<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
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,
SERIES 72
B. NAME OF DEPOSITORS:
GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
C. COMPLETE ADDRESS OF DEPOSITORS' PRINCIPAL EXECUTIVE OFFICES:
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 EAST 43RD STREET 120 BROADWAY
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10271
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 EAST 43RD STREET 120 BROADWAY
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10271
COPIES TO:
MICHAEL R. ROSELLA, ESQ.
BATTLE FOWLER LLP
75 EAST 55TH STREET
NEW YORK, NEW YORK 10022
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
290 UNITS OF EMPIRE STATE MUNICIPAL EXEMPT TRUST,
SERIES 72 ARE BEING REGISTERED UNDER THE SECURITIES ACT OF 1933
AND THE INVESTMENT COMPANY ACT OF 1940.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
$290,000*
G. AMOUNT OF FILING FEE, COMPUTED AT ONE-TWENTY-NINTH OF 1 PERCENT OF THE
PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC:
$100
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
/ / Check if it is proposed that this filing will become effective immediately
upon filing pursuant to Rule 487.
- ------------
*Estimated solely for purposes of calculating filing fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, SERIES 72
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(E) 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)
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ----------------------------------------- -------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C>
1. (a) Name of trust................... Prospectus front cover
(b) Title of securities issued...... Prospectus front cover
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--
Underwriting Account; 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..................... *
8. Fiscal year......................... *
9. Litigation.......................... *
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
<S> <C>
10. (a) Registered or bearer
securities..................... Rights of Unit Holders
(b) Cumulative or distributive
securities..................... Rights of Unit Holders
(c) Redemption...................... Rights of Unit Holders
(d) Conversion, transfer, etc....... Rights of Unit Holders
(e) Periodic payment plan........... *
(f) Voting rights................... Amendment and Termination of the
Trust Agreement
(g) Notice to certificate holders... Rights of Unit Holders--Reports and
Records; Sponsors--Responsibility;
Trustee--Resignation; Amendment
and Termination of the Trust
Agreement--Amendment
(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..... *
</TABLE>
- ------------
* Inapplicable
i
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ----------------------------------------- -------------------------------------
<S> <C>
13. (a) Load, fees, expenses, etc....... Prospectus front cover; Summary of
Essential Financial Information;
The Trust--Expenses and Charges;
Public Offering--Offering Price;
Public Offering--Market for Units;
Public Offering--Sponsors' and
Underwriters' Profits
(b) Certain information regarding
periodic payment
certificates................... *
(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;
Public Offering--Sponsors' and
Underwriters' Profits; Rights of
Unit Holders--Redemption--Purchase
by the Sponsors of Units Tendered
for Redemption
(f) Ratio of annual charges to
income......................... *
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;
Public Offering--Sponsors' and
Underwriters' Profits; 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; The Trust--
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....... The Trust--Expenses and Charges--
Other Charges; Rights of
Unit Holders--Distribution of
Interest and Principal; Amendment
and Termination of the Trust
Agreement
(d) Schedule of distributions....... *
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
</TABLE>
- ------------
* Inapplicable
ii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ----------------------------------------- -------------------------------------
<S> <C>
20. Certain miscellaneous provisions of
trust agreement................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(a) Amendment....................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(b) Termination..................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(c) and (d) Trustee, removal and
successor...................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(e) and (f) Depositor, removal and
successor...................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
21. Loans to security holders........... *
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......................... *
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
<S> <C>
25. Organization of depositor........... Sponsors
26. Fees received by depositors......... *
27. Business of depositors.............. Sponsors
28. Certain information as to officials
and affiliated persons of
depositors........................ Contents of Registration Statement
29. Voting securities of depositors..... *
30. Persons controlling depositors...... *
31. Payments by depositors for certain
services rendered to trust........ *
32. Payments 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............................. *
<CAPTION>
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
<S> <C>
35. Distribution of trust's securities
by states......................... Public Offering--Distribution of
Units
36. Suspension of sales of trust's
securities........................ *
37. Revocation of authority to
distribute........................ *
</TABLE>
- ------------
* Inapplicable
iii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ----------------------------------------- -------------------------------------
<S> <C>
38. (a) Method of distribution.......... Public Offering--Distribution of
Units; Public Offering--
Underwriting Account; Public
Offering--Sponsors' and
Underwriters' Profits
(b) Underwriting agreements......... Public Offering--Distribution of
Units; Public Offering--
Underwriting Account; Public
Offering--Sponsors' and
Underwriters' Profits
(c) Selling agreements.............. Public Offering--Distribution of
Units; Public Offering--
Underwriting Account; Public
Offering--Sponsors' and
Underwriters' Profits
39. (a) Organization of principal
underwriters................... Sponsors
(b) N.A.S.D. membership of principal
underwriters................... Sponsors
40. Certain fees received by principal
underwriters...................... *
41. (a) Business of principal
underwriters................... Sponsors
(b) Branch offices of principal
underwriters................... *
(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... *
(c) Variation in offering price to
certain persons................ Public Offering--Offering Price;
Public Offering--Distribution of
Units
45. Suspension of redemption rights..... *
46. (a) Redemption valuation............ Rights of Unit Holders--Redemption--
Computation of Redemption Price per
Unit
(b) Schedule as to redemption
price.......................... *
47. Maintenance of position in
underlying securities............. Public Offering--Market for Units;
Public Offering--Sponsors' and
Underwriters' Profits; 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
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of
trustee........................... Trustee
49. Fees and expenses of trustee........ The Trust--Expenses and Charges;
Rights of Unit Holders--
Distribution of Interest and
Principal
50. Trustee's lien...................... The Trust--Expenses and Charges--
Other Charges; Rights of Unit
Holders--Distribution of Interest
and Principal
</TABLE>
- ------------
* Inapplicable
iv
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ----------------------------------------- -------------------------------------
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C>
51. Insurance of holders of trust's
securities........................ The Trust--Insurance on the Bonds
<CAPTION>
VII. POLICY OF REGISTRANT
<S> <C>
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..................... *
(c) Policy regarding substitution or
elimination of underlying
securities..................... Sponsors--Responsibility
(d) Fundamental policy not otherwise
covered ....................... *
53. Tax status of trust................. Prospectus front cover; The Trust--
Tax Status
<CAPTION>
VIII. FINANCIAL AND STATISTICAL INFORMATION
<S> <C>
54. Trust's securities during last ten
years............................. *
55. Certain information regarding
periodic payment certificates..... *
56. Certain information regarding
periodic payment certificates..... *
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 Condition
</TABLE>
- ------------
* Inapplicable
v
<PAGE>
SUBJECT TO COMPLETION
ISSUE DATE: JULY 20, 1995
[EMPIRE STATE MUNICIPAL EXEMPT TRUST LOGO] SERIES 72
The attached final prospectus for a prior Series of Empire State Municipal
Exempt Trust is hereby used as a preliminary prospectus for Series 72. The
narrative information and structure of the final prospectus for this Series will
be substantially the same as that of the attached final prospectus. Information
with respect to pricing, the number of Units, dates and summary information
regarding the characteristics of securities to be deposited in this Series is
not now available and will be different because each Series has a unique
portfolio. ACCORDINGLY, THE INFORMATION CONTAINED HEREIN WITH REGARD TO THE
PREVIOUS SERIES SHOULD BE CONSIDERED AS BEING INCLUDED FOR INFORMATIONAL
PURPOSES ONLY. Ratings of the securities in this Series are expected to be
comparable to those of the securities deposited in the previous Series. However,
the estimated current return and estimated long term return for this Series will
depend on the interest rates and offering prices of the securities in this
Series and may vary materially from that of the previous Series. Investors
should contact account executives of the underwriters who will be informed of
the expected effective date of this Series and who will be supplied with
complete information with respect to such Series on the day of and immediately
prior to the effectiveness of the registration statement relating to Units of
this Series.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
- --------------------------------------------------------------------------------
EMPIRE STATE MUNICIPAL EXEMPT TRUSTS
- --------------------------------------------------------------------------------
(LOGO) SERIES
EMPIRE, GTD., 99
EMPIRE STATE MUNICIPAL EXEMPT TRUST GUARANTEED SERIES 11,000 UNITS
DATED: SEPTEMBER 8, 1993
(LOGO) SERIES
EMPIRE STATE, 71
4,000 UNITS
DATED: SEPTEMBER 8, 1993
MUNICIPAL EXEMPT TRUST
- -----------------------------------------
EMPIRE STATE MUNICIPAL EXEMPT TRUST
The Empire State Municipal Exempt Trust, Series 71 (the 'Uninsured Trust') and
Guaranteed Series 99 (the 'Insured Trust') (collectively referred to herein as
the 'Trusts') are unit investment trusts formed for the purpose of obtaining
tax-exempt interest income through investment in (a) for the Uninsured Trust, a
fixed portfolio of long-term, investment grade bonds and (b) for the Insured
Trust, a fixed insured portfolio of long-term bonds, including contracts and
funds for the purchase thereof, 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, including Puerto
Rico, and their public authorities (the 'Bonds' or the 'Securities'). The
Sponsors of the Trusts are Glickenhaus & Co., and Lebenthal & Co., Inc. Units of
the Trusts will be offered to residents of New York, Connecticut, Pennsylvania
and Florida. On the Date of Deposit, all of the Units and the Bonds while in the
Insured Trust will be rated AAA by Standard & Poor's Corporation and Moody's
Investors Service will assign a rating of 'Aaa' to all of the Bonds in the
Insured Trust, as insured. The value of the Units of each Trust will fluctuate
with the value of the underlying Bonds. Minimum purchase: 1 Unit.
In the opinion of counsel, under existing law, interest income to the Insured
Trust and the Uninsured Trust, and, with certain exceptions, to Unit Holders is
exempt from all regular federal, New York State and New York City income taxes,
but may be subject to state and local taxes in other jurisdictions. Capital
gains, if any, are subject to tax. Interest on the Bonds will not be subject to
the federal alternative minimum tax. See 'The Trusts--Tax Status' in Part B of
this Prospectus.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trusts, the Statement
of Condition of the Trusts and the Portfolios. Part B contains general
information about the Trusts. Part A may not be distributed unless accompanied
by Part B. Please read and retain both parts of this Prospectus for future
reference.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENCE.
PROSPECTUS PART A DATED SEPTEMBER 8, 1993
<PAGE>
(EMPIRE EMPIRE STATE MUNICIPAL EXEMPT TRUST,
STATE LOGO) SERIES 71
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT SEPTEMBER 7, 1993 (1):
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO. TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
<TABLE>
<S> <C>
DATE OF DEPOSIT: September 8, 1993
AGGREGATE PRINCIPAL AMOUNT OF BONDS IN TRUST: $ 4,000,000(2)
NUMBER OF UNITS: 4,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST PER UNIT: 1/4,000
TOTAL VALUE OF SECURITIES IN PORTFOLIO (Based on Offering Side Valuations of Securities): $ 3,852,703.15
----------------
----------------
SPONSORS' INITIAL REPURCHASE PRICE PER UNIT (Total Value of Securities divided by 4,000 Units): $ 963.17(3)
Plus Sales Charge of 4.9% (on sales of fewer than 250 Units) of Public Offering Price (4): 49.62
----------------
PUBLIC OFFERING PRICE PER UNIT: $ 1,012.79(5)
----------------
----------------
REDEMPTION PRICE PER UNIT: $ 955.51(6)
EXCESS OF PUBLIC OFFERING PRICE OVER REDEMPTION PRICE PER UNIT: $ 57.29
EXCESS OF PUBLIC OFFERING PRICE OVER SPONSORS' INITIAL REPURCHASE PRICE PER UNIT: $ 49.62
WEIGHTED AVERAGE MATURITY OF BONDS IN THE TRUST: 26.90 years
<S> <C>
EVALUATION TIME: 4:00 P.M. New York Time during the initial offering period and 2:00 P.M. New York
Time after the initial offering period.
EVALUATOR'S FEE: $.55 per Bond for each valuation.
TRUSTEE'S ANNUAL FEE: For each $1,000 principal amount of Bonds in the Trust, $.91 under the monthly and
$.51 under the semi-annual distribution plan.
SPONSORS' ANNUAL FEE: Maximum of $0.25 per $1,000 principal amount of underlying Securities. See 'The
Trust--Expenses and Charges.'
<S> <C>
SPONSORS' PROFIT (LOSS) ON DEPOSIT: $37,535.25
MANDATORY TERMINATION DATE: December 31, 2042
FIRST SETTLEMENT DATE: September 15, 1993
MINIMUM PRINCIPAL DISTRIBUTION: $1.00 per Unit
MINIMUM VALUE OF THE TRUST UNDER WHICH TRUST AGREEMENT MAY
BE TERMINATED: $2,000,000 or 20% of the principal amount of the Bonds
deposited in Trust, whichever is lower.
<CAPTION>
MONTHLY
SEMI-ANNUAL
<S> <C> <C> <C>
ESTIMATED ANNUAL INTEREST INCOME (INCLUDES CASH INCOME ACCRUAL ONLY): $ 54.48 $ 54.48
P
E Less Estimated Annual Expenses: 1.88 1.39
R
----------- ------------
ESTIMATED NET ANNUAL INTEREST INCOME: $ 52.60 $ 53.09
----------- ------------
----------- ------------
U ESTIMATED INTEREST DISTRIBUTION (9): $ 4.38 $ 26.54
N ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE (INCLUDES CASH
I INCOME ACCRUAL ONLY) (10): 5.19% 5.24%
T ESTIMATED LONG-TERM RETURN (12): 5.12% 5.17%
ESTIMATED DAILY RATE OF NET INTEREST ACCRUAL: $ .14613 $ .14747
RECORD DATES: 15th Day of Month 15th Day of
May and November
1st Day of
PAYMENT DATES: 1st Day of Month
June and December
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
A-2
<PAGE>
(EMPIRE EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GTD LOGO) GUARANTEED SERIES 99
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT SEPTEMBER 7, 1993 (1):
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO. TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
<TABLE>
<S> <C>
DATE OF DEPOSIT: September 8, 1993
AGGREGATE PRINCIPAL AMOUNT OF BONDS IN TRUST: $ 11,000,000.00(2)
NUMBER OF UNITS: 11,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST PER UNIT: 1/11,000
TOTAL VALUE OF SECURITIES IN PORTFOLIO (Based on Offering Side Valuations of Securities): $ 10,569,679.70
----------------
----------------
SPONSORS' INITIAL REPURCHASE PRICE PER UNIT (Total Value of Securities divided by 11,000 Units): $ 960.88(3)
Plus Sales Charge of 4.9% (on sales of fewer than 250 Units) of Public Offering Price (4): 49.50
----------------
PUBLIC OFFERING PRICE PER UNIT: $ 1,010.38(5)
----------------
----------------
REDEMPTION PRICE PER UNIT: $ 952.90(6)
EXCESS OF PUBLIC OFFERING PRICE OVER REDEMPTION PRICE PER UNIT: $ 57.48
EXCESS OF PUBLIC OFFERING PRICE OVER SPONSORS' INITIAL REPURCHASE PRICE PER UNIT: $ 49.50
WEIGHTED AVERAGE MATURITY OF BONDS IN THE TRUST: 25.32 years
<S> <C>
EVALUATION TIME: 4:00 P.M. New York Time during the initial offering period and 2:00 P.M. New York
Time after the initial offering period.
ANNUAL INSURANCE PREMIUM (7): $28,231.00
EVALUATOR'S FEE: $.55 per Bond for each valuation.
TRUSTEE'S ANNUAL FEE: For each $1,000 principal amount of Bonds in the Trust, $.91 under the monthly and
$.51 under the semi-annual distribution plan.
SPONSORS' ANNUAL FEE: Maximum of $0.25 per $1,000 principal amount of underlying Securities. See 'The
Trust--Expenses and Charges.'
<S> <C>
SPONSORS' PROFIT (LOSS) ON DEPOSIT: $129,278.35
MANDATORY TERMINATION DATE: December 31, 2042
FIRST SETTLEMENT DATE: September 15, 1993
MINIMUM PRINCIPAL DISTRIBUTION: $1.00 per Unit
MINIMUM VALUE OF THE TRUST UNDER WHICH TRUST AGREEMENT MAY
BE TERMINATED: $2,000,000 or 20% of the principal amount of the Bonds
deposited in Trust, whichever is lower.
<CAPTION>
MONTHLY
SEMI-ANNUAL
<S> <C> <C> <C>
ESTIMATED ANNUAL INTEREST INCOME (INCLUDES CASH INCOME ACCRUAL ONLY): $ 54.02 $ 54.02
Less Annual premium on Portfolio Insurance: 2.57 2.57
P
E Less Estimated Annual Expenses (8): 1.64 1.14
R
----------- ------------
ESTIMATED NET ANNUAL INTEREST INCOME: $ 49.81 $ 50.31
----------- ------------
----------- ------------
U ESTIMATED INTEREST DISTRIBUTION (9): $ 4.15 $ 25.15
N ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE (INCLUDES CASH
I INCOME ACCRUAL ONLY) (10)(11): 4.93% 4.98%
T ESTIMATED LONG-TERM RETURN (12)(13): 4.89% 4.94%
ESTIMATED DAILY RATE OF NET INTEREST ACCRUAL: $ .13836 $ .13975
RECORD DATES: 15th Day of Month 15th Day of
May and November
1st Day of
PAYMENT DATES: 1st Day of Month
June and December
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
A-3
<PAGE>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) The business day prior to the date of this Prospectus. The date of this
Prospectus is the date on which the Trust Agreement was signed and the deposit
with the Trustee was made.
(2) If a Replacement Bond is not acquired when a contract for the purchase
of Bonds fails, the aggregate principal amount of the Bonds may be reduced. See
'The Trusts--Portfolios--General Considerations' in Part B.
(3) Based, during the initial offering period, solely upon the offering
prices of the Securities and thereafter on the bid prices of such Securities.
See 'The Trusts--Market for Units' in this Part A.
(4) After the initial offering period, Units may be available for purchase
from the Sponsors at a price based upon the aggregate bid price of the Bonds in
the Trusts (as determined by the Evaluator) plus a sales charge determined in
accordance with the schedule set forth in 'Public Offering-Offering Price' in
Part B of this Prospectus, which is based upon the maturities of each Bond in
the Trusts.
(5) No accrued interest will be added to the Public Offering Price in
connection with purchases of Units contracted for on September 8, 1993. With
respect to purchases contracted for after such date, accrued interest from
September 15, 1993 to, but not including, the date of settlement (normally five
business days after order) will be added to the Public Offering Price.
(6) Based solely upon the bid prices of the Securities. Upon tender for
redemption, the price to be paid will include accrued interest as described in
'Rights of Unit Holders--Redemption--Computation of Redemption Price per Unit'
in Part B.
(7) Based upon the aggregate principal amount of the Bonds in the Insured
Trust. If the Trustee had exercised its right to obtain Permanent Insurance on
all of the Bonds in the Insured Trust as of the Date of Deposit, the total cost
of the Permanent Insurance premiums for such insurance would have been
$321,500.00.
(8) Excluding insurance costs.
(9) The first interest distribution of $1.00 and $1.00 per Unit for the
Uninsured Trust and the Insured Trust, respectively, will be made on December 1,
1993 (the 'First Distribution Date') to all certificateholders of record on
November 15, 1993 (the 'First Record Date'). The regular monthly payment for the
Uninsured Trust and the Insured Trust will be $4.38 and $4.15, respectively, on
January 1, 1994 and January 1, 1994, respectively, and thereafter. The first
semi-annual payment will be $26.54 and $25.15, respectively, on June 1, 1994 and
June 1, 1994, respectively, and thereafter. In order to reduce the amount of
accrued interest investors have to pay in addition to the Public Offering Price,
the Trustee has agreed to advance to each Trust the amount of accrued interest
due on Securities through and including September 8, 1993. This accrued interest
will be paid to the Sponsors as the holders of record of all Units on such date.
Consequently, when the Sponsors sell Units, the amount of accrued interest to be
added to the Public Offering Price of the Units purchased by an investor will
include only accrued interest from September 8, 1993 to but not including the
date of settlement of the investor's purchase (normally five business days after
the purchase contract), less any distributions from the Interest Account. Since
a person who contracts to purchase Units on September 8, 1993 will settle his
purchase on September 8, 1993, no accrued interest will be added to the Public
Offering Price of Units settled on that date. The Trustee will recover its
advancements (without interest or other cost to the Trust) from interest
received on the Securities deposited in each Trust. On such record date the
interest accrued on a Unit, less such initial distribution, under the monthly
and semi-annual payment plans will be $7.76 and $7.84, respectively, for the
Uninsured Trust and $7.30 and $7.38, respectively for the Insured Trust. See
'Rights of Unit Holders-- Redemption--Computation at Redemption Price per Unit
in Part B.'
(10) 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 each
Trust and the Evaluator, and with the redemption, maturity, exchange or sale of
Securities. This calculation, which includes cash income
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(notes continued from preceding pages)
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 'The Trusts--Tax Status' in Part B of this Prospectus and 'The
Trusts--Estimated Current Return and Estimated Long-Term Return to Unit Holders'
in this Part A.
(11) Calculated after payment of insurance premiums payable by the Insured
Trust. The Estimated Current Return on such date on an identical portfolio
without such insurance would have been 5.23% based on the semi-annual payment
plan and 5.19% based on the monthly payment plan.
(12) 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 each 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. This calculation does not take into account
delays in payment to Unit holders for the first few months of each Trust's
operations, which reduces the Long-Term Return number. See 'The Trusts--
Estimated Current Return and Estimated Long-Term Return to Unit Holders' in this
Part A.
(13) Calculated after payment of insurance premiums payable by the Insured
Trust. The Estimated Long-Term Return on such date on an identical portfolio
without such insurance would have been 5.19% based on the semi-annual payment
plan and 5.15% based on the monthly payment plan.
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THE TRUSTS
Empire State Municipal Exempt Trust (the 'Fund') is comprised of Empire
State Municipal Exempt Trust, Series 71 (the 'Uninsured Trust') and Guaranteed
Series 99 (the 'Insured Trust') (the Uninsured Trust and the Insured Trust are
collectively referred to in this Prospectus as the 'Trusts'), each of which is a
series of similar but separate unit investment trusts created under the laws of
the State of New York by separate Trust Indentures and Agreements* (the 'Trust
Agreements'), dated the Date of Deposit, among Glickenhaus & Co. and Lebenthal &
Co., Inc. as sponsors (the 'Sponsors'), The Bank of New York, as trustee (the
'Trustee'), and Muller Data Corporation, as evaluator (the 'Evaluator'). The
objective of the Fund is to obtain tax-exempt interest income through an
investment in (a) for the Uninsured Trust, a fixed portfolio consisting
primarily of various long-term investment grade municipal bonds with average
maturities of over 10 years and (b) for the Insured Trust, a fixed insured
portfolio consisting primarily of various long-term municipal bonds with average
maturities of over 10 years. Insurance does not protect against the risk of
market fluctuations on the underlying bonds in the Insured Trust's portfolio and
of the units of the Insured Trust. No assurance can be given that the Fund's
objectives will be achieved as these objectives are subject to the continuing
ability of the respective issuers of the bonds to meet their obligations and,
with regard to the Insured Trust, of the Insurer to meet its obligations under
the insurance. In addition, an investment in such portfolios can be affected by
fluctuations in interest rates.
Certain of the Bonds in each Trust may be purchased at prices which result
in each portfolio as a whole being purchased at a discount due to original issue
discount, market discount or the inclusion of zero coupon bonds. Bonds selling
at market discount tend to increase in market value as they approach maturity
when the principal amount is payable, thus increasing the potential for gain
(all or a portion of which may be taxable as ordinary income). Any income other
than any earned original issue discount will be taxable and will not be realized
until maturity, redemption or sale of the underlying Bonds or Units of each
Trust. In the case of Bonds acquired at a market discount, gain will be treated
as ordinary income to the extent of accrued market discount. At the time of the
original issuance of the Bonds held by each Trust, opinions relating to the
validity of the Bonds and the exemption of interest thereon from Federal income
tax and New York State and City personal income tax were (or with respect to
'when-issued' Bonds will be) rendered by bond counsel to the issuing
governmental authority. The continued tax-exempt status will depend upon the
issuer's ability to comply with the provisions of the Internal Revenue Code of
1986, as amended. See 'The Trusts-- Tax Status' in Part B of this Prospectus. On
the Date of Deposit, the Sponsors, acting for the Underwriting Account (see
'Underwriting Account' in this Part A), deposited with the Trustee delivery
statements relating to contracts for the purchase of $4,000,000 and $11,000,000
aggregate principal amount for the Uninsured Trust and the Insured Trust,
respectively, of interest-bearing obligations, including funds (represented by
cash, cash equivalents and/or an irrevocable letter of credit issued by a major
financial institution) for the purchase of certain such obligations (the 'Bonds'
or the 'Securities'). The Trustee thereafter delivered to the Sponsors a
registered certificate of 4,000 Units of the Uninsured Trust, representing the
entire ownership of the Uninsured Trust, and 11,000 Units of the Insured Trust,
representing the entire ownership of the Insured Trust, which Units are being
offered hereby.
