<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1994
REGISTRATION NO. 33-53603
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1
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 105
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 25 BROADWAY
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
SETH M. GLICKENHAUS JAMES A. LEBENTHAL
GLICKENHAUS & CO. LEBENTHAL & CO., INC.
6 EAST 43RD STREET 25 BROADWAY
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
COPIES TO:
MICHAEL R. ROSELLA, ESQ.
BATTLE FOWLER
280 PARK AVENUE
NEW YORK, NEW YORK 10017
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
13,000* UNITS OF EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 105 ARE BEING REGISTERED UNDER THE SECURITIES ACT OF 1933
AND THE INVESTMENT COMPANY ACT OF 1940.
F. PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC OF THE SECURITIES
BEING REGISTERED:
$13,000,000**
G. AMOUNT OF FILING FEE, COMPUTED AT ONE-TWENTY-NINTH OF 1 PERCENT OF THE
PROPOSED MAXIMUM AGGREGATE OFFERING PRICE TO THE PUBLIC:
$4,482.79***
H. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT.
/x/ Check if it is proposed that this filing will become effective immediately
upon filing pursuant to Rule 487.
- ------------
*Including 3,000 Units registered for the purpose of resale by the Depositors.
**Estimated solely for purposes of calculating filing fee.
***$100 of this amount was previously paid.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 105
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(E) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION AS
TO THE PROSPECTUS IN FORM S-6)
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ---------------------------------------- -------------------------------------
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C>
1. (a) Name of trust................... Prospectus front cover
(b) Title of securities issued...... Prospectus front cover
2. Name and address of each
depositor......................... Sponsors
3. Name and address of trustee......... Trustee
4. Name and address of principal
underwriters...................... Sponsors; Public Offering--
Underwriting Account; Back Cover
5. State of organization of trust...... The Trust
6. Execution and termination of trust
agreement......................... The Trust; Amendment and Termination
of the Trust Agreement
7. Changes of name..................... *
8. Fiscal year......................... *
9. Litigation.......................... *
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
<S> <C>
10. (a) Registered or bearer
securities.................... Rights of Unit Holders
(b) Cumulative or distributive
securities.................... Rights of Unit Holders
(c) Redemption...................... Rights of Unit Holders
(d) Conversion, transfer, etc....... Rights of Unit Holders
(e) Periodic payment plan........... *
(f) Voting rights................... Amendment and Termination of the
Trust Agreement
(g) Notice to certificate holders... Rights of Unit Holders--Reports and
Records; Sponsors--Responsibility;
Trustee--Resignation; Amendment
and Termination of the Trust
Agreement--Amendment
(h) Consents required............... Sponsors--Responsibility; Amendment
and Termination of the Trust
Agreement
(i) Other provisions................ The Trust--Tax Status
11. Type of securities comprising
units............................. Prospectus front cover; The Trust--
Portfolio
12. Certain information regarding
periodic payment certificates..... *
</TABLE>
- ------------
* Inapplicable
i
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ---------------------------------------- -------------------------------------
<S> <C>
13. (a) Load, fees, expenses, etc....... Prospectus front cover; Summary of
Essential Financial Information; The
Trust--Expenses and Charges; Public
Offering--Offering Price; Public
Offering--Market for Units; Public
Offering--Sponsors' and
Underwriters' Profits
(b) Certain information regarding
periodic payment
certificates.................. *
(c) Certain percentages............. Public Offering--Offering Price
(d) Certain other fees, etc. payable
by holders.................... Rights of Unit Holders--Certificates
(e) Certain profits receivable by
depositors, principal
underwriters, trustee or
affiliated persons............ Public Offering--Offering Price;
Public Offering--Sponsors' and
Underwriters' Profits; Rights of
Unit Holders--Redemption--Purchase
by the Sponsors of Units Tendered
for Redemption
(f) Ratio of annual charges to
income............................ *
14. Issuance of trust's securities...... The Trust; Rights of Unit Holders--
Certificates
15. Receipt and handling of payments
from purchasers................... Public Offering--Offering Price;
Public Offering--Sponsors' and
Underwriters' Profits; Amendment
and Termination of the Trust
Agreement
16. Acquisition and disposition of
underlying securities............. The Trust--Portfolio; Sponsors--
Responsibility
17. Withdrawal or redemption............ Public Offering--Market for Units;
Rights of Unit Holders--Redemption
18. (a) Receipt, custody and disposition
of income..................... The Trust--Portfolio--General Con-
siderations; The Trust--Insurance
on the Bonds; Public Offering--
Offering Price; Rights of Unit
Holders--Distribution of Interest
and Principal; Rights of Unit
Holders--Reports and Records;
Amendment and Termination of the
Trust Agreement
(b) Reinvestment of distributions... Automatic Accumulation Account
(c) Reserves or special funds....... The Trust--Expenses and Charges--
Other Charges; Rights of Unit
Holders--Distribution of Interest
and Principal; Amendment and
Termination of the Trust
Agreement
(d) Schedule of distributions....... *
19. Records, accounts and reports....... Rights of Unit Holders--Reports and
Records; Rights of Unit Holders--
Distribution of Interest and
Principal; Amendment and Termi-
nation of the Trust Agreement
</TABLE>
- ------------
* Inapplicable
ii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ---------------------------------------- -------------------------------------
<S> <C>
20. Certain miscellaneous provisions of
trust agreement................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(a) Amendment....................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(b) Termination..................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(c) and (d) Trustee, removal and
successor......................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
(e) and (f) Depositor, removal and
successor......................... Sponsors--Resignation; Trustee--
Resignation; Trustee--Limitations
on Liability; Amendment and
Termination of the Trust Agreement
21. Loans to security holders........... *
22. Limitations on liability............ The Trust--Portfolio; Sponsors--
Limitations on Liability;
Trustee--Limitations on Liability
23. Bonding arrangements................ Additional Information--Item A
24. Other material provisions of trust
agreement......................... *
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
<S> <C>
25. Organization of depositor........... Sponsors
26. Fees received by depositors......... *
27. Business of depositors.............. Sponsors
28. Certain information as to officials
and affiliated persons of
depositors........................ Contents of Registration Statement
29. Voting securities of depositors..... *
30. Persons controlling depositors...... *
31. Payments by depositors for certain
services rendered to trust........ *
32. Payments by depositors for certain
other services rendered to
trust............................. *
33. Remuneration of employees of
depositors for certain services
rendered to trust................. *
34. Remuneration of other persons for
certain services rendered to
trust............................. *
<CAPTION>
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
<S> <C>
35. Distribution of trust's securities
by states......................... Public Offering--Distribution of
Units
36. Suspension of sales of trust's
securities........................ *
37. Revocation of authority to
distribute........................ *
</TABLE>
- ------------
* Inapplicable
iii
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ---------------------------------------- -------------------------------------
<S> <C>
38. (a) Method of distribution.......... Public Offering--Distribution of
Units; Public Offering--Underwrit-
ing Account; Public Offering--
Sponsors' and Underwriters' Profits
(b) Underwriting agreements......... Public Offering--Distribution of
Units; Public Offering--Underwrit-
ing Account; Public Offering--
Sponsors' and Underwriters' Profits
(c) Selling agreements.............. Public Offering--Distribution of
Units; Public Offering--Underwrit-
ing Account; Public Offering--
Sponsors' and Underwriters' Profits
39. (a) Organization of principal
underwriters.................. Sponsors
(b) N.A.S.D. membership of principal
underwriters.................. Sponsors
40. Certain fees received by principal
underwriters...................... *
41. (a) Business of principal
underwriters.................. Sponsors
(b) Branch offices of principal
underwriters.................. *
(c) Salesmen of principal
underwriters.................. *
42. Ownership of trust's securities by
certain persons................... *
43. Certain brokerage commissions
received by principal
underwriters...................... *
44. (a) Method of valuation............. Prospectus front cover; Public
Offering--Offering Price; Public
Offering--Distribution of Units
(b) Schedule as to offering price... *
(c) Variation in offering price to
certain persons............... Public Offering--Offering Price;
Public Offering--Distribution of
Units
45. Suspension of redemption rights..... *
46. (a) Redemption valuation............ Rights of Unit Holders--Redemption--
Computation of Redemption Price per
Unit
(b) Schedule as to redemption
price......................... *
47. Maintenance of position in
underlying securities............. Public Offering--Market for Units;
Public Offering--Sponsors' and
Underwriters' Profits; Rights of
Unit Holders--Redemption--Purchase
by the Sponsors of Units Tendered
for Redemption; Rights of Unit
Holders--Redemption--Computation
of Redemption Price per Unit
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of
trustee........................... Trustee
49. Fees and expenses of trustee........ The Trust--Expenses and Charges;
Rights of Unit Holders--Distribution
of Interest and Principal
50. Trustee's lien...................... The Trust--Expenses and Charges--
Other Charges; Rights of Unit
Holders--Distribution of Interest
and Principal
</TABLE>
- ------------
* Inapplicable
iv
<PAGE>
<TABLE>
<CAPTION>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
- ---------------------------------------- -------------------------------------
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C>
51. Insurance of holders of trust's
securities........................ The Trust--Insurance on the Bonds
<CAPTION>
VII. POLICY OF REGISTRANT
<S> <C>
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities..................... Prospectus front cover; Sponsors--
Responsibility
(b) Transactions involving
elimination of underlying
securities..................... *
(c) Policy regarding substitution or
elimination of underlying
securities..................... Sponsors--Responsibility
(d) Fundamental policy not otherwise
covered....................... *
53. Tax status of trust................. Prospectus front cover; The Trust--
Tax Status
<CAPTION>
VIII. FINANCIAL AND STATISTICAL INFORMATION
<S> <C>
54. Trust's securities during last ten
years............................. *
55. Certain information regarding
periodic payment certificates..... *
56. Certain information regarding
periodic payment certificates..... *
57. Certain information regarding
periodic payment certificates..... *
58. Certain information regarding
periodic payment certificates..... *
59. Financial statements (Instruction
1(c) to Form S-6)................. Statement of Condition
</TABLE>
- ------------
* Inapplicable
v
<PAGE>
- --------------------------------------------------------------------------------
------------------------------
10,000 Units
[EMPIRE, GTD. LOGO]
------------------------------
Dated: June 16, 1994
------------------------------
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 105
- --------------------------------------------------------------------------------
The Empire State Municipal Exempt Trust, Guaranteed Series 105 (the 'Trust') is
a unit investment trust formed for the purpose of obtaining tax-exempt interest
income through investment in a fixed insured portfolio of long-term bonds,
including contracts and funds for the purchase thereof, issued by or on behalf
of the State of New York and counties, municipalities, authorities or political
subdivisions thereof or issued by certain United States territories or
possessions, including Puerto Rico, and their public authorities (the 'Bonds'
or the 'Securities'). The Sponsors of the Trust are Glickenhaus & Co., and
Lebenthal & Co., Inc. Units of the Trust will be offered to residents of New
York, Connecticut, Pennsylvania and Florida. On the Date of Deposit, all of the
Units and the Bonds while in the Trust will be rated AAA by Standard & Poor's
Corporation and Moody's Investors Service will assign a rating of 'Aaa' to all
of the Bonds in the Trust, as insured. The value of the Units of the Trust will
fluctuate with the value of the underlying Bonds. Minimum purchase: 1 Unit.
In the opinion of counsel, under existing law, interest income to the Trust,
and, with certain exceptions, to Unit Holders is exempt from all regular
federal, New York State and New York City income taxes, but may be subject to
state and local taxes in other jurisdictions. Capital gains, if any, are
subject to tax. Interest on the Bonds will not be subject to the federal
alternative minimum tax. See 'The Trust--Tax Status' in Part B of this
Prospectus.
This Prospectus consists of two parts. Part A contains the Summary of Essential
Information including descriptive material relating to the Trust, the Statement
of Condition of the Trust and the Portfolio. Part B contains general
information about the Trust. Part A may not be distributed unless accompanied
by Part B. Please read and retain both parts of this Prospectus for future
reference.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS PART A DATED JUNE 16, 1994
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 105
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
[EMPIRE, GTD. LOGO]
AT JUNE 15, 1994 (1):
SPONSORS: GLICKENHAUS & CO.
LEBENTHAL & CO., INC.
AGENT FOR SPONSORS: GLICKENHAUS & CO. TRUSTEE: THE BANK OF NEW YORK
EVALUATOR: MULLER DATA CORPORATION
DATE OF DEPOSIT: June 16, 1994
<TABLE>
<S> <C>
AGGREGATE PRINCIPAL AMOUNT OF BONDS IN TRUST: $10,000,000.00(2)
NUMBER OF UNITS: 10,000
FRACTIONAL UNDIVIDED INTEREST IN TRUST PER UNIT: 1/10,000
TOTAL VALUE OF SECURITIES IN PORTFOLIO (Based on Offering
Side Valuations of Securities): $ 9,506,030.00
--------------
--------------
SPONSORS' INITIAL REPURCHASE PRICE PER UNIT (Total Value of
Securities divided by 10,000 Units): $ 950.60(3)
Plus Sales Charge of 4.9% (on sales of fewer than 250
Units) of Public Offering Price (4): 48.97
--------------
PUBLIC OFFERING PRICE PER UNIT: $ 999.57(5)
--------------
--------------
REDEMPTION PRICE PER UNIT: $ 941.68(6)
EXCESS OF PUBLIC OFFERING PRICE OVER REDEMPTION PRICE
PER UNIT: $ 57.89
EXCESS OF PUBLIC OFFERING PRICE OVER SPONSORS' INITIAL
REPURCHASE PRICE PER UNIT: $ 48.97
WEIGHTED AVERAGE MATURITY OF BONDS IN THE TRUST: 27.75 years
</TABLE>
<TABLE>
<S> <C>
EVALUATION TIME: 4:00 P.M. New York Time during the initial
offering period and 2:00 P.M. New York Time
after the initial offering period.
ANNUAL INSURANCE PREMIUM (7): $13,646.00
EVALUATOR'S FEE: $.55 per Bond for each valuation.
TRUSTEE'S ANNUAL FEE (12): For each $1,000 principal amount of Bonds in the
Trust, $1.33 under the monthly and $.93 under
the semi-annual distribution plan.
SPONSORS' ANNUAL FEE: Maximum of $0.25 per $1,000 principal amount of
underlying Securities. See 'The Trust--Expenses
and Charges.'
</TABLE>
<TABLE>
<S> <C>
SPONSORS' PROFIT (LOSS) ON DEPOSIT: $59,715.00
MANDATORY TERMINATION DATE: December 31, 2043
FIRST SETTLEMENT DATE: June 23, 1994
MINIMUM PRINCIPAL DISTRIBUTION: $1.00 per Unit
MINIMUM VALUE OF THE TRUST UNDER WHICH
TRUST AGREEMENT MAY BE TERMINATED: $2,000,000 or 20% of the principal
amount of the Bonds deposited in
Trust, whichever is lower.
</TABLE>
<TABLE>
<CAPTION>
MONTHLY SEMI-ANNUAL
----------------- ------------------
<S> <C> <C>
ESTIMATED ANNUAL INTEREST INCOME
(INCLUDES CASH INCOME ACCRUAL ONLY): $ 57.88 $ 57.88
P Less Annual premium on Portfolio
E Insurance: 1.36 1.36
R Less Estimated Annual Expenses (8): 2.05 1.55
--------- -----------
ESTIMATED NET ANNUAL INTEREST INCOME: $ 54.47 $ 54.97
U --------- -----------
N --------- -----------
I ESTIMATED INTEREST DISTRIBUTION (9): $ 4.53 $ 27.48
T ESTIMATED CURRENT RETURN BASED ON
PUBLIC OFFERING PRICE (INCLUDES CASH
INCOME ACCRUAL ONLY) (10): 5.45% 5.50%
ESTIMATED LONG-TERM RETURN (11): 5.46% 5.51%
ESTIMATED DAILY RATE OF NET INTEREST
ACCRUAL: $ .15130 $ .15269
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>
(CONTINUED ON FOLLOWING PAGE)
A-2
<PAGE>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) The business day prior to the date of this Prospectus. The date of this
Prospectus is the date on which the Trust Agreement was signed and the deposit
with the Trustee was made.
(2) If a Replacement Bond is not acquired when a contract for the purchase
of Bonds fails, the aggregate principal amount of the Bonds may be reduced. See
'The Trust--Portfolio--General Considerations' in Part B.
(3) Based, during the initial offering period, solely upon the offering
prices of the Securities and thereafter on the bid prices of such Securities.
See 'The Trust--Market for Units' in this Part A.
(4) After the initial offering period, Units may be available for purchase
from the Sponsors at a price based upon the aggregate bid price of the Bonds in
the Trust (as determined by the Evaluator) plus a sales charge determined in
accordance with the schedule set forth in 'Public Offering-Offering Price' in
Part B of this Prospectus, which is based upon the maturities of each Bond in
the Trust.
(5) No accrued interest will be added to the Public Offering Price in
connection with purchases of Units contracted for on June 16, 1994. With respect
to purchases contracted for after such date, accrued interest from June 23, 1994
to, but not including, the date of settlement (normally five business days after
order) will be added to the Public Offering Price.
(6) Based solely upon the bid prices of the Securities. Upon tender for
redemption, the price to be paid will include accrued interest as described in
'Rights of Unit Holders--Redemption--Computation of Redemption Price per Unit'
in Part B.
(7) Based upon the aggregate principal amount of the Bonds in the Trust. If
the Trustee had exercised its right to obtain Permanent Insurance on all of the
Bonds in the Trust as of the Date of Deposit, the total cost of the Permanent
Insurance premiums for such insurance would have been $153,389.
(8) Excluding insurance costs.
(9) The first monthly interest distribution of $3.32 per Unit will be made
on August 1, 1994 (the 'First Distribution Date') to all monthly
certificateholders of record on July 15, 1994 (the 'First Record Date'). The
regular monthly payment will be $4.53 on September 1, 1994 and thereafter. The
first semi-annual interest distribution of $21.68 per Unit will be made on
December 1, 1994 to all semi-annual certificateholders of record on November 15,
1994. The regular semi-annual payment will be $27.48 on June 1, 1995 and
thereafter. In order to reduce the amount of accrued interest investors have to
pay in addition to the Public Offering Price, the Trustee has agreed to advance
to the Trust the amount of accrued interest due on Securities through and
including June 16, 1994. This accrued interest will be paid to the Sponsors as
the holders of record of all Units on such date. Consequently, when the Sponsors
sell Units, the amount of accrued interest to be added to the Public Offering
Price of the Units purchased by an investor will include only accrued interest
from June 16, 1994 to but not including the date of settlement of the investor's
purchase (normally five business days after the purchase contract), less any
distributions from the Interest Account. Since a person who contracts to
purchase Units on June 16, 1994 will settle his purchase on June 23, 1994, no
accrued interest will be added to the Public Offering Price of Units settled on
that date. The Trustee will recover its advancements (without interest or other
cost to the Trust) from interest received on the Securities deposited in the
Trust. See 'Rights of Unit Holders--Redemption--Computation at Redemption Price
per Unit in Part B.'
(10) Calculated after payment of insurance premiums payable by the Trust.
The Estimated Current Return on such date on an identical portfolio without such
insurance would have been 5.64% based on the semi-annual payment plan and 5.59%
based on the monthly payment plan. 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 Trust 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 'The Trust--Tax Status' in Part B of this Prospectus
and 'The Trust--Estimated Current Return and Estimated Long-Term Return to Unit
Holders' in this Part A.
A-3
<PAGE>
(notes continued from preceding pages)
(11) Calculated after payment of insurance premiums payable by the Trust.
The Estimated Long-Term Return on such date on an identical portfolio without
such insurance would have been 5.65% based on the semi-annual payment plan and
5.60% based on the monthly payment plan. 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. This
calculation does not take into account delays in payment to Unit holders for the
first few months of the Trust's operations, which reduces the Long-Term Return
number. See 'The Trust--Estimated Current Return and Estimated Long-Term Return
to Unit Holders' in this Part A.
(12) During the first year, the Trustee's fee will be adjusted downward by
$.32 per Unit; interest income will be $57.88 per Unit; estimated expenses per
Unit exclusive of insurance costs under the monthly and semi-annual distribution
plans will be $1.73 and $1.23 respectively; and estimated net interest income
per Unit will remain the same as shown. The Trustee has agreed to the foregoing
to cover interest on any Bonds accruing prior to their expected dates of
delivery since interest will not accrue to the benefit of the Unit holders until
such Bonds are actually delivered to the Trust. See 'Distribution of Interest
and Principal.'
A-4
<PAGE>
THE TRUST
Empire State Municipal Exempt Trust (the 'Fund'), Guaranteed Series 105
(the 'Trust') is one of a series of similar but separate unit investment trusts
created under the laws of the State of New York by a Trust Indenture and
Agreement* (the 'Trust Agreement'), dated the Date of Deposit, among Glickenhaus
& Co. and Lebenthal & Co., Inc. as sponsors (the 'Sponsors'), The Bank of New
York, as trustee (the 'Trustee'), and Muller Data Corporation, as evaluator (the
'Evaluator'). The objective of the Trust is to obtain tax-exempt interest income
through an investment in a fixed insured portfolio consisting primarily of
various long-term municipal bonds with average maturities of over 10 years.
Insurance does not protect against the risk of market fluctuations on the
underlying bonds in the Trust's portfolio and of the units of the Trust. No
assurance can be given that the Trust's objectives will be achieved as these
objectives are subject to the continuing ability of the respective issuers of
the bonds to meet their obligations or of the insurer to meet its obligations
under the insurance. In addition, an investment in such portfolio can be
affected by fluctuations in interest rates.
Certain of the Bonds in the Trust may be purchased at prices which result
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 gain
(all or a portion of which may be taxable as ordinary income). Any income other
than any earned original issue discount will be taxable and will not be realized
until maturity, redemption or sale of the underlying Bonds or Units of the
Trust. In the case of Bonds acquired at a market discount, gain will be treated
as ordinary income to the extent of accrued market discount. At the time of the
original issuance of the Bonds held by the Trust, opinions relating to the
validity of the Bonds and the exemption of interest thereon from Federal income
tax and New York State and City personal income tax were (or with respect to
'when-issued' Bonds will be) rendered by bond counsel to the issuing
governmental authority. The continued tax-exempt status will depend upon the
issuer's ability to comply with the provisions of the Internal Revenue Code of
1986, as amended. See 'The Trust--Tax Status' in Part B of this Prospectus. On
the Date of Deposit, the Sponsors, acting for the Underwriting Account (see
'Underwriting Account' in this Part A), deposited with the Trustee delivery
statements relating to contracts for the purchase of $10,000,000 aggregate
principal amount for the interest-bearing obligations, including funds
(represented by cash, cash equivalents and/or an irrevocable letter of credit
issued by a major financial institution) for the purchase of certain such
obligations (the 'Bonds' or the 'Securities'). The Trustee thereafter delivered
to the Sponsors a registered certificate of 10,000 Units, representing the
entire ownership of the Trust, which Units are being offered hereby.
In view of the Fund's objectives, the following factors, among others, were
considered in selecting the Bonds: (1) all the Bonds are obligations of the
State of New York and counties, municipalities, authorities or political
subdivisions thereof or issued by certain United States territories or
possessions, including Puerto Rico, and their public authorities so that the
interest on them will be exempt from Federal, New York State and New York City
income tax under existing law; (2) the Bonds are varied as to purpose of issue;
(3) in the opinion of the Sponsors, the Bonds are fairly valued relative to
other bonds of comparable quality and maturity; and (4) Municipal Bond Investors
Assurance Corporation insurance for the payment of principal and interest on the
Securities is available. Subsequent to the Date of Deposit, a Bond may cease to
be rated or its rating may be reduced. In the event a Bond's rating is
downgraded to below investment grade (i.e., 'high yield' or 'junk bond' status),
such a Bond, as compared to an investment grade
- ------------------------------------
* References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
A-5
<PAGE>
bond, is subject to greater risk of downward price volatility in periods of
economic uncertainty. If a Bond in the Trust is downgraded to high yield bond
status, a decrease in the net asset value of the Trust may result. If such a
decrease in net asset value occurs and Units of the Trust are tendered for
redemption, the Trust may be forced to liquidate some of the Bonds at a loss. If
such redemptions are substantial enough, this could trigger a complete and
unexpected liquidation of the Trust before maturity, resulting in unanticipated
losses for investors. Notwithstanding such risk, neither the downgrading of a
Bond to below investment grade nor a Bond's ceasing to be rated, requires an
elimination of such Bond from the portfolio of the Trust, but such an event may
be considered in the Sponsors' determination to direct the Trustee to dispose of
the Bonds. See 'Sponsors--Responsibility' in Part B.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units of the Trust during the initial
offering period is equal to the aggregate offering price of the Securities in
the respective Trust's portfolio divided by the number of Units outstanding,
plus a sales charge equal to 4.9% of the Public Offering Price of the Trust on
sales of fewer than 250 Units. In addition, for Units ordered after the date
hereof, accrued interest will be payable from the First Settlement Date for
Units of the Trust (five business days from the date hereof) to the expected
date of settlement (five business days after order). For additional information
regarding the Public Offering Price, the descriptions of interest and principal
distributions, repurchase and redemption of Units and other essential
information regarding the Trust, see the 'Summary of Essential Information' in
this Part A. During the initial public offering period, sales of at least 250
Units will be entitled to a volume discount from the Public Offering Price. See
'Public Offering--Offering Price' in Part B. If the Units of the Trust had been
available for sale on June 15, 1994, the Public Offering Price per Unit would
have been $999.57.
MARKET FOR UNITS
The Sponsors, although they are not obligated to do so, currently intend to
maintain a secondary market for the Units in the Trust at prices based upon the
aggregate bid price of the Securities plus accrued interest, if any, and a sales
charge of 4.9% of the Public Offering Price of the Trust at the time. If such a
market is not maintained, a Unit holder may be able to dispose of his Units only
through redemption at prices based upon the aggregate bid price of the
Securities. The purchase price of the Securities, if they were available for
direct purchase by investors, would not include the sales charge included in the
Public Offering Price of the Units. Neither the bid nor the offering side
valuations of the underlying Securities or of the Units of the Trust, absent
situations in which Securities are in default in payment of principal or
interest or in significant risk of such default, include value, if any,
attributable to the insurance obtained by the Trust. See 'Public
Offering--Market for Units' in Part B of this Prospectus.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Units of the Trust are offered to investors on a 'dollar price' basis
(using the computation method previously described under 'Public Offering
Price') as distinguished from a 'yield price' basis often used in offerings of
tax exempt bonds (involving the lesser of the yield as computed to maturity of
bonds or to an earlier redemption date). Since they are offered on a dollar
price basis, the rate of return on an investment in Units of the Trust is
measured in terms of 'Estimated Current Return' and 'Estimated Long Term
Return.'
Estimated Long Term Return is calculated by: (1) computing the yield to
maturity or to an earlier call date (whichever results in a lower yield) for
each Bond in the Trust portfolio in accordance with accepted practices, which
practices take into account not only the interest payable on the Bonds but also
the amortization of premiums or accretion of discounts, if any; (2) calculating
the average of the yields for the Bonds in the Trust portfolio by weighing
A-6
<PAGE>
each Bond's yield by the market value of the Bond and by the amount of time
remaining to the date to which the Bond is priced (thus creating an average
yield for the portfolio of the Trust); and (3) reducing the average yield for
the portfolio of the Trust in order to reflect estimated fees and expenses of
the Trust and the maximum sales charge paid by Unit holders. The resulting
Estimated Long Term Return represents a measure of the return to Unit holders
earned over the estimated life of the Trust. The Estimated Long Term Return as
of the day prior to the Date of Deposit is stated for the Trust under 'Summary
of Essential Information' in Part A.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price per Unit. In contrast to
the Estimated Long Term Return, the Estimated Current Return does not take into
account the amortization of premium or accretion of discount, if any, on the
Bonds in the portfolio of the Trust. Moreover, because interest rates on Bonds
purchased at a premium are generally higher than current interest rates on newly
issued bonds of a similar type with comparable rating, the Estimated Current
Return per Unit may be affected adversely if such Securities are redeemed prior
to their maturity. On the day prior to the Date of Deposit, the Estimated Net
Annual Interest Income per Unit divided by the Public Offering Price resulted in
the Estimated Current Return stated for the Trust under 'Summary of Essential
Information' in Part A.
