $ 135 773
INVESTMENTS IN SECURITIES, at market value (cost $8,816,992).................................... 9 690 469
ACCRUED INTEREST RECEIVABLE..................................................................... 130 919
--------------
Total trust property.................................................................... 9 957 161
LESS - ACCRUED EXPENSES......................................................................... 1 065
--------------
NET ASSETS...................................................................................... $ 9 956 096
==============
</TABLE>
<TABLE>
NET ASSETS REPRESENTED BY:
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
<S> <C> <C> <C>
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS........................................ $ 6 254 035 $ 3 456 288 $ 9 710 323
UNDISTRIBUTED NET INVESTMENT
INCOME........................................... 44 543 201 230 245 773
------------ ------------- --------------
Total value.................................. $ 6 298 578 $ 3 657 518 $ 9 956 096
============ ============= ==============
UNITS OUTSTANDING.................................... 5 926 3 275 9 201
============ ============= ==============
VALUE PER UNIT....................................... $ 1 062.87 $ 1 116.80
============ =============
- ----------
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
STATEMENTS OF OPERATIONS
--------------------------------------------------------------
--------------------------------------------------------------
<CAPTION>
Year ended
March 31,
---------------------------------------
1995 1994
------------- ---------
<S> <C> <C>
INVESTMENT INCOME - INTEREST........................................... $ 707 987 $ 723 327
------------- ------------
EXPENSES:
Trustee fees ........................................................ 10 113 10 681
Evaluation fees....................................................... 2 295 1 769
Insurance premiums.................................................... 20 291 20 797
Sponsors' advisory fees............................................... 2 353 2 358
Auditors' fees........................................................ 1 800 1 800
------------- ------------
Total expenses.................................................... 36 852 37 405
------------- ------------
NET INVESTMENT INCOME.................................................. 671 135 685 922
REALIZED GAIN ON SECURITIES SOLD
OR REDEEMED (Note 3).................................................. 7 722 32 411
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION.......................................................... (152 645) (359 013)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................ $ 526 212 $ 359 320
============= ============
</TABLE>
- ----------
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------
---------------------------------------------------------
<CAPTION>
Year ended
March 31,
--------------------------------------
1995 1994
-------------- ---------
<S> <C> <C>
OPERATIONS:
Net investment income............................................... $ 671 135 $ 685 922
Realized gain on securities
sold or redeemed.................................................. 7 722 32 411
Net change in unrealized market
depreciation...................................................... (152 645) (359 013)
-------------- --------------
Net increase in net assets resulting
from operations............................................ 526 212 359 320
DISTRIBUTIONS TO UNIT HOLDERS OF NET
INVESTMENT INCOME................................................... (674 336) (690 676)
CAPITAL SHARE TRANSACTIONS:
Redemption of 191 and 211 units..................................... (199 460) (234 830)
-------------- --------------
NET DECREASE IN NET ASSETS............................................. (347 584) (566 186)
NET ASSETS:
Beginning of year................................................... 10 303 680 10 869 866
-------------- --------------
End of year......................................................... $ 9 956 096 $ 10 303 680
============== ==============
DISTRIBUTIONS PER UNIT (Note 2):
Interest:
Monthly plan...................................................... $ 71.63 $ 71.89
Semi-annual plan.................................................. $ 72.33 $ 72.43
</TABLE>
- ----------
See accompanying notes to financial statements.
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------
---------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
General
The Trust is registered under the Investment Company Act of 1940.
Securities
Securities transacations are recorded on a trade date basis.
Securities are stated at bid side market value as determined by an
independent outside evaluator.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit holders either
semi-annually on the first day of June and December or, if elected by the Unit
holder, on the first day of each month, after deducting applicable expenses. No
principal distributions, resulting from the sale or redemption of securities,
were made in the year ended March 31, 1995.
<TABLE>
NOTE 3 - BONDS SOLD OR REDEEMED
<CAPTION>
Port-
folio Principal Date Realized
No. Amount Redeemed Description Net Proceeds Cost Gain
- ---- --------- -------- ---------------------------------------- ------------ ------------ -------
Year ended March 31, 1995:
<S> <C> <C> <C> <C> <C> <C>
7 $ 10 000 5/24/94 New York State Municipal $ 10 875 $ 10 217 $ 658
Water Finance Authority,
Water and Sewer System
Revenue Bonds Fiscal
1987 Series B
11 5 000 6/16/94 New York State Medical 5 000 4 950 50
Care Facilities Finance
Agency, Mental Health
Services Facilities
Improvement Revenue Bonds,
1990 Series A
8 20 000 10/6/94 Metropolitan Transportation 21 900 20 000 1 900
Authority, Commuter
Facilities 1987 Service
Contract Bonds, Series 2
9 35 000 12/9/94 New York State Urban 36 260 35 192 1 068
Development Corporation,
Correctional Facilities
Revenue Bonds, Series B
9 80 000 1/24/95 New York State Urban 82 960 80 439 2 521
Development Corporation,
Correctional Facilities
Revenue Bonds, Series B
</TABLE>
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
NOTES TO FINANCIAL STATEMENTS
(Concluded)
---------------------------------------------------------
---------------------------------------------------------
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
<CAPTION>
Port-
folio Principal Date Realized
No. Amount Redeemed Description Net Proceeds Cost Gain
- ---- --------- -------- ---------------------------------------- ------------ ------------ -------
Year ended March 31, 1995 (continued):
<S> <C> <C> <C> <C> <C> <C>
9 $ 50 000 3/27/95 New York State Urban $ 51 800 $ 50 275 $ 1 525
Development Corporation,
Correctional Facilities
Revenue Bonds, Series B
$ 200 000 $ 208 795 $ 201 073 $ 7 722
========== ========= ========= =======
</TABLE>
NOTE 4 - NET ASSETS
Cost of 10,000 units at Date of Deposit $10 095 078
Less gross underwriting commission 494 600
--------
Net cost - initial offering price 9 600 478
Realized net gain on securities sold or redeemed 94 660
Unrealized market appreciation of securities 873 477
Redemption of 799 units (858 292)
Undistributed net investment income 245 773
--------
Net assets $9 956 096
==========
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<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C>
1 AAA $ 1 000 000 New York State 8.100% 02/15/22 No Sinking Fund
Medical Care Fa- 02/15/98 @ 102 Opt.
cilities Finance
Agency, Hospital
and Nursing Home
FHA-Insured Mort-
gage Revenue
Bonds, 1988
Series B
2 AAA 1 745 000 New York State 8.000 02/15/28 No Sinking Fund
Medical Care Fa- 08/15/98 @ 102 Opt.
cilities Finance
Agency, Hospital
and Nursing Home
Insured Mortgage
Revenue Bonds,
1988 Series B
3 Aaa* 830 000 New York State 8.000 02/15/25 No Sinking Fund
Medical Care Fa- 08/15/97 @ 102 Opt.
cilities Finance
Agency, Hospital
Insured Mortgage
Revenue Bonds,
1987 Series A
(FHA-Insured
Mortgage)
4a AAA 180 000 New York State 7.875 08/15/15 08/15/11 @ 100 S.F.
Medical Care Fa- 08/15/98 @ 102 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities
Improvement
Revenue Bonds,
1988 Series B
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- ------------ -------
1 $ 1 020 050 $ 1 105 330 $ 81 000
2 1 769 011 1 944 663 139 600
3 840 649 904 833 66 400
4a 180 000 199 906 14 175
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<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
4b BBB+ $ 70 000 New York State 7.875% 08/15/15 08/15/11 @ 100 S.F.
Medical Care Fa- 08/15/98 @ 102 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities
Improvement
Revenue Bonds,
1988 Series B
5 Aaa* 500 000 New York State 8.125 01/01/14 01/01/09 @ 100 S.F.
Urban Development 01/01/98 @ 102 Opt.
Corporation, Cor-
rectional Facili-
ties Revenue
Bonds, Series E
6 AAA 1 250 000 Triborough Bridge 8.000 01/01/18 01/01/09 @ 100 S.F.
and Tunnel Au- 01/01/98 @ 101.5 Opt.
thority, Mortgage
Recording Tax
Special Obliga-
tion Bonds,
Series 1988 A
7 AAA 880 000 New York State 8.250 06/15/16 06/15/08 @ 100 S.F
Municipal Water 06/15/97 @ 102 Opt.
Finance Authority,
Water and Sewer
System Revenue
Bonds Fiscal
1987 Series B
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- ------------ -------
4b $ 70 000 $ 75 023 $ 5 513
5 507 410 551 380 40 625
6 1 250 000 1 369 000 100 000
7 899 114 960 045 72 600
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<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
8 AAA $ 885 000 Metropolitan 8.000% 07/01/18 07/01/09 @ 100 S.F.
Transportation 07/01/98 @ 102 Opt.
Authority, Com-
muter Facilities
1987 Service
Contract Bonds,
Series 2
9 Aaa* 375 000 New York State 8.000 01/01/06 01/01/02 @ 100 S.F.
Urban Development 01/01/96 @ 102 Opt.
Corporation, Cor-
rectional Facili-
ties Revenue
Bonds, Series B
10 A- 1 000 000 The City of New 6.000 08/01/10 No Sinking Fund
York General 08/01/97 @ 100 Opt.
Obligation Bonds,
Fiscal 1990
Series A
11a Aaa* 70 000 New York State 7.750 02/15/20 02/15/11 @ 100 S.F.
Medical Care Fa- 02/15/00 @ 102 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities Im-
provement Revenue
Bonds, 1990
Series A
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- ------------ -------
8 $ 885 000 $ 983 793 $ 70 800
9 377 058 391 691 30 000
10 788 450 935 290 60 000
11a 69 300 79 140 5 425
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<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
<CAPTION>
Redemption Features
Port- Aggregate Date of S.F. - Sinking Fund
folio Rating Principal Name of Issuer and Coupon Maturity Opt. - Optional Call
No. (Note A) Amount Title of Bond Rate (Note B) (Note B)
- ----- -------- -------- ------------------ ------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
11b BBB+ $ 125 000 New York State 7.750% 02/15/20 02/15/11 @ 100 S.F.
Medical Care Fa- 02/15/00 @ 102 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities Im-
provement Revenue
Bonds, 1990
Series A
12a AAA 180 000 New York State 0.000 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care Fa- 08/15/98 @ 21.869 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities Im-
provement Revenue
Bonds, 1988
Series B
12b BBB+ 130 000 New York State 0.000 08/15/18 02/15/16 @ 82.192 S.F.
Medical Care Fa- 08/15/98 @ 21.869 Opt.
cilities Finance
Agency, Mental
Health Services
Facilities Im-
provement Revenue
Bonds, 1988
Series B
$ 9 220 000
================
</TABLE>
Market Value Annual
Port- Cost of as of Interest
folio Bonds March 31, Income to
No. to Trust 1995 Trust
- ----- -------- ------------ -------
11b $ 123 750 $ 134 208 $ 9 687
12a 21 600 33 386 -
12b 15 600 22 781 -
$ 8 816 992 $ 9 690 469 $ 695 825
================ ================ ============
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 57
TAX-EXEMPT BOND PORTFOLIO
MARCH 31, 1995
(Continued)
----------------------------------------------------
----------------------------------------------------
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings
are by Standard & Poor's Corporation, except for those indicated by
an asterisk (*), which are by Moody's Investors Service. Certain bond
ratings have changed since the Date of Deposit, at which time all
such bonds were rated A or better by either Standard & Poor's
Corporation or Moody's Investors Service.
(B) Bonds may be redeemable prior to maturity from a sinking fund
(mandatory partial redemption) (S.F.) or at the stated optional call
(at the option of the issuer) (Opt.) or by refunding. Certain bonds
in the portfolio may be redeemed earlier than dates shown in whole or
in part under certain unusual or extraordinary circumstances as
specified in the terms and provisions of such bonds. Single-family
mortgage revenue bonds and housing authority bonds are most likely to
be called subject to such provisions, but other bonds may have
similar call features.
-16-
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series
PROSPECTUS, Part II
Note: Part II of this Prospectus may not be
distributed unless accompanied by Part I.
THE TRUST
Organization
The Trust is one of a Series of similar but separate unit
investment trusts. Each Trust was created under the laws of the State of New
York pursuant to a Trust Indenture and Agreement (the "Trust Agreement"),
dated the Date of Deposit as set forth in "Summary of Essential Financial
Information" in Part I of this Prospectus, among the Sponsors, the Trustee and
the Evaluator. The Bank of New York acts as successor trustee of Series 1
through 22 and as Trustee of Series 23 and subsequent Series. Muller Data
Corporation acts as successor Evaluator for all Series. Glickenhaus & Co. and
Lebenthal & Co., Inc. act as co-Sponsors for all Series (the "Sponsors").
On the date of this Prospectus, each Unit represented the
fractional undivided interest in the Trust set forth in Part I of this
Prospectus under "Summary of Essential Financial Information." Thereafter, if
any Units are redeemed by the Trustee, the fractional undivided interest in
the Trust represented by each unredeemed Unit will increase, although the
actual interest in the Trust represented by each such Unit will remain
essentially the same. Units will remain outstanding until redeemed upon tender
to the Trustee by any Unit holder, which may include the Sponsors, or until
the termination of the Trust Agreement for the related Trust. See "Rights of
Unit Holders--Redemption."
On the Date of Deposit for each Trust, the Sponsors deposited with
the Trustee obligations or contracts for the purchase of such obligations (the
"Bonds" or "Securities"). Certain of the Bonds may have been purchased at
prices which resulted in the portfolio as a whole being purchased at a
discount due to original issue discount, market discount or the inclusion of
zero coupon bonds. Bonds selling at market discount tend to increase in market
value as they approach maturity when the principal amount is payable, thus
increasing the potential for capital gain. Any capital gain other than any
earned original issue discount will be taxable and will not be realized until
maturity, redemption or sale of the underlying Bonds or Units.
Objectives
The objective of the Trust is to obtain tax-exempt interest income
through an investment in a fixed, insured portfolio consisting primarily of
various long-term municipal
279831.1
<PAGE>
bonds. No assurance can be given that the Trust's objectives will be achieved
because these objectives are subject to the continuing ability of the
respective issuers of the bonds in the Portfolio to meet their obligations and
of the Insurer to meet its obligations under the insurance. In addition, an
investment in the Trust can be affected by interest rate fluctuations.
Series 1 through 5, Series 6 through 30 and Series 31 and
subsequent Series have obtained insurance guaranteeing the payment of
principal and interest on the Bonds in each respective Trust from National
Union Fire Insurance Company of Pittsburgh, Pa. ("National Union"), MBIA Inc.
("MBIA") and MBIA Insurance Corporation ("MBIAC"), respectively (National
Union, MBIA and MBIAC are collectively referred to herein as the "Insurer").
Insurance obtained by the Trust applies only while Bonds are retained in the
Trust. As to Series 18 through Series 30 and Series 31 and subsequent Series,
however, pursuant to irrevocable commitments of MBIA and MBIAC, respectively,
in the event of a sale of a Bond from the Trust the Trustee has the right to
obtain permanent insurance for such Bond upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such Bond. It
is expected that the Trustee will exercise the right to obtain permanent
insurance for a Bond in such Series upon instruction from the Sponsors
whenever the value of that Bond insured to its maturity less the applicable
permanent insurance premium and the related custodial fee exceeds the value of
the Bond without such insurance. Insurance relates only to the payment of
principal and interest on the Bonds in the Trust but neither covers the
nonpayment of any redemption premium on the Bonds nor guarantees the market
value of the Units. Certain Bonds in the Trust may also be insured under
insurance obtained by the issuers of such Bonds or third parties ("Pre-insured
Bonds"). As a result of the insurance, Moody's Investors Service, Inc.
("Moody's") has assigned a rating of "Aaa" to all of the Bonds in Series 6 and
subsequent Series, as insured, and Standard & Poor's Corporation ("Standard &
Poor's") has assigned a rating of "AAA" to the Units of the Trust, and to the
Bonds in Series 17 and subsequent Series, as insured, while in the Trust. No
representation is made as to any insurer's ability to meet its commitments.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. A
single or annual premium is paid by the issuer or any other party for its
insurance on Pre-insured Bonds, and a monthly premium is paid by the Trust for
the insurance it obtains from the Insurer on the Bonds in the Trust that are
not pre-insured by such Insurer. No premium will be paid by Series 1 through
5, Series 6 through 30 and Series 31 and subsequent Series on Bonds
pre-insured by National Union, MBIA and MBIAC, respectively. See "Insurance on
the Bonds."