In view of the Fund's objectives, the following factors, among others, were
considered in selecting the Bonds: (1) all the Bonds are obligations of the
State of New York and counties, municipalities, authorities or political
subdivisions thereof or issued by certain United States territories or
possessions, including Puerto Rico, and their public authorities so that the
interest on them will be exempt from Federal, New York State and New York City
income tax under existing law; (2) the Bonds are varied as to purpose of issue;
(3) in the opinion of the Sponsors, the Bonds are fairly
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* References in this Prospectus to the Trust Agreements are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
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valued relative to other bonds of comparable quality and maturity; and (4) with
respect to the Insured Trust, Municipal Bond Investors Assurance Corporation
insurance for the payment of principal and interest on the Securities is
available. Subsequent to the Date of Deposit, a Bond may cease to be rated or
its rating may be reduced. In the event a Bond's rating is downgraded to below
investment grade (i.e., 'high yield' or 'junk bond' status), such a Bond, as
compared to an investment grade bond, is subject to greater risk of downward
price volatility in periods of economic uncertainty. If a Bond in a Trust is
downgraded to high yield bond status, a decrease in the net asset value of such
Trust may result. For the Uninsured Trust, because the Bonds are not covered by
insurance guaranteeing the payment of principal and interest on the Bonds, the
risk of such a decrease is higher. If such a decrease in net asset value occurs
and Units of a Trust are tendered for redemption, such Trust may be forced to
liquidate some of the Bonds at a loss. If such redemptions are substantial
enough, this could trigger a complete and unexpected liquidation of such Trust
before maturity, resulting in unanticipated losses for investors.
Notwithstanding such risk, neither the downgrading of a Bond to below investment
grade nor a Bond's ceasing to be rated, requires an elimination of such Bond
from the portfolio of either Trust, but such an event may be considered in the
Sponsors' determination to direct the Trustee to dispose of the Bonds. See
'Sponsors-Responsibility' in Part B.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units of the Uninsured and the Insured
Trust during the initial offering period is equal to the aggregate offering
price of the Securities in the respective Trust's portfolio divided by the
number of Units outstanding, plus a sales charge equal to 4.9% of the Public
Offering Price of each Trust on sales of fewer than 250 Units. In addition, for
Units ordered after the date hereof, accrued interest will be payable from the
First Settlement Date for Units of the Trust (five business days from the date
hereof) to the expected date of settlement (five business days after order). For
additional information regarding the Public Offering Price, the descriptions of
interest and principal distributions, repurchase and redemption of Units and
other essential information regarding the Trusts, see the 'Summary of Essential
Information' for each Trust in this Part A. During the initial public offering
period, sales of at least 250 Units will be entitled to a volume discount from
the Public Offering Price. See 'Public Offering--Offering Price' in Part B. If
the Units of the Uninsured Trust had been available for sale on September 7,
1993, the Public Offering Price per Unit would have been $1,012.79; if the Units
of the Insured Trust had been available for sale on September 7, 1993, the
Public Offering Price per Unit would have been $1,010.38.
MARKET FOR UNITS
The Sponsors, although they are not obligated to do so, currently intend to
maintain a secondary market for the Units in each Trust at prices based upon the
aggregate bid price of the Securities plus accrued interest, if any, and a sales
charge of 4.9% of the Public Offering Price of each Trust at the time. 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
Securities in each Trust. The purchase price of the Securities, if they were
available for direct purchase by investors, would not include the sales charge
included in the Public Offering Price of the Units. With respect to the Insured
Trust, neither the bid nor the offering side valuations of the underlying
Securities or of the Units of such Trust, absent situations in which Securities
are in default in payment of principal or interest or in significant risk of
such default, include value, if any, attributable to the insurance obtained by
the Insured Trust. See 'Public Offering--Market for Units' in Part B of this
Prospectus.
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ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Units of the Trusts are offered to investors on a 'dollar price' basis
(using the computation method previously described under 'Public Offering
Price') as distinguished from a 'yield price' basis often used in offerings of
tax exempt bonds (involving the lesser of the yield as computed to maturity of
bonds or to an earlier redemption date). Since they are offered on a dollar
price basis, the rate of return on an investment in Units of each Trust is
measured in terms of 'Estimated Current Return' and 'Estimated Long Term
Return.'
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in each Trust portfolio in accordance with accepted practices, which
practices take into account not only the interest payable on the Bonds but also
the amortization of premiums or accretion of discounts, if any; (2) calculating
the average of the yields for the Bonds in each Trust portfolio by weighing each
Bond's yield by the market value of the Bond and by the amount of time remaining
to the date to which the Bond is priced (thus creating an average yield for the
portfolio of each Trust); and (3) reducing the average yield for the portfolio
of each Trust in order to reflect estimated fees and expenses of each Trust and
the maximum sales charge paid by Unit holders. The resulting Estimated Long Term
Return represents a measure of the return to Unit holders earned over the
estimated life of each Trust. The Estimated Long Term Return as of the day prior
to the Date of Deposit is stated for the Trusts under 'Summary of Essential
Information' for each Trust in Part A.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of each Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Securities are redeemed prior
to their maturity. On the day prior to the Date of Deposit, the Estimated Net
Annual Interest Income per Unit divided by the Public Offering Price resulted in
the Estimated Current Return stated for the Trust under 'Summary of Essential
Information' for each Trust in Part A.
The Estimated Net Annual Interest Income per Unit of each Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trusts. The Public Offering Price will vary with
changes in the offering prices (bid prices in the case of the secondary market)
of the Bonds. Therefore, there is no assurance that the present Estimated
Current Return or Estimated Long Term Return will be realized in the future.
A schedule of cash flow projections is available from the Sponsor upon
request.
DISTRIBUTIONS
Distributions of interest received by each Trust, pro rated on an annual
basis, will be made semi-annually unless the Unit holder elects to receive them
monthly. The first distribution will be $1.00 for Units of the Uninsured Trust
and $1.00 for Units of the Insured Trusts and will be made on December 1, 1993,
to Unit holders of record on November 15, 1993, and thereafter distributions
will be made on a semi-annual basis. See 'Rights of Unit Holders-- Distribution
of Interest and Principal' in Part B of this Prospectus.
Each Unit of the Uninsured Trust at the Date of Deposit represents 1/4,000
fractional undivided interest in the $4,000,000 face amount of underlying Bonds
and net income of the Uninsured Trust in the ratio of 1 Unit for each $1,000
principal amount of underlying Bonds (including contracts and funds for the
purchase thereof) in the Uninsured Trust. Each Unit of the Insured Trust at the
Date of Deposit represents 1/11,000 fractional undivided interest in the
$11,000,000 face amount of underlying Bonds and net income of the Insured Trust
in the ratio of 1 Unit for each
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$1,000 principal amount of underlying Bonds (including contracts and funds for
the purchase thereof) in the Insured Trust.
AUTOMATIC ACCUMULATION ACCOUNT
Distributions from the Trusts are made semi-annually unless the Unit holder
elects to receive them monthly. Unit holders of the Trusts have the option,
however, of either receiving their interest check, together with any principal
payments, from the Trustee or participating in the Automatic Accumulation
Account reinvestment program offered by the Sponsors (the 'Plan'). Under the
Plan, a Unit holder may elect to have distributions from Units in each Trust
automatically reinvested in shares of an open-end mutual fund. For a description
of the fund involved see 'Automatic Accumulation Account' in Part B.
Participation in the Plan is conditioned on the participating fund's lawful
qualification for sale in the state in which the Unit holder is a resident. The
Plan is not designed to be a complete investment program. See 'Automatic
Accumulation Account' in Part B for details on how to enroll in the Plan and how
to obtain a prospectus.
INSURANCE
Insurance guaranteeing the payment of all principal (either at stated
maturity or by advancement of maturity pursuant to a mandatory sinking fund
payment) and interest on each of the Bonds in the Insured Trust as such payments
shall become due but shall not be paid has been obtained by the Insured Trust
from Municipal Bond Investors Assurance Corporation (sometimes referred to
hereinafter as the 'Insurer'). Insurance obtained by the Insured Trust applies
only while Bonds are retained in the Insured Trust. Pursuant to an irrevocable
commitment of the Insurer, in the event of a sale of a Bond from the Insured
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. Insurance obtained by the Insured Trust relates only
to the payment of principal and interest on the Bonds in the Insured Trust but
neither covers the nonpayment of any redemption premium on the Bonds nor
guarantees the market value of the Units. With respect to small-issue industrial
development Bonds and pollution control revenue Bonds covered by the insurance,
the Insurer also guarantees any accelerated payments required to be made by or
on behalf of an issuer of such Bonds if there occurs 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
thereby required. The insurance does not otherwise guarantee any accelerated
payments required to be made by or on behalf of an issuer of other than
small-issue industrial development Bonds or pollution control revenue Bonds if
there occurs an event which results in the loss of the tax-exempt status of such
Bonds nor will the insurance cover accelerated payments of principal or penalty
interest or premiums unrelated to taxability of interest on any of the Bonds. In
the event of such an acceleration, the payments guaranteed by the Insurer shall
be made in such amounts and at such times as such payments would have been made
absent such acceleration. As a result of the Municipal Bond Investors Assurance
Corporation insurance, Moody's Investors Service has assigned a rating of 'Aaa'
to all of the Bonds in the Insured Trust, as insured, and Standard & Poor's
Corporation has assigned a rating of 'AAA' to the Units and Bonds while in the
Insured Trust. See 'The Trusts--Insurance on the Bonds in the Insured Trust'in
Part B. No representation is made as to any insurer's ability to meet its
commitments.
Some of the Bonds in the Insured Trust may also have been previously
insured by insurance obtained by the issuers of such Bonds or by persons other
than the Insured Trust ('Pre-insured Bonds'). None of the issues initially
deposited in the Insured Trust were Pre-insured Bonds. Insurance obtained by the
Insured Trust from the Insurer is effective only while the Bonds thus insured
are held in such Trust; however, insurance previously obtained by the issuer or
by persons other than the Insured Trust, for which a single premium has been
paid, is effective so long as the Pre-insured Bonds are outstanding. No
representation is made as to the ability of any insurer to meet its commitments.
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Neither the Public Offering Price nor any evaluation of Units of the
Insured Trust for purposes of repurchases or redemptions reflects any element of
value for the insurance obtained by the Insured Trust unless Securities are in
default in payment of principal or interest or, in the Sponsors' opinion, is in
significant risk of such default. See 'Public Offering--Offering Price' in Part
B of this Prospectus. On the other hand, the value, if any, of insurance
obtained by the issuer of the Securities or by parties other than the Insured
Trust is reflected and included in the market value of such Securities.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. If an
issue is accepted for Municipal Bond Investors Assurance Corporation insurance,
a non-cancellable policy for the payment of interest on and principal of the
bonds is issued by the Insurer. A single or annual premium is paid by the issuer
or any other party for its insurance on Pre-insured Bonds, and a monthly premium
is paid by the Insured Trust for the insurance it obtains from the Insurer on
the Bonds in the Insured Trust that are not also Municipal Bond Investors
Assurance Corporation Pre-insured Bonds or Municipal Bond Insurance Association
Pre-insured Bonds. No premium will be paid by the Insured Trust for the
insurance it obtains from the Insurer on Bonds that are also Municipal Bond
Investors Assurance Corporation Pre-insured Bonds or Municipal Bond Insurance
Association Pre-insured Bonds. Pursuant to an irrevocable commitment of the
Insurer, upon the sale of a Bond from the Insured Trust, the Trustee has the
right to obtain permanent insurance with respect to 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 the Insured Trust 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. See 'The Trusts--Insurance on the
Bonds in the Insured Trust' in Part B of this Prospectus.
THE PORTFOLIOS
The Uninsured Trust. The portfolio of the Uninsured Trust contains
contracts to purchase 8 issues of Bonds issued by entities located in New York
or certain United States territories or possessions, including Puerto Rico. All
such contracts are expected to be settled by September 15, 1993. The following
information is being supplied to inform Unit holders of circumstances affecting
the Uninsured Trust. 27.63% of the aggregate principal amount of the Bonds in
the portfolio are general obligations of the governmental entity issuing them
which are backed by the taxing power thereof. 18.12% of the aggregate principal
amount of the Bonds in the portfolio are payable from appropriations. 54.25% of
the aggregate principal amount of the Bonds in the portfolio are payable from
the income of specific projects or authorities and are not supported by the
issuers' power to levy taxes. Although income to pay such Bonds may be derived
from more than one source, the primary sources of such income, the number of
issues (and the related dollar weighted percentage of such issues) deriving
income from such sources and purpose of issue are as follows: General
Obligation, 2 (27.63%); Higher Education, 2 (16.38%); Appropriation, 1 (18.12%);
Health Care, 1 (15.13%); and Water and Sewer, 1 (15.87%). The Trust is deemed to
be concentrated in the General Obligation category.* Prior to their deposit in
the Uninsured Trust, 1 of the issues (15.12%) was rated AAA, 1 issue (5.00%) was
rated A, 1 issue (22.62%) was rated A-, 1 issue (6.25%) was rated BBB+, and 2
issues (28.25%) were rated BBB by Standard & Poor's Corporation ('Standard &
Poor's'); 1 issue (6.88%) was rated Aaa and 1 issue (15.88%) was rated A by
Moody's Investors Service ('Moody's').** Bonds rated BBB have adequate capacity
to pay interest and to repay principal, however, such Bonds
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* A Trust is considered to be 'concentrated' in a particular category or issuer
when the Bonds in that category or of that issuer constitute 25% or more of
the aggregate face amount of the portfolio. See 'The Trust--General
Considerations' in Part B of this Prospectus.
** For the meanings of ratings, including the symbols
'p' and 'Con. (. . .),' see 'Description of Ratings' in Part B
of this Prospectus. Security letter ratings
may be modified by the addition of a plus or minus sign, when appropriate, to
show relative standing within the major rating categories. There can be no
assurance that the economic and political conditions on which the ratings of
the Bonds in any Trust are based will
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may have certain speculative characteristics as well. See 'Description of
Ratings' in Part B of this Prospectus. Furthermore, Bonds rated BBB are more
sensitive to adverse economic changes or individual corporate developments. For
a more detailed discussion, it is recommended that Unit holders consult the
official statements for each security in the portfolio of the Uninsured Trust.
None of the Bonds initially deposited in the Uninsured Trust have been
purchased on a 'when issued' basis and none of the Bonds initially deposited in
the Uninsured Trust have been purchased on a delayed settlement basis. Normally,
delivery of 'when issued' Bonds and delayed settlement Bonds is expected to take
place within 30 days after the First Settlement Date. Accordingly, delivery may
be delayed or may not occur. Interest on such Bonds begins accruing to the
benefit of Unit holders on the date of delivery. Holders of Units will be 'at
risk' with respect to such Bonds (i.e., may derive either gain or loss from
fluctuations in the offering side valuation of such Bonds) from the date they
commit for Units. See 'The Trusts--Portfolios--General Considerations' in Part
B.
Approximately 81.88% of the aggregate principal amount of the Bonds in the
Uninsured Trust are original issue discount bonds and have mandatory sinking
fund installment provisions beginning on August 15, 1995, at redemption prices
equal to the compound accredited value on the date of redemption. Of these
original issue discount bonds, 6.87% are zero coupon bonds. Zero coupon bonds do
not provide for the payment of any current interest and provide for payment and
maturity at par value unless sooner sold or redeemed. The market for zero coupon
bonds is subject to greater fluctuations than coupon bonds in response to
changes in interest rates. (See 'Original Issue Discount and Zero Coupon Bonds'
in Part B of this Prospectus). On the Date of Deposit, the offering side
valuations of portfolio numbers 1, 3, 4, 5 and 7 for the Uninsured Trust were at
a premium and these Bonds are subject to retirement or refunding within ten
years of the Date of Deposit. On the Date of Deposit, based on the offering side
valuation, none of the aggregate principal amount of the Bonds were at par,
31.25% of the aggregate principal amount of the Bonds were at a discount from
par and 68.75% of the aggregate principal amount of the Bonds were at a premium.
The Insured Trust. The portfolio of the Insured Trust contains contracts to
purchase 9 issues of Bonds issued by entities located in New York or certain
United States territories or possessions, including Puerto Rico. All such
contracts are expected to be settled by September 15, 1993. The following
information is being supplied to inform Unit holders of circumstances affecting
the Insured Trust. 40.50% of the aggregate principal amount of the Bonds in the
portfolio are general obligations of the governmental entity issuing them which
are backed by the taxing power thereof. 17.51% of the aggregate principal amount
of the Bonds in the portfolio are payable from appropriations. 41.99% of the
aggregate principal amount of the Bonds in the portfolio are payable from the
income of specific projects or authorities and are not supported by the issuers'
power to levy taxes. Although income to pay such Bonds may be derived from more
than one source, the primary sources of such income, the number of issues (and
the related dollar weighted percentage of such issues) deriving income from such
sources and purpose of issue are as follows: General Obligation, 5 (40.50%);
Escrowed to Maturity, 1 (6.59%); Higher Education, 1 (18.95%); Appropriation, 1
(17.51%); and Water and Sewer, 1 (16.45%). The Trust is deemed to be
concentrated in the General Obligation category. Prior to their deposit in the
Insured Trust, 1 issue (19.45%) was rated A, 4 issues (21.05%) were rated A-,
and 2 issues (36.46%) were rated BBB by Standard & Poor's; 1 issue (6.59%) was
rated Aaa and 1 issue (16.45%) was rated A by Moodys. Bonds rated BBB have
adequate capacity to pay interest and to repay principal, however, such Bonds
may have certain speculative characteristics as well. Furthermore, Bonds rated
BBB are more sensitive to adverse economic changes or individual corporate
developments. See 'Description of Ratings' in Part B of this Prospectus. For a
more detailed discussion, it is recommended that Unit holders consult the
official statements for each security in the portfolio of the Insured Trust.
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continue or that particular Bond issues may not be adversely affected by
changes in economic, political or other conditions that do not affect the
above ratings. See 'The Trust--Special Factors Affecting New York' and 'The
Trust--General Considerations' in Part B of this Prospectus.
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None of the Bonds initially deposited in the Insured Trust have been
purchased on a 'when issued' basis and none of the Bonds initially deposited in
the Insured Trust have been purchased on a delayed settlement basis. Normally,
delivery of 'when issued' Bonds and delayed settlement Bonds is expected to take
place within 30 days after the First Settlement Date. Accordingly, delivery may
be delayed or may not occur. Interest on such Bonds begins accruing to the
benefit of Unit holders on the date of delivery. Holders of Units will be 'at
risk' with respect to such Bonds (i.e., may derive either gain or loss from
fluctuations in the offering side valuation of such Bonds) from the date they
commit for Units. Moreover, the insurance on the Bonds in the portfolio obtained
by the Insured Trust does not cover such Bonds until they are delivered to the
Insured Trust. See 'The Trusts--Portfolios--General Considerations' in Part B.
Approximately 82.50% of the aggregate principal amount of the Bonds in the
Insured Trust are original issue discount bonds and have mandatory sinking fund
installment provisions beginning on July 1, 2011, at redemption prices equal to
the compound accreted value on the date of redemption. Of these original issue
discount bonds, 6.59% are zero coupon bonds. Zero coupon bonds do not provide
for the payment of any current interest and provide for payment and maturity at
par value unless sooner sold or redeemed. The market for zero coupon bonds is
subject to greater fluctuations than coupon bonds in response to changes in
interest rates. (See 'Original Issue Discount and Zero Coupon Bonds' in Part B
of this Prospectus). On the Date of Deposit, the offering side valuations of
portfolio numbers 2, 4, 5, 6, 7 and 8 for the Insured Trust were at a premium
and these Bonds are subject to retirement or refunding within ten years of the
Date of Deposit. On the Date of Deposit, based on the offering side valuation,
none of the aggregate principal amount of the Bonds were at par, 40.55% of the
aggregate principal amount of the Bonds were at a discount from par and 59.45%
of the aggregate principal amount of the Bonds were at a premium.
An investment in Units of the Trusts should be made with an understanding
of the risks entailed in investments in fixed-rate bonds, including the risk
that the value of such bonds (and, therefore, of the Units) will decline with
increases in interest rates or a decrease in the federal or New York State
income tax rate. Inflation and recession, as well as measures implemented to
address these and other economic problems, contribute to fluctuations in
interest rates and the values of fixed-rate bonds generally. Additionally,
changes in the tax treatment of bonds may have an adverse impact on the value of
the Units. The Sponsors cannot predict future economic policies or their
consequences, nor can they predict the course or extent of such fluctuations in
the future.
A-12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Sponsors, Trustee, and Unit Holders of Empire State Municipal Exempt Trust,
Series 71 and Guaranteed Series 99
We have audited the Statement of Condition of Empire State Municipal Exempt
Trust, Series 71 and Guaranteed Series 99, including the related portfolios as
of September 8, 1993. This financial statement is the responsibility of the
Sponsors. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsors, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion. An
irrevocable letter of credit deposited on Septemer 8, 1993 in the amount
required to purchase securities, as described in the Statement of Condition, was
confirmed to us by the Trustee.
In our opinion, the Statement of Condition referred to above presents
fairly, in all material respects, the financial position of Empire State
Municipal Exempt Trust, Series 71 and Guaranteed Series 99 at September 8, 1993
in conformity with generally accepted accounting principles.
BDO SEIDMAN
Woodbridge, New Jersey
September 8, 1993
A-13
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
SERIES 71 AND GUARANTEED SERIES 99
STATEMENT OF CONDITION AS OF DATE OF DEPOSIT
SEPTEMBER 8, 1993
TRUST PROPERTY
<TABLE>
<S> <C> <C>
Guaranteed
Investment in Securities: Series 71 Series 99
-------------- --------------
Contracts to purchase underlying Securities (1) (2).............................. $ 3,852,703.15 $10,569,679.70
Accrued interest receivable........................................................ 50,698.50 165,807,74
-------------- --------------
Total......................................................................... $ 3,903,401.65 $10,735,487.44
-------------- --------------
-------------- --------------
</TABLE>
INTEREST OF UNIT HOLDERS
<TABLE>
<S> <C> <C>
Units of fractional undivided interest outstanding (Uninsured Trust: 4,000; Insured
Trust: 11,000):
Cost to investors (3).............................................................. $ 4,051,183.15 $11,114,179.70
Less--gross underwriting commission.............................................. 198,480.00 544,500.00
-------------- --------------
3,852,703.15 10,569,679.70
Accrued interest receivable........................................................ 50,698.50 165,807.74
-------------- --------------
Total.................................................................... $ 3,903,401.65 $10,735,487.44
-------------- --------------
-------------- --------------
</TABLE>
- ------------------
(1) Aggregate cost to each Trust of the Securities listed under 'Portfolio'
of each Trust is based on offering side valuation determined by the Evaluator on
the basis set forth under 'Public Offering--Offering Price' in Part B. The
aggregate bid side evaluation of the Securities in each portfolio, as determined
by the Evaluator, as of the Date of Deposit was $3,822,052.60 and $10,481,904.60
for the Uninsured Trust and the Insured Trust, respectively. Irrevocable letters
of credit relating to the Uninsured Trust and Insured Trust portfolios, issued
by Bankers Trust, in an aggregate amount equal to or in excess of $3,903,401.65
and $10,735,487.44 have been deposited with the Trustee. The amounts of such
letter of credit includes $3,852,703.15 and $10,569,679.70, the amount required
to purchase the tax-exempt securities listed in the related portfolios, plus
$50,698.50 and $165,807.74 covering accrued interest through expected dates of
delivery. Insurance coverage providing for the payment of all principal and
interest on the Bonds in the Insured Trust has been obtained by the Insured
Trust. The cost of insurance for the Insured Trust is $28,231.00. Such insurance
does not guarantee the market value of the Bonds or the value of the Units of
the Insured Trust. The insurance obtained by the Insured Trust is effective only
while Bonds thus insured are held in the Insured Trust. Neither the bid nor
offering prices of the underlying Bonds, or of the Units, absent situations in
which Bonds are in default in payment of principal or interest or in significant
risk of such default, include value, if any, attributable to the insurance
obtained by the Insured Trust.
(2) On the basis set forth under 'Rights of Unit Holders--Distribution of
Interest and Principal' in Part B the Trustee will advance an amount equal to
the accrued interest on the Securities as of September 15, 1993 (the 'First
Settlement Date') plus any cash received by the Trustee with respect to interest
on the Securities prior to such date, and the same will be distributed to the
Sponsors on the First Settlement Date. Consequently, the amount of interest
accrued on a Unit to be added to the public offering price thereof will include
only such accrued interest from the First Settlement Date to the date of
settlement, less all withdrawals and deductions from the Interest Account
subsequent to the First Settlement Date made with respect to the Unit.
(3) Aggregate public offering price (exclusive of interest) is computed on
4,000 and 11,000 Units of the Uninsured Trust and the Insured Trust,
respectively, on the basis set forth above under 'Public Offering--Offering
Price' in Part B.
(4) A sales charge of 4.9% computed on 4,000 and 11,000 Units of the
Uninsured Trust and the Insured Trust, respectively. See 'Public
Offering--Offering Price' in Part B for volume discounts on sales of 250 Units
or more.