The Estimated Net Annual Interest Income per Unit of the Trust will vary
with changes in the fees and expenses of the Trustee and the Evaluator
applicable to the Trust and with the redemption, maturity, sale or other
disposition of the Bonds in the Trust. The Public Offering Price will vary with
changes in the offering prices (bid prices in the case of the secondary market)
of the Bonds. Therefore, there is no assurance that the present Estimated
Current Return or Estimated Long Term Return will be realized in the future.
A schedule of cash flow projections is available from the Sponsor upon
request.
DISTRIBUTIONS
Distributions of interest received by the Trust, pro rated on an annual
basis, will be made semi-annually unless the Unit holder elects to receive them
monthly. The first monthly distribution will be $3.32 for Units of the Trust and
will be made on August 1, 1994, to monthly Unit holders of record on July 15,
1994, and $4.53 thereafter. The first semi-annual distribution will be $21.68
for Units of the Trust and will be made on December 1, 1994, to semi-annual Unit
holders of record on November 15, 1994, and $27.48 thereafter. See 'Rights of
Unit Holders--Distribution of Interest and Principal' in Part B of this
Prospectus.
Each Unit of the Trust at the Date of Deposit represents 1/10,000
fractional undivided interest in the $10,000,000 face amount of underlying Bonds
and net income of the Trust in the ratio of 1 Unit for each $1,000 principal
amount of underlying Bonds (including contracts and funds for the purchase
thereof) in the Trust.
AUTOMATIC ACCUMULATION ACCOUNT
Distributions from the Trust are made semi-annually unless the Unit holder
elects to receive them monthly. Unit holders of the Trust have the option,
however, of either receiving their interest check, together with any principal
payments, from the Trustee or participating in the Automatic Accumulation
Account reinvestment program offered by the Sponsors (the 'Plan'). Under the
Plan, a Unit holder may elect to have distributions from Units in the Trust
automatically reinvested in shares of an open-end mutual fund. For a description
of the fund involved see 'Automatic Accumulation Account' in Part B.
Participation in the Plan is conditioned on the participating fund's lawful
qualification for sale in the state in which the Unit holder is a resident. The
Plan is not designed to be a complete
A-7
<PAGE>
investment program. See 'Automatic Accumulation Account' in Part B for details
on how to enroll in the Plan and how to obtain a prospectus.
INSURANCE
Insurance guaranteeing the payment of all principal (either at stated
maturity or by advancement of maturity pursuant to a mandatory sinking fund
payment) and interest on each of the Bonds in the Trust as such payments shall
become due but shall not be paid has been obtained by the Trust from Municipal
Bond Investors Assurance Corporation (sometimes referred to hereinafter as the
'Insurer'). Insurance obtained by the Trust applies only while Bonds are
retained in the Trust. Pursuant to an irrevocable commitment of the Insurer, 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.
Insurance obtained by the Trust 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.
With respect to small-issue industrial development Bonds and pollution control
revenue Bonds covered by the insurance, the Insurer also guarantees any
accelerated payments required to be made by or on behalf of an issuer of such
Bonds if there occurs an event which results in the loss of the tax-exempt
status of interest on such Bonds, including principal, interest or premium
payments payable thereon, if any, as and when thereby required. The insurance
does not otherwise guarantee any accelerated payments required to be made by or
on behalf of an issuer of other than small-issue industrial development Bonds or
pollution control revenue Bonds if there occurs an event which results in the
loss of the tax-exempt status of such Bonds nor will the insurance cover
accelerated payments of principal or penalty interest or premiums unrelated to
taxability of interest on any of the Bonds. In the event of such an
acceleration, the payments guaranteed by the Insurer shall be made in such
amounts and at such times as such payments would have been made absent such
acceleration. As a result of the Municipal Bond Investors Assurance Corporation
insurance, Moody's Investors Service has assigned a rating of 'Aaa' to all of
the Bonds in the Trust, as insured, and Standard & Poor's Corporation has
assigned a rating of 'AAA' to the Units and Bonds while in the Trust. See 'The
Trust--Insurance on the Bonds'in Part B. No representation is made as to any
insurer's ability to meet its commitments.
Some of the Bonds in the Trust may also have been previously insured by
insurance obtained by the issuers of such Bonds or by persons other than the
Trust ('Pre-insured Bonds'). Four of the issues (59.00%) initially deposited in
the Trust were Pre-insured Bonds. Insurance obtained by the Trust from the
Insurer is effective only while the Bonds thus insured are held in such Trust;
however, insurance previously obtained by the issuer or by persons other than
the Trust, for which a single premium has been paid, is effective so long as the
Pre-insured Bonds are outstanding. No representation is made as to the ability
of any insurer to meet its commitments.
Neither the Public Offering Price nor any evaluation of Units of the Trust
for purposes of repurchases or redemptions reflects any element of value for the
insurance obtained by the Trust unless Securities are in default in payment of
principal or interest or, in the Sponsors' opinion, is in significant risk of
such default. See 'Public Offering--Offering Price' in Part B of this
Prospectus. On the other hand, the value, if any, of insurance obtained by the
issuer of the Securities or by parties other than the Trust is reflected and
included in the market value of such Securities.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. If an
issue is accepted for Municipal Bond Investors Assurance Corporation insurance,
a non-cancellable policy for the payment of interest on and principal of the
bonds is issued by the Insurer. A single or annual premium is paid by the issuer
or any other party for its insurance on Pre-insured Bonds, and a monthly premium
A-8
<PAGE>
is paid by the Trust for the insurance it obtains from the Insurer on the Bonds
in the Trust that are not also Municipal Bond Investors Assurance Corporation
Pre-insured Bonds or Municipal Bond Insurance Association Pre-insured Bonds. No
premium will be paid by the Trust for the insurance it obtains from the Insurer
on Bonds that are also Municipal Bond Investors Assurance Corporation
Pre-insured Bonds or Municipal Bond Insurance Association Pre-insured Bonds.
Pursuant to an irrevocable commitment of the Insurer, upon the sale of a Bond
from the Trust, the Trustee has the right to obtain permanent insurance with
respect to such Bond upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. It is expected that the
Trustee will exercise the right to obtain permanent insurance for a Bond in the
Trust upon instruction from the Sponsors whenever the value of that Bond insured
to its maturity less the applicable permanent insurance premium and the related
custodial fee exceeds the value of the Bond without such insurance. See 'The
Trust--Insurance on the Bonds' in Part B of this Prospectus.
THE PORTFOLIO
The portfolio of the Trust contains contracts to purchase 6 issues of Bonds
issued by entities located in New York or certain United States territories or
possessions, including Puerto Rico. Except as described below, all such
contracts are expected to be settled by June 23, 1994. The following information
is being supplied to inform Unit holders of circumstances affecting the Trust.
23.00% of the aggregate principal amount of the Bonds in the portfolio are
general obligations of the governmental entity issuing them which are backed by
the taxing power thereof. 18.00% of the aggregate principal amount of the Bonds
in the portfolio are payable from appropriations. 59.00% of the aggregate
principal amount of the Bonds in the portfolio are payable from the income of
specific projects or authorities and are not supported by the issuers' power to
levy taxes. Although income to pay such Bonds may be derived from more than one
source, the primary sources of such income, the number of issues (and the
related dollar weighted percentage of such issues) deriving income from such
sources and purpose of issue are as follows: General Obligations, 1 (23.00%);
Appropriation, 1 (18.00%); Higher Education, 1 (2.00%); Pollution Control, 1
(19.00%); Single Family Housing, 1 (19.00%); and Water & Sewer, 1 (19.00%). The
Trust is not deemed to be concentrated in any category.* Prior to their deposit
in the Trust, 4 issues (59.00%) were rated AAA, and 1 issue (23.00%) was rated
A-by Standard and Poor's Corporation; and 1 issue (18.00%) was rated Baa1 by
Moody's Investors Service.** Bonds rated BBB have adequate capacity to pay
interest and to repay principal, however, such Bonds may have certain
speculative characteristics as well. Furthermore, Bonds rated BBB are more
sensitive to adverse economic changes or individual corporate developments. See
'Description of Bond Ratings' in Part B of this Prospectus. For a more detailed
discussion, it is recommended that Unit holders consult the official statements
for each security in the portfolio of the Trust.
None of the Bonds initially deposited in the Trust have been purchased on a
'when issued' basis and one of the Bonds (18.00%) initially deposited in the
Trust has been purchased on a delayed settlement basis. Normally, delivery of
'when issued' Bonds and delayed settlement Bonds is expected to take place
within 30 days after the First Settlement Date. Accordingly, delivery may be
delayed or may not occur. Interest on such Bonds begins accruing to the benefit
of Unit holders on the date of delivery. Holders of Units will be 'at risk' with
respect to such Bonds (i.e., may derive
- ------------------------------------
* A Trust is considered to be 'concentrated' in a particular category or issuer
when the Bonds in that category or of that issuer constitute 25% or more of
the aggregate face amount of the portfolio. See 'The Trust--General
Considerations' in Part B of this Prospectus.
** For the meanings of ratings, including the symbols 'p' and 'Con. (...),'
see 'Description of Bond Ratings' in Part B of this Prospectus. Security
letter ratings may be modified by the addition of a plus or minus sign, when
appropriate, to show relative standing within the major rating categories.
There can be no assurance that the economic and political conditions on which
the ratings of the Bonds in any Trust are based will continue or that
particular Bond issues may not be adversely affected by changes in economic,
political or other conditions that do not affect the above ratings. See 'The
Trust--Special Factors Affecting New York' and 'The Trust--General
Considerations' in Part B of this Prospectus.
A-9
<PAGE>
either gain or loss from fluctuations in the offering side valuation of such
Bonds) from the date they commit for Units. Moreover, the insurance on the Bonds
in the portfolio obtained by the Trust does not cover such Bonds until they are
delivered to the Trust. See 'The Trust--Portfolio--General Considerations' in
Part B.
81.00% of the aggregate principal amount of the Bonds in the Trust are
original issue discount bonds and have mandatory sinking fund installment
provisions beginning on January 1, 2014, at redemption prices equal to the
compound accreted value on the date of redemption. Of these original issue
discount bonds, 2.00% are zero coupon bonds. Zero coupon bonds do not provide
for the payment of any current interest and provide for payment and maturity at
par value unless sooner sold or redeemed. The market for zero coupon bonds is
subject to greater fluctuations than coupon bonds in response to changes in
interest rates. (See 'Original Issue Discount and Zero Coupon Bonds' in Part B
of this Prospectus). On the Date of Deposit, the offering side valuations of
portfolio numbers 1, 2, 3, 4 and 6 for the Trust were at a premium and these
Bonds are subject to retirement or refunding within ten years of the Date of
Deposit. On the Date of Deposit, based on the offering side valuation, none of
the aggregate principal amount of the Bonds were at par, 77.00% of the aggregate
principal amount of the Bonds were at a discount from par and 23.00% of the
aggregate principal amount of the Bonds were at a premium.
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 or a decrease in the federal or New York State
income tax rate. Inflation and recession, as well as measures implemented to
address these and other economic problems, contribute to fluctuations in
interest rates and the values of fixed-rate bonds generally. Additionally,
changes in the tax treatment of bonds may have an adverse impact on the value of
the Units. The Sponsors cannot predict future economic policies or their
consequences, nor can they predict the course or extent of such fluctuations in
the future.
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Sponsors, Trustee, and Unit Holders of Empire State Municipal Exempt Trust,
Guaranteed Series 105
We have audited the Statement of Condition of Empire State Municipal Exempt
Trust, Guaranteed Series 105, including the Portfolio as of June 16, 1994. This
financial statement is the responsibility of the Sponsors. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsors, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion. An
irrevocable letter of credit deposited on June 16, 1994 in the amount required
to purchase securities, as described in the Statement of Condition, was
confirmed to us by the Trustee.
In our opinion, the Statement of Condition referred to above presents
fairly, in all material respects, the financial position of Empire State
Municipal Exempt Trust, Guaranteed Series 105 at June 16, 1994 in conformity
with generally accepted accounting principles.
BDO SEIDMAN
Woodbridge, New Jersey
June 16, 1994
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 105
STATEMENT OF CONDITION AS OF DATE OF DEPOSIT
JUNE 16, 1994
TRUST PROPERTY
<TABLE>
<S> <C>
Investment in Securities:
Contracts to purchase underlying Securities (1) (2)............ $9,506,030.00
Accrued interest receivable...................................... 150,759.17
-------------
Total....................................................... $9,656,789.17
-------------
-------------
</TABLE>
INTEREST OF UNIT HOLDERS
<TABLE>
<S> <C> <C>
Units of fractional undivided interest outstanding
(10,000):
Cost to investors (3)............................. $9,995,730.00
Less--gross underwriting commission(4).......... 489,700.00 $9,506,030.00
-------------
Accrued interest receivable....................... 150,759.17
-------------
Total................................... $9,656,789.17
-------------
-------------
</TABLE>
- ------------------
(1) Aggregate cost to the Trust of the Securities listed under 'Portfolio'
is based on offering side valuation determined by the Evaluator on the basis set
forth under 'Public Offering--Offering Price' in Part B. The aggregate bid side
evaluation of the Securities in the portfolio, as determined by the Evaluator,
as of the Date of Deposit was $9,416,812.00. An irrevocable letter of credit
issued by Bankers Trust, in an aggregate amount equal to or in excess of
$9,667,165.55 has been deposited with the Trustee. The amount of such letter of
credit includes $9,506,030.00, the amount required to purchase the tax-exempt
securities listed in the related portfolio, plus $161,135.55 covering accrued
interest through expected dates of delivery. Insurance coverage providing for
the payment of all principal and interest on the Bonds in the Trust has been
obtained by the Trust. The cost of insurance for the Trust is $13,646.00.Such
insurance does not guarantee the market value of the Bonds or the value of the
Units of the Trust. The insurance obtained by the Trust is effective only while
Bonds thus insured are held in the Trust. Neither the bid nor offering prices of
the underlying Bonds, or of the Units, absent situations in which Bonds are in
default in payment of principal or interest or in significant risk of such
default, include value, if any, attributable to the insurance obtained by the
Trust.
(2) On the basis set forth under 'Rights of Unit Holders--Distribution of
Interest and Principal' in Part B the Trustee will advance an amount equal to
the accrued interest on the Securities as of June 23, 1994 (the 'First
Settlement Date') plus any cash received by the Trustee with respect to interest
on the Securities prior to such date, and the same will be distributed to the
Sponsors on the First Settlement Date. Consequently, the amount of interest
accrued on a Unit to be added to the public offering price thereof will include
only such accrued interest from the First Settlement Date to the date of
settlement, less all withdrawals and deductions from the Interest Account
subsequent to the First Settlement Date made with respect to the Unit.
(3) Aggregate public offering price (exclusive of interest) is computed on
10,000 Units on the basis set forth above under 'Public Offering--Offering
Price' in Part B.
(4) A sales charge of 4.9% computed on 10,000 Units. See 'Public
Offering--Offering Price' in Part B for volume discounts on sales of 250 Units
or more.
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<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 105
PORTFOLIO AS OF DATE OF DEPOSIT, JUNE 16, 1994
<TABLE>
<CAPTION>
REDEMPTION FEATURES
PORT- COUPON ANT.--ANTICIPATED YIELD COST OF
FOLIO RATING PRINCIPAL REPRESENTED BY CONTRACTS TO RATE AND S.F.--SINKING FUND TO SECURITIES
NO. (1)(2) AMOUNT (3) PURCHASE SECURITIES (4) MATURITY OPT.--OPTIONAL (5) MATURITY TO TRUST (6)(7)
- ----- --------- ----------- ------------------------------------- -------- --------------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 AAA/Aaa $ 1,900,000 New York State Energy Research and 6.050% No Sinking Fund 6.056% $ 1,898,100.00
Development Authority, Pollution 04/01/34 04/01/04 @ 102 Opt.
Control Refunding Revenue Bonds (New
York State Electric and Gas
Corporation Project), 1994 Series A
(MBIA Insured)
2 AAA/Aaa 1,900,000 New York City Municipal Water Finance 5.750 No Sinking Fund 6.001 1,837,680.00
Authority, Water and Sewer System 06/15/20 06/15/04 @ 101.5 Opt.
Revenue Bonds, Fixed Rate Fiscal 1994
Series F (MBIA Insured)
3 AAA/Aaa 1,900,000 State of New York Mortgage Agency, 5.400 04/01/13 @ 100 S.F. 6.023 1,752,750.00
Homeowner Mortgage Revenue Bonds, 10/01/17 03/01/04 @ 102 Opt.
Series 33 (MBIA Insured)
4 AAA/Aaa 200,000 Dormitory Authority of the State of 0.000 No Sinking Fund 5.925 37,000.00
New York, State University 05/15/23 No Optional Call
Educational Facilities, Revenue
Bonds, Series 1994A (MBIA Insured)
5 A-/Aaa 2,300,000 The City of New York, General 6.750 No Sinking Fund 6.216(8) 2,392,000.00
Obligation Bonds, Fiscal 1993 Series 10/01/16 10/01/02 @ 101.5 Opt.
B
6 Baa1*/Aaa 1,800,000 New York State Urban Development 5.375 01/01/14 @ 100 S.F. 6.264 1,588,500.00
Corporation, Correctional Capital 01/01/23 01/01/04 @ 102 Opt.
Facilities Revenue Bonds, Series 4
----------- ---------------
$10,000,000 $ 9,506,030.00
----------- ---------------
----------- ---------------
</TABLE>
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<PAGE>
NOTES TO PORTFOLIO
The symbol 'NR' denotes a non-rated issue of Bonds.
(1) All ratings except those identified by an asterisk (*) are by Standard &
Poor's Corporation. A Standard & Poor's corporate or municipal bond rating is a
current assessment of the creditworthiness of an obligor with respect to a
specific obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees. The bond rating
is not a recommendation to purchase, sell or hold a security, inasmuch as it
does not comment as to market price or suitability for a particular investor. A
brief description of the rating symbols and their meanings is set forth under
'Description of Bond Ratings' in Part B.
(2) Ratings in the right hand column are after deposit of these issues in
the Trust and their insurance by MBIA. Moody's Investors Service has assigned
its 'Aaa' investment rating to all of the Bonds while in the Trust, as insured
by Municipal Bond Investors Assurance Corporation.
(3) All Bonds are represented by contracts to purchase.
(4) All contracts to purchase the Bonds were entered into on June 14, 1994.
All contracts are expected to be settled prior to or on the First Settlement
Date of the Trust which is expected to be June 23, 1994 except portfolio number
6 which will settle July 5, 1994. These bonds are expected to be settled (and
interest begins accruing on these bonds to the benefit of Unit holders of the
Trust) within 30 days after the First Settlement Date.
(5) Unless otherwise indicated, there is shown under this heading the year
in which each issue of bonds initially is redeemable and the redemption price
for that year. Each such issue continues to be redeemable at declining prices
thereafter, but not below par. 'S.F.' indicates a sinking fund has been or will
be established with respect to an issue of Bonds. In addition, certain Bonds in
the Trust may be redeemed in whole or in part other than by operation of the
stated optional call or sinking fund provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth the terms
and provisions of such Bonds. A sinking fund is a reserve fund accumulated over
a period of time for retirement of debt. 'Ant.' indicates the existence of
anticipated redemptions at a price of 100%. Under certain circumstances, these
anticipated redemptions can be altered. A callable bond is one which is subject
to redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a bond issue is redeemed before maturity by the
proceeds of a new bond issue.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed Bonds
have an offering side valuation which represents a premium over par. To the
extent that the Bonds were deposited in the Trust at a price higher than the
price at which they are redeemed, this will represent a loss of capital when
compared with the original Public Offering Price of the Units. Conversely, to
the extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Monthly and semi-annual
distributions will generally be reduced by the amount of the income which would
otherwise have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium received on
such redemption. The estimated current return in this event may be affected by
such redemptions. The Federal tax effect on Unit holders of such redemptions and
resultant distributions is described in the section entitled 'The Trust--Tax
Status' in Part B.
(6) See Note (1) to 'Statement of Condition as of Date of Deposit' regarding
cost of Bonds. The offering prices are greater than the current bid prices of
the Bonds which is the basis on which Redemption Price per Unit is determined
for purposes of redemption of Units (see the first paragraphs under 'Public
Offering--Offering Price' and 'Rights of Unit Holders--Redemption--Computation
of Redemption Price Per Unit' in Part B). On the business day prior to the Date
of Deposit the aggregate bid side valuation of the Securities in the Trust was
lower than the aggregate offering side valuation by .939%. Yield of Bonds was
computed on the basis of offering prices on the Date of Deposit.
Bonds identified as escrowed to maturity under 'Portfolio' for the Trust in
this Part A are priced to the maturity date not the call date.
(7) Annual interest income to the Trust is $578,800.00.
(8) Yield calculated based on a call date prior to stated maturity.
A-14
<PAGE>
UNDERWRITING ACCOUNT
The names and addresses of the Underwriters and the number of Units of the
Trust each has agreed to purchase from the Underwriting Account are:
<TABLE>
<CAPTION>
UNITS
NAME ADDRESS SERIES 105
- -------------------------------- ---------------------------------- ----------
<S> <C> <C>
Glickenhaus & Co. .............. 6 East 43rd Street 3,150
New York, New York 10017
Lebenthal & Co., Inc. .......... 25 Broadway 3,150
New York, New York 10004
Gruntal & Co., Inc. ............ 14 Wall Street 1,200
New York, New York 10005
Smith Barney Shearson Inc. ..... 2 World Trade Center 250
New York, New York 10048
David Lerner Associates, Inc. .. 477 Jericho Turnpike 200
Syosset, New York 11791
Nathan & Lewis Securities Inc. . 1140 Avenue of the Americas 200
New York, New York 10036
W.J. Nolan & Co. Inc. .......... Two Wall Street 150
New York, New York 10005
Advest, Incorporated............ 280 Trumbull Street 100
Hartford, Connecticut 06103
Cadaret, Grant & Co., Inc. ..... 108 W. Jefferson Street 100
Syracuse, New York 13203
Cowen & Company................. Financial Square 100
New York, New York 10005
Fidelity Capital Markets
Company....................... 161 Devonshire Street, D4 100
Boston, Massachusetts 02110
Gibraltar Securities Co. ....... Ten James Street 100
Florham Park, New Jersey 07932
Janney Montgomery Scott Inc. ... 9201 Fourth Avenue 100
Brooklyn, New York 11209
J.C. Bradford & Co. ............ 330 Commerce Street 100
Nashville, Tennessee 37201
Josephthal Lyon & Ross
Incorporated.................. 6 East 43rd Street 100
New York, New York 10017
Kemper Securities Group, Inc.
Prescott Ball & Turben
Division...................... 77 West Wacker Drive 100
Chicago, Illinois 60606
Mabon Securities Corp. ......... One Liberty Plaza 100
165 Broadway
New York, New York 10006
Oppenheimer & Company .......... World Financial Center 100
New York, New York 10281
</TABLE>
A-15
<PAGE>
<TABLE>
<CAPTION>
UNITS
NAME ADDRESS SERIES 105
- -------------------------------- ---------------------------------- ----------
<S> <C> <C>
Pershing & Company
(Division of Donaldson, Lufkin
& Jenrette Securities
Corporation).................. One Pershing Plaza 100
Jersey City, New Jersey 07399
Raymond James & Associates, Inc. 880 Carillon Parkway 100
St. Petersburg, FL 33733
Roosevelt & Cross, Inc. ........ 20 Exchange Place 100
New York, New York 10005
Sage, Rutty & Co., Inc. ........ 183 E. Main Street 100
Rochester, New York 14604
Stuart, Coleman & Co., Inc. .... 11 West 42nd Street 100
New York, New York 10036
W.H. Newbolds, a division of
Fahnestock & Co. ............. 1500 Walnut Street 100
Philadelphia, Pennsylvania 19102
----------
10,000
----------
----------
</TABLE>
A-16
<PAGE>
TAX EQUIVALENT YIELDS
The following tables indicate the approximate yield resident individuals in
various income brackets must earn on a security subject to Federal, New York
State and New York City income taxes to receive an after-tax yield equivalent to
that provided by a tax-exempt bond yielding from 4.5% to 8.5%, based on
anticipated 1994 Federal, New York State and New York City marginal tax rates.
New York City taxpayers should refer to Table I. New York State taxpayers
outside of New York City should refer to Table II.
TABLE I. COMBINED EFFECT OF FEDERAL, NEW YORK STATE AND NEW YORK CITY
INCOME TAXES
<TABLE>
<CAPTION>
Approx.
1994 To equal a tax-exempt yield of:
Federal, --------------------------------------------------------------------------------------
If your net taxable income 1 NYS & NYC 4.50% 5.00% 5.50% 6.00% 6.25% 6.50% 6.75% 7.00%
is approximately 2 Marginal --------------------------------------------------------------------------------------
Joint Return Single Return Tax Rates 4 A taxable investment would have to pay you: 3
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27,001-$38,000 $15,001-$22,750 25.19% 6.0% 6.7% 7.4% 8.0% 8.4% 8.7% 9.0% 9.4%
- -----------------------------------------------------------------------------------------------------------------------------------
$38,001-$91,850 $22,751-$55,100 36.64% 7.1% 7.9% 8.7% 9.5% 9.9% 10.3% 10.7% 11.0%
- -----------------------------------------------------------------------------------------------------------------------------------
$91,851- $55,101-
$140,000 $115,000 39.32% 7.4% 8.2% 9.1% 9.9% 10.3% 10.7% 11.1% 11.5%
- -----------------------------------------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 43.71% 8.0% 8.9% 9.8% 10.7% 11.1% 11.5% 12.0% 12.4%
- -----------------------------------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 46.88% 8.5% 9.4% 10.4% 11.3% 11.8% 12.3% 12.7% 13.2%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Approx.
1994 To equal a tax-exempt yield of:
Federal, --------------------------------------------------------
If your net taxable income 1 NYS & NYC 7.25% 7.50% 7.75% 8.00% 8.50%
is approximately 2 Marginal --------------------------------------------------------
Joint Return Single Return Tax Rates 4 A taxable investment would have to pay you: 3
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$27,001-$38,000 $15,001-$22,750 25.19% 9.7% 10.0% 10.4% 10.7% 11.4%
- -----------------------------------------------------------------------------------------------------
$38,001-$91,850 $22,751-$55,100 36.64% 11.4% 11.8% 12.2% 12.6% 13.4%
- -----------------------------------------------------------------------------------------------------
$91,851- $55,101-
$140,000 $115,000 39.32% 11.9% 12.4% 12.8% 13.2% 14.0%
- -----------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 43.71% 12.9% 13.3% 13.8% 14.2% 15.1%
- ------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 46.88% 13.6% 14.1% 14.6% 15.1% 16.0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
TABLE II. COMBINED EFFECT OF FEDERAL AND NEW YORK STATE INCOME TAXES
<TABLE>
<CAPTION>
Approx.