Portfolio
In view of the Trust's objectives, the following factors, among
others, were considered in selecting the Bonds: (1) all the Bonds are
obligations of the State of New York and counties, municipalities, authorities
or political subdivisions thereof or issued by certain United States
territories or possessions, including Puerto Rico, and their public
authorities so that the interest on them will be exempt from Federal, New York
State and
- 2 -
279831.1
<PAGE>
New York City income tax under existing law; (2) the Bonds are varied as to
purpose of issue; (3) in the opinion of the Sponsors, the Bonds are fairly
valued relative to other bonds of comparable quality and maturity; and (4)
availability of insurance for the payment of principal and interest on the
Bonds. Subsequent to the Date of Deposit, a Bond may cease to be rated or its
rating may be reduced. Neither event requires an elimination of such Bond from
the portfolio, but such an event may be considered in the Sponsors'
determination to direct the Trustee to dispose of the Bonds. See
"Sponsors--Responsibility."
An investment in Units of the Trust should be made with an
understanding of the risks entailed in investments in fixed-rate bonds,
including the risk that the value of such bonds (and, therefore, of the Units)
will decline with increases in interest rates. Inflation and recession, as
well as measures implemented to address these and other economic problems,
contribute to fluctuations in interest rates and the value of fixed-rate bonds
generally. The Sponsors cannot predict future economic policies or their
consequences nor, therefore, can they predict the course or extent of such
fluctuations in the future.
Special Factors Affecting New York
The information set forth below is derived from the official
statements and/or preliminary drafts of official statements prepared in
connection with the issuance of New York State and New York City municipal
bonds. The Sponsors have not independently verified this information.
State Economic Trends. Over the long term, the State of New York
(the "State") and the City of New York (the "City") face serious potential
economic problems. The City accounts for approximately 41% of the State's
population and personal income, and the City's financial health affects the
State in numerous ways. The State historically has been one of the wealthiest
states in the nation. For decades, however, the State has grown more slowly
than the nation as a whole, gradually eroding its relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City. 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
- 3 -
279831.1
<PAGE>
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.
(1) 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
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.
- 4 -
279831.1
<PAGE>
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
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.
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On May 12, 1995 the City submitted to the Control Board the
Financial Plan for the 1995 through 1999 fiscal years, which is a modification
to the 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 from 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 submitted to the Control Board on May
12, 1995 reflects actual receipts and expenditures since the Financial Plan
published on October 25, 1994 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 $774 million
budget gap resulting principally from (i) projections of non- property tax
revenue shortfalls of $423 million, resulting from lower capital gains,
bonuses and business profits, the timing of certain payments and discounting
by retailers, (ii) projected increases in certain agency expenditures,
including additional Medicaid payments, of $312 million, and (iii) other
revenue shortfalls, partially offset by a $100 million projected increase in
unrestricted aid and a $101 million projected increase in property taxes. The
gap-closing measures for the 1995 fiscal year set forth in the Financial Plan
include (i) additional proposed agency expenditure reductions aggregating $257
million, (ii) $162 million of debt service savings, including savings
resulting from a completed refunding of outstanding City debt, (iii) $239
million of increased revenues resulting from a proposed sale of two criminal
justice facilities to the State and a proposed sale of certain mortgages, and
(iv) $116 million of increased revenues resulting from the refund by the
Internal Revenue Service of social security payments by the City. Certain of
the foregoing gap-closing actions will be subject to the ability of the City
to implement expenditure reduction initiatives. In addition, the proposed sale
of the criminal justice facilities is subject to approval by the State
Legislature. In the event the foregoing gap-closing actions cannot be fully
implemented, or if expenditures exceed current forecasts, 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.
The Financial Plan also sets forth projections for the 1996
through 1999 fiscal years and outlines a proposed gap-closing program to close
a projected gap of $3.1 billion
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for the 1996 fiscal year and to substantially reduce projected gaps of $3.7
billion, $4.3 billion and $4.2 billion for the 1997, 1998 and 1999 fiscal
years, respectively.
The proposed gap-closing actions in the Financial Plan for the
1996 through 1999 fiscal years include (i) a reduction in spending for
entitlements of between $700 million and $815 million in each of the 1996
through 1999 fiscal years, primarily affecting public assistance and Medicaid
payments by the City; (ii) expenditure reductions in agencies totalling
between $1.0 billion and $1.4 billion in each of the 1996 through 1999 fiscal
years; (iii) productivity, efficiency and labor savings, totalling $600
million, $400 million and $200 million in each of the 1996, 1997 and 1998
fiscal years, respectively; (iv) $45 million in projected savings as a result
of proposed tort reform in each of the 1996 through 1999 fiscal years; (v)
between $179 million and $237 million of increased revenues resulting from
certain revenue initiatives in each of the 1996 through 1999 fiscal years;
(vi) a proposed phase-in of the estimated $300 million annual pension funding
cost due to revisions resulting from an actuarial audit of the City pension
systems, which would reduce such costs by between $142 million and $255
million in each of the 1996 through 1999 fiscal years; and (vii) $250 million
of proposed additional State aid and $50 million of proposed additional
Federal aid in each of the 1996 through 1999 fiscal years.
The proposed agency spending reductions include the reduction of
City personnel through attrition, government efficiency initiatives,
procurement initiatives and labor productivity initiatives, a substantial part
of which are subject to negotiation with the City's municipal unions.
In addition to the gap-closing program set forth in the Financial
Plan, the City has described an additional gap-closing program for the 1997,
1998 and 1999 fiscal years to offset the remaining $592 million, $1.1 billion
and $1.3 billion projected budget gaps for the 1997, 1998 and 1999 fiscal
years, respectively.
The proposals contained in the Financial Plan to close the
projected budget gaps, for the 1996 and subsequent fiscal years have caused
substantial public debate, and it can be expected that the public debate
relating to the 1996 fiscal year budget will continue through the time the
budget is scheduled to be adopted in June 1995.
The City's capital plan for fiscal years 1996 through 1999
contemplates the issuance of $8.4 billion of general obligation bonds to make
capital investments.
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'
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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 and 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 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 in 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 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
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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 Municipal
Assistance Corporation for the City of New York ("MAC"), Office of the State
Deputy Comptroller ("OSDC"), 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 future to meet the costs of
its expenditure increases and to provide necessary services. It is reasonable
to expect that such reports and statements will continue to be issued and to
engender public comment.
On May 16, 1995, the City Comptroller issued a report on the
secondary effects on the City budget of proposed cuts in City and State
spending outlined in the Financial Plan. The report noted that the savings
projected in the Financial Plan from the proposed spending cuts assume that
people deprived of one service will not require another, possibly more
expensive, service. For example, the report noted that, depending on
behavioral changes by institutions and individuals as a result of such
proposals, proposed reductions in home health care could be offset by
increased utilization of nursing homes or hospitals; proposed reductions in
foster boarding care through voluntary agencies and day care could be offset
by increased costs in foster care; proposed reductions in State mental health
facilities and community mental health programs will result in a greater
number of
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patients in HHC hospitals; proposed reductions in rent supplement payments and
home relief could be offset by increased costs for homeless shelters; and
proposed reductions in Medicaid spending, will result in the loss of between
34,000 and 61,000 jobs and $270 million in tax revenues, as well as greater
welfare costs for the increased number of unemployed. The report noted that
the City's current fiscal problems are as serious as those which the City
faced in the mid-1970s, and may be more difficult to solve, since the City's
economy remains weak and the State and Federal governments are reducing
support for the City.
On March 7, 1995, the City Comptroller issued a report on the
Financial Plan submitted to the Control Board in February, 1995 (the "February
Financial Plan"), which concluded that the budget gap for the 1996 fiscal
year, before implementation of the gap- closing actions proposed in the
February Financial Plan, may be between $338 million and $538 million greater
than set forth in the February Financial Plan.
With respect to the City's $2.7 billion gap-closing program for
the 1996 fiscal year, the report noted that a substantial number of the
proposed actions are beyond the control of the City, including proposed State
aid and mandate relief, proposed Federal aid, and proposed productivity
efficiencies and labor initiatives to be negotiated with the City's labor
unions. The report noted that portions of the Governor's entitlement relief
proposals face opposition in the State Assembly; and that certain proposals
may require Federal legislative action or waivers. In addition, the report
noted the possible need for the City to close a substantial budget deficit at
HHC resulting from anticipated reductions in Medicaid revenues, depending on
the results of the State budget and the preparation by HHC of a plan to
implement such reductions. The report also noted that the BOE needs to
identify approximately $255 million in additional gap-closing initiatives for
the 1996 fiscal year and $690 million and $765 million of savings initiatives
in the 1997 fiscal year and 1998 fiscal year, respectively, a substantial
portion of which require State action. The report concluded that, with actions
still to be taken on the Federal and State budgets, the proposed budget for
the 1996 fiscal year is subject to significant revision.
In early December 1994, the City Comptroller issued a report which
noted that the City is currently seeking to develop and implement plans which
will satisfy the Federal Environmental Protection Agency that the water
supplied by the City watershed areas does not need to be filtered. The City
Comptroller noted that, if the City is ordered to build filtration plants,
they could cost as much as $4.57 billion to construct, with annual debt
service and operating costs of more than $500 million, leading to a water rate
increase of 45%.
On March 17, 1995, the staff of the Control Board issued a report
reviewing the February Financial Plan. With respect to the 1995 fiscal year,
the report noted that the City must still achieve a number of ambitious
gap-closing actions within a limited time frame, including additional work
force reductions and the receipt of $120 million from the sale of certain
upstate jails. In addition, the report noted that there were risks to the 1995
fiscal year of $209 million, primarily as a result of possible overspending at
the BOE and the
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inability of the BOE to implement proposed actions to reduce the budget gap.
With respect to the 1996 through 1998 fiscal years, the report identified
risks of $486 million, $897 million and $1.2 billion, respectively. In
addition, the report noted that the February Financial Plan reflected
substantial initiatives which are dependent upon actions outside the City's
control, including (i) initiatives contained in the State Executive Budget of
approximately $800 million in the 1996 fiscal year; and (ii) proposed
productivity efficiencies and labor initiatives to be negotiated with the
City's unions totaling $600 million, $400 million and $200 million in the 1996
through 1998 fiscal years, respectively. Moreover, the report noted that
expenditures for the City are projected to exceed the rate of inflation by the
1998 fiscal year, while projected revenues are unable to maintain growth at
the rate of inflation, which opens a gap between revenues and expenditures
beginning in the 1997 fiscal year, even assuming successful implementation of
the $2.7 billion gap-closing program for the 1996 fiscal year. The report
noted that the City's mature local economy cannot be expected to generate
significant growth until the City's competitive position is gradually repaired
through the comparative slow growth in rents, taxes and the cost of living in
general.
On March 21, 1995, OSDC issued a report reviewing the February
Financial Plan for fiscal years 1996 through 1998. The report noted that the
$2.7 billion budget gap projected by the City for the 1996 fiscal year is the
largest gap, both in absolute terms and as a percent of City-fund revenues,
faced by the City in at least 15 years. In addition, the report noted that the
projected budget gaps could be greater than forecast by the City by $288
million, $318 million and $247 million in the 1996 through 1998 fiscal years,
respectively, primarily due to uncertainty concerning anticipated health
insurance savings and overtime costs in the uniformed agencies, as well as
slightly lower than projected tax revenues. The report identified a number of
additional risks that could raise the projected budget gaps by another $382
million, $682 million and $715 million for the 1996 through 1998 fiscal years,
respectively. These risks include the expiration of the 14% personal income
tax surcharge which the February Financial Plan assumes will be extended by
the State, unfunded liabilities at BOE, and the potential for higher pension
costs. The report noted that these risks could be partially offset by annual
savings of $150 million from overestimating prior years' expense.
With respect to the City's proposed $2.7 billion gap-closing
program for the 1996 fiscal year, the report noted that it relies to a very
large degree on the cooperation of the Federal and State governments and the
municipal unions, and that the City has direct control of less than $500
million of the total gap-closing measures. The gap-closing plan specifically
assumes (i) an increase in the Federal Medicaid reimbursement rate, reducing
the City's costs by $123 million; (ii) that the State budget will include
initiatives worth approximately $800 million that will help the City achieve
savings in its Medicaid and public assistance programs, which are facing heavy
opposition in the State Assembly; (iii) that the BOE will reduce projected
City-funded spending by $500 million; and (iv) that the City's municipal
unions will provide $600 million in savings from negotiations. The report
noted that the current economic outlook for the City is weakened by the sharp
downturn in the
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bond market in 1994 and by the Federal Reserve's policy of raising interest
rates to dampen national economic growth. The report concluded that if the
gap-closing program for the 1996 fiscal year is successfully implemented it
would greatly reduce the cost of City government; nonetheless, projected
spending would still outpace the projected growth in revenues, indicating
continued structural imbalance in the 1997 and 1998 fiscal years.
A substantial portion of the capital improvements in the City are
financed by indebtedness issued by MAC. MAC was organized in 1975 to provide
financing assistance to 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 the
State or the City. As of September 30, 1994, MAC had outstanding an aggregate
of approximately $4.885 billion of its bonds.
On July 10, 1995, Standard & Poor's reduced its rating of the
City's general obligation bonds from A- to BBB+. The City's general obligation
bonds are rated Baa1 by Moody's. 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.
(2) 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
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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
economies. 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 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
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
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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. 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, respectively. 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 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 the 1995-96
fiscal year included significant savings from Medicaid cost containment
measures and welfare reform and substantial
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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 tax payers 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 pre-school 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 slower 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
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expected did not occur before April 1, 1995. 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 prior 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 reduced its ratings of 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 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
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obligation indebtedness or otherwise for debt service. This assistance is
expected to continue to be required in future years.
The Metropolitan Transit Authority ("MTA"), a State agency,
oversees the operation of the City's subway and bus system by its affiliates,
the New York City Transit Authority and Bronx Surface Transit Operating
Authority (collectively, the "TA") and commuter rail and bus lines serving the
New York metropolitan area. Fare revenues from such operations have been
insufficient to meet expenditures, and 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 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 "1992-96 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 system 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 a
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
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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.
(3) 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 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 Supreme 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 state of incorporation of the intermediary bank, broker or
depository. New York and Delaware have executed a settlement agreement which
provides for payments 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 provides for
aggregate payments by New York of $23 million, payable over five 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
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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
retroactive application of State regulations recalibrating nursing home
Medicaid rates; and (17) a challenge by AT&T to New York Tax Law ss.
186-a(2-a) as violative of the commerce clause of the U.S. Constitution.
General Considerations
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with their
terms and the proceeds from such events will be distributed to Unit holders
and will not be reinvested, no assurance can be given that the Trust will
retain for any length of time its present size and composition. The inclusion
of unrated Bonds in certain Series of the Trust may result in less flexibility
in their disposal and a loss to the Trust upon their disposition. Except as
described in footnotes to "Summary of Essential Financial Information" in Part
I of this Prospectus, interest accrues to the benefit of Unitholders
commencing with the expected date of settlement for purchase of the Units.
Neither the Sponsors nor the Trustee shall be liable in any way for any
default, failure or defect in any Security.
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The following paragraphs discuss the characteristics of the Bonds
in the Trust and of certain types of issuers of the Bonds in the Trust. See
"Special Factors Concerning the Portfolio" in Part I of this Prospectus. These
paragraphs discuss, among other things, certain circumstances which may
adversely affect the ability of such issuers to make payments of principal of
and interest on Bonds held in the portfolio of the Trust or which may
adversely affect the ratings of such Bonds. Because of the insurance obtained
by the Sponsors or by the issuers, however, such changes should not adversely
affect the Trust's ultimate receipt of principal and interest, the Standard &
Poor's or Moody's ratings of the Bonds in the portfolio, or the Standard &
Poor's rating of the Units of the Trust. An investment in Units of the Trust
should be made with an understanding of the risks that such an investment may
entail, certain of which are described below. Unit holders may obtain
additional information concerning a particular Bond by requesting an official
statement from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest. The
taxing power of any governmental entity may be limited, however, by provisions
of state constitutions or laws, and an entity's credit will depend on many
factors, including potential erosion of the tax base due to population
declines, natural disasters, declines in the state's industrial base or
inability to attract new industries; economic limits on the ability to tax
without eroding the tax base; state legislative proposals or voter initiatives
to limit ad valorem real property taxes; and the extent to which the entity
relies on Federal or state aid, access to capital markets or other factors
beyond the state or entity's control.
