As filed with the Securities and Exchange Commission on September 26, 1996
Registration No. 33-28267*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 7
To
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 48 AND
GUARANTEED SERIES 49
B. Name of depositors: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
C. Complete address of depositors' principal executive offices:
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 East 43rd Street 120 Broadway
New York, NY 10017 New York, NY 10271
D. Name and complete address of agent for service:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL Copy of comments to:
Glickenhaus & Co. Lebenthal & Co., Inc. MICHAEL R. ROSELLA, ESQ.
6 East 43rd Street 120 Broadway Battle Fowler LLP
New York, NY 10017 New York, NY 10271 75 East 55th Street
New York, NY 10022
(212) 856-6858
It is proposed that this filing become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on September 30, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ( date ) pursuant to paragraph (a) of Rule 485
* The Prospectus included in this Registration Statement constitutes a
combined Prospectus as permitted by the provisions of Rule 429 of the
General Rules and Regulations under the Securities Act of 1933 (the
"Act"). Said Prospectus covers units of undivided interest in Empire State
Municipal Exempt Trust, Guaranteed Series 48 and Guaranteed Series 49
covered by prospectuses heretofore filed as part of separate registration
statements on Form S-6 (Registration Nos. 33-28267 and 33-28268,
respectively) under the Act.
C/M: 10726.0053 299333.1
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 48
AND GUARANTEED SERIES 49
CROSS-REFERENCE SHEET
Pursuant to Rule 404 of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
<CAPTION>
Form N8B-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...... "
2. Name and address of each depositor.. Sponsors
3. Name and address of trustee......... Trustee
4. Name and address of principal
underwriters...................... Sponsors; Public Offering --
Distribution of Units; Back Cover
5. State of organization of trust...... The Trust
6. Execution and termination of
trust agreement................... The Trust; Amendment and Termination of
the Trust Agreement
7. Changes of name..................... Not Applicable
8. Fiscal year......................... "
9. Litigation.......................... None
II. General Description of the Trust and Securities of the Trust
10. (a) Registered or bearer
securities..................... Rights of Unit Holders
(b) Cumulative or distributive
securities..................... "
(c) Redemption...................... "
(d) Conversion, transfer, etc....... "
(e) Periodic payment plan........... Not Applicable
(f) Voting rights................... Amendment and Termination of the Trust
Agreement
(g) Notice to certificateholders.... Rights of Unit Holders--Reports and
Records; Sponsors--Responsibility;
Trustee--Resignation; Amendment and
Termination of the Trust Agreement
(h) Consents required............... Sponsors--Responsibility; Amendment and
Termination of the Trust Agreement
(i) Other provisions................ The Trust--Tax Status
11. Type of securities
comprising units.................. Prospectus front cover; The Trust--
Portfolio
12. Certain information regarding
periodic payment certificates..... Not Applicable
13. (a) Load, fees, expenses, etc....... Prospectus front cover; Summary of
Essential Financial Information;
Rights of Unit Holders--Expenses and
Charges; Public Offering--Offering
Price; Public Offering--Market for
Units
ii
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<PAGE>
(b) Certain information regarding
periodic payment certificates... Not Applicable
(c) Certain percentages............. Public Offering--Offering Price
(d) Certain other fees, etc. payable Rights of Unit Holders--Certificates
by holders......................
(e) Certain profits receivable by
depositors, principal
underwriters, trustee or
affiliated persons.............. Public Offering--Offering Price; Rights
of Unit Holders--Redemption--Purchase by
the Sponsors of Units Tendered for
Redemption
(f) Ratio of annual charges
to income....................... Not Applicable
14. Issuance of trust's securities...... The Trust; Rights of Unit Holders--
Certificates
15. Receipt and handling of payments
from purchasers................... Public Offering--Offering Price;
Amendment and Termination of the Trust
Agreement
16. Acquisition and disposition of
underlying securities............. The Trust--Portfolio; Sponsors--
Responsibility
17. Withdrawal or redemption............ Public Offering--Market for Units;
Rights of Unit Holders--Redemption
18. (a) Receipt, custody and
disposition of income........... The Trust--Portfolio--General
Considerations; Insurance on the
Bonds; Public Offering--Offering
Price; Rights of Unit Holders--
Distribution of Interest and
Principal; Rights of Unit Holders--
Reports and Records; Amendment and
Termination of the Trust Agreement
(b) Reinvestment of distributions... Automatic Accumulation Account
(c) Reserves or special funds....... Rights of Unit Holders; Rights of Unit
Holders--Distribution of Interest and
Principal; Expenses and Charges--Other
Charges; Amendment and Termination of
the Trust Agreement
(d) Schedule of distributions....... Not Applicable
19. Records, accounts and reports....... Rights of Unit Holders--Reports and
Records; Rights of Unit Holders--
Distribution of Interest and
Principal; Amendment and Termination
of the Trust Agreement
20. Certain miscellaneous provisions
of trust agreement................ Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations on
Liability; Amendment and Termination
of the Trust Agreement
(a) Amendment....................... "
(b) Termination..................... "
(c) and (d) Trustee, removal and
successor....................... "
(e) and (f) Depositor, removal
and successor................... "
21. Loans to security holders........... Not Applicable
iii
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<PAGE>
22. Limitations on liability............ The Trust--Portfolio; Sponsors--
Limitations on Liability; Trustee--
Limitations on Liability
23. Bonding arrangements................ Additional Information--Item A
24. Other material provisions
of trust agreement................ Not Applicable
III. Organization, Personnel and Affiliated Persons of Depositor
25. Organization of depositor.......... Sponsors
26. Fees received by depositors........ Not Applicable
27. Business of depositors............. Sponsors
28. Certain information as to
officials and affiliated
persons of depositor.............. Contents of Registration Statement
29. Voting securities of depositors..... Not Applicable
30. Persons controlling depositors...... "
31. Payments by depositors for certain
services rendered to trust........ "
32. Payment by depositors for certain
other services rendered to trust.. "
33. Remuneration of employees of
depositors for certain services
rendered to trust................... "
34. Remuneration of other persons for
certain services rendered to trust.. "
IV. Distribution and Redemption of Securities
35. Distribution of trust's
securities by states.............. Public Offering--Distribution of Units
36. Suspension of sales of trust's
securities........................ Not Applicable
37. Revocation of authority
to distribute..................... "
38. (a) Method of distribution.......... Public Offering--Distribution of Units
(b) Underwriting agreements......... "
(c) Selling agreements.............. "
39. (a) Organization of principal
underwriters.................... Sponsors
(b) N.A.S.D. membership of
principal underwriters.......... "
40. Certain fees received by
principal underwriters............ Not Applicable
41. (a) Business of principal
underwriters.................... Sponsors
(b) Branch offices of principal
underwriters.................... Not Applicable
(c) Salesmen of principal
underwriters.................... "
42. Ownership of trust's
securities by certain persons..... "
43. Certain brokerage commissions
received by principal
underwriters...................... "
44. (a) Method of valuation............. Prospectus front cover; Public
Offering--Offering Price; Public
Offering-- Distribution of Units
(b) Schedule as to offering price... Not Applicable
iv
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<PAGE>
(c) Variation in offering price
to certain persons.............. Public Offering--Offering Price; Public
Offering-- Distribution of Units
45. Suspension of redemption rights..... Not Applicable
46. (a) Redemption valuation............ Rights of Unit Holders--Redemption--
Computation of Redemption Price per Unit
(b) Schedule as to redemption
price................ Not Applicable
47. Maintenance of position in
underlying securities............. Public Offering--Market for Units;
Rights of Unit Holders--Redemption--
Purchase by the Sponsors of Units
Tendered for Redemption; Rights of
Unit Holders--Redemption--Computation
of Redemption Price per Unit
V. Information Concerning the Trustee or Custodian
48. Organization and regulation
of trustee........................ Trustee
49. Fees and expenses of trustee........ Rights of Unit Holders--Expenses and
Charges; Rights of Unit Holders--
Distribution of Interest and Principal
50. Trustee's lien...................... Rights of Unit Holders--Expenses and
Charges--Other Charges; Rights of Unit
Holders--Distribution of Interest and
Principal
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of
trust's securities................ Insurance on the Bonds
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities...................... Prospectus front cover;
Sponsors--Responsibility
(b) Transactions involving
elimination of underlying
securities...................... Not Applicable
(c) Policy regarding substitution
or elimination of underlying
securities...................... Sponsors--Responsibility
(d) Fundamental policy not
otherwise covered............... Not Applicable
53. Tax status of trust................. Prospectus front cover; Tax
Status
VIII. Financial and Statistical Information
54. Trust's securities during
last ten years.................... Not Applicable
55. Certain information regarding
periodic payment certificates..... "
56. Certain information regarding
periodic payment certificates..... "
v
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<PAGE>
57. Certain information regarding
periodic payment certificates..... "
58. Certain information regarding
periodic payment certificates..... "
59. Financial Statements
(Instruction 1(c) to Form S-6)...... Statement of Net Assets; Statements of
Operations; Statements of Changes in
Net Assets
</TABLE>
vi
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
Prospectus, Part I 8,579 Units Dated: September 30, 1996
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of June 28, 1996
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of May 31, 1996. The second part of
this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income to the Unit holders
is generally exempt from all New York State and New York City income taxes.
Capital gains, if any, are subject to tax. See Part II under "Tax Status."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited
in the portfolio of the Trust are sometimes referred to herein as the
"Securities." Insurance guaranteeing the payment of principal and interest on
the Securities while in the Trust has been obtained by the Trust from the
Insurer as set forth in Part II under "Insurance on the Bonds." Such insurance
does not guarantee the market value of the Securities or the Units offered
hereby. The payment of interest and the preservation of principal are, of
course, dependent upon the continuing ability of the issuers of the Bonds and
any other insurer to meet their obligations. As a result of the insurance on
the Bonds, the Units are rated "AAA" by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies ("Standard & Poor's").
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights
of Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering
- -- Market for Units." If such a market is not maintained, a Unit holder may be
able to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 48
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT JUNE 28, 1996
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
<S> <C>
Aggregate Principal Amount of Bonds in the Trust: $ 7,230,000
Number of Units: 8,579
Fractional Undivided Interest in the Trust Per Unit: 1/8,579
Total Value of Securities in the Portfolio (Based on Bid Side
Evaluations of Securities): $ 7,337,427.10
=================
Sponsors' Repurchase Price Per Unit: $ 855.28
Plus Sales Charge(1): 12.41
-----------------
Public Offering Price Per Unit(2): $ 867.69
=================
Redemption Price Per Unit(3): $ 855.28
Excess of Public Offering Price Over Redemption Price Per Unit: $ 12.41
Weighted Average Maturity of Bonds in the Trust: 9.583 years
Evaluation Time: 2:00 p.m., New York Time, on the day next following receipt by a
Sponsor of an order for a Unit sale or purchase or by the Trustee of
a Unit tendered for redemption.
Annual Insurance Premium: $12,385
Evaluator's Fee: $.55 for each issue of Bonds in the Trust for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds in the Trust, $1.08
under the monthly and $.60 under the semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of underlying securities.
Date of Deposit: June 7, 1989
Date of Trust Agreement: June 7, 1989
Mandatory Termination Date: December 31, 2038
Minimum Principal
Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust
Agreement may be
Terminated: $2,000,000
</TABLE>
-2-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 48
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT JUNE 28, 1996
(Continued)
<CAPTION>
Monthly Semi-annual
<S> <C> <C>
P Estimated Annual Interest Income: $58.47 $58.47
Less Annual Premium on Portfolio Insurance 1.45 1.45
E Less Estimated Annual Expenses 1.26 .82
------ ------
R Estimated Net Annual Interest Income: $55.76 $56.20
====== ======
U Estimated Interest Distribution: $28.10 $ 4.64
N Estimated Current Return Based on Public Offering Price (4): 6.43% 6.48%
I
Estimated Long-Term Return Based on Public Offering Price (5): 4.22% 4.27%
T
Estimated Daily Rate of Net Interest Accrual: $.15488 $.15611
Record Dates: 15th Day of Month 15th Day of May
and November
Payment Dates: 1st Day of Month 1st Day of June
and December
</TABLE>
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
2. Plus accrued interest to July 3, 1996, the expected date of settlement, of
$11.73 monthly and $16.56 semi-annually.
3. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption --Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net annual
interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator, and with the redemption, maturity, exchange or
sale of Securities. This calculation, which includes cash income accrual
only, does not include discount accretion on original issue discount bonds
or on zero coupon bonds or premium amortization on bonds purchased at a
premium. See "Tax Status" and "Estimated Current Return and Estimated
Long-Term Return to Unit Holders" in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes into
account the yields (including accretion of discounts and amortization of
premiums) of the individual Bonds in the Trust's portfolio, weighted to
reflect the market value and time to maturity (or, in certain cases, to
earlier call date) of such Bonds, adjusted to reflect the Public Offering
Price (including sales charge and expenses) per Unit. See "Estimated
Current Return and Estimated Long-Term Return to Unit Holders" in Part II
of this Prospectus.
-3-
<PAGE>
Portfolio Information
On May 31, 1996, the bid side valuation of 18.4% of the aggregate principal
amount of Bonds in the Portfolio for this Trust was at a discount from par and
81.6% was at a premium over par. See Note (B) to "Tax-Exempt Bond Portfolio"
for information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
The Portfolio consists of 9 issues of Bonds issued by entities located in New
York or certain United States territories or possessions. The following
information is being supplied to inform Unit holders of circumstances affecting
the Trust. 4.2% of the aggregate principal amount of the Bonds in the Portfolio
are general obligations of the governmental entities issuing them and are
backed by the taxing power thereof. 18.2% of the aggregate principal amount of
the Bonds in the Portfolio are payable from appropriations. 77.6% of the
aggregate principal amount of the Bonds in the Portfolio are payable from the
income of specific projects or authorities and are not supported by the
issuers' power to levy taxes.
Although income to pay such Bonds may be derived from more than one source,
the primary sources of such income, the number of issues (and the related
dollar weighted percentage of such issues) deriving income from such sources
and the purpose of issue are as follows: General Obligation, 1 (4.2%);
Appropriations, 2 (18.2%); Revenue: Health Care, 1 (23.3%); Public Power, 1
(4.3%); Housing, 1 (13.1%); Higher Education, 1 (10.0%); Water & Sewer, 1
(22.6%); and Resource Recovery, 1 (4.3%). The Trust is not deemed to be
concentrated in any particular category of bonds1. One issue, constituting
10.0% of the Bonds in the Portfolio, is an original issue discount bond and a
zero coupon bond. On May 31, 1996, 3 issues (41.0%) were rated AAA, 1 issue
(23.3%) was rated AA, and 1 issue (10.0%) was rated BBB by Standard & Poor's; 1
issue (13.1%) was rated Aaa, 2 issues (8.4%) were rated Aa and 1 issue (4.2%)
was rated A by Moody's Investors Service, Inc. ("Moody's").2 Subsequent to such
date, such ratings may have changed. See "Tax-Exempt Bond Portfolio." For a
more detailed discussion, it is recommended that Unit holders consult the
official statements for each Security in the Portfolio of the Trust.
Tax Status (The tax opinion which is described herein was rendered on the Date
of Deposit. Consult your tax advisor to discuss any relevant changes in tax
laws since the Date of Deposit. See also "Tax Status" in Part II of this
Prospectus.)
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable
from gross income under the Internal Revenue Code of 1986, as amended.
See "The Trust -- Portfolio" in Part II of this Prospectus.
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust - - General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part
II of this Prospectus.
-4-
<PAGE>
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on a
sale or redemption of a Unit of the Trust is, however, includable in gross
income as capital gain (or loss) for federal, state and local income tax
purposes assuming that the Unit is held as a capital asset. Such gain (or loss)
does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term depending on the facts
and circumstances. Bonds selling at a market discount tend to increase in
market value as they approach maturity when the principal amount is payable,
thus increasing the potential for taxable gain (or reducing the potential for
loss) on their redemption, maturity or sale. In the case of Bonds acquired at a
market discount, gain will be treated as ordinary income to the extent of
accrued market discount. For tax years beginning after December 31, 1992,
long-term capital gains will be taxed at a maximum federal income tax rate of
28%, while ordinary income will be taxed at a maximum federal income tax rate
of 36% (plus a 10% surtax applicable to certain high income taxpayers).
-5-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal Exempt Trust,
Guaranteed Series 48:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 48, including the bond portfolio, as
of May 31, 1996, and the related statements of operations and changes in net
assets for the years ended May 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Sponsors. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of May 31, 1996, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsors, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 48 as of May 31, 1996, and the results of its
operations and changes in net assets for the years ended May 31, 1996, 1995 and
1994, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
June 28, 1996
-6-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
STATEMENT OF NET ASSETS
MAY 31, 1996
CASH.............................................. $ 82,695
INVESTMENTS IN SECURITIES, in market
value (cost $7,205,126)........................... 7,368,944
ACCRUED INTEREST RECEIVABLE....................... 181,972
-----------
Total trust property...................... 7,633,611
LESS - ACCRUED EXPENSES........................... 2,235
------------
NET ASSETS........................................ $7,631,376
==========
<TABLE>
NET ASSETS REPRESENTED BY:
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
<S> <C> <C> <C>
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS..................................... $4,204,072 $3,190,008 $7,394,080
UNDISTRIBUTED NET INVESTMENT
INCOME........................................ 82,256 155,040 237,296
----------- ----------- -----------
Total value................................ $4,286,328 $3,345,048 $7,631,376
========== ========== ==========
UNITS OUTSTANDING................................ 4,892 3,712 8,604
============ ============ ============
VALUE PER UNIT................................... $ 876.19 $ 901.14
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
STATEMENTS OF OPERATIONS
<CAPTION>
Year ended May 31,
---------------------------------------------------------------
1996 1995 1994
----------------- ----------------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME - INTEREST.............................. $572,820 $ 695,857 $ 718,102
-------- --------- ---------
EXPENSES:
Trustee fees 9,040 10,207 9,932
Evaluation fees.......................................... 1,645 1,755 2,099
Insurance premiums....................................... 13,171 15,936 16,518
Sponsors' advisory fees.................................. 1,714 2,413 2,436
Auditors' fees........................................... 1,800 1,800 1,800
--------- ---------- ----------
Total expenses....................................... 27,370 32,111 32,785
--------- --------- ----------
NET INVESTMENT INCOME..................................... 545,450 663,746 685,317
REALIZED GAIN (LOSS) ON SECURITIES SOLD
OR REDEEMED (Note 3)..................................... (98,222) 14,701 894
NET CHANGE IN UNREALIZED MARKET
DEPRECIATION............................................. (80,082) (168,077) (331,507)
-------- --------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................................... $367,146 $ 510,370 $ 354,704
======== ========= =========
</TABLE>
See accompanying notes to financial statements.
-8-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Year ended May 31,
-----------------------------------------------------------
1996 1995 1994
--------------- ----------------- ---------
<S> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 545,450 $ 663,746 $ 685,317
Realized gain (loss) on securities sold or redeemed....... (98,222) 14,701 894
Net change in unrealized market depreciation.............. (80,082) (168,077) (331,507)
------------ ------------ ------------
Net increase in net assets resulting from
operations............................................ 367,146 510,370 354,704
----------- ------------ -----------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income..................................... (599,364) (673,854) (694,200)
Principal................................................. (819,570) (110,116) -
------------ ----------- ----------
Total distributions................................... (1,418,934) (783,970) (694,200)
----------- ----------- ----------
CAPITAL SHARE TRANSACTIONS:
Redemption of 879, 332 and 185 units...................... (801,151) (321,232) (187,515)
------------ ----------- ---------
NET DECREASE IN NET ASSETS................................. (1,852,939) (594,832) (527,011)
NET ASSETS:
Beginning of year......................................... 9,484,315 10,079,147 10,606,158
----------- ---------- -----------
End of year............................................... $ 7,631,376 $9,484,315 $10,079,147
=========== ========== ===========
DISTRIBUTION PER UNIT (Note 2):
Interest:
Monthly plan............................................ $63.25 $68.02 $68.34
Semi-annual plan........................................ $67.24 $69.02 $68.86
Principal:
Monthly plan............................................ $13.35 $11.33 $ -
Semi-annual plan...................................... $13.35 $11.33 $ -
</TABLE>
See accompanying notes to financial statements.
-9-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
General
The Trust is registered under the Investment Company Act of 1940.
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit holders either
semi-annually on the first day of June and December or, if elected by the Unit
holder, on the first day of each month, after deducting applicable expenses.
Principal distributions, resulting from the sale or redemption of securities,
were made in March, September and October 1995.
<TABLE>
NOTE 3 - BONDS SOLD OR REDEEMED
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ------- -------- -------- ----------- ------------ ---- -------
Year ended May 31, 1996:
<S> <C> <C> <C> <C> <C>
* $210,000 6/29/95 Dormitory Authority of the State of New $214,200 $229,732 $(15,532)
York, Hospital Revenue Bonds, Rochester
General Hospital (FHA Insured Mortgage),
Series 1985
* 805,000 8/ 1/95 Dormitory Authority of the State of New 821,100 880,638 (59,538)
York, Hospital Revenue Bonds, Rochester
General Hospital (FHA Insured Mortgage),
Series 1985
* 120,000 8/15/95 State of New York, Serial Bonds (Callable) 121,200 113,907 7,293
9 120,000 9/26/95 Metropolitan Transportation Authority, 125,760 129,623 (3,863)
Transit Facilities Service Contract Bonds,
Series G
* 185,000 11/ 2/95 New York State Medical Care Facilities 189,440 202,851 (13,411)
Finance Agency, Insured Hospital
Mortgage Revenue Bonds, 1985 Series C
(FHA-Insured Mortgage)
</TABLE>
-10-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ------ -------- -------- ----------- ------------ ---- -------
Year ended May 31, 1996 (continued):
<S> <C> <C> <C> <C> <C> <C>
* $30,000 11/24/95 New York State Medical Care Facilities $30,630 $32,895 $(2,265)
Finance Agency, Insured Hospital
Mortgage Revenue Bonds, 1985 Series C
(FHA-Insured Mortgage)
* 65,000 1/15/96 New York State Medical Care Facilities 66,300 71,271 (4,971)
Finance Agency, insured Hospital
Mortgage Revenue Bonds, 1985 Series C
(FHA-Insured Mortgage)
9 25,000 2/15/96 Metropolitan Transportation Authority, 25,625 27,005 (1,380)
Transit Facilities Service Contract Bonds,
Series G
9 25,000 3/13/96 Metropolitan Transportation Authority, 25,500 27,005 (1,505)
Transit Facilities Service Contract Bonds,
Series G
9 15,000 3/26/96 Metropolitan Transportation Authority, 15,375 16,203 (828)
Transit Facilities Service Contract Bonds,
Series G
9 10,000 4/30/96 Metropolitan Transportation Authority, 10,210 10,802 (592)
Transit Facilities Service Contract Bonds,
Series G
9 25,000 4/22/96 Metropolitan Transportation Authority, 25,375 27,005 (1,630)
---------- Transit Facilities Service Contract Bonds, --------- --------- ---------
Series G
$1,635,000 $1,670,715 $1,768,937 $(98,222)
========== ========== ========== =========
</TABLE>
* Portfolio redeemed in its entirety.