1994 To equal a tax-exempt yield of:
Federal --------------------------------------------------------------------------------------
If your net taxable income 1 & NYS 4.50% 5.00% 5.50% 6.00% 6.25% 6.50% 6.75% 7.00%
is approximately 2 Marginal --------------------------------------------------------------------------------------
Joint Return Single Return Tax Rates 5 A taxable investment would have to pay you: 3
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27,001-$38,000 $15,001-$22,750 21.45% 5.7% 6.4% 7.0% 7.6% 8.0% 8.3% 8.6% 8.9%
- -----------------------------------------------------------------------------------------------------------------------------------
$38,001-$91,850 $22,751-$55,100 33.47% 6.8% 7.5% 8.3% 9.0% 9.4% 9.8% 10.1% 10.5%
- -----------------------------------------------------------------------------------------------------------------------------------
$91,851- $55,101-
$140,000 $115,000 36.24% 7.1% 7.8% 8.6% 9.4% 9.8% 10.2% 10.6% 11.0%
- -----------------------------------------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 40.86% 7.6% 8.5% 9.3% 10.1% 10.6% 11.0% 11.4% 11.8%
- -----------------------------------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 44.19% 8.1% 9.0% 9.9% 10.8% 11.2% 11.6% 12.1% 12.5%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Approx.
1994 To equal a tax-exempt yield of:
Federal ---------------------------------------------------------
If your net taxable income 1 & NYS 7.25% 7.50% 7.75% 8.00% 8.50%
is approximately 2 Marginal ---------------------------------------------------------
Joint Return Single Return Tax Rates 5 A taxable investment would have to pay you: 3
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$27,001-$38,000 $15,001-$22,750 21.45% 9.2% 9.5% 9.9% 10.2% 10.8%
- ------------------------------------------------------------------------------------------------------
$38,001-$91,850 $22,751-$55,100 33.47% 10.9% 11.3% 11.6% 12.0% 12.8%
- ------------------------------------------------------------------------------------------------------
$91,851- $55,101-
$140,000 $115,000 36.24% 11.4% 11.8% 12.2% 12.5% 13.3%
- ------------------------------------------------------------------------------------------------------
$140,001- $115,001-
$250,000 $250,000 40.86% 12.3% 12.7% 13.1% 13.5% 14.4%
- ------------------------------------------------------------------------------------------------------
$250,001+ $250,001+ 44.19% 13.0% 13.4% 13.9% 14.3% 15.3%
- ------------------------------------------------------------------------------------------------------
</TABLE>
1 After exemptions and deductions other than state and local tax
deductions.
2 The tables cover only a representative range of incomes, and income
brackets have been rounded off to facilitate illustration. Actual
Federal, New York State and New York City income brackets may differ
slightly from those in the table.
3 Yields on taxable investments have been rounded off to facilitate
illustration.
4 This rate is calculated by using the highest New York State and New York
City marginal tax rates that apply to the bracket and a marginal Federal
tax rate based on a single return claiming one personal exemption and a
joint return claiming two personal exemptions (subject to the personal
exemption phaseout applicable at the highest two categories of income).
The tables are based on 1994 tax rates assuming that the 1994 scheduled
New York State tax rate decreases take effect. If, however, the New York
State tax rate decrease is postponed, then the tax equivalent yields will
be higher than depicted above. There can be no assurance that such rates
will remain unchanged.
5 This rate is calculated by using the highest New York State marginal tax
rate that applies to the bracket and a marginal Federal tax rate based on
a single return claiming one personal exemption and a joint return
claiming two personal exemptions (subject to the personal exemption phase
out applicable at the highest two categories of income).
A-17
<PAGE>
EMPIRE STATE MUNICIPAL EXEMPT TRUST
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART A
THE TRUST
ORGANIZATION
Empire State Municipal Exempt Trust (the 'Fund'), Guaranteed Series 105
(the 'Trust') is one of a series of similar but separate unit investment trusts
created under the laws of the State of New York by a Trust Indenture and
Agreement* (the 'Trust Agreement'), dated the Date of Deposit, among Glickenhaus
& Co. and Lebenthal & Co., Inc. as sponsors (the 'Sponsors'), The Bank of New
York, as trustee (the 'Trustee'), and Muller Data Corporation, as evaluator (the
'Evaluator').
On the date of this Prospectus each Unit represented the fractional
undivided interest in the Trust set forth under 'Summary of Essential Financial
Information' in Part A. Thereafter, if any Units of the Trust are redeemed by
the Trustee, the fractional undivided interest 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' in this Part B.
OBJECTIVES
The objective of the Fund is to obtain tax-exempt interest income through
an investment in a fixed insured portfolio consisting primarily of various
long-term municipal bonds with average maturities of over 10 years. No assurance
can be given that the Fund's objectives will be achieved as these objectives are
subject to the continuing ability of the respective issuers of the bonds to meet
their obligations and, of the Insurer to meet its obligations under the
insurance. In addition, an investment in such portfolio can be affected by
fluctuations in interest rates.
PORTFOLIO
The portfolio of the Trust consists of the Bonds described in 'The
Portfolio' in Part A and are represented by the Sponsors' contracts to purchase,
which are expected to be settled by the date set forth in Part A. The Trust may
contain Bonds which have been purchased on a when, as, and if issued basis.
Accordingly, the delivery of such Bonds may be delayed or may not occur. (See
'The Portfolio' in Part A.) Interest on these Bonds begins accruing to the
benefit of Unit holders on their respective dates of delivery. Unit holders will
be 'at risk' with respect to these Bonds (i.e., may derive either gain or loss
from fluctuations in the offering side evaluation of the Bonds) from the date
they commit for Units. (See 'The Portfolio' in Part A.) For a discussion of the
Sponsors' obligations in the event of the failure of any contract for the
purchase of any of the Bonds and limited right to substitute other bonds to
replace any failed contract, see 'Substitution of Bonds' in this Part B. As a
result of the Municipal Bond Investors Assurance Corporation insurance, Moody's
Investors Service ('Moody's') has assigned a rating of 'Aaa' to all of the Bonds
in the Trust, as insured and Standard & Poor's Corporation ('S&P') has assigned
a rating of 'AAA' to the Units and Bonds while in the Trust. (See 'Insurance on
the Bonds' in this Part B).
In view of the Fund's objectives, the following factors, among others, were
considered in selecting the Bonds: (1) All the Bonds are obligations of the
State of New York and counties, municipalities, authorities or political
- ------------------------------------
* References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
<PAGE>
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) Municipal Bond Investors
Assurance Corporation insurance for the payment of principal and interest on the
Securities is available. Subsequent to the Date of Deposit, a Bond may cease to
be rated or its rating may be reduced. Neither event requires an elimination of
such Bond from the portfolio, but such an event may be considered in the
Sponsors' determination to direct the Trustee to dispose of the Bonds. See
'Sponsors-Responsibility' in Part B. The insurance on the Bonds in the portfolio
obtained by the Trust does not cover such Bonds until they are delivered to the
Trust. See 'The Trust--Portfolio--General Considerations' in this Part B.
SPECIAL FACTORS AFFECTING NEW YORK
Beginning in early 1975, New York State (the 'State'), and several of its
public benefit corporations that issue municipal bonds under state legislation
('authorities') and municipalities, particularly New York City (the 'City'),
faced serious financing difficulties which impaired the borrowing abilities of
the State and the respective entities. If during the term of the Trust there
should be a default by any authority or municipality, or other financial crisis
relating to the State, its authorities or municipalities, the market price and
marketability of outstanding Bonds in the Trust, and therefore the asset value
of Units of the Trust could be adversely affected.
The information set forth below is derived from the official statements
and/or preliminary drafts of official statements prepared in connection with the
issuance of New York State and New York City municipal bonds. The Sponsors have
not independently verified this information.
New York City. The City, with a population of approximately 7.3 million, is
an international center of business and culture. Its non-manufacturing economy
is broadly based, with the banking and securities, life insurance,
communications, publishing, fashion design, retailing and construction
industries accounting for a significant portion of the City's total employment
earnings. Additionally, the City is the nation's leading tourist destination.
The City's manufacturing activity is conducted primarily in apparel and
publishing.
The national economic recession which began in July 1990 has adversely
impacted the City harder than almost any other political jurisdiction in the
nation. As a result, the City, with approximately 3 percent of national
employment, has lost approximately 20 percent of all U.S. jobs during the recent
economic downturn and, consequently, has suffered erosion of its local tax base.
In total, the City private sector employment has plummeted by approximately
360,000 jobs since 1987. But, after nearly five years of decline, the City
appears to be on the verge of a broad-based recovery which will lift many
sectors of the local economy. Most of the nascent local recovery can be
attributed to the continued improvement in the U.S. economy, but a great deal of
the strength expected in the City economy will be due to local factors, such as
the heavy concentration of the securities and banking industries in the City.
The current forecast calls for modest employment growth of about 20,000 a year
(0.6 percent) on average through 1998 with some slowing but still positive
growth in employment in 1995-96 as U.S. growth slows (local job gains slow from
25,000 to around 10,000 per year).
During the most recent economic downturn, the City has faced recurring
extraordinary budget gaps that have been addressed by undertaking one-time,
one-shot budgetary initiatives to close then projected budget gaps in order to
achieve a balanced budget as required by the laws of the State. For example, in
order to achieve a balanced budget for the 1992 fiscal year, the City increased
taxes and reduced services during the 1991 fiscal year to close a then projected
gap of $3.3 billion in the 1992 fiscal year which resulted from, among other
things, lower than expected tax revenue of approximately $1.4 billion, reduced
State aid for the City of approximately $564 million and greater than projected
B-2
<PAGE>
increases in legally mandated expenditures of approximately $400 million,
including public assistance and Medicare expenditures. The gap closing measures
for fiscal year 1992 included receipt of $605 million from tax increases,
approximately $1.5 billion of proposed service reductions and proposed
productivity savings of $545 million.
Notwithstanding its recurring projected budget gaps, for fiscal years 1981
through 1993 the City achieved balanced operating results (the City's General
Fund revenues and transfers reduced by expenditures and transfers), as reported
in accordance with Generally Accepted Accounting Principles ('GAAP'), and the
City's 1994 fiscal year results are projected to be balanced in accordance with
GAAP.
The City's ability to maintain balanced budgets in the future is subject to
numerous contingencies; therefore, even though the City has managed to close
substantial budget gaps in recent years in order to maintain balanced operating
results, there can be no assurance that the City will continue to maintain a
balanced budget as required by State law without additional tax or other revenue
increases or reduction 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. The City is
required to submit its financial plans to review bodies, including the New York
State Financial Control Board ('Control Board'). If the City were to experience
certain adverse financial circumstances, including the occurrence or the
substantial likelihood and imminence of the occurrence of an annual operating
deficit of more than $100 million or the loss of access to the public credit
markets to satisfy the City's capital and seasonal financing requirements, the
Control Board would be required by State law to exercise powers, among others,
of prior approval of City financial plans, proposed borrowings and certain
contracts.
On November 23, 1993, the City submitted to the Control Board the Financial
Plan for the 1994 through 1997 fiscal years, which is a modification to a
financial plan submitted to the Control Board on August 30, 1993 and which
relates to the City, the Board of Education ('BOE') and the City University of
New York ('CUNY'). The 1994-1997 Financial Plan projects revenues and
expenditures for the 1994 fiscal year balanced in accordance with GAAP. The
1994-1997 Financial Plan sets forth actions to close a previously projected gap
of approximately $2.0 billion in the 1994 fiscal year. The gap-closing actions
for the 1994 fiscal year included agency actions aggregating $666 million,
including productivity savings and savings from restructuring the delivery of
City services; service reductions aggregating $274 million; the sale of
delinquent real property tax receivables for $215 million; discretionary
transfers from the 1993 fiscal year of $110 million; reduced debt service costs
aggregating $187 million, resulting from refinancings and other actions; $150
million in proposed increased Federal assistance; a continuation of the personal
income tax surcharge, resulting in revenues of $143 million; $80 million in
proposed increased State aid, which is subject to approval by the Governor; and
revenue actions aggregating $173 million.
The Financial Plan also sets forth projections for the 1995 through 1997
fiscal years and outlines a proposed gap-closing program to close projected
budget gaps of $1.7 billion, $2.5 billion and $2.7 billion for the 1995 through
1997 fiscal years, respectively. City gap-closing actions total $640 million in
the 1995 fiscal year, $814 million in the 1996 fiscal year and $870 million in
the 1997 fiscal year. These actions include increased revenues and reduced
expenditures from agency actions aggregating $165 million, $439 million and $470
million in the 1995 through 1997 fiscal years, respectively, including
productivity savings and savings from restructuring the delivery of City
services and service reductions; possible BOE expenditure reductions aggregating
$125 million in each of the 1995 through 1997 fiscal years; and reduced other
than personal service costs aggregating $50 million in each of the 1995 through
1997 fiscal years.
B-3
<PAGE>
State actions proposed in the gap-program total $306 million, $616 million
and $766 million in each of the 1995, 1996 and 1997 fiscal years, respectively.
These actions include savings from various proposed mandate relief measures and
the proposed reallocation of State education aid among various localities
totaling $175 million, $325 million and $475 million in each of the 1995, 1996
and 1997 fiscal years, respectively. These actions also include $131 million in
1995 and $291 million in each of 1996 and 1997 in anticipated State actions
which could include savings from the proposed State assumption of certain
Medicaid costs or various proposed mandate relief measures.
The Federal actions proposed in the gap-closing program are $100 million
and $200 million in increased Federal assistance in fiscal years 1996 and 1997,
respectively.
Other Actions proposed in the gap-closing program represent Federal, State
or City actions to be specified in the future.
Various actions proposed in the Financial Plan, including the proposed
continuation of the personal income tax surcharge beyond December 31, 1995 and
the proposed increase in State aid, are subject to approval by the Governor and
the State Legislature, and the proposed increase in Federal aid is subject to
approval by Congress and the President. The State Legislature has in previous
legislative sessions failed to approve proposals for the State assumption of
certain Medicaid costs, mandate relief and reallocation of State education aid,
thereby increasing the uncertainty as to the receipt of the State assistance
included in the Financial Plan. If these actions cannot be implemented, the City
will be required to take other actions to decrease expenditures or increase
revenues to maintain a balanced financial plan. The State Legislature has
approved the continuation of the personal income tax surcharge through December
31, 1995, and the Governor is expected to approve this continuation. The
Financial Plan has been the subject of extensive public comment and criticism
particularly regarding the sale of delinquent property tax receivables, the sale
of the New York City Off-Track Betting Corporation ('OTB'), the amount of State
and Federal aid included in the Financial Plan and the inclusions of
non-recurring actions.
Notwithstanding the proposed city, federal and state actions in the
gap-closing programs, the City Comptroller has warned in past published reports
that State and local tax increases in an economic downturn or period of slow
economic growth can have adverse effects on the local economy and can slow down
an economic recovery. The City Comptroller has also previously expressed
concerns about the effects on the City's economy and budgets of rapidly
increasing water and sewer rates, decreasing rental payments in future years
from the Port Authority under leases for LaGuardia and Kennedy airports, the
dependence on increased aid from the State and Federal Governments for
gap-closing programs, the escalation cost of judgements and claims, federal
deficit reduction measures and the increasing percentage of future years'
revenues projected to be consumed by debt service, even after reductions in the
capital program.
Although the City has maintained balanced budgets in each of its last
thirteen fiscal years, and is projected to achieve balanced operating results
for the 1993 fiscal year, there can be no assurance that the gap-closing actions
proposed in the Financial Plan can be successfully implemented or that the City
will maintain a balanced budget in future years without additional State aid,
revenue increases or expenditure reductions. Additional tax increases and
reductions in essential City services could adversely affect the City's economic
base.
In November 1993, Rudolph W. Giuliani was elected mayor of the City,
replacing the previous administration on January 1, 1994. Mayor Giuliani's
Modification No. 94-2 to the Financial Plan for the City and Covered
Organizations for fiscal years 1994-1998 (the 'Modification'), issued February
10, 1994, reports that for 1995 fiscal year, the budget gap is estimated at
$2.26 billion, or nearly a 12 percent shortfall of existing tax revenues over
baseline expenditures. Absent gap closing initiatives, the Modification reports
that the projected budget gap will grow to nearly $3.4 billion by 1998 fiscal
year. According to the Modification, the 1995 fiscal year budget gap is the
largest that the City has faced since 1981, when the City converted to GAAP. The
Modification attributes the projected budget gaps to the lingering
B-4
<PAGE>
national recession, to a sharp growth in expenditures during the boom years of
the 1980s and the failure of the City to reduce the City's municipal workforce.
The Modification reports that at the same time that City employment has declined
as a percentage of U.S. employment, local government employment in the City,
which exceeds the state government employment of the five largest states, is on
the verge of an historic high. According to the Modification, at the end of
December 1993, the City's full-time municipal workforce stood at more than
362,000 employees, and absent reductions, will reach an all-time high at the end
of fiscal year 1994.
The Modification states that in order to strengthen the City's long-term
fiscal position the City's gap closing initiatives must be accomplished without
resorting to one-shot gap-closing measures, such as tax increases; instead, it
must balance its budgets by reducing City spending, reducing the size of the
City's municipal workforce and reducing certain City taxes to encourage economic
growth. Under the Modification, fiscal year 1995 spending declines by $516
million over the current fiscal year, the lowest projected spending rate since
1975. The Modification plans to reduce the City's municipal workforce by 15,000
positions, as compared to the current actual headcount, by the end of fiscal
year 1995. The workforce reduction will be achieved through an aggressive
severance package, and, if necessary, layoffs. It is anticipated that these
workforce reduction initiatives will save $117 million, $144 million, $311
million, $415 million and $539 million in fiscal years 1994 through 1998,
respectively, after taking into account an estimated $200 million in costs
related to instituting the proposed severance programs which are anticipated to
be financed with surplus Municipal Assistance Corporation funds (see below for a
discussion of the Municipal Assistance Corporation). The Modification also
contemplates the loss of $35 million, $186 million, $534 million and $783
million in tax revenues in 1995 through 1998, respectively, as a result of the
reduction in certain City taxes, such as the reduction of the hotel tax from 6
percent to 5 percent, commercial rent tax reductions and the elimination of the
12.5 percent personal income tax surcharge.
The 1994-97 Financial Plan is based on numerous assumptions, including the
recovery of the City's and the region's economy early in the calendar year 1993
and the concomitant receipt of economically sensitive tax revenues in the
amounts projected. The 1994-97 Financial Plan is subject to various other
uncertainties and contingencies relating to, among other factors, the extent, if
any, to which wage increases for City employees exceed the annual increases
assumed for the 1994 through 1997 fiscal years; continuation of the 9% interest
earnings assumptions for pension fund assets affecting the City's required
pension fund contributions; the willingness and ability of the State to provide
the aid contemplated by the Financial Plan and to take various other actions to
assist the City, including the proposed State takeover of certain Medicaid costs
and State mandate relief, the ability of the New York City Health and Hospitals
Corporation ('HHC'), BOE and other agencies to maintain budget balance; the
willingness of the Federal government to provide Federal aid; approval of the
proposed continuation of the personal income tax surcharge and the State
budgets; adoption of the City's budgets by the City Council; the ability of the
City to implement contemplated productivity and service and personnel reduction
programs and the success with which the City controls expenditures; additional
expenditures that may be incurred due to the requirements of certain legislation
requiring minimum levels of funding for education; the City's ability to market
its securities successfully in the public credit markets; the level of funding
required to comply with the Americans with Disabilities Act of 1990; and
additional expenditures that may be incurred as a result of deterioration in the
condition of the City's infrastructure. Certain of these assumptions have been
questioned by the City Comptroller and other public officials.
Estimates of the City's revenues and expenditures are based on numerous
assumptions and subject to various uncertainties. If expected Federal or State
aid is not forthcoming, if unforeseen developments in the economy significantly
reduce revenues derived from economically sensitive taxes or necessitate
increased expenditures for public assistance, if the City should negotiate wage
increases for its employees greater than the amounts provided for in the City's
Financial Plan or if other uncertainties materialize that reduce expected
revenues or increase projected expenditures, then, to avoid operating deficits,
the City may be required to implement additional actions, including
B-5
<PAGE>
increases in taxes and reductions in essential City services. The City might
also seek additional assistance from the State.
The City depends on the State for State aid both to enable the City to
balance its budget and to meet its cash requirements. For its 1993 fiscal year,
the State, before taking any remedial action, reported a potential budget
deficit of $4.8 billion (before providing for repayment of the deficit notes as
described below). If the State experiences revenue shortfalls or spending
increases beyond its projections during its 1993 fiscal year or subsequent
years, such developments could result in reductions in projected State aid to
the City. In addition, there can be no assurance that State budgets in future
fiscal years will be adopted by the April 1 statutory deadline and that there
will not be adverse effects on the City's cash flow and additional City
expenditures as a result of such delays.
Implementation of the Financial Plan is also dependent upon the City's
ability to market its securities successfully in the public credit markets. The
City's financing program for fiscal years 1994-1997 contemplates issuance of
$11.7 billion of general obligation bonds primarily to reconstruct and
rehabilitate the City's infrastructure and physical assets and to make capital
investments. A significant portion of such bond financing is used to reimburse
the City's general fund for capital expenditures already incurred. In addition,
the City issues revenue and tax anticipation notes to finance its seasonal
working capital requirements. The success of projected public sales of City
bonds and notes will be subject to prevailing market conditions at the time of
the sale, and no assurance can be given that such sales will be completed. If
the City were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned operating and capital expenditures.
Substantially all of the City's full-time employees are members of labor
unions. The Financial Emergency Act requires that all collective bargaining
agreements entered into by the City and the Covered Organizations be consistent
with the City's current financial plan, except under certain circumstances, such
as awards arrived at through impasse procedures.
On January 11, 1993, the City announced a settlement with a coalition of
municipal unions, including Local 237 of the International Brotherhood of
Teamsters, District Council 37 of the American Federation of State, County and
Municipal Employees and other unions covering approximately 44% of the City's
workforce. The settlement, which has been ratified by the unions, includes a
total net expenditure increase of 8.25% over a 39-month period, ending March 31,
1995 for most of these employees. On April 9, 1993 the City announced an
agreement with the Uniformed Fire Officers Association which is consistent with
the coalition agreement. The agreement has been ratified. The Financial Plan
reflects the costs associated with these settlements and provides for similar
increases for all other City-funded employees.
The Financial Plan provides no additional wage increases for City employees
after their contracts expire in the 1995 fiscal year. Each 1% wage increase for
all employees commencing in the 1995 fiscal year would cost the City an
additional $30 million for the 1995 fiscal year and $135 million for the 1996
fiscal year and $150 million for each year thereafter above the amounts provided
for in the Financial Plan.
A substantial portion of the capital improvements in the City are financed
by indebtedness issued by the Municipal Assistance Corporation for the City of
New York ('MAC'). MAC was organized in 1975 to provide financing assistance for
the City and also to exercise certain review functions with respect to the
City's finances. MAC bonds are payable out of certain State sales and
compensating use taxes imposed within the City, State stock transfer taxes and
per capita State aid to the City. Any balance from these sources after meeting
MAC debt service and reserve fund requirements and paying MAC's operating
expenses is remitted to the City or, in the case of the stock transfer taxes,
rebated to the taxpayers. The State is not, however, obligated to continue the
imposition of such taxes or to continue appropriation of the revenues therefrom
to MAC, nor is the State obligated to continue to appropriate the State per
capita aid to the City which would be required to pay the debt service on
certain MAC obligations. MAC has no taxing
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power and MAC bonds do not create an enforceable obligation of either the State
or the City. As of September 30, 1993, MAC had outstanding an aggregate of
approximately $5.304 billion of its bonds.
S&P has rated City Bonds A-. Moody's has rated City Bonds Baa1. Such
ratings reflect only the views of S&P and Moody's from which an explanation of
the significance of such ratings may be obtained. There is no assurance that
either or both of such ratings will continue for any given period of time or
that either or both will not be revised downward or withdrawn entirely. Any such
downward revision or withdrawal could have an adverse effect on the market
prices of the Bonds.
In 1975, S&P suspended its A rating of City Bonds. This suspension remained
in effect until March 1981, at which time the City received an investment grade
rating of BBB from S&P. On July 2, 1985, S&P revised its rating of City Bonds
upward to BBB+ and on November 19, 1987, to A-. On July 2, 1993, Standard &
Poor's reconfirmed its A- rating of City Bonds, continued its negative rating
outlook assessment and stated that maintenance of such ratings depended upon the
City's making further progress towards reducing budget gaps in the outlying
years. Moody's ratings of City Bonds were revised in November 1981 from B (in
effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in
May 1988 to A and again in February 1991 to Baa1.
New York State and its Authorities. The national recession which commenced
in mid-1990 has had a more adverse impact on the State's economy than on other
parts of the nation, owing to a significant retrenchment in the financial
services industry, cutbacks in defense spending, and an overbuilt real estate
market in the State and City. As a result of the national and regional economic
recession, the State's tax revenues for its 1991 and 1992 fiscal years were
substantially lower than projected. Consequently, the State took various actions
for its 1992 fiscal year, which included increases in certain State taxes and
fees, substantial decreases in certain expenditures from previously projected
levels, including cuts in State operations and reductions in State aid to
localities, and the sale of $531 million of short-term deficit notes prior to
the end of the State's 1992 fiscal year. The State's 1992-93 budget was passed
on time, closing an estimated $4.8 billion imbalance resulting primarily from
the national and regional economic recession. Major budgetary actions included a
freeze in the scheduled reduction in the personal income tax and business tax
surcharge, adoption of significant Medicaid cost containment or revenue
initiatives, and reductions in both agency operations and grants to local
governments from previously anticipated levels. The State completed its 1993
fiscal year with a positive margin of $671 million in the General Fund which was
deposited into a tax refund reserve account.
The Governor released the recommended Governor's Executive Budget for the
1993-95 fiscal year on January 19, 1993. The recommended 1993-94 State Financial
Plan projected a balanced General Fund. General Fund receipts and transfers from
other funds were projected at $31.6 billion, included $184 million carried over
from the State's 1993 fiscal year. Disbursements and transfers from other funds
were projected at $31.5 billion, not including a $67 million repayment to the
State's Tax Stabilization Reserve Fund. To achieve General Fund budgetary
balance in the 1994 State fiscal year, the Governor recommended various actions.
These included proposed spending reductions and other actions that would reduce
General Fund spending ($1.6 billion); continuing the freeze on personal income
and corporate tax reductions and on hospital assessments ($1.3 billion);
retaining moneys in the General Fund that would otherwise have been deposited in
dedicated highway and transportation funds ($516 million); a 21-cent increase in
the cigarette tax ($180 million); and new revenues from miscellaneous sources
($91 million). The recommended Governor's 1993-1994 Executive Budget included
reductions in anticipated aid to all levels of local government.
In comparison to the recommended 1993-94 Executive Budget, the 1993-94
State budget, as enacted, reflects increases in both receipts and disbursements
in the General Fund of $811 million.
The $811 million increase in projected receipts reflects (i) an increase of
$487 million, from $184 million to $671 million, in the positive year-end
margins at March 31, 1993, which resulted primarily from improving economic
conditions and higher-than-expected tax collections (ii) an increase of $269
million in projected receipts, $211 million
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resulting from the improved 1992-93 results and the expectation of an improving
economy and the balance from improved auditing and enforcement measures and
other miscellaneous items, (iii) additional payments of $200 million from the
Federal Government to reimburse the State for the costs of providing indigent
medical care, and (iv) the payment of an additional $50 million of personal
income tax refunds in the 1993-93 fiscal year which would otherwise have been
paid in fiscal year 1993-94; offset by (v) $195 million of revenue raising
recommendations in the Executive Budget that were not enacted in the budget and
thus are not included in the 1993-94 State Financial Plan.