Appropriations Bonds
Many state or local governmental entities enter into lease
purchase obligations as a means for financing the acquisition of capital
projects (e.g., buildings or equipment, among other things). Such obligations
are often made subject to annual appropriations. Certain Series of the Trust
may contain Bonds in the portfolio that are, in whole or in part, subject to
and dependent upon (1) the governmental entity making appropriations from time
to time or (2) the continued existence of special temporary taxes which
require legislative action for their reimposition. The availability of any
appropriation is subject to the willingness of the governmental entity to
continue to make such special appropriations or to reimpose such special
taxes. The obligation to make lease payments exists only to the extent of the
monies available to the governmental entity therefor, and no liability is
incurred by the governmental entity beyond the monies so appropriated. Subject
to the foregoing, once an annual appropriation is made, the governmental
entity's obligation to make lease rental payments is absolute and
unconditional without setoff or counterclaim, regardless of contingencies,
whether or not a given project is completed or used by the governmental entity
and notwithstanding any circumstances or occurrences which might arise. In the
event of non-appropriation, certificate holders' or bondowners' sole remedy
(absent credit
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enhancement) generally is limited to repossession of the collateral for resale
or releasing, and the obligation of the governmental lessee is not backed by a
pledge of the general credit of the governmental lessee. In the event of
non-appropriation, the Sponsors may instruct the Trustee to sell such Bonds.
Moral Obligation Bonds. Certain Series of the Trust may contain
Bonds in the portfolio that are secured by pledged revenues and additionally
by the so-called "moral obligation" of the State or a local governmental body.
Should the pledged revenues prove insufficient, the payment of such Bonds is
not a legal obligation of the State or local government, and is subject to its
willingness to appropriate funds therefor.
Revenue Bonds
Mortgage Revenue Bonds. Certain Bonds may be "mortgage revenue
bonds". Under the Internal Revenue Code of 1986, as amended (the "Code") (and
under similar provisions of the prior tax law), "mortgage revenue bonds" are
obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting, certification, and public hearing requirements. There
can be no assurance that additional federal legislation will not be introduced
or that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bond proceeds is not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Original Issue Discount and Zero
Coupon Bonds").
Housing Bonds. Some of the aggregate principal amount of Bonds may
consist of obligations of state and local housing authorities whose revenues
are primarily derived from mortgage loans to housing projects for low to
moderate income families. Since such obligations are not general obligations
of a particular state or municipality and are generally payable primarily or
solely from rents and other fees, adverse economic developments including
failure or inability to increase rentals, fluctuations of interest rates and
increasing construction and operating costs may reduce revenues available to
pay existing obligations.
The housing bonds in the Trust, despite their optional redemption
provisions which generally do not take effect until ten years after the
original issuance dates of such Bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period.
In recent periods of declining interest rates there have been increased
redemptions of housing bonds pursuant to such redemption provisions. In
addition, the housing bonds in the Trust are also subject to mandatory
redemption in part at par at any time that voluntary or involuntary
prepayments of principal on the underlying mortgages are made to the trustee
for
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such Bonds or that the mortgages are sold by the bond issuer. Prepayments of
principal tend to be greater in periods of declining interest rates; it is
possible that such prepayments could be sufficient to cause a housing bold to
be redeemed substantially prior to its stated maturity date, earliest call
date or sinking fund redemption date.
Public Power Revenue Bonds. General problems of the electric
utility industry include difficulty in financing large construction programs
during an inflationary period; restrictions on operations and increased costs
and delays attributable to environmental considerations; the difficulty of the
capital markets in absorbing utility debt and equity securities; the
availability of fuel for electric generation at reasonable prices, including
among other considerations the potential rise in fuel costs and the costs
associated with conversion to alternate fuel sources such as coal; technical
cost factors and other problems associated with construction, licensing,
regulation and operation of nuclear facilities for electric generation,
including among other considerations the problems associated with the use of
radioactive materials and the disposal of radioactive waste; and the effects
of energy conservation. Certain Bonds may have been issued in connection with
the financing of nuclear generating facilities. In view of recent developments
in connection with such facilities, legislative and administrative actions
have been taken and proposed relating to the development and operation of
nuclear generating facilities. The Sponsors are unable to predict whether any
such actions or whether any such proposals or litigation, if enacted or
instituted, will have an adverse impact on the revenues available to pay the
debt service on the Bonds in the portfolio issued to finance such nuclear
projects.
Each of the problems referred to above could adversely affect the
ability of the issuers of public power revenue bonds to make payments of
principal of and/or interest on such bonds. Certain municipal utilities or
agencies may have entered into contractual arrangements with investor-owned
utilities and large industrial users and consequently may be dependent in
varying degrees on the performance of such contracts for payment of bond debt
service.
Health Care Revenue Bonds. Some of the aggregate principal amount
of Bonds may consist of hospital revenue bonds. Ratings of hospital bonds are
often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary
considerably from such projections. A hospital's gross receipts and net income
will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to
provide them, physicians' confidence in hospital management capability,
economic developments in the service area, competition, actions by insurers
and governmental agencies and the increased cost and possible unavailability
of malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
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Proposals for significant changes in the health care system and
the present programs for third party payment of health care costs are under
consideration in Congress and many states. Future legislation or changes in
the areas noted above, among other things, would affect all hospitals to
varying degrees and, accordingly, any adverse change in these areas may affect
the ability of such issuers to make payment of principal and interest on such
bonds.
Higher Education Revenue Bonds. Higher education revenue bonds
include debt of state and private colleges, universities and systems, and
parental and student loan obligations. The ability of universities and
colleges to meet their obligations is dependent upon various factors,
including the revenues, costs and enrollment levels of the institutions. In
addition, their ability may be affected by declines in Federal, state and
alumni financial support, fluctuations in interest rates and construction
costs, increased maintenance and energy costs, failure or inability to raise
tuition or room charges and adverse results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution
control facilities category include securities issued on behalf of a private
corporation,* including utilities, to provide facilities for the treatment of
air, water and solid waste pollution. Repayment of these bonds is dependent
upon income from the specific pollution control facility and/or the financial
condition of the project corporation. See also "Private Activity
Bonds."
Other Utility Revenue Bonds. Bonds in this category include
securities issued to finance natural gas supply, distribution and transmission
facilities, public water supply, treatment and distribution facilities, and
sewage collection, treatment and disposal facilities. Repayment of these bonds
is dependent primarily on revenues derived from the billing of residential,
commercial and industrial customers for utility services, as well as, in some
instances, connection fees and hook-up charges. Such utility revenue bonds may
be adversely affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this
category include securities issued to finance facilities for removal and
disposal of solid municipal waste. Repayment of these bonds is dependent on
factors which may include revenues from appropriations from a governmental
entity, the financial condition of the private project corporation and
revenues derived from the collection of charges for disposal of solid waste.
Repayment of resource recovery bonds may also be dependent to various degrees
on revenues from the sale of electric energy or steam. Bonds in this category
may be subject to
- --------
* For the purposes of the description of users of facilities, all
references to "corporations" shall be deemed to include any other
nongovernmental person or entity.
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mandatory redemption in the event of project non-completion, if the project is
rendered uneconomical or if it is considered an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds
issued for airport facilities, bridges, turnpikes, port authorities, railroad
systems or mass transit systems. Generally, airport facility revenue bonds are
payable from and secured by the revenues derived from the ownership and
operation of a particular airport. Payment on other transportation bonds is
often dependent primarily or solely on revenues from financed facilities,
including user fees, charges, tolls and rents. Such revenues may be adversely
affected by increased construction and maintenance costs or taxes, decreased
use, competition from alternative facilities, scarcity of fuel, reduction or
loss of rents or the impact of environmental considerations. Other
transportation bonds may be dependent primarily or solely on Federal, state or
local assistance including motor fuel and motor vehicle taxes, fees and
licenses and, therefore, may be subject to fluctuations in such assistance.
Private Activity Bonds. The portfolio of the Trust may contain
other Bonds that 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 that a private entity may have
a right to use or manage to some degree, such as an airport, seaport facility
or water system and (2) Bonds for facilities deemed owned or beneficially
owned by a private entity but which were financed with tax-exempt bonds of a
public issuer, such as a manufacturing facility or a pollution control
facility. In the case of the first type, bonds are generally payable from a
designated source of revenues derived from the facility and may further
receive the benefit of the legal or moral obligation of one or more political
subdivisions or taxing jurisdictions. In most cases of project financing of
the first type, receipts or revenues of the Issuer are derived from the
project or the operator or from the unexpended proceeds of the bonds. Such
revenues include user fees, service charges, rental and lease payments, and
mortgage and other loan payments.
The second type of issue will generally finance projects which are
owned by or for the benefit of, and are operated by, corporate entities.
Ordinarily, such private activity bonds are not general obligations of
governmental entities and are not backed by the taxing power of such entities,
and are solely dependent upon the creditworthiness of the corporate user of
the project or corporate guarantor.
The private activity bonds in the Trust have generally been issued
under bond resolutions, agreements or trust indentures pursuant to which the
revenues and receipts payable under the issuer's arrangements with the users
or the corporate operator of a particular project have been assigned and
pledged to the holders of the private activity bonds. In certain cases a
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition,
private activity bonds are frequently directly guaranteed by the corporate
operator of the project or by another affiliated company.
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Special Tax Revenue Bonds. Bonds in this category are bonds
secured primarily or solely by receipt of certain state or local taxes,
including sales and use taxes or excise taxes. Consequently, such bonds may be
subject to fluctuations in the collection of such taxes. Such bonds do not
include tax increment bonds or special assessment bonds.
Other Revenue Bonds. Certain Series of the Trust may also contain
revenue bonds which are payable from and secured primarily or solely by
revenues from the ownership and operation of particular facilities, such as
correctional facilities, parking facilities, convention centers, arenas,
museums and other facilities owned or used by a charitable entity. Payment on
bonds related to such facilities is, therefore, primarily or solely dependent
on revenues from such projects, including user fees, charges and rents. Such
revenues may be affected adversely by increased construction and maintenance
costs or taxes, decreased use, competition from alternative facilities,
reduction or loss of rents or the impact of environmental considerations.
Certain Series of the Trust may also contain bonds that are
secured by direct obligations of the U.S. Government or, in some cases,
obligations guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. In a few isolated instances to date, bonds which were thought
to be escrowed to maturity have been called for redemption prior to maturity.
Puerto Rico Bonds
Certain of the Bonds in the Trust may be general obligations
and/or revenue bonds of issuers located in Puerto Rico which will be affected
by general economic conditions in Puerto Rico. The economy of Puerto Rico is
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). Real personal income showed a small
decrease in fiscal 1991 principally as a result of a decline in real transfer
payments. 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
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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 of borrowing during the period. Real gross product
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 period showed a decrease of 1.4% over
fiscal 1992. Growth in the Puerto Rico economy in fiscal 1994 and 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.
Original Issue Discount Bonds and Zero Coupon Bonds
Certain Series of the Trust may contain original issue discount
bonds and/or zero coupon bonds. Original issue discount bonds are bonds that
were originally issued at less than the market interest rate. Zero coupon
bonds are original issue discount bonds that do not provide for the payment of
current interest. For Federal income tax purposes, original issue discount on
such bonds must be amortized over the term of such bonds. On sale or
redemption, the excess of (1) the amount realized (other than amounts treated
as tax-exempt income as described below), over (2) the tax basis of such bonds
(properly adjusted, in the circumstances described below, for amortization of
original issue discount) will be treated as taxable income or loss. See "The
Trust--Tax Status." The Code requires holders of tax-exempt obligations issued
with original issue discount, such as the Trust, to accrue tax-exempt original
issue discount by using the constant interest method provided for the holders
of taxable obligations. In addition, the Code provides that the basis of a
tax-exempt obligation is increased by the amount of accrued tax-exempt
original issue discount. These provisions are applicable to obligations issued
after September 3, 1982 and acquired after March 1, 1984. The Trust's tax
basis in a Bond is increased by any accrued original issue discount as is a
Unit holder's tax basis in his Units. For Bonds issued after June 9, 1980 that
are redeemed prior to maturity, the difference between the Trust's basis, as
adjusted, and the amount received will be taxable gain or loss to the Unit
holders. All or a portion of any such gain may be taxable as ordinary income.
There can be no assurance that additional Federal legislation will
not be enacted or that existing legislation will not be amended hereafter with
the effect that interest
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<PAGE>
on bonds becomes subject to Federal income taxation. If the interest on the
Bonds should ultimately be deemed to be taxable, the Sponsors may instruct the
Trustee to sell them, and, since they would be sold as taxable securities, it
is expected that they would have to be sold at a substantial discount from
current market prices.
Bonds Subject to Sinking Fund Provisions
Most of the Bonds in the Trust are subject to redemption prior to
their stated maturity date pursuant to sinking fund or call provisions. A
sinking fund is a reserve fund accumulated over a period of time for
retirement of debt. Sinking fund provisions are designed to redeem a
significant portion of an issue gradually over the life of the issue.
Obligations to be redeemed are generally chosen by lot. A callable debt
obligation is one which is subject to redemption prior to maturity at the
option of the issuer. To the extent that obligations in the Trust have a bid
site valuation higher than their par value, redemption of such obligations at
par would result in a loss of capital to a purchaser of Units at the public
offering price. The estimated current return of the Units might also be
adversely affected if the return on the retired Bonds is greater than the
average return on the Bonds in the Trust. In general, call provisions are more
likely to be exercised when the offering side valuation is at a premium over
par than when it is at a discount from par. See "Special Factors Concerning
the Portfolio" in Part I of this Prospectus for information for the number of
bonds in the Portfolio that are original issue discount and zero coupon bonds
and "Portfolio Information" in Part I of this Prospectus for a breakdown of
the percentage of Bonds in the Trust with offering side valuations at a
premium, discount or at par. See also "Estimated Current Return and Estimated
Long Term Return". The portfolio and "Summary of Essential Financial
Information" in Part I of this Prospectus contain a listing of the sinking
fund and call provisions, if any, with respect to each of the Bonds therein.
Other Matters
An amendment to the Federal Bankruptcy Act relating to the
adjustment of indebtedness owed by any political subdivision or public agency
or instrumentality of any state, including municipalities, became effective in
1979. Among other things, this amendment facilitates the use of proceedings
under the Federal Bankruptcy Act by any such entity to restructure or
otherwise alter the terms of its obligations, including those of the type
comprising the Trust's portfolio. The Sponsors are unable to predict what
effect, if any, this legislation will have on the Trust.
To the best knowledge of the Sponsors, there is no litigation
pending as of the date hereof in respect of any Securities which might
reasonably be expected to have a material adverse effect on the Trust, unless
otherwise stated in Part I of this Prospectus. At any time, however,
litigation may be initiated on a variety of grounds with respect to Securities
in the Trust. Such litigation as, for example, suits challenging the issuance
of pollution control revenue bonds under recently enacted environmental
protection statutes, may affect the validity of such Securities or the
tax-free nature of the interest thereon. While
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the outcome of such litigation can never be entirely predicted with certainty,
bond counsel have given opinions to the issuing authorities of each Bond on
the date of issuance to the effect that such Securities have been validly
issued and that the interest thereon is exempt from regular Federal income
tax. In addition, other litigation or other factors may arise from time to
time which potentially may impair the ability of issuers to meet obligations
undertaken with respect to Securities.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units is based on the aggregate
bid price of the Bonds in the Trust (as determined by the Evaluator) plus a
sales charge determined in accordance with the schedule set forth below, which
is based upon the maturities of each Bond in the Trust. The Sponsors have
implemented this variable format as a more equitable method of assessing the
sales charge for secondary market purchases. For the purpose of computing the
sales charge, Bonds are deemed to mature on their expressed maturity dates,
unless the Evaluator evaluates the price of the Bonds to a different date,
such as a call date or a mandatory tender date, in which case the maturity
will be deemed to be such other date. This method of computing the sales
charge will apply different sales charge rates to each Bond in the Trust
depending on the maturity of each Bond in accordance with the following
schedule:
Secondary Market Period
Sales Charge
Percentage of Percentage of Net
Years to Maturity Per Bond Public Offering Price Amount Invested
0 Months to 2 Years 1.0% 1.010%
2 but less than 3 2.0% 2.091%
3 but less than 4 3.0% 3.093%
4 but less than 8 4.0% 4.167%
8 but less than 12 5.0% 5.363%
12 but less than 15 5.5% 5.820%
15 or more 5.9% 6.270%
A minimum sales charge of 1.0% of the Public Offering Price is
applied to all secondary market unit purchases. There is no reduction of the
sales charge for volume purchases in secondary market transactions.