A-14
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
SERIES 71
PORTFOLIO AS OF DATE OF DEPOSIT, SEPTEMBER 8, 1993
<TABLE>
<CAPTION>
REDEMPTION FEATURES
PORT- COUPON ANT.--ANTICIPATED YIELD
FOLIO PRINCIPAL REPRESENTED BY CONTRACTS TO RATE AND S.F.--SINKING FUND TO
NO. RATING (1) AMOUNT (3) PURCHASE SECURITIES (4) MATURITY (7) OPT.--OPTIONAL (5) MATURITY
- ----- ---------- ---------- --------------------------------- ------------ ------------------------ --------
<S> <C> <C> <C> <C> <C> <C>
1 AAA $605,000 New York State Medical Care, 5.700% 08/15/95 @ 100 S.F. 5.469%(8)
Facilities Finance Agency, St. 02/15/29 08/15/03 @ 102 Opt.
Luke's-Roosevelt Center, Hospital
FHA-Insured Mortgage Revenue
Bonds, 1993 Series A
2 Aaa* 275,000 Glen Cove Industrial Development 0.000 No Sinking Fund 5.671
Agency, Civic Facility Revenue 10/15/19 No Optional Call
Bonds, (The Regency at Glen
Cove), 1992 Series B (Escrowed to
Maturity)
3 A 200,000 Puerto Rico Public Buildings 5.750 07/01/11 @ 100 S.F. 5.500(8)
Authority, Public Education and 07/01/15 07/01/03 @ 101.5 Opt.
Health Facilities Refunding
Bonds, Series M, Guaranteed by
the Commonwealth of Puerto Rico
4 A* 635,000 New York City, Municipal Water 6.000 06/15/17 @ 100 S.F. 5.400(8)
Finance Authority, Water and 06/15/19 06/15/99 @ 100 Opt.
Sewer System Revenue Bonds,
Fiscal 1990 Series A
5 A- 905,000 The City of New York, General 6.250 No Sinking Fund 5.700(8)
Obligation Bonds, Fiscal 1993 08/01/17 08/01/02 @ 101.5
Series A
6 BBB+ 250,000 Dormitory Authority of the State 5.250 05/15/14 @ 100 S.F. 5.543
of New York, State University 05/15/19 No Optional Call
Educational Facilities, Revenue
Bonds, Series 1993 B
7 BBB 405,000 Dormitory Authority of the State 6.000 07/01/15 @ 100 S.F. 5.600(8)
of New York, City University 07/01/16 07/01/00 @ 100 Opt.
System Consolidated, Second
General Resolution Revenue Bonds,
Series 1990 C
8 BBB 725,000 New York State Housing Finance 5.500 03/15/15 @ 100 S.F. 5.597
Agency, Service Contracts 09/15/22 03/15/03 @ 102 Opt.
Obligation Revenue Bonds, 1993
Series A
----------
$4,000,000
----------
----------
<CAPTION>
PORT- COST OF
FOLIO SECURITIES
NO. TO TRUST (6)(7)
- ----- ---------------
<S> <C>
1 $617,100.00
2 63,937.50
3 204,278.00
4 653,561.05
5 944,874.30
6 240,000.00
7 414,015.30
8 714,937.00
---------------
$3,852,703.15
---------------
---------------
</TABLE>
A-15
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 99
PORTFOLIO AS OF DATE OF DEPOSIT, SEPTEMBER 8, 1993
<TABLE>
<CAPTION>
REDEMPTION FEATURES
PORT- COUPON ANT.--ANTICIPATED YIELD
FOLIO RATING PRINCIPAL REPRESENTED BY CONTRACTS TO RATE AND S.F.--SINKING FUND TO
NO. (1)(2) AMOUNT (3) PURCHASE SECURITIES (4) MATURITY (7) OPT.--OPTIONAL (5) MATURITY
- ----- ---------- ----------- --------------------------------- ------------ ------------------------ --------
<S> <C> <C> <C> <C> <C> <C>
1 Aaa*/Aaa $ 725,000 Glen Cove Industrial Development 0.000% No Sinking Fund 5.671%
Agency, Civic Facility Revenue 10/15/19 No Optional Call
Bonds (The Regency at Glen Cove),
1992 Series B (Escrowed to
Maturity)
2 A/Aaa 2,140,000 Puerto Rico Public Buildings 5.750 07/01/11 @ 100 S.F. 5.500(8)
Authority, Public Education and 07/01/15 07/01/03 @ 101.5 Opt.
Health Facilities Refunding
Bonds, Guaranteed by the
Commonwealth of Puerto Rico,
Series M
3 A*/Aaa 1,810,000 New York City Municipal Water 5.500 06/15/18 @ 100 S.F. 5.517
Finance Authority, Water and 06/15/20 06/15/02 @ 100 Opt.
Sewer System Revenue Bonds,
Fiscal 1993 Series A
4 A-/Aaa 250,000 The City of New York, General 6.250 No Sinking Fund 5.700(8)
Obligation Bonds, Fiscal 1993 08/01/18 08/01/02 @ 101.5 Opt.
Series A
5 A-/Aaa 175,000 The City of New York, General 6.250 No Sinking Fund 5.700(8)
Obligation Bonds, Fiscal 1993 08/01/17 08/01/02 @ 101.5 Opt.
Series A
6 A-/Aaa 300,000 The City of New York, General 6.250 No Sinking Fund 5.700(8)
Obligation Bonds, Fiscal 1993 08/01/21 08/01/02 @ 101.5 Opt.
Series A
7 A-/Aaa 1,590,000 The City of New York, General 6.000 No Sinking Fund 5.751(8)
Obligation Bonds, Fiscal 1993 05/15/20 05/15/03 @ 101.5 Opt.
Series E
8 BBB/Aaa 2,085,000 Dormitory Authority of the State 6.000 07/01/15 @ 100 S.F. 5.600(8)
of New York, City University 07/01/16 07/01/00 @ 100 Opt.
System Consolidated, Second
General Resolution Revenue Bonds,
Series 1990 C
9 BBB/Aaa 1,925,000 New York State Housing Finance 5.500 03/15/15 @ 100 S.F. 5.597
Agency, Service Contract 09/15/22 03/15/03 @ 102 Opt.
Obligation Revenue Bonds, 1993
Series A
-----------
$11,000,000
-----------
-----------
<CAPTION>
PORT- COST OF
FOLIO SECURITIES
NO. TO TRUST (6)(7)
- ----- ---------------
<S> <C>
1 $ 168,562.50
2 2,185,774.60
3 1,805,475.00
4 261,015.00
5 182,710.50
6 313,218.00
7 1,623,231.00
8 2,131,412.10
9 1,898,281.00
---------------
$ 10,569,679.70
---------------
---------------
</TABLE>
A-16
<PAGE>
NOTES TO PORTFOLIOS
The symbol 'NR' denotes a non-rated issue of Bonds.
(1) All ratings except those identified by an asterisk (*) are by Standard &
Poor's Corporation. A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees. The bond rating
is not a recommendation to purchase, sell or hold a security, inasmuch as it
does not comment as to market price or suitability for a particular investor. A
brief description of the rating symbols and their meanings is set forth under
'Description of Ratings' in Part B.
(2) Ratings in the right hand column are after deposit of these issues in
the Insured Trust and their insurance by MBIA. Moody's Investors Service has
assigned its 'Aaa' investment rating to all of the Bonds while in the Insured
Trust, as insured by Municipal Bond Investors Assurance Corporation.
(3) All Bonds are represented by contracts to purchase.
(4) All contracts to purchase the Bonds were entered into on August 30, 1993
to August 31, 1993 for the Uninsured Trust and August 26, 1993 to August 27,
1993 for the Insured Trust. All contracts are expected to be settled prior to or
on the First Settlement Date of the Trust which is expected to be September 15,
1993. These bonds are expected to be settled (and interest begins accruing on
these bonds to the benefit of Unit holders of each Trust) within 30 days after
the First Settlement Date.
(5) Unless otherwise indicated, there is shown under this heading the year
in which each issue of bonds initially is redeemable and the redemption price
for that year. Each such issue continues to be redeemable at declining prices
thereafter, but not below par. 'S.F.' indicates a sinking fund has been or will
be established with respect to an issue of Bonds. In addition, certain Bonds in
the Trusts may be redeemed in whole or in part other than by operation of the
stated optional call or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the terms
and provisions of such Bonds. A sinking fund is a reserve fund accumulated over
a period of time for retirement of debt. 'Ant.' indicates the existence of
anticipated redemptions at a price of 100%. Under certain circumstances, these
anticipated redemptions can be altered. A callable bond is one which is subject
to redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a bond issue is redeemed before maturity by the
proceeds of a new bond issue.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have an offering side valuation which represents a premium over par. To the
extent that the Bonds were deposited in each Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Monthly and semi-annual
distributions will generally be reduced by the amount of the income which would
otherwise have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium received on
such redemption. The estimated current return in this event may be affected by
such redemptions. The Federal tax effect on Unit holders of such redemptions and
resultant distributions is described in the section entitled 'The Trusts--Tax
Status' in Part B.
(6) See Note (1) to 'Statement of Condition as of Date of Deposit' regarding
cost of Bonds. The offering prices are greater than the current bid prices of
the Bonds which is the basis on which Redemption Price per Unit is determined
for purposes of redemption of Units (see the first paragraphs under 'Public
Offering--Offering Price' and 'Rights of Unit Holders--Redemption--Computation
of Redemption Price Per Unit' in Part B). On the business day prior to the Date
of Deposit the aggregate bid side valuation of the Securities in the Uninsured
Trust and the Insured Trust was lower than the aggregate offering side valuation
by .796% and .830%, respectively. Yield of Bonds was computed on the basis of
offering prices on the Date of Deposit.
Bonds identified as escrowed to maturity under 'Portfolio' for each Trust in
this Part I are priced to the maturity date not the call date.
(7) Annual interest income to the Uninsured Trust and the Insured Trust is
$217,947.50 and $594,287.50, respectively.
(8) Yield calculated based on a call date prior to stated maturity.
A-17
<PAGE>
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and the number of Units of each
Trust each has agreed to purchase from the Underwriting Account are:
<TABLE>
<CAPTION>
UNITS UNITS
NAME ADDRESS SERIES 71 SERIES 99
- ------------------------------------------------------------ ----------------------------------- --------- ---------
<S> <C> <C> <C>
Glickenhaus................................................. 6 East 43rd Street 2,250 3,400
New York, New York 10017
Lebenthal & Co., Inc........................................ 25 Broadway
New York, New York 10004 3,400
Gruntal & Co., Incorporated................................. 14 Wall Street 250 1,300
New York, New York 10005
Josephthal Lyon & Ross Incorporated......................... 6 East 43rd Street 200 300
New York, New York 10017
Kemper Securities Group, Inc.
Prescott Ball & Turben Division........................... 33 West Wacker Drive
Chicago, Illinois 60606 250
W.H. Newbolds, a division of Fahnestock & Co................ 1500 Walnut Street 100 250
Philadelphia, PA 19102
Advest, Incorporated........................................ 280 Trumball Street 100 100
Hartford, Connecticut 06103
David Lerner Associates, Inc................................ 477 Jericho Turnpike 100 100
Syosset, New York 11791
First Investors Corporation................................. 95 Wall Street 200
New York, New York 10005
Gibraltar Securities Co..................................... Ten James Street 100 100
Florham Park, New Jersey 07932
Ladenburg, Thalmann & Co. Inc............................... 540 Madison Avenue 100 100
New York, NY 10022
Mayer & Schweitzer Inc...................................... 111 Pavonia Avenue East 200
Jersey City, New Jersey 07310
Nathan & Lewis Securities Inc............................... 119 W. 40th Street 100 100
New York, New York 10018
Oppenheimer & Company....................................... World Financial Center 100 100
New York, New York 10281
Roosevelt & Cross, Inc...................................... 20 Exchange Place 100 100
New York, New York 10005
Tripp & Co., Inc............................................ 40 Rector Street 100 100
New York, New York 10006
W.J. Nolan & Co. Inc........................................ Two Wall Street 100 100
New York, New York 10005
Cadaret, Grant & Co., Inc................................... 108 W. Jefferson Street
Syracuse, New York 13203 100
</TABLE>
A-18
<PAGE>
<TABLE>
<CAPTION>
UNITS UNITS
NAME ADDRESS SERIES 71 SERIES 99
- ------------------------------------------------------------ ----------------------------------- --------- ---------
<S> <C> <C> <C>
Cowen & Company............................................. Financial Square
New York, New York 10005 100
Federated Securities........................................ P.O. Box 214
Huntington Station, NY 11746 100
Fidelity Capital Markets, a division of
National Financial Services Corporation................... 161 Devonshire Street D-4
Boston, MA 02110 100
Janney Montgomery Scott Inc................................. 9201 Fourth Avenue
Brooklyn, New York 11209 100
J.C. Bradford & Co.......................................... 330 Commerce Street
Nashville, Tennessee 37201 100
Monarch Financial Corporation of America.................... 120 Broadway 100
New York, NY 10271
Pershing (Division of
Donaldson, Lufkin & Jenrette
Securities Corporation)................................... One Pershing Plaza
Jersey City, NJ 07399 100
Raymond James & Associates, Inc............................. 880 Carillon Parkway
St. Petersburg, FL 33733 100
Stuart, Coleman & Co., Inc.................................. 11 West 42nd Street
New York, New York 10036 100
William R. Hough & Co....................................... 100 Second Avenue South
Suite 800 100
St. Petersburg, FL 33701
--------- ---------
4,000 11,000
--------- ---------
--------- ---------
</TABLE>
A-19
<PAGE>
TAX EQUIVALENT YIELDS
The following tables indicate the approximate yield resident individuals in
various income brackets must earn on a security subject to Federal, New York
State and New York City income taxes to receive an after-tax yield equivalent to
that provided by a tax-exempt bond yielding from 4.5% to 8.5%, based on
anticipated 1993 Federal, New York State and New York City marginal tax rates.
New York City taxpayers should refer to Table I. New York State taxpayers
outside of New York City should refer to Table II.
TABLE I. COMBINED EFFECT OF FEDERAL,
NEW YORK STATE AND NEW YORK CITY INCOME TAXES
<TABLE>
<CAPTION>
Approx.
1993 To equal a tax-exempt yield of:
Federal, --------------------------------------------------------------------------------------
If your net taxable income1 NYS&NYC 4.50% 5.00% 5.50% 6.00% 6.25% 6.50% 6.75% 7.00%
is approximately2 Marginal --------------------------------------------------------------------------------------
Joint Return Single Return Tax Rates4 A taxable investment would have to pay you:3
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27,001-$36,900 $15,001-$22,100 25.33% 6.0% 6.7% 7.4% 8.0% 8.4% 8.7% 9.0% 9.4%
- -----------------------------------------------------------------------------------------------------------------------------------
$36,901-$89,150 $22,101-$53,500 36.84% 7.1% 7.9% 8.7% 9.5% 9.9% 10.3% 10.7% 11.1%
- -----------------------------------------------------------------------------------------------------------------------------------
$89,151- $53,501-
$140,000 $115,000 39.51% 7.4% 8.3% 9.1% 9.9% 10.3% 10.7% 11.2% 11.6%
- -----------------------------------------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 43.89% 8.0% 8.9% 9.8% 10.7% 11.1% 11.6% 12.0% 12.5%
- -----------------------------------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 47.05% 8.5% 9.4% 10.4% 11.3% 11.8% 12.3% 12.7% 13.2%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Approx.
1993
Federal,
If your net taxable income1 NYS&NYC 7.25% 7.50% 7.75% 8.00% 8.50%
is approximately2 Marginal
Joint Return Single Return Tax Rates4
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$27,001-$36,900 $15,001-$22,100 25.33% 9.7% 10.0% 10.4% 10.7% 11.4%
- -----------------------------------------------------------------------------------------------------
$36,901-$89,150 $22,101-$53,500 36.84% 11.5% 11.9% 12.3% 12.7% 13.5%
- -----------------------------------------------------------------------------------------------------
$89,151- $53,501-
$140,000 $115,000 39.51% 12.0% 12.4% 12.8% 13.2% 14.1%
- -----------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 43.89% 12.9% 13.4% 13.8% 14.3% 15.1%
- ------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 47.05% 13.7% 14.2% 14.6% 15.1% 16.1%
- ------------------------------------------------------------------------------------------------------
</TABLE>
TABLE II. COMBINED EFFECT OF FEDERAL AND NEW YORK STATE INCOME TAXES
<TABLE>
<CAPTION>
Approx.
1993 To equal a tax-exempt yield of:
Federal & --------------------------------------------------------------------------------------
If your net taxable income1 NYS 4.50% 5.00% 5.50% 6.00% 6.25% 6.50% 6.75% 7.00%
is approximately2 Marginal --------------------------------------------------------------------------------------
Joint Return Single Return Tax Rates5 A taxable investment would have to pay you:3
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27,001-$36,900 $15,001-$22,100 21.69% 5.7% 6.4% 7.0% 7.7% 8.0% 8.3% 8.6% 8.9%
- -----------------------------------------------------------------------------------------------------------------------------------
$36,901-$89,150 $22,101-$53,500 33.67% 6.8% 7.5% 8.3% 9.0% 9.4% 9.8% 10.2% 10.6
- -----------------------------------------------------------------------------------------------------------------------------------
$89,151- $53,501-
$140,000 $115,000 36.43% 7.1% 7.9% 8.7% 9.4% 9.8% 10.2% 10.6% 11.0
- -----------------------------------------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 41.04% 7.6% 8.5% 9.3% 10.2% 10.6% 11.0% 11.4% 11.9
- -----------------------------------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 44.36% 8.1% 9.0% 9.9% 10.8% 11.2% 11.7% 12.1% 12.6
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Approx.
1993
Federal &
If your net taxable income1 NYS 7.25% 7.50% 7.75% 8.00% 8.50%
is approximately2 Marginal
Joint Return Single Return Tax Rates5
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$27,001-$36,900 $15,001-$22,100 21.69% 9.3% 9.6% 9.9% 10.2% 10.9%
- -----------------------------------------------------------------------------------------------------
$36,901-$89,150 $22,101-$53,500 33.67% 10.9% 11.3% 11.7% 12.1% 12.8%
- -----------------------------------------------------------------------------------------------------
$89,151- $53,501-
$140,000 $115,000 36.43% 11.4% 11.8% 12.2% 12.6% 13.4%
- -----------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 41.04% 12.3% 12.7% 13.1% 13.6% 14.4%
- ------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 44.36% 13.0% 13.5% 13.9% 14.4% 15.3%
- ------------------------------------------------------------------------------------------------------
</TABLE>
1 After exemptions and deductions other than state and local tax
deductions.
2 The tables cover only a representative range of incomes, and income
brackets have been rounded off to facilitate illustration. Actual
Federal, New York State and New York City income brackets may differ
slightly from those in the table.
3 Yields on taxable investments have been rounded off to facilitate
illustration.
4 This rate is calculated by using the highest New York State and New York
City marginal tax rates that apply to the bracket and a marginal Federal
tax rate based on a single return claiming one personal exemption and a
joint return claiming two personal exemptions (subject to the
personal exemption phaseout applicable at the highest two categories
of income). The tables are based on 1993 tax rates. There can be
no assurance that such rates will remain unchanged.
5 This rate is calculated by using the highest New York State marginal tax
rate that applies to the bracket and a marginal Federal tax rate based on
a single return claiming one personal exemption and a joint return
claiming two personal exemptions (subject to the personal
exemption phase out applicable at the highest two categories of
income).
A-20
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART A
THE TRUST
ORGANIZATION
Empire State Municipal Exempt Trust (the 'Fund') is comprised of Empire
State Municipal Exempt Trust, Series 71 (the 'Uninsured Trust') and Guaranteed
Series 99 (the 'Insured Trust') (the Uninsured Trust and the Insured Trust are
collectively referred to in this Prospectus as the 'Trusts'), each of which is a
series of similar but separate unit investment trusts created under the laws of
the State of New York by separate Trust Indentures and Agreements* (the 'Trust
Agreements'), dated the Date of Deposit, among Glickenhaus & Co. and Lebenthal &
Co., Inc. as sponsors (the 'Sponsors'), The Bank of New York, as trustee (the
'Trustee'), and Muller Data Corporation, as evaluator (the 'Evaluator').
On the date of this Prospectus each Unit represented the fractional
undivided interest in the Trust set forth under 'Summary of Essential Financial
Information' in Part A for each Trust. Thereafter, if any Units of either Trust
are redeemed by the Trustee, the fractional undivided interest in each Trust
represented by each unredeemed Unit will increase, although the actual interest
in each Trust represented by each such Unit will remain essentially the same.
Units will remain outstanding until redeemed upon tender to the Trustee by any
Unit holder, which may include the Sponsors, or until the termination of the
Trust Agreement for the related Trust. See 'Rights of Unit Holders-- Redemption'
in this Part B.
OBJECTIVES
The objective of the Fund is to obtain tax-exempt interest income through
an investment in (a) for the Uninsured Trust, a fixed portfolio consisting
primarily of various long-term, investment grade municipal bonds with average
maturities of over 10 years and (b) for the Insured Trust, a fixed insured
portfolio consisting primarily of various long-term municipal bonds with average
maturities of over 10 years. No assurance can be given that the Fund's
objectives will be achieved as these objectives are subject to the continuing
ability of the respective issuers of the bonds to meet their obligations and,
with regard to the Insured Trust, of the Insurer to meet its obligations under
the insurance. In addition, an investment in such portfolio can be affected by
fluctuations in interest rates.
PORTFOLIOS
The portfolios of each Trust consists of the Bonds described in 'The
Portfolios' in Part A and are represented by the Sponsors' contracts to
purchase, which are expected to be settled by the date set forth in Part A. The
Trusts may contain Bonds which have been purchased on a when, as, and if issued
basis. Accordingly, the delivery of such Bonds may be delayed or may not occur.
(See 'The Portfolios' in Part A.) Interest on these Bonds begins accruing to the
benefit of Unit holders on their respective dates of delivery. Unit holders will
be 'at risk' with respect to these Bonds (i.e., may derive either gain or loss
from fluctuations in the offering side evaluation of the Bonds) from the date
they commit for Units. (See 'The Portfolios' in Part A.) For a discussion of the
Sponsors' obligations in the event of the failure of any contract for the
purchase of any of the Bonds and limited right to substitute other bonds to
replace any failed contract, see 'Substitution of Bonds' in this Part B. As a
result of the Municipal Bond Investors Assurance
- ------------------------------------
* References in this Prospectus to the Trust Agreements are qualified in their
entirety by the Trust Agreements which are incorporated herein by reference.
<PAGE>
Corporation insurance, Moody's Investors Service has assigned a rating of 'Aaa'
to all of the Bonds in the Insured Trust, as insured and Standard & Poor's
Corporation has assigned a rating of 'AAA' to the Units and Bonds while in the
Insured Trust. (See 'Insurance on the Bonds in the Insured Trust' in this Part
B).
In view of the Fund's objectives, the following factors, among others, were
considered in selecting the Bonds: (1) All the Bonds are obligations of the
State of New York and counties, municipalities, authorities or political
subdivisions thereof or issued by certain United States territories or
possessions, including Puerto Rico and their public authorities so that the
interest on them will be exempt from Federal, New York State and New York City
income tax under existing law; (2) the Bonds are varied as to purpose of issue;
(3) in the opinion of the Sponsors, the Bonds are fairly valued relative to
other bonds of comparable quality and maturity; and (4) with respect to the
Insured Trust, Municipal Bond Investors Assurance Corporation insurance for the
payment of principal and interest on the Securities is available. Subsequent to
the Date of Deposit, a Bond may cease to be rated or its rating may be reduced.
Neither event requires an elimination of such Bond from the portfolio, but such
an event may be considered in the Sponsors' determination to direct the Trustee
to dispose of the Bonds. See 'Sponsors-Responsibility' in Part B. The insurance
on the Bonds in the portfolio obtained by the Insured Trust does not cover such
Bonds until they are delivered to the Insured Trust. See 'The
Trusts--Portfolios--General Considerations' in this Part B.
SPECIAL FACTORS AFFECTING NEW YORK
Beginning in early 1975, New York State (the 'State'), and several of its
public benefit corporations that issue municipal bonds under state legislation
('authorities') and municipalities, particularly New York City (the 'City'),
faced serious financing difficulties which impaired the borrowing abilities of
the State and the respective entities. If during the term of the Trust there
should be a default by any authority or municipality, or other financial crisis
relating to the State, its authorities or municipalities, the market price and
marketability of outstanding Bonds in the Trust, and therefore the asset value
of Units of the Trusts could be adversely affected.
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.
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, printing
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 fell in
those two years. Beginning in 1992, the improvement in the national economy
helped stabilize conditions in the City. The City now projects, and its current
four-year financial plan assumes, that the City's economy will continue to
improve during calendar year 1993 and that a modest economic recovery will begin
during the second half of this calendar year. The Mayor is responsible for
preparing the City's four-year financial plan, including the City's current
financial plan for the 1994 through 1997 fiscal years (the 'Financial Plan' or
the '1994-97 Financial Plan').