-11-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
NOTES TO FINANCIAL STATEMENTS
(Concluded)
NOTE 4 - NET ASSETS
Cost of 10,000 units at Date of Deposit $10,234,376
Less gross underwriting commission 501,400
-------------
Net cost - initial offering price 9,732,976
Realized net loss on securities sold or redeemed (98,130)
Principal distributions (1,094,686)
Redemption of 1,396 units (1,309,898)
Unrealized market appreciation of securities 163,818
Undistributed net investment income 237,296
-------------
Net assets $ 7,631,376
===========
-12-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
<CAPTION>
Date of Redemption Features
Port- Aggregate Name of Issuer and Maturity S.F. - Sinking Fund
folio Rating Principal Title of Bond Coupon (Note B) Opt. - Optional Call
No. (Note A) Amount Rate (Note B)
----- -------- ------- ------------------------------ ------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1 AAA $1,000,000 Housing New York 8.625% 11/01/06 11/01/00 @ 100 S.F.
Corporation, Revenue 11/01/97 @ 102 Opt.
Bonds 1987 Series A
(MBIA Insured)
2 AA 1,775,000 New York State Medical 7.250 02/15/24 02/15/10 @ 100 S.F.
Care Facilities Finance 02/15/99 @ 102 Opt.
Agency, Hospital and
Nursing Home FHA-
Insured Mortgage Revenue
Bonds, 1989 Series A
3 A* 320,000 State of New York, Series 4.000 03/01/07 No Sinking Fund
Bonds (Callable) 03/01/97 @ 102 Opt.
4 Aa* 325,000 Municipal Assistance 5.500 07/01/08 No Sinking Fund
Corporation for the City of 07/01/97 @ 100 Opt.
New York (A Public
Benefit Corporation of the
State of New York), Series
62 Bonds
5 Aa* 325,000 Power Authority of the State 6.000 01/01/18 No Sinking Fund
of New York, General 07/01/96 @ 100 Opt.
Purpose Bonds, Series N
</TABLE>
Market Value
Port- as of Annual Interest
folio Cost of Bonds May 31, Income to
No. to Trust 1996 Trust
----- ------------- ------ ----------------
1 $1,113,020 $1,084,730 $ 86,250
2 1,763,906 1,875,767 128,687
3 227,152 278,131 12,800
4 277,124 325,049 17,875
5 288,691 324,971 19,500
-13-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
(Continued)
<CAPTION>
Date of Redemption Features
Port- Aggregate Name of Issuer and Maturity S.F. - Sinking Fund
folio Rating Principal Title of Bond Coupon (Note B) Opt. - Optional Call
No. (Note A) Amount Rate (Note B)
----- -------- ------- ------------------------------- ------- ----------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
6 AAA $ 400,000 Metropolitan,Transportation 8.500% 07/01/05 07/01/02 @ 100 S.F.
Authority, Transit 07/01/96 @ 102 Opt.
Facilities Service Contract
Bonds, Series G
7 Aaa* 1,000,000 New York State Urban 8.125 01/01/14 01/01/09 @ 100 S.F.
Development Corporation, 01/01/98 @ 102 Opt.
Correctional Facilities
Revenue Bonds, Series E
8 BBB 760,000 Dormitory Authority of the 0.000 07/01/18 07/01/09 @ 48.306 S.F.
State of New York, City 07/01/98 @ 20.844 Opt.
University System
Consolidated Revenue
Bonds, Series 1988E
9 AAA 1,725,000 New York City Municipal 9.000 06/15/17 06/15/11 @ 100 S.F.
Water Financial Authority, 06/15/97 @ 102 Opt.
Water and Sewer System
Revenue Bonds, Fiscal
1988 Series A
----------
$7,630,000
==========
</TABLE>
Market Value
Port- as of Annual Interest
folio Cost of Bonds May 31, Income to
No. to Trust 1996 Trust
----- ------------- ------ ----------------
6 $ 432,075 $ 432,075 $ 34,400
7 1,059,950 1,077,480 81,250
8 89,300 144,491 -
9 1,953,908 1,848,941 155,250
---------- ---------- --------
$7,205,126 $7,368,944 $535,612
========== ========== ========
-14-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 48
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
(Continued)
NOTES TO TAX-EXEMPT BOND PORTFOLIO
(A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings
are by Standard & Poor's, except for those indicated by an asterisk
(*), which are by Moody's. Certain bond ratings have changed since the
Date of Deposit, at which time all such bonds were rated A or better by
either Standard & Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund
(mandatory partial redemption) (S.F.) or at the stated optional call
(at the option of the issuer) (Opt.) or by refunding. Certain bonds in
the portfolio may be redeemed earlier than dates shown in whole or in
part under certain unusual or extraordinary circumstances as specified
in the terms and provisions of such bonds. Single-family mortgage
revenue bonds and housing authority bonds are most likely to be called
subject to such provisions, but other bonds may have similar call
features.
-15-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
Prospectus, Part I 8,228 Units Dated: September 30, 1996
NOTE: Part I of this Prospectus may not be distributed
unless accompanied by Part II.
This Prospectus consists of two parts. The first part contains a "Summary
of Essential Financial Information" on the reverse hereof as of June 28, 1996
and a summary of additional specific information including "Special Factors
Concerning the Portfolio" and audited financial statements of the Trust,
including the related bond portfolio, as of May 31, 1996. The second part of
this Prospectus contains a general summary of the Trust and "Special Factors
Affecting New York."
In the opinion of special counsel for the Sponsors as of the Date of
Deposit, interest on the Bonds which is exempt from federal income tax when
received by the Trust will be excludable from the federal gross income of the
Unit holders and, with certain exceptions, interest income to the Unit holders
is generally exempt from all New York State and New York City income taxes.
Capital gains, if any, are subject to tax. See Part II under "Tax Status."
The Trust is a unit investment trust formed for the purpose of obtaining
tax-exempt interest income through investment in a diversified, insured
portfolio of long-term bonds, issued by or on behalf of the State of New York
and counties, municipalities, authorities or political subdivisions thereof or
issued by certain United States territories or possessions and their public
authorities (the "Bonds"). See Part II under "The Trust." The Bonds deposited
in the portfolio of the Trust are sometimes referred to herein as the
"Securities." Insurance guaranteeing the payment of principal and interest on
the Securities while in the Trust has been obtained by the Trust from the
Insurer as set forth in Part II under "Insurance on the Bonds." Such insurance
does not guarantee the market value of the Securities or the Units offered
hereby. The payment of interest and the preservation of principal are, of
course, dependent upon the continuing ability of the issuers of the Bonds and
any other insurer to meet their obligations. As a result of the insurance on
the Bonds, the Units are rated "AAA" by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies ("Standard & Poor's").
Offering. The initial public offering of Units in the Trust has been
completed. The Units offered hereby are issued and outstanding Units which have
been acquired by the Sponsors either by purchase from the Trustee of Units
tendered for redemption or in the secondary market. See Part II under "Rights
of Unit Holders -- Redemption -- Purchase by the Sponsors of Units Tendered for
Redemption" and "Public Offering -- Market for Units." The price at which the
Units offered hereby were acquired was not less than the redemption price
determined as described herein. See Part II under "Rights of Unit Holders --
Redemption -- Computation of Redemption Price per Unit."
The Public Offering Price of the Units is based on the aggregate bid price
of the Securities in the Trust divided by the number of Units outstanding, plus
a sales charge determined on the basis of the maturities of the Securities in
the Trust. See "Public Offering -- Offering Price" in Part II of this
Prospectus.
Market for Units. The Sponsors, although they are not obligated to do so,
intend to maintain a secondary market for the Units at prices based upon the
aggregate bid price of the Securities in the Trust plus accrued interest to the
date of settlement, as more fully described in Part II under "Public Offering
- -- Market for Units." If such a market is not maintained, a Unit holder may be
able to dispose of his Units only through redemption at prices based upon the
aggregate bid price of the underlying Securities. The purchase price of the
Securities in the Trust, if they were available for direct purchase by
investors, would not include the sales charges included in the Public Offering
Price of the Units.
Investors should retain both Parts of this Prospectus for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 49
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT JUNE 28, 1996
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO.
TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
<S> <C>
Aggregate Principal Amount of Bonds in the Trust: $ 6,585,000
Number of Units: 8,228
Fractional Undivided Interest in the Trust Per Unit: 1/8,228
Total Value of Securities in the Portfolio (Based on Bid Side
Evaluations of Securities): $ 6,115,525.00
==================
Sponsors' Repurchase Price Per Unit: $ 743.26
Plus Sales Charge(1): 13.02
------------------
Public Offering Price Per Unit(2): $ 756.28
==================
Redemption Price Per Unit(3): $ 743.26
Excess of Public Offering Price Over Redemption Price Per Unit: $ 13.02
Weighted Average Maturity of Bonds in the Trust: 6.625 years
</TABLE>
<TABLE>
<S> <C>
Evaluation Time: 2:00 p.m., New York Time, on the day next following receipt by a
Sponsor of an order for a Unit sale or purchase or by the Trustee of
a Unit tendered for redemption.
Annual Insurance Premium: $8,408
Evaluator's Fee: $.55 for each issue of Bonds in the Trust for each daily valuation.
Trustee's Annual Fee: For each $1,000 principal amount of Bonds in the Trust, $1.08
under the monthly and $.60 under the semi-annual distribution plan.
Sponsors' Annual Fee: Maximum of $.25 per $1,000 face amount of underlying securities.
Date of Deposit: July 18, 1989
Date of Trust Agreement: July 18, 1989
Mandatory Termination Date: December 31, 2038
Minimum Principal
Distribution: $1.00 per Unit
Minimum Value of the Trust
under which Trust
Agreement may be
Terminated: $2,000,000
</TABLE>
-2-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 49
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT JUNE 28, 1996
(Continued)
<CAPTION>
Monthly Semi-annual
<S> <C> <C>
P Estimated Annual Interest Income: $51.56 $51.56
Less Annual Premium on Portfolio Insurance 1.03 1.03
E Less Estimated Annual Expenses 1.32 .92
------- -------
R Estimated Net Annual Interest Income: $49.21 $49.61
====== ======
U Estimated Interest Distribution: $ 4.10 $24.80
N Estimated Current Return Based on Public Offering Price (4): 6.51% 6.56%
I
Estimated Long-Term Return Based on Public Offering Price (5): 4.03% 4.08%
T
Estimated Daily Rate of Net Interest Accrual: $.13669 $.13780
Record Dates: 15th Day of Month 15th Day of May
and November
Payment Dates: 1st Day of Month 1st Day of June
and December
</TABLE>
1. The sales charge is determined based on the maturities of the underlying
securities in the portfolio. See "Public Offering -- Offering Price" in
Part II of this Prospectus.
2. Plus accrued interest to July 3, 1996, the expected date of settlement, of
$9.56 monthly and $13.56 semi-annually.
3. Based solely upon the bid side evaluations of the portfolio securities.
Upon tender for redemption, the price to be paid will include accrued
interest as described in Part II under "Rights of Unit Holders --
Redemption --Computation of Redemption Price per Unit."
4. Estimated Current Return is calculated by dividing the estimated net annual
interest income received in cash per Unit by the Public Offering Price.
Interest income per Unit will vary with changes in fees and expenses of the
Trustee and the Evaluator, and with the redemption, maturity, exchange or
sale of Securities. This calculation, which includes cash income accrual
only, does not include discount accretion on original issue discount bonds
or on zero coupon bonds or premium amortization on bonds purchased at a
premium. See "Tax Status" and "Estimated Current Return and Estimated
Long-Term Return to Unit Holders" in Part II of this Prospectus.
5. Estimated Long-Term Return is calculated by using a formula that takes into
account the yields (including accretion of discounts and amortization of
premiums) of the individual Bonds in the Trust's portfolio, weighted to
reflect the market value and time to maturity (or, in certain cases, to
earlier call date) of such Bonds, adjusted to reflect the Public Offering
Price (including sales charge and expenses) per Unit. See "Estimated
Current Return and Estimated Long-Term Return to Unit Holders" in Part II
of this Prospectus.
-3-
<PAGE>
Portfolio Information
On May 31, 1996, the bid side valuation of 40.1% of the aggregate principal
amount of Bonds in the Portfolio for this Trust was at a discount from par and
59.9% was at a premium over par. See Note (B) to "Tax-Exempt Bond Portfolio"
for information concerning call and redemption features of the Bonds.
Special Factors Concerning the Portfolio
The Portfolio consists of 10 issues of Bonds issued by entities located in New
York or certain United States territories or possessions. The following
information is being supplied to inform Unit holders of circumstances affecting
the Trust. 7.7% of the aggregate principal amount of the Bonds in the Portfolio
are general obligations of the governmental entities issuing them and are
backed by the taxing power thereof. 11.4% of the aggregate principal amount of
the Bonds in the Portfolio are payable from appropriations. 80.9% of the
aggregate principal amount of the Bonds in the Portfolio are payable from the
income of specific projects or authorities and are not supported by the
issuers' power to levy taxes.
Although income to pay such Bonds may be derived from more than
one source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and the purpose of issue are as follows: General Obligation, 1 (7.7%);
Appropriations, 2 (11.4%); Revenue: Housing, 2 (5.6%); Higher Education, 1
(15.6%); Health Care, 3 (43.1%); and Transportation, 1 (16.6%). The Trust is
deemed to be concentrated in the Health Care category.1 Two issues,
constituting 11.4% of the Bonds in the Portfolio, are original issue discount
bonds, both of which are zero coupon bonds. On May 31, 1996, 6 issues (66.5%)
were rated AAA and 1 issue (8.0%) was rated AA by Standard & Poor's; 1 issue
(4.7%) was rated Aaa and 1 issue (7.7%) was rated A by Moody's Investors
Service, Inc. ("Moody's").2 One issue is partially refunded. The partially
refunded portion (4.7%) was rated AAA by Standard & Poor's. The remaining
portion (8.4%) was rated BBB+ by Standard & Poor's. Subsequent to such date,
such ratings may have changed. See "Tax-Exempt Bond Portfolio." For a more
detailed discussion, it is recommended that Unit holders consult the official
statements for each Security in the Portfolio of the Trust.
Tax Status (The tax opinion which is described herein was rendered on the Date
of Deposit. Consult your tax advisor to discuss any relevant changes in tax
laws since the Date of Deposit. See also "Tax Status" in Part II of this
Prospectus.)
Interest income on the Bonds contained in the Trust Portfolio is, in the
opinion of bond counsel to the issuing governmental authorities, excludable
from gross income under the Internal Revenue Code of 1986, as amended.
See "The Trust -- Portfolio" in Part II of this Prospectus.
1 A Trust is considered to be "concentrated" in a particular category or
issuer when the Bonds in that category or of that issuer constitute 25% or more
of the aggregate face amount of the Portfolio. See "The Trust - - General
Considerations" in Part II of this Prospectus.
2 For the meanings of ratings, see "Description of Bond Ratings" in Part
II of this Prospectus.
-4-
<PAGE>
Gain (or loss) realized on a sale, maturity or redemption of the Bonds or on a
sale or redemption of a Unit of the Trust is, however, includable in gross
income as capital gain (or loss) for federal, state and local income tax
purposes assuming that the Unit is held as a capital asset. Such gain (or loss)
does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term depending on the facts
and circumstances. Bonds selling at a market discount tend to increase in
market value as they approach maturity when the principal amount is payable,
thus increasing the potential for taxable gain (or reducing the potential for
loss) on their redemption, maturity or sale. In the case of Bonds acquired at a
market discount, gain will be treated as ordinary income to the extent of
accrued market discount. For tax years beginning after December 31, 1992,
long-term capital gains will be taxed at a maximum federal income tax rate of
28%, while ordinary income will be taxed at a maximum federal income tax rate
of 36% (plus a 10% surtax applicable to certain high income taxpayers).
-5-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsors, Trustee and Unit Holders of Empire State Municipal Exempt Trust,
Guaranteed Series 49:
We have audited the accompanying statement of net assets of Empire State
Municipal Exempt Trust, Guaranteed Series 49, including the bond portfolio, as
of May 31, 1996, and the related statements of operations and changes in net
assets for the years ended May 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Sponsors. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of May 31, 1996, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsors, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Empire State Municipal Exempt
Trust, Guaranteed Series 49 as of May 31, 1996, and the results of its
operations and changes in net assets for the years ended May 31, 1996, 1995 and
1994 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
June 28, 1996
-6-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
STATEMENT OF NET ASSETS
MAY 31, 1996
CASH $ 24,162
INVESTMENTS IN SECURITIES, at market
value (cost $5,961,671)......................... 6,144,640
ACCRUED INTEREST RECEIVABLE..................... 146,521
-------------
Total trust property.................... 6,315,323
LESS - ACCRUED EXPENSES......................... 1,820
--------------
NET ASSETS...................................... $ 6,313,503
===========
<TABLE>
NET ASSETS REPRESENTED BY:
<CAPTION>
Monthly Semi-annual
distribution distribution
plan plan Total
<S> <C> <C> <C>
VALUE OF FRACTIONAL UNDIVIDED
INTERESTS..................................... $3,297,374 $2,824,195 $ 6,121,569
UNDISTRIBUTED NET INVESTMENT
INCOME........................................ 61,189 130,745 191,934
----------- ----------- ------------
Total value................................ $3,358,563 $2,954,940 $ 6,313,503
========== ========== ===========
UNITS OUTSTANDING................................ 4,432 3,796 8,228
============ ============ =============
VALUE PER UNIT................................... $ 757.79 $ 778.43
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
STATEMENTS OF OPERATIONS
<CAPTION>
Year ended May 31,
--------------------------------------------------------------
1996 1995 1994
------------------- --------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME - INTEREST.............................. $ 456,734 $ 649,830 $ 689,877
--------- --------- ---------
EXPENSES:
Trustee fees 8,228 9,713 9,629
Evaluation fees.......................................... 2,001 2,074 1,991
Insurance premiums....................................... 9,034 11,651 12,297
Sponsors' advisory fees.................................. 1,371 2,310 2,396
Auditors' fees........................................... 1,800 1,800 1,800
---------- ---------- ----------
Total expenses....................................... 22,434 27,548 28,113
---------- ---------- ---------
NET INVESTMENT INCOME..................................... 434,300 622,282 661,764
REALIZED GAIN (LOSS) ON SECURITIES SOLD
OR REDEEMED (Note 3)..................................... (163,659) (29,236) 448
NET CHANGE IN UNREALIZED MARKET
APPRECIATION (DEPRECIATION).............................. 43,033 (156,749) (329,675)
---------- ---------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................................... $ 313,674 $ 436,297 $ 332,537
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
-8-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Year ended May 31,
-----------------------------------------------------------
1996 1995 1994
------------------ ----------------- ----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 434,300 $ 622,282 $ 661,764
Realized gain (loss) on securities sold
or redeemed............................................. (163,659) (29,236) 448
Net change in unrealized market appreciation
(depreciation).......................................... 43,033 (156,749) (329,675)
------------ ----------- ------------
Net increase in net assets resulting from
operations............................................ 313,674 436,297 332,537
------------ ----------- ------------
DISTRIBUTIONS TO UNIT HOLDERS:
Net investment income..................................... (521,337) (641,265) (668,602)
Principal................................................. (1,808,712) (172,884) -
----------- ----------- ---------------
Total distributions................................... (2,330,049) (814,149) (668,602)
----------- ----------- ------------
CAPITAL SHARE TRANSACTIONS:
Redemption of 762, 386 and 325 units...................... (610,953) (378,627) (330,896)
------------ ----------- ------------
NET DECREASE IN NET ASSETS................................. (2,627,328) (756,479) (666,961)
NET ASSETS:
Beginning of year......................................... 8,940,831 9,697,310 10,364,271
------------ ----------- ------------
End of year............................................... $ 6,313,503 $8,940,831 $ 9,697,310
=========== ========== ============
DISTRIBUTION PER UNIT (Note 2):
Interest:
Monthly plan............................................ $ 54.99 $ 68.21 $ 68.16
Semi-annual plan........................................ $ 63.23 $ 69.25 $ 68.69
Principal:
Monthly plan............................................ $204.93 $ 19.08 $ -
Semi-annual plan...................................... $204.93 $ 19.08 $ -
</TABLE>
See accompanying notes to financial statements.
-9-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
General
The Trust is registered under the Investment Company Act of 1940.
Securities
Securities are stated at bid side market value as determined by an
independent outside evaluator.
Taxes on income
The Trust is not subject to taxes on income and, accordingly, no
provision has been made.
NOTE 2 - DISTRIBUTIONS
Interest received by the Trust is distributed to Unit holders either
semi-annually on the first day of June and December or, if elected by the Unit
holder, on the first day of each month, after deducting applicable expenses.
Principal distributions, resulting from the sale or redemption of securities,
were made in April 1995 and August 1995.
<TABLE>
NOTE 3 - BONDS SOLD OR REDEEMED
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ------- -------- -------- ----------- ------------ ---- -------
Year ended May 31, 1996:
<S> <C> <C> <C> <C> <C> <C>
* $ 385,000 7/ 1/95 Triborough Bridge and Tunnel Authority, $ 392,700 $ 434,091 $ (41,391)
Convention Center Project Bonds,
Series D
* 1,480,000 7/ 1/95 Dormitory Authority of the State of 1,509,600 1,632,809 (123,209)
New York, New York University Insured
Revenue Bonds, Series 1985B
(FGIC Insured)
1 110,000 8/ 1/95 New York State Medical Care Facilities 122,650 114,749 7,901
Finance Agency, Mental Health Services
Facilities Improvement Revenue Bonds,
1989 Series A (MBIA Insured)
8 20,000 8/17/95 New York State Medical Care Facilities 22,000 22,578 (578)
Finance Agency, Mental Health Services
Facilities Improvement Revenue Bonds,
1987 Series A Refunding
</TABLE>
-10-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - BONDS SOLD OR REDEEMED (continued)
<CAPTION>
Port- Realized
folio Principal Date Gain
No. Amount Redeemed Description Net Proceeds Cost (Loss)
- ------ -------- -------- ----------- ------------ ---- -------
Year ended May 31, 1996 (continued):
<S> <C> <C> <C> <C> <C> <C>
7 $ 100,000 9/26/95 Triborough Bridge and Tunnel Authority, $ 106,400 $ 108,661 $ (2,261)
General Purpose Revenue Bonds, Series K
7 20,000 11/ 2/95 Triborough Bridge and Tunnel Authority, 20,880 21,732 (852)
General Purpose Revenue Bonds, Series K
9 15,000 11/24/95 Dormitory Authority of the State of 16,064 16,141 (77)
New York, City University System
Consolidated Revenue Bonds,
Series 1987A
9 80,000 2/15/96 Dormitory Authority of the State of 85,920 86,086 (166)
New York, City University System
Consolidated Revenue Bonds,
Series 1987A
9 80,000 3/13/96 Dormitory Authority of the State of 84,600 86,086 (1,486)
New York, City University System
Consolidated Revenue Bonds,
Series 1987A
9 20,000 4/30/96 Dormitory Authority of the State of 21,200 21,522 (322)
New York, City University System
Consolidated Revenue Bonds,
Series 1987A
8 20,000 5/22/96 New York State Medical Care Facilities 21,360 22,578 (1,218)
Finance Agency, Mental Health Services
Facilities Improvement Revenue Bonds,
1987 Series A Refunding
$2,330,000 $2,403,374 $2,567,033 $(163,659)
========== ========== ========== =========
</TABLE>
* Portfolio redeemed in its entirety.