A proportionate share of accrued and undistributed interest on the
Securities at the date of delivery of the Units to the purchaser is also added
to the Public Offering Price.
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<PAGE>
Unless Securities are in default in payment of principal or
interest or in significant risk of such default, the Evaluator will not
attribute any value to the Units due to the insurance obtained by the Trust.
See also "Rights of Unit Holders--Certificates" and "Rights of Unit
Holders--Redemption" for information relating to redemption of Units. The
Evaluator will consider in its evaluation of Defaulted Bonds which are covered
by insurance obtained by the Trust the value of the insurance guaranteeing
interest and principal payments as well as the market value of the Securities
and the market value of similar securities of issuers whose securities, if
identifiable, carry identical interest rates and maturities and are of
creditworthiness comparable to the issuer prior to the default or risk of
default. If such other securities are not identifiable, the Evaluator will
compare prices of securities with substantially identical interest rates and
maturities and of a creditworthiness of minimum investment grade. As to Series
18 and subsequent Series, the value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the
exercise of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance and the related
custodial fee) and (ii) the market value of such Defaulted Bonds not covered
by Permanent Insurance. In any case the Evaluator will consider the ability of
the Insurer to meet its commitments under the Trust's insurance policy and, in
the case of Series 18 and subsequent Series, MBIA's or MBIAC's commitment to
issue Permanent Insurance. For a description of the circumstances under which
a full or partial suspension of the right of Unit holders to redeem their
Units may occur, see "Rights of Unit Holders--Redemption."
It is the present intention of the Trustee (and, in the case of
Series 18 and subsequent Series, assuming the Trustee does not exercise the
right to obtain Permanent Insurance on any Defaulted Bonds), so long as the
Trust contains either some Bonds not in default or any Pre-insured Bonds, not
to sell Defaulted Bonds to effect redemptions or for any other reason but
rather to retain them in the portfolio BECAUSE VALUE ATTRIBUTABLE TO THE
INSURANCE OBTAINED BY THE TRUST CANNOT BE REALIZED UPON SALE. Insurance
obtained by the issuer of a Pre-insured Bond, or by some other party, is
effective so long as such Pre-insured Bond is outstanding and the insurer of
such Bond continues to fulfill its obligations. Therefore, any such insurance
may be considered to represent an element of market value in regard to the
Pre-insured Bond, but the exact effect, if any, of this insurance on such
market value cannot be predicted. Regardless of whether the insurer of a
Pre-insured Bond continues to fulfill its obligations, however, such Bond will
in any case continue to be insured under the policy obtained by the Trust from
the Insurer as long as the Bond is held in the Trust.
Certain commercial banks are making Units of the Trust available
to their customers on an agency basis. A portion of the sales charge discussed
above is retained by or remitted to the banks. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the
Glass-Steagall Act does permit certain agency transactions, and banking
regulators have not indicated that these particular agency transactions are
not permitted under such Act.
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<PAGE>
Market for Units
Although they are not obligated to do so, the Sponsors have
maintained and intend to continue to maintain a market for the Units and to
continuously offer to purchase Units at prices based on the aggregate bid
price of the Securities. The Sponsors' Repurchase Price shall be not less than
the Redemption Price plus accrued interest through the expected date of
settlement. See "Rights of Unit Holders--Redemption--Computation of Redemption
Price per Unit." There is no sales charge incurred when a Unit holder sells
Units back to the Sponsors. Any Units repurchased by the Sponsors may be
reoffered to the public by the Sponsors at the Public Offering Price at the
time, plus accrued interest.
If the supply of Units of any Series exceeds demand, or for some
other business reason, the Sponsors may discontinue purchases of Units of such
Series at prices based on the aggregate bid price of the Securities. The
Sponsors do not in any way guarantee the enforceability, marketability or
price of any Security in the portfolio or of the Units of the Trust. In the
event that a market is not maintained for the Units, a Unit holder desiring to
dispose of his Units may be able to do so only by tendering such Units to the
Trustee for redemption at the Redemption Price, which is based upon the
aggregate bid price of the underlying Securities. The aggregate bid price of
the Securities in the Trust may be expected to be less than the aggregate
offering price. If a Unit holder wishes to dispose of his Units, he should
inquire of the Sponsors as to current market prices prior to making a tender
for redemption to the Trustee. See "Rights of Unit Holders--Redemption" and
"Sponsors."
Employees (and their immediate families) of the Sponsors may,
pursuant to employee benefit arrangements, purchase Units of the Trust at a
price equal to the bid side evaluation of the underlying securities in the
Trust, divided by the number of Units outstanding. Such arrangements result in
less selling effort and selling expenses than sales to employee groups of other
companies. Resales or transfers of Units purchased under the employee benefit
arrangements may only be made through the Sponsors' secondary market, so long as
it is being maintained.
Distribution of Units
The Sponsors are the sole underwriters of the Units. It is the
Sponsors' intention to effect a public distribution of the Units solely
through their own organizations. Units may, however, be sold to dealers who
are members of the National Association of Securities Dealers, Inc. at a
discount. Such discount is subject to change from time to time by the Agent
for the Sponsors. Sales will be made only with respect to whole Units, and the
Sponsors reserve the right to reject, in whole or in part, any order for the
purchase of Units. It is the Sponsors' intention to continue to qualify Units
of the Trust for sale where such qualification is necessary. In maintaining a
market for the Units (see "Public Offering--Market for Units"), the Sponsors
will realize profits or sustain losses in the amount of any
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difference between the price at which they buy Units and the price at which
they resell such Units (the Public Offering Price described in the currently
effective Prospectus which includes the sales charge set forth in Part I of
this Prospectus under "Summary of Essential Financial Information") or the
price at which they may redeem such Units (based upon the aggregate bid side
evaluation of the Securities), as the case may be, and to the extent that they
earn sales charges on resales.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO
UNIT HOLDERS
Units of the Trust are offered on a "dollar price" basis. In
contrast, tax-exempt bonds customarily are offered on a "yield price" basis.
Therefore, the rate of return on each Unit is measured in terms of both
Estimated Current Return and Estimated Long- Term Return. Estimated Current
Return based on the Public Offering Price per Unit and Estimated Long-Term
Return per Unit and information regarding estimated monthly and semi-annual
distributions of interest to Unit holders are set forth under "Summary of
Essential Financial Information" in Part I of this Prospectus.
Estimated Current Return is computed by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. Estimated Net
Interest Income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator and with principal prepayment, redemption, maturity,
exchange or sale of Bonds. The Public Offering Price per Unit will vary with
changes in the offering price of the Bonds. Estimated Current Return takes
into account only the interest payable on the Bonds and does not involve a
computation of yield to maturity or to an earlier redemption date nor does it
reflect any amortization of premium or discount from par value in the Bond's
purchase price. Moreover, because interest rates on bonds purchased at a
premium are generally higher than current interest rates on newly issued bonds
of a similar type with comparable ratings, the Estimated Current Return per
Unit may be affected adversely if such Bonds are redeemed prior to their
maturity. Therefore, there is no assurance that the Estimated Current Return
as set forth under "Summary of Essential Financial Information" in Part I of
this Prospectus will be realized in the future.
Estimated Long-Term Return is calculated using a formula that (i)
takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (taking into account the amortization
of premiums and the accretion of discounts) and estimated retirements of all
the Bonds in the portfolio and (ii) takes into account the expenses and sales
charge associated with each Unit of the Trust. The Estimated Long-Term Return
assumes that each Bond is retired on its pricing life date (i.e., that date
which produces the lowest dollar price when yield price calculations are done
for each optional call date and the maturity date of a callable security). If
the Bond is retired on any optional call or maturity date other than the
pricing life date, the yield to the holder of that Bond will be greater than
the initial quoted yield. Since the market values and estimated retirements of
the Bonds, the expenses of the Trust and the Net Annual Interest Income and
Public Offering Price per Unit
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<PAGE>
may change, there is no assurance that the Estimated Long-Term Return as set
forth under "Summary of Essential Financial Information" in Part I of this
Prospectus will be realized in the future.
INSURANCE ON THE BONDS
Insurance guaranteeing the timely payment, when due, of all
principal and interest on the Bonds in the Trust has been obtained from the
Insurer by the Trust. The Insurer has issued a policy of insurance covering
each of the Bonds in the Trust, including Pre-insured Bonds. As to each Trust,
the Insurer shall not have any liability under the policy with respect to any
Bonds which do not constitute part of the Trust. In determining to insure the
Bonds, the Insurer has applied its own respective standards which generally
correspond to the standards it has established for determining the
insurability of new issues of municipal bonds.
By the terms of its policy, the Insurer unconditionally guarantees
to the Trust the payment, when due, required of the issuer of the Bonds of an
amount equal to the principal of (either at the stated maturity or by any
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on the Bonds as such payments shall become due but not paid. Except
as provided below with respect to small issue industrial development Bonds and
pollution control revenue Bonds, in the event of any acceleration of the due
date of principal by reason of mandatory or optional redemption (other than
mandatory sinking fund redemption), default or otherwise, the payments
guaranteed will be made in such amounts and at such times as would have been
due had there not been an acceleration. The Insurer will be responsible for
such payments less any amounts received by the Trust from any trustee for the
Bond issuers or from any other source. The policy issued by the Insurer does
not guarantee payment on an accelerated basis, the payment of any redemption
premium or the value of the Units. The MBIA and MBIAC policies also do not
insure against nonpayment of principal of or interest on the Bonds resulting
from the insolvency, negligence or any other act or omission of the trustee or
other paying agent for the Bonds. With respect to small issue industrial
development Bonds and pollution control revenue Bonds in Series 9 through
Series 30 and Series 31 and subsequent Series, however, MBIA and MBIAC,
respectively, guarantee the full and complete payments required to be made by
or on behalf of an issuer of such Bonds if there occurs pursuant to the terms
of the Bonds an event which results in the loss of the tax-exempt status of
interest on such Bonds, including principal, interest or premium payments
payable thereon, if any, as and when required to be made by or on behalf of
the issuer pursuant to the terms of such Bonds. No assurance can be given that
the policy issued by the Insurer would insure the payment of principal or
interest on Bonds which is not required to be paid by the issuer thereof
because the Bonds were not validly issued. At the respective times of issuance
of the Bonds, opinions relating to the validity thereof were rendered by bond
counsel to the respective issuing authorities.
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The insurance policy relating to the Trust is non-cancellable and
will continue in force so long as the Trust is in existence and the Securities
described in the policy continue to be held in and owned by the Trust. Failure
to pay premiums on the policy obtained by the Trust will not result in the
cancellation of insurance but will force the Insurer to take action against
the Trustee to recover premium payments due it. The Trustee in turn will be
entitled to recover such payments from the Trust.
The policy issued by the Insurer shall terminate as to any Bond
which has been redeemed from or sold by the Trustee on the date of such
redemption or on the settlement date of such sale, and the Insurer shall not
have any liability under the policy as to any such Bond thereafter. If the
date of such redemption or the settlement date of such sale occurs between a
record date and a date of payment of any such Bonds, any MBIA or MBIAC policy
will terminate as to such Bond on the business day next succeeding such date
of payment. The termination of a MBIA or MBIAC policy as to any Bond shall not
affect MBIA's or MBIAC's obligations regarding any other Bond in such Trust or
any other Trust which has obtained a MBIA or MBIAC insurance policy. The
policy issued by the Insurer will terminate as to all Bonds on the date on
which the last of the Bonds matures, is redeemed or is sold by the Trust.
In the case of Series 18 through 30 and Series 31 and subsequent
Series, pursuant to irrevocable commitments of MBIA and MBIAC, respectively,
the Trustee upon the sale of a Bond in the Trust has the right to obtain
permanent insurance with respect to such Bond (i.e., insurance to maturity of
the Bonds) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such Bond.
Accordingly, any Bond in such Series of the Trust is eligible to be sold on an
insured basis. It is expected that the Trustee will exercise the right to
obtain Permanent Insurance for a Bond in the Trust upon instruction from the
Sponsors only if upon such exercise the Trust would receive net proceeds (sale
of Bond proceeds less the insurance premium attributable to the Permanent
Insurance and the related custodial fee) from such sale in excess of the sale
proceeds if such Bond was sold on an uninsured basis.
The Permanent Insurance premium with respect to each Bond is
determined based upon the insurability of each Bond as of the Date of Deposit
and will not be increased or decreased for any change in the creditworthiness
of such Bond unless such Bond is in default as to payment of principal and/or
interest. In such event, the Permanent Insurance premium shall be subject to
an increase predetermined at the Date of Deposit and payable from the proceeds
of the sale of such Bond.
Except as indicated below, insurance obtained by the Trust has no
effect on the price or redemption value of Units thereof. It is the present
intention of the Evaluator to attribute a value to the insurance obtained by
the Trust (including, as to Series 18 and subsequent Series, the right to
obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units thereof only if the Bonds covered by such insurance
are in default in payment of principal or interest or, in the Sponsors'
opinion, in significant risk
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<PAGE>
of such default ("Defaulted Bonds"). The value of the insurance will be equal
to the difference between (1) the market value of a Defaulted Bond insured by
the Trust (as to Series 18 and subsequent Series, the market value of a
Defaulted Bond assuming the exercise of the right to obtain Permanent
Insurance less the insurance premium attributable to the purchase of Permanent
Insurance and the related custodial fee) and (2) the market value of similar
securities not in default or significant risk thereof (as to Series 18 and
subsequent Series, the market value of such Defaulted Bonds not covered by
Permanent Insurance). Insurance obtained by the issuer of a Bond or by parties
other than the Trust is effective so long as such Pre-insured Bond is
outstanding and the insurer of such Pre-insured Bond continues to fulfill its
obligations.
Regardless of whether the insurer of a Pre-insured Bond continues
to fulfill its obligations, however, such Bond will continue to be insured
under the policy obtained by the Trust from MBIA or MBIAC as long as the Bond
is held in the Trust. Insurance obtained by the issuer of a Bond or by other
parties may be considered to represent an element of market value in regard to
the Bonds thus insured, but the exact effect, if any, of this insurance on
such market value cannot be predicted.
In the event that interest on or principal of a Bond is due for
payment but is unpaid by reason of nonpayment by the issuer thereof, the
Insurer will make payments to its fiscal agent, as identified in the insurance
policy (the "Fiscal Agent"), equal to such unpaid amounts of principal and
interest not later than one business day after the Insurer has been notified
by the Trustee that such nonpayment has occurred (but not earlier than the
date such payment is due). The Fiscal Agent will disburse to the Trustee the
amount of principal and interest which is then due for payment but is unpaid
upon receipt by the Fiscal Agent of (1) evidence of the Trust's right to
receive payment of such principal and interest and (2) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of
such principal or interest then due for payment shall thereupon vest in the
Insurer. Upon payment by the Insurer of any principal or interest payments
with respect to any Bonds, the Insurer shall succeed to the rights of the
owner of such Bonds with respect to such payment.
National Union, which was incorporated in Pennsylvania in 1901, is
a stock insurance company which provides fire and casualty insurance and is a
wholly-owned subsidiary of American International Group, Inc.
Each insurance company constituting MBIA will be severally and not
jointly obligated under any MBIA policy obtained by the Trust in the following
respective percentages: The Aetna Casualty and Surety Company, 33%; Fireman's
Fund Insurance Company, 30%; The Travelers Indemnity Company, 15%; Aetna
Insurance Company*, 12%; and The Continental Insurance Company, 10%. As a
several obligor, each such
- --------
* Now known as Cigna Property and Casualty Company.