For fiscal years 1981 through 1992 the City has achieved balanced operating
results when reported in accordance with generally accepted accounting
principles ('GAAP'), and the City's 1993 fiscal year results are projected to be
balanced in accordance with GAAP. As used herein, 'operating results' refers to
the City's General Fund revenues and transfers reduced by expenditures and
transfers. Since 1978, the City's annual financial statements, prepared in
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conformity with GAAP, have been audited by independent certified public
accountants. The City's ability to maintain balanced budgets in the future is
subject to numerous contingencies.
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. 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 achieved balanced operating results as reported in accordance with
GAAP for the 1992 fiscal year. During the 1991 fiscal year, the City implemented
various actions to offset a projected budget deficit of $3.3 billion for the
1992 fiscal year. This $3.3 billion gap resulted from, among other things,
projected tax revenue shortfalls of approximately $1.4 billion in fiscal year
1992; $564 million of proposed reductions of State aid for the City;
approximately $400 million of projected increases in legally mandated
expenditures, including public assistance and Medicaid expenditures; and $73
million of increased debt service costs. The gap-closing measures for fiscal
year 1992 included receipt of $605 million from tax increases; approximately
$1.5 billion of proposed service reductions; proposed productivity savings of
$545 million; and revenue initiatives of $213 million, including improved tax
audit collections.
On July 6, 1993, the City prepared the Financial Plan for the 1994 through
1997 fiscal years, which relates to the City, the Board of Education ('BOE') and
the City University of New York ('CUNY'). The City is in the process of
preparing a more detained financial plan, which will conform to the Financial
Plan; and which the City expects to submit to the Control Board in August 1993.
The 1994-1997 Financial Plan projects revenues and expenditures for the
1994 fiscal year balanced in accordance with GAAP. The 1994-1997 Financial Plan
sets forth actions to close a previously projected gap of approximately $2.0
billion in the 1994 fiscal year. The gap-closing actions for the 1994 fiscal
year include agency actions aggregating $666 million, including productivity
savings and savings from restructuring the delivery of City services; service
reductions aggregating $274 million; the sale of delinquent real property tax
receivables for $215 million; discretionary transfers from the 1993 fiscal year
of $110 million; reduced debt service costs aggregating $187 million, resulting
from refinancings and other actions; $150 million in proposed increased Federal
assistance; a proposed continuation of the personal income tax surcharge,
resulting in revenues of $143 million; $80 million in proposed increases State
aid, of which approximately $35 million may be subject to approval by the
Governor and State Legislature; and revenue actions aggregating $173 million.
The projected expenditures for the 1994 fiscal year reflect the $131 million of
expenditure reductions announced subsequent to the adoption of the budget on
June 14, 1993, including a $50 million reduction in BOE expenditures, a $30
million reduction in personal service costs and a $25 million reduction in other
than personal services.
The Financial Plan also sets forth projections for the 1995 through 1997
fiscal years and outlines a proposed gap-closing program to close projected
budget gaps of $1.3 billion, $1.8 billion and $2.0 billion for the 1995 through
1997 fiscal years, respectively. The projections include $150 million of
increased Federal assistance in each of the 1994 through 1997 fiscal years and
$131 million, $291 million and $291 million of increased State assistance in the
1995, 1996 and 1997 fiscal years, respectively, which could include savings from
the proposed State assumption of certain Medicaid costs or various proposed
mandate relief measures and include the continuation of the personal income tax
surcharge, resulting in revenues of $420, $446 and $471 million in the 1995,
1996 and 1997 fiscal years, respectively.
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The proposed gap-closing actions include City actions aggregating $287 million,
$564 million and $645 million in the 1995 through 1997 fiscal years,
respectively; $100 million and $200 million in proposed additional Federal
assistance in the 1996 and 1997 fiscal years, respectively; savings from various
proposed mandate relief measures and the proposed reallocation of State
education aid among various localities, aggregating $175 million, $325 million
and $475 million in the 1995 through 1997 fiscal years, respectively; and other
unspecified Federal, State or city actions of $800 million, $800 million and $70
million in the 1995 through 1997 fiscal years, respectively.
Various actions proposed in the Financial Plan, including the proposed
continuation of the personal income tax surcharge beyond December 31, 1995 and
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. The State Legislature has in previous
legislative sessions failed to approve proposals for the State assumption of
certain Medicaid costs, mandate relief and reallocation of State education aid,
thereby increasing the uncertainty as to the receipt of the State assistance
included in the Financial Plan. If these actions cannot be implemented, the City
will be required to take other actions to decrease expenditures or increase
revenues to maintain a balanced financial plan. The State Legislature has
approved the continuation of the personal income tax surcharge through December
31, 1995, and the Governor is expected to approve this continuation. The
Financial Plan has been the subject of extensive public comment and criticism
particularly regarding the sale of delinquent property tax receivables, the sale
of the New York City Off-Track Betting Corporation ('OTB'), the amount of State
and Federal aid included in the Financial Plan and the inclusions of
non-recurring actions.
The City Comptroller issued a statement on June 14, 1993 that identified
problems totalling $476 million in the fiscal year 1994 budget. The problems
included the uncertainty of (i) receiving all the Federal aid anticipated, (ii)
completing the sale or reorganization of OTB in fiscal year 1994 and (iii)
winning approval to eliminate preparation time for certain teachers. The City
Comptroller is expected to issue reports on the Financial Plan in the near
future.
Although the City has maintained balanced budgets in each of its last
twelve fiscal years, and is projected to achieve balanced operating results for
the 1993 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 1994-97 Financial Plan is based on numerous assumptions, including the
recovery of the City's and the region's economy early in the calendar year 1993.
The 1994-97 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
1994 through 1997 fiscal years; continuation of the 9% interest earnings
assumptions for pension fund assets affecting the City's required pension fund
contributions; the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions to assist
the City, including the proposed State takeover of certain Medicaid costs and
State mandate relief, the ability of HHC, BOE and other agencies to maintain
budget balance; the willingness of the Federal government to provide Federal
aid; approval of the proposed continuation of the personal income tax surcharge
and the State budgets; adoption of the City's budgets by the City Council; the
ability of the City to implement contemplated productivity and service and
personnel reduction programs and the success with which the City controls
expenditures; additional expenditures that may be incurred due to the
requirements of certain legislation requiring minimum levels of funding for
education; the City's ability to market its securities successfully in the
public credit markets; the level of funding required to comply with the
Americans with Disabilities Act of 1990; 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.
B-4
<PAGE>
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 1994-1997 contemplates issuance of
$10.8 billion of general obligation bonds to reconstruct and rehabilitate the
City's infrastructure and physical assets and to make capital investments. A
significant portion of such bond financing is used to reimburse the City's
general fund for capital expenditures already incurred. 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 at the time of the sale,
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 operating and capital expenditures.
On January 11, 1994, 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. On April 9, 1993 the City announced an
agreement with the Uniformed Fire Officers Association which is consistent with
the coalition agreement. The agreement has been ratified. The Financial Plan
reflects the costs associated with these settlements and provides for similar
increases for all other City-funded employees.
The Financial Plan provides no additional wage increases for City employees
after their contracts expire in the 1995 fiscal year. Each 1% wage increase for
all employees commencing in the 1995 fiscal year would cost the City an
additional $56 million for the 1995 fiscal year and $152 million for the 1996
fiscal year and each year thereafter above the amounts provided for in the
Financial Plan.
The terms of eventual wage settlements could be determined through the
impasse procedure in the New York City Collective Bargaining Law, which can
impose a binding settlement.
MAC was organized in 1975 to provide financing assistance for the City and
also to exercise certain review functions with respect to the City's finances.
MAC bonds are payable out of certain State sales and compensating use taxes
imposed within the City, State stock transfer taxes and per capita State aid to
the City. Any balance from these sources after meeting MAC debt service and
reserve fund requirements and paying MAC's operating expenses is remitted to the
City or, in the case of the stock transfer taxes, rebated to the taxpayers. The
State is not, however, obligated to continue the imposition of such taxes or to
continue appropriation of the revenues therefrom to MAC, nor is the State
obligated to continue to appropriate the State per capita aid to the City which
would be required to pay the debt service on certain MAC obligations. MAC has no
taxing power and MAC bonds do not create an enforceable obligation of either the
State or the City. As of March 31, 1993, MAC had outstanding an aggregate of
approximately $5.463 billion of its bonds.
S&P has rated City Bonds A-. Moody's has rated City Bonds Baa1. Such
ratings reflect only the views of S&P and Moody's from which an explanation of
the significance of such ratings may be obtained. There is no assurance that
either or both of such ratings will continue for any given period of time or
that either or both 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 Bonds.
In 1975, S&P suspended its A rating of City Bonds. This suspension remained
in effect until March 1981, at which time the City received an investment grade
rating of BBB from S&P. On July 2, 1985, S&P revised its rating of City Bonds
upward to BBB+ and on November 19, 1987, to A-. On July 2, 1993, Standard &
Poor's reconfirmed its A-rating of City Bonds, continued its negative rating
outlook assessment and stated that maintenance of such ratings depended upon the
City's making further progress towards reducing budget gaps in the outlying
years. Moody's ratings
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of City Bonds were revised in November 1981 from B (in effect since 1977) to
Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and
again in February 1991 to Baa1.
New York State and its Authorities. As a result of the national and
regional economic recession, the State's tax revenues for its 1991 and 1992
fiscal years were substantially lower than projected. Consequently, the State
took various actions for its 1992 fiscal year, which included increases in
certain State taxes and fees, substantial decreases in certain expenditures from
previously projected levels, including cuts in State operations and reductions
in State aid to localities, and the sale of $531 million of short-term deficit
notes prior to the end of the State's 1992 fiscal year. The State's 1992-93
budget was passed on time, closing an estimated $4.8 billion imbalance resulting
primarily from the national and regional economic recession. Major budgetary
actions included a freeze in the scheduled reduction in the personal income tax
and business tax surcharge, adoption of significant Medicaid cost containment or
revenue initiatives, and reductions in both agency operations and grants to
local governments from previously anticipated levels. 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 Governor released the recommended Governor's Executive Budget for the
1993-95 fiscal year on January 19, 1993. The recommended 1993-94 State Financial
Plan projected a balanced General Fund. General Fund receipts and transfers from
other funds were projected at $31.6 billion, included $184 million carried over
from the State's 1993 fiscal year. Disbursements and transfers from other funds
were projected at $31.5 billion, not including a $67 million repayment to the
State's Tax Stabilization Reserve Fund. To achieve General Fund budgetary
balance in the 1994 State fiscal year, the Governor recommended various actions.
These included proposed spending reductions and other actions that would reduce
General Fund spending ($1.6 billion); continuing the freeze on personal income
and corporate tax reductions and on hospital assessments ($1.3 billion);
retaining moneys in the General Fund that would otherwise have been deposited in
dedicated highway and transportation funds ($516 million); a 21-cent increase in
the cigarette tax ($180 million); and new revenues from miscellaneous sources
($91 million). The recommended Governor's 1993-1994 Executive Budget included
reductions in anticipated aid to all levels of local government.
In comparison to the recommended 1993-94 Executive Budget, the 1993-94
State budget, as enacted, reflects increases in both receipts and disbursements
in the General Fund of $811 million.
The $811 million increase in projected receipts reflects (i) an increase of
$487 million, from $184 million to $671 million, in the positive year-end
margins at March 31, 1993, which resulted primarily from improving economic
conditions and higher-than-expected tax collections (ii) an increase of $269
million in projected receipts, $211 million resulting from the improved 1992-93
results and the expectation of an improving economy and the balance from
improved auditing and enforcement measures and other miscellaneous items, (iii)
additional payments of $200 million from the Federal Government to reimburse the
State for the costs of providing indigent medical care, and (iv) the payment of
an additional $50 million of personal income tax refunds in the 1993-93 fiscal
year which would otherwise have been paid in fiscal year 1993-94; offset by (v)
$195 million of revenue raising recommendations in the Executive Budget that
were not enacted in the budget and thus are not included in the 1993-94 State
Financial Plan.
The $811 million increase in projected disbursements reflects (i) an
increase of $252 million in projected school-aid payments, after applying
estimated receipts from the State Lottery allocated to school aid, (ii) an
increase of $194 million in projected payments for Medicaid assistance and other
social service programs, (iii) additional spending on the judiciary ($56
million) and criminal justice ($48 million), (iv) a net increase in projected
disbursements for all other programs and purposes, including mental hygiene and
capital projects, of $161 million, after reflecting certain re-estimates in
spending, and (v) the transfer of $100 million to a newly-established
contingency reserve.
The 1993-94 State budget, as enacted, included $400 million less in State
actions than the City had anticipated. Reform of education aid formulas was
achieved which brought an additional $145 million education dollars to New
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York City. However, the State Legislature failed to enact a takeover of local
Medicaid costs, other significant mandate relief items and certain Medicaid cost
containment items proposed by the Governor, which would have provided the City
with savings. The adopted State budget cut aid for probation services, increased
sanctions on social service programs, eliminated the pass-through of a State
surcharge on parking tickets, cut reimbursement for CHIPS transportation
operating dollars, and required a large contribution in City funds to hold the
MTA fare at the current level. In the event of any significant reduction in
projected State revenues or increases in projected State expenditures from the
amounts currently projected by the State, there could be an adverse impact on
the timing and amounts of State aid payments to the City in the future.
In certain prior fiscal years, the State has failed to enact a budget prior
to the beginning of the State's fiscal year. A delay in the adoption of the
State's budget beyond the statutory April 1 deadline and the resultant delay in
the State's Spring borrowing has in certain prior years delayed 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.
The State has noted that its forecasts of tax receipts have been subject to
variance in recent fiscal years. As a result of these uncertainties and other
factors, 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 14, 1992, S&P downgraded the State's general obligation bonds
from A to A-. Also downgraded was certain of the State's variously rated moral
obligation, lease purchase, guaranteed and contractual obligation debt,
including debt issued by certain State agencies. On June 6, 1990, Moody's
changed its rating of the State's outstanding general obligation bonds from AA-
to A. The State's tax and revenue anticipation notes issued in February 1991
were rated MIG-2 by Moody's and SP-1 by S&P. On January 6, 1992, Moody's changed
its rating of certain appropriations-backed debt of the State from A to Baa1.
Moody's also placed the State's general obligation, State guaranteed and New
York State Local Government Assistance Corporation bonds under review for
possible downgrading in coming months. Any action taken by S&P or Moody's to
lower the credit rating on outstanding indebtedness and obligations of the State
may have an adverse impact on the marketability of the State's notes and bonds.
As of March 31, 1993, the State had approximately $5.132 billion in general
obligation bonds, excluding refunding bonds and $294 million in bond
anticipation notes outstanding. On May 4, 1993, the State issued $850 million in
tax and revenue anticipation notes all of which will mature on December 31,
1993. Principal and interest due on general obligation bonds and interest due on
bond anticipation notes and on tax and revenue anticipation notes were $890
million and $818.8 million for the 1991-92 and 1993-94 fiscal years,
respectively, and is estimated to be $789 million for the State's 1993-94 fiscal
year, not including interest on refunding bonds, issued in July 1992, to the
extent that such interest is to be paid from escrowed funds.
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 $62.2 billion as of September 30, 1992, of which approximately
$8.2 billion was moral obligation debt and approximately $17.1 billion was
financed under lease purchase or contractual-obligation financing arrangements.
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
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for operating and other expenses and, in fulfillment of its commitments on moral
obligation indebtedness or otherwise for debt service. This assistance is
expected to continue to be required in future years.
The Metropolitan Transit Authority ('MTA'), a State agency, oversees the
operation of the City's subway and bus system (the 'Transit Authority' or 'TA')
and commuter rail lines serving the New York metropolitan area. Fare revenues
from such operations have been insufficient to meet expenditures, and the MTA
depends heavily upon a system of State, local, Triborough Bridge and Tunnel
Authority ('TBTA') and, to the extent available, Federal support. Over the past
several years, the State has enacted several taxes, including a surcharge on the
profits of banks, insurance corporations and general business corporations doing
business in the 12 county region (the 'Metropolitan Transportation 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 1993, TA originally projected a budget gap of about $266 million. The
MTA Board approved an increase in TBTA tolls which took effect January 31, 1993.
Since the TBTA operating surplus helps subsidize TA operations, the January toll
increase on TBTA facilities, and other developments, reduced the projected gap
to approximately $241 million. Legislation passed in April 1993 relating to the
MTA's 1992-1996 Capital Program reflected a plan for closing this gap without
raising fares. A major element of the plan provides that the TA receive a
significant share of the petroleum business tax which will be paid directly to
MTA for its agencies. The plan also relies on certain City actions that have not
yet been taken. The plan also relies an MTA and TA resources projected to be
available to help close the gap. If any of the assumptions used in making these
projections prove incorrect, the TA's gap could grow, and the TA would be
required to seek additional State assistance, raise fares or take other actions.
Two serious accidents in December 1990 and August 1991, which caused
fatalities and many injuries, have given rise to substantial claims for damages
against both the TA and the City.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. The Housing
Finance Agency ('HFA') and the Urban Development Corporation ('UDC') have in the
past required substantial amounts of assistance from the State to meet debt
service costs or to pay operating expenses. Further assistance, possibly in
increasing amounts, may be required for these, or other, Authorities in the
future. In addition, certain statutory arrangements provide for State local
assistance payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.
Also, a number of other court actions have been brought involving State
finances. State programs and miscellaneous tort, real property, employment
discrimination and contract claims in which the State is a defendant and the
monetary damages sought are substantial. The proceedings could affect the
ability of the State to maintain a balanced State Financial Plan in the 1994-97
fiscal years or thereafter. Among the more significant of these litigations,
which are at various procedural stages, are those that challenge: (1) the
validity of agreements and treaties by which various Indian tribes transferred
title to the State of certain land in central New York; (2) certain aspects of
the State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (3) contamination in the
Love Canal area of Niagara Falls; (4) an action against State and New York City
officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain proper
housing; (5) challenges to the practice of reimbursing certain Office of Mental
Health
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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) a challenge to the State's
possession of certain funds taken pursuant to the State's Abandoned Property
Law; (8) alleged responsibility of State officials to assist in remedying racial
segregation in the City of Yonkers; (9) 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; (10) actions challenging the constitutionality of
legislation enacted during the 1990 legislative session which changed the
actuarial funding methods for determining contributions to State employee
retirement systems; (11) 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; (12) a challenge to the constitutionality of financing programs of the
Thruway Authority authorized by Chapters 166 and 410 of the Laws of 1991; (13) a
challenge to the constitutionality of financing programs of the Metropolitan
Transportation Authority and the Thruway Authority authorized by Chapter 56 of
the Laws of 1993; (14) challenges to the delay by the State Department of Social
Services in making two one-week Medicaid payments to the service providers; (15)
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; (16) challenges to the
promulgation of the State's proposed procedure to determine the eligibility for
and nature of home care services for Medicaid recipients; (17) a challenge to
State implementation of a program which reduces Medicaid benefits to certain
home-relief recipients; and (18) challenges to the rationality and retroactive
application of State regulations recalibrating nursing home Medicaid rates.
State Economic Trends. Over the long term, the State and the City also 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.
A national recession commenced in mid-1990. The downturn, which continued
throughout the remainder of the 1990-91 fiscal year, has been a mild recession
when compared with the post-war historical average. The State has suffered a
more severe economic downturn. The national recession has been exacerbated in
the State by a significant retrenchment in the financial services industry,
cutbacks in defense spending, and an overbuilt real estate market.
The State has for many years had a very high State and local tax burden
relative to other states. The State and its localities have used these taxes to
develop and maintain their transportation networks, public schools and colleges,
public health systems, other social services and recreational facilities.
Despite these benefits, the burden of State and local taxation, in combination
with the many other causes of regional economic dislocation, has contributed to
the decisions of some businesses and individuals to relocate outside, or not
locate within, the State.
Reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State's localities.
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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 either Trust will retain for
any length of time its present size and composition. Except as described in
footnotes to 'Summary of Essential Financial Information' for the Uninsured
Trust and the Insured Trust interest accrues to the benefit of Unit holders
commencing with the expected date of settlement for purchase of the Units. If a
Replacement Bond is not acquired, accrued interest (at the coupon rate of the
Failed Bonds or earned original issue discount in the case of original issue
discount and zero coupon Bonds) will be paid to Unit holders (from the Deposit
Date to the date the Trustee is notified of the failure of the Sponsors to
purchase a Replacement Bond). All such interest paid to Unit holders which
accrued after the date of settlement for a purchase of Units will be paid by the
Sponsors and accordingly will not be treated as tax-exempt income. In the event
a Replacement Bond is not acquired by either Trust, the net annual interest
income per Unit for either Trust would be reduced and the estimated current
return might be lowered.
Neither the Sponsors nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event that any contract for
the purchase of Securities in either Trust fails and no Replacement Bond as
hereinafter defined is acquired, the Sponsors shall refund to all Unit holders
the sales charge attributable to such failed contract, and the principal and
accrued interest (at the coupon rate of the relevant Security or earned original
issue discount in the case of original issue discount and zero coupon Bonds to
the date the Sponsors are notified of the failure) which are attributable to
such failed contract, shall be distributed at the next Monthly Payment Date
which is more than 30 days after the failure to purchase Replacement Bonds. The
portion of such interest paid to a Unit holder which accrued after the expected
date of settlement for purchase of his Units will be paid by the Sponsors and
accordingly will not be treated as tax-exempt income.
The following paragraphs discuss the characteristics of the Bonds in either
of the Trusts and of certain types of issuers of the Bonds in either of the
Trusts. These paragraphs discuss, among other things, certain circumstances
which may adversely affect the ability of such issuers to make payment of
principal of and interest on Bonds held in the portfolio of either of the Trusts
or which may adversely affect the ratings of such Bonds. Because of the
insurance obtained by the Sponsors or by the issuers for the Insured Trust,
however, such changes should not adversely affect the Insured 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 either of the Trusts 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.
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APPROPRIATIONS BONDS
Many state or local governmental entities enter into lease purchase
obligations as a means for financing the acquisition of capital projects (e.g.,
buildings or equipment, among other things). Such obligations are often made
subject to annual appropriations. Certain Bonds in either of the Trusts may be
Bonds that are, in whole or in part, subject to and dependent upon (i) the
governmental entity making appropriations from time to time or (ii) the
continued existence of special temporary taxes which require legislative action
for their reimposition. The availability of any appropriation is subject to the
willingness of the governmental entity to continue to make such special
appropriations or to reimpose such special taxes. The obligation to make lease
payments exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental entity beyond
the monies so appropriated. Subject to the foregoing, once an annual
appropriation is made, the governmental entity's obligation to make lease rental
payments is absolute and unconditional without setoff or counterclaim,
regardless of contingencies, whether or not a given project is completed or used
by the governmental entity and notwithstanding any circumstances or occurrences
which might arise. In the event of non-appropriation, certificateholders' or
bondowners' sole remedy (absent credit enhancement) generally is limited to
repossession of the collateral for resale or releasing, and the obligation of
the governmental lessee is not backed by a pledge of the general credit of the
governmental lessee. In the event of non-appropriation, the Sponsors may
instruct the Trustee to sell such Bonds.
Moral Obligation Bonds. Certain of the Bonds in either of the Trusts may be
secured by pledged revenues and additionally by the so-called 'moral
obligations' of the State or a local governmental body. Should the pledged
revenues prove insufficient, the payment of such Bonds is not a legal obligation
of the State or 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
Bonds proceeds are not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see 'Original Issue Discount and Zero Coupon Bonds').
Housing Bonds. Some of the aggregate principal amount of Bonds of each
Trust 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 from rents and
other fees, 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 each of the Trusts, 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
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pursuant to such redemption provisions. In addition, the housing bonds in each
of the Trusts are also subject to mandatory redemption in part at par at any
time that voluntary or involuntary prepayments of principal on the underlying
mortgages are made to the trustee for such Bonds or that the mortgages are sold
by the bond issuer. Prepayments of principal tend to be greater in periods of
declining interest rates; it is possible that such prepayments could be
sufficient to cause a housing bond to be redeemed substantially prior to its
stated maturity date, earliest call date or sinking fund redemption date.
Public Power Revenue Bonds. General problems of the electric utility
industry include difficulty in financing large construction programs during an
inflationary period; restrictions on operations and increased costs and delays
attributable to environmental considerations; the difficulty of the capital
markets in absorbing utility debt and equity securities; the availability of
fuel for electric generation at reasonable prices, including among other
considerations the potential rise in fuel costs and the costs associated with
conversion to alternate fuel sources such as coal; technical cost factors and
other problems associated with construction, licensing, 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
of each Trust may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary considerably
from such projections. A hospital's gross receipts and net income will be
affected by future events and conditions including, among other things, demand
for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
federal or state programs such as Medicare and Medicaid which have been revised
substantially in recent years and which are undergoing further review at the
state and federal level. 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.
B-12
<PAGE>
Pollution Control Facility Revenue Bonds. Bonds in the pollution control
facilities category include securities issued on behalf of a private
corporation,* including utilities, to provide facilities for the treatment of
air, water and solid waste pollution. Repayment of these bonds is dependent upon
income from the specific pollution control facility and/or the financial
condition of the project corporation.