-11-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
NOTES TO FINANCIAL STATEMENTS
(Concluded)
NOTE 4 - NET ASSETS
Cost of 10,000 units at Date of Deposit $10,221,906
Less gross underwriting commission 500,800
Net cost - initial offering price 9,721,106
Realized net loss on securities sold or redeemed (187,444)
Principal distributions (1,981,596)
Redemption of 1,772 units (1,613,466)
Unrealized market appreciation of securities 182,969
Undistributed net investment income 191,934
-------------
Net assets $ 6,313,503
============
-12-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
<CAPTION>
Date of Redemption Features
Port- Aggregate Name of Issuer and Maturity S.F. - Sinking Fund
folio Rating Principal Title of Bond Coupon (Note B) Opt. - Optional Call
No. (Note A) Amount Rate (Note B)
----- -------- ------- ---------------------------- ------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1 AAA $1,455,000 New York State Medical 7.500% 08/15/09 02/15/08 @ 100 S.F.
Care Facilities Finance 02/15/99 @ 102 Opt.
Agency, Mental Health
Services Facilities
Improvement Revenue
Bonds,1989 Series A
(MBIA Insured)
2 AAA 100,000 New York City Housing 5.000 01/01/14 No Sinking Fund
Authority, New Housing 07/01/96 @ 103 Opt.
Authority Bonds
3 AAA 270,000 New York City Housing 5.000 01/01/12 No Sinking Fund
Authority, New Housing 07/01/96 @ 103 Opt.
Authority Bonds
4 AAA 440,000 New York State Urban 0.000 01/01/18 01/01/14 @ 73.069 S.F.
Development Corporation, 01/01/98 @ 21.453 Opt.
Correctional Facilities
Revenue Bonds, Series C
(AMBAC Insured)
</TABLE>
Market Value
Port- as of Annual Interest
folio Cost of Bonds May 31, Income to
No. to Trust 1996 Trust
----- ------------ ------ ---------
1 $1,517,812 $1,581,893 $109,125
2 81,225 92,602 5,000
3 221,125 253,565 13,500
4 53,900 87,987 -
-13-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
(Continued)
<CAPTION>
Date of Redemption Features
Port- Aggregate Name of Issuer and Maturity S.F. - Sinking Fund
folio Rating Principal Title of Bond Coupon (Note B) Opt. - Optional Call
No. (Note A) Amount Rate (Note B)
----- -------- ------- ---------------------------- ------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
5 AA $ 525,000 New York State Medical 8.000% 02/15/27 No Sinking Fund
Care Facilities Finance 08/15/97 @ 102 Opt.
Agency, Hospital and
Nursing Home Insured
Mortgage Revenue Bonds,
1987 Series A (FHA
Insured Mortgage)
6 A* 510,000 New York State General 1.000 04/01/04 No Sinking Fund
Obligation 10/01/96 @ 100 opt.
7 AAA 1,090,000 Triborough Bridge and 8.250 01/01/17 01/01/08 @ 100 S.F.
Tunnel Authority, General 01/01/97 @ 102 Opt.
Purpose Revenue Bonds,
Series K
8a AAA 305,000 New York State Medical 8.875 08/15/07 02/15/00 @ 100 S.F.
Care Facilities Finance 08/15/97 @ 102 Opt.
Agency, Mental Health
Services Facilities
Improvement Revenue
Bonds, 1987 Series A
Refunding
</TABLE>
Market Value
Port- as of Annual Interest
folio Cost of Bonds May 31, Income to
No. to Trust 1996 Trust
----- ------------- ------ ----------------
5 $ 550,851 $ 555,907 $ 42,000
6 242,255 364,798 5,100
7 1,184,405 1,138,668 89,925
8a 344,312 328,897 27,069
-14-
<PAGE>
<TABLE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
(Continued)
<CAPTION>
Date of Redemption Features
Port- Aggregate Name of Issuer and Maturity S.F. - Sinking Fund
folio Rating Principal Title of Bond Coupon (Note B) Opt. - Optional Call
No. (Note A) Amount Rate (Note B)
----- -------- ------- ------------------------------ ------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
8b BBB+ $ 555,000 New York State Medical 8.875% 08/15/07 02/15/00 @ 100 S.F.
Care Facilities Finance 08/15/97 @ 102 Opt.
Agency, Mental Health
Services Facilities
Improvement Revenue
Bonds, 1987 Series A
Refunding
9 AAA 1,025,000 Dormitory Authority of the 8.125 07/01/17 07/01/08 @ 100 S.F.
State of New York, City 07/01/97 @ 102 Opt.
University System
Consolidated Revenue
Bonds, Series 1987A
10 Aaa* 310,000 New York State Urban 0.000 01/01/18 01/01/15 @ 78.463 S.F.
Development Corporation, 01/01/98 @ 20.447 Opt.
Correctional Facilities
Revenue Bonds, Series E
$6,585,000
==========
</TABLE>
Market Value
Port- as of Annual Interest
folio Cost of Bonds May 31, Income to
No. to Trust 1996 Trust
----- ------------- ------ ----------------
8b $ 626,534 $ 589,759 $ 49,256
9 1,102,982 1,091,481 83,281
10 36,270 59,083 -
$5,961,671 $6,144,640 $424,256
========== ========== ========
-15-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 49
TAX-EXEMPT BOND PORTFOLIO
MAY 31, 1996
(Continued)
NOTES TO TAX-EXEMPT BOND PORTFOLIO
A) A description of the rating symbols and their meanings appears under
"Description of Bond Ratings" in Part II of this Prospectus. Ratings
are by Standard & Poor's, except for those indicated by an asterisk
(*), which are by Moody's. Certain bond ratings have changed since the
Date of Deposit, at which time all such bonds were rated A or better by
either Standard & Poor's or Moody's.
(B) Bonds may be redeemable prior to maturity from a sinking fund
(mandatory partial redemption) (S.F.) or at the stated optional call
(at the option of the issuer) (Opt.) or by refunding. Certain bonds in
the portfolio may be redeemed earlier than dates shown in whole or in
part under certain unusual or extraordinary circumstances as specified
in the terms and provisions of such bonds. Single-family mortgage
revenue bonds and housing authority bonds are most likely to be called
subject to such provisions, but other bonds may have similar call
features.
-16-
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series
PROSPECTUS, Part II
Note: Part II of this Prospectus may not be
distributed unless accompanied by Part I.
THE TRUST
Organization
The Trust is one of a Series of similar but separate unit
investment trusts. Each Trust was created under the laws of the State of New
York pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), dated
the Date of Deposit as set forth in "Summary of Essential Financial
Information" in Part I of this Prospectus, among the Sponsors, the Trustee and
the Evaluator. The Bank of New York acts as successor trustee of Series 1
through 22 and as Trustee of Series 23 and subsequent Series. Muller Data
Corporation acts as successor Evaluator for all Series. Glickenhaus & Co. and
Lebenthal & Co., Inc. act as co-Sponsors for all Series (the "Sponsors").
On the date of this Prospectus, each Unit represented the
fractional undivided interest in the Trust set forth in Part I of this
Prospectus under "Summary of Essential Financial Information." Thereafter, if
any Units are redeemed by the Trustee, the fractional undivided interest in the
Trust represented by each unredeemed Unit will increase, although the actual
interest in the Trust represented by each such Unit will remain essentially the
same. Units will remain outstanding until redeemed upon tender to the Trustee
by any Unit holder, which may include the Sponsors, or until the termination of
the Trust Agreement for the related Trust. See "Rights of Unit
Holders--Redemption."
On the Date of Deposit for each Trust, the Sponsors
deposited with the Trustee obligations or contracts for the purchase of such
obligations (the "Bonds" or "Securities"). Certain of the Bonds may have been
purchased at prices which resulted in the portfolio as a whole being purchased
at a discount due to original issue discount, market discount or the inclusion
of zero coupon bonds. Bonds selling at market discount tend to increase in
market value as they approach maturity when the principal amount is payable,
thus increasing the potential for capital gain. Any capital gain other than any
earned original issue discount will be taxable and will not be realized until
maturity, redemption or sale of the underlying Bonds or Units.
Objectives
The objective of the Trust is to obtain tax-exempt
interest income through an investment in a fixed, insured portfolio consisting
primarily of various long-term municipal bonds. No assurance can be given that
the Trust's objectives will be achieved because these objectives are subject to
the continuing ability of the respective issuers of the bonds in the Portfolio
to meet their obligations and of the Insurer to meet its obligations under the
insurance. In addition, an investment in the Trust can be affected by interest
rate fluctuations.
Series 1 through 5, Series 6 through 30 and Series 31 and
subsequent Series have obtained insurance guaranteeing the payment of
principal and interest on the Bonds in each respective Trust from National
Union Fire Insurance Company of Pittsburgh, Pa. ("National Union"), MBIA Inc.
and MBIA Insurance Corporation ("MBIA"), respectively (National Union, MBIA
Inc. and MBIA are collectively referred to herein as the "Insurer").
Insurance obtained by the Trust applies only while Bonds are retained in the
279831.5
<PAGE>
Trust. As to Series 18 through Series 30 and Series 31 and subsequent Series,
however, pursuant to irrevocable commitments of MBIA and MBIAC, respectively,
in the event of a sale of a Bond from the Trust the Trustee has the right to
obtain permanent insurance for such Bond upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such Bond. It
is expected that the Trustee will exercise the right to obtain permanent
insurance for a Bond in such Series upon instruction from the Sponsors whenever
the value of that Bond insured to its maturity less the applicable permanent
insurance premium and the related custodial fee exceeds the value of the Bond
without such insurance. Insurance relates only to the payment of principal and
interest on the Bonds in the Trust but neither covers the nonpayment of any
redemption premium on the Bonds nor guarantees the market value of the Units.
Certain Bonds in the Trust may also be insured under insurance obtained by the
issuers of such Bonds or third parties ("Pre-insured Bonds"). As a result of
the insurance, Moody's Investors Service, Inc. has assigned a rating of "Aaa"
to all of the Bonds in Series 6 and subsequent Series, as insured, and Standard
& Poor's Corporation, a division of McGraw- Hill, has assigned a rating of
"AAA" to the Units of the Trust, and to the Bonds in Series 17 and subsequent
Series, as insured, while in the Trust. No representation is made as to any
insurer's ability to meet its commitments. Insurance is not a substitute for
the basic credit of an issuer, but supplements the existing credit and provides
additional security therefor. A single or annual premium is paid by the issuer
or any other party for its insurance on Pre-insured Bonds, and a monthly
premium is paid by the Trust for the insurance it obtains from the Insurer on
the Bonds in the Trust that are not pre-insured by such Insurer. No premium
will be paid by Series 1 through 5, Series 6 through 30 and Series 31 and
subsequent Series on Bonds pre- insured by National Union, MBIA and MBIAC,
respectively. See "Insurance on the Bonds."
Portfolio
In view of the Trust's objectives, the following factors,
among others, were considered in selecting the Bonds: (1) all the Bonds are
obligations of the State of New York and counties, municipalities, authorities
or political subdivisions thereof or issued by certain United States
territories or possessions, including Puerto Rico, and their public authorities
so that the interest on them will be exempt from Federal, New York State and
New York City income tax under existing law; (2) the Bonds are varied as to
purpose of issue; (3) in the opinion of the Sponsors, the Bonds are fairly
valued relative to other bonds of comparable quality and maturity; and (4)
availability of insurance for the payment of principal and interest on the
Bonds. Subsequent to the Date of Deposit, a Bond may cease to be rated or its
rating may be reduced. Neither event requires an elimination of such Bond from
the portfolio, but such an event may be considered in the Sponsors'
determination to direct the Trustee to dispose of the Bonds. See
"Sponsors--Responsibility."
An investment in Units of the Trust should be made with an
understanding of the risks entailed in investments in fixed-rate bonds,
including the risk that the value of such bonds (and, therefore, of the Units)
will decline with increases in interest rates. Inflation and recession, as well
as measures implemented to address these and other economic problems,
contribute to fluctuations in interest rates and the value of fixed-rate bonds
generally. The Sponsors cannot predict future economic policies or their
consequences nor, therefore, can they predict the course or extent of such
fluctuations in the future.
Special Factors Affecting New York
The information set forth below is derived from the
official statements and/or preliminary drafts of official statements prepared
in
- 2 -
279831.5
<PAGE>
connection with the issuance of New York State and New York City municipal
bonds. The Sponsors have not independently verified this information.
Economic Trends. Over the long term, the State of New York
(the "State") and the City of New York (the "City") face serious potential
economic problems. The City accounts for approximately 41% of the State's
population and personal income, and the City's financial health affects the
State in numerous ways. The State historically has been one of the wealthiest
states in the nation. For decades, however, the State has grown more slowly
than the nation as a whole, gradually eroding its relative economic affluence.
Statewide, urban centers have experienced significant changes involving
migration of the more affluent to the suburbs and an influx of generally less
affluent residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high State and
local tax burden relative to other states. The State and its localities have
used these taxes to develop and maintain their transportation networks, public
schools and colleges, public health systems, other social services and
recreational facilities. Despite these benefits, the burden of State and local
taxation, in combination with the many other causes of regional economic
dislocation, has contributed to the decisions of some businesses and
individuals to relocate outside, or not locate within, the State.
Notwithstanding the numerous initiatives that the State
and its localities may take to encourage economic growth and achieve balanced
budgets, reductions in Federal spending could materially and adversely affect
the financial condition and budget projections of the State and its localities.
New York City. The City, with a population of
approximately 7.3 million, is an international center of business and culture.
Its non- manufacturing economy is broadly based, with the banking and
securities, life insurance, communications, publishing, fashion design,
retailing and construction industries accounting for a significant portion of
the City's total employment earnings. Additionally, the City is the nation's
leading tourist destination. The City's manufacturing activity is conducted
primarily in apparel and printing.
The national economic downturn which began in July 1990
adversely affected the local economy, which had been declining since late 1989.
As a result, the City experienced job losses in 1990 and 1991 and real Gross
City Product ("GCP") fell in those two years. Beginning in calendar year 1992,
the improvement in the national economy helped stabilize conditions in the
City. Employment losses moderated toward year-end and real GCP increased,
boosted by strong wage gains. After noticeable improvements in the City's
economy during calendar year 1994, economic growth slowed in calendar year
1995, and the City's current four-year financial plan assumes that moderate
economic growth will continue through calendar year 2000.
For each of the 1981 through 1995 fiscal years, the City
achieved balanced operating results as reported in accordance with generally
accepted accounting principles ("GAAP"). The City was required to close
substantial budget gaps in recent years in order to maintain balanced operating
results. For fiscal year 1995, the City adopted a budget which halted the trend
in recent years of substantial increases in City-funded spending from one year
to the next. There can be no assurance that the City will continue to maintain
a balanced budget as required by State law without additional tax or other
- 3 -
279831.5
<PAGE>
revenue increases or reductions in City services, which could adversely affect
the City's economic base.
Pursuant to the laws of the State, the City prepares an
annual four-year financial plan, which is reviewed and revised on a quarterly
basis and which includes the City's capital, revenue and expense projections
and outlines proposed gap-closing programs for years with projected budget
gaps. The City's current four-year financial plan projects substantial budget
gaps for each of the 1998 through 2000 fiscal years. The City is required to
submit its financial plans to review bodies, including the New York State
Financial Control Board ("Control Board").
The fourth quarter modification to the City's financial
plan for the 1996 fiscal year, submitted to the Control Board on June 21, 1996
(the "1996 Modification"), projects a balanced budget in accordance with GAAP
for the 1996 fiscal year, after taking into account a discretionary transfer of
$243 million. The 1996 Modification assumes $119 million of savings from a
proposed increase in the investment earnings assumptions for pension assets,
$39 million of which, relating to the police pension fund, the City currently
does not expect to be achieved. The Financial Plan for the 1997 through 2000
fiscal years, submitted to the Control Board on June 21, 1996, which relates to
the City, the Board of Education ("BOE") and the City University of New York
("CUNY"), is based on the City's expense and capital budgets for the City's
1997 fiscal year, which were adopted on June 12, 1996, and includes proposed
actions by the City for the 1997 fiscal year to close substantial projected
budget gaps resulting from lower than projected tax receipts and other revenues
and greater than projected expenditures.
Although the City has maintained balanced budgets in each
of its last fifteen fiscal years, and is projected to achieve balanced
operating results for the 1996 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 City depends on the State for State aid both to enable
the City to balance its budget and to meet its cash requirements. There can be
no assurance that there will not be reductions in State aid to the City from
amounts currently projected or that State budgets in future fiscal years will
be adopted by the April 1 statutory deadline and that such reductions or delays
will not have adverse effects on the City's cash flow or expenditures. In
addition, the Federal Budget negotiation process could result in a reduction in
or a delay in the receipt of Federal grants in the City's 1997 fiscal year
which could have additional adverse effects on the City's cash flow or
revenues.
The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial plan for the
1997 through 2000 fiscal years (the "1997-2000 Financial Plan" or "Financial
Plan"). The City's projections set forth in the Financial Plan are based on
various assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City
employees consistent with those assumed in the Financial Plan, employment
growth, the results of a pending actuarial audit of the City's pension system
which is expected to significantly increase the City's annual pension costs,
the ability to implement proposed reductions in City personnel
- 4 -
279831.5
<PAGE>
and other cost reduction initiatives, which may require in certain cases the
cooperation of the City's municipal unions, the ability of the New York City
Health and Hospitals Corporation ("HHC") and BOE to take actions to offset
reduced revenues, the ability to complete revenue generating transactions and
provision of State and Federal aid and mandate relief and the impact on City
revenues of proposals for Federal and State welfare reform.
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 1997 through 2000
contemplates the issuance of $5.7 billion of general obligation bonds and $4.5
billion of bonds to be issued by the proposed New York City Infrastructure
Finance Authority ("Infrastructure Finance Authority") primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make
other capital investments. The creation of Infrastructure Finance Authority,
which is subject to the enactment of State legislation, is being proposed by
the City as part of the City's effort to avoid conflict with the forecast level
of the constitutional restrictions on the amount of debt the City is authorized
to issue. 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 and Infrastructure Finance Authority bonds
will be subject to prevailing market conditions, and no assurance can be given
that such sales will be completed. If the City were unable to sell its general
obligation bonds and notes or bonds of the proposed Infrastructure Finance
Authority, it would be prevented from meeting its planned capital and operating
expenditures. Future developments concerning the City and public discussion of
such developments, as well as prevailing market conditions, may affect the
market for outstanding City general obligation bonds and notes.
The 1997-2000 Financial Plan projects revenues and
expenditures for the 1997 fiscal year balanced in accordance with GAAP. The
projections for the 1997 fiscal year reflect proposed actions to close a
previously projected gap of approximately $2.6 billion for the 1997 fiscal
year. The proposed actions for the 1997 fiscal year include (i) additional
agency actions totaling $1.2 billion; (ii) a revised tax reduction program
which would increase projected tax revenues by $385 million due to the
four-year extension of the 12.5% personal income tax surcharge and other
actions; (iii) savings resulting from cost containment in entitlement programs
to reduce City expenditures and additional proposed State aid of $75 million;
(iv) the assumed receipt of revenues relating to rent payments for the City's
airports totaling $269 million, which are currently the subject of a dispute
with the Port Authority; (v) the sale of the City's television station for $207
million; and (vi) pension cost savings totaling $134 million resulting from a
proposed increase in the earnings assumption for pension assets from 8.5% to
8.75%, $40 million of which the City currently does not expect to be achieved.
The Financial Plan also sets forth projections for the
1998 through 2000 fiscal years and projects gaps of $1.7 billion, $2.7 billion
and $3.4 billion for the 1998, 1999 and 2000 fiscal years, respectively.
The 1997-2000 Financial Plan is based on numerous
assumptions, including the condition of the City's and the region's economy and
a modest employment recovery and the concomitant receipt of economically
sensitive tax revenues in the amounts projected. The 1997-2000 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 wage costs assumed for the 1997 through 2000 fiscal years;
continuation of projected interest earnings assumptions for pension fund assets
and current assumptions with respect to wages for City employees affecting the
City's required pension fund contributions; the willingness and
- 5 -
279831.5
<PAGE>
ability of the State, in the context of the State's current financial
condition, to provide the aid contemplated by the Financial Plan and to take
various other actions to assist the City; the ability of HHC, BOE and other
such agencies to maintain balanced budgets; the willingness of the Federal
government to provide the amount of Federal aid contemplated in the Financial
Plan; adoption of the City's budgets by the City Council in substantially the
forms submitted by the Mayor; the ability of the City to implement proposed
reductions in City personnel and other cost reduction initiatives, and the
success with which the City controls expenditures; the impact of conditions in
the real estate market on real estate tax revenues; the City's ability to
market its securities successfully in the public credit markets; and
unanticipated expenditures that may be incurred as a result of the need to
maintain the City's infrastructure. Certain of these assumptions have been
questioned by the City Comptroller and other public officials.
The projections for the 1997 through 2000 fiscal years
also assume (i) approval by the Governor and the State Legislature of the
extension of the 12.5% personal income tax surcharge, which is projected to
provide revenue of $171 million, $447 million, $478 million and $507 million in
the 1997 through 2000 fiscal years, respectively; (ii) collection of the
projected rent payments for the City's airports, which may depend on the
successful completion of negotiations with the Port Authority or the
enforcement of the City's rights under the existing leases thereto through
pending legal actions; (iii) the ability of HHC and BOE to identify actions to
offset substantial City and State revenue reductions and the receipt by BOE of
additional State aid; and (iv) State approval of the cost containment
initiatives and State aid proposed by the City. The Financial Plan does not
reflect any increased costs which the City might incur as a result of welfare
legislation recently enacted by Congress.