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insurance company will be obligated only to the extent of its percentage of
any claim under the MBIA policy and will not be obligated to pay any unpaid
obligations of any other member of MBIA. Each insurance company's
participation is backed by all of its assets. Each insurance company is,
however, a multiline insurer involved in several lines of insurance other than
municipal bond insurance, and the assets of each insurance company will also
secure all of its other insurance policy and surety bond obligations.
MBIAC is the principal operating subsidiary of MBIA Inc., a New
York Stock Exchange listed company. MBIAC is a separate and distinct entity
from MBIA Inc. MBIAC has no liability to the bondholders for the obligations
of MBIA under any policy of insurance. Neither MBIA Inc. nor its shareholders
are obligated to pay the debts of or claims against MBIAC. MBIAC is a limited
liability corporation rather than a several liability association. MBIAC is
domiciled in the State of New York and licensed to do business in all 50
states, the District of Columbia and the Commonwealth of Puerto Rico.
As of December 31, 1993, MBIAC had admitted assets of $3.1 billion
(audited), total liabilities of $2.1 billion (audited), and total capital and
surplus of $978 million (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIAC had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIAC's year end financial statements prepared in
accordance with statutory accounting practices are available from MBIAC. The
address of MBIAC is 113 King Street, Armonk, New York 10504.
No representation is made herein as to the accuracy or adequacy of
such information or as to the absence of material adverse changes in such
information subsequent to the date thereof. The Sponsors are not aware that
the information herein is inaccurate or incomplete as of the date hereof.
The contract of insurance relating to the Trust and the
negotiations in respect thereof (and, in the case of Series 18 and subsequent
Series, certain agreements relating to Permanent Insurance) represent the only
significant relationship between the Insurer and the Trust. Otherwise, neither
the Insurer nor any associate thereof has any material business relationship,
direct or indirect, with the Trust or the Sponsors, except that the Sponsors
may from time to time in the normal course of their business participate as
underwriters or as managers or as members of underwriting syndicates in the
distribution of new issues of municipal bonds for which a policy of insurance
guaranteeing the payment of interest and principal has been obtained from the
Insurer, and except that James A. Lebenthal, Chairman of the Board of
Directors of Lebenthal & Co., Inc., is a director of MBIA Inc. Although all
issues contained in the portfolio of the Trust are individually insured,
neither the Trust, the Units nor the portfolio is insured directly or
indirectly by the Insurer.
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A purpose of the insurance on the Bonds in the portfolio obtained
by the Trust is to obtain a higher yield on the Trust portfolio than would be
available if all the Securities in such portfolio had Standard & Poor's "AAA"
rating and/or Moody's "Aaa" rating but were uninsured and yet at the same time
to have the protection of insurance of payment of interest and principal on
the Securities. There is, of course, no certainty that this result will be
achieved. Any Pre-insured Bonds in the Trust (all of which are rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's, respectively) may or may not have a
higher yield than uninsured bonds rated "AAA" by Standard & Poor's and/or
"Aaa" by Moody's, respectively.
Because the Securities are insured by the Insurer as to the
payment of principal and interest, Standard & Poor's Rating group, a division
of McGraw Hill ("Standard & Poor's"), has assigned its "AAA" investment rating
to the Units of the Trust and, in the case of Series 17 and subsequent Series,
to all the Bonds, as insured, and, in the case of Series 6 and subsequent
Series, Moody's has assigned a rating of "Aaa" to all of the Bonds in the
Trust, as insured. See "Tax Exempt Bond Portfolio" in Part I of this
Prospectus. The obtaining of these ratings by the Trust should not be
construed as an approval of the offering of the Units by Standard & Poor's or
Moody's or as a guarantee of the market value of the Trust or of the Units.
These ratings are not a recommendation to buy, hold or sell and do not take
into account the extent to which Trust expenses or portfolio asset sales for
less than the Trust's acquisition price will reduce payment to the Unit
holders of the interest or principal.
TAX STATUS (See also "Tax Status" in Part I of this Prospectus)
Interest income on the Bonds contained in the Trust portfolio is,
in the opinion of bond counsel to the issuing governmental authorities, which
opinion was rendered at the time of original issuance of the Bonds, excludible
from gross income under the Internal Revenue Code of 1954, as amended (the
"1954 Code"), or the Internal Revenue Code of 1986, as amended (the "Code"),
depending upon the date of issuance of the Bonds in any particular Series. See
"The Trust--Portfolio."
Gain (or loss) realized on a sale, maturity or redemption of the
Bonds or on a sale or redemption of a Unit is, however, includible in gross
income as capital gain (or loss) for Federal, state and local income tax
purposes, assuming that the Unit is held as a capital asset. Such gain (or
loss) does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term, depending on the
holding period of the Units. Bonds selling at a market discount tend to
increase in market value as they approach maturity when the principal amount
is payable, thus increasing the potential for taxable gain (or reducing the
potential for loss) on their redemption, maturity or sale. Gain on the
disposition of a Bond purchased at a market discount generally will be treated
as ordinary income, rather than capital gain, to the extent of accrued market
discount. The deductibility of capital losses is limited to the amount of
capital gain; in addition, up to $3,000 of capital losses of non-corporate
Unit holders may be deducted against ordinary income. Since the proceeds from
sales of Bonds, under certain circumstances, may not be
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distributed pro-rata, a Unit holder's taxable income for any year may exceed
the actual cash distributions to the Unit holder in that year.
Among other things, the Code provides for the following: (1)
interest on certain private activity bonds issued after August 7, 1986 is
included in the calculation of the individual's alternative minimum tax
(currently taxed at a rate of up to 28%); none of the Bonds in the Trust is a
private activity bond, the interest on which is subject to the alternative
minimum tax; (2) interest on certain private activity bonds issued after
August 7, 1986 is included in the calculation of the corporate alternative
minimum tax and 75% of the amount by which adjusted current earnings
(including interest on all tax-exempt bonds, such as the Bonds) exceed
alternative minimum taxable income, as modified for this calculation, will be
included in alternative minimum taxable income. Interest on the Bonds is
includible in the adjusted current earnings of a corporation for purposes of
such alternative minimum tax, the Code does not otherwise require
corporations, and does not require taxpayers other than corporations,
including individuals, to treat interest on the Bonds as an item of tax
preference in computing an alternative minimum tax; (3) subject to certain
exceptions, no financial institution is allowed a deduction for that portion
of the institutions's interest expense allocable to tax-exempt interest on
tax-exempt bonds acquired after August 7, 1986; (4) the amount of the
deduction allowed to property and casualty insurance companies for
underwriting loss is decreased by an amount determined with regard to
tax-exempt interest income and the deductible portion of dividends received by
such companies; (5) all taxpayers are required to report for informational
purposes on their Federal income tax returns the amount of tax-exempt interest
they receive; (6) an issuer must meet certain requirements on a continuing
basis in order for interest on a tax-exempt bond to be tax-exempt, with
failure to meet such requirements resulting in the loss of tax exemption; and
(7) a branch profits tax on U.S. branches of foreign corporations is
implemented which, because of the manner in which the branch profits tax is
calculated, may have the effect of subjecting the U.S. branch of a foreign
corporation to Federal income tax on the interest on bonds otherwise exempt
from such tax.
The Superfund Revenue Act of 1986 (the "Superfund Act") imposes a
deductible, broad-based tax on a corporation's alternative minimum taxable
income (before net operating losses and any deduction for the tax) at a rate
of $12 per $10,000 (0.12%) of alternative minimum taxable income in excess of
$2,000,000. The tax is imposed for tax years beginning after 1986 and
beginning before 1996 and is applicable even if the corporation pays no
alternative minimum tax. For purposes of the Superfund Act, alternative
minimum taxable income includes interest on all tax-exempt bonds to the same
extent and in the same manner as the Code. The Superfund Act does not impose a
tax on taxpayers other than corporations.
Section 86 of the Code provides that a portion of social security
benefits is includible in taxable income for taxpayers whose "modified
adjusted gross income," combined with a portion of their social security
benefits, exceeds a base amount. The base amount is $25,000 for an individual,
$32,000 for a married couple filing a joint return and
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zero for married persons filing separate returns. Interest on tax-exempt bonds
is added to adjusted gross income for purposes of determining whether an
individual's income exceeds the base amount described above.
In addition, certain "S Corporations" may be subject to minimum
tax on certain passive income, including tax-exempt interest, such as interest
on the Bonds.
At the time of the original issuance of the Bonds held by the
Trust, opinions relating to the validity of the Bonds and the exemption of
interest thereon from regular Federal income tax were or (with respect to
"when, as and if issued" Bonds) were to be rendered by bond counsel to the
issuing governmental authorities. Neither the Sponsors nor their special
counsel have made any review of proceedings relating to the issuance of such
Bonds or the basis for bond counsel's opinions.
In the case of certain Bonds which may be included in the Trust,
the opinions of bond counsel indicate that, although interest on such Bonds is
generally exempt from Federal income tax, such Bonds are "industrial
development bonds" under the 1954 Code or are "private activity bonds" as that
term is defined in the Code (the following discussion also applies to Bonds
that are "industrial development bonds" as they are defined in the 1954 Code
in terms similar to those under which private activity bonds are defined in
the Code and are generally subject to the same limitations). Interest on
certain qualified small issue private activity bonds is exempt from all
present Federal income taxation only so long as the "principal user" of the
bond-financed facility and any "related person" remain within the capital
expenditure limitations imposed by Section 144(a)(4) of the Code and only so
long as the aggregate private activity bond limits of Section 144(a)(10) of
the Code (Sections 103(b)(6)(D) and 103(b)(15) of the 1954 Code, respectively)
are met. In addition, interest on private activity bonds will not be exempt
from Federal income tax for any period during which such bonds are held by a
"substantial user" of the facilities financed by the proceeds of such bonds
(or a "related person" to such a "substantial user"). Interest attributable to
such Bonds, if received by a Unit holder who is such a "substantial user" or
"related person," will be taxable (i.e., not tax-exempt) to the same extent as
if such Bonds were held directly as owner.
In addition, a Bond can lose its tax-exempt status as a result of
other subsequent but unforeseeable events such as prohibited "arbitrage"
activities by the issuer of the Bond or the failure of the Bond to continue to
satisfy the conditions required for the exemption of interest thereon from
regular federal income tax. No investigation has been made as to the current
or future owners or users of the facilities financed by the bonds, the amount
of such persons' outstanding tax-exempt private activities bonds, or the
facilities themselves, and no assurance can be given that future events will
not affect the tax-exempt status of the Bonds. Investors should consult their
tax advisors for advice with respect to the effect of these provisions on
their particular tax situation.
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Under Section 265 of the Code, if borrowed funds are used by a
Unit holder to purchase or carry Units of the Trust, interest on such
indebtedness will not be deductible for Federal income tax purposes. Under
rules used by the Internal Revenue Service, the purchase of Units may be
considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. Similar rules are
applicable for purposes of state and local taxation. Also, under Section 291
of the Code, certain financial institutions that acquired Units on or before
August 7, 1986 may be subject to a reduction in the amount of interest expense
that would otherwise be allowable as a deduction for Federal income tax
purposes. Subject to certain exceptions under Section 265 of the Code, no
deduction is allowed to a financial institution for that portion of the
institution's interest expense allocable to tax-exempt interest on Units
acquired after August 7, 1986. Investors with questions regarding this issue
should consult their tax advisors.
The Trust may contain Bonds issued with original issue discount.
The Code requires holders of tax-exempt obligations issued with original issue
discount, such as the Trust, to accrue tax-exempt original issue discount by
using the constant interest method provided for the holders of taxable
obligations and to increase the basis of a tax-exempt obligation by the amount
of accrued tax-exempt original issue discount. These provisions are applicable
to obligations issued after September 3, 1982 and acquired after March 1,
1984. The Trust's tax basis in a Bond is increased by any accrued original
issue discount as is a Unit holder's tax basis in his Units. For Bonds issued
on or after June 9, 1980 that are redeemed prior to maturity, the difference
between the Trust's basis, as adjusted, and the amount received will be
taxable gain or loss to the Unit holders.
Unit holders should consult their tax advisors with respect to the
state and local tax consequences of owning original issue discount bonds. It
is possible that, under applicable provisions governing determination of such
state and local taxes, interest on tax-exempt bonds such as any Bonds issued
with original issue discount may be deemed to be received in the year of
accrual even though there is no corresponding cash payment.
If a Unit holder's tax cost for his pro rata interest in a Bond
exceeds his pro rata interest in the Bond's face amount, the Unit holder will
be considered to have purchased his pro rata interest in the Bond at a
"premium." The Unit holder will be required to amortize any premium relating
to his pro rata interest in a Bond prior to the maturity of the Bond.
Amortization of premium on a Bond will reduce a Unit holder's tax basis for
this pro rata interest in the Bond, but will not result in any deduction from
the Unit holder's income. Thus, for example, a Unit holder who purchases a pro
rata interest in a Bond at a premium and resells it at the same price will
recognize taxable gain equal to the portion of the premium that was amortized
during the period the Unit holder is considered to have held such interest.
For obligations issued on or before September 27, 1985, bond
premium must be amortized under the method the Unit holder regularly employs
for amortizing bond
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<PAGE>
premium (assuming such method is reasonable) or, otherwise, on a straight-line
basis. Thus, if a Unit holder has previously amortized bond premium with
respect to other bonds (whether tax-exempt or taxable) on a straight-line
basis, the Unit holder may be prohibited from adopting a more favorable method
of amortizing bond premium such as a constant interest method. For obligations
issued after September 27, 1985, amortizable bond premium must be computed on
the basis of the Unit holder's yield to maturity, determined by using the Unit
holder's basis for the Bond, compounding at the close of each "accrual period"
(as defined in Section 1272(a)(5) of the Code). With respect to any tax-exempt
bond, the amount of bond premium is determined with reference to the amount of
the basis of such bond and the total amount payable at maturity or on an
earlier call date. If the amount payable on an earlier call date is used in
determining the amortizable bond premium attributable to the period before the
earlier call date, such bond shall be treated as maturing on such date for the
amount so payable and then reissued on such date for the amount so payable.
The exemption of interest on municipal obligations for Federal
income tax purposes does not necessarily result in exemption under the income
tax laws of any state or local government. Interest income derived from the
Bonds is not excluded from net income in determining New York State or New
York City franchise taxes on corporations or financial institutions. The laws
of such states and local governments vary with respect to the taxation of such
obligations.
From time to time proposals have been introduced before Congress,
the purpose of which is to restrict or eliminate the Federal income tax
exemption for interest on debt obligations similar to the Bonds in the Trust,
and it can be expected that similar proposals may be introduced in the future.
The Sponsors cannot predict whether additional legislation, if any, in respect
of the Federal income tax status of interest on debt obligations may be
enacted and what the effect of such legislation would be on Bonds in the
Trust. In addition, the enactment of a "flat tax" or other legislation that
significantly alters the federal income tax system may have a material adverse
effect on the value of Units. If the interest on any Bonds in the Trust should
ultimately be deemed to be taxable, the Sponsors may instruct the Trustee to
sell such Bonds, and, since they would be sold as taxable securities, it is
expected that they would be sold at a substantial discount from current market
prices.
In South Carolina v. Baker, the U.S. Supreme Court held that the
federal government may constitutionally require states to register bonds they
issue and subject the interest on such bonds to federal income tax if not
registered, and that there is no constitutional prohibition against the
federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the federal
government to regulate and control bonds such as the Bonds in the Trust and to
tax interest on such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the Bonds
in the Trust in accordance with Section 103 of the Code.
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RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates
executed by the Trustee and the Sponsors. The Trustee is authorized to treat
as the record owner of Units that person who is registered as such owner on
the books of the Trustee. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any
multiple thereof. A Unit holder may be required to pay $2.00 per certificate
reissued or transferred and to pay any governmental charge that may be imposed
in connection with each such transfer or interchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit holder must
furnish indemnity satisfactory to the Trustee and must pay such expenses as
the Trustee may incur. Mutilated certificates must be surrendered to the
Trustee for replacement.