Other Utility Revenue Bonds. Bonds in this category include securities
issued to finance natural gas supply, distribution and transmission facilities,
public water supply, treatment and distribution facilities, and sewage
collection, treatment and disposal facilities. Repayment of these bonds is
dependent primarily on revenues derived from the billing of residential,
commercial and industrial customers for utility services, as well as, in some
instances, connection fees and hook-up charges. Such utility revenue bonds may
be adversely affected by the lack of availability of Federal and state grants
and by decisions of Federal and state regulatory bodies and courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in this category
include securities issued to finance facilities for removal and disposal of
solid municipal waste. Repayment of these bonds is dependent on factors which
may include revenues from appropriations from a governmental entity, the
financial condition of the private project corporation and revenues derived from
the collection of charges for disposal of solid waste. Repayment of resource
recovery bonds may also be dependent to various degrees on revenues from the
sale of electric energy or steam. Bonds in this category may be subject to
mandatory redemption in the event of project non-completion, if the project is
rendered uneconomical or if it is considered an environmental hazard.
Transportation Revenue Bonds. Bonds in this category include bonds issued
for airport facilities, bridges, turnpikes, port authorities, railroad systems,
or mass transit systems. Generally, airport facility revenue bonds are payable
from and secured by the revenues derived from the ownership and operation of a
particular airport. Payment on other transportation bonds is often dependent
primarily or solely on revenues from financed facilities, including user fees,
charges, tolls and rents. Such revenues may be adversely affected by increased
construction and maintenance costs or taxes, decreased use, competition from
alternative facilities, scarcity of fuel, reduction or loss of rents or the
impact of environmental considerations. Other transportation bonds may be
dependent primarily or solely on Federal, state or local 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 either of the Trusts may contain
other Bonds that are 'private activity bonds,' which would be primarily of two
types: (1) Bonds for a publicly owned facility that a private entity may have a
right to use or manage to some degree, such as an airport, seaport facility or
water system and (2) 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, issuers are obligated to
pay the principal of, any premium then due, or interest on the private activity
bonds only to the extent that funds are available from receipts or revenues of
the Issuer 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.
- ------------------------------------
* For purposes of the description of users of facilities, all references to
'corporations' shall be deemed to include any other nongovernmental person or
entity.
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<PAGE>
The private activity bonds in either of the Trusts have generally been
issued under bond resolutions, agreements or trust indentures pursuant to which
the revenues and receipts payable under the issuer's arrangements with the users
or the corporate operator of a particular project have been assigned and pledged
to the holders of the private activity bonds. In certain cases a mortgage on the
underlying project has been assigned to the holders of the private activity
bonds or a trustee as additional security. In addition, private activity bonds
are frequently directly guaranteed by the corporate operator of the project or
by another affiliated company.
Special Tax Revenue Bonds. Bonds in this category are bonds secured
primarily or solely by receipt of certain state or local taxes, including sales
and use taxes or excise taxes. Consequently, such bonds may be subject to
fluctuations in the collection of such taxes. Such bonds do not include tax
increment bonds or special assessment bonds.
Other Revenue Bonds. Certain of the Bonds in either of the Trusts may be
revenue bonds which are payable from and secured primarily or solely by revenues
from the ownership and operation of particular facilities, such as correctional
facilities, parking facilities, convention centers, arenas, museums and other
facilities owned or used by a charitable entity. Payment on bonds related to
such facilities is, therefore, primarily or solely dependent on revenues from
such projects, including user fees, charges and rents. Such revenues may be
affected adversely by increased construction and maintenance costs or taxes,
decreased use, competition from alternative facilities, reduction or loss of
rents or the impact of environmental considerations.
Certain of the Bonds in either of the Trusts 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 either of the Trusts 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
1989, approximately 87% of Puerto Rico's exports were to the United States
mainland, which was also the source of 67% of Puerto Rico's imports. In fiscal
1989, Puerto Rico experienced a $965.7 million 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. Since fiscal 1985, personal income has increased
consistently in each fiscal year. Personal income includes transfer payments to
individuals in Puerto Rico under various social programs. Transfer payments to
individuals in fiscal 1989 were $3.9 billion, of which $2.7 billion, or 69.2%,
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 rose to a record level
during fiscal 1990. Unemployment, although at the lowest level since the late
1970s, remains above the average for the United States. In fiscal 1990, the
unemployment rate in Puerto Rico was 14.3%. From fiscal 1985 through fiscal
1989, Puerto Rico experienced an economic expansion that affected almost every
sector of its economy and resulted in record levels of employment. Factors
behind this expansion include Commonwealth sponsored economic development
programs, the relatively stable prices of oil imports, the continued growth of
the United States economy, periodic declines in exchange value of the United
States dollar and the relatively low cost borrowing during the period. In fiscal
1989, the economy of Puerto Rico completed its sixth consecutive year of
economic growth. Real gross product amounted to approximately $15.4 billion in
fiscal 1989, or 3.6% above the
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fiscal 1988 level. The economy continued its growth during fiscal 1990 but at a
slower rate. The Puerto Rico Planning Board's economic activity index, a
composite index for thirteen economic indicators, increased 1% for the first ten
months of fiscal 1990 compared to the same period in fiscal 1989, which period
showed an increase of 3.2% over the same period in fiscal 1988.
ORIGINAL ISSUE DISCOUNT BONDS AND ZERO COUPON BONDS
Certain of the Bonds in either of the Trusts may be original issue discount
bonds and/or zero coupon bonds. Original issue discount bonds are bonds that
were originally issued at less than the market interest rate. Zero coupon bonds
are original issue discount bonds that do not provide for the payment of current
interest. For Federal income tax purposes, original issue discount on such bonds
must be amortized over the term of such bonds. On sale or redemption, the excess
of (i) the amount realized (other than amounts treated as tax-exempt income as
described below) over (ii) the tax basis of such bonds (properly adjusted, in
the circumstances described below, for amortization of original issue discount)
will be taxable as capital gain or loss. See 'The Trusts--Tax Status' in this
Part B. The Code requires holders of tax-exempt obligations issued with original
issue discount, such as the Trust, to accrue tax-exempt original issue discount
by using the constant interest method provided for the holders of taxable
obligations. In addition, the Code provides that the basis of a tax-exempt
obligation is increased by the amount of accrued tax-exempt original issue
discount. These provisions are applicable to obligations issued after September
3, 1982 and acquired after March 1, 1984. Each Trust's tax basis in a Bond is
increased by any accrued original issue discount as 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 Trusts' basis, as adjusted, and the amount
received will be taxable gain or loss to the Unit holders: all or a portion of
any gain may be taxable as ordinary income.
There can be no assurance that additional Federal legislation will not be
enacted or that existing legislation will not be amended hereafter with the
effect that interest on bonds becomes subject to Federal income taxation. If the
interest on the Bonds in either Trust should ultimately be deemed to be taxable,
the Trustee may sell them and, since they would be sold as taxable securities,
it is expected that they would have to be sold at a substantial discount from
current market price.
BONDS SUBJECT TO SINKING FUND PROVISIONS
Bonds in either of the Trusts may be subject to redemption prior to their
stated maturity date pursuant to sinking fund or call provisions. A sinking fund
is a reserve fund accumulated over a period of time for retirement of debt.
Sinking fund provisions are designed to redeem a significant portion of an issue
gradually over the life of the issue. Obligations to be redeemed are generally
chosen by lot. On the Date of Deposit, the offering valuations of some of the
Bonds in either of the Trusts may have been at a premium and subject to
retirement or refunding within ten years of the Date of Deposit. A callable debt
obligation is one which is subject to redemption prior to maturity at the option
of the issuer. To the extent that obligations are deposited in either Trust at a
price higher than their par value, such redemption at par would result in a loss
of capital to a purchaser of Units at their original public offering price. The
estimated current return of the Units might also be adversely affected if the
return on the retired Bonds is greater than the average return on the Bonds in
either Trust. In general, call provisions are more likely to be exercised when
the offering side valuation is at a premium over par than when it is at a
discount from par. See 'The Portfolios' in Part A for a list of original issue
discount and/or zero coupon bonds and for a breakdown of the percentage of Bonds
in each Trust with offering side valuations at a premium, discount or at par.
See also 'Estimated Current Return and Estimated Long Term Return' in Part A.
The portfolio contains a listing of the sinking fund and call provisions, if
any, with respect to each of the Bonds therein.
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<PAGE>
SUBSTITUTION OF BONDS
In the event of a failure to deliver any Bond that has been purchased for
either Trust under a contract, including those Bonds purchased on a 'when, as
and if issued' basis ('Failed Bonds'), the Sponsors are authorized to purchase
other bonds ('Replacement Bonds') which the Trustee shall pay for out of funds
held in connection with the Failed Bonds and to accept delivery of the
Replacement Bonds to make up the original corpus of either Trust. The
Replacement Bonds must be purchased within 20 days after delivery of the notice
of the failed contract, and the purchase price (exclusive of accrued interest)
may not exceed the principal attributable to the Failed Bonds. The Replacement
Bonds (i) must be tax-exempt bonds issued by the State of New York or counties,
municipalities, authorities or political subdivisions thereof or issued by
certain United Stated territories or possessions or their public authorities as
described in the first paragraph under 'Portfolio,' (ii) must have a fixed
maturity date not exceeding the maturity date of the Failed Bonds and not less
than ten years after the date of purchase, (iii) shall be purchased at a price
that results in a yield to maturity and a current return, in each case as of the
Date of Deposit, at least equal to the yield to maturity and the current return
of the Failed Bonds, (iv) shall not be 'when issued' bonds, (v) with respect to
the Insured Trust, must be rated at least equal to the Failed Bonds and (vi)
must be eligible for coverage under the Municipal Bond Investors Assurance
Corporation insurance policy obtained by the Insured Trust. Whenever a
Replacement Bond has been acquired for either Trust, the Trustee shall, within
five days thereafter, notify all Unit holders of either Trust of the acquisition
of the Replacement Bond and shall, on the next monthly Payment Date which is
more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to either Trust of the Failed Bond exceeded the cost of
the Replacement Bond. Once the original corpus of either Trust is acquired, the
Trustee will have no power to vary the investment of the Trust, i.e., the
Trustee will have no managerial power to take advantage of market variations to
improve a Unit holder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsors will refund the sales charge attributable to such Failed
Bonds to all Unit holders of either Trust, and distribute the principal and
accrued interest (at the coupon rate of such Failed Bond, or earned original
issue discount in the case of zero coupon bonds, from the Deposit Date to the
date the Sponsors notify the Trustee that they will not purchase Replacement
Bonds) attributable to such Failed Bonds on the next monthly Payment Date which
is more than 30 days thereafter. In the event a Replacement Bond is not acquired
by either Trust, the Estimated Net Annual Interest Income per Unit for either
Trust would be reduced and the Estimated Current Return thereon might be
lowered.
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
either Trust's portfolio. The Sponsors are unable to predict at this time what
effect, if any, this legislation will have on the Trusts.
To the best knowledge of the Sponsors, there is no litigation pending as of
the Date of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon either Trust. At any time after
the Date of Deposit, litigation may be initiated on a variety of grounds with
respect to Securities in the Trusts. Such litigation as, for example, suits
challenging the issuance of pollution control revenue bonds under recently
enacted environmental protection statutes, may affect the validity of such
Securities or the tax-free nature of the interest thereon. While the outcome of
such litigation can never be entirely predicted with certainty, bond counsel has
given or will give opinions to the issuing authorities of each Bond on the date
of issuance to the effect that such Securities have been validly issued and that
the interest thereon is exempt from regular Federal income tax. In addition,
other litigation
B-16
<PAGE>
or other factors may arise from time to time which potentially may impair the
ability of issuers to meet obligations undertaken with respect to Securities.
PUBLIC OFFERING
OFFERING PRICE
The price of the Units of the Uninsured Trust and the Insured Trust as of
the Date of Deposit was determined by adding to the Evaluator's determination of
the aggregate offering price of the Securities per Unit a sales charge of 5.152%
thereof equal to 4.9% of the Public Offering Price. During the initial public
offering period, sales of at least 250 Units will be entitled to a volume
discount from the Public Offering Price as described below. For purchases
settling after the First Settlement Date, a proportionate share of accrued and
undistributed interest on the Securities at the date of delivery of the Units to
the purchaser is also added to the Public Offering Price.
During the initial offering period the aggregate offering price of the
Securities in each Trust is determined by the Evaluator (1) on the basis of
current offering prices for the Securities,* (2) if offering prices are not
available for any Securities, on the basis of current offering prices for
comparable securities, (3) by making an appraisal of the value of the Securities
on the basis of offering prices in the market, or (4) by any combination of the
above. Such determinations are made each business day during the initial public
offering period as of the Evaluation Time set forth in the 'Summary of Essential
Financial Information' in Part A for each Trust, effective for all sales made
subsequent to the last preceding determination. For information relating to the
calculation of the Redemption Price, which is based upon the aggregate bid price
of the underlying Securities and which may be expected to be less than the
aggregate offering price, see 'Rights of Unit Holders--Redemption' in Part B.
Unless Securities are in default in payment of principal or interest or in
significant risk of such default, the Evaluator will not attribute any value to
the Units due to the Municipal Bond Investors Assurance Corporation insurance
obtained by the Insured Trust. See also 'Rights of Unit Holders-- Certificates'
and 'Rights of Unit Holders--Redemption' in Part B for information relating to
redemption of Units.
The Evaluator will consider in its evaluation of Securities which are in
default in payment of principal or interest or, in the Sponsors' opinion, in
significant risk of such default ('Defaulted Bonds') and which are covered by
insurance obtained by the Insured Trust the value of the insurance guaranteeing
interest and principal payments. The value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance premium
attributable to the purchase of Permanent Insurance and the 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 Municipal Bond
Investors Assurance Corporation to meet its commitments under the Insured
Trust's insurance policy, including the commitment to issue Permanent Insurance.
The Evaluator intends to use a similar valuation method with respect to
Securities insured by the Insured Trust if there is a significant risk of
default and a resulting decrease in the market value. For a description of the
circumstances under which a full or partial suspension of the right of Unit
holders to redeem their Units may occur, see 'Rights of Unit
Holders--Redemption' in Part B.
If the Trustee does not exercise the right to obtain Permanent Insurance as
to any Defaulted Bonds in the Insured Trust, it is the present intention of the
Trustee, so long as the Insured 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
- ------------------------------------
* With respect to the evaluation of Bonds during the initial syndicate offering
period for such Bonds, the 'current offering price,' as determined by the
Evaluator, will normally be equal to the syndicate offering price as of the
Evaluation Time, unless the Evaluator determines that a material event has
occurred which it believes may result in the syndicate offering price not
accurately reflecting the market value of such Bonds, in which case the
Evaluator, in making its determination with respect to such Bonds, will
consider not only the syndicate offering price but also the factors described
in (2) and (3) herein.
B-17
<PAGE>
INSURED TRUST CANNOT BE REALIZED UPON SALE. Insurance obtained by the issuer of
a Pre-insured Bond, or by some party other than the Insured Trust, is effective
so long as such Pre-insured Bond is outstanding and the insurer of such Bond
continues to fulfill its obligations. Therefore, any such insurance may be
considered to represent an element of market value in regard to the Pre-insured
Bond, but the exact effect, if any, of this insurance on such market value
cannot be predicted. Regardless of whether the insurer of a Pre-insured Bond
continues to fulfill its obligations, however, such Bond will in any case
continue to be insured under the policy obtained by the Insured Trust from
Municipal Bond Investors Assurance Corporation as long as the Bond is held in
the Insured Trust.
No value has been ascribed to the Municipal Bond Investors Assurance
Corporation insurance obtained by the Insured Trust as of the date of this
Prospectus.
The secondary market Public Offering Price of the Units of either Trust is
based on the aggregate bid price of the Bonds in either 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 such Trust.
The Sponsors have implemented this variable format as a more equitable method of
assessing the sales charge for secondary market purchases. For purposes of
computation, Bonds will be deemed to mature on their expressed maturity dates
unless the Evaluator evaluates the price of the Bonds to a different date such
as a call date or a mandatory tender date, in which case the maturity will be
deemed to be such other date.
This method of sales charge computation will apply different sales charge
rates to each Bond in either of the Trusts based upon the maturity of each such
Bond in accordance with the following schedule:
<TABLE>
<CAPTION>
SECONDARY MARKET
PERIOD SALES CHARGE
----------------------------------------
PERCENTAGE OF PERCENTAGE OF
PUBLIC NET YEARS TO
OFFERING MATURITY AMOUNT
PER BOND PRICE INVESTED
-------------- ---------------
<S> <C> <C>
YEARS TO MATURITY
PER BOND
- --------------------------------------------------------------
0 Months to 1 year............................................ 1.0% 1.010%
1 but less than 2............................................. 2.0% 2.091%
2 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%
</TABLE>
A minimum sales charge of 4.9% of the Public Offering Price will be applied
to all secondary market unit purchases.
During the initial public offering period, purchasers of 250 Units or more
will be entitled to a volume discount from the Public Offering Price as set
forth in the table below:
<TABLE>
<CAPTION>
DISCOUNT FROM
PUBLIC OFFERING
NUMBER OF UNITS PRICE PER UNIT
- -------------------------------------------------------------------------------- ---------------
<S> <C>
250-499......................................................................... $ 2.50
500-999......................................................................... 7.50
1,000-1,999..................................................................... 15.00
2,000 or more................................................................... 20.00
</TABLE>
B-18
<PAGE>
Except as discussed under 'Distribution of Units' below, the above volume
discount will be the responsibility of the Selling Underwriter or dealer and
will apply on all purchases at any one time by the same person of Units in each
Trust in the amounts stated. Units held in the name of the spouse of the
purchaser or in the name of a child of the purchaser under 21 years of age are
deemed for the purposes hereof to be registered in the name of the purchaser.
The graduated sales charges are also applicable to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
Certain commercial banks are making Units of both Trusts available to their
customers on an agency basis. A portion of the sales charge discussed above is
retained by or remitted to the banks. Under the Glass-Steagall Act, banks are
prohibited from underwriting Trust Units; however, the Glass-Steagall Act does
permit certain agency transactions, and banking regulators have not indicated
that these particular agency transactions are not permitted under such Act.
Market for Units
Although they are not obligated to do so, the Sponsors intend to maintain a
market for the Units of each Trust and continuously to offer to purchase Units
of each Trust during the initial offering period at prices based upon the
aggregate offering price of the Securities in each Trust; and thereafter at
prices based on the aggregate bid price of the related Securities. After the
initial offering period the Sponsors' Repurchase Price shall be not less than
the Redemption Price plus accrued interest through the expected date of
settlement. (See 'Rights of Unit Holders--Redemption-- Computation of Redemption
Price per Unit' in Part B) There is no sales charge incurred when a Unit holder
sells Units back to the Sponsors. Any Units repurchased by the Sponsors may be
reoffered to the public by the Sponsors at the Public Offering Price at the
time, plus accrued interest.
If the supply of Units of either Series exceeds demand, or for some other
business reason, the Sponsors may discontinue purchases of Units of either
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 either Trust. In the event
that a market is not maintained for the Units of either Trust, a Unit holder
desiring to dispose of his Units may be able to do so only by tendering such
Units to the Trustee for redemption at the Redemption Price, which is based upon
the aggregate bid price of the underlying Securities. The aggregate bid price of
the Securities in either of the Trusts may be expected to be less than the
aggregate offering price. If a Unit holder wishes to dispose of his Units, he
should inquire of the Sponsors as to current market prices prior to making a
tender for redemption to the Trustee. See 'Rights of Unit Holders--Redemption'
and 'Sponsors' in Part B.
DISTRIBUTION OF UNITS
The Underwriters of the Units of each Trust are listed in the Underwriting
Account (see 'Underwriting Account' in Part A). It is the Underwriters'
intention to qualify Units of each Trust for sale in certain of the states and
to effect a public distribution of the Units solely through their own
organizations. However, Units may be sold to dealers who are members of the
National Association of Securities Dealers, Inc. at prices which represent a
concession equal to $30.00 per Unit from the related Public Offering Price
applicable to sales of fewer than 500 Units subject in each case to change from
time to time by the Agent for the Sponsors. Any volume discount (see 'Offering
Price' in Part B) offered to investors will be borne by the selling Underwriter
or dealer except that, during the initial public offering period, the Sponsors
may pay the selling Underwriter or dealer $2.50 per Unit for individual sales of
more than 500 Units.
B-19
<PAGE>
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.
SPONSORS' AND UNDERWRITERS' PROFITS
As set forth under 'Public Offering--Offering Price' in Part B, the
Underwriters will receive gross commissions equal to the specified percentages
of the Public Offering Price of the Units of each Trust. The Sponsors will
receive from the Underwriters the excess of such gross sales commission over $35
per Unit from Underwriters underwriting 100 to 999 Units, will receive the
excess over $37.50 per Unit from Underwriters underwriting 1,000 or more Units
and will receive the excess over $40.00 per Unit from Underwriters who
underwrite 15% of the Units of each Trust. In addition, the Sponsors may, during
the initial public offering period, pay any Underwriter an additional $2.50 per
Unit for sales to individual purchasers of 500 or more Units. The Sponsors may
also from time to time pay, in addition to the amounts referenced above, an
additional concession, in the form of cash or other compensation, any
Underwriter who underwrites or sells, during a specific period, minimum dollar
amounts of the Units of each Trust. In no event will such additional concession
paid by the Sponsors to the Underwriter exceed the difference between the sales
charge and the Underwriter's allowance in respect of Units underwritten by the
Underwriter. Such Units then may be distributed to the public by the dealers at
the Public Offering Price then in effect.
In addition, the Sponsors realize a profit or sustain a loss, as the case
may be, in the amount of any difference between the cost of the Securities to
each Trust (which is based on the aggregate offering price of the Securities on
the Date of Deposit) and the purchase price of such Securities to the Sponsors
(which is the cost of such Securities at the time they were acquired for the
account of such Trust). The Underwriters share in the profits, if any, described
in the preceding sentence. See 'Summary of Essential Financial Information' in
Part A for each Trust. In addition, the Sponsors may realize profits or sustain
losses with respect to Bonds deposited in each Trust which were acquired from
one or more of the Sponsors or from underwriting syndicates of which they were
members. During the initial offering period, the Underwriters also may realize
profits or sustain losses as a result of fluctuations after the Date of Deposit
in the offering prices of the Securities and hence in the Public Offering Price
received by the Underwriters for Units. Cash, if any, made available to the
Sponsors prior to the settlement date for the purchase of Units of either Trust
may be used in the Sponsors' businesses, subject to the limitations of the
Securities Exchange Act of 1934 and may be of benefit to the Sponsors.
The Sponsors may have participated as underwriters or as managers or
members of underwriting syndicates from which some of the aggregate principal
amount of the Bonds were acquired for either Trust in the amounts set forth in
Part A. The Sponsors have not purchased any of the Securities in either Trust
from their managed accounts.
In maintaining a market for the Units of each Trust (see 'Market for
Units') the Sponsors and Underwriters will also realize profits or sustain
losses in the amount of any difference between the price at which they buy Units
and the price at which they resell or redeem such Units and to the extent they
earn sales charges on resales.
B-20
<PAGE>
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO UNIT HOLDERS
Units of each Trust are offered on a 'dollar price' basis. In contrast,
tax-exempt bonds customarily are offered on a 'yield price' basis. Therefore,
the rate of return on each Unit is measured in terms of both Estimated Current
Return and Estimated Long-Term Return. Estimated Current Return based on the
Public Offering Price per Unit and Estimated Long-Term Return per Unit, each as
of the business day prior to the Date of Deposit, is set forth under 'Summary of
Essential Financial Information ' in Part A for each Trust. Information
regarding the estimated monthly distributions of principal and interest to Unit
holders of each Trust is available from the Sponsors on request.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price. Estimated Net 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 A for each Trust 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 either
of the Trusts and (ii) takes into account the expenses and sales charge
associated with each Unit of each Trust. The Estimated Long-Term Return assumes
that each Bond is retired on its pricing life date (i.e., that date which
produces the lowest dollar price when yield price calculations are done for each
optional call date and the maturity date of a callable security). If the Bond is
retired on any optional call or maturity date other than the pricing life date,
the yield to the holder of that Bond will be greater than the initial quoted
yield. Since the market values and estimated retirements of the Bonds, the
expenses of the Trust and the Net Annual Interest Income and Public Offering
Price per Unit may change, there is no assurance that the Estimated Long-Term
Return as set forth under 'Summary of Essential Financial Information' in Part A
for each Trust will be realized in the future.
B-21
<PAGE>
INSURANCE ON THE BONDS IN THE INSURED TRUST
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in the Insured Trust has been obtained from the Insurer by
the Insured Trust. The Insurer has issued a policy of insurance covering each of
the Bonds in the Insured Trust, including Pre-insured Bonds. The Municipal Bond
Investors Assurance Corporation insurance obtained by the Insured Trust is only
effective as to Bonds owned by and held in the Insured Trust and, consequently,
does not cover Bonds for which the contract for purchase fails. A 'when issued'
Bond will be covered under the Municipal Bond Investors Assurance Corporation
policy upon the settlement date of the issue of such 'when issued' Bond. The
Municipal Bond Investors Assurance Corporation policy shall continue in force
only with respect to Bonds held in and owned by the Insured Trust, and the
Insurer shall not have any liability under the policy with respect to any Bonds
which do not constitute part of the Insured Trust. In determining to insure the
Bonds, the Insurer has applied its own standards
which generally correspond to the
standards it has established for determining the insurability of new issues of
municipal bonds. See 'Notes to Portfolios' in Part A of this Prospectus.