In connection with the Financial Plan, the City has
outlined a gap-closing program for the 1998 through 2000 fiscal years to
substantially reduce the remaining $1.7 billion, $2.7 billion and $3.4 billion
projected budget gaps for such fiscal years. This program, which is not
specified in detail, assumes additional agency programs to reduce expenditures
or increase revenues by $674 million, $959 million and $1.1 billion in the 1998
through 2000 fiscal years, respectively; additional reductions in entitlement
cost of $400 million, $750 million and $1.0 billion in the 1998 through 2000
fiscal years, respectively; additional savings of $250 million, $300 million
and $500 million in the 1998 through 2000 fiscal years, respectively, resulting
from restructuring City government by consolidating operations, privatization
and mandate management and other initiatives; additional proposed Federal and
State aid of $105 million, $200 million and $300 million in the 1998 through
2000 fiscal years, respectively; additional revenue initiatives and asset sales
of $155 million, $350 million and $400 million in the 1998 through 2000 fiscal
years, respectively; and the availability in each of the 1998 through 2000
fiscal years of $100 million of the General Reserve.
The City's projected budget gaps for the 1999 and 2000
fiscal years do not reflect the savings expected to result from prior years'
programs to close the gaps set forth in the Financial Plan. Thus, for example,
recurring savings anticipated from the actions which the City proposes to take
to balance the fiscal year 1998 budget are not taken into account in projecting
the budget gaps for the 1999 and 2000 fiscal years.
The City's financial plans have been the subject of
extensive public comment and criticism. On July 16, 1996, the staff of the City
Comptroller issued a report on the Financial Plan. The report concluded that
the City's fiscal situation remains serious, and that the City faces budgetary
risks of approximately $787 million to $941 million for the 1997 fiscal year,
which increase to $4.16 billion to $4.31 billion for fiscal year 2000.
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On July 10, 1995, Standard & Poor's revised downward its
rating on City general obligation bonds from A- to BBB+ and removed City bonds
from CreditWatch. Standard & Poor's stated that "structural budgetary balance
remains elusive because of persistent softness in the City's economy,
highlighted by weak job growth and a growing dependence on the historically
volatile financial services sector". Other factors identified by Standard &
Poor's in lowering its rating on City bonds included a trend of using one-time
measures, including debt refinancings, to close projected budget gaps,
dependence on unratified labor savings to help balance the Financial Plan,
optimistic projections of additional federal and State aid or mandate relief, a
history of cash flow difficulties caused by State budget delays and continued
high debt levels.
On March 1, 1996, Moody's stated that the rating for City
general obligation bonds remains under review pending the outcome of the
adoption of the City's budget for the 1997 fiscal year, and, in light of the
status of the debate on public assistance and Medicaid reform; the enactment of
a State budget, upon which major assumptions regarding State aid are dependent,
which may be extensively delayed; and the seasoning of the City's economy with
regard to its strength and direction in the face of a potential national
economic slowdown. Since July 15, 1993, Fitch Investors Service, L.P. ("Fitch")
has rated City bonds A-. On February 28, 1996, Fitch placed the City's general
obligation bonds on FitchAlert with negative implications.
New York State and its Authorities. The State's current
fiscal year commenced on April 1, 1996, and ends on March 31, 1997, and is
referred to herein as the State's 1996-97 fiscal year. The State's budget for
the 1996-97 fiscal year was enacted by the Legislature on July 13, 1996, more
than three months after the start of the fiscal year. The State Financial Plan
for the 1996-97 fiscal year was formulated on July 25, 1996 and is based on the
State's budget as enacted by the Legislature and signed into law by the
Governor, as well as actual results for the first quarter of the current fiscal
year. The State's prior fiscal year commenced on April 1, 1995, and ended on
March 31, 1996, and is referred to herein as the State's 1995-96 fiscal year.
The State's budget for the 1995-96 fiscal year was enacted by the Legislature
on June 7, 1995, more than two months after the start of the fiscal year. The
State Financial Plan for the 1995-96 fiscal year was formulated on June 20,
1995 and is based on the State's budget as enacted by the Legislature and
signed into law by the Governor.
The State closed projected budget gaps of $5.0 billion and
$3.9 billion for its 1995-96 and 1996-97 fiscal years, respectively. The
1997-98 gap was projected at $1.44 billion, based on the Governor's proposed
budget of December 1995. As a result of changes made in the enacted budget,
that gap is now expected to be larger. However, the gap is not expected to be
as large as those faced in the prior two fiscal years. The Governor has
indicated that he will propose to close any potential imbalance primarily
through General Fund expenditure reductions and without increases in taxes or
deferrals of scheduled tax reductions.
The 1996-97 State Financial Plan is projected to be
balanced on a cash basis. As compared to the Governor's proposed budget as
revised on March 20, 1996, the State's adopted budget for 1996-97 increases
General Fund spending by $842 million, primarily from increases for education,
special education and higher education ($563 million). The balance represents
funding increases to a variety of other programs, including community projects
and increased assistance to fiscally distressed cities. Resources used to fund
these additional expenditures include $540 million in increased revenues
projected for 1996-97 based on higher-than-projected tax collections during the
first half of calendar 1996, $110 million in projected receipts from a new
State tax amnesty program, and other resources including certain non-recurring
resources. The total amount of non-recurring resources included in the
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1996-97 State budget is projected by the State Division of the Budget ("DOB")
to be $1.3 billion, or 3.9 percent of total General Fund receipts.
The economic and financial condition of the State may be
affected by various financial, social, economic and political factors. Those
factors can be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its agencies
and instrumentalities, but also by entities, such as the Federal government,
that are not under the control of the State. Because of the uncertainty and
unpredictability of changes in these factors, their impact cannot be fully
included in the assumptions underlying the State's projections. There can be no
assurance that the State economy will not experience results that are worse
than predicted, with corresponding material and adverse effects on the State's
financial projections.
The DOB believes that its projections of receipts and
disbursements relating to the current State Financial Plan, and the assumptions
on which they are based, are reasonable. Actual results, however, could differ
materially and adversely from the projections set forth below, and those
projections may be changed materially and adversely from time to time.
The State Financial Plan is based on a June 1996
projection by DOB of national and State economic activity. The national economy
has resumed a more robust rate of growth after a "soft landing" in 1995, with
over 11 million jobs added nationally since early 1992. The State economy has
continued to expand, but growth remains somewhat slower than in the nation.
Although the State has added approximately 240,000 jobs since late 1992,
employment growth in the State has been hindered during recent years by
significant cutbacks in the computer and instrument manufacturing, utility,
defense, and banking industries. Government downsizing has also moderated these
job gains. DOB forecasts that national economic growth will be quite strong in
the first half of calendar 1996, but will moderate considerably as the year
progresses. The overall growth rate of the national economy during calendar
year 1996 is expected to be just slightly below the "consensus" of a widely
followed survey of national economic forecasters. Growth in real Gross Domestic
Product during 1996 is projected to be moderate at 2.1 percent, with
anticipated declines in federal spending and net exports more than offset by
increases in consumption and investment. Inflation, as measured by the Consumer
Price Index, is projected to be contained at about 3 percent due to moderate
wage growth and foreign competition. Personal income and wages are projected to
increase by about 5 percent.
The forecast of the State's economy shows modest expansion
during the first half of calendar 1996, but some slowdown is projected during
the second half of the year. Although industries that export goods and services
are expected to continue to do well, growth is expected to be slowed by
government cutbacks at all levels and by tight fiscal constraints on health and
social services. On an average annual basis, employment growth in the State is
expected to be up slightly from the 1995 rate. Personal income is expected to
record moderate gains in 1996. Bonus payments in the securities industry are
expected to increase further from last year's record level.
The forecast for continued slow growth, and any resultant
impact on the State's 1996-97 Financial Plan, contains some uncertainties.
Stronger- than-expected gains in employment could lead to a significant
improvement in consumption spending. Investments could also remain robust.
Conversely, the prospect of a continuing deadlock on federal budget deficit
reduction or fears of excessively rapid economic growth could create upward
pressures on interest rates. In addition, the State economic forecast could
over- or underestimate the level of future bonus payments or inflation growth,
resulting in forecasted average wage growth that could differ significantly
from actual
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growth. Similarly, the State forecast could fail to correctly account for
expected declines in government and banking employment and the direction of
employment change that is likely to accompany telecommunications deregulation.
The General Fund is the principal operating fund of the
State and is used to account for all financial transactions, except those
required to be accounted for in another fund. It is the State's largest fund
and receives almost all State taxes and other resources not dedicated to
particular purposes. In the State's 1996-97 fiscal year, the General Fund is
expected to account for approximately 47 percent of total governmental-fund
receipts and 71 percent of total governmental-fund disbursements. General Fund
moneys are also transferred to other funds, primarily to support certain
capital projects and debt service payments in other fund types.
The General Fund is projected to be balanced on a cash
basis for the 1996-97 fiscal year. Total receipts and transfers from other
funds are projected to be $33.17 billion, an increase of $365 million from the
prior fiscal year. Total General Fund disbursements and transfers to other
funds are projected to be $33.12 billion, an increase of $444 million from the
total in the prior fiscal year.
The State reported a General Fund operating surplus of
$380 million for the 1995-96 fiscal year, as compared to an operating deficit
of $1.43 billion for the prior fiscal year. The 1995-96 fiscal year surplus
reflects several major factors, including the cash-basis surplus and the
benefit of $529 million in Local Government Assistance Corporation ("LGAC")
bond proceeds which were used to fund various local assistance programs. This
was offset in part by a $437 million increase in tax refund liability primarily
resulting from the effects of ongoing tax reductions and (to a lesser extent)
changes in accrual measurement policies, and increases in various other
expenditure accruals. Revenues increased $530 million (nearly 1.7 percent) over
the prior fiscal year with an increase in personal income taxes and
miscellaneous revenues offset by decreases in business and other taxes.
Expenditures decreased $716 million (2.2 percent) from the prior fiscal year
with the largest decrease occurring in State aid for social services programs
and State operations spending. Net other financing sources nearly tripled,
increasing $561 million, due primarily to an increase in bonds issued by LGAC,
a transfer from the Mass Transportation Operating Assistance Fund and transfers
from public benefit corporations.
On January 13, 1992, Standard & Poor's reduced its ratings
on the State's general obligation bonds from A to A- and, in addition, reduced
its ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on October 3,
1995, confirmed its A- rating. On January 6, 1992, Moody's reduced its ratings
on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On October 2, 1995, Moody's reconfirmed its A
rating on the State's general obligation long-term indebtedness.
Litigation. The court actions in which the State is a
defendant generally involve State programs and miscellaneous tort, real
property, and contract claims. While the ultimate outcome and fiscal impact, if
any, on the State of those proceedings and claims are not currently
predictable, adverse determinations in certain of them might have a material
adverse effect upon the State's ability to maintain a balanced 1996-97 State
Financial Plan.
The claims involving the City other than routine
litigation incidental to the performance of their governmental and other
functions and
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certain other litigation arise out of alleged constitutional violations, torts,
breaches of contract and other violations of law and condemnation proceedings.
While the ultimate outcome and fiscal impact, if any, on the City of those
proceedings and claims are not currently predictable, adverse determinations in
certain of them might have a material adverse effect upon the City's ability to
carry out the 1997-2000 Financial Plan. The City has estimated that its
potential future liability on account of outstanding claims against it as of
June 30, 1995 amounted to approximately $2.5 billion.
General Considerations
Because certain of the Bonds may from time to time under
certain circumstances be sold or redeemed or will mature in accordance with
their terms and the proceeds from such events will be distributed to Unit
holders and will not be reinvested, no assurance can be given that the Trust
will retain for any length of time its present size and composition. The
inclusion of unrated Bonds in certain Series of the Trust may result in less
flexibility in their disposal and a loss to the Trust upon their disposition.
Except as described in footnotes to "Summary of Essential Financial
Information" in Part I of this Prospectus, interest accrues to the benefit of
Unitholders commencing with the expected date of settlement for purchase of the
Units. Neither the Sponsors nor the Trustee shall be liable in any way for any
default, failure or defect in any Security.
The following paragraphs discuss the characteristics of
the Bonds in the Trust and of certain types of issuers of the Bonds in the
Trust. See "Special Factors Concerning the Portfolio" in Part I of this
Prospectus. These paragraphs discuss, among other things, certain circumstances
which may adversely affect the ability of such issuers to make payments of
principal of and interest on Bonds held in the portfolio of the Trust or which
may adversely affect the ratings of such Bonds. Because of the insurance
obtained by the Sponsors or by the issuers, however, such changes should not
adversely affect the Trust's ultimate receipt of principal and interest, the
Standard & Poor's or Moody's ratings of the Bonds in the portfolio, or the
Standard & Poor's rating of the Units of the Trust. An investment in Units of
the Trust should be made with an understanding of the risks that such an
investment may entail, certain of which are described below. Unit holders may
obtain additional information concerning a particular Bond by requesting an
official statement from the issuer of such Bond.
General Obligation Bonds
General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. The taxing power of any governmental entity may be limited, however,
by provisions of state constitutions or laws, and an entity's credit will
depend on many factors, including potential erosion of the tax base due to
population declines, natural disasters, declines in the state's industrial base
or inability to attract new industries; economic limits on the ability to tax
without eroding the tax base; state legislative proposals or voter initiatives
to limit ad valorem real property taxes; and the extent to which the entity
relies on Federal or state aid, access to capital markets or other factors
beyond the state or entity's control.
Appropriations Bonds
Many state or local governmental entities enter into lease
purchase obligations as a means for financing the acquisition of capital
projects (e.g., buildings or equipment, among other things). Such obligations
are often made subject to annual appropriations. Certain Series of the Trust
may contain Bonds in the portfolio that are, in whole or in part, subject to
and dependent upon (1) the governmental entity making appropriations from time
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to time or (2) the continued existence of special temporary taxes which require
legislative action for their reimposition. The availability of any
appropriation is subject to the willingness of the governmental entity to
continue to make such special appropriations or to reimpose such special taxes.
The obligation to make lease payments exists only to the extent of the monies
available to the governmental entity therefor, and no liability is incurred by
the governmental entity beyond the monies so appropriated. Subject to the
foregoing, once an annual appropriation is made, the governmental entity's
obligation to make lease rental payments is absolute and unconditional without
setoff or counterclaim, regardless of contingencies, whether or not a given
project is completed or used by the governmental entity and notwithstanding any
circumstances or occurrences which might arise. In the event of
non-appropriation, certificate holders' or bondowners' sole remedy (absent
credit enhancement) generally is limited to repossession of the collateral for
resale or releasing, and the obligation of the governmental lessee is not
backed by a pledge of the general credit of the governmental lessee. In the
event of non-appropriation, the Sponsors may instruct the Trustee to sell such
Bonds.
Moral Obligation Bonds. Certain Series of the Trust may
contain Bonds in the portfolio that are secured by pledged revenues and
additionally by the so-called "moral obligation" of the State or a local
governmental body. Should the pledged revenues prove insufficient, the payment
of such Bonds is not a legal obligation of the State or local government, and
is subject to its willingness to appropriate funds therefor.
Revenue Bonds
Mortgage Revenue Bonds. Certain Bonds may be "mortgage
revenue bonds". Under the Internal Revenue Code of 1986, as amended (the
"Code") (and under similar provisions of the prior tax law), "mortgage revenue
bonds" are obligations the proceeds of which are used to finance owner-occupied
residences under programs which meet numerous statutory requirements relating
to residency, ownership, purchase price and target area requirements, ceiling
amounts for state and local issuers, arbitrage restrictions, and certain
information reporting, certification, and public hearing requirements. There
can be no assurance that additional federal legislation will not be introduced
or that existing legislation will not be further amended, revised, or enacted
after delivery of these Bonds or that certain required future actions will be
taken by the issuing governmental authorities, which action or failure to act
could cause interest on the Bonds to be subject to federal income tax. If any
portion of the Bond proceeds is not committed for the purpose of the issue,
Bonds in such amount could be subject to earlier mandatory redemption at par,
including issues of Zero Coupon Bonds (see "Original Issue Discount and Zero
Coupon Bonds").
Housing Bonds. Some of the aggregate principal amount of
Bonds may consist of obligations of state and local housing authorities whose
revenues are primarily derived from mortgage loans to housing projects for low
to moderate income families. Since such obligations are not general obligations
of a particular state or municipality and are generally payable primarily or
solely from rents and other fees, adverse economic developments including
failure or inability to increase rentals, fluctuations of interest rates and
increasing construction and operating costs may reduce revenues available to
pay existing obligations.
The housing bonds in the Trust, despite their optional
redemption provisions which generally do not take effect until ten years after
the original issuance dates of such Bonds (often referred to as "ten year call
protection"), do contain provisions which require the issuer to redeem such
obligations at par from unused proceeds of the issue within a stated period. In
recent periods of declining interest rates there have been increased
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redemptions of housing bonds pursuant to such redemption provisions. In
addition, the housing bonds in the Trust are also subject to mandatory
redemption in part at par at any time that voluntary or involuntary prepayments
of principal on the underlying mortgages are made to the trustee for such Bonds
or that the mortgages are sold by the bond issuer. Prepayments of principal
tend to be greater in periods of declining interest rates; it is possible that
such prepayments could be sufficient to cause a housing bond to be redeemed
substantially prior to its stated maturity date, earliest call date or sinking
fund redemption date.
Public Power Revenue Bonds. General problems of the
electric utility industry include difficulty in financing large construction
programs during an inflationary period; restrictions on operations and
increased costs and delays attributable to environmental considerations; the
difficulty of the capital markets in absorbing utility debt and equity
securities; the availability of fuel for electric generation at reasonable
prices, including among other considerations the potential rise in fuel costs
and the costs associated with conversion to alternate fuel sources such as
coal; technical cost factors and other problems associated with construction,
licensing, regulation and operation of nuclear facilities for electric
generation, including among other considerations the problems associated with
the use of radioactive materials and the disposal of radioactive waste; and the
effects of energy conservation. Certain Bonds may have been issued in
connection with the financing of nuclear generating facilities. In view of
recent developments in connection with such facilities, legislative and
administrative actions have been taken and proposed relating to the development
and operation of nuclear generating facilities. The Sponsors are unable to
predict whether any such actions or whether any such proposals or litigation,
if enacted or instituted, will have an adverse impact on the revenues available
to pay the debt service on the Bonds in the portfolio issued to finance such
nuclear projects.
Each of the problems referred to above could adversely
affect the ability of the issuers of public power revenue bonds to make
payments of principal of and/or interest on such bonds. Certain municipal
utilities or agencies may have entered into contractual arrangements with
investor-owned utilities and large industrial users and consequently may be
dependent in varying degrees on the performance of such contracts for payment
of bond debt service.
Health Care Revenue Bonds. Some of the aggregate principal
amount of Bonds may consist of hospital revenue bonds. Ratings of hospital
bonds are often initially based on feasibility studies which contain
projections of occupancy levels, revenues and expenses. Actual experience may
vary considerably from such projections. A hospital's gross receipts and net
income will be affected by future events and conditions including, among other
things, demand for hospital services and the ability of the hospital to provide
them, physicians' confidence in hospital management capability, economic
developments in the service area, competition, actions by insurers and
governmental agencies and the increased cost and possible unavailability of
malpractice insurance. Additionally, a major portion of hospital revenue
typically is derived from federal or state programs such as Medicare and
Medicaid which have been revised substantially in recent years and which are
undergoing further review at the state and federal level.
Proposals for significant changes in the health care
system and the present programs for third party payment of health care costs
are under consideration in Congress and many states. Future legislation or
changes in the areas noted above, among other things, would affect all
hospitals to varying degrees and, accordingly, any adverse change in these
areas may affect the ability of such issuers to make payment of principal and
interest on such bonds.
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Higher Education Revenue Bonds. Higher education revenue
bonds include debt of state and private colleges, universities and systems, and
parental and student loan obligations. The ability of universities and colleges
to meet their obligations is dependent upon various factors, including the
revenues, costs and enrollment levels of the institutions. In addition, their
ability may be affected by declines in Federal, state and alumni financial
support, fluctuations in interest rates and construction costs, increased
maintenance and energy costs, failure or inability to raise tuition or room
charges and adverse results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the
pollution control facilities category include securities issued on behalf of a
private corporation,* including utilities, to provide facilities for the
treatment of air, water and solid waste pollution. Repayment of these bonds is
dependent upon income from the specific pollution control facility and/or the
financial condition of the project corporation. See also "Private Activity
Bonds."
Other Utility Revenue Bonds. Bonds in this category
include securities issued to finance natural gas supply, distribution and
transmission facilities, public water supply, treatment and distribution
facilities, and sewage collection, treatment and disposal facilities. Repayment
of these bonds is dependent primarily on revenues derived from the billing of
residential, commercial and industrial customers for utility services, as well
as, in some instances, connection fees and hook-up charges. Such utility
revenue bonds may be adversely affected by the lack of availability of Federal
and state grants and by decisions of Federal and state regulatory bodies and
courts.
Solid Waste and Resource Recovery Revenue Bonds. Bonds in
this category include securities issued to finance facilities for removal and
disposal of solid municipal waste. Repayment of these bonds is dependent on
factors which may include revenues from appropriations from a governmental
entity, the financial condition of the private project corporation and revenues
derived from the collection of charges for disposal of solid waste. Repayment
of resource recovery bonds may also be dependent to various degrees on revenues
from the sale of electric energy or steam. Bonds in this category may be
subject to mandatory redemption in the event of project non-completion, if the
project is rendered uneconomical or if it is considered an environmental
hazard.
Transportation Revenue Bonds. Bonds in this category
include bonds issued for airport facilities, bridges, turnpikes, port
authorities, railroad systems or mass transit systems. Generally, airport
facility revenue bonds are payable from and secured by the revenues derived
from the ownership and operation of a particular airport. Payment on other
transportation bonds is often dependent primarily or solely on revenues from
financed facilities, including user fees, charges, tolls and rents. Such
revenues may be adversely affected by increased construction and maintenance
costs or taxes, decreased use, competition from alternative facilities,
scarcity of fuel, reduction or loss of rents or the impact of environmental
considerations. Other transportation bonds may be dependent primarily or solely
on Federal, state or local assistance including motor fuel and motor vehicle
taxes, fees and licenses and, therefore, may be subject to fluctuations in such
assistance.
Private Activity Bonds. The portfolio of the Trust may
contain other Bonds that are "private activity bonds" (often called industrial
revenue bonds ("IRBs") if issued prior to 1987), which would be primarily of
two
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* For the purposes of the description of users of facilities, all
references to "corporations" shall be deemed to include any other
nongovernmental person or entity.