The $811 million increase in projected disbursements reflects (i) an
increase of $252 million in projected school-aid payments, after applying
estimated receipts from the State Lottery allocated to school aid, (ii) an
increase of $194 million in projected payments for Medicaid assistance and other
social service programs, (iii) additional spending on the judiciary ($56
million) and criminal justice ($48 million), (iv) a net increase in projected
disbursements for all other programs and purposes, including mental hygiene and
capital projects, of $161 million, after reflecting certain re-estimates in
spending, and (v) the transfer of $100 million to a newly-established
contingency reserve.
The 1993-94 State budget, as enacted, included $400 million less in State
actions than the City had anticipated. Reform of education aid formulas was
achieved which brought an additional $145 million education dollars to New York
City. However, the State Legislature failed to enact a takeover of local
Medicaid costs, other significant mandate relief items and certain Medicaid cost
containment items proposed by the Governor, which would have provided the City
with savings. The adopted State budget cut aid for probation services, increased
sanctions on social service programs, eliminated the pass-through of a State
surcharge on parking tickets, cut reimbursement for CHIPS transportation
operating dollars, and required a large contribution in City funds to hold the
MTA fare at the current level. In the event of any significant reduction in
projected State revenues or increases in projected State expenditures from the
amounts currently projected by the State, there could be an adverse impact on
the timing and amounts of State aid payments to the City in the future.
On October 29, 1993, the State released a revised financial plan for the
State's 1993-94 fiscal year (the 'Revised State Financial Plan') which includes
increased taxes and other revenues, deferral of scheduled personal income and
corporation tax reductions, reductions from previously projected levels in aid
to localities and State operations and other budgetary actions that further
limit the growth of General Fund disbursements as compared to the initial
financial plan for the State's 1993-94 fiscal year. The Revised State Financial
Plan is based on economic projections that the State will perform more poorly
than the nation as a whole. The State's economy,as measured by employment, was
expected to commence growth late in the 1993 calendar year. Many uncertainties
exist in forecasts of both the national and State economies, including consumer
attitudes toward spending. There can be no assurance that the State economy will
not experience worse-than-predicted results in the 1993-94 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.
In certain prior fiscal years, the State has failed to enact a budget prior
to the beginning of the State's fiscal year. A delay in the adoption of the
State's budget beyond the statutory April 1 deadline and the resultant delay in
the State's Spring borrowing has in certain prior years delayed the projected
receipt by the City of State aid, and there can be no assurance that State
budgets in future fiscal years will be adopted by the April 1 statutory
deadline.
The State has noted that its forecasts of tax receipts have been subject to
variance in recent fiscal years. As a result of these uncertainties and other
factors, actual results could differ materially and adversely from the State's
current projections and the State's projections could be materially and
adversely changed from time to time.
On January 14, 1992, S&P downgraded the State's general obligation bonds
from A to A-. Also downgraded was certain of the State's variously rated moral
obligation, lease purchase, guaranteed and contractual obligation debt,
including debt issued by certain State agencies. On June 6, 1990, Moody's
changed its rating of the State's outstanding general obligation bonds from AA-
to A. The State's tax and revenue anticipation notes issued in February 1991
were
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rated MIG-2 by Moody's and SP-1 by S&P. On January 6, 1992, Moody's changed its
rating of certain appropriations-backed debt of the State from A to Baa1.
Moody's also placed the State's general obligation, State guaranteed and New
York State Local Government Assistance Corporation bonds under review for
possible downgrading in coming months. Any action taken by S&P or Moody's to
lower the credit rating on outstanding indebtedness and obligations of the State
may have an adverse impact on the marketability of the State's notes and bonds.
As of March 31, 1993, the State had approximately $5.132 billion in general
obligation bonds, excluding refunding bonds and $294 million in bond
anticipation notes outstanding. On May 24, 1993, the State issued $850 million
in tax and revenue anticipation notes all of which will mature on December 31,
1993. Principal and interest due on general obligation bonds and interest due on
bond anticipation notes and on tax and revenue anticipation notes were $890
million and $818.8 million for the 1991-92 and 1993-94 fiscal years,
respectively, and is estimated to be $789 million for the State's 1993-94 fiscal
year, not including interest on refunding bonds, issued in July 1992, to the
extent that such interest is to be paid from escrowed funds.
The fiscal stability of the State is related to the fiscal stability of its
authorities, which generally have responsibility for financing, constructing and
operating revenue-producing public benefit facilities. The authorities are not
subject to the constitutional restrictions on the incurrence of debt which apply
to the State itself and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. As of September 30,
1992, there were 18 authorities that had outstanding debt of $100 million or
more. The aggregate outstanding debt, including refunding bonds, of these 18
authorities was $62.2 billion as of September 30, 1992, of which approximately
$8.2 billion was moral obligation debt and approximately $17.1 billion was
financed under lease purchase or contractual-obligation financing arrangements.
The authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, the
State has provided financial assistance through appropriations, in some cases of
a recurring nature, to certain of the 18 authorities for operating and other
expenses and, in fulfillment of its commitments on moral obligation indebtedness
or otherwise for debt service. This assistance is expected to continue to be
required in future years.
The Metropolitan Transit Authority ('MTA'), a State agency, oversees the
operation of the City's subway and bus system (the 'Transit Authority' or 'TA')
and commuter rail lines serving the New York metropolitan area. Fare revenues
from such operations have been insufficient to meet expenditures, and the MTA
depends heavily upon a system of State, local, Triborough Bridge and Tunnel
Authority ('TBTA') and, to the extent available, Federal support. Over the past
several years, the State has enacted several taxes, including a surcharge on the
profits of banks, insurance corporations and general business corporations doing
business in the 12 county region (the 'Metropolitan Transportation Region')
served by the MTA and a special one-quarter of 1% regional sales and use tax,
that provide additional revenues for mass transit purposes including assistance
to the MTA. The surcharge, which expires in November 1995, yielded $507 million
in calendar year 1992, of which the MTA was entitled to receive approximately
90% or approximately $456 million.
For 1993, TA originally projected a budget gap of about $266 million. The
MTA Board approved an increase in TBTA tolls which took effect January 31, 1993.
Since the TBTA operating surplus helps subsidize TA operations, the January toll
increase on TBTA facilities, and other developments, reduced the projected gap
to approximately $241 million. Legislation passed in April 1993 relating to the
MTA's 1992-1996 Capital Program reflected a plan for closing this gap without
raising fares. A major element of the plan provides that the TA receive a
significant share of the petroleum business tax which will be paid directly to
MTA for its agencies. The plan also relies on certain City actions that have not
yet been taken. The plan also relies an MTA and TA resources projected to be
available to help close the
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gap. If any of the assumptions used in making these projections prove incorrect,
the TA's gap could grow, and the TA would be required to seek additional State
assistance, raise fares or take other actions.
Two serious accidents in December 1990 and August 1992, which caused
fatalities and many injuries, have given rise to substantial claims for damages
against both the TA and the City.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. The Housing
Finance Agency ('HFA') and the Urban Development Corporation ('UDC') have in the
past required substantial amounts of assistance from the State to meet debt
service costs or to pay operating expenses. Further assistance, possibly in
increasing amounts, may be required for these, or other, Authorities in the
future. In addition, certain statutory arrangements provide for State local
assistance payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.
Litigation. A number of court actions have been brought involving State
finances. The court actions in which the State is a defendant generally involve
state programs and miscellaneous tort, real property, employment discrimination
and contract claims and the monetary damages sought are substantial. The outcome
of these proceedings could affect the ability of the State to maintain a
balanced State Financial Plan in the 1994-97 fiscal year or thereafter.
In particular, for the State's 1993-1994 fiscal year, the State may be
required to make payments as a result of the United States Supreme Court
decision in the case of State of Delaware v. State of New York, which involved a
challenge to the State's possession of certain funds taken pursuant to the
State's Abandoned Property Law. Although it is not possible to predict the
amounts of the payments that may be required to be made in the State's 1993-94
fiscal year, the amount may be significant. The Division of the Budget expects,
however, that the State will have the resources to meet reasonably anticipated
payment requirements for the 1993-94 fiscal year resulting from the litigation.
In addition, on November 23, 1993, the New York Court of Appeals, the
State's highest court, affirmed the decisions of the State's Supreme Court in
several actions challenging the constitutionality of legislation enacted in 1990
which changed the actuarial funding methods for determining contributions by the
State and local governments to the State and local retirement systems. As a
result of this decision, the State Comptroller has developed a plan to return to
the previous actuarial funding method and to restore previous funding levels of
the retirement system. The Comptroller expects to achieve this objective in a
manner that, consistent with its fiduciary duties, will neither require the
State to make additional contributions in its 1993-1994 fiscal year nor
materially and adversely affect the financial condition of the State thereafter.
Among the more significant of these claims still pending against the State
at various procedural stages, are those that challenge: (1) the validity of
agreements and treaties by which various Indian tribes transferred title to the
State of certain land in central New York; (2) certain aspects of the State's
Medicaid rates and regulations, including reimbursements to providers of
mandatory and optional Medicaid services; (3) contamination in the Love Canal
area of Niagara Falls; (4) an action against State and New York City officials
alleging that the present level of shelter allowance for public assistance
recipients is inadequate under statutory standards to maintain proper housing;
(5) challenges to the practice of reimbursing certain Office of Mental Health
patient care expenses from the client's Social Security benefits; (6) a
challenge to the methods by which the State reimburses localities for the
administrative costs of food stamp programs; (7) alleged responsibility of State
officials to assist in remedying racial segregation in the City of Yonkers; (8)
an action in which the State is a third party defendant, for injunctive or other
appropriate relief, concerning liability for the maintenance of stone groins
constructed along certain areas of Long Island's shoreline; (9)
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an action challenging legislation enacted in 1990 which had the effect of
deferring certain employer contributions to the State Teachers' Retirement
System and reducing State aid to school districts by a like amount; (10) a
challenge to the constitutionality of financing programs of the Thruway
Authority authorized by Chapters 166 and 410 of the Laws of 1991; (11) a
challenge to the constitutionality of financing programs of the Metropolitan
Transportation Authority and the Thruway Authority authorized by Chapter 56 of
the Laws of 1993; (12) challenges to the delay by the State Department of Social
Services in making two one-week Medicaid payments to the service providers; (13)
challenges to provisions of Section 2807-C of the Public Health Law, which
impose a 13% surcharge on inpatient hospital bills paid by commercial insurers
and employee welfare benefit plans and portions of Chapter 55 of The Laws of
1992 which require hospitals to impose and remit to the State an 11% surcharge
on hospital bills paid by commercial insurers; (14) challenges to the
promulgation of the State's proposed procedure to determine the eligibility for
and nature of home care services for Medicaid recipients; (15) a challenge to
State implementation of a program which reduces Medicaid benefits to certain
home-relief recipients; and (16) challenges to the rationality and retroactive
application of State regulations recalibrating nursing home Medicaid rates.
State Economic Trends. Over the long term, the State and the City also face
serious potential economic problems. The City accounts for approximately 41% of
the State's population and personal income, and the City's financial health
affects the State in numerous ways. The State historically has been one of the
wealthiest states in the nation. For decades, however, the State has grown more
slowly than the nation as a whole, gradually eroding its relative economic
affluence. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City. In recent years the
State's economic position has improved in a manner consistent with that for the
Northeast as a whole.
The State has for many years had a very high State and local tax burden
relative to other states. The State and its localities have used these taxes to
develop and maintain their transportation networks, public schools and colleges,
public health systems, other social services and recreational facilities.
Despite these benefits, the burden of State and local taxation, in combination
with the many other causes of regional economic dislocation, has contributed to
the decisions of some businesses and individuals to relocate outside, or not
locate within, the State.
Reductions in Federal spending could materially and adversely affect the
financial condition and budget projections of the State's localities.
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. Except as described in
footnotes to 'Summary of Essential Financial Information' for the Trust interest
accrues to the benefit of Unit holders commencing with the expected date of
settlement for purchase of the Units. If a Replacement Bond is not acquired,
accrued interest (at the coupon rate of the Failed Bonds or earned original
issue discount in the case of original issue discount and zero coupon Bonds)
will be paid to Unit holders (from the Deposit Date to the date the Trustee is
notified of the failure of the Sponsors to purchase a Replacement Bond). All
such interest paid to Unit holders which accrued after the date of settlement
for a purchase of Units will be paid by the Sponsors and accordingly will not be
treated as tax-exempt income. In the event a Replacement Bond is not acquired by
the Trust, the net annual interest income per Unit for the Trust would be
reduced and the estimated current return might be lowered.
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Neither the Sponsors nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event that any contract for
the purchase of Securities in the Trust fails and no Replacement Bond as
hereinafter defined is acquired, the Sponsors shall refund to all Unit holders
the sales charge attributable to such failed contract, and the principal and
accrued interest (at the coupon rate of the relevant Security or earned original
issue discount in the case of original issue discount and zero coupon Bonds to
the date the Sponsors are notified of the failure) which are attributable to
such failed contract, shall be distributed at the next Monthly Payment Date
which is more than 30 days after the failure to purchase Replacement Bonds. The
portion of such interest paid to a Unit holder which accrued after the expected
date of settlement for purchase of his Units will be paid by the Sponsors and
accordingly will not be treated as tax-exempt income.
The following paragraphs discuss the characteristics of the Bonds in the
Trust and of certain types of issuers of the Bonds in the Trust. These
paragraphs discuss, among other things, certain circumstances which may
adversely affect the ability of such issuers to make payment of principal of and
interest on Bonds held in the portfolio of the Trust or which may adversely
affect the ratings of such Bonds. Because of the insurance obtained by the
Sponsors or by the issuers for the Trust, 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 Bonds in the Trust may be Bonds that
are, in whole or in part, subject to and dependent upon (i) the governmental
entity making appropriations from time to time or (ii) the continued existence
of special temporary taxes which require legislative action for their
reimposition. The availability of any appropriation is subject to the
willingness of the governmental entity to continue to make such special
appropriations or to reimpose such special taxes. The obligation to make lease
payments exists only to the extent of the monies available to the governmental
entity therefor, and no liability is incurred by the governmental entity beyond
the monies so appropriated. Subject to the foregoing, once an annual
appropriation is made, the governmental entity's obligation to make lease rental
payments is absolute and unconditional without setoff or counterclaim,
regardless of contingencies, whether or not a given project is completed or used
by the governmental entity and notwithstanding any circumstances or occurrences
which might arise. In the event of non-appropriation, certificateholders' or
bondowners' sole remedy (absent credit enhancement) generally is limited to
repossession of the collateral for resale or releasing, and the obligation of
the governmental lessee is not backed by a pledge of the general credit of the
governmental lessee. In the event of non-appropriation, the Sponsors may
instruct the Trustee to sell such Bonds.
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Moral Obligation Bonds. Certain of the Bonds in the Trust may be secured by
pledged revenues and additionally by the so-called 'moral obligations' of the
State or a local governmental body. Should the pledged revenues prove
insufficient, the payment of such Bonds is not a legal obligation of the State
or local government, and is subject to its willingness to appropriate funds
therefor.
REVENUE BONDS
Mortgage Revenue Bonds. Certain Bonds may be 'mortgage revenue bonds.'
Under the Internal Revenue Code of 1986, as amended (the 'Code'), (and under
similar provisions of the prior tax law) 'mortgage revenue bonds' are
obligations the proceeds of which are used to finance owner-occupied residences
under programs which meet numerous statutory requirements relating to residency,
ownership, purchase price and target area requirements, ceiling amounts for
state and local issuers, arbitrage restrictions, and certain information
reporting, certification, and public hearing requirements. There can be no
assurance that additional federal legislation will not be introduced or that
existing legislation will not be further amended, revised, or enacted after
delivery of these Bonds or that certain required future actions will be taken by
the issuing governmental authorities, which action or failure to act could cause
interest on the Bonds to be subject to federal income tax. If any portion of the
Bonds proceeds are not committed for the purpose of the issue, Bonds in such
amount could be subject to earlier mandatory redemption at par, including issues
of Zero Coupon Bonds (see 'Original Issue Discount and Zero Coupon Bonds').
Housing Bonds. Some of the aggregate principal amount of Bonds of the Trust
may consist of obligations of state and local housing authorities whose revenues
are primarily derived from mortgage loans to housing projects for low to
moderate income families. Since such obligations are not general obligations of
a particular state or municipality and are generally payable primarily or solely
from rents and other fees, adverse economic developments including failure or
inability to increase rentals, fluctuations of interest rates and increasing
construction and operating costs may reduce revenues available to pay existing
obligations.
The housing bonds in the Trust, despite their optional redemption
provisions which generally do not take effect until ten years after the original
issuance dates of such Bonds (often referred to as 'ten year call protection'),
do contain provisions which require the issuer to redeem such obligations at par
from unused proceeds of the issue within a stated period. In recent periods of
declining interest rates there have been increased redemptions of housing bonds
pursuant to such redemption provisions. In addition, the housing bonds in the
Trust are also subject to mandatory redemption in part at par at any time that
voluntary or involuntary prepayments of principal on the underlying mortgages
are made to the trustee for 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
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such proposals or litigation, if enacted or instituted, will have an adverse
impact on the revenues available to pay the debt service on the Bonds in the
portfolio issued to finance such nuclear projects.
Each of the problems referred to above could adversely affect the ability
of the issuers of public power revenue bonds to make payments of principal of
and/or interest on such bonds. Certain municipal utilities or agencies may have
entered into contractual arrangements with investor-owned utilities and large
industrial users and consequently may be dependent in varying degrees on the
performance of such contracts for payment of bond debt service.
Health Care Revenue Bonds. Some of the aggregate principal amount of Bonds
of the Trust may consist of hospital revenue bonds. Ratings of hospital bonds
are often initially based on feasibility studies which contain projections of
occupancy levels, revenues and expenses. Actual experience may vary considerably
from such projections. A hospital's gross receipts and net income will be
affected by future events and conditions including, among other things, demand
for hospital services and the ability of the hospital to provide them,
physicians' confidence in hospital management capability, economic developments
in the service area, competition, actions by insurers and governmental agencies
and the increased cost and possible unavailability of malpractice insurance.
Additionally, a major portion of hospital revenue typically is derived from
federal or state programs such as Medicare and Medicaid which have been revised
substantially in recent years and which are undergoing further review at the
state and federal level.
Proposals for significant changes in the health care system and the present
programs for third party payment of health care costs are under consideration in
Congress and many states. Future legislation or changes in the areas noted
above, among other things, would affect all hospitals to varying degrees and,
accordingly, any adverse change in these areas may affect the ability of such
issuers to make payment of principal and interest on such bonds.
Higher Education Revenue Bonds. Higher education revenue bonds include debt
of state and private colleges, universities and systems, and parental and
student loan obligations. The ability of universities and colleges to meet their
obligations is dependent upon various factors, including the revenues, costs and
enrollment levels of the institutions. In addition, their ability may be
affected by declines in Federal, state and alumni financial support,
fluctuations in interest rates and construction costs, increased maintenance and
energy costs, failure or inability to raise tuition or room charges and adverse
results of endowment fund investments.
Pollution Control Facility Revenue Bonds. Bonds in the pollution control
facilities category include securities issued on behalf of a private
corporation,* including utilities, to provide facilities for the treatment of
air, water and solid waste pollution. Repayment of these bonds is dependent upon
income from the specific pollution control facility and/or the financial
condition of the project corporation.
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
- ------------------------------------
* For purposes of the description of users of facilities, all references to
'corporations' shall be deemed to include any other nongovernmental person or
entity.
B-14
<PAGE>
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,' which would be primarily of two types: (1)
Bonds for a publicly owned facility that a private entity may have a right to
use or manage to some degree, such as an airport, seaport facility or water
system and (2) facilities deemed owned or beneficially owned by a private entity
but which were financed with tax-exempt bonds of a public issuer, such as a
manufacturing facility or a pollution control facility. In the case of the first
type, bonds are generally payable from a designated source of revenues derived
from the facility and may further receive the benefit of the legal or moral
obligation of one or more political subdivisions or taxing jurisdictions. In
most cases of project financing of the first type, issuers are obligated to pay
the principal of, any premium then due, or interest on the private activity
bonds only to the extent that funds are available from receipts or revenues of
the Issuer derived from the project or the operator or from the unexpended
proceeds of the bonds. Such revenues include user fees, service charges, rental
and lease payments, and mortgage and other loan payments.
The second type of issue will generally finance projects which are owned by
or for the benefit of, and are operated by, corporate entities. Ordinarily, such
private activity bonds are not general obligations of governmental entities and
are not backed by the taxing power of such entities, and are solely dependent
upon the creditworthiness of the corporate user of the project or corporate
guarantor.
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 of the Bonds in the Trust may be revenue bonds
which are payable from and secured primarily or solely by revenues from the
ownership and operation of particular facilities, such as correctional
facilities, parking facilities, convention centers, arenas, museums and other
facilities owned or used by a charitable entity. Payment on bonds related to
such facilities is, therefore, primarily or solely dependent on revenues from
such projects, including user fees, charges and rents. Such revenues may be
affected adversely by increased construction and
B-15
<PAGE>
maintenance costs or taxes, decreased use, competition from alternative
facilities, reduction or loss of rents or the impact of environmental
considerations.
Certain of the Bonds in the Trust are secured by direct obligations of the
U.S. Government, or in some cases, obligations guaranteed by the U.S.
Government, placed in an escrow account maintained by an independent trustee
until maturity or a predetermined redemption date. In a few isolated instances
to date, bonds which were thought to be escrowed to maturity have been called
for redemption prior to maturity.
PUERTO RICO BONDS
Certain of the Bonds in the Trust may be general obligations and/or revenue
bonds of issuers located in Puerto Rico which will be affected by general
economic conditions in Puerto Rico. The economy of Puerto Rico is closely
integrated with that of the mainland United States. During fiscal year 1991,
approximately 87% of Puerto Rico's exports were to the United States mainland,
which was also the source of 67% of Puerto Rico's imports. In fiscal 1991,
Puerto Rico experienced a $2,325.5 million positive adjusted trade balance. The
economy of Puerto Rico is dominated by the manufacturing and service sectors.
The manufacturing sector has experienced a basic change over the years as a
result of increased emphasis on higher wage, high technology industries such as
pharmaceuticals, electronics, computers, microprocessors, professional and
scientific instruments, and certain high technology machinery and equipment. The
service sector, including finance, insurance and real estate, also plays a major
role in the economy. It ranks second only to manufacturing in contribution to
the gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in response
to and paralleling the expansion of the manufacturing sector. Since fiscal 1987,
personal income has increased consistently in each fiscal year. In fiscal 1991,
aggregate personal income was $21.4 billion ($18.7 billion in 1987 prices) and
personal income per capita was $6.038 ($5.287 in 1987 prices). Real personal
income showed a small decrease in fiscal 1991 principally as a result of a
decline in real transfer payments. Real transfer payments grew at an above
normal rate in fiscal 1990 due to the receipt of non-recurrent relief of federal
funds for hurricane Hugo victims. 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 1991 were $4.6 billion, of which $3.0
billion, or 65.4%, represent entitlement to individuals who had previously
performed services or made contributions under programs such as social security,
veterans benefits and medicare. The number of persons employed in Puerto Rico
rose to a record level during fiscal 1991. Unemployment, although at the lowest
level since the late 1970s, remains above the average for the United States. In
fiscal 1991, the unemployment rate in Puerto Rico was 15.2%. From fiscal 1987
through fiscal 1990, Puerto Rico experienced an economic expansion that affected
almost every sector of its economy and resulted in record levels of employment.
Factors behind this expansion include Commonwealth sponsored economic
development programs, the relatively stable prices of oil imports, the continued
growth of the United States economy, periodic declines in exchange value of the
United States dollar and the relatively low cost borrowing during the period.
Real gross product amounted to approximately $19.2 billion in fiscal 1991, or
.9% above the fiscal 1990 level. The economy continued its growth during fiscal
1991 but at a slower rate. The Puerto Rico Planning Board's economic activity
index, a composite index for thirteen economic indicators, increased .4% for the
first eleven months of fiscal 1992 compared to the same period in fiscal 1991,
which period showed a decrease of .5% over the same period in fiscal 1990.
Growth in the Puerto Rico economy in fiscal 1993 depends on several factors,
including the state of the United States economy and the relative stability in
the price of oil imports, the exchange value of the U.S. dollar and the cost of
borrowing.
B-16
<PAGE>
ORIGINAL ISSUE DISCOUNT BONDS AND ZERO COUPON BONDS
Certain of the Bonds in the Trust may be original issue discount bonds
and/or zero coupon bonds. Original issue discount bonds are bonds that were
originally issued at less than the market interest rate. Zero coupon bonds are
original issue discount bonds that do not provide for the payment of current
interest. For Federal income tax purposes, original issue discount on such bonds
must be amortized over the term of such bonds. On sale or redemption, the excess
of (i) the amount realized (other than amounts treated as tax-exempt income as
described below) over (ii) the tax basis of such bonds (properly adjusted, in
the circumstances described below, for amortization of original issue discount)
will be treated as taxable income or loss. See 'The Trust--Tax Status' in this
Part B. The Code requires holders of tax-exempt obligations issued with original
issue discount, such as the Trust, to accrue tax-exempt original issue discount
by using the constant interest method provided for the holders of taxable
obligations. In addition, the Code provides that the basis of a tax-exempt
obligation is increased by the amount of accrued tax-exempt original issue
discount. These provisions are applicable to obligations issued after September
3, 1982 and acquired after March 1, 1984. Each Trust's tax basis in a Bond is
increased by any accrued original issue discount as is a Unit holder's tax basis
in his Units. For Bonds issued after June 9, 1980 that are redeemed prior to
maturity, the difference between the 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 gain may be taxable as ordinary income.
There can be no assurance that additional Federal legislation will not be
enacted or that existing legislation will not be amended hereafter with the
effect that interest on bonds becomes subject to Federal income taxation. If the
interest on the Bonds in the Trust should ultimately be deemed to be taxable,
the Trustee may sell them and, since they would be sold as taxable securities,
it is expected that they would have to be sold at a substantial discount from
current market price.
BONDS SUBJECT TO SINKING FUND PROVISIONS
Bonds in the Trust may be subject to redemption prior to their stated
maturity date pursuant to sinking fund or call provisions. A sinking fund is a
reserve fund accumulated over a period of time for retirement of debt. Sinking
fund provisions are designed to redeem a significant portion of an issue
gradually over the life of the issue. Obligations to be redeemed are generally
chosen by lot. On the Date of Deposit, the offering valuations of some of the
Bonds in the Trust may have been at a premium and subject to retirement or
refunding within ten years of the Date of Deposit. A callable debt obligation is
one which is subject to redemption prior to maturity at the option of the
issuer. To the extent that obligations are deposited in the Trust at a price
higher than their par value, such redemption at par would result in a loss of
capital to a purchaser of Units at their original public offering price. The
estimated current return of the Units might also be adversely affected if the
return on the retired Bonds is greater than the average return on the Bonds in
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 'The Portfolio' in Part A for a list of original issue discount
and/or zero coupon bonds and for a breakdown of the percentage of Bonds in the
Trust with offering side valuations at a premium, discount or at par. See also
'Estimated Current Return and Estimated Long Term Return' in Part A. The
portfolio contains a listing of the sinking fund and call provisions, if any,
with respect to each of the Bonds therein.
SUBSTITUTION OF BONDS
In the event of a failure to deliver any Bond that has been purchased for
the Trust under a contract, including those Bonds purchased on a 'when, as and
if issued' basis ('Failed Bonds'), the Sponsors are authorized to purchase other
bonds ('Replacement Bonds') which the Trustee shall pay for out of funds held in
connection with the Failed Bonds and to accept delivery of the Replacement Bonds
to make up the original corpus of the Trust. The Replacement Bonds must be
purchased within 20 days after delivery of the notice of the failed contract,
and the purchase price (exclusive of
B-17
<PAGE>
accrued interest) may not exceed the principal attributable to the Failed Bonds.