By the terms of its policy, the Insurer will unconditionally guarantee to
the Insured 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 issues of small 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 by reason of mandatory or optional redemption
(other than a mandatory sinking fund redemption). The Insurer will be
responsible for such payments less any amounts received by the Insured Trust
from any trustee for the Bond issuers or from any other source. Except as
provided below, the Municipal Bond Investors Assurance Corporation policy does
not guarantee payment on an accelerated basis, the payment of any redemption
premium or the value of the Units of the Insured Trust. The Municipal Bond
Investors Assurance Corporation policy also does not insure against nonpayment
of principal of or interest on the Bonds resulting from the insolvency,
negligence or any other act or omission of the Trustee or other paying agent for
the Bonds. However, with respect to small issue industrial development Bonds and
pollution control revenue Bonds covered by the policy, the Insurer guarantees
any accelerated payments required to be made by or on behalf of an issuer of
such Bonds if there occurs pursuant to the terms of the Bonds an event which
results in the loss of the tax-exempt status of interest on such Bonds,
including principal, interest or premium payments payable thereon, if any, as
and when required to be made by or on behalf of the issuer pursuant to the terms
of such Bonds. No assurance can be given that the Municipal Bond Investors
Assurance Corporation policy would insure the payment of principal or interest
on Bonds which is not required to be paid by the issuer thereof because the
Bonds were not validly issued. At the respective times of issuance of the Bonds,
opinions relating to the validity thereof were rendered by bond counsel to the
respective issuing authorities.
The Municipal Bond Investors Assurance Corporation insurance policy is
non-cancellable and will continue in force so long as the Insured Trust is in
existence and the Securities described in the policy continue to be held in and
owned by the Insured Trust (see 'The Trust--Insurance' in Part A of this
Prospectus). Failure to pay premiums on the Municipal Bond Investors Assurance
Corporation policy obtained by the Insured 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 Insured Trust.
B-22
<PAGE>
The Municipal Bond Investors Assurance Corporation policy shall terminate
as to any Bond which has been redeemed from the Insured Trust or sold by the
Trustee on the date of such redemption or on the settlement date of such sale,
and the Insurer shall not have any liability under the policy as to any such
Bond thereafter. If the date of such redemption or the settlement date of such
sale occurs between a record date and a date of payment of any such Bonds, the
Municipal Bond Investors Assurance Corporation policy will terminate as to such
Bond on the business day next succeeding such date of payment. The termination
of the Municipal Bond Investors Assurance Corporation policy as to any Bond
shall not affect the Insurer's obligations regarding any other Bond in the
Insured Trust or any other Trust which has obtained a Municipal Bond Investors
Assurance Corporation insurance policy. The Municipal Bond Investors Assurance
Corporation policy will terminate as to all Bonds on the date on which the last
of the Bonds matures, is redeemed or is sold by the Insured Trust.
Pursuant to an irrevocable commitment of the Insurer, the Trustee upon the
sale of a Bond in the Insured Trust has the right to obtain permanent insurance
with respect to such Bond (i.e., insurance to maturity of the Bond) (the
'Permanent Insurance') upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly, any Bond in the
Insured 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 Insured Trust upon instruction from the Sponsors only if upon such exercise
the Insured Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium attributable to the Permanent Insurance and the related
custodial fee) from such sale in excess of the sale proceeds if such Bond were
sold on an uninsured basis.
The Permanent Insurance premium with respect to each Bond in the Insured
Trust is determined based upon the insurability of each Bond as of the Date of
Deposit and will not be increased or decreased for any change in the
creditworthiness of such Bond unless such Bond is in default as to payment of
principal and/or interest. In such event, the Permanent Insurance premium shall
be subject to an increase predetermined at the Date of Deposit and payable from
the proceeds of the sale of such Bond. See footnote 7 to the 'Summary of
Essential Financial Information' in Part A for the Insured Trust for the cost of
Permanent Insurance as of the Date of Deposit.
Except as indicated below, insurance obtained by the Insured Trust has no
effect on the price or redemption value of Units thereof. lt is the present
intention of the Evaluator to attribute a value to the insurance obtained by the
Insured Trust (including the right to obtain Permanent Insurance) for the
purpose of computing the price or redemption value of Units thereof only if the
Bonds covered by such insurance are in default in payment of principal or
interest or, in the Sponsors' opinion, in significant risk of such default. The
value of the insurance will be equal to the difference between (i) the market
value of a Bond which is in default in payment of principal or interest or in
significant risk of such default assuming the exercise of the right to obtain
Permanent Insurance (less the insurance premium attributable to the purchase of
Permanent Insurance and the related custodial fee) and (ii) the market value of
such Bonds not covered by Permanent Insurance. See 'Public Offering--Offering
Price' in this Part B for a more complete description of the Evaluator's method
of valuing defaulted Bonds and Bonds which have a significant risk of default.
Insurance obtained by the issuer of a Bond or by parties other than the Insured
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 Insured Trust from the Insurer as long as the Bond is
held in the Insured 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, Citibank, N.A., New York, New York (the 'Fiscal
Agent'), equal to such unpaid amounts of principal and interest not later than
one business day after the Insurer has been notified by the Trustee that such
nonpayment has occurred (but not earlier than the date such payment is due). The
B-23
<PAGE>
Fiscal Agent will disburse to the Trustee the amount of principal and interest
which is then due for payment but is unpaid upon receipt by the Fiscal Agent of
(i) evidence of the Trust's right to receive payment of such principal and
interest and (ii) evidence, including any appropriate instruments of assignment,
that all of the rights to payment of such principal or interest then due for
payment shall thereupon vest in the Insurer. Upon payment by the Insurer of any
principal or interest payments with respect to any Bonds, the Insurer shall
succeed to the rights of the owner of such Bonds with respect to such payment.
The Insurer is the principal operating subsidiary of MBIA Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is a limited liability corporation
rather than a several liability association. The Insurer is domiciled in the
State of New York and licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico.
As of December 31, 1992, the Insurer had admitted assets of $2.6 billion
(audited), total liabilities of $1.7 billion (audited), and total capital and
surplus of $896 million (audited) determined in accordance with statutory
accounting
practices prescribed or permitted by insurance regulatory authorities. As of
March 31, 1993, the Insurer had admitted assets of $2.7 billion (unaudited),
total liabilities of $1.8 billion (unaudited), and total capital and surplus of
$918 million (unaudited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Copies of
the Insurer's year end financial statements prepared in accordance with
statutory accounting practices are available from the Insurer. The address of
the Insurer is 113 King Street, Armonk, New York 10504.
No representation is made herein as to the accuracy 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.
Standard & Poor's Corporation has assigned to the Units and Bonds in the
Insured Trust a rating of 'AAA.' Moody's Investors Service has assigned a rating
of 'Aaa' to all of the Bonds in the Insured Trust, as insured. These ratings
apply to the Bonds only while they are held in the Insured Trust. Also, these
ratings reflect Standard & Poor's and Moody's current assessments of the
creditworthiness of the Insurer and their ability to pay claims on their
policies of insurance.
Battle Fowler, special counsel for the Sponsors, have rendered an opinion
to the effect that the payment of proceeds from the insurance will be excludible
from Federal gross income if, and to the same extent as, such interest would
have been so excludible if paid by the issuer of the defaulted obligations. See
'Tax Status' in this Part B.
The contract of insurance relating to the Insured Trust, certain agreements
relating to the Permanent Insurance and the negotiations in respect thereof
represent the only significant relationship between the Insurer and the Insured
Trust. Otherwise, neither the Insurer nor any associate thereof has any material
business relationship, direct or indirect, with the Trust or the Sponsors,
except that the Sponsors may from time to time in the normal course of their
business, participate as underwriters or as managers or as members of
underwriting syndicates in the distribution of new issues of municipal bonds for
which a policy of insurance guaranteeing the payment of interest and principal
has been obtained from the Insurer, and except that James A. Lebenthal, Chairman
of the Board of Directors of Lebenthal & Co., Inc., is a Director of the
Insurer's parent company, MBIA Inc. Although all issues contained in the Insured
Trust are individually insured, neither the Insured Trust, the Units nor the
portfolio is insured directly or indirectly by the Insurer.
A purpose of the insurance on the Bonds in the portfolio obtained by the
Insured 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
Corporation's 'AAA' rating and/or Moody's Investors Service'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,
B-24
<PAGE>
no certainty that this result will be achieved. Any Pre-insured Bonds in the
Insured Trust (all of which are rated 'AAA' by Standard & Poor's Corporation
and/or 'Aaa' by Moody's Investors Service, respectively) may or may not have a
higher yield than uninsured bonds rated 'AAA' by Standard & Poor's Corporation
and/or 'Aaa' by Moody's Investors Service, respectively. In selecting
Pre-insured Bonds for the portfolio of the Insured Trust, the Sponsors have
applied the criteria hereinbefore described.
Because the Securities in the Insured Trust are insured by Municipal Bond
Investors Assurance Corporation as to the payment of principal and interest,
Standard & Poor's Corporation has assigned its 'AAA' investment rating to the
Units and Bonds in the Insured Trust and Moody's Investors Service has assigned
a rating of 'Aaa' to all of the Bonds in the Insured Trust, as insured. See
'Statement of Condition--Notes to Portfolios' in Part A. The obtaining of these
ratings by the Insured Trust should not be construed as an approval of the
offering of the Units by Standard & Poor's Corporation or Moody's Investors
Service or as a guarantee of the market value of the Insured 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 Insured Trust's acquisition
price will reduce payment to the Unit holders of the interest or principal.
TAX STATUS
Interest income on the Bonds contained in the portfolio of each of the
Trusts is, in the opinion of bond counsel to the issuing governmental
authorities, which opinion was rendered at the time of original issuance of the
Bonds, excludible from gross income under the Code. See 'The Trusts' in Part A.
Gain (or loss) realized on sale, maturity, or redemption of the Bonds or on
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 dispositon 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 noncorporate Unit holders may be deducted against ordinary income.
Since the proceeds from sales of Bonds, under certain circumstances, may not be
distributed pro-rata, the Unit holder's taxable income for any year may exceed
their actual cash distributions in that year.
In the opinion of Battle Fowler, special counsel for the Sponsors, under
existing law:
The Fund and each Trust is not an association taxable as a corporation
for Federal income tax purposes, and interest on the Bonds which is
excludible from regular Federal gross income under the Code, when received
by a Trust, will be excludible from the regular Federal gross income of the
Unit holders of such Trust. Any proceeds paid under the insurance policy
described above issued to the Insured Trust with respect to the Bonds and
any proceeds paid under individual policies obtained by issuers of Bonds or
other parties which represent maturing interest on defaulted obligations
held by the Insured Trust will be excludible from Federal gross income if,
and to the same extent as, such interest would have been so excludible if
paid in the normal course by the issuer of the defaulted obligations.
Each Unit holder will be considered the owner of a pro rata portion of
the Bonds and any other assets held in the related Trust under the grantor
trust rules of Code Sections 671-679. Each Unit holder will be considered
to have received his pro rata share of income from Bonds held by the
related Trust on receipt (or earlier accrual,
B-25
<PAGE>
depending on the Unit
holder's method of accounting and depending on the existence of any
original issue discount) by such Trust, and each Unit holder will have a
taxable event when an underlying Bond is disposed of (whether by sale,
redemption, or payment at maturity) or when the Unit holder redeems or
sells his Units. Gain from a sale will be treated as short term or long
term capital gain depending on how long the Bond was held by the related
Trust. The total tax basis (i.e., cost) of each Unit to a Unit holder is
allocated among each of the Bonds held in the related Trust (in accordance
with the proportion of such Trust comprised by each such Bond) in order to
determine his per Unit tax basis for each Bond, and the tax basis reduction
requirements of the Code relating to amortization of bond premium will
apply separately to the per Unit cost of each such Bond. Therefore, under
some circumstances, a Unit holder may realize taxable gain when his Units
are sold or redeemed for an amount equal to his original cost. No deduction
is allowed for the amortization of bond premium on tax-exempt bonds such as
the Bonds. None of the interest received from the portfolio is subject to
the alternative minimum tax for individuals; however, some or all of the
interest received from the portfolio may be includible in the calculation
of a corporation's alternative minimum tax.
For Federal income tax purposes, when a Bond is sold, a Unit holder
may exclude from his share of the amount received any amount that
represents accrued interest but may not exclude amounts attributable to
market discount. Thus, when a Bond is sold by a Trust, taxable gain or loss
will equal the difference between (i) the amount received (excluding the
portion representing accrued interest) and (ii) the adjusted basis
(including any accrued original issue discount, limited in the case of
Bonds issued after June 8, 1980 to the portion earned from the date of
acquisition, as discussed below). In the case of Bonds acquired at a market
discount, gain will be treated as ordinary income to the extent of accrued
market discount.
A Unit holder may also realize taxable gain or loss when a Unit is
sold or redeemed. Taxable gain will result if a Unit is sold or redeemed
for an amount greater than its adjusted basis to the Unit holder. The
amount received when a Unit is sold or redeemed is allocated among all the
Bonds in the related Trust in the same manner as when such Trust disposes
of Bonds, and the Unit holder may exclude accrued interest, including the
earned portion of any original issue discount, but not amounts attributable
to market discount. In the case of Bonds acquired at a market discount gain
will be treated as ordinary income to the extent of accrued market
discount. The return of a Unit holder's tax basis is otherwise a tax-free
return of capital.
If either Trust purchases any units of a previously issued series
then, based on the opinion of counsel with respect to such series, each
Trust's pro rata ownership interest in the bonds of such series (or any
previously issued series) will be treated as though it were owned directly
by that Trust.
Under the income tax laws of the State and City of New York, the Fund
and each Trust is not an association taxable as a corporation and the
income of either Trust will be treated as the income of the Unit holders.
A Unit holder who is a non-resident of New York will not be subject to
New York State or City income tax on any interest or gain derived from his
interest in either Trust's assets or upon any gain from the sale of his
Units except to the extent that such interest or gain is from property
employed in a business, trade, profession or occupation carried on by him
in the State of New York. An individual Unit holder who resides in New York
State or City will not be subject to State or City tax on interest income
derived from the Bonds held in either Trust (except in certain limited
circumstances), although he will be subject to New York State and,
depending upon his place of residence, City tax with respect to any gains
realized when Bonds are sold, redeemed or paid at maturity or when any such
Units are sold or redeemed. In addition, an individual Unit holder residing
in New York State or City will not be subject to State or City income tax
on any proceeds paid under the insurance policy or policies described above
with respect to the Insured Trust which represent maturing interest on
defaulted obligations held by the Trustee if, and to the same extent as,
such interest would have been so excludible if paid by the issuer of the
defaulted obligations. A New York State or City resident should determine
his basis and holding period for his Units for New York State and City tax
purposes in the same manner as for Federal tax purposes.
B-26
<PAGE>
The above opinion of Battle Fowler as to the tax status of the Trusts is
not affected by the provision of the Trust Agreements that authorizes the
acquisition of Replacement Bonds or by the implementation of the option
automatically to reinvest principal and interest distributions from each Trust
pursuant to the Automatic Accumulation Plan, described under 'Automatic
Accumulation Account' in this Part B.
Among other things, the Code provides for the following: (1) interest on
certain private activity bonds issued after August 7, 1986 is included in the
calculation of the individual's alternative minimum tax (currently taxed at a
rate of up to 28%); none of the Bonds in either of the Trusts is a Private
Activity Bond the interest on which is subject to the alternative minimum tax;
(2) interest on certain Private Activity Bonds issued after August 7, 1986 is
included in the calculation of the corporate alternative minimum tax and 75% of
the amount by which adjusted current earnings (including interest on all
tax-exempt bonds, such as the Bonds) exceed alternative minimum taxable income,
as modified for this calculation, will be included in alternative minimum
taxable income. Interest on the Bonds is
includible in the adjusted current earnings of a corporation for purposes of
such alternative minimum tax. The Code does not otherwise require corporations,
and does not require taxpayers other than corporations, including individuals,
to treat interest on the Bonds as an item of tax preference in computing an
alternative minimum tax; (3) subject to certain exceptions, no financial
institution is allowed a deduction for that portion of the institution's
interest expense allocable to tax-exempt interest on tax-exempt bonds acquired
after August 7, 1986; (4) the amount of the deduction allowed to property and
casualty insurance companies for underwriting loss is decreased by an amount
determined with regard to tax-exempt interest income and the deductible portion
of dividends received by such companies; (5) all taxpayers are required to
report for informational purposes on their Federal income tax returns the amount
of tax-exempt interest they receive; (6) an issuer must meet certain
requirements on a continuing basis in order for interest on a tax-exempt bond to
be tax-exempt, with failure to meet such requirements resulting in the loss of
tax exemption; and (7) a branch profits tax on U.S. branches of foreign
corporations is implemented which, because of the manner in which the branch
profits tax is calculated, may have the effect of subjecting the U.S. branch of
a foreign corporation to Federal income tax on the interest on bonds otherwise
exempt from such tax.
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 before 1996, 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 50% of their social security benefits exceeds a base
amount. The base amount is $25,000 for an individual, $32,000 for a married
couple filing a joint return and zero for married persons filing separate
returns. Under Section 86 of the Code, interest on tax-exempt bonds is to be
added to adjusted gross income for purposes of determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax. The amount of social security benefits that
could be includible in taxable income would be the lesser of one-half of the
benefits or one-half of the excess of the taxpayer's combined income (modified
adjusted gross income plus one-half of benefits) over the base amount. For
taxable years beginning after December 31, 1993, the amount of social security
benefits subject to tax will be increased.
In addition, certain 'S Corporations', with accumulated earnings and
profits from Subchapter C years, may be subject to minimum tax on excess passive
income, including tax-exempt interest, such as interest on the Bonds.
B-27
<PAGE>
At the time of the original issuance of the Bonds held by either Trust,
opinions relating to the validity of the Bonds and the exemption of interest
thereon from regular Federal income tax were or (with respect to 'when issued'
Bonds) were to be rendered by bond counsel to the issuing governmental
authorities. Neither the Sponsors nor their special counsel have made any review
of proceedings relating to the issuance of such Bonds or the basis for bond
counsel's opinions.
Under Section 265 of the Code, if borrowed funds are used by a Unit holder
to purchase or carry Units of either 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 acquire Units 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. Investors with questions regarding this issue should
consult with their tax advisors.
The Trusts may contain Bonds issued with original issue discount. The Code
requires holders of tax-exempt obligations issued with original issue discount,
such as the Trusts, 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. A
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 a Trust's
basis, as adjusted, and the amount received will be taxable gain or loss to the
Unit holders.
Unit holders should consult their own tax advisors with respect to the
state and local tax consequences of owning original issue discount bonds. It is
possible that under applicable provisions governing determination of such state
and local taxes, interest on tax-exempt bonds such as any Bonds issued with
original issue discount may be deemed to be received in the year of accrual even
though there is no corresponding cash payment.
If a Unit holder's tax cost for 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 his pro rata interest in the
Bond, but will not result in any deduction from the Unit holder's income. Thus,
for example, a Unit holder who purchases a pro rata interest in a Bond at a
premium and resells it at the same price will recognize taxable gain equal to
the portion of the premium that was amortized during the period the Unit holder
is considered to have held such interest.
Bond premium must be amortized under the method the Unit holder regularly
employs for amortizing bond premium (assuming such method is reasonable). With
respect to a callable bond, the premium must be computed with respect to the
call price and be amortized to the first call date (and successively to later
call dates based on the call prices for those dates).
In the case of Bonds that are private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on such
Bonds is exempt from regular federal income tax. However, interest on such Bonds
will not be exempt from regular federal income tax for any period during which
such Bonds are held by a 'substantial user' of the facilities financed by the
proceeds of such Bonds or by a 'related person' thereof within the meaning of
the Code. Therefore, interest on any such Bonds allocable to a Unit holder who
is such a 'substantial user' or 'related person' thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the 'small issue' exemption,
the 'small issue' exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding tax-
exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities was determined to
have exceeded $40,000,000 on the date of issue. In the case of Bonds issued
under the $10,000,000 'small issue' exemption, interest on such Bonds will
become taxable if the face amount of the Bonds plus certain capital expenditures
exceeds $10,000,000 within 3 years of the date of issue of such Bonds.
B-28
<PAGE>
In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events such as prohibited 'arbitrage' activities by
the issuer of the Bond or the failure of the Bond to continue to satisfy the
conditions required for the exemption of interest thereon from regular federal
income tax. No investigation has been made as to the current or future owners or
users of the facilities financed by the Bonds, the amount of such persons'
outstanding tax-exempt private activity bonds, or the facilities themselves, and
no assurance can be given that future events will not affect the tax-exempt
status of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME TAX
PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME TAX LAWS OF
ANY STATE OR LOCAL GOVERNMENT. INTEREST INCOME DERIVED FROM THE BONDS IS NOT
EXCLUDED FROM NET INCOME IN DETERMINING NEW YORK STATE OR NEW YORK CITY
FRANCHISE TAXES ON CORPORATIONS OR FINANCIAL INSTITUTIONS. THE LAWS OF SUCH
STATES AND LOCAL GOVERNMENTS VARY WITH RESPECT TO THE TAXATION OF SUCH
OBLIGATIONS.
From time to time, proposals have been introduced before Congress, the
purpose of which is to restrict or eliminate the Federal income tax exemption
for interest on debt obligations similar to the Bonds in either 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 either Trust.
The Revenue Reconciliation Act of 1993 was recently enacted. This Act
increases maximum marginal tax rates for individuals and corporations (generally
effective for taxable years beginning after December 31, 1992), extends the
authority to issue certain categories of tax-exempt bonds (qualified small issue
bonds and qualified mortgage bonds), expands a category of qualified tax-exempt
bonds (bonds for high-speed intercity rail facilities), limits the availability
of capital gain treatment for tax-exempt bonds purchased at a market discount,
and makes a variety of other changes. Prospective investors are urged to consult
their own tax advisors as to the effect of this Act on a possible investment in
the Trust.
In South Carolina v. Baker, the U.S. Supreme Court held that the federal
government may constitutionally require states to register bonds they issue and
subject the interest on such bonds to federal income tax if not registered, and
that there is no constitutional prohibition against the federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the federal government to regulate and control
bonds such as the Bonds in the Trusts 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 Trusts in accordance with
Section 103 of the Code.
The opinions of counsel to the issuing governmental authorities to the
effect that interest on the Bonds is exempt from regular federal income tax may
be limited to law existing at the time the Bonds were issued, and may not apply
to the extent that future changes in law, regulations or interpretations affect
such Bonds. Investors are advised to consult their own advisors for advice with
respect to the effect of any legislative changes.
B-29
<PAGE>
RIGHTS OF UNIT HOLDERS
CERTIFICATES
Ownership of Units of each Trust is evidenced by registered certificates
executed by the Trustee and the Sponsors. The Trustee is authorized to treat as
the record owner of Units that person who is registered as such owner on the
books of the Trustee. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit holder may be required to pay $2.00 per certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. For new certificates issued to replace
destroyed, stolen or lost certificates, the Unit holder must furnish indemnity
satisfactory to the Trustee and must pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for replacement.
DISTRIBUTION OF INTEREST AND PRINCIPAL
While interest will be distributed semi-annually or monthly, depending on
the method of distribution chosen, principal, including capital gains, will be
distributed only semi-annually; provided, however, that, other than for purposes
of redemption, no distribution need be made from the Principal Account if the
balance therein is less than $1.00 per Unit then outstanding, and that, if at
any time the pro rata share represented by the Units of cash in the Principal
Account exceeds $10.00 as of a Monthly Record Date, the Trustee shall, on the
next succeeding Monthly Distribution Date, distribute the Unit holder's pro rata
share of the balance of the Principal Account. Interest (semi-annually or
monthly) and principal, including capital gains, if any (semi-annually),
received by each Trust will be distributed on each Distribution Date to Unit
holders of record of each Trust as of the preceding Record Date who are entitled
to such distributions at that time under the plan of distribution chosen. All
distributions will be net of applicable expenses and funds required for the
redemption of Units. See 'Summary of Essential Financial Information' in Part A
for each Trust, 'The Trust--Expenses and Charges' and 'Rights of Unit
Holders--Redemption' in Part B.
The Trustee will credit to the Interest Account for each Trust all interest
received by such Trust, including that part of the proceeds of any disposition
of Securities which represents accrued interest. Other receipts of each Trust
will be credited to the Principal Account for such Trust. The pro rata share of
the Interest Account of each Trust and the pro rata share of cash in the
Principal Account (other than amounts representing failed contracts as
previously discussed) represented by each Unit thereof will be computed by the
Trustee each month as of the Record Date. See 'Summary of Essential Financial
Information' in Part A for each Trust. Proceeds received from the disposition of
any of the Securities subsequent to a Record Date and prior to the next
succeeding Distribution Date will be held in the Principal Account for each
Trust and will not be distributed until the second succeeding Distribution Date.