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<PAGE>
types: (1) Bonds for a publicly owned facility that a private entity may have a
right to use or manage to some degree, such as an airport, seaport facility or
water system, and (2) Bonds for facilities deemed owned or beneficially owned
by a private entity but which were financed with tax-exempt bonds of a public
issuer, such as a manufacturing facility or a pollution control facility. In
the case of the first type, bonds are generally payable from a designated
source of revenues derived from the facility and may further receive the
benefit of the legal or moral obligation of one or more political subdivisions
or taxing jurisdictions. In most cases of project financing of the first type,
receipts or revenues of the Issuer are derived from the project or the operator
or from the unexpended proceeds of the bonds. Such revenues include user fees,
service charges, rental and lease payments, and mortgage and other loan
payments.
The second type of issue will generally finance projects
which are owned by or for the benefit of, and are operated by, corporate
entities. Ordinarily, such private activity bonds are not general obligations
of governmental entities and are not backed by the taxing power of such
entities, and are solely dependent upon the creditworthiness of the corporate
user of the project or corporate guarantor.
The private activity bonds in the Trust have generally
been issued under bond resolutions, agreements or trust indentures pursuant to
which the revenues and receipts payable under the issuer's arrangements with
the users or the corporate operator of a particular project have been assigned
and pledged to the holders of the private activity bonds. In certain cases a
mortgage on the underlying project has been assigned to the holders of the
private activity bonds or a trustee as additional security. In addition,
private activity bonds are frequently directly guaranteed by the corporate
operator of the project or by another affiliated company.
Special Tax Revenue Bonds. Bonds in this category are
bonds secured primarily or solely by receipt of certain state or local taxes,
including sales and use taxes or excise taxes. Consequently, such bonds may be
subject to fluctuations in the collection of such taxes. Such bonds do not
include tax increment bonds or special assessment bonds.
Other Revenue Bonds. Certain Series of the Trust may also
contain revenue bonds which are payable from and secured primarily or solely by
revenues from the ownership and operation of particular facilities, such as
correctional facilities, parking facilities, convention centers, arenas,
museums and other facilities owned or used by a charitable entity. Payment on
bonds related to such facilities is, therefore, primarily or solely dependent
on revenues from such projects, including user fees, charges and rents. Such
revenues may be affected adversely by increased construction and maintenance
costs or taxes, decreased use, competition from alternative facilities,
reduction or loss of rents or the impact of environmental considerations.
Certain Series of the Trust may also contain bonds that
are secured by direct obligations of the U.S. Government or, in some cases,
obligations guaranteed by the U.S. Government, placed in an escrow account
maintained by an independent trustee until maturity or a predetermined
redemption date. In a few isolated instances to date, bonds which were thought
to be escrowed to maturity have been called for redemption prior to maturity.
Puerto Rico Bonds
Certain of the Bonds in the Trust may be general
obligations and/or revenue bonds of issuers located in Puerto Rico which will
be affected by general economic conditions in Puerto Rico. The economy of
Puerto Rico is closely integrated with that of the mainland United States.
During fiscal
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year 1995, approximately 89% of Puerto Rico's exports were to the United States
mainland, which was also the source of 65% of Puerto Rico's imports. In fiscal
1995, Puerto Rico experienced a $4.6 billion positive adjusted trade balance.
The economy of Puerto Rico is dominated by the manufacturing and service
sectors. The manufacturing sector has experienced a basic change over the years
as a result of increased emphasis on higher wage, high technology industries
such as pharmaceuticals, electronics, computers, microprocessors, professional
and scientific instruments, and certain high technology machinery and
equipment. The service sector, including finance, insurance and real estate,
wholesale and retail trade, and hotel and related services, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to and paralleling the expansion of the manufacturing sector. Since fiscal
1985, personal income, both aggregate and per capita, has increased
consistently in each fiscal year. In fiscal 1995, aggregate personal income was
$27.0 billion ($22.5 billion in 1987 prices) and personal income per capita was
$7,296 ($6,074 in 1987 prices). Personal income includes transfer payments to
individuals in Puerto Rico under various social programs. Total federal
payments to Puerto Rico, which include many types in addition to federal
transfer payments, are lower on a per capita basis in Puerto Rico than in any
state. Transfer payments to individuals in fiscal 1994 were $5.9 billion, of
which $4.0 billion, or 67.6%, represent entitlement to individuals who had
previously performed services or made contributions under programs such as
Social Security, Veterans Benefits and Medicare. The number of persons employed
in Puerto Rico during fiscal 1995 averaged 1,051,000, an increase of 4.0% over
fiscal 1994. The unemployment rate in Puerto Rico for fiscal 1995 decreased
from 16.0% to 13.8%. The Puerto Rico Planning Board's most recent gross product
forecast for fiscal 1996, made in February 1995, showed an increase of 2.7%.
The Planning Board's Economic Activity Index, a composite index for thirteen
economic indicators, increased 2.7% for the first seven months of fiscal 1995
compared to the same period of fiscal 1994, which period showed an increase of
1.7% over the same period of fiscal 1993. During the first four months of
fiscal 1996 the Index increased 1.8% compared to the same period of fiscal
1995, which period showed an increase of 2.7% over the same period of fiscal
1994. Growth in the Puerto Rico economy in fiscal 1996 depends on several
factors, including the state of the United States economy and the relative
stability in the price of oil imports, the exchange value of the U.S. dollar,
the level of federal transfers and the cost of borrowing.
Original Issue Discount Bonds and Zero Coupon Bonds
Certain Series of the Trust may contain original issue
discount bonds and/or zero coupon bonds. Original issue discount bonds are
bonds that were originally issued at less than the market interest rate. Zero
coupon bonds are original issue discount bonds that do not provide for the
payment of current interest. For Federal income tax purposes, original issue
discount on such bonds must be amortized over the term of such bonds. On sale
or redemption, the excess of (1) the amount realized (other than amounts
treated as tax-exempt income as described below), over (2) the tax basis of
such bonds (properly adjusted, in the circumstances described below, for
amortization of original issue discount) will be treated as taxable income or
loss. See "The Trust--Tax Status." The Code requires holders of tax-exempt
obligations issued with original issue discount, such as the Trust, to accrue
tax-exempt original issue discount by using the constant interest method
provided for the holders of taxable obligations. In addition, the Code provides
that the basis of a tax-exempt obligation is increased by the amount of accrued
tax-exempt original issue discount. These provisions are applicable to
obligations issued after September 3, 1982 and acquired after March 1, 1984.
The Trust's tax basis in a Bond is increased by any accrued original issue
discount as is a Unit holder's tax basis in his Units. For Bonds issued after
June 9, 1980
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that are redeemed prior to maturity, the difference between the Trust's basis,
as adjusted, and the amount received will be taxable gain or loss to the Unit
holders. All or a portion of any such gain may be taxable as ordinary income.
There can be no assurance that additional Federal
legislation will not be enacted or that existing legislation will not be
amended hereafter with the effect that interest on bonds becomes subject to
Federal income taxation. If the interest on the Bonds should ultimately be
deemed to be taxable, the Sponsors may instruct the Trustee to sell them, and,
since they would be sold as taxable securities, it is expected that they would
have to be sold at a substantial discount from current market prices.
Bonds Subject to Sinking Fund Provisions
Most of the Bonds in the Trust are subject to redemption
prior to their stated maturity date pursuant to sinking fund or call
provisions. A sinking fund is a reserve fund accumulated over a period of time
for retirement of debt. Sinking fund provisions are designed to redeem a
significant portion of an issue gradually over the life of the issue.
Obligations to be redeemed are generally chosen by lot. A callable debt
obligation is one which is subject to redemption prior to maturity at the
option of the issuer. To the extent that obligations in the Trust have a bid
site valuation higher than their par value, redemption of such obligations at
par would result in a loss of capital to a purchaser of Units at the public
offering price. The estimated current return of the Units might also be
adversely affected if the return on the retired Bonds is greater than the
average return on the Bonds in the Trust. In general, call provisions are more
likely to be exercised when the offering side valuation is at a premium over
par than when it is at a discount from par. See "Special Factors Concerning the
Portfolio" in Part I of this Prospectus for information for the number of bonds
in the Portfolio that are original issue discount and zero coupon bonds and
"Portfolio Information" in Part I of this Prospectus for a breakdown of the
percentage of Bonds in the Trust with offering side valuations at a premium,
discount or at par. See also "Estimated Current Return and Estimated Long Term
Return". The portfolio and "Summary of Essential Financial Information" in Part
I of this Prospectus contain a listing of the sinking fund and call provisions,
if any, with respect to each of the Bonds therein.
Other Matters
An amendment to the Federal Bankruptcy Act relating to the
adjustment of indebtedness owed by any political subdivision or public agency
or instrumentality of any state, including municipalities, became effective in
1979. Among other things, this amendment facilitates the use of proceedings
under the Federal Bankruptcy Act by any such entity to restructure or otherwise
alter the terms of its obligations, including those of the type comprising the
Trust's portfolio. The Sponsors are unable to predict what effect, if any, this
legislation will have on the Trust.
To the best knowledge of the Sponsors, there is no
litigation pending as of the date hereof in respect of any Securities which
might reasonably be expected to have a material adverse effect on the Trust,
unless otherwise stated in Part I of this Prospectus. At any time, however,
litigation may be initiated on a variety of grounds with respect to Securities
in the Trust. Such litigation as, for example, suits challenging the issuance
of pollution control revenue bonds under recently enacted environmental
protection statutes, may affect the validity of such Securities or the tax-free
nature of the interest thereon. While the outcome of such litigation can never
be entirely predicted with certainty, bond counsel have given opinions to the
issuing authorities of each Bond on the date of issuance to the effect that
such Securities have been validly issued and that the interest thereon is
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exempt from regular Federal income tax. In addition, other litigation or other
factors may arise from time to time which potentially may impair the ability of
issuers to meet obligations undertaken with respect to Securities.
PUBLIC OFFERING
Offering Price
The Public Offering Price of the Units is based on the
aggregate bid price of the Bonds in the Trust (as determined by the Evaluator)
plus a sales charge determined in accordance with the schedule set forth below,
which is based upon the maturities of each Bond in the Trust. The Sponsors have
implemented this variable format as a more equitable method of assessing the
sales charge for secondary market purchases. For the purpose of computing the
sales charge, Bonds are deemed to mature on their expressed maturity dates,
unless the Evaluator evaluates the price of the Bonds to a different date, such
as a call date or a mandatory tender date, in which case the maturity will be
deemed to be such other date. This method of computing the sales charge will
apply different sales charge rates to each Bond in the Trust depending on the
maturity of each Bond in accordance with the following schedule:
Secondary Market Period
Sales Charge
Percentage
Percentage of of Net
Years to Maturity Per Bond Public Offering Price Amount Invested
0 Months to 2 Years 1.0% 1.010%
2 but less than 3 2.0% 2.091%
3 but less than 4 3.0% 3.093%
4 but less than 8 4.0% 4.167%
8 but less than 12 5.0% 5.363%
12 but less than 15 5.5% 5.820%
15 or more 5.9% 6.270%
A minimum sales charge of 1.0% of the Public Offering
Price is applied to all secondary market unit purchases. There is no reduction
of the sales charge for volume purchases in secondary market transactions.
A proportionate share of accrued and undistributed
interest on the Securities at the date of delivery of the Units to the
purchaser is also added to the Public Offering Price.
Unless Securities are in default in payment of principal
or interest or in significant risk of such default, the Evaluator will not
attribute any value to the Units due to the insurance obtained by the Trust.
See also "Rights of Unit Holders--Certificates" and "Rights of Unit
Holders--Redemption" for information relating to redemption of Units. The
Evaluator will consider in its evaluation of Defaulted Bonds which are covered
by insurance obtained by the Trust the value of the insurance guaranteeing
interest and principal payments as well as the market value of the Securities
and the market value of similar securities of issuers whose securities, if
identifiable, carry identical interest rates and maturities and are of
creditworthiness comparable to the issuer prior to the default or risk of
default. If such other securities are not identifiable, the Evaluator will
compare prices of securities with substantially identical interest rates and
maturities and of a creditworthiness of minimum investment grade. As to Series
18 and subsequent Series, the value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the
exercise of the right to obtain Permanent Insurance (less the insurance
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premium attributable to the purchase of Permanent Insurance and the related
custodial fee) and (ii) the market value of such Defaulted Bonds not covered by
Permanent Insurance. In any case the Evaluator will consider the ability of the
Insurer to meet its commitments under the Trust's insurance policy and, in the
case of Series 18 and subsequent Series, MBIA's or MBIAC's commitment to issue
Permanent Insurance. For a description of the circumstances under which a full
or partial suspension of the right of Unit holders to redeem their Units may
occur, see "Rights of Unit Holders--Redemption."
It is the present intention of the Trustee (and, in the
case of Series 18 and subsequent Series, assuming the Trustee does not exercise
the right to obtain Permanent Insurance on any Defaulted Bonds), so long as the
Trust contains either some Bonds not in default or any Pre-insured Bonds, not
to sell Defaulted Bonds to effect redemptions or for any other reason but
rather to retain them in the portfolio BECAUSE VALUE ATTRIBUTABLE TO THE
INSURANCE OBTAINED BY THE TRUST CANNOT BE REALIZED UPON SALE. Insurance
obtained by the issuer of a Pre-insured Bond, or by some other party, is
effective so long as such Pre-insured Bond is outstanding and the insurer of
such Bond continues to fulfill its obligations. Therefore, any such insurance
may be considered to represent an element of market value in regard to the
Pre-insured Bond, but the exact effect, if any, of this insurance on such
market value cannot be predicted. Regardless of whether the insurer of a Pre-
insured Bond continues to fulfill its obligations, however, such Bond will in
any case continue to be insured under the policy obtained by the Trust from the
Insurer as long as the Bond is held in the Trust.
Certain commercial banks are making Units of the Trust
available to their customers on an agency basis. A portion of the sales charge
discussed above is retained by or remitted to the banks. Under the Glass-
Steagall Act, banks are prohibited from underwriting Trust Units; however, the
Glass-Steagall Act does permit certain agency transactions, and banking
regulators have not indicated that these particular agency transactions are not
permitted under such Act.
Market for Units
Although they are not obligated to do so, the Sponsors
have maintained and intend to continue to maintain a market for the Units and
to continuously offer to purchase Units at prices based on the aggregate bid
price of the Securities. The Sponsors' Repurchase Price shall be not less than
the Redemption Price plus accrued interest through the expected date of
settlement. See "Rights of Unit Holders--Redemption--Computation of Redemption
Price per Unit." There is no sales charge incurred when a Unit holder sells
Units back to the Sponsors. Any Units repurchased by the Sponsors may be
reoffered to the public by the Sponsors at the Public Offering Price at the
time, plus accrued interest.
If the supply of Units of any Series exceeds demand, or
for some other business reason, the Sponsors may discontinue purchases of Units
of such Series at prices based on the aggregate bid price of the Securities.
The Sponsors do not in any way guarantee the enforceability, marketability or
price of any Security in the portfolio or of the Units of the Trust. In the
event that a market is not maintained for the Units, a Unit holder desiring to
dispose of his Units may be able to do so only by tendering such Units to the
Trustee for redemption at the Redemption Price, which is based upon the
aggregate bid price of the underlying Securities. The aggregate bid price of
the Securities in the Trust may be expected to be less than the aggregate
offering price. If a Unit holder wishes to dispose of his Units, he should
inquire of the Sponsors as to current market prices prior to making a tender
for redemption to the Trustee. See "Rights of Unit Holders--Redemption" and
"Sponsors."
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Employees (and their immediate families) of the Sponsors
may, pursuant to employee benefit arrangements, purchase Units of the Trust at
a price equal to the bid side evaluation of the underlying securities in the
Trust, divided by the number of Units outstanding. Such arrangements result in
less selling effort and selling expenses than sales to employee groups of other
companies. Resales or transfers of Units purchased under the employee benefit
arrangements may only be made through the Sponsors' secondary market, so long
as it is being maintained.
Distribution of Units
The Sponsors are the sole underwriters of the Units. It is
the Sponsors' intention to effect a public distribution of the Units solely
through their own organizations. Units may, however, be sold to dealers who are
members of the National Association of Securities Dealers, Inc. at a discount.
Such discount is subject to change from time to time by the Agent for the
Sponsors. Sales will be made only with respect to whole Units, and the Sponsors
reserve the right to reject, in whole or in part, any order for the purchase of
Units. It is the Sponsors' intention to continue to qualify Units of the Trust
for sale where such qualification is necessary. In maintaining a market for the
Units (see "Public Offering--Market for Units"), the Sponsors will realize
profits or sustain losses in the amount of any difference between the price at
which they buy Units and the price at which they resell such Units (the Public
Offering Price described in the currently effective Prospectus which includes
the sales charge set forth in Part I of this Prospectus under "Summary of
Essential Financial Information") or the price at which they may redeem such
Units (based upon the aggregate bid side evaluation of the Securities), as the
case may be, and to the extent that they earn sales charges on resales.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO UNIT HOLDERS
Units of the Trust are offered on a "dollar price" basis.
In contrast, tax-exempt bonds customarily are offered on a "yield price" basis.
Therefore, the rate of return on each Unit is measured in terms of both
Estimated Current Return and Estimated Long-Term Return. Estimated Current
Return based on the Public Offering Price per Unit and Estimated Long-Term
Return per Unit and information regarding estimated monthly and semi-annual
distributions of interest to Unit holders are set forth under "Summary of
Essential Financial Information" in Part I of this Prospectus.
Estimated Current Return is computed by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering Price.
Estimated Net Interest Income per Unit will vary with changes in fees and
expenses of the Trustee and the Evaluator and with principal prepayment,
redemption, maturity, exchange or sale of Bonds. The Public Offering Price per
Unit will vary with changes in the offering price of the Bonds. Estimated
Current Return takes into account only the interest payable on the Bonds and
does not involve a computation of yield to maturity or to an earlier redemption
date nor does it reflect any amortization of premium or discount from par value
in the Bond's purchase price. Moreover, because interest rates on bonds
purchased at a premium are generally higher than current interest rates on
newly issued bonds of a similar type with comparable ratings, the Estimated
Current Return per Unit may be affected adversely if such Bonds are redeemed
prior to their maturity. Therefore, there is no assurance that the Estimated
Current Return as set forth under "Summary of Essential Financial Information"
in Part I of this Prospectus will be realized in the future.
Estimated Long-Term Return is calculated using a formula
that (i) takes into consideration, and determines and factors in the relative
weightings of, the market values, yields (taking into account the amortization
of premiums and the accretion of discounts) and estimated retirements of all
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the Bonds in the portfolio and (ii) takes into account the expenses and sales
charge associated with each Unit of the Trust. The Estimated Long-Term Return
assumes that each Bond is retired on its pricing life date (i.e., that date
which produces the lowest dollar price when yield price calculations are done
for each optional call date and the maturity date of a callable security). If
the Bond is retired on any optional call or maturity date other than the
pricing life date, the yield to the holder of that Bond will be greater than
the initial quoted yield. Since the market values and estimated retirements of
the Bonds, the expenses of the Trust and the Net Annual Interest Income and
Public Offering Price per Unit may change, there is no assurance that the
Estimated Long-Term Return as set forth under "Summary of Essential Financial
Information" in Part I of this Prospectus will be realized in the future.
INSURANCE ON THE BONDS
Insurance guaranteeing the timely payment, when due, of
all principal and interest on the Bonds in the Trust has been obtained from the
Insurer by the Trust. The Insurer has issued a policy of insurance covering
each of the Bonds in the Trust, including Pre-insured Bonds. As to each Trust,
the Insurer shall not have any liability under the policy with respect to any
Bonds which do not constitute part of the Trust. In determining to insure the
Bonds, the Insurer has applied its own respective standards which generally
correspond to the standards it has established for determining the insurability
of new issues of municipal bonds.
By the terms of its policy, the Insurer unconditionally
guarantees to the Trust the payment, when due, required of the issuer of the
Bonds of an amount equal to the principal of (either at the stated maturity or
by any advancement of maturity pursuant to a mandatory sinking fund payment)
and interest on the Bonds as such payments shall become due but not paid.
Except as provided below with respect to small issue industrial development
Bonds and pollution control revenue Bonds, in the event of any acceleration of
the due date of principal by reason of mandatory or optional redemption (other
than mandatory sinking fund redemption), default or otherwise, the payments
guaranteed will be made in such amounts and at such times as would have been
due had there not been an acceleration. The Insurer will be responsible for
such payments less any amounts received by the Trust from any trustee for the
Bond issuers or from any other source. The policy issued by the Insurer does
not guarantee payment on an accelerated basis, the payment of any redemption
premium or the value of the Units. The MBIA and MBIAC policies also do not
insure against nonpayment of principal of or interest on the Bonds resulting
from the insolvency, negligence or any other act or omission of the trustee or
other paying agent for the Bonds. With respect to small issue industrial
development Bonds and pollution control revenue Bonds in Series 9 through
Series 30 and Series 31 and subsequent Series, however, MBIA and MBIAC,
respectively, guarantee the full and complete payments required to be made by
or on behalf of an issuer of such Bonds if there occurs pursuant to the terms
of the Bonds an event which results in the loss of the tax-exempt status of
interest on such Bonds, including principal, interest or premium payments
payable thereon, if any, as and when required to be made by or on behalf of the
issuer pursuant to the terms of such Bonds. No assurance can be given that the
policy issued by the Insurer would insure the payment of principal or interest
on Bonds which is not required to be paid by the issuer thereof because the
Bonds were not validly issued. At the respective times of issuance of the
Bonds, opinions relating to the validity thereof were rendered by bond counsel
to the respective issuing authorities.
The insurance policy relating to the Trust is
non-cancellable and will continue in force so long as the Trust is in existence
and the Securities described in the policy continue to be held in and owned by
the Trust. Failure to pay premiums on the policy obtained by the Trust will not
result in the cancellation of insurance but will force the Insurer to take
action
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against the Trustee to recover premium payments due it. The Trustee in turn
will be entitled to recover such payments from the Trust.
The policy issued by the Insurer shall terminate as to any
Bond which has been redeemed from or sold by the Trustee on the date of such
redemption or on the settlement date of such sale, and the Insurer shall not
have any liability under the policy as to any such Bond thereafter. If the date
of such redemption or the settlement date of such sale occurs between a record
date and a date of payment of any such Bonds, any MBIA or MBIAC policy will
terminate as to such Bond on the business day next succeeding such date of
payment. The termination of a MBIA or MBIAC policy as to any Bond shall not
affect MBIA's or MBIAC's obligations regarding any other Bond in such Trust or
any other Trust which has obtained a MBIA or MBIAC insurance policy. The policy
issued by the Insurer will terminate as to all Bonds on the date on which the
last of the Bonds matures, is redeemed or is sold by the Trust.