Distribution of Interest and Principal
While interest will be distributed semi-annually or monthly,
depending on the method of distribution chosen, principal, including capital
gains, will be distributed only semi-annually; provided, however, that, other
than for purposes of redemption, no distribution need be made from the
Principal Account if the balance therein is less than $1.00 per Unit then
outstanding, and that, if at any time the pro rata share represented by the
Units of cash in the Principal Account exceeds $10.00 as of a Monthly Record
Date, the Trustee shall, on the next succeeding Monthly Distribution Date,
distribute the Unit holder's pro rata share of the balance of the Principal
Account. Interest (semi-annually or monthly) and principal, including capital
gains, if any (semi-annually), received by the Trust will be distributed on
each Distribution Date to Unit holders of record of the Trust as of the
preceding Record Date who are entitled to such distributions at that time
under the plan of distribution chosen. All distributions will be net of
applicable expenses and funds required for the redemption of Units. See
"Summary of Essential Financial Information" in Part I of this Prospectus,
"The Trust--Expenses and Charges" and "Rights of Unit Holders--Redemption."
The Trustee will credit to the Interest Account for the Trust all
interest received by the Trust, including that part of the proceeds of any
disposition of Securities which represents accrued interest. Other receipts of
the Trust will be credited to the Principal Account for the Trust. The pro
rata share of the Interest Account of the Trust and the pro rata share of cash
in the Principal Account of the Trust represented by each Unit thereof will be
computed by the Trustee each month as of the Record Date. See "Summary of
Essential Financial Information" in Part I of this Prospectus. Proceeds
received from the disposition of any of the Securities subsequent to a Record
Date and prior to the next
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succeeding Distribution Date will be held in the Principal Account for the
Trust and will not be distributed until the second succeeding Distribution
Date. Because interest on the Securities is not received by the Trust at a
constant rate throughout the year, any particular interest distribution may be
more or less than the amount credited to the Interest Account of the Trust as
of the Record Date. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the second
Distribution Date following their purchase of Units under the applicable plan
of distribution. No distribution need be made from the Principal Account if
the balance therein is less than an amount sufficient to distribute $1.00 per
Unit.
The difference between the estimated net interest accrued to the
first Record Date and to the related Distribution Date is an asset of the
respective Unit holder and will be realized in subsequent distributions or
upon the earlier of the sale of such Units or the maturity, redemption or sale
of Securities in the Trust.
The plan of distribution selected by a Unit holder will remain in
effect until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of the
prior owner. Each April, the Trustee will furnish each Unit holder a card to
be returned together with the Certificate by May 15 of such year if the Unit
holder desires to change his plan of distribution, and the change will become
effective on May 16 of such year for the ensuing twelve months. For a
discussion of redemption of Units, see "Rights of Unit
Holders--Redemption--Tender of Units."
As of the fifteenth day of each month the Trustee will deduct from
the Interest Account and, to the extent funds are not sufficient therein, from
the Principal Account, amounts necessary to pay the expenses of the Trust as
of the first day of such month. See "The Trust--Expenses and Charges." The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of
the Trust. Amounts so withdrawn shall not be considered a part of the Trust's
assets until such time as the Trustee shall return all or any part of such
amounts to the appropriate account. In addition, the Trustee may withdraw from
the Interest Account and the Principal Account such amounts as may be
necessary to cover redemption of Units by the Trustee. See "Rights of Unit
Holders--Redemption." Funds which are available for future distributions,
payments of expenses and redemptions are in accounts which are non-interest
bearing to the Unit holders and are available for use by the Trustee pursuant
to normal banking procedures.
Because interest on Securities in the Trust is payable at varying
intervals, usually in semi-annual installments, the interest accruing to the
Trust will not be equal to the amount of money received and available monthly
for distribution from the Interest Account to Unit holders choosing the
monthly payment plan. Therefore, on each monthly Distribution Date, the amount
of interest actually deposited in the Interest Account and available for
distribution may be slightly more or less than the monthly interest
distribution made. In addition, because of the varying interest payment dates
of the Securities
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constituting the Trust portfolio, accrued interest at any point in time will
be greater than the amount of interest actually received by the Trust and
distributed to Unit holders. Therefore, there will usually remain an item of
accrued interest that is added to the value of the Units. If a Unit holder
sells all or a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his Units.
Similarly, if a Unit holder redeems all or a portion of his Units, the
Redemption Price per Unit which he is entitled to receive from the Trustee
will also include accrued interest on the Securities. Thus, the accrued
interest attributable to a Unit will not be entirely recovered until the Unit
holder either redeems or sells such Unit or until the Trust is terminated. See
"Rights of Unit Holders--Redemption--Computation of Redemption Price per
Unit."
Expenses and Charges
Initial Expenses
At no cost to the Trust, the Sponsors have borne all the expenses
of creating and establishing the Trust, including the cost of the initial
preparation, printing and execution of the Trust Agreement and the
certificates for Units, legal expenses, advertising and selling expenses,
expenses of the Trustee and other out-of-pocket expenses.
Fees
The Trustee's, Sponsor's and Evaluator's fees are set forth under
"Summary of Essential Financial Information" in Part I of this Prospectus. The
Sponsors' fee, if any, which is earned for portfolio supervisory services, is
based on the face amount of Securities in the Trust at December 1 of each
year. The Sponsors' fee, which is not to exceed the maximum amount set forth
in the "Summary of Essential Financial Information" in Part I of this
Prospectus, may exceed the actual costs of providing portfolio supervisory
services for a particular Series, but at no time will the total amount
received by the Sponsors for portfolio supervisory services rendered to all
Series of Empire State Municipal Exempt Trust in any calendar year exceed the
aggregate cost to them of supplying such services in such year.
The Trustee will receive for its ordinary recurring services to
the Trust an annual fee in the amount set forth in the "Summary of Essential
Financial Information" in Part I of this Prospectus. There is no minimum fee
and, except as hereinafter set forth, no maximum fee. For a discussion of
certain benefits derived by the Trustee from the Trust's funds, see "Rights of
Unit Holders--Distribution of Interest and Principal." For a discussion of the
services performed by the Trustee pursuant to its obligations under the Trust
Agreement, reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee's and Evaluator's fees are payable monthly on or
before each Distribution Date and the Sponsors' annual fee is payable annually
on December 1, each from the Interest Account to the extent funds are
available and then from the Principal Account. These fees may be increased
without approval of the Unit holders by amounts not
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exceeding proportionate increases in consumer prices for services as measured
by the United States Department of Labor's Consumer Price Index entitled "All
Services Less Rent." If the balances in the Principal and Interest Accounts
are insufficient to provide for amounts payable by the Trust, or amounts
payable to the Trustee which are secured by its prior lien on the Trust, the
Trustee is permitted to sell Bonds to pay such amounts.
Insurance Premiums
The cost of the insurance obtained by the Trust as set forth under
"Summary of Essential Financial Information" in Part I of this Prospectus is
based on the aggregate amount of Bonds in the Trust as of the date of such
information. The premium, which is an obligation of each respective Trust, is
payable monthly by the Trustee on behalf of the Trust. As Securities in the
portfolio of the Trust mature, are redeemed by their respective issuers or are
sold by the Trustee, the amount of the premium will be reduced in respect of
those Securities no longer owned by and held in the Trust. The Trust does not
incur any premium expense for any insurance which has been obtained by an
issuer of a Pre-insured Bond, since the premium or premiums for such insurance
have been paid by such issuer or other party; Pre-insured Bonds, however, are
additionally insured by the Trust. No premium will be paid by the Trust on
Bonds which are also MBIAC Pre-insured Bonds or MBIA Pre-insured Bonds. The
premium payable for Permanent Insurance and the related custodial fee will be
paid solely from the proceeds of the sale of a Bond from the Trust in the
event that the Trustee exercises the right to obtain Permanent Insurance on
such Bond.
Other Charges
The following additional charges are or may be incurred by the
Trust: all expenses (including audit and counsel fees) of the Trustee incurred
in connection with its activities under the Trust Agreement, including annual
audit expenses by independent public accountants selected by the Sponsors (so
long as the Sponsors maintain a secondary market, the Sponsors will bear any
audit expense which exceeds 50 cents per Unit), the expenses and costs of any
action undertaken by the Trustee to protect the Trust and the rights and
interests of the Unit holders; fees of the Trustee for any extraordinary
services performed under the Trust Agreement; indemnification of the Trustee
for any loss or liability accruing to it without willful misconduct, bad faith
or gross negligence on its part, arising out of or in connection with its
acceptance or administration of the Trust; and all taxes and other
governmental charges imposed upon the Securities or any part of the Trust (no
such taxes or charges are being levied or made or, to the knowledge of the
Sponsors, contemplated). The above expenses, including the Trustee's fee, when
paid by or owing to the Trustee, are secured by a lien on the Trust. In
addition, the Trustee is empowered to sell Securities in order to make funds
available to pay all expenses.
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Reports and Records
The Trustee shall furnish Unit holders of the Trust in connection
with each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable time after the end
of each calendar year, the Trustee will furnish to each person who at any time
during the calendar year was a Unit holder of record a statement providing the
following information: (1) as to the Interest Account: interest received
(including amounts representing interest received upon any disposition of
Securities and any earned original issue discount), and, if the issuers of the
Securities are located in different states or territories, the percentage of
such interest by such states or territories, deductions for payment of
applicable taxes and for fees and expenses of the Trust (including insurance
costs), redemptions of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (2) as to the Principal Account: the
dates of disposition of any Securities and the net proceeds received therefrom
(including any unearned original issue discount but excluding any portion
representing interest, with respect to the Trust the premium attributable to
the Trustee's exercise of the right to obtain Permanent Insurance and any
related custodial fee), deductions for payments of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, the amount of any "when
issued" interest treated as a return of capital and the balance remaining
after such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (3) a list of the
Securities held and the number of Units outstanding on the last business day
of such calendar year; (4) the Redemption price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts actually
distributed during such calendar year from the Interest Account and from the
Principal Account, separately stated, expressed both as total dollar amounts
and as dollar amounts representing the pro rata share of each Unit
outstanding.
The Trustee shall keep available for inspection by Unit holders,
at all reasonable times during usual business hours, books of record and
account of its transactions as Trustee including records of the names and
addresses of Unit holders, certificates issued or held, a current list of
Securities in the portfolio of the Trust and a copy of the Trust Agreement.
Redemption
Tender of Units
While it is anticipated that Units can be sold in the secondary
market, Units may also be tendered to the Trustee for redemption at its
corporate trust office at 101 Barclay Street, New York, New York 10286, upon
payment of any applicable tax. At the present time there are no specific taxes
related to the redemption of the Units. No
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<PAGE>
redemption fee will be charged by the Sponsors or the Trustee. Units redeemed
by the Trustee will be cancelled.
Certificates for Units to be redeemed must be delivered to the
Trustee and must be properly endorsed and accompanied by a written instrument
of transfer. Thus, redemption of Units cannot be effected until certificates
representing such Units have been delivered to the person seeking redemption.
See "Rights of Unit Holders--Certificates." Unit holders must sign exactly as
their names appear on the face of the certificate with signature(s) guaranteed
by an officer of a national bank or trust company, a member firm of either the
New York, Midwest or Pacific Stock Exchange, or in such other manner as may be
acceptable to the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority.
Within seven calendar days following such tender or, if the
seventh calendar day is not a business day, on the first business day prior
thereto, the Unit holder will be entitled to receive in cash an amount for
each Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth in Part I of this Prospectus under "Summary of
Essential Financial Information" as of the next subsequent Evaluation Time.
See "Redemption--Computation of Redemption Price per Unit." The "date of
tender" is deemed to be the date on which Units are received by the Trustee,
except that as regards Units received after the Evaluation Time on the New
York Stock Exchange, the date of tender is the next day on which such Exchange
is open for trading or the next day on which there is a sufficient degree of
trading in Units of the Trust, and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the Redemption Price
computed on that day. For information relating to the purchase by the Sponsors
of Units tendered to the Trustee for redemption at prices in excess of the
Redemption Price, see "Redemption--Purchase by the Sponsors of Units Tendered
for Redemption."
Accrued interest paid on redemption shall be withdrawn from the
Interest Account or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn
from the Principal Account. The Trustee is empowered to sell Securities in
order to make funds available for redemption. Such sales, if required, could
result in a sale of Securities by the Trustee at a loss. To the extent
Securities are sold, the size and diversity of the Trust will be reduced.
As to Series 18 and subsequent Series, if the Trustee exercises
the right to obtain Permanent Insurance on a Bond, such Bond will be sold from
the Trust on an insured basis. In the event that the Trustee does not exercise
the right to obtain Permanent Insurance on a Bond, such Bond will be sold from
the Trust on an uninsured basis since the insurance obtained by the Trust
covers the timely payment of principal and interest when due on the Bonds only
while the Bonds are held in and owned by the Trust. If the Trustee does not
obtain Permanent Insurance on a Defaulted Bond, to the extent that (and, in
the case of Series 18 and subsequent Series, assuming that the Trustee does
not exercise the right to
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obtain Permanent Insurance on a Defaulted Bond) Bonds which are current in
payment of interest are sold from the Trust portfolio in order to meet
redemption requests and Defaulted Bonds are retained in the portfolio in order
to preserve the related insurance protection applicable to said Bonds, the
overall value of the Bonds remaining in the Trust will tend to diminish. See
"Sponsors--Responsibility" for the effect of selling Defaulted Bonds to meet
redemption requests.
The Trustee reserves the right to suspend the right of redemption
and to postpone the date of payment of the Redemption Price per Unit for any
period during which the New York Stock Exchange is closed, other than weekend
and holiday closings, or during which trading on that Exchange is restricted
or during which (as determined by the Securities and Exchange Commission by
rule or regulation) an emergency exists as a result of which disposal or
evaluation of the underlying Bonds is not reasonably practicable, or for such
other periods as the Securities and Exchange Commission has by order
permitted.
Because insurance obtained by the Trust terminates as to Bonds
which are sold by the Trustee, and because the insurance obtained by the Trust
does not have a realizable cash value which can be used by the Trustee to meet
redemptions of Units (assuming, in the case of Series 18 and subsequent
Series, that the Trustee does not exercise the right to obtain Permanent
Insurance on Defaulted Bonds), under certain circumstances the Sponsors may
apply to the Securities and Exchange Commission for an order permitting a full
or partial suspension of the right of Unit holders to redeem their Units if a
significant portion of the Bonds in the portfolio is in default in payment of
principal or interest or in significant risk of such default. No assurances
can be given that the Securities and Exchange Commission will permit the
Sponsors to suspend the rights of Unit holders to redeem their Units, and,
without the suspension of such redemption rights when faced with excessive
redemptions, the Sponsors may not be able to preserve the benefits of the
Trust's insurance on Defaulted Bonds.
Computation of Redemption Price Per Unit
The Redemption Price per Unit is determined by the Trustee on the
basis of the bid prices of the Securities in the Trust, as of the Evaluation
Time stated under "Summary of Essential Financial Information" in Part I of
this Prospectus on the day any such determination is made. The Redemption
Price per Unit is each Unit's pro rata share, determined by the Trustee, of
(1) the aggregate value of the Securities in the Trust (determined by the
Evaluator as set forth below), except for those cases in which the value of
insurance has been included, (2) cash on hand in the Trust, and (3) accrued
and unpaid interest on the Securities as of the date of computation, less (a)
amounts representing taxes or governmental charges payable out of the Trust,
(b) the accrued expenses of the Trust, and (c) cash held for distribution to
Unit holders of record as of a date prior to the evaluation. The Evaluator may
determine the value of the Securities in the Trust (i) on the basis of current
bid prices for the Securities, (ii) if bid prices are not available for any
Securities, on the basis of current bid prices for comparable bonds, (iii) by
appraisal, or (iv) by any
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combination of the above. In determining the Redemption Price per Unit, no
value will be assigned to the portfolio insurance obtained by the Trust on the
Bonds in the Trust unless such Bonds are in default in payment of principal or
interest or in significant risk of such default. On the other hand,
Pre-insured Bonds in the Trust are entitled at all times to the benefits of
insurance obtained by their respective issuers so long as the Pre-insured
Bonds are outstanding and the insurer continues to fulfill its obligations,
and such benefits are reflected and included in the market value of
Pre-insured Bonds. For a description of the situations in which the Evaluator
may value the insurance obtained by the Trust, see "Public Offering--Market
for Units."