The Replacement Bonds (i) must be tax-exempt bonds issued by the State of New
York or counties, municipalities, authorities or political subdivisions thereof
or issued by certain United States territories or possessions or their public
authorities as described in the first paragraph under 'Portfolio,' (ii) must
have a fixed maturity date not exceeding the maturity date of the Failed Bonds
and not less than ten years after the date of purchase, (iii) shall be purchased
at a price that results in a yield to maturity and a current return, in each
case as of the Date of Deposit, at least equal to the yield to maturity and the
current return of the Failed Bonds, (iv) shall not be 'when issued' bonds, (v)
must be rated at least equal to the Failed Bonds and (vi) must be eligible for
coverage under the Municipal Bond Investors Assurance Corporation insurance
policy obtained by the Trust. Whenever a Replacement Bond has been acquired for
the Trust, the Trustee shall, within five days thereafter, notify all Unit
holders of the Trust of the acquisition of the Replacement Bond and shall, on
the next monthly Payment Date which is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of the
Failed Bond exceeded the cost of the Replacement Bond. Once the original corpus
of the Trust is acquired, the Trustee will have no power to vary the investment
of the Trust, i.e., the Trustee will have no managerial power to take advantage
of market variations to improve a Unit holder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Bonds in the event of a failed
contract, the Sponsors will refund the sales charge attributable to such Failed
Bonds to all Unit holders of the Trust, and distribute the principal and accrued
interest (at the coupon rate of such Failed Bond, or earned original issue
discount in the case of zero coupon bonds, from the Deposit Date to the date the
Sponsors notify the Trustee that they will not purchase Replacement Bonds)
attributable to such Failed Bonds on the next monthly Payment Date which is more
than 30 days thereafter. In the event a Replacement Bond is not acquired by the
Trust, the Estimated Net Annual Interest Income per Unit for the Trust would be
reduced and the Estimated Current Return thereon might be lowered.
OTHER MATTERS
An amendment to the Federal Bankruptcy Act relating to the adjustment of
indebtedness owed by any political subdivision or public agency or
instrumentality of any state, including municipalities, became effective in
1979. Among other things, this amendment facilitates the use of proceedings
under the Federal Bankruptcy Act by any such entity to restructure or otherwise
alter the terms of its obligations, including those of the type comprising the
Trust's portfolio. The Sponsors are unable to predict at this time 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 of Deposit in respect of any Securities which might reasonably be
expected to have a material adverse effect upon the Trust. At any time after the
Date of Deposit, 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 has
given or will give opinions to the issuing authorities of each Bond on the date
of issuance to the effect that such Securities have been validly issued and that
the interest thereon is exempt from regular Federal income tax. In addition,
other litigation 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.
B-18
<PAGE>
PUBLIC OFFERING
OFFERING PRICE
The price of the Units of the Trust as of the Date of Deposit was
determined by adding to the Evaluator's determination of the aggregate offering
price of the Securities per Unit a sales charge of 5.152% thereof equal to 4.9%
of the Public Offering Price. During the initial public offering period, sales
of at least 250 Units will be entitled to a volume discount from the Public
Offering Price as described below. For purchases settling after the First
Settlement Date, a proportionate share of accrued and undistributed interest on
the Securities at the date of delivery of the Units to the purchaser is also
added to the Public Offering Price.
During the initial offering period the aggregate offering price of the
Securities in the Trust is determined by the Evaluator (1) on the basis of
current offering prices for the Securities,* (2) if offering prices are not
available for any Securities, on the basis of current offering prices for
comparable securities, (3) by making an appraisal of the value of the Securities
on the basis of offering prices in the market, or (4) by any combination of the
above. Such determinations are made each business day during the initial public
offering period as of the Evaluation Time set forth in the 'Summary of Essential
Financial Information' in Part A, effective for all sales made subsequent to the
last preceding determination. For information relating to the calculation of the
Redemption Price, which is based upon the aggregate bid price of the underlying
Securities and which may be expected to be less than the aggregate offering
price, see 'Rights of Unit Holders--Redemption' in Part B. Unless Securities are
in default in payment of principal or interest or in significant risk of such
default, the Evaluator will not attribute any value to the Units due to the
Municipal Bond Investors Assurance Corporation insurance obtained by the Trust.
See also 'Rights of Unit Holders--Certificates' and 'Rights of Unit
Holders--Redemption' in Part B for information relating to redemption of Units.
The Evaluator will consider in its evaluation of Securities which are in
default in payment of principal or interest or, in the Sponsors' opinion, in
significant risk of such default ('Defaulted Bonds') and which are covered by
insurance obtained by the Trust the value of the insurance guaranteeing interest
and principal payments. The value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance premium
attributable to the purchase of Permanent Insurance and the related custodial
fee) and (ii) the market value of such Defaulted Bonds not covered by Permanent
Insurance. In any case the Evaluator will consider the ability of Municipal Bond
Investors Assurance Corporation to meet its commitments under the Trust's
insurance policy, including the commitment to issue Permanent Insurance. The
Evaluator intends to use a similar valuation method with respect to Securities
insured by the Trust if there is a significant risk of default and a resulting
decrease in the market value. For a description of the circumstances under which
a full or partial suspension of the right of Unit holders to redeem their Units
may occur, see 'Rights of Unit Holders--Redemption' in Part B.
If the Trustee does not exercise the right to obtain Permanent Insurance as
to any Defaulted Bonds in the Trust, it is the present intention of the Trustee,
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 party
other than the Trust, is effective so long as such Pre-insured Bond is
outstanding and the insurer of such Bond continues to fulfill its obligations.
Therefore, any such insurance may be considered to represent an element of
market value in regard to the
- ------------------------------------
* With respect to the evaluation of Bonds during the initial syndicate offering
period for such Bonds, the 'current offering price,' as determined by the
Evaluator, will normally be equal to the syndicate offering price as of the
Evaluation Time, unless the Evaluator determines that a material event has
occurred which it believes may result in the syndicate offering price not
accurately reflecting the market value of such Bonds, in which case the
Evaluator, in making its determination with respect to such Bonds, will
consider not only the syndicate offering price but also the factors described
in (2) and (3) herein.
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<PAGE>
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 Municipal
Bond Investors Assurance Corporation as long as the Bond is held in the Trust.
No value has been ascribed to the Municipal Bond Investors Assurance
Corporation insurance obtained by the Trust as of the date of this Prospectus.
The secondary market Public Offering Price of the Units of the Trust 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 purposes of
computation, Bonds will be deemed to mature on their expressed maturity dates
unless the Evaluator evaluates the price of the Bonds to a different date such
as a call date or a mandatory tender date, in which case the maturity will be
deemed to be such other date.
This method of sales charge computation will apply different sales charge
rates to each Bond in the Trust based upon the maturity of each such Bond in
accordance with the following schedule:
<TABLE>
<CAPTION>
SECONDARY MARKET
PERIOD SALES CHARGE
-----------------------------
PERCENTAGE OF
PUBLIC PERCENTAGE OF
YEARS TO MATURITY OFFERING NET AMOUNT
PER BOND PER BOND PRICE INVESTED
- ------------------------- -------------- -------------
<S> <C> <C>
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%
</TABLE>
A minimum sales charge of 1.0% of the Public Offering Price will be applied
to all secondary market unit purchases.
During the initial public offering period, purchasers of 250 Units or more
will be entitled to a volume discount from the Public Offering Price as set
forth in the table below:
<TABLE>
<CAPTION>
DISCOUNT FROM
PUBLIC OFFERING
NUMBER OF UNITS PRICE PER UNIT
- ------------------ ---------------
<S> <C>
250-499........... $ 2.50
500-999........... 7.50
1,000-1,999....... 15.00
2,000 or more..... 20.00
</TABLE>
Except as discussed under 'Distribution of Units' below, the above volume
discount will be the responsibility of the Selling Underwriter or dealer and
will apply on all purchases at any one time by the same person of Units in the
Trust in the amounts stated. Units held in the name of the spouse of the
purchaser or in the name of a child of the
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<PAGE>
purchaser under 21 years of age are deemed for the purposes hereof to be
registered in the name of the purchaser. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing Units for a single trust
estate or single fiduciary account.
Certain commercial banks are making Units of 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 intend to maintain a
market for the Units of the Trust and continuously to offer to purchase Units of
the Trust during the initial offering period at prices based upon the aggregate
offering price of the Securities in the Trust; and thereafter at prices based on
the aggregate bid price of the related Securities. After the initial offering
period the Sponsors' Repurchase Price shall be not less than the Redemption
Price plus accrued interest through the expected date of settlement. (See
'Rights of Unit Holders--Redemption--Computation of Redemption Price per Unit'
in Part B). There is no sales charge incurred when a Unit holder sells Units
back to the Sponsors. Any Units repurchased by the Sponsors may be reoffered to
the public by the Sponsors at the Public Offering Price at the time, plus
accrued interest.
If the supply of Units of either Series exceeds demand, or for some other
business reason, the Sponsors may discontinue purchases of Units of either
Series at prices based on the aggregate bid price of the Securities. The
Sponsors do not in any way guarantee the enforceability, marketability, or price
of any Security in the portfolio or of the Units of the Trust. In the event that
a market is not maintained for the Units of the Trust, a Unit holder desiring to
dispose of his Units may be able to do so only by tendering such Units to the
Trustee for redemption at the Redemption Price, which is based upon the
aggregate bid price of the underlying Securities. The aggregate bid price of the
Securities in 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' in Part B.
DISTRIBUTION OF UNITS
The Underwriters of the Units of the Trust are listed in the Underwriting
Account (see 'Underwriting Account' in Part A). It is the Underwriters'
intention to qualify Units of the Trust for sale in certain of the states and to
effect a public distribution of the Units solely through their own
organizations. However, Units may be sold to dealers who are members of the
National Association of Securities Dealers, Inc. at prices which represent a
concession equal to $30.00 per Unit from the related Public Offering Price
applicable to sales of fewer than 500 Units subject in each case to change from
time to time by the Agent for the Sponsors. Any volume discount (see 'Offering
Price' in Part B) offered to investors will be borne by the selling Underwriter
or dealer except that, during the initial public offering period, the Sponsors
may pay the selling Underwriter or dealer $2.50 per Unit for individual sales of
more than 500 Units.
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.
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<PAGE>
Underwriters and broker-dealers of the Trust, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsors a nominal award for each of their registered representatives who have
sold a minimum number of units of unit investment trusts created by the Sponsors
during a specified time period. In addition, at various times the Sponsors may
implement other programs under which the sales forces of Underwriters, brokers,
dealers, banks and/or others may be eligible to win other nominal awards for
certain sales efforts, or under which the Sponsors will reallow to any such
Underwriters, brokers, dealers, banks and/or others that sponsor sales contests
or recognition programs conforming to criteria established by the Sponsors, or
participate in sales programs sponsored by the Sponsors, an amount not exceeding
the total applicable sales charges on the sales generated by such person at the
public offering price during such programs. Also, the Sponsors in their
discretion may from time to time pursuant to objective criteria established by
the Sponsors pay fees to qualifying Underwriters, brokers, dealers, banks and/or
others for certain services or activities which are primarily intended to result
in sales of Units of the Trust. Such payments are made by the Sponsors out of
their own assets and not out of the assets of the Trust. These programs will not
change the price Unitholders pay for their Units or the amount that the Trust
will receive from the Units sold.
SPONSORS' AND UNDERWRITERS' PROFITS
As set forth under 'Public Offering--Offering Price' in Part B, the
Underwriters will receive gross commissions equal to the specified percentages
of the Public Offering Price of the Units of the Trust. The Sponsors will
receive from the Underwriters the excess of such gross sales commission over $35
per Unit from Underwriters underwriting 100 to 249 Units, will receive the
excess over $36 per Unit from Underwriters underwriting 250 to 499 Units, will
receive the excess over $37 per Unit from Underwriters underwriting 500 to 749
Units, will receive the excess over $38 per Unit from Underwriters underwriting
750 to 999 Units, will receive the excess over $39 per Unit from Underwriters
underwriting 1,000 or more Units and will receive the excess over $40 per Unit
from Underwriters who underwrite 15% of the Units of the Trust. In addition, the
Sponsors may, during the initial public offering period, pay any Underwriter an
additional $2.50 per Unit for sales to individual purchasers of 500 or more
Units. The Sponsors may also from time to time pay, in addition to the amounts
referenced above, an additional concession, in the form of cash or other
compensation, any Underwriter who underwrites or sells, during a specific
period, minimum dollar amounts of the Units of the Trust. In no event will such
additional concession paid by the Sponsors to the Underwriter exceed the
difference between the sales charge and the Underwriter's allowance in respect
of Units underwritten by the Underwriter. Such Units then may be distributed to
the public by the dealers at the Public Offering Price then in effect.
In addition, the Sponsors realize a profit or sustain a loss, as the case
may be, in the amount of any difference between the cost of the Securities to
the Trust (which is based on the aggregate offering price of the Securities on
the Date of Deposit) and the purchase price of such Securities to the Sponsors
(which is the cost of such Securities at the time they were acquired for the
account of the Trust). The Underwriters share in the profits, if any, described
in the preceding sentence. See 'Summary of Essential Financial Information' in
Part A. In addition, the Sponsors may realize profits or sustain losses with
respect to Bonds deposited in the Trust which were acquired from one or more of
the Sponsors or from underwriting syndicates of which they were members. During
the initial offering period, the Underwriters also may realize profits or
sustain losses as a result of fluctuations after the Date of Deposit in the
offering prices of the Securities and hence in the Public Offering Price
received by the Underwriters for Units. Cash, if any, made available to the
Sponsors prior to the settlement date for the purchase of Units of the Trust may
be used in the Sponsors' businesses, subject to the limitations of the
Securities Exchange Act of 1934 and may be of benefit to the Sponsors.
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The Sponsors may have participated as underwriters or as managers or
members of underwriting syndicates from which some of the aggregate principal
amount of the Bonds were acquired for the Trust in the amounts set forth in Part
A. The Sponsors have not purchased any of the Securities in the Trust from their
managed accounts.
In maintaining a market for the Units of the Trust (see 'Market for Units')
the Sponsors and Underwriters will also realize profits or sustain losses in the
amount of any difference between the price at which they buy Units and the price
at which they resell or redeem such Units and to the extent they earn sales
charges on resales.
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, each as
of the business day prior to the Date of Deposit, is set forth under 'Summary of
Essential Financial Information ' in Part A. Information regarding the estimated
monthly distributions of principal and interest to Unit holders of the Trust is
available from the Sponsors on request.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price. Estimated Net Interest
Income per Unit will vary with changes in fees and expenses of the Trustee and
the Evaluator and with principal prepayment, redemption, maturity, exchange or
sale of Bonds. The Public Offering Price per Unit will vary with changes in the
offering price of the Bonds. Estimated Current Return takes into account only
the interest payable on the Bonds and does not involve a computation of yield to
maturity or to an earlier redemption date nor does it reflect any amortization
of premium or discount from par value in the Bond's purchase price. Moreover,
because interest rates on Bonds purchased at a premium are generally higher than
current interest rates on newly issued bonds of a similar type with comparable
ratings, the Estimated Current Return per Unit may be affected adversely if such
Bonds are redeemed prior to their maturity. Therefore, there is no assurance
that the Estimated Current Return as set forth under 'Summary of Essential
Financial Information' in Part A will be realized in the future.
Estimated Long-Term Return is calculated using a formula that (i) takes
into consideration, and determines and factors in the relative weightings of,
the market values, yields (taking into account the amortization of premiums and
the accretion of discounts) and estimated retirements of all the Bonds in the
Trust 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 A will be realized in
the future.
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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. The Municipal Bond Investors
Assurance Corporation insurance obtained by the Trust is only effective as to
Bonds owned by and held in the Trust and, consequently, does not cover Bonds for
which the contract for purchase fails. A 'when issued' Bond will be covered
under the Municipal Bond Investors Assurance Corporation policy upon the
settlement date of the issue of such 'when issued' Bond. The Municipal Bond
Investors Assurance Corporation policy shall continue in force only with respect
to Bonds held in and owned by the Trust, and 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 standards which generally correspond to the standards it has established
for determining the insurability of new issues of municipal bonds. See 'Notes to
Portfolio' in Part A of this Prospectus.
By the terms of its policy, the Insurer will unconditionally guarantee 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 issues of small industrial development Bonds and
pollution control revenue Bonds, in the event of any acceleration of the due
date of principal by reason of mandatory or optional redemption (other than
mandatory sinking fund redemption), default or otherwise, the payments
guaranteed will be made in such amounts and at such times as would have been due
had there not been an acceleration by reason of mandatory or optional redemption
(other than a mandatory sinking fund redemption). The Insurer will be
responsible for such payments less any amounts received by the Trust from any
trustee for the Bond issuers or from any other source. Except as provided below,
the Municipal Bond Investors Assurance Corporation policy does not guarantee
payment on an accelerated basis, the payment of any redemption premium or the
value of the Units of the Trust. The Municipal Bond Investors Assurance
Corporation policy also does not insure against nonpayment of principal of or
interest on the Bonds resulting from the insolvency, negligence or any other act
or omission of the Trustee or other paying agent for the Bonds. However, with
respect to small issue industrial development Bonds and pollution control
revenue Bonds covered by the policy, the Insurer guarantees any accelerated
payments required to be made by or on behalf of an issuer of such Bonds if there
occurs pursuant to the terms of the Bonds an event which results in the loss of
the tax-exempt status of interest on such Bonds, including principal, interest
or premium payments payable thereon, if any, as and when required to be made by
or on behalf of the issuer pursuant to the terms of such Bonds. No assurance can
be given that the Municipal Bond Investors Assurance Corporation policy would
insure the payment of principal or interest on Bonds which is not required to be
paid by the issuer thereof because the Bonds were not validly issued. At the
respective times of issuance of the Bonds, opinions relating to the validity
thereof were rendered by bond counsel to the respective issuing authorities.
The Municipal Bond Investors Assurance Corporation insurance policy is
non-cancellable and will continue in force so long as the Trust is in existence
and the Securities described in the policy continue to be held in and owned by
the Trust (see 'The Trust--Insurance' in Part A of this Prospectus). Failure to
pay premiums on the Municipal Bond Investors Assurance Corporation policy
obtained by the Trust will not result in the cancellation of insurance but will
force the Insurer to take action against the Trustee to recover premium payments
due it. The Trustee in turn will be entitled to recover such payments from the
Trust.
The Municipal Bond Investors Assurance Corporation policy shall terminate
as to any Bond which has been redeemed from the Trust or sold by the Trustee on
the date of such redemption or on the settlement date of such sale,
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and the Insurer shall not have any liability under the policy as to any such
Bond thereafter. If the date of such redemption or the settlement date of such
sale occurs between a record date and a date of payment of any such Bonds, the
Municipal Bond Investors Assurance Corporation policy will terminate as to such
Bond on the business day next succeeding such date of payment. The termination
of the Municipal Bond Investors Assurance Corporation policy as to any Bond
shall not affect the Insurer's obligations regarding any other Bond in the Trust
or any other trust which has obtained a Municipal Bond Investors Assurance
Corporation insurance policy. The Municipal Bond Investors Assurance Corporation
policy will terminate as to all Bonds on the date on which the last of the Bonds
matures, is redeemed or is sold by the Trust.
Pursuant to an irrevocable commitment of the Insurer, 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 Bond) (the 'Permanent
Insurance') upon the payment of a single predetermined insurance premium from
the proceeds of the sale of such Bond. Accordingly, any Bond in the 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 were sold on an uninsured basis.
The Permanent Insurance premium with respect to each Bond in the Trust is
determined based upon the insurability of each Bond as of the Date of Deposit
and will not be increased or decreased for any change in the creditworthiness of
such Bond unless such Bond is in default as to payment of principal and/or
interest. In such event, the Permanent Insurance premium shall be subject to an
increase predetermined at the Date of Deposit and payable from the proceeds of
the sale of such Bond. See footnote 7 to the 'Summary of Essential Financial
Information' in Part A for the Trust for the cost of Permanent Insurance as of
the Date of Deposit.
Except as indicated below, insurance obtained by the Trust has no effect on
the price or redemption value of Units thereof. lt is the present intention of
the Evaluator to attribute a value to the insurance obtained by the Trust
(including the right to obtain Permanent Insurance) for the purpose of computing
the price or redemption value of Units thereof only if the Bonds covered by such
insurance are in default in payment of principal or interest or, in the
Sponsors' opinion, in significant risk of such default. The value of the
insurance will be equal to the difference between (i) the market value of a Bond
which is in default in payment of principal or interest or in significant risk
of such default assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium attributable to the purchase of Permanent Insurance
and the related custodial fee) and (ii) the market value of such Bonds not
covered by Permanent Insurance. See 'Public Offering--Offering Price' in this
Part B for a more complete description of the Evaluator's method of valuing
defaulted Bonds and Bonds which have a significant risk of default. Insurance
obtained by the issuer of a Bond or by parties other than the 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 the Insurer as long as the Bond is held in
the Trust. Insurance obtained by the issuer of a Bond or by other parties may be
considered to represent an element of market value in regard to the Bonds thus
insured, but the exact effect, if any, of this insurance on such market value
cannot be predicted.
In the event that interest on or principal of a Bond is due for payment but
is unpaid by reason of nonpayment by the issuer thereof, the Insurer will make
payments to its fiscal agent, State Street Bank and Trust Company, N.A., New
York, New York (the 'Fiscal Agent'), equal to such unpaid amounts of principal
and interest not later than one business day after the Insurer has been notified
by the Trustee that such nonpayment has occurred (but not earlier than
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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 (i) evidence of the Trust's right to receive
payment of such principal and interest and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of such
principal or interest then due for payment shall thereupon vest in the Insurer.
Upon payment by the Insurer of any principal or interest payments with respect
to any Bonds, the Insurer shall succeed to the rights of the owner of such Bonds
with respect to such payment.
The Insurer is the principal operating subsidiary of MBIA Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is a limited liability corporation
rather than a several liability association. The Insurer is domiciled in the
State of New York and licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico.
As of December 31, 1993, the Insurer had admitted assets of $3.1 billion
(audited), total liabilities of $2.1 billion (audited), and total capital and
surplus of $978 million (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1994, the Insurer had admitted assets of $3.2
billion (unaudited), total liabilities of $2.2 billion (unaudited), and total
capital and surplus of $998 million (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of the Insurer's year end financial statements prepared in
accordance with statutory accounting practices are available from the Insurer.
The address of the Insurer is 113 King Street, Armonk, New York 10504.
No representation is made herein as to the accuracy or adequacy of such
information or as to the absence of material adverse changes in such information
subsequent to the date thereof. The Sponsors are not aware that the information
herein is inaccurate or incomplete as of the date hereof.
Standard & Poor's Rating Group, a division of McGraw Hill ('Standard &
Poor's') has assigned to the Units and Bonds in the Trust a rating of 'AAA.'
Moody's Investors Service has assigned a rating of 'Aaa' to all of the Bonds in
the Trust, as insured. These ratings apply to the Bonds only while they are held
in the Trust. Also, these ratings reflect Standard & Poor's and Moody's current
assessments of the creditworthiness of the Insurer and their ability to pay
claims on their policies of insurance.
Battle Fowler, special counsel for the Sponsors, have rendered an opinion
to the effect that the payment of proceeds from the insurance will be excludible
from Federal gross income if, and to the same extent as, such interest would
have been so excludible if paid by the issuer of the defaulted obligations. See
'Tax Status' in this Part B.
The contract of insurance relating to the Trust, certain agreements
relating to the Permanent Insurance and the negotiations in respect thereof
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 the
Insurer's parent company, MBIA Inc. Although all issues contained in 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 Corporation's
'AAA' rating and/or Moody's Investors Service's 'Aaa' rating but were uninsured
and yet at the same time to have the protection of insurance of payment of
interest and principal on the Securities. There is, of course, no certainty that
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this result will be achieved. Any Pre-insured Bonds in the Trust (all of which
are rated 'AAA' by Standard & Poor's Corporation and/or 'Aaa' by Moody's
Investors Service, respectively) may or may not have a higher yield than
uninsured bonds rated 'AAA' by Standard & Poor's Corporation and/or 'Aaa' by
Moody's Investors Service, respectively. In selecting Pre-insured Bonds for the
portfolio of the Trust, the Sponsors have applied the criteria hereinbefore
described.
Because the Securities in the Trust are insured by Municipal Bond Investors
Assurance Corporation as to the payment of principal and interest, Standard &
Poor's Corporation has assigned its 'AAA' investment rating to the Units and
Bonds in the Trust and Moody's Investors Service has assigned a rating of 'Aaa'
to all of the Bonds in the Trust, as insured. See 'Statement of Condition--Notes
to Portfolio' in Part A. 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
Corporation or Moody's Investors Service 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
Interest income on the Bonds contained in the portfolio of the Trust is, in
the opinion of bond counsel to the issuing governmental authorities, which
opinion was rendered at the time of original issuance of the Bonds, excludible
from gross income under the Code. See 'The Trust' in Part A.
Gain (or loss) realized on sale, maturity, or redemption of the Bonds or on
sale or redemption of a Unit is, however, includible in gross income as capital
gain (or loss) for Federal, state and local income tax purposes assuming that
the Unit is held as a capital asset. Such gain (or loss) does not include any
amount received in respect of accrued interest. In addition, such gain (or loss)
may be long or short term depending on the holding period of the Units. Bonds
selling at a market discount tend to increase in market value as they approach
maturity when the principal amount is payable, thus increasing the potential for
taxable gain (or reducing the potential for loss) on their redemption, maturity,
or sale. Gain on the dispositon of a Bond purchased at a market discount
generally will be treated as ordinary income, rather than capital gain, to the
extent of accrued market discount. The deductibility of capital losses is
limited to the amount of capital gain; in addition, up to $3,000 of capital
losses of noncorporate Unit holders may be deducted against ordinary income.
Since the proceeds from sales of Bonds, under certain circumstances, may not be
distributed pro-rata, the Unit holder's taxable income for any year may exceed
their actual cash distributions in that year.
In the opinion of Battle Fowler, special counsel for the Sponsors, under
existing law:
The Trust is not an association taxable as a corporation for Federal
income tax purposes, and interest on the Bonds which is excludible from
regular Federal gross income under the Code, when received by the Trust,
will be excludible from the regular Federal gross income of the Unit
holders of the Trust. Any proceeds paid under the insurance policy
described above issued to the Trust with respect to the Bonds and any
proceeds paid under individual policies obtained by issuers of Bonds or
other parties which represent maturing interest on defaulted obligations
held by the Trust will be excludible from Federal gross income if, and to
the same extent as, such interest would have been so excludible if paid in
the normal course by the issuer of the defaulted obligations.
Each Unit holder will be considered the owner of a pro rata portion of
the Bonds and any other assets held in the Trust under the grantor trust
rules of Code Sections 671-679. Each Unit holder will be considered to have
received his pro rata share of income from Bonds held by the Trust on
receipt (or earlier accrual, depending on the Unit holder's method of
accounting and depending on the existence of any original issue discount)
by the Trust, and each Unit holder will have a taxable event when an
underlying Bond is disposed of (whether by sale,
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redemption, or payment at maturity) or when the Unit holder redeems or
sells his Units. Gain from a sale will be treated as short term or long
term capital gain depending on how long the Bond was held by the Trust. The
total tax basis (i.e., cost) of each Unit to a Unit holder is allocated
among each of the Bonds held in the Trust (in accordance with the
proportion of the Trust comprised by each such Bond) in order to determine
his per Unit tax basis for each Bond, and the tax basis reduction
requirements of the Code relating to amortization of bond premium will
apply separately to the per Unit cost of each such Bond. Therefore, under
some circumstances, a Unit holder may realize taxable gain when his Units
are sold or redeemed for an amount equal to his original cost. No deduction
is allowed for the amortization of bond premium on tax-exempt bonds such as
the Bonds. None of the interest received from the portfolio is subject to
the alternative minimum tax for individuals; however, some or all of the
interest received from the portfolio may be includible in the calculation
of a corporation's alternative minimum tax.