In the case of Series 18 through 30 and Series 31 and
subsequent Series, pursuant to irrevocable commitments of MBIA and MBIAC,
respectively, the Trustee upon the sale of a Bond in the Trust has the right to
obtain permanent insurance with respect to such Bond (i.e., insurance to
maturity of the Bonds) (the "Permanent Insurance") upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such Bond.
Accordingly, any Bond in such Series of the Trust is eligible to be sold on an
insured basis. It is expected that the Trustee will exercise the right to
obtain Permanent Insurance for a Bond in the Trust upon instruction from the
Sponsors only if upon such exercise the Trust would receive net proceeds (sale
of Bond proceeds less the insurance premium attributable to the Permanent
Insurance and the related custodial fee) from such sale in excess of the sale
proceeds if such Bond was sold on an uninsured basis.
The Permanent Insurance premium with respect to each Bond
is determined based upon the insurability of each Bond as of the Date of
Deposit and will not be increased or decreased for any change in the
creditworthiness of such Bond unless such Bond is in default as to payment of
principal and/or interest. In such event, the Permanent Insurance premium shall
be subject to an increase predetermined at the Date of Deposit and payable from
the proceeds of the sale of such Bond.
Except as indicated below, insurance obtained by the Trust
has no effect on the price or redemption value of Units thereof. It is the
present intention of the Evaluator to attribute a value to the insurance
obtained by the Trust (including, as to Series 18 and subsequent Series, the
right to obtain Permanent Insurance) for the purpose of computing the price or
redemption value of Units thereof only if the Bonds covered by such insurance
are in default in payment of principal or interest or, in the Sponsors'
opinion, in significant risk of such default ("Defaulted Bonds"). The value of
the insurance will be equal to the difference between (1) the market value of a
Defaulted Bond insured by the Trust (as to Series 18 and subsequent Series, the
market value of a Defaulted Bond assuming the exercise of the right to obtain
Permanent Insurance less the insurance premium attributable to the purchase of
Permanent Insurance and the related custodial fee) and (2) the market value of
similar securities not in default or significant risk thereof (as to Series 18
and subsequent Series, the market value of such Defaulted Bonds not covered by
Permanent Insurance). Insurance obtained by the issuer of a Bond or by parties
other than the Trust is effective so long as such Pre- insured Bond is
outstanding and the insurer of such Pre-insured Bond continues to fulfill its
obligations.
Regardless of whether the insurer of a Pre-insured Bond
continues to fulfill its obligations, however, such Bond will continue to be
insured under the policy obtained by the Trust from MBIA or MBIAC as long as
the Bond is held in the Trust. Insurance obtained by the issuer of a Bond or by
other
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<PAGE>
parties may be considered to represent an element of market value in regard to
the Bonds thus insured, but the exact effect, if any, of this insurance on such
market value cannot be predicted.
In the event that interest on or principal of a Bond is
due for payment but is unpaid by reason of nonpayment by the issuer thereof,
the Insurer will make payments to its fiscal agent, as identified in the
insurance policy (the "Fiscal Agent"), equal to such unpaid amounts of
principal and interest not later than one business day after the Insurer has
been notified by the Trustee that such nonpayment has occurred (but not earlier
than the date such payment is due). The Fiscal Agent will disburse to the
Trustee the amount of principal and interest which is then due for payment but
is unpaid upon receipt by the Fiscal Agent of (1) evidence of the Trust's right
to receive payment of such principal and interest and (2) evidence, including
any appropriate instruments of assignment, that all of the rights to payment of
such principal or interest then due for payment shall thereupon vest in the
Insurer. Upon payment by the Insurer of any principal or interest payments with
respect to any Bonds, the Insurer shall succeed to the rights of the owner of
such Bonds with respect to such payment.
National Union, which was incorporated in Pennsylvania in
1901, is a stock insurance company which provides fire and casualty insurance
and is a wholly-owned subsidiary of American International Group, Inc.
MBIA Insurance Corporation ("MBIA"), formerly known as
Municipal Bond Investors Assurance Corporation, 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 MBIA. MBIA is domiciled in
the State of New York and licensed to do business in all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. MBIA has one European branch in the Republic of France.
As of March 31, 1996 MBIA had admitted assets of $4.0
billion (unaudited), total liabilities of $2.7 billion (unaudited), and total
capital and surplus of $1.3 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1995, MBIA had admitted assets of $3.8 billion
(audited), total liabilities of $2.5 billion (audited), and total capital and
surplus of $1.3 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. All information regarding MBIA, a wholly owned subsidiary of MBIA
Inc., including the financial statements of MBIA for the year ended December
31, 1995, prepared in accordance with generally accepted accounting principles,
included in the Annual Report on Form 10-K of MBIA Inc. for the year ended
December 31, 1995 is hereby incorporated by reference into this Official
Statement and shall be deemed to be a part hereof. Any statement contained in a
document incorporated by reference herein shall be modified or superseded for
purposes of this Official Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Official Statement.
No representation is made herein as to the accuracy or
adequacy of such information or as to the absence of material adverse changes
in such information subsequent to the date thereof. The Sponsors are not aware
that the information herein is inaccurate or incomplete as of the date hereof.
The contract of insurance relating to the Trust and the
negotiations in respect thereof (and, in the case of Series 18 and subsequent
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Series, certain agreements relating to Permanent Insurance) represent the only
significant relationship between the Insurer and the Trust. Otherwise, neither
the Insurer nor any associate thereof has any material business relationship,
direct or indirect, with the Trust or the Sponsors, except that the Sponsors
may from time to time in the normal course of their business participate as
underwriters or as managers or as members of underwriting syndicates in the
distribution of new issues of municipal bonds for which a policy of insurance
guaranteeing the payment of interest and principal has been obtained from the
Insurer, and except that James A. Lebenthal, Chairman of the Board of Directors
of Lebenthal & Co., Inc., is a director of MBIA Inc. Although all issues
contained in the portfolio of the Trust are individually insured, neither the
Trust, the Units nor the portfolio is insured directly or indirectly by the
Insurer.
A purpose of the insurance on the Bonds in the portfolio
obtained by the Trust is to obtain a higher yield on the Trust portfolio than
would be available if all the Securities in such portfolio had Standard &
Poor's Rating group, a division of McGraw-Hill ("Standard & Poor's"), "AAA"
rating and/or Moody's Investors Service, Inc. ("Moody's") "Aaa" rating but were
uninsured and yet at the same time to have the protection of insurance of
payment of interest and principal on the Securities. There is, of course, no
certainty that this result will be achieved. Any Pre-insured Bonds in the Trust
(all of which are rated "AAA" by Standard & Poor's and/or "Aaa" by Moody's,
respectively) may or may not have a higher yield than uninsured bonds rated
"AAA" by Standard & Poor's and/or "Aaa" by Moody's, respectively.
Because the Securities are insured by the Insurer as to
the payment of principal and interest, Standard & Poor's has assigned its "AAA"
investment rating to the Units of the Trust and, in the case of Series 17 and
subsequent Series, to all the Bonds, as insured, and, in the case of Series 6
and subsequent Series, Moody's has assigned a rating of "Aaa" to all of the
Bonds in the Trust, as insured. See "Tax Exempt Bond Portfolio" in Part I of
this Prospectus. The obtaining of these ratings by the Trust should not be
construed as an approval of the offering of the Units by Standard & Poor's or
Moody's or as a guarantee of the market value of the Trust or of the Units.
These ratings are not a recommendation to buy, hold or sell and do not take
into account the extent to which Trust expenses or portfolio asset sales for
less than the Trust's acquisition price will reduce payment to the Unit holders
of the interest or principal.
TAX STATUS (See also "Tax Status" in Part I of this Prospectus)
Interest income on the Bonds contained in the Trust
portfolio is, in the opinion of bond counsel to the issuing governmental
authorities, which opinion was rendered at the time of original issuance of the
Bonds, excludible from gross income under the Internal Revenue Code of 1954, as
amended (the "1954 Code"), or the Internal Revenue Code of 1986, as amended
(the "Code"), depending upon the date of issuance of the Bonds in any
particular Series. See "The Trust--Portfolio."
Gain (or loss) realized on a sale, maturity or redemption
of the Bonds or on a sale or redemption of a Unit is, however, includible in
gross income as capital gain (or loss) for Federal, state and local income tax
purposes, assuming that the Unit is held as a capital asset. Such gain (or
loss) does not include any amount received in respect of accrued interest. In
addition, such gain (or loss) may be long- or short-term, depending on the
holding period of the Units. Bonds selling at a market discount tend to
increase in market value as they approach maturity when the principal amount is
payable, thus increasing the potential for taxable gain (or reducing the
potential for loss) on their redemption, maturity or sale. Gain on the
disposition of a Bond purchased at a market discount generally will be treated
as ordinary income, rather than capital gain, to the extent of accrued market
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discount. The deductibility of capital losses is limited to the amount of
capital gain; in addition, up to $3,000 of capital losses of non-corporate Unit
holders may be deducted against ordinary income. Since the proceeds from sales
of Bonds, under certain circumstances, may not be distributed pro-rata, a Unit
holder's taxable income for any year may exceed the actual cash distributions
to the Unit holder in that year.
Among other things, the Code provides for the following:
(1) interest on certain private activity bonds issued after August 7, 1986 is
included in the calculation of the individual's alternative minimum tax
(currently taxed at a rate of up to 28%); none of the Bonds in the Trust is a
private activity bond, the interest on which is subject to the alternative
minimum tax; (2) interest on certain private activity bonds issued after August
7, 1986 is included in the calculation of the corporate alternative minimum tax
and 75% of the amount by which adjusted current earnings (including interest on
all tax-exempt bonds, such as the Bonds) exceed alternative minimum taxable
income, as modified for this calculation, will be included in alternative
minimum taxable income. Interest on the Bonds is includible in the adjusted
current earnings of a corporation for purposes of such alternative minimum tax.
The Code does not otherwise require corporations, and does not require
taxpayers other than corporations, including individuals, to treat interest on
the Bonds as an item of tax preference in computing an alternative minimum tax;
(3) subject to certain exceptions, no financial institution is allowed a
deduction for that portion of the institutions's interest expense allocable to
tax-exempt interest on tax-exempt bonds acquired after August 7, 1986; (4) the
amount of the deduction allowed to property and casualty insurance companies
for underwriting loss is decreased by an amount determined with regard to
tax-exempt interest income and the deductible portion of dividends received by
such companies; (5) all taxpayers are required to report for informational
purposes on their Federal income tax returns the amount of tax-exempt interest
they receive; (6) an issuer must meet certain requirements on a continuing
basis in order for interest on a tax-exempt bond to be tax-exempt, with failure
to meet such requirements resulting in the loss of tax exemption; and (7) a
branch profits tax on U.S. branches of foreign corporations is implemented
which, because of the manner in which the branch profits tax is calculated, may
have the effect of subjecting the U.S. branch of a foreign corporation to
Federal income tax on the interest on bonds otherwise exempt from such tax.
Section 86 of the Code provides that a portion of social
security benefits is includible in taxable income for taxpayers whose "modified
adjusted gross income," combined with a portion of their social security
benefits, exceeds a base amount. The base amount is $25,000 for an individual,
$32,000 for a married couple filing a joint return and zero for married persons
filing separate returns. Interest on tax-exempt bonds is added to adjusted
gross income for purposes of determining whether an individual's income exceeds
the base amount described above.
In addition, certain "S Corporations" may be subject to
minimum tax on certain passive income, including tax-exempt interest, such as
interest on the Bonds.
At the time of the original issuance of the Bonds held by
the Trust, opinions relating to the validity of the Bonds and the exemption of
interest thereon from regular Federal income tax were or (with respect to
"when, as and if issued" Bonds) were to be rendered by bond counsel to the
issuing governmental authorities. Neither the Sponsors nor their special
counsel have made any review of proceedings relating to the issuance of such
Bonds or the basis for bond counsel's opinions.
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In the case of certain Bonds which may be included in the
Trust, the opinions of bond counsel indicate that, although interest on such
Bonds is generally exempt from Federal income tax, such Bonds are "industrial
development bonds" under the 1954 Code or are "private activity bonds" as that
term is defined in the Code (the following discussion also applies to Bonds
that are "industrial development bonds" as they are defined in the 1954 Code in
terms similar to those under which private activity bonds are defined in the
Code and are generally subject to the same limitations). Interest on certain
qualified small issue private activity bonds is exempt from all present Federal
income taxation only so long as the "principal user" of the bond-financed
facility and any "related person" remain within the capital expenditure
limitations imposed by Section 144(a)(4) of the Code and only so long as the
aggregate private activity bond limits of Section 144(a)(10) of the Code
(Sections 103(b)(6)(D) and 103(b)(15) of the 1954 Code, respectively) are met.
In addition, interest on private activity bonds will not be exempt from Federal
income tax for any period during which such bonds are held by a "substantial
user" of the facilities financed by the proceeds of such bonds (or a "related
person" to such a "substantial user"). Interest attributable to such Bonds, if
received by a Unit holder who is such a "substantial user" or "related person,"
will be taxable (i.e., not tax-exempt) to the same extent as if such Bonds were
held directly as owner.
In addition, a Bond can lose its tax-exempt status as a
result of other subsequent but unforeseeable events such as prohibited
"arbitrage" activities by the issuer of the Bond or the failure of the Bond to
continue to satisfy the conditions required for the exemption of interest
thereon from regular federal income tax. No investigation has been made as to
the current or future owners or users of the facilities financed by the bonds,
the amount of such persons' outstanding tax-exempt private activities bonds, or
the facilities themselves, and no assurance can be given that future events
will not affect the tax-exempt status of the Bonds. Investors should consult
their tax advisors for advice with respect to the effect of these provisions on
their particular tax situation.
Under Section 265 of the Code, if borrowed funds are used
by a Unit holder to purchase or carry Units of the Trust, interest on such
indebtedness will not be deductible for Federal income tax purposes. Under
rules used by the Internal Revenue Service, the purchase of Units may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of Units. Similar rules are
applicable for purposes of state and local taxation. Also, under Section 291 of
the Code, certain financial institutions that acquired Units on or before
August 7, 1986 may be subject to a reduction in the amount of interest expense
that would otherwise be allowable as a deduction for Federal income tax
purposes. Subject to certain exceptions under Section 265 of the Code, no
deduction is allowed to a financial institution for that portion of the
institution's interest expense allocable to tax-exempt interest on Units
acquired after August 7, 1986. Investors with questions regarding this issue
should consult their tax advisors.
The Trust may contain Bonds issued with original issue
discount. The Code requires holders of tax-exempt obligations issued with
original issue discount, such as the Trust, to accrue tax-exempt original issue
discount by using the constant interest method provided for the holders of
taxable obligations and to increase the basis of a tax-exempt obligation by the
amount of accrued tax-exempt original issue discount. These provisions are
applicable to obligations issued after September 3, 1982 and acquired after
March 1, 1984. The Trust's tax basis in a Bond is increased by any accrued
original issue discount as is a Unit holder's tax basis in his Units. For Bonds
issued on or after June 9, 1980 that are redeemed prior to maturity, the
difference between the Trust's basis, as adjusted, and the amount received will
be taxable gain or loss to the Unit holders.
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If a Unit holder's tax cost for his pro rata interest in a
Bond exceeds his pro rata interest in the Bond's face amount, the Unit holder
will be considered to have purchased his pro rata interest in the Bond at a
"premium." The Unit holder will be required to amortize any premium relating to
his pro rata interest in a Bond prior to the maturity of the Bond. Amortization
of premium on a Bond will reduce a Unit holder's tax basis for this pro rata
interest in the Bond, but will not result in any deduction from the Unit
holder's income. Thus, for example, a Unit holder who purchases a pro rata
interest in a Bond at a premium and resells it at the same price will recognize
taxable gain equal to the portion of the premium that was amortized during the
period the Unit holder is considered to have held such interest.
The exemption of interest on municipal obligations for
Federal income tax purposes does not necessarily result in exemption under the
income tax laws of any state or local government. Interest income derived from
the Bonds is not excluded from net income in determining New York State or New
York City franchise taxes on corporations or financial institutions. The laws
of such states and local governments vary with respect to the taxation of such
obligations.
From time to time proposals have been introduced before
Congress, the purpose of which is to restrict or eliminate the Federal income
tax exemption for interest on debt obligations similar to the Bonds in the
Trust, and it can be expected that similar proposals may be introduced in the
future. The Sponsors cannot predict whether additional legislation, if any, in
respect of the Federal income tax status of interest on debt obligations may be
enacted and what the effect of such legislation would be on Bonds in the Trust.
In addition, the enactment of a "flat tax" or other legislation that
significantly alters the federal income tax system may have a material adverse
effect on the value of Units. If the interest on any Bonds in the Trust should
ultimately be deemed to be taxable, the Sponsors may instruct the Trustee to
sell such Bonds, and, since they would be sold as taxable securities, it is
expected that they would be sold at a substantial discount from current market
prices.
In South Carolina v. Baker, the U.S. Supreme Court held
that the federal government may constitutionally require states to register
bonds they issue and subject the interest on such bonds to federal income tax
if not registered, and that there is no constitutional prohibition against the
federal government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the federal
government to regulate and control bonds such as the Bonds in the Trust and to
tax interest on such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the Bonds
in the Trust in accordance with Section 103 of the Code.
RIGHTS OF UNIT HOLDERS
Certificates
Ownership of Units is evidenced by registered certificates
executed by the Trustee and the Sponsors. The Trustee is authorized to treat as
the record owner of Units that person who is registered as such owner on the
books of the Trustee. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or
any multiple thereof. A Unit holder may be required to pay $2.00 per
certificate reissued or transferred and to pay any governmental charge that may
be imposed in connection with each such transfer or interchange. For new
certificates
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<PAGE>
issued to replace destroyed, stolen or lost certificates, the Unit holder must
furnish indemnity satisfactory to the Trustee and must pay such expenses as the
Trustee may incur. Mutilated certificates must be surrendered to the Trustee
for replacement.
Distribution of Interest and Principal
While interest will be distributed semi-annually or
monthly, depending on the method of distribution chosen, principal, including
capital gains, will be distributed only semi-annually; provided, however, that,
other than for purposes of redemption, no distribution need be made from the
Principal Account if the balance therein is less than $1.00 per Unit then
outstanding, and that, if at any time the pro rata share represented by the
Units of cash in the Principal Account exceeds $10.00 as of a Monthly Record
Date, the Trustee shall, on the next succeeding Monthly Distribution Date,
distribute the Unit holder's pro rata share of the balance of the Principal
Account. Interest (semi-annually or monthly) and principal, including capital
gains, if any (semi-annually), received by the Trust will be distributed on
each Distribution Date to Unit holders of record of the Trust as of the
preceding Record Date who are entitled to such distributions at that time under
the plan of distribution chosen. All distributions will be net of applicable
expenses and funds required for the redemption of Units. See "Summary of
Essential Financial Information" in Part I of this Prospectus, "The
Trust--Expenses and Charges" and "Rights of Unit Holders--Redemption."
The Trustee will credit to the Interest Account for the
Trust all interest received by the Trust, including that part of the proceeds
of any disposition of Securities which represents accrued interest. Other
receipts of the Trust will be credited to the Principal Account for the Trust.
The pro rata share of the Interest Account of the Trust and the pro rata share
of cash in the Principal Account of the Trust represented by each Unit thereof
will be computed by the Trustee each month as of the Record Date. See "Summary
of Essential Financial Information" in Part I of this Prospectus. Proceeds
received from the disposition of any of the Securities subsequent to a Record
Date and prior to the next succeeding Distribution Date will be held in the
Principal Account for the Trust and will not be distributed until the second
succeeding Distribution Date. Because interest on the Securities is not
received by the Trust at a constant rate throughout the year, any particular
interest distribution may be more or less than the amount credited to the
Interest Account of the Trust as of the Record Date. Persons who purchase Units
between a Record Date and a Distribution Date will receive their first
distribution on the second Distribution Date following their purchase of Units
under the applicable plan of distribution. No distribution need be made from
the Principal Account if the balance therein is less than an amount sufficient
to distribute $1.00 per Unit.
The difference between the estimated net interest accrued
to the first Record Date and to the related Distribution Date is an asset of
the respective Unit holder and will be realized in subsequent distributions or
upon the earlier of the sale of such Units or the maturity, redemption or sale
of Securities in the Trust.
The plan of distribution selected by a Unit holder will
remain in effect until changed. Unit holders purchasing Units in the secondary
market will initially receive distributions in accordance with the election of
the prior owner. Each April, the Trustee will furnish each Unit holder a card
to be returned together with the Certificate by May 15 of such year if the Unit
holder desires to change his plan of distribution, and the change will become
effective on May 16 of such year for the ensuing twelve months. For a
discussion of redemption of Units, see "Rights of Unit
Holders--Redemption--Tender of Units."
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As of the fifteenth day of each month the Trustee will
deduct from the Interest Account and, to the extent funds are not sufficient
therein, from the Principal Account, amounts necessary to pay the expenses of
the Trust as of the first day of such month. See "The Trust--Expenses and
Charges." The Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of the Trust. Amounts so withdrawn shall not be considered a part
of the Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the Trustee may
withdraw from the Interest Account and the Principal Account such amounts as
may be necessary to cover redemption of Units by the Trustee. See "Rights of
Unit Holders--Redemption." Funds which are available for future distributions,
payments of expenses and redemptions are in accounts which are non-interest
bearing to the Unit holders and are available for use by the Trustee pursuant
to normal banking procedures.
Because interest on Securities in the Trust is payable at
varying intervals, usually in semi-annual installments, the interest accruing
to the Trust will not be equal to the amount of money received and available
monthly for distribution from the Interest Account to Unit holders choosing the
monthly payment plan. Therefore, on each monthly Distribution Date, the amount
of interest actually deposited in the Interest Account and available for
distribution may be slightly more or less than the monthly interest
distribution made. In addition, because of the varying interest payment dates
of the Securities constituting the Trust portfolio, accrued interest at any
point in time will be greater than the amount of interest actually received by
the Trust and distributed to Unit holders. Therefore, there will usually remain
an item of accrued interest that is added to the value of the Units. If a Unit
holder sells all or a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his Units.
Similarly, if a Unit holder redeems all or a portion of his Units, the
Redemption Price per Unit which he is entitled to receive from the Trustee will
also include accrued interest on the Securities. Thus, the accrued interest
attributable to a Unit will not be entirely recovered until the Unit holder
either redeems or sells such Unit or until the Trust is terminated. See "Rights
of Unit Holders--Redemption--Computation of Redemption Price per Unit."