Because interest on the Securities is not received by each 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 such Trust as of the
Record Date. It may take up to four or five months after the Date of Deposit for
the Trustee to receive sufficient interest payments on the Securities to
generate enough cash to make distributions to Unit holders. See 'Summary of
Essential Financial Information' in Part A for each Trust. 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.
B-30
<PAGE>
The difference between the estimated net interest accrued to the first
Record Date and to the related Distribution Date is an asset of the respective
Unit holder and will be realized in subsequent distributions or upon the earlier
of the sale of such Units or the maturity, redemption or sale of Securities in
the Trust.
Purchasers of Units who desire to receive distributions on a monthly basis
may elect to do so at the time of purchase during the initial public offering
period. Those indicating no choice will be deemed to have chosen the semi-annual
distribution plan. All Unit holders, however, purchasing Units during the
initial public offering period and prior to the first Record Date will receive
the first distribution of interest to Unit holders. Thereafter, record dates for
monthly distributions will be the fifteenth day of the preceding month and
record dates for semi-annual distributions will be the fifteenth day of May and
November.
Details of estimated interest distributions under the payment plans, on a
per Unit basis, appear in footnote 9 to the 'Summary of Essential Financial
Information' in Part A for each 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' in Part B.
The Trustee will, as of the fifteenth day of each month, deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of each Trust as of the
first day of such month. See 'The Trusts--Expenses and Charges' in Part B. The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of
each Trust. Amounts so withdrawn shall not be considered a part of each Trust's
assets until such time as the Trustee shall return all or any part of such
amounts to the appropriate account. In addition, the Trustee may withdraw from
the Interest Account and the Principal Account such amounts as may be necessary
to cover redemption of Units by the Trustee. See 'Rights of Unit
Holders--Redemption' in Part B. Funds which are available for future
distributions, payments of expenses and redemptions are in accounts which are
non-interest bearing to the Unit holders and are available for use by the
Trustee pursuant to normal banking procedures.
Because interest on Securities in each Trust is payable at varying
intervals, usually in semi-annual installments, the interest accruing to each
Trust will not be equal to the amount of money received and available monthly
for distribution from the Interest Account to Unit holders choosing the monthly
payment plan. Therefore, on each monthly Distribution Date, the amount of
interest actually deposited in the Interest Account and available for
distribution may be slightly more or less than the monthly interest distribution
made. In order to eliminate fluctuations in monthly interest distributions
resulting from such variances during the first year of each Trust, the Trustee
is required by the Trust Agreement to advance such amounts as may be necessary
to provide monthly interest distributions of approximately equal amounts. The
Trustee will be reimbursed, without interest, for any such advances from funds
available from the Interest Account on the next ensuing monthly Record Date.
In order to acquire certain of the Securities subject to contract, it may
be necessary to pay on the settlement dates for delivery of such Securities
amounts covering accrued interest on such Securities which exceed the amounts
paid by Unit holders (which excess will be made available under a letter of
credit furnished by the Sponsors on the Date of Deposit). The Trustee has agreed
to pay for any amounts necessary to cover any such excess and will be reimbursed
therefor (without interest) when funds become available from interest payments
on the particular Securities with respect to which such payments may have been
made. Also, since interest on such Securities in the portfolio of each Trust
(see 'The Portfolios' in Part A) does not begin accruing as tax-exempt interest
income to the benefit of Unit holders until such Bonds' respective dates of
delivery (accrued interest prior to delivery being treated under the Code as a
return of principal), the Trustee will, in order to cover interest treated as a
return of principal, adjust its fee downward in an amount equal to the amount of
interest that would have so accrued as tax-exempt interest (if not treated as a
return of principal) on such Securities between the date of settlement for the
Units and such dates of delivery.
B-31
<PAGE>
In addition, because of the varying interest payment dates of the
Securities comprising the Trust portfolio, accrued interest at any point in time
will be greater than the amount of interest actually received by each Trust and
distributed to Unit holders. Therefore, there will always 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 holder either redeems or sells such
Unit or until the Trust is terminated.
EXPENSES AND CHARGES
Initial Expenses
At no cost to either Trust, the Sponsors have borne all the expenses of
creating and establishing the Trust and the Underwriting Account, including the
cost of the initial preparation, printing and execution of the Trust Agreement
and the certificates for Units, the fees of the Evaluator during the initial
public offering, legal expenses, advertising and selling expenses, expenses of
the Trustee and other out-of-pocket expenses.
Fees
The Trustee's, Sponsors' and Evaluator's fees are set forth under the
'Summary of Essential Financial Information' in Part A for each Trust. The
Sponsors' fee, which is earned for portfolio supervisory services, is based on
the face amount of Securities in each Trust at December 1 of each year. The
Sponsors' fee, which is not to exceed the maximum amount set forth under the
'Summary of Essential Financial Information' for each Trust, may exceed the
actual costs of providing portfolio supervisory services for each Trust, but at
no time will the total amount the Sponsors receive for portfolio supervisory
services rendered to all series of Empire State Municipal Exempt Trust in any
calendar year exceed the aggregate cost to them of supplying such services in
such year.
The Trustee will receive for its ordinary recurring services to each Trust
an annual fee in the amount set forth in the 'Summary of Essential Financial
Information' for each Trust; provided, however, that such fees may be adjusted
as set forth under the 'Summary of Essential Financial Information' for each
Trust. There is no minimum fee and, except as hereinafter set forth, no maximum
fee. For a discussion of certain benefits derived by the Trustee from the
Trust's funds, see 'Rights of Unit Holders--Distribution of Interest and
Principal' in Part B. For a discussion of the services performed by the Trustee
pursuant to its obligations under the Trust Agreements, reference is made to the
material set forth under 'Rights of Unit Holders' in Part B.
The Trustee's and Evaluator's fees are payable monthly on or before each
Distribution Date and the Sponsors' annual fee is payable annually on December
1, each from the Interest Account to the extent funds are available and then
from the Principal Account. These fees may be increased without approval of the
Unit holders by amounts not exceeding proportionate increases in consumer prices
for services as measured by the United States Department of Labor's Consumer
Price Index entitled 'All Services Less Rent'; except no such increase in the
Trustee's fee will be so made for the sole purpose of making up any downward
adjustment therein as described in 'Summary of Essential Financial Information'
for each Trust. If the balances in the Principal and Interest Accounts are
insufficient to provide for amounts payable by either Trust, or amounts payable
to the Trustee which are secured by its prior lien on such Trust, the Trustee is
permitted to sell Bonds to pay such amounts.
B-32
<PAGE>
Insurance Premiums
The cost of the Municipal Bond Investors Assurance Corporation insurance
obtained by the Insured Trust, based on the aggregate amount of Bonds in the
Insured Trust as of the Date of Deposit, is set forth in the 'Summary of
Essential Financial Information' for the Insured Trust. Premiums, which are
obligations of the Insured Trust, are payable monthly by the Trustee on behalf
of the Insured Trust. As Securities in the portfolio mature, are redeemed by
their respective issuers or are sold by the Trustee, the amount of the premium
will be reduced in respect of those Securities no longer owned by and held in
the Insured Trust. The Insured 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 Insured
Trust. No premium will be paid by the Insured Trust on Bonds which are also
Municipal Bond Investors
Assurance Corporation Pre-insured Bonds or Municipal Bond Insurance Association
Pre-insured Bonds. The premium payable for Permanent Insurance and the related
custodial fee will be paid solely from the proceeds of the sale of a Bond from
the Insured Trust in the event the Trustee exercises the right to obtain
Permanent Insurance on such Bond.
OTHER CHARGES
The following additional charges are or may be incurred by either of the
Trusts: all expenses (including audit and counsel fees) of the Trustee incurred
in connection with its activities under the Trust Agreements, 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 each Trust and the rights and
interests of the Unit holders; fees of the Trustee for any extraordinary
services performed under the Trust Agreements; 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 each Trust; and all taxes and other governmental
charges imposed upon the Securities or any part of such 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 pertinent Trust. In addition,
the Trustee is empowered to sell Securities in order to make funds available to
pay all expenses.
REPORTS AND RECORDS
The Trustee shall furnish Unit holders of each 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 for the Insured Trust), 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
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Insured Trust the premium
attributable to the Trustee's exercise of the right to obtain Permanent
Insurance and any related custodial fee), deductions for payments of applicable
taxes and for fees and expenses of the Trust, purchase of Replacement Bonds,
redemptions of Units, the amount of any 'when issued' interest treated as a
return of capital and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (3) a list of the Securities held and the number of
Units outstanding on the last business day of such calendar year; (4) the
Redemption Price per Unit based upon the last computation thereof made during
such calendar year; and (5) amounts actually distributed during such calendar
year from the Interest Account and from the Principal Account, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
The Trustee shall keep available for inspection by Unit holders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee including records of the names and addresses of Unit
holders of each Trust, certificates issued or held, a current list of Securities
in each Trust and a copy of each Trust Agreement.
REDEMPTION
Tender of Units
While it is anticipated that Units can be sold in the secondary market,
Units may also be tendered to the Trustee for redemption at its corporate trust
office at 101 Barclay Street, New York, New York 10286, upon payment of any
applicable tax. At the present time there are no specific taxes related to the
redemption of the Units. No redemption fee will be charged by the Sponsors or
the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates for Units to be redeemed must be delivered to the Trustee and
must be properly endorsed and accompanied by a written instrument of transfer.
Thus, redemption of Units cannot be effected until certificates representing
such Units have been delivered to the person seeking redemption (see 'Rights of
Unit Holders-- Certificates' in Part B). Unit holders must sign exactly as their
names appear on the face of the certificate with signature(s) guaranteed by an
officer of a national bank or trust company, a member firm of either the New
York, Midwest or Pacific Stock Exchange, or in such other manner as may be
acceptable to the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto, the
Unit holder will be entitled to receive in cash an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the 'Summary of Essential Financial Information' for each Trust 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 each 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' in Part B.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the Principal
Account. The Trustee is empowered to sell Securities in order to make funds
available for redemption. Such sales, if required, could result in a sale of
Securities by the Trustee at a loss. To the extent Securities are sold, the size
and diversity of each Trust will be reduced.
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If the Trustee exercises the right to obtain Permanent Insurance on a Bond
in the Insured Trust, such Bond will be sold from the Insured Trust on an
insured basis. In the event the Trustee does not exercise the right to obtain
Permanent Insurance on a Bond, such Bond will be sold from the Insured Trust on
an uninsured basis, since the Municipal Bond Investors Assurance Corporation
insurance obtained by the Insured 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 Insured Trust. If the Trustee does not obtain Permanent Insurance on a
Defaulted Bond, to the extent that Bonds which are current in payment of
interest are sold from the Insured 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 Insured Trust will tend to diminish. See
'Sponsors--Responsibility' in Part B for the effect of selling Defaulted Bonds
to meet redemption requests.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend
and holiday closings, or during which trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission by rule or
regulation) an emergency exists as a result of which disposal or evaluation of
the underlying Bonds is not reasonably practicable, or for such other periods as
the Securities and Exchange Commission has by order permitted.
Because insurance obtained by the Insured Trust terminates as to Bonds
which are sold by the Trustee, and because the insurance obtained by the Insured
Trust does not have a realizable cash value which can be used by the Trustee to
meet redemptions of Units, under certain circumstances the Sponsors may apply to
the Securities and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units if a significant
portion of the Bonds in the Insured Trust is in default in payment of principal
or interest or in significant risk of such default. No assurances can be given
that the Securities and Exchange Commission will permit the Sponsors to suspend
the rights of Unit holders to redeem their Units, and without the suspension of
such redemption rights when faced with excessive redemptions the Sponsors may
not be able to preserve the benefits of the Insured 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 each Trust, while the Public Offering Price
of Units during the initial offering period is determined on the basis of the
offering prices of the Securities, both as of the Evaluation Time on the day any
such determination is made. The bid prices of the Securities may be expected to
be less than the offering prices. This Redemption Price per Unit is each Unit's
pro rata share, determined by the Trustee, of: (1) the aggregate value of the
Securities in each 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 each Trust (other than cash covering contracts to purchase
Securities), and (3) accrued and unpaid interest on the Securities as of the
date of computation, less (a) amounts representing taxes or governmental charges
payable out of each Trust, (b) the accrued expenses of each 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 each
Trust (1) on the basis of current bid prices for the Securities, (2) if bid
prices are not available for any Securities, on the basis of current bid prices
for comparable bonds, (3) by appraisal, or (4) by any combination of the above.
In determining the Redemption Price per Unit no value will be assigned to the
portfolio insurance obtained by the Insured Trust on the Bonds in the Insured
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
Insured 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 Insured Trust, see 'Public Offering--Offering Price' in this
Part B.
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<PAGE>
The difference between the bid and offering prices of the Securities may be
expected to average 1 1/2% of face amount. In the case of actively traded bonds,
the difference may be as little as 1/2 of 1%, and in the case of inactively
traded bonds such difference usually will not exceed 3%. On the business day
prior to the date of this Prospectus, the aggregate bid side evaluation was
lower than the aggregate offering side evaluation by the amount set forth in
footnote 6 to the 'Portfolio' for each Trust. For this reason, among others, the
price at which Units may be redeemed could be less than the price paid by the
Unit holder. On the Date of Deposit the aggregate current offering price of such
Securities per Unit exceeded the bid price of such Securities per Unit by the
amount set forth under 'Summary of Essential Financial Information' for each
Trust.
Purchase by the Sponsors of Units Tendered for Redemption
Each 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' in this Part B). Units held by
the Sponsors may be tendered to the Trustee for redemption as any other Units,
provided that the Sponsors shall not receive for Units purchased as set forth
above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors will be the Public
Offering Price determined in the manner provided in this Prospectus (See 'Public
Offering--Offering Price' in Part B). Any profit resulting from the resale of
such Units will belong to the Sponsors which likewise will bear any loss
resulting from a lower offering or redemption price subsequent to its
acquisition of such Units (See 'Public Offering--Sponsors' and Underwriters'
Profits' in this Part B).
EXCHANGE OPTION
The Sponsors of the series of Empire State Municipal Exempt Trust,
(including the series of Municipal Exempt Trust, the predecessor trust to Empire
State Municipal Exempt Trust) (the 'Exchange Trusts') are offering Unit holders
of the Exchange Trusts for which the Sponsors are maintaining a secondary market
an option to exchange a Unit of any series of the Exchange Trusts for a Unit of
a different series of the Exchange Trusts being offered by the Sponsors (other
than in the initial offering period) at a Public Offering Price generally based
on the bid prices of the underlying Securities divided by the number of Units
outstanding (see 'Public Offering--Markets for Units') plus a fixed sales charge
of $15 per Unit (in lieu of the normal sales charge). However, a Unit holder
must have held his Unit for a period of at least six months in order to exercise
the exchange option or agree to pay a sales charge based on the greater of $15
per Unit or an amount which together with the initial sales charge paid in
connection with the acquisition of Units being exchanged equals the normal sales
charge of the series into which the investment is being converted, determined as
of the date of the exchange. Such exchanges will be effected in whole Units
only. Any excess proceeds from the Units being surrendered will be returned, and
the Unit holder will not be permitted to advance any new money in order to
complete an exchange. The Sponsors reserve the right to modify, suspend or
terminate this plan at any time without further notice to the Unit holders. In
the event the exchange option is not available to a Unit holder at the time he
wishes to exercise it, the Unit holder will be immediately notified and no
action will be taken with respect to his Units without further instructions from
the Unit holder.
Unit holders are urged to consult their own tax advisors as to the tax
consequences of exchanging Units.
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<PAGE>
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
each Trust to elect to have distributions from Units in each 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 either Trust. The bonds purchased by the Empire Builder
will be of 'investment grade' quality--that is, at the time of purchase by the
Empire Builder, such bonds either will be rated not lower than the four highest
ratings of either Moody's Investors Service, Inc. (Aaa, Aa, A or Baa) or
Standard & Poor's Corporation (AAA, AA, A or BBB) or will be unrated bonds which
at the time of purchase are judged by the Empire Builder's investment advisor to
be of comparable quality to bonds rated within such four highest grades. It is a
fundamental policy of the Empire Builder that under normal market conditions at
least 90% of the income distributed to its shareholders will be exempt from
Federal income tax, New York State and New York City personal income taxes.
However, during times of adverse market conditions, when the Empire Builder is
investing for temporary defensive purposes in obligations other than New York
tax-exempt bonds, more than 10% of the Empire Builder's income distributions
could be subject to Federal income tax, New York State and/or New York City
income taxes, as described in the current prospectus relating to the Empire
Builder (the 'Empire Builder Prospectus'). Glickenhaus & Co. ('Glickenhaus'), a
sponsor of the Trust, acts as the investment adviser and distributor for the
Empire Builder.
Each Unit holder may request from The Bank of New York (the 'Plan Agent'),
a copy of the Empire Builder Prospectus describing the Empire Builder and a form
by which such Unit holder may elect to become a participant ('Participant') in
the Plan. Thereafter, as directed by such person, distributions on the
Participant's Units will, on the applicable distribution date, automatically be
applied as of that date by the Trustee to purchase shares (or fractions thereof)
of the Empire Builder at a net asset value as computed as of the close of
trading on the New York Stock Exchange on such date, as described in the Empire
Builder Prospectus. Unless otherwise indicated, new Participants in the Empire
Builder Plan will be deemed to have elected the monthly distribution plan with
respect to their Units. Confirmations of all transactions undertaken for each
Participant in the Plan will be mailed to each Participant by the Plan Agent
indicating distributions and shares (or fractions thereof) of the Empire Builder
purchased on his behalf. A Participant may at any time prior to ten days
preceding the next succeeding distribution date, by so notifying the Plan Agent
in writing, elect to terminate his participation in the Plan and receive future
distributions on his Units in cash. There will be no charge or other penalty for
such termination. The Sponsors, the Trustee, the Empire Builder and Glickenhaus,
as investment advisor for Empire Builder, each will have the right to terminate
this Plan at any time for any reason. The reinvestment of distributions from the
Trust through the Plan will not affect the income tax status of such
distributions. For more complete information about investing in the Empire
Builder through the Plan, including charges and expenses, return the enclosed
card for a copy of the Empire Builder Prospectus. Read it carefully before you
decide to participate.
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<PAGE>
(ALTERNATE PAGE)
AUTOMATIC ACCUMULATION ACCOUNT
For Unit holders of the Trust who are clients of Lebenthal & Co., Inc., the
Sponsors have entered into an arrangement (the 'Plan') with Lebenthal New York
Municipal Bond Fund (the 'Bond Fund') which permits Unit holders of the Trust to
elect to have distributions from Units in the Trust automatically reinvested in
shares of the Bond Fund. The Bond Fund is an open-end, non-diversified
investment company whose investment objective is to maximize current income
exempt from regular Federal income tax, and from New York State and New York
City income taxes, consistent with preservation of capital and with
consideration given to opportunities for capital gain. It is the policy of the
Bond Fund to invest primarily in long term investment grade tax-exempt
securities the interest income from which is exempt from such taxes.
The Bond Fund has an investment objective which differs in certain respects
from that of the Trust. The bonds purchased by the Bond Fund will be of
'investment grade' quality--that is, at the time of purchase by the Bond Fund,
such bonds either will be rated not lower than the four highest ratings of
either Moody's Investors Service, Inc. (Aaa, Aa, A or Baa) or Standard & Poor's
Corporation (AAA, AA, A or BBB) or will be unrated bonds which at the time of
purchase are judged by the Bond Fund's investment advisor to be of comparable
quality to bonds rated within such four highest grades. It is a fundamental
policy of the Bond Fund that under normal market conditions at least 80% of the
income distributed to its shareholders will be exempt from regular Federal
income tax, and from New York State and New York City personal income taxes.
However, during times of adverse market conditions, more than 20% of the Bond
Fund's income distributions could be subject to Federal income tax, New York
State and/or New York City income taxes, as described in the current prospectus
relating to the Bond Fund (the 'Bond Fund Prospectus'). Lebenthal & Co., Inc., a
sponsor of the Trust, acts as the manager and distributor for the Bond Fund.
Each Unit holder may request from The Bank of New York (the 'Plan Agent'),
a copy of the Bond Fund Prospectus describing the Bond Fund and a form by which
such Unit holder may elect to become a participant ('Participant') in the Plan.
Thereafter, as directed by such person, distributions on the Participant's Units
will, on the applicable distribution date, automatically be applied as of that
date by the Trustee to purchase shares (or fractions thereof) of the Bond Fund
at a net asset value as computed as of the close of trading on the New York
Stock Exchange on such date, as described in the Bond Fund Prospectus. Unless
otherwise indicated, new Participants in the Bond Fund Plan will be deemed to
have elected the monthly distribution plan with respect to their Units.
Confirmations of all transactions undertaken for each Participant in the Plan
will be mailed to each Participant by the Plan Agent indicating distributions
and shares (or fractions thereof) of the Bond Fund purchased on his behalf. A
Participant may at any time prior to ten days preceding the next succeeding
distribution date, by so notifying the Plan Agent in writing, elect to terminate
his participation in the Plan and receive future distributions on his Units in
cash. There will be no charge or other penalty for such termination. The
Sponsors, the Trustee, the Bond Fund and Lebenthal & Co. Inc., as manager for
the Bond Fund, each will have the right to terminate this Plan at any time for
any reason. The reinvestment of distributions from the Trust through the Plan
will not affect the income tax status of such distributions. For more complete
information about investing in the Bond Fund through the Plan, including charges
and expenses, return the enclosed card for a copy of the Bond Fund Prospectus.
Read it carefully before you decide to participate.
B-37
<PAGE>
SPONSORS
Glickenhaus and Lebenthal are the Sponsors of Empire State Municipal Exempt
Trust, Series 10 and all subsequent series.
Glickenhaus, a New York limited partnership, is engaged in the underwriting
and securities brokerage business, and in the investment advisory business. It
is a member of the New York Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. and is an associate member of the American Stock
Exchange. Glickenhaus acts as a sponsor for successive Series of The Municipal
Insured National Trusts and for the prior series of Empire State Municipal
Exempt Trust including those sold under the name of Municipal Exempt Trust, New
York Exempt Series 1, New York Series 2 and New York Series 3. Glickenhaus, in
addition to participating as a member of various selling groups of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
Lebenthal, a New York corporation originally organized as a New York
partnership in 1925, has been buying and selling municipal bonds for its own
account as a dealer for over 67 years; Lebenthal also buys and sells securities
as an agent and participates as an underwriter in public offerings of municipal
bonds. It acted as a sponsor of Empire State Tax Exempt Bond Trust, Series 8 and
successive Series of The Municipal Insured National Trust through Series 28.
Lebenthal is registered as a broker/dealer with the Securities and Exchange
Commission and various state securities regulatory agencies and is a member of
the National Association of Securities Dealers, Inc. and Securities Investors
Protection Corp.
Limitations on Liability
The Sponsors are jointly and severally liable for the performance of their
obligations arising from their responsibilities under each Trust Agreement, but
will be under no liability to the Unit holders for taking any action or
refraining from any action in good faith or for errors in judgment; nor will
they be responsible in any way for depreciation or loss incurred by reason of
the sale of any Bonds, except in cases of their willful misconduct, bad faith,
gross negligence or reckless disregard for their obligations and duties. See
'The Trusts--Portfolios' and 'Sponsors-- Responsibility' in Part B.
Responsibility
The Trustee shall sell, for the purpose of redeeming Units tendered by any
Unit holder and for the payment of expenses for which funds are not available,
such of the Bonds in a list furnished by the Sponsors as the Trustee in its sole
discretion may deem necessary. In the event the Trustee does not exercise the
right to obtain Permanent Insurance on a Defaulted Bond or Bonds in the Insured
Trust, to the extent that Bonds are sold which are current in payment of
principal and interest in order to meet redemption requests and Defaulted Bonds
are retained in the Insured Trust in order to preserve the related insurance
protection applicable to said Bonds, the overall value of the Bonds remaining in
the Insured Trust's Portfolio will tend to diminish. In the event the Trustee
does not exercise the right to obtain Permanent Insurance on a Defaulted Bond or
Bonds, except as described below and in certain other unusual circumstances for
which it is determined by the Trustee to be in the best interests of the Unit
holders or if there is no alternative, the Trustee is not empowered to sell
Defaulted Bonds for which value has been attributed for the insurance obtained
by the Insured Trust. Because of such restrictions on the Trustee, under certain
circumstances the Sponsors may seek a full or partial suspension of the right of
Unit holders to redeem their Units. See 'Rights of Unit Holders-- Redemption' in
Part B. The Sponsors are empowered, but not obligated, to direct the Trustee to
dispose of Bonds in the event of advanced refunding.