For Federal income tax purposes, when a Bond is sold, a Unit holder
may exclude from his share of the amount received any amount that
represents accrued interest but may not exclude amounts attributable to
market discount. Thus, when a Bond is sold by the Trust, taxable gain or
loss will equal the difference between (i) the amount received (excluding
the portion representing accrued interest) and (ii) the adjusted basis
(including any accrued original issue discount, limited in the case of
Bonds issued after June 8, 1980 to the portion earned from the date of
acquisition, as discussed below). In the case of Bonds acquired at a market
discount, gain will be treated as ordinary income to the extent of accrued
market discount.
A Unit holder may also realize taxable gain or loss when a Unit is
sold or redeemed. Taxable gain will result if a Unit is sold or redeemed
for an amount greater than its adjusted basis to the Unit holder. The
amount received when a Unit is sold or redeemed is allocated among all the
Bonds in the Trust in the same manner as when the Trust disposes of Bonds,
and the Unit holder may exclude accrued interest, including the earned
portion of any original issue discount, but not amounts attributable to
market discount. In the case of Bonds acquired at a market discount gain
will be treated as ordinary income to the extent of accrued market
discount. The return of a Unit holder's tax basis is otherwise a tax-free
return of capital.
If the Trust purchases any units of a previously issued series then,
based on the opinion of counsel with respect to such series, the Trust's
pro rata ownership interest in the bonds of such series (or any previously
issued series) will be treated as though it were owned directly by the
Trust.
Under the income tax laws of the State and City of New York, the Trust
is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unit holders.
A Unit holder who is a non-resident of New York will not be subject to
New York State or City income tax on any interest or gain derived from his
interest in the Trust's assets or upon any gain from the sale of his Units
except to the extent that such interest or gain is from property employed
in a business, trade, profession or occupation carried on by him in the
State of New York. An individual Unit holder who resides in New York State
or City will not be subject to State or City tax on interest income derived
from the Bonds held in the Trust (except in certain limited circumstances),
although he will be subject to New York State and, depending upon his place
of residence, City tax with respect to any gains realized when Bonds are
sold, redeemed or paid at maturity or when any such Units are sold or
redeemed. In addition, an individual Unit holder residing in New York State
or City will not be subject to State or City income tax on any proceeds
paid under the insurance policy or policies described above with respect to
the Trust which represent maturing interest on defaulted obligations held
by the Trustee if, and to the same extent as, such interest would have been
so excludible if paid by the issuer of the defaulted obligations. A New
York State or City resident should determine his basis and holding period
for his Units for New York State and City tax purposes in the same manner
as for Federal tax purposes.
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The above opinion of Battle Fowler as to the tax status of the Trust is not
affected by the provision of the Trust Agreement that authorizes the acquisition
of Replacement Bonds or by the implementation of the option automatically to
reinvest principal and interest distributions from the Trust pursuant to the
Automatic Accumulation Plan, described under 'Automatic Accumulation Account' in
this Part B.
Among other things, the Code provides for the following: (1) interest on
certain private activity bonds issued after August 7, 1986 is included in the
calculation of the individual's alternative minimum tax (currently taxed at a
rate of up to 28%); none of the Bonds in 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 institution's interest expense allocable to tax-exempt interest
on tax-exempt bonds acquired after August 7, 1986; (4) the amount of the
deduction allowed to property and casualty insurance companies for underwriting
loss is decreased by an amount determined with regard to tax-exempt interest
income and the deductible portion of dividends received by such companies; (5)
all taxpayers are required to report for informational purposes on their Federal
income tax returns the amount of tax-exempt interest they receive; (6) an issuer
must meet certain requirements on a continuing basis in order for interest on a
tax-exempt bond to be tax-exempt, with failure to meet such requirements
resulting in the loss of tax exemption; and (7) a branch profits tax on U.S.
branches of foreign corporations is implemented which, because of the manner in
which the branch profits tax is calculated, may have the effect of subjecting
the U.S. branch of a foreign corporation to Federal income tax on the interest
on bonds otherwise exempt from such tax.
The Superfund Revenue Act of 1986 (the 'Superfund Act') imposes a
deductible, broad-based tax on a corporation's alternative minimum taxable
income (before net operating losses and any deduction for the tax) at a rate of
$12 per $10,000 (0.12%) of alternative minimum taxable income in excess of
$2,000,000. The tax is imposed for tax years beginning before 1996, even if the
corporation pays no alternative minimum tax. For purposes of the Superfund Act,
alternative minimum taxable income includes interest on all tax-exempt bonds to
the same extent and in the same manner as the Code. The Superfund Act does not
impose a tax on taxpayers other than corporations.
Section 86 of the Code provides that a portion of social security benefits
is includible in taxable income for taxpayers whose 'modified adjusted gross
income' combined with 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. Under Section 86 of the Code, interest on tax-exempt bonds is to be
added to adjusted gross income for purposes of determining whether an
individual's income exceeds the base amount above which a portion of the
benefits would be subject to tax.
In addition, certain 'S Corporations', with accumulated earnings and
profits from Subchapter C years, may be subject to minimum tax on excess passive
income, including tax-exempt interest, such as interest on the Bonds.
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 issued'
Bonds) were to be rendered by bond counsel to the issuing governmental
authorities. Neither the 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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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 acquire Units may be subject to a reduction in the amount of interest
expense that would otherwise be allowable as a deduction for Federal income tax
purposes. Investors with questions regarding this issue should consult with
their tax advisors.
The 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 after June 9,
1980 that are redeemed prior to maturity, the difference between the Trust's
basis, as adjusted, and the amount received will be taxable gain or loss to the
Unit holders.
Unit holders should consult their own tax advisors with respect to the
state and local tax consequences of owning original issue discount bonds. It is
possible that under applicable provisions governing determination of such state
and local taxes, interest on tax-exempt bonds such as any Bonds issued with
original issue discount may be deemed to be received in the year of accrual even
though there is no corresponding cash payment.
If a Unit holder's tax cost for his pro rata interest in a Bond exceeds his
pro rata interest in the Bond's face amount, the Unit holder will be considered
to have purchased his pro rata interest in the Bond at a 'premium.' The Unit
holder will be required to amortize any premium relating to his pro rata
interest in a Bond prior to the maturity of the Bond. Amortization of premium on
a Bond will reduce a Unit holder's tax basis for his pro rata interest in the
Bond, but will not result in any deduction from the Unit holder's income. Thus,
for example, a Unit holder who purchases a pro rata interest in a Bond at a
premium and resells it at the same price will recognize taxable gain equal to
the portion of the premium that was amortized during the period the Unit holder
is considered to have held such interest.
Bond premium must be amortized under the method the Unit holder regularly
employs for amortizing bond premium (assuming such method is reasonable). With
respect to a callable bond, the premium must be computed with respect to the
call price and be amortized to the first call date (and successively to later
call dates based on the call prices for those dates).
In the case of Bonds that are private activity bonds, the opinions of bond
counsel to the respective issuing authorities indicate that interest on such
Bonds is exempt from regular federal income tax. However, interest on such Bonds
will not be exempt from regular federal income tax for any period during which
such Bonds are held by a 'substantial user' of the facilities financed by the
proceeds of such Bonds or by a 'related person' thereof within the meaning of
the Code. Therefore, interest on any such Bonds allocable to a Unit holder who
is such a 'substantial user' or 'related person' thereof will not be tax-exempt.
Furthermore, in the case of Bonds that qualify for the 'small issue' exemption,
the 'small issue' exemption will not be available or will be lost if, at any
time during the three-year period beginning on the later of the date the
facilities are placed in service or the date of issue, all outstanding tax-
exempt IRBs, together with a proportionate share of any present issue, of an
owner or principal user (or related person) of the facilities was determined to
have exceeded $40,000,000 on the date of issue. In the case of Bonds issued
under the $10,000,000 'small issue' exemption, interest on such Bonds will
become taxable if the face amount of the Bonds plus certain capital expenditures
exceeds $10,000,000 within 3 years of the date of issue of such Bonds.
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In addition, a Bond can lose its tax-exempt status as a result of other
subsequent but unforeseeable events such as prohibited 'arbitrage' activities by
the issuer of the Bond or the failure of the Bond to continue to satisfy the
conditions required for the exemption of interest thereon from regular federal
income tax. No investigation has been made as to the current or future owners or
users of the facilities financed by the Bonds, the amount of such persons'
outstanding tax-exempt private activity bonds, or the facilities themselves, and
no assurance can be given that future events will not affect the tax-exempt
status of the Bonds. Investors should consult their tax advisors for advice with
respect to the effect of these provisions on their particular tax situation.
THE EXEMPTION OF INTEREST ON MUNICIPAL OBLIGATIONS FOR FEDERAL INCOME TAX
PURPOSES DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME TAX LAWS OF
ANY STATE OR LOCAL GOVERNMENT. INTEREST INCOME DERIVED FROM THE BONDS IS NOT
EXCLUDED FROM NET INCOME IN DETERMINING NEW YORK STATE OR NEW YORK CITY
FRANCHISE TAXES ON CORPORATIONS OR FINANCIAL INSTITUTIONS. THE LAWS OF SUCH
STATES AND LOCAL GOVERNMENTS VARY WITH RESPECT TO THE TAXATION OF SUCH
OBLIGATIONS.
From time to time, proposals have been introduced before Congress, the
purpose of which is to restrict or eliminate the Federal income tax exemption
for interest on debt obligations similar to the Bonds in 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.
The Revenue Reconciliation Act of 1993 was recently enacted. This Act
increases maximum marginal tax rates for individuals and corporations, extends
the authority to issue certain categories of tax-exempt bonds (qualified small
issue bonds and qualified mortgage bonds), expands a category of qualified
tax-exempt bonds (bonds for high-speed intercity rail facilities), limits the
availability of capital gain treatment for tax-exempt bonds purchased at a
market discount, and makes a variety of other changes. Prospective investors are
urged to consult their own tax advisors as to the effect of this Act on a
possible investment in the Trust.
In South Carolina v. Baker, the U.S. Supreme Court held that the federal
government may constitutionally require states to register bonds they issue and
subject the interest on such bonds to federal income tax if not registered, and
that there is no constitutional prohibition against the federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the federal government to regulate and control
bonds such as the Bonds in the Trust and to tax interest on such bonds in the
future. The decision does not, however, affect the current exemption from
taxation of the interest earned on the Bonds in the Trust in accordance with
Section 103 of the Code.
The opinions of counsel to the issuing governmental authorities to the
effect that interest on the Bonds is exempt from regular federal income tax may
be limited to law existing at the time the Bonds were issued, and may not apply
to the extent that future changes in law, regulations or interpretations affect
such Bonds. Investors are advised to consult their own advisors for advice with
respect to the effect of any legislative changes.
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RIGHTS OF UNIT HOLDERS
CERTIFICATES
Ownership of Units of the Trust is evidenced by registered certificates
executed by the Trustee and the Sponsors. The Trustee is authorized to treat as
the record owner of Units that person who is registered as such owner on the
books of the Trustee. Certificates are transferable by presentation and
surrender to the Trustee properly endorsed and accompanied by a written
instrument or instruments of transfer.
Certificates may be issued in denominations of one Unit or any multiple
thereof. A Unit holder may be required to pay $2.00 per certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. For new certificates issued to replace
destroyed, stolen or lost certificates, the Unit holder must furnish indemnity
satisfactory to the Trustee and must pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for replacement.
DISTRIBUTION OF INTEREST AND PRINCIPAL
While interest will be distributed semi-annually or monthly, depending on
the method of distribution chosen, principal, including capital gains, will be
distributed only semi-annually; provided, however, that, other than for purposes
of redemption, no distribution need be made from the Principal Account if the
balance therein is less than $1.00 per Unit then outstanding, and that, if at
any time the pro rata share represented by the Units of cash in the Principal
Account exceeds $10.00 as of a Monthly Record Date, the Trustee shall, on the
next succeeding Monthly Distribution Date, distribute the Unit holder's pro rata
share of the balance of the Principal Account. Interest (semi-annually or
monthly) and principal, including capital gains, if any (semi-annually),
received by 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 A,
'The Trust--Expenses and Charges' and 'Rights of Unit Holders--Redemption' in
Part B.
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 (other than amounts representing failed contracts as previously
discussed) represented by each Unit thereof will be computed by the Trustee each
month as of the Record Date. See 'Summary of Essential Financial Information' in
Part A. 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. See
'Summary of Essential Financial Information' in Part A. 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.
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Purchasers of Units who desire to receive distributions on a monthly basis
may elect to do so at the time of purchase during the initial public offering
period. Those indicating no choice will be deemed to have chosen the semi-annual
distribution plan. Record dates for monthly distributions will be the fifteenth
day of the preceding month and record dates for semi-annual distributions will
be the fifteenth day of May and November.
Details of estimated interest distributions under the payment plans, on a
per Unit basis, appear in footnote 9 to the 'Summary of Essential Financial
Information' in Part A.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Each April, the Trustee will furnish each Unit holder a card to be
returned together with the Certificate by May 15 of such year if the Unit holder
desires to change his plan of distribution, and the change will become effective
on May 16 of such year for the ensuing twelve months. For a discussion of
redemption of Units, see 'Rights of Unit Holders--Redemption--Tender of Units'
in Part B.
The Trustee will, as of the fifteenth day of each month, deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust as of the
first day of such month. See 'The Trust--Expenses and Charges' in Part B. The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of 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' in
Part B. Funds which are available for future distributions, payments of expenses
and redemptions are in accounts which are non-interest bearing to the Unit
holders and are available for use by the Trustee pursuant to normal banking
procedures.
Because interest on Securities in 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 order to eliminate fluctuations in monthly interest distributions
resulting from such variances during the first year of the Trust, the Trustee is
required by the Trust Agreement to advance such amounts as may be necessary to
provide monthly interest distributions of approximately equal amounts. In
addition, the Trustee has agreed to advance sufficient funds to the Trust in
order to reduce the amount of time before monthly distributions of interest to
Unit holders commence. The Trustee will be reimbursed, without interest, for any
such advances from funds available from the Interest Account of the Trust. The
Trustee's fee takes into account the costs attributable to the outlay of capital
needed to make such advances.
In order to acquire certain of the Securities subject to contract, it may
be necessary to pay on the settlement dates for delivery of such Securities
amounts covering accrued interest on such Securities which exceed the amounts
paid by Unit holders (which excess will be made available under a letter of
credit furnished by the Sponsors on the Date of Deposit). The Trustee has agreed
to pay for any amounts necessary to cover any such excess and will be reimbursed
therefor (without interest) when funds become available from interest payments
on the particular Securities with respect to which such payments may have been
made. Also, since interest on such Securities in the portfolio of the Trust (see
'The Portfolio' in Part A) does not begin accruing as tax-exempt interest income
to the benefit of Unit holders until such Bonds' respective dates of delivery
(accrued interest prior to delivery being treated under the Code as a return of
principal), the Trustee will, in order to cover interest treated as a return of
principal, adjust its fee downward
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in an amount equal to the amount of interest that would have so accrued as
tax-exempt interest (if not treated as a return of principal) on such Securities
between the date of settlement for the Units and such dates of delivery.
In addition, because of the varying interest payment dates of the
Securities comprising the Trust portfolio, accrued interest at any point in
time, subsequent to the recovery of any advancements of interest made by the
Trustee, 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 holder either
redeems or sells such Unit or until the Trust is terminated.
EXPENSES AND CHARGES
Initial Expenses
At no cost to the Trust, the Sponsors have borne all the expenses of
creating and establishing the Trust and the Underwriting Account, including the
cost of the initial preparation, printing and execution of the Trust Agreement
and the certificates for Units, the fees of the Evaluator during the initial
public offering, legal expenses, advertising and selling expenses, expenses of
the Trustee and other out-of-pocket expenses.
Fees
The Trustee's, Sponsors' and Evaluator's fees are set forth under the
'Summary of Essential Financial Information' in Part A. The Sponsors' fee, which
is earned for portfolio supervisory services, is based on the face amount of
Securities in the Trust at December 1 of each year. The Sponsors' fee, which is
not to exceed the maximum amount set forth under the 'Summary of Essential
Financial Information' for the Trust, may exceed the actual costs of providing
portfolio supervisory services for the Trust, but at no time will the total
amount the Sponsors receive for portfolio supervisory services rendered to all
series of Empire State Municipal Exempt Trust in any calendar year exceed the
aggregate cost to them of supplying such services in such year.
The Trustee will receive for its ordinary recurring services to the Trust
an annual fee in the amount set forth in the 'Summary of Essential Financial
Information' for the Trust; provided, however, that such fees may be adjusted as
set forth under the 'Summary of Essential Financial Information'. There is no
minimum fee and, except as hereinafter set forth, no maximum fee. For a
discussion of certain benefits derived by the Trustee from the Trust's funds,
see 'Rights of Unit Holders--Distribution of Interest and Principal' in Part B.
For a discussion of the services performed by the Trustee pursuant to its
obligations under the Trust Agreement, reference is made to the material set
forth under 'Rights of Unit Holders' in Part B.
The Trustee's and Evaluator's fees are payable monthly on or before each
Distribution Date and the Sponsors' annual fee is payable annually on December
1, each from the Interest Account to the extent funds are available and then
from the Principal Account. These fees may be increased without approval of the
Unit holders by amounts not exceeding proportionate increases in consumer prices
for services as measured by the United States Department of Labor's Consumer
Price Index entitled 'All Services Less Rent'; except no such increase in the
Trustee's fee will be so made for the sole purpose of making up any downward
adjustment therein as described in 'Summary of Essential Financial Information'.
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.
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Insurance Premiums
The cost of the Municipal Bond Investors Assurance Corporation insurance
obtained by the Trust, based on the aggregate amount of Bonds in the Trust as of
the Date of Deposit, is set forth in the 'Summary of Essential Financial
Information'. Premiums, which are obligations of the Trust, are payable monthly
by the Trustee on behalf of the Trust. As Securities in the portfolio mature,
are redeemed by their respective issuers or are sold by the Trustee, the amount
of the premium will be reduced in respect of those Securities no longer owned by
and held in the 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 Municipal Bond
Investors Assurance Corporation Pre-insured Bonds or Municipal Bond Insurance
Association Pre-insured Bonds. The premium payable for Permanent Insurance and
the related custodial fee will be paid solely from the proceeds of the sale of a
Bond from the Trust in the event the Trustee exercises the right to obtain
Permanent Insurance on such Bond.
OTHER CHARGES
The following additional charges are or may be incurred by the Trust: all
expenses (including audit and counsel fees) of the Trustee incurred in
connection with its activities under the Trust Agreement, including annual audit
expenses by independent public accountants selected by the Sponsors (so long as
the Sponsors maintain a secondary market, the Sponsors will bear any audit
expense which exceeds 50 cents per Unit), the expenses and costs of any action
undertaken by the Trustee to protect the Trust and the rights and interests of
the Unit holders; fees of the Trustee for any extraordinary services performed
under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without willful misconduct, bad faith, or gross
negligence on its part, arising out of or in connection with its acceptance or
administration of the Trust; and all taxes and other governmental charges
imposed upon the Securities or any part of the Trust (no such taxes or charges
are being levied or made or, to the knowledge of the Sponsors, contemplated).
The above expenses, including the Trustee's fee, when paid by or owing to the
Trustee, are secured by a lien on the Trust. In addition, the Trustee is
empowered to sell Securities in order to make funds available to pay all
expenses.
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, purchase of Replacement
Bonds, redemptions of Units, the amount of any 'when issued' interest treated as
a return of capital and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar amount
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representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (3) a list of the Securities held and the number of
Units outstanding on the last business day of such calendar year; (4) the
Redemption Price per Unit based upon the last computation thereof made during
such calendar year; and (5) amounts actually distributed during such calendar
year from the Interest Account and from the Principal Account, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
The Trustee shall keep available for inspection by Unit holders at all
reasonable times during usual business hours, books of record and account of its
transactions as Trustee including records of the names and addresses of Unit
holders of the Trust, certificates issued or held, a current list of Securities
in 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 charged by the Sponsors or
the Trustee. Units redeemed by the Trustee will be cancelled.
Certificates for Units to be redeemed must be delivered to the Trustee and
must be properly endorsed and accompanied by a written instrument of transfer.
Thus, redemption of Units cannot be effected until certificates representing
such Units have been delivered to the person seeking redemption (see 'Rights of
Unit Holders--Certificates' in Part B). Unit holders must sign exactly as their
names appear on the face of the certificate with signature(s) guaranteed by an
officer of a national bank or trust company, a member firm of either the New
York, Midwest or Pacific Stock Exchange, or in such other manner as may be
acceptable to the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority.
Within seven calendar days following such tender, or if the seventh
calendar day is not a business day, on the first business day prior thereto, the
Unit holder will be entitled to receive in cash an amount for each Unit tendered
equal to the Redemption Price per Unit computed as of the Evaluation Time set
forth in the 'Summary of Essential Financial Information' 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' in Part B.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the Principal
Account. The Trustee is empowered to sell Securities in order to make funds
available for redemption. Such sales, if required, could result in a sale of
Securities by the Trustee at a loss. To the extent Securities are sold, the size
and diversity of the Trust will be reduced.
If the Trustee exercises the right to obtain Permanent Insurance on a Bond
in the Trust, such Bond will be sold from the Trust on an insured basis. In the
event the Trustee does not exercise the right to obtain Permanent Insurance on a
Bond, such Bond will be sold from the Trust on an uninsured basis, since the
Municipal Bond Investors Assurance
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<PAGE>
Corporation 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 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' in Part B for the effect of selling Defaulted Bonds
to meet redemption requests.
The Trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or during which trading on that Exchange is restricted or
during which (as determined by the Securities and Exchange Commission by rule or
regulation) an emergency exists as a result of which disposal or evaluation of
the underlying Bonds is not reasonably practicable, or for such other periods as
the Securities and Exchange Commission has by order permitted.
Because insurance obtained by the 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, 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 Trust is in default in payment of principal or
interest or in significant risk of such default. No assurances can be given that
the Securities and Exchange Commission will permit the Sponsors to suspend the
rights of Unit holders to redeem their Units, and without the suspension of such
redemption rights when faced with excessive redemptions the Sponsors may not be
able to preserve the benefits of the 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, while the Public Offering Price
of Units during the initial offering period is determined on the basis of the
offering prices of the Securities, both as of the Evaluation Time on the day any
such determination is made. The bid prices of the Securities may be expected to
be less than the offering prices. This Redemption Price per Unit is each Unit's
pro rata share, determined by the Trustee, of: (1) the aggregate value of the
Securities in 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 (other than cash covering contracts to purchase Securities),
and (3) accrued and unpaid interest on the Securities as of the date of
computation, less (a) amounts representing taxes or governmental charges payable
out of 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 (1) on the
basis of current bid prices for the Securities, (2) if bid prices are not
available for any Securities, on the basis of current bid prices for comparable
bonds, (3) by appraisal, or (4) by any combination of the above. In determining
the Redemption Price per Unit no value will be assigned to the portfolio
insurance obtained by the 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--Offering Price' in this Part B.
The difference between the bid and offering prices of the Securities may be
expected to average 1 1/2% of face amount. In the case of actively traded bonds,
the difference may be as little as 1/2 of 1%, and in the case of inactively
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traded bonds such difference usually will not exceed 3%. On the business day
prior to the date of this Prospectus, the aggregate bid side evaluation was
lower than the aggregate offering side evaluation by the amount set forth in
footnote 6 to the 'Portfolio'. For this reason, among others, the price at which
Units may be redeemed could be less than the price paid by the Unit holder. On
the Date of Deposit the aggregate current offering price of such Securities per
Unit exceeded the bid price of such Securities per Unit by the amount set forth
under 'Summary of Essential Financial Information'.
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' in this Part B). Units held by
the Sponsors may be tendered to the Trustee for redemption as any other Units,
provided that the Sponsors shall not receive for Units purchased as set forth
above a higher price than they paid, plus accrued interest.
The offering price of any Units resold by the Sponsors will be the Public
Offering Price determined in the manner provided in this Prospectus (see 'Public
Offering--Offering Price' in Part B). Any profit resulting from the resale of
such Units will belong to the Sponsors which likewise will bear any loss
resulting from a lower offering or redemption price subsequent to its
acquisition of such Units (see 'Public Offering--Sponsors' and Underwriters'
Profits' in this Part B).
EXCHANGE OPTION
The Sponsors of the series of Empire State Municipal Exempt Trust,
(including the series of Municipal Exempt Trust, the predecessor trust to Empire
State Municipal Exempt Trust) (the 'Exchange Trusts') are offering Unit holders
of the Exchange Trusts for which the Sponsors are maintaining a secondary market
an option to exchange a Unit of any series of the Exchange Trusts for a Unit of
a different series of the Exchange Trusts being offered by the Sponsors (other
than in the initial offering period) at a Public Offering Price generally based
on the bid prices of the underlying Securities divided by the number of Units
outstanding (see 'Public Offering--Markets for Units') plus a fixed sales charge
of $15 per Unit (in lieu of the normal sales charge). However, a Unit holder
must have held his Unit for a period of at least six months in order to exercise
the exchange option or agree to pay a sales charge based on the greater of $15
per Unit or an amount which together with the initial sales charge paid in
connection with the acquisition of Units being exchanged equals the normal sales
charge of the series into which the investment is being converted, determined as
of the date of the exchange. Such exchanges will be effected in whole Units
only. Any excess proceeds from the Units being surrendered will be returned, and
the Unit holder will not be permitted to advance any new money in order to
complete an exchange. The Sponsors reserve the right to modify, suspend or
terminate this plan at any time without further notice to the Unit holders. In
the event the exchange option is not available to a Unit holder at the time he
wishes to exercise it, the Unit holder will be immediately notified and no
action will be taken with respect to his Units without further instructions from
the Unit holder.
Unit holders are urged to consult their own tax advisors as to the tax
consequences of exchanging Units.
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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 Investors Service, Inc. (Aaa, Aa, A or Baa) or Standard &
Poor's Corporation (AAA, AA, A or BBB) or will be unrated bonds which at the
time of purchase are judged by the Empire Builder's investment advisor to be of
comparable quality to bonds rated within such four highest grades. It is a
fundamental policy of the Empire Builder that under normal market conditions at
least 90% of the income distributed to its shareholders will be exempt from
Federal income tax, New York State and New York City personal income taxes.
However, during times of adverse market conditions, when the Empire Builder is
investing for temporary defensive purposes in obligations other than New York
tax-exempt bonds, more than 10% of the Empire Builder's income distributions
could be subject to Federal income tax, New York State and/or New York City
income taxes, as described in the current prospectus relating to the Empire
Builder (the 'Empire Builder Prospectus'). Glickenhaus & Co. ('Glickenhaus'), a
sponsor of the Trust, acts as the investment adviser and distributor for the
Empire Builder.