Expenses and Charges
Initial Expenses
At no cost to the Trust, the Sponsors have borne all the
expenses of creating and establishing the Trust, including the cost of the
initial preparation, printing and execution of the Trust Agreement and the
certificates for Units, legal expenses, advertising and selling expenses,
expenses of the Trustee and other out-of-pocket expenses.
All or a portion of the expenses incurred in creating and
establishing the Trust for Series 119 and subsequent Series, including the cost
of the initial preparation and execution of the Trust Agreement, the initial
fees and expenses of the Trustee, legal expenses and other actual out-of-pocket
expenses, will be paid by the Trust and amortized over a five year period. All
advertising and selling expenses, as well as any organizational expenses not
paid by the Trust, will be borne by the Sponsors at no cost to the Trust.
Fees
The Trustee's, Sponsor's and Evaluator's fees are set
forth under "Summary of Essential Financial Information" in Part I of this
Prospectus. The Sponsors' fee, if any, which is earned for portfolio
supervisory services,
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<PAGE>
is based on the face amount of Securities in the Trust at December 1 of each
year. The Sponsors' fee, which is not to exceed the maximum amount set forth in
the "Summary of Essential Financial Information" in Part I of this Prospectus,
may exceed the actual costs of providing portfolio supervisory services for a
particular Series, but at no time will the total amount received by the
Sponsors for portfolio supervisory services rendered to all Series of Empire
State Municipal Exempt Trust in any calendar year exceed the aggregate cost to
them of supplying such services in such year.
The Trustee will receive for its ordinary recurring
services to the Trust an annual fee in the amount set forth in the "Summary of
Essential Financial Information" in Part I of this Prospectus. There is no
minimum fee and, except as hereinafter set forth, no maximum fee. For a
discussion of certain benefits derived by the Trustee from the Trust's funds,
see "Rights of Unit Holders--Distribution of Interest and Principal." For a
discussion of the services performed by the Trustee pursuant to its obligations
under the Trust Agreement, reference is made to the material set forth under
"Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable monthly on
or before each Distribution Date and the Sponsors' annual fee is payable
annually on December 1, each from the Interest Account to the extent funds are
available and then from the Principal Account. These fees may be increased
without approval of the Unit holders by amounts not exceeding proportionate
increases in consumer prices for services as measured by the United States
Department of Labor's Consumer Price Index entitled "All Services Less Rent."
If the balances in the Principal and Interest Accounts are insufficient to
provide for amounts payable by the Trust, or amounts payable to the Trustee
which are secured by its prior lien on the Trust, the Trustee is permitted to
sell Bonds to pay such amounts.
Insurance Premiums
The cost of the insurance obtained by the Trust as set
forth under "Summary of Essential Financial Information" in Part I of this
Prospectus is based on the aggregate amount of Bonds in the Trust as of the
date of such information. The premium, which is an obligation of each
respective Trust, is payable monthly by the Trustee on behalf of the Trust. As
Securities in the portfolio of the Trust mature, are redeemed by their
respective issuers or are sold by the Trustee, the amount of the premium will
be reduced in respect of those Securities no longer owned by and held in the
Trust. The Trust does not incur any premium expense for any insurance which has
been obtained by an issuer of a Pre-insured Bond, since the premium or premiums
for such insurance have been paid by such issuer or other party; Pre-insured
Bonds, however, are additionally insured by the Trust. No premium will be paid
by the Trust on Bonds which are also MBIAC Pre-insured Bonds or MBIA
Pre-insured Bonds. The premium payable for Permanent Insurance and the related
custodial fee will be paid solely from the proceeds of the sale of a Bond from
the Trust in the event that the Trustee exercises the right to obtain Permanent
Insurance on such Bond.
Other Charges
The following additional charges are or may be incurred by
the Trust: all expenses (including audit and counsel fees) of the Trustee
incurred in connection with its activities under the Trust Agreement, including
annual audit expenses by independent public accountants selected by the
Sponsors (so long as the Sponsors maintain a secondary market, the Sponsors
will bear any audit expense which exceeds 50 cents per Unit), the expenses and
costs of any action undertaken by the Trustee to protect the Trust and the
rights and interests of the Unit holders; fees of the Trustee for any
extraordinary services performed under the Trust Agreement;
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<PAGE>
indemnification of the Trustee for any loss or liability accruing to it without
willful misconduct, bad faith or gross negligence on its part, arising out of
or in connection with its acceptance or administration of the Trust; and all
taxes and other governmental charges imposed upon the Securities or any part of
the Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsors, contemplated). The above expenses, including the
Trustee's fee, when paid by or owing to the Trustee, are secured by a lien on
the Trust. In addition, the Trustee is empowered to sell Securities in order to
make funds available to pay all expenses.
Reports and Records
The Trustee shall furnish Unit holders of the Trust in
connection with each distribution a statement of the amount of interest, if
any, and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit. Within a reasonable time
after the end of each calendar year, the Trustee will furnish to each person
who at any time during the calendar year was a Unit holder of record a
statement providing the following information: (1) as to the Interest Account:
interest received (including amounts representing interest received upon any
disposition of Securities and any earned original issue discount), and, if the
issuers of the Securities are located in different states or territories, the
percentage of such interest by such states or territories, deductions for
payment of applicable taxes and for fees and expenses of the Trust (including
insurance costs), redemptions of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (2) as to the Principal Account: the
dates of disposition of any Securities and the net proceeds received therefrom
(including any unearned original issue discount but excluding any portion
representing interest, with respect to the Trust the premium attributable to
the Trustee's exercise of the right to obtain Permanent Insurance and any
related custodial fee), deductions for payments of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, the amount of any "when
issued" interest treated as a return of capital and the balance remaining after
such distributions and deductions, expressed both as a total dollar amount and
as a dollar amount representing the pro rata share of each Unit outstanding on
the last business day of such calendar year; (3) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (4) the Redemption price per Unit based upon the last computation thereof
made during such calendar year; and (5) amounts actually distributed during
such calendar year from the Interest Account and from the Principal Account,
separately stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
The Trustee shall keep available for inspection by Unit
holders, at all reasonable times during usual business hours, books of record
and account of its transactions as Trustee including records of the names and
addresses of Unit holders, certificates issued or held, a current list of
Securities in the portfolio of the Trust and a copy of the Trust Agreement.
Redemption
Tender of Units
While it is anticipated that Units can be sold in the
secondary market, Units may also be tendered to the Trustee for redemption at
its corporate trust office at 101 Barclay Street, New York, New York 10286,
upon payment of any applicable tax. At the present time there are no specific
taxes related to the redemption of the Units. No redemption fee will be
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charged by the Sponsors or the Trustee. Units redeemed by the Trustee will be
cancelled.
Certificates for Units to be redeemed must be delivered to
the Trustee and must be properly endorsed and accompanied by a written
instrument of transfer. Thus, redemption of Units cannot be effected until
certificates representing such Units have been delivered to the person seeking
redemption. See "Rights of Unit Holders--Certificates." Unit holders must sign
exactly as their names appear on the face of the certificate with signature(s)
guaranteed by an officer of a national bank or trust company, a member firm of
either the New York, Midwest or Pacific Stock Exchange, or in such other manner
as may be acceptable to the Trustee. In certain instances the Trustee may
require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority.
Within seven calendar days following such tender or, if
the seventh calendar day is not a business day, on the first business day prior
thereto, the Unit holder will be entitled to receive in cash an amount for each
Unit tendered equal to the Redemption Price per Unit computed as of the
Evaluation Time set forth in Part I of this Prospectus under "Summary of
Essential Financial Information" as of the next subsequent Evaluation Time. See
"Redemption--Computation of Redemption Price per Unit." The "date of tender" is
deemed to be the date on which Units are received by the Trustee, except that
as regards Units received after the Evaluation Time on the New York Stock
Exchange, the date of tender is the next day on which such Exchange is open for
trading or the next day on which there is a sufficient degree of trading in
Units of the Trust, and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the Redemption Price computed on that
day. For information relating to the purchase by the Sponsors of Units tendered
to the Trustee for redemption at prices in excess of the Redemption Price, see
"Redemption--Purchase by the Sponsors of Units Tendered for Redemption."
Accrued interest paid on redemption shall be withdrawn
from the Interest Account or, if the balance therein is insufficient, from the
Principal Account. All other amounts paid on redemption shall be withdrawn from
the Principal Account. The Trustee is empowered to sell Securities in order to
make funds available for redemption. Such sales, if required, could result in a
sale of Securities by the Trustee at a loss. To the extent Securities are sold,
the size and diversity of the Trust will be reduced.
As to Series 18 and subsequent Series, if the Trustee
exercises the right to obtain Permanent Insurance on a Bond, such Bond will be
sold from the Trust on an insured basis. In the event that the Trustee does not
exercise the right to obtain Permanent Insurance on a Bond, such Bond will be
sold from the Trust on an uninsured basis since the insurance obtained by the
Trust covers the timely payment of principal and interest when due on the Bonds
only while the Bonds are held in and owned by the Trust. If the Trustee does
not obtain Permanent Insurance on a Defaulted Bond, to the extent that (and, in
the case of Series 18 and subsequent Series, assuming that the Trustee does not
exercise the right to obtain Permanent Insurance on a Defaulted Bond) Bonds
which are current in payment of interest are sold from the Trust portfolio in
order to meet redemption requests and Defaulted Bonds are retained in the
portfolio in order to preserve the related insurance protection applicable to
said Bonds, the overall value of the Bonds remaining in the Trust will tend to
diminish. See "Sponsors--Responsibility" for the effect of selling Defaulted
Bonds to meet redemption requests.
The Trustee reserves the right to suspend the right of
redemption and to postpone the date of payment of the Redemption Price per Unit
for any period during which the New York Stock Exchange is closed, other than
weekend
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and holiday closings, or during which trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission by rule
or regulation) an emergency exists as a result of which disposal or evaluation
of the underlying Bonds is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission has by order permitted.
Because insurance obtained by the Trust terminates as to
Bonds which are sold by the Trustee, and because the insurance obtained by the
Trust does not have a realizable cash value which can be used by the Trustee to
meet redemptions of Units (assuming, in the case of Series 18 and subsequent
Series, that the Trustee does not exercise the right to obtain Permanent
Insurance on Defaulted Bonds), under certain circumstances the Sponsors may
apply to the Securities and Exchange Commission for an order permitting a full
or partial suspension of the right of Unit holders to redeem their Units if a
significant portion of the Bonds in the portfolio is in default in payment of
principal or interest or in significant risk of such default. No assurances can
be given that the Securities and Exchange Commission will permit the Sponsors
to suspend the rights of Unit holders to redeem their Units, and, without the
suspension of such redemption rights when faced with excessive redemptions, the
Sponsors may not be able to preserve the benefits of the Trust's insurance on
Defaulted Bonds.
Computation of Redemption Price Per Unit
The Redemption Price per Unit is determined by the Trustee
on the basis of the bid prices of the Securities in the Trust, as of the
Evaluation Time stated under "Summary of Essential Financial Information" in
Part I of this Prospectus on the day any such determination is made. The
Redemption Price per Unit is each Unit's pro rata share, determined by the
Trustee, of (1) the aggregate value of the Securities in the Trust (determined
by the Evaluator as set forth below), except for those cases in which the value
of insurance has been included, (2) cash on hand in the Trust, and (3) accrued
and unpaid interest on the Securities as of the date of computation, less (a)
amounts representing taxes or governmental charges payable out of the Trust,
(b) the accrued expenses of the Trust, and (c) cash held for distribution to
Unit holders of record as of a date prior to the evaluation. The Evaluator may
determine the value of the Securities in the Trust (i) on the basis of current
bid prices for the Securities, (ii) if bid prices are not available for any
Securities, on the basis of current bid prices for comparable bonds, (iii) by
appraisal, or (iv) by any combination of the above. In determining the
Redemption Price per Unit, no value will be assigned to the portfolio insurance
obtained by the Trust on the Bonds in the Trust unless such Bonds are in
default in payment of principal or interest or in significant risk of such
default. On the other hand, Pre-insured Bonds in the Trust are entitled at all
times to the benefits of insurance obtained by their respective issuers so long
as the Pre-insured Bonds are outstanding and the insurer continues to fulfill
its obligations, and such benefits are reflected and included in the market
value of Pre-insured Bonds. For a description of the situations in which the
Evaluator may value the insurance obtained by the Trust, see "Public
Offering--Market for Units."
Purchase by the Sponsors of Units Tendered for Redemption
The Trust Agreement requires that the Trustee notify the
Sponsors of any tender of Units for redemption. So long as the Sponsors are
maintaining a bid in the secondary market, the Sponsors, prior to the close of
business on the second succeeding business day, will purchase any Units
tendered to the Trustee for redemption at the price so bid by making payment
therefor to the Unit holder in an amount not less than the Redemption Price on
the date of tender not later than the day on which the Units would otherwise
have been redeemed by the Trustee. See "Public Offering--Market for Units."
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Units held by the Sponsors may be tendered to the Trustee for redemption as any
other Units, provided that the Sponsors shall not receive for Units purchased
as set forth above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors
will be the Public Offering Price determined in the manner provided in this
Prospectus. See "Public Offering-- Offering Price." Any profit resulting from
the resale of such Units will belong to the Sponsors which likewise will bear
any loss resulting from a lower offering or redemption price subsequent to
their acquisition of such Units.
Exchange Option
The Sponsors of the Series of Empire State Municipal
Exempt Trust (including the Series of Municipal Exempt Trust, the predecessor
trust to Empire State Municipal Exempt Trust) (the "Trust") are offering Unit
holders of those Series of the Trust for which the Sponsors are maintaining a
secondary market an option to exchange a Unit of any Series of the Trust for a
Unit of a different Series of the Trust being offered by the Sponsors (other
than in the initial offering period) at a Public Offering Price generally based
on the bid prices of the underlying Securities divided by the number of Units
outstanding (see "Public Offering--Market for Units") plus a fixed sales charge
of $15 per Unit (in lieu of the normal sales charge). However, a Unit holder
must have held his Unit for a period of at least six months in order to
exercise the exchange option or agree to pay a sales charge based on the
greater of $15 per Unit or an amount which together with the initial sales
charge paid in connection with the acquisition of Units being exchanged equals
the normal sales charge of the Series into which the investment is being
converted, determined as of the date of the exchange. Such exchanges will be
effected in whole Units only. Any excess proceeds from the Units being
surrendered will be returned, and the Unit holder will not be permitted to
advance any new money in order to complete an exchange. The Sponsors reserve
the right to modify, suspend or terminate this plan at any time without further
notice to the Unit holders. In the event that the exchange option is not
available to a Unit holder at the time he wishes to exercise it, the Unit
holder will be immediately notified and no action will be taken with respect to
his Units without further instructions from the Unit holder.
Unit holders are urged to consult their tax advisors as to
the tax consequences of exchanging Units.
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AUTOMATIC ACCUMULATION ACCOUNT
The Sponsors have entered into an arrangement (the "Plan")
with Empire Builder Tax Free Bond Fund (the "Empire Builder") which permits
Unit holders of the Trust to elect to have distributions from Units in the
Trust automatically reinvested in shares of the Empire Builder. The Empire
Builder is an open-end, non-diversified investment company whose investment
objective is to seek as high a level of current income exempt from Federal
income tax, New York State and New York City income taxes as is believed to be
consistent with preservation of capital. It is the policy of the Empire Builder
to invest primarily in debt securities the interest income from which is exempt
from such taxes.
The Empire Builder has an investment objective which
differs in certain respects from that of the Trust. The bonds purchased by the
Empire Builder will be of "investment grade" quality - that is, at the time of
purchase by the Empire Builder, such bonds either will be rated not lower than
the four highest ratings of either Moody's (Aaa, Aa, A or Baa) or Standard &
Poor's (AAA, AA, A, or BBB) or will be unrated bonds which at the time of
purchase are judged by the Empire Builder's investment advisor to be of
comparable quality to bonds rated within such four highest grades. It is a
fundamental policy of the Empire Builder that under normal market conditions at
least 90% of the income distributed to its shareholders will be exempt from
Federal income tax, New York State and New York City personal income taxes.
However, during times of adverse market conditions when the Empire Builder is
investing for temporary defensive purposes in obligations other than New York
tax-exempt bonds, more than 10% of the Empire Builder's income distributions
could be subject to Federal income tax, New York State income tax and/or New
York City income tax, as described in the current prospectus relating to the
Empire Builder (the "Empire Builder Prospectus"). Glickenhaus & Co.
("Glickenhaus"), a sponsor of the Trust, acts as the investment advisor and
distributor for the Empire Builder.
Each Unit holder may request from The Bank of New York
(the "Plan Agent") a copy of the Empire Builder Prospectus describing the
Empire Builder and a form by which such Unit holder may elect to become a
participant ("Participant") in the Plan. Thereafter, as directed by such
person, distributions on the Participant's Units will, on the applicable
Distribution Date, automatically be applied as of that date by the Trustee to
purchase shares (or fractions thereof) of the Empire Builder at a net asset
value as computed as of the close of trading on the New York Stock Exchange on
such date, as described in the Empire Builder Prospectus. Unless otherwise
indicated, new Participants in the Empire Builder Plan will be deemed to have
elected the monthly distribution plan with respect to their Units.
Confirmations of all transactions undertaken for each Participant in the Plan
will be mailed to each such Participant by the Plan Agent indicating
distributions and shares (or fractions thereof) of the Empire Builder purchased
on his behalf. A Participant may at any time prior to ten days preceding the
next succeeding distribution date, by so notifying the Plan Agent in writing,
elect to terminate his participation in the Plan and receive future
distributions on his Units in cash. There will be no charge or other penalty
for such termination. The Sponsors, the Trustee, the Empire 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, request a
copy of the Empire Builder Prospectus from The Bank of New York, Unit
Investment Trust Division, P.O. Box 988, Wall Street Station, New York, New
York 10268. Read it carefully before you decide to participate.
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[ALTERNATE PAGE]
AUTOMATIC ACCUMULATION ACCOUNT
For Unit holders of the Trust who are clients of Lebenthal
& Co., Inc., the Sponsors have entered into an arrangement (the "Plan") with
Lebenthal New York Municipal Bond Fund (the "Bond Fund") which permits Unit
holders of the Trust to elect to have distributions from Units in the Trust
automatically reinvested in shares of the Bond Fund. The Bond Fund is an
open-end, non-diversified investment company whose investment objective is to
maximize current income exempt from regular Federal income tax, and from New
York State and New York City income taxes, consistent with preservation of
capital and with consideration given to opportunities for capital gain. It is
the policy of the Bond Fund to invest primarily in long term investment grade
tax-exempt securities the interest income from which is exempt from such taxes.
The Bond Fund has an investment objective which differs in
certain respects from that of the Trust. The bonds purchased by the Bond Fund
will be of "investment grade" quality -- that is, at the time of purchase by
the Bond Fund, such bonds either will be rated not lower than the four highest
ratings of either Moodys' (Aaa, Aa, A or Baa) or Standard & Poor's (AAA, A, A
or BBB) or will be unrated bonds which at the time of purchase are judged by
the Bond Fund's investment advisor to be of comparable quality to bonds rated
within such four highest grades. It is a fundamental policy of the Bond Fund
that under normal market conditions at least 80% of the income distributed to
its shareholders will be exempt from regular Federal income tax, and from New
York State and New York City personal income taxes. However, during times of
adverse market conditions, more than 20% of the Bond Fund's income
distributions could be subject to Federal income tax, New York State and/or New
York City income taxes, as described in the current prospectus relating to the
Bond Fund (the "Bond Fund Prospectus"). Lebenthal & Co., Inc., a sponsor of the
Trust, acts as the manager and distributor for the Bond Fund.
Each Unit holder may request from The Bank of New York
(the "Plan Agent") a copy of the Bond Fund Prospectus describing the Bond Fund
and a form by which such Unit holder may elect to become a participant
("Participant") in the Plan. Thereafter, as directed by such person,
distributions on the Participant's Unit will, on the applicable Distribution
Date, automatically be applied as of that date by the Trustee to purchase
shares (or fractions thereof) of the Bond Fund at a net asset value as computed
as of the close of trading on the New York Stock Exchange on such date, as
described in the Bond Fund Prospectus. Unless otherwise indicated, new
Participants in the Bond Fund Plan will be deemed to have elected the monthly
distribution plan with respect to their Units. Confirmations of all
transactions undertaken for each Participant in the Plan will be mailed to each
Participant by the Plan Agent indicating distributions and shares (or fractions
thereof) of the Bond Fund purchased on his behalf. A Participant may at any
time prior to ten days preceding the next succeeding distribution date, by so
notifying the Plan Agent in writing, elect to terminate his participation in
the Plan and receive future distributions on his Units in cash. There will be
no charge or other penalty for such termination. The Sponsors, the Trustee, the
Bond Fund and Lebenthal & Co. Inc., as manager for the Bond Fund, each will
have the right to terminate this Plan at any time for any reason. The
reinvestment of distributions from the Trust through the Plan will not affect
the income tax status of such distributions. For more complete information
about investing in the Bond Fund through the Plan, including charges and
expenses, request a copy of the Bond Fund Prospectus from The Bank of New York,
Unit Investment Trust Division, P.O. Box 988, Wall Street Station, New York,
New York 10268. Read it carefully before you decide to participate.
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SPONSORS
Glickenhaus and Lebenthal are the Sponsors for Empire
State Municipal Exempt Trust, Series 10 and all subsequent Series, including
all Guaranteed Series.
Glickenhaus, a New York limited partnership, is engaged in
the underwriting and securities brokerage business and in the investment
advisory business. It is a member of the New York Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. and is an associate member of
the American Stock Exchange. Glickenhaus acts as a sponsor for successive
Series of The Glickenhaus Value Portfolios and The Municipal Insured National
Trusts, and for the prior series of Empire State Municipal Exempt Trust,
including those sold under the name of Municipal Exempt Trust, New York Exempt
Series 1, New York Series 2 and New York Series 3. Glickenhaus, in addition to
participating as a member of various selling groups of other investment
companies, executes orders on behalf of investment companies for the purchase
and sale of securities of such companies and sells securities to such companies
in its capacity as a broker or dealer in securities. The principal offices of
Glickenhaus are located at 6 East 43rd Street, New York, New York 10017.
Lebenthal, a New York corporation originally organized as
a New York partnership in 1925, has been buying and selling municipal bonds for
its own account as a dealer for over 67 years; Lebenthal also buys and sells
securities as an agent and participates as an underwriter in public offerings
of municipal bonds. It acted as a sponsor for Empire State Tax Exempt Bond
Trust, Series 8 and successive Series of The Municipal Insured National Trust
through Series 28. Lebenthal is registered as a broker/dealer with the
Securities and Exchange Commission and various state securities regulatory
agencies and is a member of the National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp. The principal offices of
Lebenthal are located at 120 Broadway, New York, New York 10271.