Purchase by the Sponsors of Units Tendered for Redemption
The Trust Agreement requires that the Trustee notify the Sponsors
of any tender of Units for redemption. So long as the Sponsors are maintaining
a bid in the secondary market, the Sponsors, prior to the close of business on
the second succeeding business day, will purchase any Units tendered to the
Trustee for redemption at the price so bid by making payment therefor to the
Unit holder in an amount not less than the Redemption Price on the date of
tender not later than the day on which the Units would otherwise have been
redeemed by the Trustee. See "Public Offering--Market for Units." Units held
by the Sponsors may be tendered to the Trustee for redemption as any other
Units, provided that the Sponsors shall not receive for Units purchased as set
forth above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors will be the
Public Offering Price determined in the manner provided in this Prospectus.
See "Public Offering-- Offering Price." Any profit resulting from the resale
of such Units will belong to the Sponsors which likewise will bear any loss
resulting from a lower offering or redemption price subsequent to their
acquisition of such Units.
Exchange Option
The Sponsors of the Series of Empire State Municipal Exempt Trust
(including the Series of Municipal Exempt Trust, the predecessor trust to
Empire State Municipal Exempt Trust) (the "Trust") are offering Unit holders
of those Series of the Trust for which the Sponsors are maintaining a
secondary market an option to exchange a Unit of any Series of the Trust for a
Unit of a different Series of the Trust being offered by the Sponsors (other
than in the initial offering period) at a Public Offering Price generally
based on the bid prices of the underlying Securities divided by the number of
Units outstanding (see "Public Offering--Market for Units") plus a fixed sales
charge of $15 per Unit (in lieu of the normal sales charge). However, a Unit
holder must have held his Unit for a period of at least six months in order to
exercise the exchange option or agree to pay a sales charge based on the
greater of $15 per Unit or an amount which together with the initial sales
charge paid in connection with the acquisition of Units being exchanged equals
the normal sales charge of the Series into which the investment is being
converted, determined as of the date of the exchange. Such exchanges will be
effected in whole Units only. Any excess proceeds from the Units being
surrendered will be returned, and the Unit holder will not be permitted to
advance any new money in order to complete an exchange. The Sponsors reserve
the right
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<PAGE>
to modify, suspend or terminate this plan at any time without further notice
to the Unit holders. In the event that the exchange option is not available to
a Unit holder at the time he wishes to exercise it, the Unit holder will be
immediately notified and no action will be taken with respect to his Units
without further instructions from the Unit holder.
Unit holders are urged to consult their tax advisors as to the tax
consequences of exchanging Units.
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AUTOMATIC ACCUMULATION ACCOUNT
The Sponsors have entered into an arrangement (the "Plan") with
Empire Builder Tax Free Bond Fund (the "Empire Builder") which permits Unit
holders of the Trust to elect to have distributions from Units in the Trust
automatically reinvested in shares of the Empire Builder. The Empire Builder
is an open-end, non-diversified investment company whose investment objective
is to seek as high a level of current income exempt from Federal income tax,
New York State and New York City income taxes as is believed to be consistent
with preservation of capital. It is the policy of the Empire Builder to invest
primarily in debt securities the interest income from which is exempt from
such taxes.
The Empire Builder has an investment objective which differs in
certain respects from that of the Trust. The bonds purchased by the Empire
Building will be of "investment grade" quality - that is, at the time of
purchase by the Empire Building, such bonds either will be rated not lower
than the four highest ratings of either Moody's (Aaa, Aa, A or Baa) or
Standard & Poor's (AAA, AA, A, or BBB) or will be unrated bonds which at the
time of purchase are judged by the Empire Builder's investment advisor to be
of comparable quality to bonds rated within such four highest grades. It is a
fundamental policy of the Empire Builder that under normal market conditions
at least 90% of the income distributed to its shareholders will be exempt from
Federal income tax, New York State and New York City personal income taxes.
However, during times of adverse market conditions when the Empire Builder is
investing for temporary defensive purposes in obligations other than New York
tax-exempt bonds, more than 10% of the Empire Builder's income distributions
could be subject to Federal income tax, New York State income tax and/or New
York City income tax, as described in the current prospectus relating to the
Empire Builder (the "Empire Builder Prospectus"). Glickenhaus & Co.
("Glickenhaus"), a sponsor of the Trust, acts as the investment advisor and
distributor for the Empire Builder.
Each Unit holder may request from The Bank of New York (the "Plan
Agent") a copy of the Empire Builder Prospectus describing the Empire Builder
and a form by which such Unit holder may elect to become a participant
("Participant") in the Plan. Thereafter, as directed by such person,
distributions on the Participant's Units will, on the applicable Distribution
Date, automatically be applied as of that date by the Trustee to purchase
shares (or fractions thereof) of the Empire Builder at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such
date, as described in the Empire Builder Prospectus. Unless otherwise
indicated, new Participants in the Empire Builder Plan will be deemed to have
elected the monthly distribution plan with respect to their Units.
Confirmations of all transactions undertaken for each Participant in the Plan
will be mailed to each such Participant by the Plan Agent indicating
distributions and shares (or fractions thereof) of the Empire Builder
purchased on his behalf. A Participant may at any time prior to ten days
preceding the next succeeding distribution date, by so notifying the Plan
Agent in writing, elect to terminate his participation in the Plan and receive
future distributions on his Units in cash. There will be no charge or other
penalty for such termination. The Sponsors, the Trustee, the Empire Building
and Glickenhaus, as investment advisor for Empire Builder
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each will have the right to terminate this Plan at any time for any reason.
The reinvestment of distributions from the Trust through the Plan will not
affect the income tax status of such distributions. For more complete
information about investing in the Empire Builder through the Plan, including
charges and expenses, request a copy of the Empire Builder Prospectus from The
Bank of New York, Unit Investment Trust Division, P.O. Box 988, Wall Street
Station, New York, New York 10268. Read it carefully before you decide to
participate.
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[ALTERNATE PAGE]
AUTOMATIC ACCUMULATION ACCOUNT
For Unit holders of the Trust who are clients of Lebenthal & Co.,
Inc., the Sponsors have entered into an arrangement (the "Plan") with
Lebenthal New York Municipal Bond Fund (the "Bond Fund") which permits Unit
holders of the Trust to elect to have distributions from Units in the Trust
automatically reinvested in shares of the Bond Fund. The Bond Fund is an
open-end, non-diversified investment company whose investment objective is to
maximize current income exempt from regular Federal income tax, and from New
York State and New York City income taxes, consistent with preservation of
capital and with consideration given to opportunities for capital gain. It is
the policy of the Bond Fund to invest primarily in long term investment grade
tax-exempt securities the interest income from which is exempt from such
taxes.
The Bond Fund has an investment objective which differs in certain
respects from that of the Trust. The bonds purchased by the Bond Fund will be
of "investment grade" quality -- that is, at the time of purchase by the Bond
Fund, such bonds either will be rated not lower than the four highest ratings
of either Moodys' (Aaa, Aa, A or Baa) or Standard & Poor's (AAA, A, A or BBB)
or will be unrated bonds which at the time of purchase are judged by the Bond
Fund's investment advisor to be of comparable quality to bonds rated within
such four highest grades. It is a fundamental policy of the Bond Fund that
under normal market conditions at least 80% of the income distributed to its
shareholders will be exempt from regular Federal income tax, and from New York
State and New York City personal income taxes. However, during times of
adverse market conditions, more than 20% of the Bond Fund's income
distributions could be subject to Federal income tax, New York State and/or
New York City income taxes, as described in the current prospectus relating to
the Bond Fund (the "Bond Fund Prospectus"). Lebenthal & Co., Inc., a sponsor
of the Trust, acts as the manager and distributor for the Bond Fund.
Each Unit holder may request from The Bank of New York (the "Plan
Agent") a copy of the Bond Fund Prospectus describing the Bond Fund and a form
by which such Unit holder may elect to become a participant ("Participant") in
the Plan. Thereafter, as directed by such person, distributions on the
Participant's Unit will, on the applicable Distribution Date, automatically be
applied as of that date by the Trustee to purchase shares (or fractions
thereof) of the Bond Fund at a net asset value as computed as of the close of
trading on the New York Stock Exchange on such date, as described in the Bond
Fund Prospectus. Unless otherwise indicated, new Participants in the Bond Fund
Plan will be deemed to have elected the monthly distribution plan with respect
to their Units. Confirmations of all transactions undertaken for each
Participant in the Plan will be mailed to each Participant by the Plan Agent
indicating distributions and shares (or fractions thereof) of the Bond Fund
purchased on his behalf. A Participant may at any time prior to ten days
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[ALTERNATE PAGE]
preceding the next succeeding distribution date, by so notifying the Plan
Agent in writing, elect to terminate his participation in the Plan and receive
future distributions on his Units in cash. There will be no charge or other
penalty for such termination. The Sponsors, the Trustee, the Bond Fund and
Lebenthal & Co. Inc., as manager for the Bond Fund, each will have the right
to terminate this Plan at any time for any reason. The reinvestment of
distributions from the Trust through the Plan will not affect the income tax
status of such distributions. For more complete information about investing in
the Bond Fund through the Plan, including charges and expenses, request a copy
of the Bond Fund Prospectus from The Bank of New York, Unit Investment Trust
Division, P.O. Box 988, Wall Street Station, New York, New York 10268. Read it
carefully before you decide to participate.
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<PAGE>
SPONSORS
Glickenhaus and Lebenthal are the Sponsors for Empire State
Municipal Exempt Trust, Series 10 and all subsequent Series, including all
Guaranteed Series.
Glickenhaus, a New York limited partnership, is engaged in the
underwriting and securities brokerage business and in the investment advisory
business. It is a member of the New York Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. and is an associate member of the
American Stock Exchange. Glickenhaus acts as a sponsor for successive Series
of The Municipal Insured National Trusts and for the prior Series of Empire
State Municipal Exempt Trust (including those sold under the name of Municipal
Exempt Trust, New York Exempt Series 1, New York Series 2 and New York Series
3). Glickenhaus, in addition to participating as a member of various selling
groups of other investment companies, executers orders on behalf of investment
companies for the purchase and sale of securities of such companies and sells
securities to such companies in its capacity as a broker or dealer in
securities. The principal offices of Glickenhaus are located at 6 East 43rd
Street, New York, New York 10017.
Lebenthal, a New York corporation originally organized as a New
York partnership in 1925, has been buying and selling municipal bonds for its
own account as a dealer for over 67 years; Lebenthal also buys and sells
securities as an agent and participates as an underwriter in public offerings
of municipal bonds. It acted as a sponsor for Empire State Tax Exempt Bond
Trust, Series 8 and successive Series of The Municipal Insured National Trust
through Series 28. Lebenthal is registered as a broker/dealer with the
Securities and Exchange Commission and various state securities regulatory
agencies and is a member of the National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp. The principal offices of
Lebenthal are located at 120 Broadway, New York, New York 10271.
Limitations on Liability
The Sponsors are jointly and severally liable for the performance
of their obligations arising from their responsibilities under the Trust
Agreement, but will be under no liability to the Unit holders for taking any
action or refraining from any action in good faith or for errors in judgment;
nor will they be responsible in any way for depreciation or loss incurred by
reason of the sale of any Bonds, except in cases of their willful misconduct,
bad faith or gross negligence. See "The Trust--Portfolio" and
"Sponsors--Responsibility."
Responsibility
The Trustee shall sell, for the purpose of redeeming Units
tendered by any Unit holder, and for the payment of expenses for which funds
may not be available, such of the Bonds in a list furnished by the Sponsors as
the Trustee in its sole discretion may deem necessary. In the event that the
Trustee does not exercise the right to obtain Permanent
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<PAGE>
Insurance on a Defaulted Bond or Bonds, to the extent that Bonds are sold
which are current in payment of principal and interest in order to meet
redemption requests and Defaulted Bonds are retained in the portfolio in order
to preserve the related insurance protection applicable to said Bonds, the
overall value of the Bonds remaining in the Trust's portfolio will tend to
diminish. As to Series 18 and subsequent Series, in the event that the Trustee
does not exercise the right to obtain Permanent Insurance on a Defaulted Bond
or Bonds, except as described below and in certain other unusual circumstances
for which it is determined by the Trustee to be in the best interests of the
Unit holders or if there is no alternative, the Trustee is not empowered to
sell Defaulted Bonds for which value has been attributed for the insurance
obtained by the Trust. Because of such restrictions on the Trustee, under
certain circumstances the Sponsors may seek a full or partial suspension of
the right of Unit holders to redeem their Units. See "Rights of Unit
Holders--Redemption." The Sponsors are empowered, but not obligated, to direct
the Trustee to dispose of Bonds in the event of advance refunding. It is the
responsibility of the Sponsors to instruct the Trustee to reject any offer
made by an issuer of any of the Securities to issue new obligations in
exchange and substitution for any Securities pursuant to a refunding or
refinancing plan, except that the Sponsors may instruct the Trustee to accept
such an offer or to take any other action with respect thereto as the Sponsors
may deem proper if the issuer is in default with respect to such Securities or
in the judgment of the Sponsors the issuer will probably default with respect
to such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be
held by the Trustee subject to the terms and conditions of the Trust Agreement
to the same extent as Securities originally deposited thereunder. Within five
days after the deposit of obligations in exchange or substitution for
underlying Securities, the Trustee is required to give notice thereof to each
Unit holder, identifying the obligations eliminated and the Securities
substituted therefor. Except as stated in this and the preceding paragraph,
the acquisition by the Trust of any securities other than the Securities
initially deposited is prohibited.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor either pursuant to the
portfolio insurance with respect to the Trust or otherwise within 30 days, the
Trustee is required to notify the Sponsors thereof. If the Sponsors fail to
instruct the Trustee to sell or to hold such Bond within 30 days after
notification by the Trustee to the Sponsors of such default, the Trustee may
in its discretion sell the Defaulted Bond and not be liable for any
depreciation or loss thereby incurred. See "The Trust--Insurance on the
Bonds."
The Sponsors may direct the Trustee to dispose of Bonds upon
default in the payment of principal or interest, institution of certain legal
proceedings or the existence of certain other impediments to the payment of
Bonds, default under other documents which may adversely affect debt service,
default in the payment of principal or interest on other obligations of the
same issuer, decline in projected income pledged for debt service on revenue
Bonds, or decline in price or the occurrence of other market factors,
including advance refunding, so that in the opinion of the Sponsors the
retention of such Bonds in a
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<PAGE>
Trust would be detrimental to the interest of the Unit holders. The proceeds
from any such sales will be credited to the Principal Account of the affected
Trust for distribution to the Unit holders.
Notwithstanding the foregoing, in connection with final
distributions to Unit holders (if, as to Series 18 and subsequent Series, the
Trustee does not exercise the right to obtain Permanent Insurance on any
Defaulted Bond), because the portfolio insurance obtained by the Trust is
applicable only while Bonds so insured are held by the Trust, the price to be
received by the Trust upon the disposition of any such Defaulted Bond will not
reflect any value based on such insurance. Therefore, in connection with any
liquidation with respect to a Trust, it shall not be necessary for the Trustee
to, and the Trustee does not currently intend to, dispose of any Bonds if
retention of such Bonds, until due, shall be deemed to be in the best interest
of Unit holders, including, but not limited to, situations in which Bonds so
insured are in default and situations in which Bonds so insured have a
deteriorated market price resulting from a significant risk of default. Since
the Pre-insured Bonds will reflect the value of the insurance obtained by the
Bond issuer, it is the present intention of the Sponsors not to direct the
Trustee to hold any Pre-insured Bonds after the date of termination. All
proceeds received, less applicable expenses, from insurance on Defaulted Bonds
not disposed of at the date of termination will ultimately be distributed to
Unit holders of record as of such date of termination as soon as practicable
after the date such Defaulted Bonds become due and applicable insurance
proceeds have been received by the Trustee. See "Summary of Essential
Financial Information" in Part I of this Prospectus.
Agent for Sponsors
The Sponsor named as Agent for Sponsors under "Summary of
Essential Information" in Part I of this Prospectus has been appointed by the
other Sponsor as agent for purposes of taking action under the Trust
Agreement. In those Trusts for which there is a sole Sponsor, references
herein to the Agent for Sponsors shall be deemed to refer to such sole
Sponsor. If the Sponsors are unable to agree with respect to action to be
taken jointly by them under the Trust Agreement and they cannot agree as to
which Sponsor shall act as sole Sponsor, then the Agent for Sponsors shall act
as sole Sponsor. If one of the Sponsors fails to perform its duties under the
Trust Agreement or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, that Sponsor is automatically
discharged under the Trust Agreement and the other Sponsor acts as the
Sponsors.