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<PAGE>
It is the responsibility of the Sponsors to instruct the Trustee to reject
any offer made by an issuer of any of the Securities to issue new obligations in
exchange and substitution for any Securities pursuant to a refunding or
refinancing plan, except that the Sponsors may instruct the Trustee to accept
such an offer or to take any other action with respect thereto as the Sponsors
may deem proper if the issuer is in default with respect to such Securities or
in the judgment of the Sponsors the issuer will probably default in respect to
such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Trust Agreement to the same
extent as Securities originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for underlying Securities,
the Trustee is required to give notice thereof to each Unit holder, identifying
the obligations eliminated and the Securities substituted therefor. Except as
stated in this and the preceding paragraph and in the discussion under
'Portfolio--General Considerations' in Part B regarding the substitution of
Replacement Bonds for Failed Bonds, the acquisition by each 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 Insured 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 Trusts--Insurance on the Bonds in the Insurance
Trust' in Part B.
The Sponsors may direct the Trustee to dispose of Bonds upon default in the
payment of principal or interest, institution of certain legal proceedings or
the existence of certain other impediments to the payment of Bonds, default
under other documents which may adversely affect debt service, default in the
payment of principal or interest on other obligations of the same issuer,
decline in projected income pledged for debt service on revenue Bonds, or
decline in price or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsors the retention of such Bonds in
each Trust would be detrimental to the interest of the Unit holders. The
proceeds from any such sales will be credited to the Principal Account for
distribution to the Unit holders.
Notwithstanding the foregoing, in connection with final distributions to
Unit holders, if the Trustee does not exercise the right to obtain Permanent
Insurance on any Defaulted Bond, because the portfolio insurance obtained by the
Insured Trust is applicable only while Bonds so insured are held by the Insured
Trust, the price to be received by the Insured Trust upon the disposition of any
such Defaulted Bond will not reflect any value based on such insurance.
Therefore, in connection with any liquidation prior to December 31, 2042, with
respect to the Insured Trust, it shall not be necessary for the Trustee to, and
the Trustee does not currently intend to, dispose of any Bonds if retention of
such Bonds, until due, shall be deemed to be in the best interest of Unit
holders, including, but not limited to, situations in which Bonds so insured are
in default and situations in which Bonds so insured have a deteriorated market
price resulting from a significant risk of default. Since the Pre-insured Bonds
in the Insured Trust will reflect the value of the insurance obtained by the
Bond issuer, it is the present intention of the Sponsors not to direct the
Trustee to hold any Pre-insured Bonds after the date of termination. All
proceeds received, less applicable expenses, from insurance on Defaulted Bonds
in the Insured Trust not disposed of at the date of termination will ultimately
be distributed to Unit holders of record as of such date of termination as soon
as practicable after the date such Defaulted Bonds become due and applicable
insurance proceeds have been received by the Trustee (See 'Summary of Essential
Financial Information' for the Insured Trust.).
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<PAGE>
Agent for Sponsors
The Sponsor named as Agent for Sponsors under 'Summary of Essential
Financial Information' for each Trust has been appointed by the other Sponsors
as agent for purposes of taking action under each Trust Agreement. If the
Sponsors are unable to agree with respect to action to be taken jointly by them
under each 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 each 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 each Trust
Agreement and the other Sponsors act as the Sponsors.
Resignation
Any Sponsor may resign at any time provided that at the time of such
resignation one remaining Sponsor maintains a net worth of $1,000,000 and all
the remaining Sponsors are agreeable to such resignation. Concurrent with or
subsequent to such resignation a new Sponsor may be appointed by the remaining
Sponsors and the Trustee to assume the duties of the resigning Sponsor. If, at
any time, only one Sponsor is acting under each Trust Agreement and that Sponsor
shall resign or fail to perform any of its duties thereunder or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, then the Trustee may appoint a successor sponsor or terminate each
Trust Agreement and liquidate each Trust.
Financial Information
At September 30, 1992, the total partners' capital of Glickenhaus was
$101,324,000 (audited); and at March 31, 1993, the total stockholders' equity of
Lebenthal was $5,420,701 (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 banking corporation organized under the laws of the United
States or any state which is authorized under such laws to exercise corporate
trust powers and must have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000. The duties of the Trustee are
primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for each Trust.
Limitations on Liability
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of the disposition of any monies, Securities or
certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of its
willful misconduct, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Trustee shall not be personally liable
for any taxes or other governmental charges imposed upon or in respect of either
Trust which the Trustee may be required
B-40
<PAGE>
to pay under current or future law of the United States or any other taxing
authority having jurisdiction. (See 'The Trusts--Portfolios') in Part A.
Responsibility
For information relating to the responsibilities of the Trustee under each
Trust Agreement, reference is made to the material set forth in Part B under
'Rights of Unit Holders,' 'Sponsors--Responsibility' and 'Sponsors--
Resignation' in this Part B.
Resignation
By executing an instrument in writing and filing the same with the
Sponsors, the Trustee and any successor may resign. In such an event the
Sponsors are obligated to appoint a successor trustee as soon as possible. If
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, or if the Sponsors deem it to be in the best
interest of the Unit holders, the Sponsors may remove the Trustee and appoint a
successor as provided in each Trust Agreement. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor trustee.
If, upon resignation of a trustee, no successor has been appointed and has
accepted the appointment within thirty days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective only when
the successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
Both during and after the initial offering period, the Evaluator shall be
Muller Data Corporation ('Muller Data'), a New York corporation with main
offices located at 90 Fifth Avenue, New York, New York 10011. Muller Data is a
wholly owned subsidiary of Thomson Publishing Corporation, a Delaware
corporation.
Limitations on Liability
The Trustee and the Sponsors may rely on any evaluation furnished by the
Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under each Trust Agreement shall be made in good
faith upon the basis of the best information available to it; provided, however,
that the Evaluator shall be under no liability to the Trustee, the Sponsors or
Unit holders for errors in judgement. But this provision shall not protect the
Evaluator in cases of its willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Responsibility
Each Trust Agreement requires the Evaluator to evaluate the Securities on
the basis of their bid prices on each business day after the initial offering
period, when any Unit is tendered for redemption and on any other day such
evaluation is desired by the Trustee or is requested by the Sponsors. For
information relating to the responsibility of the Evaluator to evaluate the
Securities on the basis of their offering prices, see 'Public Offering--Offering
Price' in Part B.
B-41
<PAGE>
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 each 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 a 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
each Trust, except in accordance with the provisions of each Trust Agreement. In
the event of any amendment, the Trustee is obligated to notify promptly all Unit
holders of the substance of such amendment.
Each 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 each Trust as shown by any
evaluation is less than $2,000,000 or less than 20% of the value of each Trust
as of the date hereof, whichever is lower, at which time each Trust may be
terminated (i) by the consent of 66 2/3% of the Units or (ii) by the Trustee;
provided, however, that upon affirmative written notice to the Sponsors and the
Unit holders at least 33 1/3% of the Units may instruct the Trustee not to
terminate such Trust. In no event, however, may a Trust continue beyond the
Mandatory Termination Date set forth in Part A; provided, however, that prior to
such date, the Trustee shall not dispose of any Bonds if the retention of such
Bonds, until due, shall be deemed to be in the best interest of the Unit
holders. In the event of termination, written notice thereof will be sent by the
Trustee to all Unit holders. Within a reasonable period after termination, the
Trustee will sell any remaining Securities, and, after paying all expenses and
charges incurred by such 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 such Trust.
LEGAL OPINIONS
Certain legal matters will be passed upon by Battle Fowler, 280 Park
Avenue, New York, New York 10017, as special counsel for the Sponsors, and
Tanner, Propp & Farber, 99 Park Avenue, New York, New York 10016, acting as
counsel for the Trustee.
AUDITORS
The statement of condition of each Trust included in this Prospectus has
been audited by BDO Seidman, independent certified public auditors, as stated in
their report appearing herein, and has been so included in reliance upon such
report given upon the authority of that firm as experts in accounting and
auditing.
B-42
<PAGE>
DESCRIPTION OF BOND RATINGS
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information or for other circumstances.
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.
Indicates that continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or closing
documentation confirming investments and cash flows.
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.
B-43
<PAGE>
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest. SP-3:
Speculative capacity to pay principal and interest.
* Moody's Investors Service rating. A summary of the meaning of the
applicable rating symbols as published by Moody's follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Con. (. . .)--Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by: (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from 'Aa' through 'B' in its corporate rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the security ranks in the lower end of its generic rating
category.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN PARTS A AND B OF THIS PROSPECTUS; AND
ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUSTS, THE TRUSTEE, THE
EVALUATOR, OR THE SPONSORS. THE TRUSTS ARE REGISTERED AS UNIT INVESTMENT
TRUSTS UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION DOES
NOT IMPLY THAT THE TRUSTS OR ANY OF THEIR UNITS HAVE BEEN GUARANTEED,
SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE OR
ANY AGENCY OR OFFICER THEREOF.
----------------
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.
- ------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<CAPTION>
TITLE PAGE
- ---------------------------------------------- -----
PART A
<S> <C>
Summary of Essential Information.............. A-2
Independent Auditors' Report.................. A-13
Statements of Condition....................... A-14
Portfolios.................................... A-15
Underwriting Account.......................... A-18
<CAPTION>
PART B
<S> <C>
The Trust..................................... B-1
Public Offering............................... B-17
Estimated Current Return and
Estimated Long Term Return to Unit Holders... B-21
Insurance on the Bonds in the Insured
Trust......................................... B-22
Tax Status.................................... B-25
Rights of Unit Holders........................ B-30
Automatic Accumulation Account................ B-37
Sponsors...................................... B-38
Trustee....................................... B-40
Evaluator..................................... B-41
Amendment and Termination of the Trust
Agreement................................... B-42
Legal Opinions................................ B-42
Auditors...................................... B-42
Description of Bond Ratings................... B-43
</TABLE>
- ------------------------------------------------------
PARTS A AND B OF THIS PROSPECTUS DO NOT CONTAIN ALL OF THE INFORMATION
SET FORTH IN THE REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO,
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 MADE.
- ------------------------------------------------------
(LOGO)
EMPIRE, GTD.,
EMPIRE STATE
MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES
99
Sponsors:
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
(212) 953-7532
Lebenthal & Co., Inc.
25 Broadway
New York, New York 10004
(212) 425-6116
Insurer For The Guaranteed Series:
MUNICIPAL BOND INVESTORS
ASSURANCE CORPORATION
113 King Street
Armonk, New York 10504
EMPIRE STATE
MUNICIPAL EXEMPT TRUST
SERIES
71
<PAGE>
BUILDING TAX
FREE WEALTH
WITH THE
(Photo)
EMPIRE
REINVESTMENT
OPTIONS
EMPIRE BUILDER, (LOGO)
EMPIRE BUILDER TAX FREE BOND FUND
THE EMPIRE
REINVESTMENT
OPTIONS
FREE OF SALES CHARGES & REDEMPTION FEES
The
advantages
of tax-free
income*
without the
inconve-
niences
of municipal
bonds.
Empire allows you to optimize your tax-free return with the Empire
reinvestment options. The options allow you to automatically reinvest
your Empire Trust income, principal or both into The Empire Builder Tax
Free Bond Fund, free of sales charges.
The reinvested distributions will remain in The Empire Builder Tax
Free Bond Fund, compounding monthly and triple-tax free, until you need
the proceeds.** Since the Fund offers check writing ($500 minimum),
telephone redemption and automatic cash withdrawal, you're in charge of
when you liquidate the investment. Not the bond issuer. Not the broker.
REINVESTING PRINCIPAL DISTRIBUTIONS
FOR TAX-FREE INCOME
Expected and unexpected returns of principal are a way of life for most
tax-free investors. Once a tax-free bond is called and the check is cut,
the investor stops earning income. It's practically unavoidable for
municipal bond buyers. But not for Empire investors. By choosing the
automatic reinvestment option your principal distributions, no matter
how small they may be, will be automatically reinvested into The Empire
Builder Tax Free Bond Fund where they will continue to earn tax-free income.
With Empire's principal reinvestment option, there are no reinvestment
hassles or trading commissions.
REINVESTING INTEREST AND PRINCIPAL
DISTRIBUTIONS FOR TAX-FREE WEALTH
Empire Trust investors can build a tax-free nest egg by automatically
reinvesting both interest and principal from the Empire Trust into the
Empire Builder. Twelve interest income checks per year, in addition to
principal distributions, will be reinvested from your Empire Trust into
the Empire Builder. Each month, the Empire Builder's compounded
triple-tax free dividends will be added to your Empire Trust's triple
tax-free income -- automatically.
Sooner or later, you will want or need the income from your nest egg.
With Empire's interest and principal reinvestment option, there's no
need to change investments. Just ask the broker to cancel the
reinvestment option so that earned interest income is automatically
mailed out each month to your home or to your bank. It's that
convenient. It's that easy.
THE EMPIRE
BUILDER TAX FREE
BOND FUND
A mutual fund for New York investors seeking current income exempt from
federal income tax and New York State and City personal income taxes.
The Empire Builder Tax Free Bond Fund seeks as high a level of current
income exempt from federal income tax and New York State and City income
taxes as the Fund's investment advisor believes is consistent with
preservation of capital. It is also a policy of the Fund, when possible,
to seek capital appreciation and to minimize capital losses. The Fund
invests primarily in a portfolio of New York tax-exempt bonds.
*A portion of the income from the Empire Builder may be subject to the
federal Alternative Minimum Tax (AMT).
**Redemption of the Empire Builder Tax Free Bond Fund is at the then
current net asset value which may be more or less than the original
cost.
PROFESSIONAL MANAGEMENT
The Empire Builder is actively managed. The professionals weigh the
value of each bond against other offerings in the $1 trillion municipal
market. Attention is given to each bond's credit including, but not
limited to, the strength of the issuer, the financials of the
guarantor, the source(s) and use(s) of funds, and the credit evaluations
from each of the leading rating agencies.
Careful attention is also given to the Fund's average maturity. The
yield curve, illustrating the difference between short, intermediate and
long term interest rates, is constantly changing. Investors don't want
to be positioned in a fund which limits the advisor to either short or
intermediate or long maturities. The Builder's advisors are free to
adapt to changing interest rates--seeking the highest yields available on
the yield curve.
ADDITIONAL SAFETY THROUGH
AFFORDABLE DIVERSIFICATION
The Builder provides investors with affordable diversification for a
minimum investment of just $1,000 (no minimum for reinvestment from the
Empire Group). Each share, even a fractional share, represents partial
ownership of the entire portfolio. Fund holders don't expose themselves
to undue risks by limiting their investment portfolio to just one or two
different bonds.
HOW TO GET STARTED
Selecting the reinvestment option is easy. Simply call your financial
services representative, return the attached card, or call the Empire
Builder at 1-800-847-5886, for an Empire Builder prospectus. With a
prospectus under your belt we can help you maximize Empire's
convenience, liquidity and flexibility.
EMPIRE SPECIALIZES IN
NEW YORK TAX-FREE
INVESTMENTS
- --EMPIRE STATE MUNICIPAL EXEMPT TRUST
Triple-tax free income from a diversified Unit Trust of municipal
bonds.
- --EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES
Triple-tax free income from a diversified Trust of municipal
bonds--guaranteed interest and principal payments by MBIA.
- --THE EMPIRE BUILDER TAX FREE BOND FUND
Triple-tax free income from a professionally managed mutual fund.
INVESTMENT ADVISOR
& DISTRIBUTOR
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
ADMINISTRATOR & SHAREHOLDER
SERVICING AGENT
Furman Selz Incorporated
230 Park Avenue
New York, New York 10169
MAXIMIZING CONVENIENCE,
LIQUIDITY AND FLEXIBILITY
THE CONVENIENCE OF AUTOMATIC REINVESTMENT--investors holding
the Empire Builder, Empire State, or Empire Gtd. can automatically
reinvest income, principal or both into the Empire Builder free of sales
charge.
EMPIRE BUILDER CHECK WRITING PRIVILEGE--shares of the Builder
can be redeemed by drawing checks on the account ($500 minimum).
A FLEXIBLE INVESTMENT RETURN--allows Empire investors to
choose tax-free appreciation, tax-free income or both.
NO REDEMPTION FEE--there is no penalty or fee for withdrawal
from the Empire Builder.
CHOICE OF INCOME DISTRIBUTIONS--the Empire Trusts offer
regular monthly, semi-annual or reinvested income. The Builder offers
regular monthly, quarterly (see "Automatic Cash Withdrawal Plan") or
reinvested dividends.
PROFESSIONAL MANAGEMENT--professional management is provided
by Glickenhaus & Co., a New York based partnership with over $100
million in capital and quarter of a century experience in managing
municipal bond portfolios.
AFFORDABLE DIVERSIFICATION--each share of the Empire Builder,
or each Unit of the Empire Trust, represents a whole portfolio of New
York tax exempt municipal bonds picked and/or managed by professionals.
NO MINIMUM INVESTMENT--the Empire Builder's minimum initial
investment of $1,000 is waived for reinvested distributions from the
Empire Trusts.
AUTOMATIC CASH WITHDRAWAL PLAN--investors with over $5,000 in
the Empire Builder can have monthly or quarterly checks automatically
sent to the owner of record, or to a bank checking account.
EMPIRE BUILDER, (LOGO)
EMPIRE BUILDER TAX FREE BOND FUND
// YES!
I would like to learn more about building tax-free wealth by reinvesting
my Empire State Municipal Exempt Trust income, principal or both into
The Empire Builder Tax Free Bond Fund.
Please send me a free prospectus on The Empire Builder Tax Free Bond
Fund, containing more complete information including all charges and
expenses. I will read it carefully before I invest or send money.
Name
Street
City State Zip
Broker Name Brokerage Firm
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO. 1579 NEW YORK, NY
POSTAGE PAID BY ADDRESSEE
Empire Builder Tax Free Bond Fund
230 Park Avenue
New York, NY 10164-2102
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Glickenhaus & Co. and Lebenthal & Co., Inc. are covered
under Brokers' Blanket Policies, Standard Form 14, in the respective amounts of
$5,000,000 and $10,000,000.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler LLP (included as Exhibit 99.3.1)
BDO Seidman, LLP
Muller Data Corporation (included as Exhibit 99.5.1)
The following exhibits:
<TABLE>
<S> <C>
*99.1.1 -- Reference Trust Agreement including certain Amendments to Trust
Indenture and Agreement referred to under Exhibit 99.1.1.1 below.
99.1.1.1 -- Trust Indenture and Agreement (filed as Exhibit 1.1.1 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-33746
of Empire State Municipal Exempt Trust, Guaranteed Series 66 on
December 18, 1990, and incorporated herein by reference).
99.1.3 -- Form of Agreement Among Underwriters and Selected Dealers
Agreement (filed as Exhibit 1.8 to Amendment No. 1 to Form S-6
Registration Statement No. 33-28268 of Empire State Municipal
Exempt Trust, Guaranteed Series 49 on July 18, 1989, and
incorporated herein by reference).
99.1.6 -- Restated Agreement of Limited Partnership of Glickenhaus & Co.
(filed as Exhibit 1.3 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
99.1.6(a) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(a) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(b) -- Certificate of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(b) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(c) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(c) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(d) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.2(d) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-814 of
Empire State Municipal Exempt Trust, Guaranteed Series 23 on
April 11, 1986, and incorporated herein by reference).
99.1.6(e) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(e) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-52058
of MINT Group 8 on November 18, 1992, and incorporated herein by
reference).
99.1.6(f) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(e) 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).
99.1.6.1 -- Certificate of Incorporation of Lebenthal & Co., Inc. as amended
(filed as Exhibit 1.5 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
</TABLE>
- ------------
* To be filed by amendment.
II-1
<PAGE>
<TABLE>
<S> <C>
99.1.6.2 -- By-Laws of Lebenthal & Co., Inc. (filed as Exhibit 1.5 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-22568
of Empire State Municipal Exempt Trust, Guaranteed Series 39 on
August 9, 1988, and incorporated herein by reference).
*99.1.7 -- Form of Insurance Policy obtained by the Trust.
99.1.7(a) -- Master Letter Agreement of Municipal Bond Investors Assurance
Corporation (filed as Exhibit 1.7(a) to Amendment 1 to Form S-6
Registration Statement No. 33-35124 of Empire State Municipal
Exempt Trust, Guaranteed Series 59 on July 1, 1990, and
incorporated herein by reference).
99.1.7(b) -- Form of Permanent Insurance Policy of Municipal Bond Investors
Assurance Corporation (filed as Exhibit 1.7 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-10860 of Empire State
Municipal Exempt Trust, Guaranteed Series 31 on June 10, 1987,
and incorporated herein by reference).
99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-33746 of Empire State
Municipal Exempt Trust, Guaranteed Series 66 on December 18,
1990, and incorporated herein by reference).
*99.3.1 -- Opinion of Battle Fowler LLP as to the legality of the securities
being registered.
99.4.1 -- Information as to Partners of Glickenhaus & Co. (filed as Exhibit
4.1 to Amendment No. 1 to Form S-6 Registration Statement No.
33-26577 of Empire State Municipal Exempt Trust, Guaranteed
Series 46 on April 19, 1989, and incorporated herein by
reference).
99.4.2 -- Information as to Officers and Directors of Lebenthal & Co., Inc.
(filed as Exhibit 4.2 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-22568 of Empire State Municipal Exempt Trust,
Guaranteed Series 39 on August 9, 1988, and incorporated herein
by reference).
99.4.3 -- Affiliations of Sponsors with other investment companies (filed
as Exhibit 4.6 to Amendment No. 1 to Form S-6 Registration
Statement No. 2-95041 of Municipal Insured National Trust Series
1 on March 21, 1985, and incorporated herein by reference).
99.4.4 -- Stockbrokers' Bond and Policy, Form B for Glickenhaus & Co.
(filed as Exhibit 4.7 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
99.4.5 -- Stockbrokers' Blanket Bond Policy, Standard Form No. 14 for
Lebenthal & Co., Inc. (filed as Exhibit 4.9 to Form S-6
Registration Statement No. 2-95041 of Municipal Insured National
Trust Series 1 on December 21, 1984, and incorporated herein by
reference).
*99.5.1 -- Consent To Be Evaluator of Muller Data Corporation and
Affirmation Letter of Standard & Poor's Corporation.
*99.5.2 -- Affirmation Letter of Moody's Investors Service.
99.6.1 -- Copies of Powers of Attorney of General Partners of Glickenhaus &
Co. (filed 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).
</TABLE>
- ------------
* To be filed by amendment.
II-2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EMPIRE STATE MUNICIPAL EXEMPT TRUST, SERIES 72 HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, HEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 20TH DAY OF
JULY, 1995.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
SERIES 72
By: GLICKENHAUS & CO.
----------------------------------
(SPONSOR)
By: /s/ BRIAN C. LAUX
----------------------------------
(BRIAN C. LAUX, ATTORNEY-IN-FACT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------------- ---------------------- -------------
<S> <C> <C>
ROBERT SANTORO* General Partner
- -----------------------------------------
(ROBERT SANTORO)
ALFRED FEINMAN* General Partner
- -----------------------------------------
(ALFRED FEINMAN)
SETH M. GLICKENHAUS* General Partner
- -----------------------------------------
(SETH M. GLICKENHAUS)
STEVEN B. GREEN* General Partner, Chief
- ----------------------------------------- Financial Officer
(STEVEN B. GREEN)
ARTHUR WINSTON* General Partner
- -----------------------------------------
(ARTHUR WINSTON)
JEFFREY L. LEDERER* General Partner
- -----------------------------------------
(JEFFREY L. LEDERER)
*By: /s/ BRIAN C. LAUX
------------------------------------ July 20, 1995
(BRIAN C. LAUX, ATTORNEY-IN-FACT)
</TABLE>
- ------------------
* 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-3
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EMPIRE STATE MUNICIPAL EXEMPT TRUST, SERIES 72 HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE 20TH DAY OF
JULY, 1995.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
SERIES 72
By: LEBENTHAL & CO., INC.
---------------------------------
(SPONSOR)
By: /s/ ALEXANDRA LEBENTHAL
---------------------------------
(ALEXANDRA LEBENTHAL,
ATTORNEY-IN-FACT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------------- ------------------------- -------------
<S> <C> <C>
H. GERARD BISSINGER, II* Director
- --------------------------------------
(H. GERARD BISSINGER, II)
JEFFREY M. JAMES* Director
- --------------------------------------
(JEFFREY M. JAMES)
D. WARREN KAUFMAN* Director
- --------------------------------------
(D. WARREN KAUFMAN)
/s/ ALEXANDRA LEBENTHAL Director, President July 20, 1995
- --------------------------------------
(ALEXANDRA LEBENTHAL)
JAMES A. LEBENTHAL* Director, Chief Executive
- -------------------------------------- Officer
(JAMES A. LEBENTHAL)
DUNCAN K. SMITH* Director
- --------------------------------------
(DUNCAN K. SMITH)
*By: /s/ ALEXANDRA LEBENTHAL
--------------------------------- July 20, 1995
(ALEXANDRA LEBENTHAL,
ATTORNEY-IN-FACT)
</TABLE>
- ------------------
* 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-4
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of their name in the Prospectus included
in this Registration Statement is contained in their opinion filed as Exhibit
3.1 to this Registration Statement.
------------------
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of
Empire State Municipal Exempt Trust, Series 72
We hereby consent to the use in this Registration Statement No. 33- of
our report dated July , 1995, relating to the Statement of Condition of Empire
State Municipal Exempt Trust, Series 72 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 , 1995
II-5