Limitations on Liability
The Sponsors are jointly and severally liable for the
performance of their obligations arising from their responsibilities under the
Trust Agreement, but will be under no liability to the Unit holders for taking
any action or refraining from any action in good faith or for errors in
judgment; nor will they be responsible in any way for depreciation or loss
incurred by reason of the sale of any Bonds, except in cases of their willful
misconduct, bad faith or gross negligence. See "The Trust--Portfolio" and
"Sponsors--Responsibility."
Responsibility
The Trustee shall sell, for the purpose of redeeming Units
tendered by any Unit holder, and for the payment of expenses for which funds
may not be available, such of the Bonds in a list furnished by the Sponsors as
the Trustee in its sole discretion may deem necessary. In the event that the
Trustee does not exercise the right to obtain Permanent Insurance on a
Defaulted Bond or Bonds, to the extent that Bonds are sold which are current in
payment of principal and interest in order to meet redemption requests and
Defaulted Bonds are retained in the portfolio in order to preserve the related
insurance protection applicable to said Bonds, the overall value of the Bonds
remaining in the Trust's portfolio will tend to diminish. As to Series 18 and
subsequent Series, in the event that the Trustee does not exercise the right to
obtain Permanent Insurance on a Defaulted Bond or Bonds, except as described
below and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unit holders or if there is no
alternative, the Trustee is not empowered to sell Defaulted
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Bonds for which value has been attributed for the insurance obtained by the
Trust. Because of such restrictions on the Trustee, under certain circumstances
the Sponsors may seek a full or partial suspension of the right of Unit holders
to redeem their Units. See "Rights of Unit Holders--Redemption." The Sponsors
are empowered, but not obligated, to direct the Trustee to dispose of Bonds in
the event of advance refunding. It is the responsibility of the Sponsors to
instruct the Trustee to reject any offer made by an issuer of any of the
Securities to issue new obligations in exchange and substitution for any
Securities pursuant to a refunding or refinancing plan, except that the
Sponsors may instruct the Trustee to accept such an offer or to take any other
action with respect thereto as the Sponsors may deem proper if the issuer is in
default with respect to such Securities or in the judgment of the Sponsors the
issuer will probably default with respect to such Securities in the foreseeable
future.
Any obligations so received in exchange or substitution
will be held by the Trustee subject to the terms and conditions of the Trust
Agreement to the same extent as Securities originally deposited thereunder.
Within five days after the deposit of obligations in exchange or substitution
for underlying Securities, the Trustee is required to give notice thereof to
each Unit holder, identifying the obligations eliminated and the Securities
substituted therefor. Except as stated in this and the preceding paragraph, the
acquisition by the Trust of any securities other than the Securities initially
deposited is prohibited.
If any default in the payment of principal or interest on
any Bond occurs and no provision for payment is made therefor either pursuant
to the portfolio insurance with respect to the Trust or otherwise within 30
days, the Trustee is required to notify the Sponsors thereof. If the Sponsors
fail to instruct the Trustee to sell or to hold such Bond within 30 days after
notification by the Trustee to the Sponsors of such default, the Trustee may in
its discretion sell the Defaulted Bond and not be liable for any depreciation
or loss thereby incurred. See "The Trust--Insurance on the Bonds."
The Sponsors may direct the Trustee to dispose of Bonds
upon default in the payment of principal or interest, institution of certain
legal proceedings or the existence of certain other impediments to the payment
of Bonds, default under other documents which may adversely affect debt
service, default in the payment of principal or interest on other obligations
of the same issuer, decline in projected income pledged for debt service on
revenue Bonds, or decline in price or the occurrence of other market factors,
including advance refunding, so that in the opinion of the Sponsors the
retention of such Bonds in a Trust would be detrimental to the interest of the
Unit holders. The proceeds from any such sales will be credited to the
Principal Account of the affected Trust for distribution to the Unit holders.
Notwithstanding the foregoing, in connection with final
distributions to Unit holders (if, as to Series 18 and subsequent Series, the
Trustee does not exercise the right to obtain Permanent Insurance on any
Defaulted Bond), because the portfolio insurance obtained by the Trust is
applicable only while Bonds so insured are held by the Trust, the price to be
received by the Trust upon the disposition of any such Defaulted Bond will not
reflect any value based on such insurance. Therefore, in connection with any
liquidation with respect to a Trust, it shall not be necessary for the Trustee
to, and the Trustee does not currently intend to, dispose of any Bonds if
retention of such Bonds, until due, shall be deemed to be in the best interest
of Unit holders, including, but not limited to, situations in which Bonds so
insured are in default and situations in which Bonds so insured have a
deteriorated market price resulting from a significant risk of default. Since
the Pre-insured Bonds will reflect the value of the insurance obtained by the
Bond issuer, it is the present intention of the Sponsors not to direct the
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Trustee to hold any Pre-insured Bonds after the date of termination. All
proceeds received, less applicable expenses, from insurance on Defaulted Bonds
not disposed of at the date of termination will ultimately be distributed to
Unit holders of record as of such date of termination as soon as practicable
after the date such Defaulted Bonds become due and applicable insurance
proceeds have been received by the Trustee. See "Summary of Essential Financial
Information" in Part I of this Prospectus.
Agent for Sponsors
The Sponsor named as Agent for Sponsors under "Summary of
Essential Information" in Part I of this Prospectus has been appointed by the
other Sponsor as agent for purposes of taking action under the Trust Agreement.
In those Trusts for which there is a sole Sponsor, references herein to the
Agent for Sponsors shall be deemed to refer to such sole Sponsor. If the
Sponsors are unable to agree with respect to action to be taken jointly by them
under the Trust Agreement and they cannot agree as to which Sponsor shall act
as sole Sponsor, then the Agent for Sponsors shall act as sole Sponsor. If one
of the Sponsors fails to perform its duties under the Trust Agreement or
becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, that Sponsor is automatically discharged under the Trust
Agreement and the other Sponsor acts as the Sponsors.
Resignation
Any Sponsor may resign at any time provided that at the
time of such resignation one remaining Sponsor maintains a net worth of
$1,000,000 and all the remaining Sponsors are agreeable to such resignation.
Concurrent with or subsequent to such resignation, a new Sponsor may be
appointed by the remaining Sponsors and the Trustee to assume the duties of the
resigning Sponsor. If, at any time, only one Sponsor is acting under the Trust
Agreement and that Sponsor shall resign or fail to perform any of its duties
thereunder or becomes incapable of acting or becomes bankrupt or its affairs
are taken over by public authorities, then the Trustee may appoint a successor
sponsor or terminate the Trust Agreement and liquidate the Trust.
Financial Information
At September 30, 1995, the total partners' capital of
Glickenhaus was $146,106,000 (audited); and at March 31, 1996, the total
stockholders' equity of Lebenthal was $4,518,542 (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, (800) 221-7771. The Bank of New York is subject to
supervision and examination by the Superintendent of Banks of the State of New
York and the Board of Governors of the Federal Reserve System, and its deposits
are insured by the Federal Deposit Insurance Corporation to the extent
permitted by law. The Trustee must be a corporation organized under the laws of
the United States or the State of New York, which is authorized
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under such laws to exercise corporate trust powers, and must have at all times
an aggregate capital, surplus and undivided profits of not less than $5,000,000
and its principal office and place of business in the Borough of Manhattan, New
York City. The duties of the Trustee are primarily ministerial in nature. The
Trustee did not participate in the selection of Securities for the portfolio of
any Series of the Trust.
Limitations on Liability
The Trustee shall not be liable or responsible in any way
for depreciation or loss incurred by reason of the disposition of any moneys,
Securities or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents except
in cases of its willful misconduct, bad faith, gross negligence or reckless
disregard for its obligations and duties. In addition, the Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or
in respect of the Trust which the Trustee may be required to pay under current
or future law of the United States or any other taxing authority having
jurisdiction. See "The Trust--Portfolio."
Responsibility
For information relating to the responsibilities of the
Trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Unit Holders," "Sponsors--Responsibility" and
"Sponsors--Resignation."
Resignation
By executing an instrument in writing and filing the same
with the Sponsors, the Trustee and any successor may resign. In such an event
the Sponsors are obligated to appoint a successor trustee as soon as possible.
If the Trustee becomes incapable of acting or becomes bankrupt or its affairs
are taken over by public authorities, or, in the case of Series 11 and
subsequent Series, if the Sponsors deem it to be in the best interest of the
Unit holders, the Sponsors may remove the Trustee and appoint a successor as
provided in the Trust Agreement. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor trustee. If, upon
resignation or removal of a trustee, no successor has been appointed and has
accepted the appointment within thirty days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective only when
the successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
The Evaluator is Muller Data Corporation, a New York
corporation, with main offices at 395 Hudson Street, New York, New York 10014.
Muller Data Corporation is a wholly owned subsidiary of Thomson Publishing
Corporation, a Delaware corporation.
Limitations on Liability
The Trustee and the Sponsors may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it;
provided, however, that the Evaluator shall be under no liability to the
Trustee, the Sponsors or the Unit holders for errors in judgement. This
provision shall
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not protect the Evaluator in cases of its willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Responsibility
The Trust Agreement requires the Evaluator to evaluate the
Securities on the basis of their bid prices on each business day after the
initial offering period, when any Unit is tendered for redemption and on any
other day such evaluation is desired by the Trustee or is requested by the
Sponsors. For information relating to the responsibility of the Evaluator to
evaluate the Securities on the basis of their offering prices, see "Public
Offering--Offering Price."
Resignation
The Evaluator may resign or may be removed by the Sponsors
and the Trustee, and the Sponsors and the Trustee are to use their best efforts
to appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
The Sponsors and the Trustee have the power to amend the
Trust Agreement without the consent of any of the Unit holders when such an
amendment is (1) to cure any ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders; and the Sponsors
and the Trustee may amend the Trust Agreement with the consent of the holders
of certificates evidencing 66-2/3% of the Units then outstanding, provided that
no such amendment will reduce the interest in a Trust of any Unit holder
without the consent of such Unit holder or reduce the percentage of Units
required to consent to any such amendment without the consent of all the Unit
holders. In no event shall the Trust Agreement be amended to increase the
number of Units issuable thereunder or to permit the deposit or acquisition of
securities either in addition to or in substitution for any of the Bonds
initially deposited in the Trust, except in accordance with the provisions of
the Trust Agreement. In the event of any amendment, the Trustee is obligated to
notify promptly all Unit holders of the substance of such amendment.
The Trust shall terminate upon the maturity, redemption,
sale or other disposition, as the case may be, of the last of the Securities.
The Trustee shall notify all Unit holders when the value of the Trust as shown
by any evaluation is less than $2,000,000 or less than 20% of the value of the
Trust as of the Date of Deposit, whichever is lower, at which time the Trust
may be terminated (i) by the consent of the holders of 66-2/3% of the Units or
(ii) by the Trustee; provided, however, that the holders of at least 33-1/3% of
the Units may instruct the Trustee not to terminate the Trust. In no event,
however, may the Trust continue beyond the Mandatory Termination Date set forth
in Part I of this Prospectus under "Summary of Essential Financial
Information"; provided, however, as to Series 9 and subsequent Series, that
prior to the Mandatory Termination Date the Trustee shall not dispose of any
Bonds if the retention of such Bonds, until due, shall be deemed to be in the
best interest of the Unit holders of the affected Trust. In the event of
termination, written notice thereof will be sent by the Trustee to all Unit
holders. Within a reasonable period after termination, the Trustee will sell
any remaining Securities and, after paying all expenses and charges incurred by
the Trust, will distribute to each Unit holder, upon surrender for
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cancellation of his certificate for Units, his pro rata share of the balances
remaining in the Interest and Principal Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters have been passed upon by Hall,
McNicol, Hamilton & Clark, The News Building, 220 East 42nd Street, New York,
New York 10017, as counsel for the Sponsors as to Series 1 through 8, by Brown
& Wood, One World Trade Center, New York, New York 10048, as special counsel
for the Sponsors as to Series 9 through 64 and by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022 as special counsel for the Sponsors as to
Series 65 subsequent Series of Empire State Municipal Exempt Trust, Guaranteed
Series. Kroll & Tract, 520 Madison Avenue, New York, New York 10022, acts as
counsel for the Trustee.
AUDITORS
The financial statements of the Trust included in Part I
of this Prospectus have been audited by BDO Seidman, LLP, independent certified
public auditors, as stated in their report with respect thereto, and are
included therein in reliance upon such report given upon the authority of that
firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS
A Standard & Poor's corporate or municipal bond rating is
a current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees. The bond rating
is not a recommendation to purchase, sell or hold a security, inasmuch as it
does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to
Standard & Poor's by the issuer and obtained by Standard & Poor's from other
sources it considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on 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.
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AA: Bonds rated "AA" have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay interest
and repay principal, although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB: Bonds rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Plus (+) or Minus (-): To provide more detailed
indications of credit quality, the ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. Accordingly, the investor should exercise his own
judgment with respect to such likelihood and risk.
NR: Indicates that no rating has been requested, that
there is insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of obligation as a
matter of policy.
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
SP-3: Speculative capacity to pay principal and interest.
*Moody's Investors Service, Inc. ("Moody's") rating. A summary of the meaning
of the applicable rating symbols as published by Moody's follows:
Aaa: Bonds which are rated "Aaa" are judged to be the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes
- 44 -
279831.5
<PAGE>
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 bonds are secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in
operating experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Moody's applies numerical modifiers "1," "2" and "3" in each rating
classification from "Aa" through "B" in its corporate rating system. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the security ranks in the lower end of its generic
rating category.
- 45 -
279831.5
<PAGE>
<TABLE>
<S> <C>
---------------------------------------------------
This Prospectus contains information concerning
the Trust and the Sponsors, but does not contain
all the information set forth in the registration EMPIRE STATE
statements and exhibits relating thereto, which the MUNICIPAL EXEMPT TRUST
Trust has filed with the Securities and Exchange
Commission, Washington, D.C. under the
Securities Act of 1933 and the Investment Company
Act of 1940, and to which reference is hereby made. GUARANTEED SERIES
- ----------------------------------------------------------------
PROSPECTUS, PART II
INDEX
- ----------------------------------------------------------------
Page Sponsors:
THE TRUST....................................................... 1
GLICKENHAUS & CO.
PUBLIC OFFERING................................................. 17 6 East 43rd Street
New York, New York 10017
ESTIMATED CURRENT RETURN (212) 953-7532
AND ESTIMATED LONG-TERM
RETURN TO UNIT HOLDERS.......................................... 19
LEBENTHAL & CO., INC.
INSURANCE ON THE BONDS.......................................... 20 120 Broadway
New York, New York 10271
TAX STATUS...................................................... 23 (212)425-6116
RIGHTS OF UNIT HOLDERS.......................................... 26
AUTOMATIC ACCUMULATION ACCOUNT.................................. 34
SPONSORS........................................................ 38
TRUSTEE......................................................... 40
EVALUATOR....................................................... 41
AMENDMENT AND TERMINATION
OF THE TRUST AGREEMENT.......................................... 42
LEGAL OPINIONS.................................................. 43
AUDITORS........................................................ 43
DESCRIPTION OF BOND RATINGS..................................... 43
- ----------------------------------------------------------------
No person is authorized to give any information or to make any
representations not contained in this Prospectus and any
information or representation not contained herein must not be
relied upon as having been authorized by the Trust or the
Sponsors. This Prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, securities in any state to
any person to whom it is not lawful to make such offer in such
state.
- ---------------------------------------------------------------- ---------------------------------------------------
</TABLE>
279831.5
<PAGE>
PART II
ADDITIONAL INFORMATION NOT REQUIRED
IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statements on Form S-6
comprises the following papers and documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus.
Signatures.
Written Consent of the following persons:
Consent of Independent Auditors.
Consent of Counsel (previously filed)
Consents of the Evaluator including Confirmation of Ratings
(included in Exhibit 99.5.1).
The following exhibits:
*99.5.1 -- Consents of the Evaluator including Confirmation of Ratings.
99.6.1 -- Copies of Powers of Attorney of General Partners of
Glickenhaus & Co. (filed as Exhibit 6.1 to Form S-6
Registration Statement No. 33-64155 of Glickenhaus Value
Portfolios, the 1996 Equity Collection on November 13, 1995,
and incorporated herein by reference).
99.6.2 - Copies of Powers of Attorney of Directors and certain
officers of Lebenthal & Co., Inc. (filed as Exhibit 6.2 to
Amendment No. 1 to Form S-6 Registration Statement No.
33-55385 of Empire State Municipal Exempt Trust, Guaranteed
Series 109 on November 2, 1994, and incorporated herein by
reference).
*27 -- Financial Data Schedule (for EDGAR filing only).
- --------
* Being filed by this Amendment.
II-1
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Empire State Municipal Exempt Trust, Guaranteed Series 48 and
Guaranteed Series 49 certify that they have met all of the requirements for
effectiveness of this Post-Effective Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933. The registrants
have duly caused this Post-Effective Amendment to the Registration Statement
to be signed on their behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York on the 26th day of September, 1996.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 48
AND GUARANTEED SERIES 49
(Registrants)
GLICKENHAUS & CO.
(Depositor)
By: /s/ BRIAN C. LAUX
Brian C. Laux
(Authorized Signatory)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Name Title Date
ALFRED FEINMAN* General Partner ) September 26, 1996
)
SETH M. GLICKENHAUS* General Partner, )
Chief Investment Officer ) By:/s/ BRIAN C. LAUX
) Brian C. Laux
STEVEN B. GREEN* Chief Financial Officer ) Attorney-in-Fact*
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.1 to
Registration Statement No. 33-64155 on November 13, 1995.
II-2
C/M: 10726.0053 299333.1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, Empire State Municipal Exempt Trust, Guaranteed Series 48 and
Guaranteed Series 49 certify that they have met all of the requirements for
effectiveness of this Post-Effective Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933. The registrants
have duly caused this Post-Effective Amendment to the Registration Statement
to be signed on their behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York on the 26th day of September, 1996.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 48
AND GUARANTEED SERIES 49
(Registrants)
LEBENTHAL & CO., INC.
(Depositor)
By: /s/ D. WARREN KAUFMAN
D. Warren Kaufman
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons, in the capacities and on the dates indicated.
Name Title Date
H. GERARD BISSINGER, II* Director )
) September 26, 1996
JEFFREY M. JAMES* Director )
)
/s/D. WARREN KAUFMAN Director )
)
ALEXANDRA LEBENTHAL* Director, President ) By:/s/ D. WARREN KAUFMAN
) D. Warren Kaufman
) Attorney-in-Fact*
JAMES A. LEBENTHAL* Director, Chief )
Executive Officer )
)
DUNCAN K. SMITH* Director )
- ---------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.2 to
Amendment No. 1 to Registration Statement No. 33-55385 on November 2,
1994.
II-3
C/M: 10726.0053 299333.1
<PAGE>
CONSENT OF COUNSEL
The consent of Brown & Wood to the use of their name in the Prospectus
included in the Registration Statement is contained in their opinion filed
previously.
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of
EMPIRE STATE MUNICIPAL EXEMPT TRUST GUARANTEED SERIES 48
AND GUARANTEED SERIES 49
We hereby consent to the use in Post-Effective Amendment No. 7 to
Registration Statement No. 33-28267 of our opinion dated June 28, 1996, except
for Note 5 which is as of September 1, 1995, relating to the financial
statements of Empire State Municipal Exempt Trust, Guaranteed Series 48 and
Guaranteed Series 49 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
September 30, 1996
II-4
C/M: 10726.0053 299333.1
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000849398
<NAME> ESMET, GTD 48
<S> <C>
<FISCAL-YEAR-END> May-31-1996
<PERIOD-START> Jun-01-1995
<PERIOD-END> May-31-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 7205126
<INVESTMENTS-AT-VALUE> 7368944
<RECEIVABLES> 181972
<ASSETS-OTHER> 82695
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7633611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2235
<TOTAL-LIABILITIES> 2235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8604
<SHARES-COMMON-PRIOR> 9483
<ACCUMULATED-NII-CURRENT> 237296
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 163818
<NET-ASSETS> 7631376
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 572820
<OTHER-INCOME> 0
<EXPENSES-NET> 27370
<NET-INVESTMENT-INCOME> 545450
<REALIZED-GAINS-CURRENT> (98222)
<APPREC-INCREASE-CURRENT> (80082)
<NET-CHANGE-FROM-OPS> 367146
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 599364
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 801151
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 879
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1852939)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1000.14
<PER-SHARE-NII> 63.39
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 69.66
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 886.95
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000849387
<NAME> ESMET, GTD 49
<S> <C>
<FISCAL-YEAR-END> May-31-1996
<PERIOD-START> Jun-01-1995
<PERIOD-END> May-31-1996
<PERIOD-TYPE> Year
<INVESTMENTS-AT-COST> 5961671
<INVESTMENTS-AT-VALUE> 6144640
<RECEIVABLES> 146521
<ASSETS-OTHER> 24162
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6315323
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1820
<TOTAL-LIABILITIES> 1820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8228
<SHARES-COMMON-PRIOR> 8990
<ACCUMULATED-NII-CURRENT> 191934
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 182969
<NET-ASSETS> 6313503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 456734
<OTHER-INCOME> 0
<EXPENSES-NET> 22434
<NET-INVESTMENT-INCOME> 434300
<REALIZED-GAINS-CURRENT> (163659)
<APPREC-INCREASE-CURRENT> 43033
<NET-CHANGE-FROM-OPS> 313674
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 521337
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 2419665
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 762
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2627378)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 994.53
<PER-SHARE-NII> 52.65
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 63.20
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 767.32
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Muller Data Corporation
A Thomson Financial Services Company
395 Hudson Street
New York, NY 10014-3622
Telephone (212) 807-3800
September 30, 1996
Glickenhaus & Co., Inc.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
120 Broadway
New York, New York 10003
RE: EMPIRE STATE MUNICIPAL EXEMPT TRUST
Guaranteed Series 48 - Post-effective Amendment No. 7
Guaranteed Series 49 - Post-effective Amendment No. 7
Gentlemen:
We have examined the post-effective Amendment to the Registration Statement
File No. 33-28267 for the above captioned trust(s). We hereby acknowledge that
Muller Data Corporation is currently acting as the evaluator for the trust(s).
We hereby consent to the use in the Amendment of the reference to Muller Data
Corporation as evaluator.
In addition, we hereby confirm that the ratings indicated in the above
referenced Amendment to the Registration Statement for the respective bonds
comprising the trusts portfolios are the ratings currently indicated in our
Muniview data base.
You are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Sincerely,
- ----------------
Mario S. Buscemi
Chief Operating officer
MBS:tg
C/M 10726.0053 300207.1