Each Unit holder may request from The Bank of New York (the 'Plan Agent'),
a copy of the Empire Builder Prospectus describing the Empire Builder and a form
by which such Unit holder may elect to become a participant ('Participant') in
the Plan. Thereafter, as directed by such person, distributions on the
Participant's Units will, on the applicable distribution date, automatically be
applied as of that date by the Trustee to purchase shares (or fractions thereof)
of the Empire Builder at a net asset value as computed as of the close of
trading on the New York Stock Exchange on such date, as described in the Empire
Builder Prospectus. Unless otherwise indicated, new Participants in the Empire
Builder Plan will be deemed to have elected the monthly distribution plan with
respect to their Units. Confirmations of all transactions undertaken for each
Participant in the Plan will be mailed to each Participant by the Plan Agent
indicating distributions and shares (or fractions thereof) of the Empire Builder
purchased on his behalf. A Participant may at any time prior to ten days
preceding the next succeeding distribution date, by so notifying the Plan Agent
in writing, elect to terminate his participation in the Plan and receive future
distributions on his Units in cash. There will be no charge or other penalty for
such termination. The Sponsors, the Trustee, the Empire Builder and Glickenhaus,
as investment advisor for Empire Builder, each will have the right to terminate
this Plan at any time for any reason. The reinvestment of distributions from the
Trust through the Plan will not affect the income tax status of such
distributions. For more complete information about investing in the Empire
Builder through the Plan, including charges and expenses, return the enclosed
card for a copy of the Empire Builder Prospectus. Read it carefully before you
decide to participate.
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[ALTERNATE PAGE]
AUTOMATIC ACCUMULATION ACCOUNT
For Unit holders of the Trust who are clients of Lebenthal & Co., Inc., the
Sponsors have entered into an arrangement (the 'Plan') with Lebenthal New York
Municipal Bond Fund (the 'Bond Fund') which permits Unit holders of the Trust to
elect to have distributions from Units in the Trust automatically reinvested in
shares of the Bond Fund. The Bond Fund is an open-end, non-diversified
investment company whose investment objective is to maximize current income
exempt from regular Federal income tax, and from New York State and New York
City income taxes, consistent with preservation of capital and with
consideration given to opportunities for capital gain. It is the policy of the
Bond Fund to invest primarily in long term investment grade tax-exempt
securities the interest income from which is exempt from such taxes.
The Bond Fund has an investment objective which differs in certain respects
from that of the Trust. The bonds purchased by the Bond Fund will be of
'investment grade' quality--that is, at the time of purchase by the Bond Fund,
such bonds either will be rated not lower than the four highest ratings of
either Moody's Investors Service, Inc. (Aaa, Aa, A or Baa) or Standard & Poor's
Corporation (AAA, AA, A or BBB) or will be unrated bonds which at the time of
purchase are judged by the Bond Fund's investment advisor to be of comparable
quality to bonds rated within such four highest grades. It is a fundamental
policy of the Bond Fund that under normal market conditions at least 80% of the
income distributed to its shareholders will be exempt from regular Federal
income tax, and from New York State and New York City personal income taxes.
However, during times of adverse market conditions, more than 20% of the Bond
Fund's income distributions could be subject to Federal income tax, New York
State and/or New York City income taxes, as described in the current prospectus
relating to the Bond Fund (the 'Bond Fund Prospectus'). Lebenthal & Co., Inc., a
sponsor of the Trust, acts as the manager and distributor for the Bond Fund.
Each Unit holder may request from The Bank of New York (the 'Plan Agent'),
a copy of the Bond Fund Prospectus describing the Bond Fund and a form by which
such Unit holder may elect to become a participant ('Participant') in the Plan.
Thereafter, as directed by such person, distributions on the Participant's Units
will, on the applicable distribution date, automatically be applied as of that
date by the Trustee to purchase shares (or fractions thereof) of the Bond Fund
at a net asset value as computed as of the close of trading on the New York
Stock Exchange on such date, as described in the Bond Fund Prospectus. Unless
otherwise indicated, new Participants in the Bond Fund Plan will be deemed to
have elected the monthly distribution plan with respect to their Units.
Confirmations of all transactions undertaken for each Participant in the Plan
will be mailed to each Participant by the Plan Agent indicating distributions
and shares (or fractions thereof) of the Bond Fund purchased on his behalf. A
Participant may at any time prior to ten days preceding the next succeeding
distribution date, by so notifying the Plan Agent in writing, elect to terminate
his participation in the Plan and receive future distributions on his Units in
cash. There will be no charge or other penalty for such termination. The
Sponsors, the Trustee, the Bond Fund and Lebenthal & Co. Inc., as manager for
the Bond Fund, each will have the right to terminate this Plan at any time for
any reason. The reinvestment of distributions from the Trust through the Plan
will not affect the income tax status of such distributions. For more complete
information about investing in the Bond Fund through the Plan, including charges
and expenses, return the enclosed card for a copy of the Bond Fund Prospectus.
Read it carefully before you decide to participate.
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<PAGE>
SPONSORS
Glickenhaus and Lebenthal are the Sponsors of Empire State Municipal Exempt
Trust, Series 10 and all subsequent series.
Glickenhaus, a New York limited partnership, is engaged in the underwriting
and securities brokerage business, and in the investment advisory business. It
is a member of the New York Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. and is an associate member of the American Stock
Exchange. Glickenhaus acts as a sponsor for successive Series of The Municipal
Insured National Trusts and for the prior series of Empire State Municipal
Exempt Trust including those sold under the name of Municipal Exempt Trust, New
York Exempt Series 1, New York Series 2 and New York Series 3. Glickenhaus, in
addition to participating as a member of various selling groups of other
investment companies, executes orders on behalf of investment companies for the
purchase and sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
Lebenthal, a New York corporation originally organized as a New York
partnership in 1925, has been buying and selling municipal bonds for its own
account as a dealer for over 67 years; Lebenthal also buys and sells securities
as an agent and participates as an underwriter in public offerings of municipal
bonds. It acted as a sponsor of Empire State Tax Exempt Bond Trust, Series 8 and
successive Series of The Municipal Insured National Trust through Series 28.
Lebenthal is registered as a broker/dealer with the Securities and Exchange
Commission and various state securities regulatory agencies and is a member of
the National Association of Securities Dealers, Inc. and Securities Investors
Protection Corp.
Limitations on Liability
The Sponsors are jointly and severally liable for the performance of their
obligations arising from their responsibilities under 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,
gross negligence or reckless disregard for their obligations and duties. See
'The Trust--Portfolio' and 'Sponsors--Responsibility' in Part B.
Responsibility
The Trustee shall sell, for the purpose of redeeming Units tendered by any
Unit holder and for the payment of expenses for which funds are not available,
such of the Bonds in a list furnished by the Sponsors as the Trustee in its sole
discretion may deem necessary. In the event the Trustee does not exercise the
right to obtain Permanent Insurance on a Defaulted Bond or Bonds in the Trust,
to the extent that Bonds are sold which are current in payment of principal and
interest in order to meet redemption requests and Defaulted Bonds are retained
in the Trust 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. In the event the Trustee does not exercise the right to
obtain Permanent Insurance on a Defaulted Bond or Bonds, except as described
below and in certain other unusual circumstances for which it is determined by
the Trustee to be in the best interests of the Unit holders or if there is no
alternative, the Trustee is not empowered to sell Defaulted Bonds for which
value has been attributed for the insurance obtained by the Trust. Because of
such restrictions on the Trustee, under certain circumstances the Sponsors may
seek a full or partial suspension of the right of Unit holders to redeem their
Units. See 'Rights of Unit Holders--Redemption' in Part B. The Sponsors are
empowered, but not obligated, to direct the Trustee to dispose of Bonds in the
event of advanced refunding.
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
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refinancing plan, except that the Sponsors may instruct the Trustee to accept
such an offer or to take any other action with respect thereto as the Sponsors
may deem proper if the issuer is in default with respect to such Securities or
in the judgment of the Sponsors the issuer will probably default in respect to
such Securities in the foreseeable future.
Any obligations so received in exchange or substitution will be held by the
Trustee subject to the terms and conditions of the Trust Agreement to the same
extent as Securities originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for underlying Securities,
the Trustee is required to give notice thereof to each Unit holder, identifying
the obligations eliminated and the Securities substituted therefor. Except as
stated in this and the preceding paragraph and in the discussion under
'Portfolio--General Considerations' in Part B regarding the substitution of
Replacement Bonds for Failed Bonds, the acquisition by 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' in Part B.
The Sponsors may direct the Trustee to dispose of Bonds upon default in the
payment of principal or interest, institution of certain legal proceedings or
the existence of certain other impediments to the payment of Bonds, default
under other documents which may adversely affect debt service, default in the
payment of principal or interest on other obligations of the same issuer,
decline in projected income pledged for debt service on revenue Bonds, or
decline in price or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsors the retention of such Bonds in
the Trust would be detrimental to the interest of the Unit holders. The proceeds
from any such sales will be credited to the Principal Account for distribution
to the Unit holders.
Notwithstanding the foregoing, in connection with final distributions to
Unit holders, if the Trustee does not exercise the right to obtain Permanent
Insurance on any Defaulted Bond, because the portfolio insurance obtained by the
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 prior to December 31, 2042, with respect to the Trust, it shall not
be necessary for the Trustee to, and the Trustee does not currently intend to,
dispose of any Bonds if retention of such Bonds, until due, shall be deemed to
be in the best interest of Unit holders, including, but not limited to,
situations in which Bonds so insured are in default and situations in which
Bonds so insured have a deteriorated market price resulting from a significant
risk of default. Since the Pre-insured Bonds in the Trust will reflect the value
of the insurance obtained by the Bond issuer, it is the present intention of the
Sponsors not to direct the Trustee to hold any Pre-insured Bonds after the date
of termination. All proceeds received, less applicable expenses, from insurance
on Defaulted Bonds in the Trust not disposed of at the date of termination will
ultimately be distributed to Unit holders of record as of such date of
termination as soon as practicable after the date such Defaulted Bonds become
due and applicable insurance proceeds have been received by the Trustee (see
'Summary of Essential Financial Information').
Agent for Sponsors
The Sponsor named as Agent for Sponsors under 'Summary of Essential
Financial Information' has been appointed by the other Sponsors as agent for
purposes of taking action under the Trust Agreement. 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
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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 Sponsors act as the Sponsors.
Resignation
Any Sponsor may resign at any time provided that at the time of such
resignation one remaining Sponsor maintains a net worth of $1,000,000 and all
the remaining Sponsors are agreeable to such resignation. Concurrent with or
subsequent to such resignation a new Sponsor may be appointed by the remaining
Sponsors and the Trustee to assume the duties of the resigning Sponsor. If, at
any time, only one Sponsor is acting under each Trust Agreement and that Sponsor
shall resign or fail to perform any of its duties thereunder or becomes
incapable of acting or becomes bankrupt or its affairs are taken over by public
authorities, then the Trustee may appoint a successor sponsor or terminate the
Trust Agreement and liquidate the Trust.
Financial Information
At September 30, 1993, the total partners' capital of Glickenhaus was
$132,308,000 (audited); and at March 31, 1993, the total stockholders' equity of
Lebenthal was $5,420,701 (audited).
The foregoing information with regard to the Sponsors relates to the
Sponsors only, and not to any series of Empire State Municipal Exempt Trust.
Such information is included in this Prospectus only for the purpose of
informing investors as to the financial responsibility of the Sponsors and their
ability to carry out their contractual obligations shown herein. More
comprehensive financial information can be obtained upon request from any
Sponsor.
TRUSTEE
The Trustee is The Bank of New York, a trust company organized under the
laws of New York, having its offices at 101 Barclay Street, New York, New York
10286 (212) 815-2000. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law. The
Trustee must be a banking corporation organized under the laws of the United
States or any state which is authorized under such laws to exercise corporate
trust powers and must have at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000. The duties of the Trustee are
primarily ministerial in nature. The Trustee did not participate in the
selection of Securities for 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 monies, Securities or
certificates or in respect of any evaluation or for any action taken in good
faith reliance on prima facie properly executed documents except in cases of its
willful misconduct, bad faith, gross negligence or reckless disregard for its
obligations and duties. In addition, the Trustee shall not be personally liable
for any taxes or other governmental charges imposed upon or in respect of 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') in Part A.
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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' in this
Part B.
Resignation
By executing an instrument in writing and filing the same with the
Sponsors, the Trustee and any successor may resign. In such an event the
Sponsors are obligated to appoint a successor trustee as soon as possible. If
the Trustee becomes incapable of acting or becomes bankrupt or its affairs are
taken over by public authorities, or if the Sponsors deem it to be in the best
interest of the Unit holders, the Sponsors may remove the Trustee and appoint a
successor as provided in the Trust Agreement. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor trustee.
If, upon resignation of a trustee, no successor has been appointed and has
accepted the appointment within thirty days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective only when
the successor trustee accepts its appointment as such or when a court of
competent jurisdiction appoints a successor trustee.
EVALUATOR
Both during and after the initial offering period, the Evaluator shall be
Muller Data Corporation ('Muller Data'), a New York corporation with main
offices located at 395 Hudson Street, New York, New York 10014. Muller Data is a
wholly owned subsidiary of Thomson Publishing Corporation, a Delaware
corporation.
Limitations on Liability
The Trustee and the Sponsors may rely on any evaluation furnished by the
Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under 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
Unit holders for errors in judgement. But this provision shall not protect the
Evaluator in cases of its willful misconduct, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Responsibility
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' in Part B.
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
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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 the 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 each Trust Agreement. In
the event of any amendment, the Trustee is obligated to notify promptly all Unit
holders of the substance of such amendment.
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 hereof, whichever is lower, at which time the Trust may be
terminated (i) by the consent of 66 2/3% of the Units or (ii) by the Trustee;
provided, however, that upon affirmative written notice to the Sponsors and the
Unit holders at least 33 1/3% of the Units may instruct the Trustee not to
terminate the Trust. In no event, however, may the Trust continue beyond the
Mandatory Termination Date set forth in Part A; provided, however, that prior to
such date, the Trustee shall not dispose of any Bonds if the retention of such
Bonds, until due, shall be deemed to be in the best interest of the Unit
holders. In the event of termination, written notice thereof will be sent by the
Trustee to all Unit holders. Within a reasonable period after termination, the
Trustee will sell any remaining Securities, and, after paying all expenses and
charges incurred by the Trust, will distribute to each Unit holder, upon
surrender for cancellation of his certificate for Units, his pro rata share of
the balances remaining in the Interest and Principal Accounts of the Trust.
LEGAL OPINIONS
Certain legal matters will be passed upon by Battle Fowler, 280 Park
Avenue, New York, New York 10017, as special counsel for the Sponsors, and
Tanner, Propp & Farber, 99 Park Avenue, New York, New York 10016, acting as
counsel for the Trustee.
AUDITORS
The statement of condition of the Trust included in this Prospectus has
been audited by BDO Seidman, independent certified public auditors, as stated in
their report appearing herein, and has been so included in reliance upon such
report given upon the authority of that firm as experts in accounting and
auditing.
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DESCRIPTION OF BOND RATINGS
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA--Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC--Bonds rated BB, B, CCC and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or Minus (-): to provide more detailed indications of credit
quality, the ratings from 'AA' to 'B' may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
Indicates that continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or closing
documentation confirming investments and cash flows.
Provisional Ratings: The letter 'p' indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion.
Accordingly, the investor should exercise his own judgment with respect to such
likelihood and risk.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
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SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest. SP-3:
Speculative capacity to pay principal and interest.
* Moody's Investors Service rating. A summary of the meaning of the
applicable rating symbols as published by Moody's follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge.' Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Con. (...)--Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by: (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from 'Aa' through 'B' in its corporate rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the security ranks in the lower end of its generic rating
category.
B-46
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN PARTS A AND B OF THIS PROSPECTUS; AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST, THE TRUSTEE, THE EVALUATOR, OR THE SPONSORS. THE TRUST
IS REGISTERED AS A UNIT INVESTMENT TRUST UNDER THE INVESTMENT COMPANY ACT OF
1940. SUCH REGISTRATION DOES NOT IMPLY THAT THE TRUST
OR ANY OF ITS UNITS HAVE BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY
THE UNITED STATES OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
----------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE PAGE
- -------------------------------------------------- ----
PART A
<S> <C>
Summary of Essential Information.................. A-2
Independent Auditors' Report...................... A-11
Statement of Condition............................ A-12
Portfolio......................................... A-13
Underwriting Account.............................. A-15
<CAPTION>
PART B
<S> <C>
The Trust......................................... B-1
Public Offering................................... B-19
Estimated Current Return and Estimated Long Term
Return to Unit Holders.......................... B-23
Insurance on the Bonds............................ B-24
Tax Status........................................ B-27
Rights of Unit Holders............................ B-32
Automatic Accumulation Account.................... B-39
Sponsors.......................................... B-40
Trustee........................................... B-42
Evaluator......................................... B-43
Amendment and Termination of the Trust
Agreement....................................... B-44
Legal Opinions.................................... B-44
Auditors.......................................... B-44
Description of Bond Ratings....................... B-45
</TABLE>
- -------------------------------------------------------------------------------
PARTS A AND B OF THIS PROSPECTUS DO NOT CONTAIN ALL OF THE INFORMATION SET FORTH
IN THE REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C., UNDER THE SECURITIES ACT
OF 1933, AND THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS MADE.
- -------------------------------------------------------------------------------
[EMPIRE, GTD. LOGO]
EMPIRE STATE
MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES
105
Sponsors:
GLICKENHAUS & CO.
6 East 43rd Street
New York, New York 10017
(212) 953-7532
LEBENTHAL & CO., INC.
25 Broadway
New York, New York 10004
(212) 425-6116
Insurer:
MUNICIPAL BOND INVESTORS
ASSURANCE CORPORATION
113 King Street
Armonk, New York 10504
<PAGE>
PART II -- ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM A -- BONDING ARRANGEMENTS
The employees of Glickenhaus & Co. and Lebenthal & Co., Inc. are covered
under Brokers' Blanket Policies, Standard Form 14, in the respective amounts of
$5,000,000 and $10,000,000.
ITEM B -- CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet on Form S-6.
The Cross-Reference Sheet.
The Prospectus consisting of pages.
Undertakings.
Signatures.
Written consents of the following persons:
Battle Fowler (included as Exhibit 99.3.1)
BDO Seidman
Muller Data Corporation (included as Exhibit 99.5.1)
The following exhibits:
99.1.1 -- Reference Trust Agreement including certain Amendments to Trust
Indenture and Agreement referred to under Exhibit 99.1.1.1 below.
99.1.1.1 -- Trust Indenture and Agreement (filed as Exhibit 1.1.1 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-33746
of Empire State Municipal Exempt Trust, Guaranteed Series 66 on
December 18, 1990, and incorporated herein by reference).
99.1.3 -- Form of Agreement Among Underwriters and Selected Dealers
Agreement (filed as Exhibit 1.8 to Amendment No. 1 to Form S-6
Registration Statement No. 33-28268 of Empire State Municipal
Exempt Trust, Guaranteed Series 49 on July 18, 1989, and
incorporated herein by reference).
99.1.6 -- Restated Agreement of Limited Partnership of Glickenhaus & Co.
(filed as Exhibit 1.3 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
99.1.6(a) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(a) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(b) -- Certificate of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(b) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(c) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(c) to Form
S-6 Registration Statement No. 2-95041 of Municipal Insured
National Trust Series 1 on December 21, 1984, and incorporated
herein by reference).
99.1.6(d) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(d) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-814 of
Empire State Municipal Exempt Trust, Guaranteed Series 23 on
April 11, 1986, and incorporated herein by reference).
99.1.6(e) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(e) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-52058
of MINT Group 8 on November 18, 1992, and incorporated herein by
reference).
99.1.6(f) -- Agreement of Amendment to Restated Agreement of Limited
Partnership of Glickenhaus & Co. (filed as Exhibit 1.3(e) to
Amendment No. 1 to Form S-6 Registration Statement No. 33-78036
of MINT Group 11 on May 3, 1994, and incorporated herein by
reference).
99.1.6.1 -- Certificate of Incorporation of Lebenthal & Co., Inc. as amended
(filed as Exhibit 1.5 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
99.1.6.2 -- By-Laws of Lebenthal & Co., Inc. (filed as Exhibit 1.5 to
Amendment No. 1 to Form S-6 Registration Statement No. 33-22568
of Empire State Municipal Exempt Trust, Guaranteed Series 39 on
August 9, 1988, and incorporated herein by reference).
- ------------
* Filed herewith.
II-1
<PAGE>
*99.1.7 -- Form of Insurance Policy obtained by the Trust.
99.1.7(a) -- Master Letter Agreement of Municipal Bond Investors Assurance
Corporation (filed as Exhibit 1.7(a) to Amendment 1 to Form S-6
Registration Statement No. 33-35124 of Empire State Municipal
Exempt Trust, Guaranteed Series 59 on July 1, 1990, and
incorporated herein by reference).
99.1.7(b) -- Form of Permanent Insurance Policy of Municipal Bond Investors
Assurance Corporation (filed as Exhibit 1.7 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-10860 of Empire State
Municipal Exempt Trust, Guaranteed Series 31 on June 10, 1987,
and incorporated herein by reference).
99.2.1 -- Form of Certificate (filed as Exhibit 2.1 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-33746 of Empire State
Municipal Exempt Trust, Guaranteed Series 66 on December 18,
1990, and incorporated herein by reference).
*99.3.1 -- Opinion of Battle Fowler as to the legality of the securities
being registered.
99.4.1 -- Information as to Partners of Glickenhaus & Co. (filed as Exhibit
4.1 to Amendment No. 1 to Form S-6 Registration Statement No.
33-26577 of Empire State Municipal Exempt Trust, Guaranteed
Series 46 on April 19, 1989, and incorporated herein by
reference).
99.4.2 -- Information as to Officers and Directors of Lebenthal & Co., Inc.
(filed as Exhibit 4.2 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-22568 of Empire State Municipal Exempt Trust,
Guaranteed Series 39 on August 9, 1988, and incorporated herein
by reference).
99.4.3 -- Affiliations of Sponsors with other investment companies (filed
as Exhibit 4.6 to Amendment No. 1 to Form S-6 Registration
Statement No. 2-95041 of Municipal Insured National Trust Series
1 on March 21, 1985, and incorporated herein by reference).
99.4.4 -- Stockbrokers' Bond and Policy, Form B for Glickenhaus & Co.
(filed as Exhibit 4.7 to Form S-6 Registration Statement No.
2-95041 of Municipal Insured National Trust Series 1 on December
21, 1984, and incorporated herein by reference).
99.4.5 -- Stockbrokers' Blanket Bond Policy, Standard Form No. 14 for
Lebenthal & Co., Inc. (filed as Exhibit 4.9 to Form S-6
Registration Statement No. 2-95041 of Municipal Insured National
Trust Series 1 on December 21, 1984, and incorporated herein by
reference).
*99.5.1 -- Consent To Be Evaluator of Muller Data Corporation and
Affirmation Letter of Standard & Poor's Corporation.
*99.5.2 -- Affirmation Letter of Moody's Investors Service.
99.6.1 -- Copies of Powers of Attorney of General Partners of Glickenhaus &
Co. (filed as Exhibit 6.1 to Amendment No. 1 to Form S-6
Registration Statement No. 33-58492 of Empire State Municipal
Exempt Trust, Guaranteed Series 95 on May 12, 1993, and as
Exhibit 5.2(a) to Amendment No. 1 to Form S-6 Registration
Statement No. 33-78036 of MINT Group 11 on May 3, 1994, and
incorporated herein by reference).
99.6.2 -- Copies of Powers of Attorney of Directors and certain officers of
Lebenthal & Co., Inc. (filed as Exhibit 5.2 to Amendment No. 1 to
Form S-6 Registration Statement No. 33-26577 of Empire State
Municipal Exempt Trust, Guaranteed Series 46 on April 19, 1989,
and as Exhibit 6.2 to Amendment No. 1 to Form S-6 Registration
Statement No. 33-37744 of Empire State Municipal Exempt Trust,
Guaranteed Series 67 on January 4, 1991, and incorporated herein
by reference).
- ------------
* Filed herewith.
II-2
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter adopted pursuant to
authority conferred in that section.
SIGNATURES
The registrant hereby identifies Empire State Municipal Exempt Trust,
Guaranteed Series 55 for the purposes of the representations required by Rule
487 and represents the following:
1) That the portfolio securities deposited in the Series as to the
securities of which this registration statement is being filed do not
differ materially in type or quality from those deposited in such
previous series:
2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information
for, the Series with respect to the securities of which this
registration statement is being filed, this registration statement does
not contain disclosures that differ in any material respect from those
contained in the registration statements for such previous Series as to
which the effective date was determined by the commission or the staff;
and
3) That it has complied with Rule 460 under the Securities Act of 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 105 HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW
YORK ON THE 16TH DAY OF JUNE, 1994.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 105
By: GLICKENHAUS & CO.
----------------------------------
(SPONSOR)
By: /s/ BRIAN C. LAUX
----------------------------------
(BRIAN C. LAUX, ATTORNEY-IN-FACT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------- -------------
<S> <C> <C>
ROBERT SANTORO* General Partner
(ROBERT SANTORO)
ALFRED FEINMAN* General Partner
(ALFRED FEINMAN)
SETH M. GLICKENHAUS* General Partner
(SETH M. GLICKENHAUS)
STEVEN B. GREEN* General Partner, Chief
(STEVEN B. GREEN) Financial Officer
ARTHUR WINSTON* General Partner
(ARTHUR WINSTON)
JEFFREY L. LEDERER* General Partner
(JEFFREY L. LEDERER)
*By /s/ BRIAN C. LAUX
------------------------------------- June 16, 1994
(BRIAN C. LAUX, ATTORNEY-IN-FACT)
</TABLE>
- ------------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.1 to Amendment
No. 1 to Registration Statement No. 33-58492 on May 12, 1993 and as Exhibit
5.2(a) to Amendment No. 1 to Registration Statement No. 33-78036 on May 3,
1994.
II-3
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter adopted pursuant to authority conferred in
that section.
SIGNATURES
The registrant hereby identifies Empire State Municipal Exempt Trust, Guaranteed
Series 55 for the purposes of the representations required by Rule 487 and
represents the following:
1) That the portfolio securities deposited in the Series as to the
securities of which this registration statement is being filed do not
differ materially in type or quality from those deposited in such
previous series:
2) That, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information
for, the Series with respect to the securities of which this
registration statement is being filed, this registration statement does
not contain disclosures that differ in any material respect from those
contained in the registration statements for such previous Series as to
which the effective date was determined by the commission or the staff;
and
3) That it has complied with Rule 460 under the Securities Act of 1933.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 105 HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK AND STATE OF NEW
YORK ON THE 16TH DAY OF JUNE, 1994.
EMPIRE STATE MUNICIPAL EXEMPT TRUST,
GUARANTEED SERIES 105
By: LEBENTHAL & CO., INC.
----------------------------------
(SPONSOR)
By: /s/ PETER J. SWEETSER
----------------------------------
(PETER J. SWEETSER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------- -------------
<S> <C> <C>
H. GERARD BISSINGER, II* Director
(H. GERARD BISSINGER, II)
JEFFREY M. JAMES* Director
(JEFFREY M. JAMES)
D. WARREN KAUFMAN* Director
(D. WARREN KAUFMAN)
JAMES MCGRATH* Chief Financial Officer
(JAMES MCGRATH)
JAMES A. LEBENTHAL* Director, Chief Executive
(JAMES A. LEBENTHAL) Officer
DUNCAN K. SMITH* Director
(DUNCAN K. SMITH)
/s/ PETER J. SWEETSER Director June 16, 1994
- -------------------------------------
(PETER J. SWEETSER)
*By /s/ PETER J. SWEETSER June 16, 1994
----------------------------------
(PETER J. SWEETSER,
ATTORNEY-IN-FACT)
</TABLE>
- ------------------
* Executed copies of Powers of Attorney were filed as Exhibit 6.2 to Amendment
No. 1 to Registration Statement No. 33-40723 on August 15, 1991, as Exhibit
6.2 to Amendment No. 1 to Registration Statement No. 33-37744 on January 4,
1991 and as Exhibit 5.2 to Amendment No. 1 to Registration Statement No.
33-26577 on April 19, 1989.
II-4
<PAGE>
CONSENT OF COUNSEL
The consent of counsel to the use of their name in the Prospectus included
in this Registration Statement is contained in their opinion filed as Exhibit
3.1 to this Registration Statement.