Resignation
Any Sponsor may resign at any time provided that at the time of
such resignation one remaining Sponsor maintains a net worth of $1,000,000 and
all the remaining Sponsors are agreeable to such resignation. Concurrent with
or subsequent to such resignation, a new Sponsor may be appointed by the
remaining Sponsors and the Trustee to
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<PAGE>
assume the duties of the resigning Sponsor. If, at any time, only one Sponsor
is acting under the Trust Agreement and that Sponsor shall resign or fail to
perform any of its duties thereunder or becomes incapable of acting or becomes
bankrupt or its affairs are taken over by public authorities, then the Trustee
may appoint a successor sponsor or terminate the Trust Agreement and liquidate
the Trust.
Financial Information
At September 30, 1994, the total partners' capital of Glickenhaus
was $112,898,000 (audited); and at March 31, 1995, the total stockholders'
equity of Lebenthal was $3,561,506 (audited).
The foregoing information with regard to the Sponsors relates to
the Sponsors only, and not to any series of Empire State Municipal Exempt
Trust. Such information is included in this Prospectus only for the purpose of
informing investors as to the financial responsibility of the Sponsors and
their ability to carry out their contractual obligations shown herein. More
comprehensive financial information can be obtained upon request from any
Sponsor.
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, (212) 815-2000. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State of New
York and the Board of Governors of the Federal Reserve System, and its
deposits are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law. The Trustee must be a corporation organized under the
laws of the United States or the State of New York, which is authorized under
such laws to exercise corporate trust powers, and must have at all times an
aggregate capital, surplus and undivided profits of not less than $5,000,000
and its principal office and place of business in the Borough of Manhattan,
New York City. The duties of the Trustee are primarily ministerial in nature.
The Trustee did not participate in the selection of Securities for the
portfolio of any Series of the Trust.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the disposition of any moneys,
Securities or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents except
in cases of its willful misconduct, bad faith, gross negligence or reckless
disregard for its obligations and duties. In addition, the Trustee shall not
be personally liable for any taxes or other governmental charges imposed upon
or in respect of the Trust which the Trustee may be required to pay under
current or future law of
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<PAGE>
the United States or any other taxing authority having jurisdiction. See
"The Trust--Portfolio."
Responsibility
For information relating to the responsibilities of the Trustee
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unit Holders," "Sponsors--Responsibility" and
"Sponsors--Resignation."
Resignation
By executing an instrument in writing and filing the same with the
Sponsors, the Trustee and any successor may resign. In such an event the
Sponsors are obligated to appoint a successor trustee as soon as possible. If
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, or, in the case of Series 11 and subsequent
Series, if the Sponsors deem it to be in the best interest of the Unit
holders, the Sponsors may remove the Trustee and appoint a successor as
provided in the Trust Agreement. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee. If,
upon resignation or removal of a trustee, no successor has been appointed and
has accepted the appointment within thirty days after notification, the
retiring trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The resignation or removal of a trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
EVALUATOR
The Evaluator is Muller Data Corporation, a New York corporation,
with main offices at 395 Hudson Street, New York, New York 10014. Muller Data
Corporation is a wholly owned subsidiary of Thomson Publishing Corporation, a
Delaware corporation.
Limitations on Liability
The Trustee and the Sponsors may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it; provided,
however, that the Evaluator shall be under no liability to the Trustee, the
Sponsors or the Unit holders for errors in judgement. This provision shall not
protect the Evaluator in cases of its willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations and duties.
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Responsibility
The Trust Agreement requires the Evaluator to evaluate the
Securities on the basis of their bid prices on each business day after the
initial offering period, when any Unit is tendered for redemption and on any
other day such evaluation is desired by the Trustee or is requested by the
Sponsors. For information relating to the responsibility of the Evaluator to
evaluate the Securities on the basis of their offering prices, see "Public
Offering--Offering Price."
Resignation
The Evaluator may resign or may be removed by the Sponsors and the
Trustee, and the Sponsors and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
The Sponsors and the Trustee have the power to amend the Trust
Agreement without the consent of any of the Unit holders when such an
amendment is (1) to cure any ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders; and the Sponsors
and the Trustee may amend the Trust Agreement with the consent of the holders
of certificates evidencing 66-2/3% of the Units then outstanding, provided
that no such amendment will reduce the interest in a Trust of any Unit holder
without the consent of such Unit holder or reduce the percentage of Units
required to consent to any such amendment without the consent of all the Unit
holders. In no event shall the Trust Agreement be amended to increase the
number of Units issuable thereunder or to permit the deposit or acquisition of
securities either in addition to or in substitution for any of the Bonds
initially deposited in the Trust, except in accordance with the provisions of
the Trust Agreement. In the event of any amendment, the Trustee is obligated
to notify promptly all Unit holders of the substance of such amendment.
The Trust shall terminate upon the maturity, redemption, sale or
other disposition, as the case may be, of the last of the Securities. The
Trustee shall notify all Unit holders when the value of the Trust as shown by
any evaluation is less than $2,000,000 or less than 20% of the value of the
Trust as of the Date of Deposit, whichever is lower, at which time the Trust
may be terminated (i) by the consent of the holders of 66-2/3% of the Units or
(ii) by the Trustee; provided, however, that the holders of at least 33-1/3%
of the Units may instruct the Trustee not to terminate the Trust. In no event,
however, may the
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Trust continue beyond the Mandatory Termination Date set forth in Part I of
this Prospectus under "Summary of Essential Financial Information"; provided,
however, as to Series 9 and subsequent Series, that prior to the Mandatory
Termination Date the Trustee shall not dispose of any Bonds if the retention
of such Bonds, until due, shall be deemed to be in the best interest of the
Unit holders of the affected Trust. In the event of termination, written
notice thereof will be sent by the Trustee to all Unit holders. Within a
reasonable period after termination, the Trustee will sell any remaining
Securities and, after paying all expenses and charges incurred by the Trust,
will distribute to each Unit holder, upon surrender for cancellation of his
certificate for Units, his pro rata share of the balances remaining in the
Interest and Principal Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters have been passed upon by Hall, McNicol,
Hamilton & Clark, The News Building, 220 East 42nd Street, New York, New York
10017, as counsel for the Sponsors as to Series 1 through 8, by Brown & Wood,
One World Trade Center, New York, New York 10048, as special counsel for the
Sponsors as to Series 9 through 64 and by Battle Fowler LLP, 75 East 55th
Street, New York, New York 10022 as special counsel for the Sponsors as to
Series 65 subsequent Series of Empire State Municipal Exempt Trust, Guaranteed
Series. Tanner, Propp, Fersko & Sterner, 99 Park Avenue, New York, New York
10016, acts as counsel for the Trustee.
AUDITORS
The financial statements of the Trust included in Part I of this
Prospectus have been audited by BDO Seidman, LLP, independent certified public
auditors, as stated in their report with respect thereto, and are included
therein in reliance upon such report given upon the authority of that firm as
experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees. The bond
rating is not a recommendation to purchase, sell or hold a security, inasmuch
as it does not comment as to market price or suitability for a particular
investor.
The ratings are based on current information furnished to Standard
& Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in connection
with any rating and may, on
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occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA: Bonds rated "AAA" have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA: Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only in
small degree.
A: Bonds rated "A" have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of speculation
and "CC" the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or Minus (-): To provide more detailed indications of
credit quality, the ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
- 59 -
279831.1
<PAGE>
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. Accordingly, the investor should
exercise his own judgment with respect to such likelihood and risk.
NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
*Moody's Investors Service, Inc. ("Moody's") rating. A summary of the
meaning of the applicable rating symbols as published by Moody's follows:
Aaa: Bonds which are rated "Aaa" are judged to be the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
- 60 -
279831.1
<PAGE>
Baa: Bonds which are rated "Baa" are considered as medium grade
obligations; i.e, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of time
may be small.
Con.(...): Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These bonds are secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Moody's applies numerical modifiers "1," "2" and "3" in each rating
classification from "Aa" through "B" in its corporate rating system. The
modifier "1" indicates that the security ranks in the higher end of its
generic rating category; the modifier "2" indicates a mid-range ranking; and
the modifier "3" indicates that the security ranks in the lower end of its
generic rating category.
- 61 -
279831.1
<PAGE>
--------------------------------------
This Prospectus contains information
concerning the Trust and the Sponsors,
but does not contain all the information EMPIRE STATE
set forth in the registration statements MUNICIPAL EXEMPT TRUST
and exhibits relating thereto, which
the Trust has filed with the Securities
and Exchange Commission, Washington,
D.C. under the Securities Act of 1933
and the Investment Company Act of
1940, and to which reference is hereby GUARANTEED SERIES
made.
- -------------------------------------
PROSPECTUS, PART II
INDEX
- -------------------------------------
Page Sponsors:
The Trust............................. 1
GLICKENHAUS & CO.
Public Offering....................... 28 6 East 43rd Street
New York, New York 10017
Estimated Current Return and Estimated (212)953-7532
Long-Term Return to
Unit Holders....................... 31
Insurance on the Bonds................ 32 LEBENTHAL & CO., INC.
120 Broadway
Tax Status............................ 36 New York, New York 10272
(212)425-6116
Rights of Unit Holders................ 41
Automatic Accumulation Account........ 50
Sponsors.............................. 52
Trustee .............................. 55
Evaluator............................. 56
Amendment and Termination of
the Trust Agreement................... 57
Legal Opinions........................ 58
Auditors.............................. 58
Description of Bond Ratings........... 58
- ------------------------------------------
No person is authorized to give any
information or to make any representation
not contained in this Prospectus and any
information or representation not contained
herein must not be relied upon as having
been authorized by the Trust or the Sponsors.
This Prospectus does not constitute an
offer to sell, or a solicitation of an
offer to buy, securities in any state to
any person to whom it is not lawful to make
such offer in such state
- --------------------------------------------
279831.1
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus.
Signatures.
Written Consent of the following persons:
Consent of Independent Auditors.
Consent of Brown & Wood (previously filed)
Consent of the Evaluator including Confirmation of Ratings
(included in Exhibit 99.5.1).
The following exhibits:
*99.5.1 Consent of the Evaluator including Confirmation of Ratings.
99.6.1 -- Copies of Powers of Attorney of General Partners of
Glickenhaus & Co. (filed as Exhibit 6.1 to Amendment No. 1
to Form S-6 Registration Statement No. 33-58492 of Empire
State Municipal Exempt Trust, Guaranteed Series 95 on May
12, 1993, and as Exhibit 5.2(a) to Amendment No. 1 to Form
S-6 Registration Statement No. 33-78036 of MINT Group 11 on
May 3, 1994, and incorporated herein by reference).
99.6.2 -- Copies of Powers of Attorney of Directors and certain
officers of Lebenthal & Co., Inc. (filed as Exhibit 6.2 to
Amendment No. 1 to Form S-6 Registration Statement No.
33-55385 of Empire State Municipal Exempt Trust, Guaranteed
Series 109 on November 2, 1994, and incorporated herein by
reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-1
C/M: 10726.0053 287703.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Empire State Municipal Exempt Trust, Guaranteed Series 55,
Guaranteed Series 56 and Guaranteed Series 57, certify that they have met all
of the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933. The registrants have duly caused this Post-Effective Amendment to the
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on
the 24th day of July, 1995.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 55, GUARANTEED SERIES 56
AND GUARANTEED SERIES 57
(Registrants)
GLICKENHAUS & CO.
(Depositor)
By:/s/ Brian C. Laux
(Authorized Signator)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Name Title Date
ROBERT SANTORO* General Partner )
)
ALFRED FEINMAN* General Partner ) July 24, 1995
)
)
SETH M. GLICKENHAUS* General Partner )
) By:/s/ Brian C. Laux
STEVEN B. GREEN* General Partner, ) Attorney-in-Fact*
Chief Financial Officer )
)
ARTHUR WINSTON* General Partner )
)
JEFFREY L. LEDERER* General Partner )
)
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Amendment No. 1 to Registration Statement No. 33-58492 on May 12, 1993
and as Exhibit 5.2(a) to Amendment No. 1 to Registration Statement No.
33-78036 on May 3, 1994.
II-2
C/M: 10726.0053 287703.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Empire State Municipal Exempt Trust, Guaranteed Series 55,
Guaranteed Series 56 and Guaranteed Series 57, certify that they have met all
of the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933. The registrants have duly caused this Post-Effective Amendment to the
Registration Statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on
the 21st day of July, 1995.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 55, GUARANTEED SERIES 56
AND GUARANTEED SERIES 57
(Registrants)
LEBENTHAL & CO., INC.
(Depositor)
By:/s/ Alexandra Lebenthal
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons, in the capacities and on the dates indicated.
Name Title Date
H. GERARD BISSINGER, II* Director )
) July 21, 1995
JEFFREY M. JAMES* Director )
)
D. WARREN KAUFMAN* Director )
) By: /s/ Alexandra Lebenthal
ALEXANDRA LEBENTHAL* Director, President ) Attorney-in-Fact*
)
JAMES A. LEBENTHAL* Director, Chief )
Executive Officer )
)
DUNCAN K. SMITH* Director )
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.2 to
Amendment No. 1 to Registration Statement No. 33-55385 on November 2,
1994.
II-3
C/M: 10726.0053 287703.1
<PAGE>
CONSENT OF COUNSEL
The consent of Brown & Wood to the use of their name in the Prospectus
included in the Registration Statement is contained in their opinion filed
previously.
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of
EMPIRE STATE MUNICIPAL EXEMPT TRUST GUARANTEED SERIES 55,
GUARANTEED SERIES 56 AND GUARANTEED SERIES 57
We hereby consent to the use in Post-Effective Amendment No. 5 to
Registration Statement No. 33-32434 of our opinion dated April 28, 1995
relating to the financial statements of Empire State Municipal Exempt Trust,
Guaranteed Series 55, Guaranteed Series 56 and Guaranteed Series 57 and to the
reference to our firm under the heading "Auditors" in the Prospectus which is
a part of such Registration Statement.
BDO SEIDMAN, LLP
New York, New York
July 31, 1995
II-4
C/M: 10726.0053 287703.1
<PAGE>
Exhibit Description Page No.
*99.5.1 -- Consent of the Evaluator including
Confirmation of Ratings.
99.6.1 -- Copies of Powers of Attorney of General Partners of
Glickenhaus & Co. (filed as Exhibit 6.1 to Amendment
No. 1 to Form S-6 Registration Statement No. 33-
58492 of Empire State Municipal Exempt Trust,
Guaranteed Series 95 on May 12, 1993, and as Exhibit
5.2(a) to Amendment No. 1 to Form S-6 Registration
Statement No. 33-78036 of MINT Group 11 on May 3,
1994, and incorporated herein by reference).
99.6.2 -- Copies of Powers of Attorney of Directors and
certain officers of Lebenthal & Co., Inc. (filed as
Exhibit 6.2 to Amendment No. 1 to Form S-6
Registration Statement No. 33-55385 of Empire State
Municipal Exempt Trust, Guaranteed Series 109 on
November 2, 1994, and incorporated herein by
reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* Being filed by this Amendment.
C/M: 10726.0053 287703.1
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Muller Data Corporation
A Thomson Financial Services Company
395 Hudson Street
New York, NY 10014-3622
July 15, 1995
Glickenhaus & Co., Inc.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
25 Broadway
New York, New York 10006
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series 55 - Post-effective Amendment No. 5
Guaranteed Series 56 - Post-effective Amendment No. 5
Guaranteed Series 57 - Post-effective Amendment No. 5
Gentlemen:
We have examined the post-effective Amendment to the Registration
Statement File No. 33-32434 for the above captioned trusts. We
hereby acknowledge that Muller Data Corporation is currently
acting as the evaluator for the trusts. We hereby consent to the
use in the Amendment of the reference to Muller Data Corporation
as evaluator.
In addition, we hereby confirm that the ratings indicated in the
above referenced Amendment to the Registration Statement for the
respective bonds comprising the trust portfolios are the ratings
currently indicated in our Muniview data base.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Mario S. Buscemi
Chief Operating Officer
MSB:tg
290069.1