------------------
CONSENT OF INDEPENDENT AUDITORS
The Sponsors and Trustee of
Empire State Municipal Exempt Trust, Guaranteed Series 105
We hereby consent to the use in this Registration Statement No. 33-53603 of
our report dated June 16, 1994, relating to the Statement of Condition of Empire
State Municipal Exempt Trust, Guaranteed Series 105 and to the reference to our
firm under the heading 'Auditors' in the Prospectus which is a part of such
Registration Statement.
BDO SEIDMAN
Woodbridge, N.J.
June 16, 1994
II-5
EXHIBIT 99.1.1
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 105
REFERENCE TRUST AGREEMENT
This Reference Trust Agreement dated June 16, 1994
among Glickenhaus & Co. and Lebenthal & Co., Inc., as Depositors,
The Bank of New York, as Trustee and Muller Data Corporation, as
Evaluator, sets forth certain provisions in full and incorporates
other provisions by reference to the document entitled "Empire
State Municipal Exempt Trust, Guaranteed Series 66, Trust
Indenture and Agreement" dated December 18, 1990 as amended in
part by this Reference Trust Agreement (herein as amended or
supplemented called the "Indenture"). This Reference Trust
Agreement and the Indenture, as incorporated by reference herein,
will constitute a single instrument.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositors, the Trustee, and the
Evaluator agree as follows:
Part I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the
provisions contained in the Indenture are herein incorporated by
reference in their entirety and shall be deemed to be a part of
this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument except
that for all purposes of this Empire State Municipal Exempt
Trust, Guaranteed Series 105, and all subsequent Series, the
following section of the Indenture is amended as follows:
(a) Section 1.1(9) is hereby amended by deleting the
words "Standard and Poor's Corporation" therein and substituting
the words "Muller Data Corporation" in place thereof.
Part II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby
agreed to:
(a) The interest-bearing obligations listed in Sched-
ule A hereto have been deposited in trust under this Indenture.
(b) For the purposes of the definition of the Unit in
item (28) of Section 1.1, the fractional undivided interest in
and ownership of the Trust is 1/10,000.
(c) The fiscal year for the Trust shall end on
March 31st of each year.
(d) All Certificateholders of record on July 15, 1994
(the "First Monthly Record Date") who select the monthly distribution
plan, will receive a distribution to be made on or shortly after
August 1, 1994 (the "First Distribution Date"), and thereafter distributions
will be made monthly. The first semi-annual distribution will be made on
or shortly after December 1, 1994 to all Certificateholders of record on
November 15, 1994 who have selected the semi-annual distribution plan, and
thereafter distributions will be made semi-annually.
(e) The First Settlement Date shall mean June 23, 1994.
(f) The number of Units referred to in Section 2.3 is
10,000.
(g) For the purposes of Section 4.3, the Evaluator
shall receive for each evaluation of the Bonds in the Trust $.55
per Bond for each valuation.
(h) For purposes of Section 6.4, the Trustee shall be
paid per annum $1.33 per $1,000 principal amount of Bonds for
that portion of the Trust under the monthly distribution plan and
$0.93 per $1,000 principal amount of Bonds for that portion of
the Trust under the semi-annual distribution plan.
(i) For purposes of Section 8.6, the Depositors'
maximum annual fee is hereby specified to be $0.25 per $1,000
principal amount of Bonds in the Trust.
(j) For purposes of Section 9.2, the Mandatory
Termination Date for the Trust is December 31, 2043.
(k) For purposes of this Series of Empire State
Municipal Exempt Trust, the form of Certificate set forth in this
Indenture shall be appropriately modified to reflect the title of
this Series as set forth above.
(l) For purposes of this Series of Empire State
Municipal Exempt Trust, the execution date of this Indenture
shall be the date first written above.
IN WITNESS WHEREOF, the parties hereto have caused this
Reference Trust Agreement to be duly executed on the date first
above written.
(Signatures on separate pages)
GLICKENHAUS & CO.
By BRIAN C. LAUX
Attorney-in-Fact
for each of the
General Partners
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Rachelle I. Rehner, a Notary Public in and
for the said County in the State aforesaid, do hereby certify
that Brian C. Laux personally known to me to be the same whose
name is subscribed to the foregoing instrument, appeared before
me this day in person, and acknowledged that he signed and
delivered the said instrument as his free and voluntary act as
Attorney-in-Fact for each of the General Partners, and as the
free and voluntary act of said GLICKENHAUS & CO., for the uses
and purposes therein set forth.
GIVEN, under my hand and notarial seal this 16th day of
June, 1994.
Rachelle I. Rehner
Notary Public
RACHELLE I. REHNER
Notary Public, State of New York
No. 31-4851884
Qualified in New York County
Commission Expires February 3, 1996
(SEAL)
Lebenthal & Co., Inc.
By Peter J. Sweetser
President
ATTEST:
By D. Warren Kaufman
Secretary
(CORPORATE SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Rachelle I. Rehner, a Notary Public in and
for the said County in the State aforesaid, do hereby certify
that Peter J. Sweetser and D. Warren Kaufman personally
known to me to be the same persons whose names are subscribed to
the foregoing instrument and personally known to me to be the
President and Secretary, respectively, of LEBENTHAL & CO., INC.,
appeared before me this day in person, and acknowledged that they
signed, sealed with the corporate seal of LEBENTHAL & CO., INC.,
and delivered the said instrument as their free and voluntary act
as such President and Secretary, respectively, and as the free
and voluntary act of said LEBENTHAL & CO., INC., for the uses and
purposes therein set forth.
GIVEN, under my hand and notarial seal this 16th day of
June, 1994.
Rachelle I. Rehner
Notary Public
(SEAL)
My commission expires:
RACHELLE I. REHNER
Notary Public, State of New York
No. 31-4851884
Qualified in New York County
Commission Expires February 3, 1996
THE BANK OF NEW YORK, Trustee
By Ludim Sanabria
Vice President
ATTEST:
By Jenifer Dicker
(CORPORATE SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, Emanuel T. Lytle, Jr., a Notary Public in and
for the said County in the State aforesaid, do hereby certify
that Ludim Sanabria and Jenifer Dicker personally known to
me to be the same persons whose names are subscribed to the
foregoing instrument and personally known to me to be a Vice President
and Assistant Vice President, respectively, of The Bank of New York,
appeared before me this day in person, and acknowledge that they signed,
sealed with the corporate seal of The Bank of New York and delivered
the said instrument as their free and voluntary act as such Vice President
and Assistant Vice President, respectively, and as the free and voluntary
act of said The Bank of New York for the uses and purposes therein set forth.
GIVEN, under my hand and notarial seal this 9th day of
June, 1994.
Emanuel T. Lytle, Jr.
Notary Public
(SEAL)
My commission expires:
Emanuel T. Lytle, Jr.
Notary Public, State of New York
No. 41-4696933
Qualified in Queens County
Commission Expires April 30, 1995
MULLER DATA CORPORATION, Evaluator
By:
Neil Edelstein
Executive Vice President
ATTEST:
By:
Richard Birnbaum
Vice President
(CORPORATE SEAL)
SCHEDULE A
EMPIRE STATE MUNICIPAL EXEMPT TRUST
GUARANTEED SERIES 105
PORTFOLIO AS OF DATE OF DEPOSIT, JUNE 16, 1994
<TABLE>
<CAPTION>
REDEMPTION FEATURES
PORT- COUPON ANT.--ANTICIPATED YIELD COST OF
FOLIO RATING PRINCIPAL REPRESENTED BY CONTRACTS TO RATE AND S.F.--SINKING FUND TO SECURITIES
NO. (1)(2) AMOUNT (3) PURCHASE SECURITIES (4) MATURITY OPT.--OPTIONAL (5) MATURITY TO TRUST (6)(7)
- ----- --------- ----------- ------------------------------------- -------- --------------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 AAA/Aaa $ 1,900,000 New York State Energy Research and 6.050% No Sinking Fund 6.056% $ 1,898,100.00
Development Authority, Pollution 04/01/34 04/01/04 @ 102 Opt.
Control Refunding Revenue Bonds (New
York State Electric and Gas
Corporation Project), 1994 Series A
(MBIA Insured)
2 AAA/Aaa 1,900,000 New York City Municipal Water Finance 5.750 No Sinking Fund 6.001 1,837,680.00
Authority, Water and Sewer System 06/15/20 06/15/04 @ 101.5 Opt.
Revenue Bonds, Fixed Rate Fiscal 1994
Series F (MBIA Insured)
3 AAA/Aaa 1,900,000 State of New York Mortgage Agency, 5.400 04/01/13 @ 100 S.F. 6.023 1,752,750.00
Homeowner Mortgage Revenue Bonds, 10/01/17 03/01/04 @ 102 Opt.
Series 33 (MBIA Insured)
4 AAA/Aaa 200,000 Dormitory Authority of the State of 0.000 No Sinking Fund 5.925 37,000.00
New York, State University 05/15/23 No Optional Call
Educational Facilities, Revenue
Bonds, Series 1994A (MBIA Insured)
5 A-/Aaa 2,300,000 The City of New York, General 6.750 No Sinking Fund 6.216(8) 2,392,000.00
Obligation Bonds, Fiscal 1993 Series 10/01/16 10/01/02 @ 101.5 Opt.
B
6 Baa1*/Aaa 1,800,000 New York State Urban Development 5.375 01/01/14 @ 100 S.F. 6.264 1,588,500.00
Corporation, Correctional Capital 01/01/23 01/01/04 @ 102 Opt.
Facilities Revenue Bonds, Series 4
----------- ---------------
$10,000,000 $ 9,506,030.00
----------- ---------------
----------- ---------------
</TABLE>
EXHIBIT 99.1.7
MBIA
FINANCIAL GUARANTY MASTER
WHILE IN TRUST WITH A PERMANENT OPTION
UNIT INVESTMENT TRUST INSURANCE POLICY
Municipal Bond Investors Assurance Corporation
Armonk, New York 10504
Policy No. ESGT-100-1010
Municipal Bond Investors Assurance Corporation (the "Insurer"), in
consideration of the payment of the premium and subject to the terms of this
policy, hereby unconditionally and irrevocably guarantees to the Trust, as
hereinafter defined, the full and complete payment required to be made by or
on behalf of the issuer(s) to the applicable Paying Agent(s) or its/their
successor(s) (the "Paying Agent") of an amount equal to (i) 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 obligations described in
Exhibit A attached hereto (referred to herein as the "Obligations"), as such
payments shall become due but shall not be so paid (except that in the event
of any acceleration of the due date of such principal by reason of mandatory
or optional redemption or acceleration resulting from default or otherwise,
other than any advancement of maturity pursuant to a mandatory sinking fund
payment, the payments guaranteed hereby shall be made in such amounts and at
such times as such payments of principal would have been due had there not
been any such acceleration); and (ii) the reimbursement of any such payment
which is subsequently recovered from the Trust pursuant to a final judgment by
a court of competent jurisdiction that such payment constitutes an avoidable
preference to the Trust within the meaning of any applicable bankruptcy law.
The amounts referred to in clauses (i) and (ii) of the preceding sentence
shall be referred to herein collectively as the "Insured Amounts."
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of
written notice by registered or certified mail, by the Insurer or its designee
from the Paying Agent or the Trust, that required payment of any Insured
Amount has not been made, the Insurer on the due date of such payment or
within one business day after receipt of notice of such nonpayment, whichever
is later, will make a deposit of funds, in an account with Citibank, N.A., in
New York, New York, or its successor, sufficient for the payment of any such
Insured Amounts which are then due. Upon presentment and surrender of such
Obligations or coupons or presentment of such other proof of ownership of the
Obligations registered as to principal or as to principal and interest,
together with evidence satisfactory to Citibank, N.A. that (i) in the case of
Pre-Insured Obligations, as hereinafter defined, that demand for payment has
been made from the other insurer, and (ii) in all cases, that such Obligations
or coupons are the Obligations or coupons described in this policy or
replacements or successors thereto, and any appropriate instruments of
assignment to evidence the assignment of the Insured Amounts due on the
Obligations as are paid by the Insurer, and appropriate instruments to effect
the appointment of the Insurer as agent for the Trust in any legal proceeding
related to payment of Insured Amounts on the Obligations or coupons, such
instruments being in a form satisfactory to Citibank, N.A., Citibank, N.A.
shall disburse to the Trust or the Paying Agent making such presentment and/or
surrender payment of the Insured Amounts due on such Obligations and coupons,
less any amount held by the Paying Agent for the payment of such Insured
Amounts and legally available therefor. This policy does not insure against
loss of any prepayment premium which may at any time be payable with respect
to any Obligation or coupon.
The term "Depositor" shall mean Glickenhaus & Co and Lebenthal &
Co., Inc. and its successors or any successor Depositor.
The term "Pre-Insured Obligations" shall mean obligations, if
any, on which the payment of principal of and/or interest on shall have been
insured prior to the issuance of this policy by an insurer other than the
Insurer, Municipal Bond Insurance Association or Bond Investors Guaranty
Insurance Company.
The term "Trust" shall mean the Empire State Municipal Exempt
Trust, Guaranteed Series 105, created pursuant to the Trust Indenture and
Agreement dated as of June 16, 1994 among the Depositor, the Trustee and
Muller Data Corporation.
The term "Trustee" shall mean The Bank of New York, or any
successor trustee or co-trustee.
Any service of process on the Insurer may be made to the Insurer
at its offices located at 113 King Street, Armonk, New York 10504, and such
service of process shall be valid and binding.
This policy shall only apply to Obligations held in and owned by
the Trust and shall not apply to any Obligations not deposited therein by the
Depositor. This policy shall continue in force only with respect to
Obligations held in and owned by the Trust, and, subject to the provisions of
this paragraph, the Insurer shall not have any liability under this policy
with respect to any Obligations which do not constitute part of the Trust.
This policy is non-cancellable during the term hereof for any reason, but
shall terminate as to any Obligation which has been redeemed from or sold by
the Trustee or the Trust on the date of such redemption or on the settlement
date of such sale, and the Insurer shall not have any liability under this
policy as to any such Obligation 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 Obligation, this policy shall terminate as to such
Obligation on the business day next succeeding such date of payment.
Notwithstanding the foregoing provisions of this paragraph, the termination of
this policy as to any Obligation shall not affect the obligations of the
Insurer regarding any other Obligation in the Trust. This policy shall
terminate as to all Obligations on the date on which the last of the
Obligations mature, are redeemed or are sold by the Trust.
The premium on this policy is not refundable for any reason,
including the payment prior to maturity of the Obligations.
This policy is issued only to the Trust and is nontransferable.
This policy shall be governed by and construed under the laws of
the State of New York.
This Policy is not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
IN WITNESS WHEREOF, the Insurer has caused this policy to be
executed in facsimile on its behalf by its President and its Assistant
Secretary, this 16th day of June, 1994.
MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION
David H. Elliott
President
Pauline M. Cullen
Assistant Secretary
MBIA
E N D O R S E M E N T
Attached to Policy No. ESGT-100-1010
issued by Municipal Bond Investors Assurance Corporation (the "Insurer"), to
the Trust, as defined in the policy issued with respect to the small issue
industrial development bonds and pollution control revenue bonds listed in
Exhibit A (the "Bonds").
It is further understood that this policy shall guarantee to the Trust, as
defined in the policy, the full and complete payments required to be made by
or on behalf of the Issuer if there occurs pursuant to the terms of the Bonds
an event which results in the loss of the tax exempt status of the interest on
the Bonds, including any principal, interest or premium payments payable
thereon, if any, as and when thereby required.
This endorsement forms a part of the policy to which it is attached, effective
on the inception date of the policy.
IN WITNESS WHEREOF, the Insurer has caused this endorsement to be executed in
facsimile on its behalf by its President and its Secretary
this 16th day of June, 1994.
MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION
David H. Elliott
President
Pauline M. Cullen
Assistant Secretary
MBIA
CERTIFICATE OF MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION
(EMPIRE STATE MUNICIPAL EXEMPT TRUST, GUARANTEED SERIES 105)
This Certificate is being delivered in connection with the
issuance by Municipal Bond Investors Assurance Corporation (the "Corporation")
of a Municipal Bond Guaranty Insurance Policy relating to EMPIRE STATE MUNICIPAL
EXEMPT TRUST, GUARANTEED SERIES 105 (the "Policy"). The undersigned, hereby
certifies that she is qualified and acting as an Assistant Secretary of
the Corporation.
The undersigned hereby certifies that:
(a) The Policy has been duly executed, is a valid and binding
obligation of the Corporation enforceable in accordance with
its terms except that the enforcement of the Policy may be
limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar
laws affecting creditors' rights generally and by general
principles of equity;
(b) The information concerning the Corporation and its policy or
policies as set forth in the prospectus of the Trust filed as
part of a Registration Statement dated June 16, 1994, under
the caption entitled "The Trust -- Insurance on the Bonds,"
regarding Empire State Municipal Exempt Trust, Guaranteed
Series 104, is accurate; and
(c) The financial information as of December 31, 1993 for the
Corporation supplied to the Sponsors is true and correct
financial information provided to the New York Insurance
Department in connection with the licensing of the
Corporation, and such financial information is the most
recent financial information available.
IN WITNESS WHEREOF, the undersigned has herewith set her hand and
caused his signature to be affixed hereto on this 16th day of June, 1994.
By
Pauline M. Cullen
Assistant Secretary
EXHIBIT 99.3.1
BATTLE FOWLER
A Partnership Including Professional Corporations
280 Park Avenue
New York, NY 10017
(212) 856-7000
June 16, 1994
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
25 Broadway
New York, New York 10021
Re: Empire State Municipal Exempt Trust,
Guaranteed Series 105
Dear Sirs:
We have acted as special counsel for Glickenhaus & Co. and
Lebenthal & Co., Inc., as Depositors, Sponsors and Principal
Underwriters (collectively, the "Depositors") of Empire State
Municipal Exempt Trust, Guaranteed Series 105 (the "Trust") in
connection with the issuance by the Trust of 10,000 units of
fractional undivided interest (collectively, the "Units") in the
Trust. Pursuant to the Trust Agreement referred to below, the
Depositors have transferred to the Trust certain long-term bonds and
contracts to purchase certain long-term bonds together with an
irrevocable letter of credit to be held by the Trustee upon the
terms and conditions set forth in the Trust Agreement. (All bonds
to be acquired by the Trust are collectively referred to as the "Bonds").
In connection with our representation, we have examined
copies of the following documents relating to the creation of the
Trust and the issuance and sale of the Units: (a) the Trust
Indenture and Agreement and related Reference Trust Agreement,
each of even date herewith, relating to the Trust (the "Trust
Agreements") among the Depositors, the Bank of New York, as Trustee,
and Muller Data Corporation, as Evaluator; (b) the notification of
registration on Form N-8A and the Registration Statement on Form N-
8B-2, as amended, relating to the Trust, as filed with the
Securities and Exchange Commission (the "Commission") pursuant to
the Investment Company Act of 1940 (the "1940 Act"); (c) the
Registration Statement on Form S-6 (Registration No. 33-53603) filed
with the Commission pursuant to the Securities Act of 1933 (the
"1933 Act"), and Amendment No. 1 thereto (said Registration
Statement, as amended by said Amendment No. 1, being herein called
the "Registration Statement"); (d) the proposed form of final
Prospectus (the "Prospectus") relating to the Units, which is
expected to be filed with the Commission this day; (e) certified
resolutions of Lebenthal & Co. Inc., authorizing the execution and
delivery by it of the Trust Agreements and the consummation of the
transactions contemplated thereby; (f) the Certificate of
Incorporation and By-Laws of Lebenthal & Co., Inc. and the Restated
Agreement of Limited Partnership of Glickenhaus & Co.; and (g) a
certificate of an authorized officer or partner of each of the
Depositors with respect to certain factual matters contained therein.
We have also examined the applications for orders of
exemption from certain provisions of the 1940 Act, and the
amendments thereto, filed with the Commission on May 23, 1978 (file
no. 812-4315), on November 7, 1978 (file no. 812-4389), on
September 10, 1980 (file no. 812-4334) and on November 9, 1984 (file
no. 812-5980) and the related orders issued by the Commission with
respect thereto on June 20, 1978, January 10, 1979, December 31,
1980 and February 22, 1985, respectively.
We have not reviewed the financial statements, compilation of
the Bonds held by the Trust, or other financial or statistical data
contained in the Registration Statement and the Prospectus, as to
which you have been furnished with the reports of the accountants
appearing in the Registration Statement and the Prospectus.
In addition, we have assumed the genuineness of all
agreements, instruments and documents submitted to us as originals
and the conformity to originals of all copies thereof submitted to
us. We have also assumed the genuineness of all signatures and the
legal capacity of all persons executing agreements, instruments and
documents examined or relied upon by us.
<PAGE>
In addition, with respect to the opinion set forth in
paragraph (1) below, and insofar as that opinion relates to
Glickenhaus & Co., we have relied, with their approval, on the
opinion of Newman Tannenbaum Helpern Syracuse & Hirsctritt dated of
even date herewith.
Statements in this opinion as to the validity, binding effect
and enforceability of agreements, instruments and documents are
subject: (i) to limitations as to enforceability imposed by
bankruptcy, reorganization, moratorium, insolvency and other laws of
general application relating to or affecting the enforceability of
creditors' rights, and (ii) to limitations under equitable
principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any
jurisdiction but the State of New York and we do not hold ourselves
out as experts in or express any opinion as to the laws of other
states or jurisdictions except as to matters of Federal and Delaware
corporate law.
Based exclusively on the foregoing, we are of the opinion
that under existing law:
(1) The Trust Agreements have been duly authorized and
entered into by an authorized officer or General Partner of each of
the Depositors and are valid and binding obligations of the
Depositors in accordance with their terms.
(2) The execution and delivery of the Certificates
evidencing the Units has been duly authorized by the Depositors and
such Certificates, when executed by the Depositors and the Trustee
in accordance with the provisions of the Certificates and the Trust
Agreements and issued for the consideration contemplated therein,
will constitute fractional undivided interests in the Trust, will be
entitled to the benefits of the Trust Agreements, will conform in
all material respects to the description thereof for the Units as
provided in the Trust Agreements and the Registration Statement, and
the Units will be fully paid and non-assessable by the Trust.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name in the
Registration Statement and in the Prospectus under the headings "Tax
Status" and "Legal Opinions". We authorize you to deliver copies of
this opinion to the Trustee and the Underwriters named in Schedule A
to the Master Agreement Among Underwriters relating to the Trust and
the Trustee may rely on this opinion as fully and to the same extent
as if it had been addressed to it.
This opinion is intended solely for the benefit of the
addressees and the Trustee in connection with the issuance of the
Units of the Trust and may not be relied upon in any other manner or
by any other person without our express written consent.
Very truly yours,
Battle Fowler
EXHIBIT 99.5.1
MULLER DATA CORPORATION
A Thomson Financial Services Company
June 16, 1994
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Lebenthal & Co., Inc.
25 Broadway
New York, New York 10006
RE: Empire State Municipal Exempt Trust,
Guaranteed Series 105
Gentlemen:
We have examined Registration Statement File No.33-53603 for
the above-captioned trust. We hereby acknowledge that Muller
Data Corporation is currently acting as the evaluator for the
trust. We hereby consent to the use in the Registration Statement
of the reference to Muller Data Corporation as evaluator.
In addition, we hereby confirm that the ratings indicated in
the Registration Statement for the respective bonds
comprising the trust portfolio are the ratings currently
indicated in our UITS databases as of the date of the
evaluation report.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Neil Edelstein
Executive Vice President
395 Hudson Street, New York,
New York 10014-3622 -- (212) 807-3800
Standard & Poor's Corporation
Bond Insurance Administration
25 Broadway
New York, New York 10004-1064
Telephone 212/208-1740
FAX 212/208-8262
June 16, 1994
Glickenhaus & Company
6 East 43rd Street
New York, New York 10017
Re: Empire State Municipal Exempt Trust, Guaranteed Series 105
Pursuant to your request for a Standard & Poor's rating on the units
of the above-captioned trust, SEC #33-53603, we have reviewed the
information presented to us and have assigned a 'AAA' rating to the
units of the trust and a 'AAA' rating to the securities contained in
the trust. The ratings are direct reflections, of the portfolio of the
trust, which will be composed solely of securities covered by bond
insurance policies that insure against default in the payment of
principal and interest on the securities so long as they remain
outstanding. Since such policies have been issued by one or more
insurance companies which have been assigned 'AAA' claims paying ability
ratings by S&P, S&P has assigned a 'AAA' rating to the units of the
trust and to the securities contained in the trust.
You have permission to use the name of Standard & Poor's Corporation and
the above-assigned ratings in connection with your dissemination of
information relating to these units, provided that it is understood that
the ratings are not "market" ratings nor recommendations to buy,
hold, or sell the units of the trust or the securities contained in the
trust. Further, it should be understood the rating on the units does not
take into account the extent to which fund expenses or portfolio asset
sales for less than the fund's purchase price will reduce payment to the
unit holders of the interest and principal required to be paid on the
portfolio assets. S&P reserves the right to advise its own clients,
subscribers, and the public of the ratings. S&P relies on the sponsor
and its counsel, accountants, and other experts for the accuracy and
completeness of the information submitted in connection with the
ratings. S&P does not independently verify the truth or accuracy of
any such information.
<PAGE>
This letter evidences our consent to the use of the name of Standard &
Poor's Corporation in connection with the rating assigned to the units
in the registration statement or prospectus relating to the units or the
trust. However, this letter should not be construed as a consent by us,
within the meaning of Section 7 of the Securities Act of 1933, to the
use of the name of Standard & Poor's Corporation in connection with the
ratings assigned to the securities contained in the trust. You are
hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Please be certain to send us three copies of your final prospectus as
soon as it becomes available. Should we not receive them within a
reasonable time after the closing or should they not conform to the
representations made to us, we reserve the right to withdraw the
rating.
We are pleased to have had the opportunity to be of service to you. If
we can be of further help, please do not hesitate to call upon us.
Sincerely,
Vincent S. Orgo
McGraw Hill
EXHIBIT 99.5.2
Moody's Investors Service
99 Church Street
New York, NY 10007
June 15, 1994
Municipal Bond Investors Assurance Corporation
113 King Street
Armonk, New York 10504
RE: Empire State Municipal Exempt
Trust, Guaranteed Series 105
Gentlemen:
Moody's Investors Service has assigned the rating of Aaa
(MBIA Corp.) to each of the bonds insured by Municipal Bond
Investors Assurance Corporation, comprising Empire State
Municipal Exempt Trust, Guaranteed Series 105. The rating
is based upon an insurance policy provided by Municipal Bond
Investors Assurance Corporation. The rating applies to each
bond only while it is held in such trust.
Please send us a final Prospectus when available. Should
you have any questions regarding the above, please do not
hesitate to contact the assigned analyst, Margaret
Kessler, at (212) 553-7884.
Sincerely yours,
Daniel N. Heimowitz
Executive Vice President
Director
Public Finance Dept.
Moody's Investors Service
99 Church Street
New York, NY 10007
June 15, 1994
Glickenhaus & Company
6 East 43rd Street
New York, New York 10017
Lebenthal & Company, Inc.
25 Broadway
New York, New York 10004
RE: Empire State Municipal Exempt
Trust, Guaranteed Series 105
Gentlemen:
This letter will serve to affirm that as of June 15, 1994,
Moody's Investors Service has assigned the following rating
to the issue listed below:
RATING ISSUE
------ -----
Baa1 New York State Urban Development Corporation,
Correctional Facilities, Series 4; 5.375% due
1/01/2023.
Sincerely yours,
Daniel N. Heimowitz
Executive Vice President
Director
Public Finance Dept.
DNH:vlw
